From New York to Kinshasa: The Economics of Global Poverty

June 12, 2008  -  Professor Eric Werker of the Harvard Business School presented a unique viewpoint on global poverty to a packed audience of Boston International members.

Professor Werker opened his presentation by asking three big questions:

• Do international institutions matter?
• Will AIDS prevent Africa from escaping poverty?
• Why do civil war belligerents target civilians?

Rather than attempting to answer these questions in full (we did, after all, only have 1 hour!), Prof. Werker went on to discuss his research that addresses these topics by asking “smaller” questions.

Watch the following video to see the entire presentation, or visit the Summary section below for an overview and Prof. Werker’s conclusions.

 

Full Video

 

 

Summary

Do international institutions matter?

Through his research regarding the US Security Council, Professor Werker concluded that the US and the UN provide more development aid to countries represented on the Council in years when the council’s decisions are most important, consistent with buying votes. Therefore, he concluded, that this was a piece of evidence in favor of the view that international institutions matter.

Will AIDS prevent Africa from escaping poverty?

Professor Werker researched AIDS in Africa using the fact that countries with higher rates of male circumcision were less likely to have high rates of AIDS. He unearthed a strange phenomenon: although the economic growth in countries with higher prevalence of AIDS was not lower than in countries with higher rates, these countries were significantly less effective in reducing poverty, and there was a strong correlation between AIDS rates and malnutrition. He explained this by noting that high unemployment meant that sick people could easily be replaced in the official economy, though viewed from a broader perspective, AIDS was causing higher levels of poverty.

Why do civil war belligerents target civilians?
Professor Werker went on to explain violence on civilians in Uganda in the lens of the “Principal Agent Problem”; financiers of the conflict may have different goals from its insurgents and insurgents have trouble communicating their performance back to the financiers. While “winning hearts and minds” is hard to measure, civilian deaths are a mark of effort, if not well directed. Therefore, insurgents may use violence to prove to their financiers their hard work.

 

Professor Werker summarized his research in four concluding points:

• Basic economics can clarify complex problems
• Answers to big questions can be quantified and theorized by looking at individual puzzle pieces
• Most equilibria are stable
• Economics can only describe a part of the picture

Following his presentation, we opened up the floor for 20 minutes of engaging Q&A. Afterwards, members mingled over wine and appetizers, giving us all a chance to discuss the presentation with Prof. Werker and with fellow members.

 

Photos

 

About our Speaker

Eric Werker is an Assistant Professor in the Business, Government, and the International Economy Unit at Harvard Business School. His research explores the complex relationship between developed and developing economies.

Professor Werker has written on foreign aid, foreign investment, non-governmental organizations, outside financing of insurgency, AIDS, and refugees. His work has been featured in the Financial Times, Washington Post, BBC, NPR, and publications across the developing world.

Before joining Harvard Business School, Werker worked as an economist with the US Government’s Millennium Challenge Corporation, analyzing foreign aid projects in Africa, Latin America, and Eurasia. He earned his Ph.D. and AB in economics from Harvard University.

Click here to visit Professor Werker’s page at HBS.

 

Professor Werker’s Research

• How Much Is a Seat on the Security Council Worth? Foreign Aid and Bribery at the United Nations
• How Is Foreign Aid Spent? Evidence from a Natural Experiment
• Male Circumcision and AIDS: The Macroeconomic Impact of a Health Crisis
• Portrait of a Failed Rebellion: An Account of Rational, Sub-optimal Violence in Western Uganda

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