Our library of VoxDevLits, alongside summarising the evidence we do have, identifies important policy-relevant questions for which more evidence is needed.
We now have VoxDevLits on 12 topics within development economics. In each of these living reviews, a community of scholars identifies the key takeaways for policy from economic research in low- and middle-income countries. They also shed light on what we don’t know about different research areas in development economics.
This blog collates some of these key unanswered questions in development economics to signpost areas where more research is needed (that could even be interesting dissertation topics for ambitious economics students). Since we aim to update our VoxDevLits approximately once per year, if there has been any recent research that speaks to one of the questions below, please send this through ([email protected]) so that I can pass this on to the Senior Editors ahead of the update.
Key questions on Taxation and Development – Anders Jensen
This VoxDevLit was organised around three important dimensions of taxation in low- and middle-income countries and identified key future research areas within each.
Constraints on effective taxation and enforcement:
- How would an optimal tax design combine enforcement interventions and reforms to the statutory schedule?
- New technologies and digitisation may enable governments to enhance enforcement, but this will depend on the quality and coverage of new data sources.
- What are the real efficiency costs of commonly implemented tax instruments?
Tax authorities:
- Systematising tax processes to follow transparent rules, not discretion, holds promise, but also presents challenges: while systematising the collection process, local officials are likely to gain more information and knowledge on existing and potential taxpayers.
- What policies can reduce the abuse of this information by officials?
- Communication strategies can enhance perceptions of fairness, but understanding whether, and how, this might impact compliance by taxpayers requires more evidence.
Tax equity:
- The co-existence of formal and informal sectors means that some agents in the economy may benefit from tax increases – understanding who benefits is an understudied area of research.
- The economic incidence of any tax reform will depend on many factors, including the market structure and relative market-power of the different relevant agents; as these factors will vary across settings, there is a strong need to build evidence on economic incidence ‘from the bottom up’, across a variety of environments.
More on the growing body of research on taxation and economic development.
Boosting Agricultural Technology in Africa – Chris Udry & Tavneet Suri
- How should we provide incentives to either the public or private sector for the development of new agricultural technologies that are locally customised?
- Then, how should we provide incentives for experimentation with these technologies?
- Are improvements in agricultural technology and productivity the most useful way to raise the standard of living and create a path out of poverty, or should the focus be on investments in the nonagricultural sector?
- Can the integration of rural and urban markets in Africa provide better incentives to farmers?
- Is there a way to scale down large-scale infrastructure investments to get more irrigation across Africa?
- What is the role of the state in agriculture? How extensive is crony capitalism in agriculture?
- How are policy priorities or large infrastructure investments decided specifically in agriculture?
- This VoxDevLit identifies many different constraints to farmers, especially in terms of labour, land markets and the environment, but more work is needed to understand which constraints impact which farmers.
- Lots and lots to learn on climate change!
- How is climate change likely to affect agricultural output in Africa?
- How will farmers and entire agricultural systems in Africa adapt to these changes?
- Are there technologies that can help climate adaptation in agriculture? If so, how do we trial/test and adapt them to local contexts?
More evidence and key questions on Agricultural Technology in Africa.
More evidence is needed on the following areas related to Female Labour Force Participation – Rachel Heath
- On the impacts of having women in supervisory, managerial and leadership positions within firms in low-income countries.
- On improving women’s safety, and reducing the harassment they face, in public places and the workplace.
- On the gendered effects of global trends including AI, climate change and the rise of remote work.
- To establish which aspects of the intra-household bargaining process are most important for women’s labour supply.
- On which interventions boosting womens’ economic empowerment would represent a profitable investment for private firms, the contexts in which they succeed, and more generally, represent high benefit relative to cost.
More evidence and key questions on Female Labour Force Participation.
Evidence-based policy on Barriers to Search and Hiring in Urban Labour Markets – Stefano Caria & Kate Orkin
There is very little evidence that quantifies the potential negative employment impacts of job search interventions on individuals not receiving the intervention – the so-called displacement effects. It is plausible that in the short-term these can be large, since firms in LMICs do not appear to have many unfilled vacancies. (Displacement effects are also a potential issue for training interventions.) Other questions include:
- Do job search interventions generate productivity gains for firms?
- What are the impacts of job search interventions at scale?
- They could increase labour demand, as identifying talent is identified as a key barrier to growth. However, increasing search could generate congestion, and signals about workers skills could harm low-skill workers.
- How should job search programmes be targeted?
- Initial evidence suggests that job search interventions are most effective for groups with weaker expected labour market outcomes, so would there be gains from more effective targeting?
Evidence and key questions on Barriers to Search and Hiring in Urban Labour Markets.
One key constraint holds back research on land transport infrastructure - Marco Gonzalez-Navarro & Román David Zárate
- More comprehensive and better cost data is needed.
- Cost-benefit analyses, which require accurate cost estimates, help provide policymakers with better guidance regarding how much to build and the relative merits of different infrastructure types. The lack of cost data means current analyses ultimately focus on benefits rather than more relevant benefit to cost ratios.
- What are the impacts of climate change on infrastructure provision and placement decisions?
- How to develop optimal transportation networks across space?
Evidence and key questions on Land Transport Infrastructure.
Five important knowledge gaps from research on entrepreneurship training – David McKenzie and Christopher Woodruff
- What are the longer-term effects of training?
- How do we improve the cost-effectiveness of training, for example, by better matching entrepreneurs to the appropriate type of training, or using online interactions?
- What are the factors that limit the adoption of proven beneficial business practices by entrepreneurs and managers?
- How do we make markets for training and consulting work better?
- How do we design and evaluate incubator and accelerator programmes?
Five things we have learned from research on Training Entrepreneurs.
Areas where additional work is needed to better understand bureaucracies in low- and middle-income countries – Guo Xu
It is difficult to measure the output of bureaucrats and bureaucracies.
- Future work could use remote sensing data and economic censuses to proxy changes in GDP and other outcome variables of interest.
- Administrative data capturing all the bureaucrats in a region or country, often linked to monitoring of their actions, is increasingly being used.
Gathering this type of economy-wide micro-data will open possibilities to evaluate system-wide reforms of what bureaucrats do and how they affect these outcomes, which is often what governments are interested in.
Understanding whether and how bureaucrats can innovate and adapt to future challenges is also crucial:
- The COVID-19 pandemic has uncovered large heterogeneity in the capacity of bureaucracies to respond.
- We need to identify what characteristics of bureaucracies are needed to respond to key future challenges, such as climate change, which may be different to those faced in the last century.
- How innovative are bureaucracies in using up-to-date knowledge to face current and future challenges?
What we do know about building effective bureaucracies.
Possible directions for research that can contribute to our understanding of adaptation to climate change – Namrata Kala
- What are the long-term impacts of climate change and the mechanisms facilitating adaptation?
- What actions and policies empower individuals to build sustainable resilience?
- There are no single strategies that lead to complete preparedness or recovery. Reflecting on the success of graduation programmes in pushing people out of poverty traps, can composite interventions build climate resilience?
- In many settings, take-up of weather insurance remains low. What is the optimal design and outreach approach for climate insurance in different contexts?
- A deeper understanding of firms’ adaptation to climate change could include research on areas such as the use of weather insurance, management practices and organisational structures, location of work, and research and innovation in building firm’s capacity in weathering climate shocks.
- Informality adds to the vulnerability to climate shocks in developing countries and more work is needed to understand how these populations can be covered despite climate change.
- What conditions can align political motives with climate resilience?
Economic research on climate change adaptation.
Promising avenues of future research on microfinance – Jing Cai, Muhammad Meki & Simon Quinn
Given the evidence that the effects of microcredit vary across borrowers, and that different contractual forms can work in different contexts, an open research question is how microcredit can become more flexible/tailored while retaining the advantages of its more basic forms – such as transparency, simplicity, the ability to keep costs low through group disbursement and collection, and the harnessing of social capital to promote repayment.
Different microcredit contracts clearly have different uses for different borrowers – in particular, some microcredit provides for business expansion, while much goes to consumption. There may be valuable contractual innovations in designing microfinance products that more effectively provide for business investment – and conversely, other products that more directly serve a consumption need (for example, products that are intuitive to the borrower and that incorporate appropriate consumer protection).
Evidence from economic research on microfinance.
Research on mobile money is growing, research on the new innovations building on mobile money has been lagging – Tavneet Suri
Although mobile money may seem revolutionary, aside from the dramatic adoption, it is far from revolutionising the role of financial markets or cash in low- and middle-income economies. This opens up a number of research areas:
- Should these economies actually become cashless, or close to cashless? How would this be accomplished?
- Will the banking system be the primary venue for this transformation, and, if so, what sets of products and services will be needed to accomplish this?
- What will encourage financial market transformation in these economies?
- Will mobile money be the first stepping stone toward new financial markets and transactions in these economies?
- Will it encourage broader, better-integrated, secure platforms for transactions?
Learn about the expansion of mobile money service providers and accounts over the past decade.
Two particularly fruitful avenues for progress on international trade research – David Atkin & Amit Khandelwal
- Combining multiple sources and types of data – including leveraging advances in digitisation, tracking technologies and text analysis – to provide a more complete understanding of the effects of trade in the developing world.
- Focus on specific industries where tailored firm surveys and niche datasets can overcome at least some important measurement concerns.
Crucial to these approaches is data that captures the institutional complexities, market failures and distortions of the particular setting.
More questions and evidence on international trade and development.
What do we have to learn about the causes and consequences of informality in developing countries? – Gabriel Ulyssea
On the firms’ side:
- Does informality work as a stepping-stone for entrepreneurs with high-growth potential but who might be constrained, e.g. by credit constraints?
On the workers’ side:
- We need a deeper understanding of the determinants of workers’ choice/allocation between formal and informal jobs, what determines their permanence and evolution in either, as well as the main tradeoffs they face.
- Regarding the tradeoffs, for example, we do not know how much workers value the greater job security provided by formal employment relative to informal jobs.
- As in the case of firms, we do not know how much informal jobs represent a stepping-stone for younger workers versus the extent to which there is an “informality trap” that makes future transitions into formal employment very unlikely.
- Related to this point, there are still very few studies that investigate the life-cycle dimensions of informality.