Politics, finance and growth

 c. Steve Evans

c. Steve Evans

Dr Svetlana Andrianova, University of Leicester

Start: Sep 2012 |  End: Mar 2016

Project webpage
Research Councils UK project page

Although the recent financial crisis led to suggestions that there can be too much finance, many Low Income Countries (LICs)  remain financially under-developed.  In Sub-Saharan Africa, banks continue to lend little domestically, and even where financial development has taken place, its effects on the poor are generally unknown. By analysing the linkages between politics, finance and growth in Sub-Saharan Africa, this project aims to explain how finance can help promote pro-poor economic growth in LICs.

The project seeks to analyse the causes of financial under-development. It will use appropriate methods and data focusing on:

  • determinants of high loan default in Sub-Saharan Africa;
  • the role of incumbent financiers in deterring new firms’ entry;
  • the role of natural resources on financial development.

It also aims to re-examine key aspects of the finance-growth relationship by analysing the consequences of banks’ opportunistic behaviour on financial instability, and the effect of different types of financial reforms on bank soundness. A new measure of banking fragility constructed under the project will help determine if increased fragility explains the recent weakening of the finance-growth relationship.

The diffusion of innovation in Low Income Countries

Dr Xiaolan Fu, University of Oxford

Start Date:  Sep 2012 |   End Date: Feb 2016

Project webpage
Research Councils UK project page

Film: Innovation in LICs
Report: Innovation in low income countries: A survey report
Journal article: Information Sources, ICTs and Price Information in Rural Agricultural Markets
Journal article: Drivers of Export Upgrading
Journal article: Transaction Costs, Information Technologies, and the Choice of Marketplace among Farmers in Northern Ghana
Journal article: Complementarity between in-house R&D and technology purchasing: evidence from Chinese manufacturing firms
Working paper: Innovation Under the Radar in Low Income Countries: Evidence from Ghana
Working paper: The diffusion of innovation in the private sectors in Low-income Countries (LICs): A systematic literature review
Working paper: Multi-dimensional Complementarities and the Growth Impact of Direct Investment from China on Host Countries
Working paper: Complementarity between internal knowledge creation and external knowledge sourcing in developing countries
Presentation: The Diffusion of Innovation in Low Income Countries
Working Paper: The Impact of China-Africa Trade on the Productivity of African Firms: Evidence from Ghana
Working Paper: The Innovation Effects of ICT adoption in Ghana
Working Paper: Innovation, informality, and firms' growth in low-income countries
Working Paper: Productivity convergence and exporting
Journal Article: Chinese MNEs and managerial knowledge transfer in Africa: the case of the construction sector in Ghana
Journal Article: The creation and diffusion of innovation in developing countries: a systematic literature review






Technological innovation is a key element of industrialisation and catch-up in developing countries. Since innovation is costly, risky and path-dependent, ground-breaking innovation is highly concentrated in a few rich countries and amongst a small

number of firms. Foreign sources of technology account for a large part of productivity growth in most countries. If foreign technologies are easy to diffuse and adopt, a technologically backward country can catch up rapidly through the acquisition and more rapid deployment of the most advanced technologies (Eaton and Kortum, 1995; Bell and Pavitt, 1993).

Therefore, the development process in low income countries can be supported by tapping existing knowledge and know-how. The transfer, adoption and adaptation of knowledge to low income countries hence constitutes an important issue for economic growth and global development.

Technology diffusion and adoption relies on substantial and well-directed technological efforts (Lall, 1992) as well as sufficient human and financial resources and absorptive capacity (Cohen and Levinthal, 1989). It requires appropriate institutions and policies to incentivise and facilitate the process in addition to strong local capabilities to identify the right technology and appropriate transfer mechanism, and to absorb and make adaptations according to local economic, social, technical and environmental conditions (Fu, et al., 2011). 

This research project will explore determinants and transmission channels for effective innovation creation, diffusion and adoption in LICs under institutional, resource and affordability constraints. In particular, it looks at:

  • The barriers to innovation creation and diffusion in LICs under institutional, resource and affordability constraints and the space for innovation policy;
  • The determinants of knowledge diffusion in LICs from leading innovators to latecomers, in particular the role of university-industry linkage and inter-firm networks;
  • The effect of external knowledge diffusion to LICs, in particular the productivity impact of South-South trade and FDI with a special focus on Chinese trade and FDI in Africa;
  • Develops an SME open innovation network model to increase frugal innovation for the poorer societies in LICs.

Agricultural innovations: which farmer(s) should we target?

Professor Erwin Bulte, Wageningen University

Start Date: 24 July 2012 |   End Date: 01 April 2016

Research Councils UK project page

This project will investigate if the selection of farmers chosen to promote new agricultural technologies has an effect and impact on technology diffusion and development.  

In the case study country of Democratic Republic of Congo, local field officers will research current selection methods, identify limitations in reaching vulnerable sub groups and promote the use of improved crop varieties. The results of the study will be used to design an improved selection method which will then be implemented in 30 randomly selected villages.  Detailed data will be collected before and after intervention at both village and household level and additional analyses will provide detailed insights into technology diffusion through social networks.

This research will find out if improved methods lead to enhanced diffusion of knowledge on new varieties of crops. It will also allow agricultural development programs to increase their reach amongst rural African smallholders and find out how to better target vulnerable subgroups in rural societies.

Training, productivity, and upgrading in the Bangladesh apparel sector

 Training of female workers in Dhaka, Bangladesh c. Sarah-Jane Saltmarsh/ILO  
 /* Style Definitions */
	{mso-style-name:"Table Normal";
	mso-padding-alt:0cm 5.4pt 0cm 5.4pt;

Training of female workers in Dhaka, Bangladesh c. Sarah-Jane Saltmarsh/ILO

Professor Christopher Woodruff, University of Warwick

Start Date: Feb 2012 |   End Date: Feb 2015

Research Councils UK project page

The project examines the effect of female managers on firm-level productivity in the ready-made garment (RMG) sector in Bangladesh. Around 85 per cent of machine operators in the sector are female, but managers are overwhelmingly male. The study evaluates, through a Randomized Control Trial, a Female Supervisor Training Program supported by the German overseas aid agency (GIZ) and developed with industry stakeholders. Mid-level management training is widely seen as needed in the Bangladeshi RMG sector, and thus the training program is targeted to sector-specific needs.

The research project provides supervisor training to 384 female and 96 male machine operators from 96 factories, with the aim of understanding the effect of both gender and training on a variety of outcomes. The first two outcomes are rates of trainee promotion and migration to other factories. Conditional on promotion, the project examines the management style of line supervisors, supervisee job satisfaction, and productivity -  including output, absenteeism and product quality. There is a potentially large demand for training in the sector, but also concerns among factory owners that trainees will leave the factory after completing training. The issue of migration has profound effects on demand for training and for those who fund the training.

Structural change and productivity growth in Africa

Professor Margaret McMillan, International Food Policy Research Institute

Start: Apr 2012|   End: Sep 2014

Research Councils UK project page

This research seeks to understand the causes and consequences of structural transformation in Africa. While it is well understood that structural change and economic growth go hand in hand, there is little consensus among researchers - and in the case of Africa little actual research - on the determinants of structural transformation.

A major contribution of this project is the construction of a harmonised long-term sectoral dataset for several countries in Sub-Saharan Africa. This dataset will consist of time series information on value added in international prices and employment for ten broad economic sectors for the period from 1960 to 2010.

With this new dataset, the researchers will identify countries in which structural change has been growth enhancing as well as countries in which structural change has reduced economic growth. Comparisons with other developing regions of the world will be made through similar datasets already available for Asia and Latin-America. Using the results of this analysis, the researchers will identify specific policies and events that have influenced the process of structural change.

The researchers will also examine the links between urbanization, food prices and structural change by using a combination of qualitative and quantitative methods including in-depth case studies.

Space, markets and employment in agricultural development from Southern Africa

Professor Andries du Toit, University of the Western Cape

Start Date: 01 March 2012 | End Date: 31 August 2014

Project webpage
Research Councils UK project page

Agricultural development can only lead to inclusive, sustainable growth if, in addition to productivity gains on the land, it supports non-farm employment. Recent debates indicate that conditions to support non-farm rural employment depend not only on growth in local aggregate demand, but also on the spatial and institutional configuration of the links between farm and non-farm employment, and between near and distant markets. 

This project explores the spatial and institutional articulation of markets, human settlements and farm and non-farm livelihoods in marginalised and impoverished regions of Malawi, South Africa and Zimbabwe. A qualitative picture of the flow and distribution of money, resources, risk and opportunities in socio-economic networks, value chains and markets in rural districts will be combined with a quantitative analysis of the livelihood outcomes for actors and role players in the network.

The research will be undertaken by a consortium of researchers led by the Institute for Poverty, Land and Agrarian Studies at the University of the Western Cape in South Africa. 

Rural property rights, returns to scale and contracts

Dr Elaine Liu, University of Houston

Start Date: 25 April 2012 |   End Date: 24 October 2014

Research Councils UK project page

This research entails two projects that examines the impact of rural land rights on the decisions and outcomes of farmers in China.

Previously farmers only had use rights and could not legally engage in any market land transaction such as selling or renting.

In the first project the research team will study whether giving farmers leasing rights will improve their outcome. In the second project, the researchers will study the types and terms of contracts that farmers sign when allowing other farmers or agricultural firms to use their land, and will analyse the impact of these contract choices on agricultural investment and productivity.

This research agenda builds on economic theories that suggest that some types of contracts may lead to lower investment and lower levels of productivity. It will provide valuable insight into how land market interactions among farmers and between farmers and agricultural firms affect rural economic growth.

Rural farmer in Qing Yunnan, China c. Hong Meen Chee

Malaria, productivity and access to treatment

Experimental evidence from Nigeria

Dr Andrew Dillon, International Food Policy Research Institute

Start Date: Aug 2012   |   End Date: Aug 2014

Research Councils UK project page

The consequences of ill health for productivity and economic development are presumed to be severe yet the rigorous evidence base for such a linkage is small.

For this research project a mobile health clinic was established on a plantation and used an exogenously determined order to test and treat workers. Despite the positive effect of treatment, we found that there are low rates of workers seeking curative and preventative treatments. To understand the reason for this, this study will offer access to malaria treatment and insurance at varied prices to estimate its effect on take-up and frequency of health care.

In another study phase, the effect of treatment on both worker productivity and physical activity will be measured. We will then be able to estimate the effects of malaria on physical activity in general, which will allow us to extend our findings in this context to other physical occupations in endemic areas.

 Clinic in Nigeria  Photo by Curt Carnemark, World Bank

Clinic in Nigeria

Photo by Curt Carnemark, World Bank

Innovation systems, agricultural growth and rural livelihoods in East Africa

 Farmer in Kenya c. Neil Palmer/CIAT

Farmer in Kenya c. Neil Palmer/CIAT

Dr Peter Dorward, University of Reading

Start Date: 19 June 2012   |   End Date: 31 October 2014

Project webpage
Research Councils UK project page

Smallholder farming is widely seen as a potential engine for economic growth and for poverty alleviation in rural areas of sub-Saharan Africa. Yet the arrangements put in place to encourage the uptake of new technology, and to improve the management of resources by smallholders, have not always been particularly effective.

Using Kenya, Sudan and Uganda as case studies, this project will explore how different institutional arrangements affects the innovation activity of male and female farmers and the impact this has on growth in the local economy.

The research team will build up a detailed picture of organisations and institutions that support and provide services to smallholder farmers. They will then carry out a detailed investigation of recent innovation activity in four sites in each country analysing the factors that have constrained and those that have supported innovation.

Evidence-based conclusions on the potential and limitations for enhancing support for smallholder farmers’ innovation through new institutional arrangements and different ways of implementing support programmes at local level will be developed.

Innovations to promote growth among small-scale irrigators in Africa

Elizabeth Harrison, University of Sussex

Start Date: 17 November 2012   |   End Date: 03 August 2015

Project website
Research Councils UK project page

This project examines the rules and norms governing access to and control over water by smallholder farmers, considering how these are influenced by externally-induced innovations and the effects of climate change.

The research aims to determine if general principles of water allocation and equity can be identified, and what the scope is for transferring them across contexts. It involves comparative research in Bangladesh, Tanzania and Malawi.

Key questions include:

  • What are the ‘local rules’ for governing access to water and what shapes these?
  • What is the relationship between ‘local’ rules and ‘outside’ influences such as government, business and NGO initiatives?
  • How are the politics of water control changing?

Information, market creation and agricultural growth

Dr Arjunan Subramanian, University of Glasgow

Start Date: 01 November 2012   |   End Date: 31 October 2016

Project webpage
Research Councils UK project page

The role of information and communication technology (ICT) in economic development has become a much contested topic over the last decade.

Although anecdotes exist about the impact of information provided through ICT, we know little about the effects of providing real-time information to farmers on productivity, farm incomes, changes in agricultural practices, and reduction in transaction costs. Some fear that with ICT, technological disparity will arise, and existing socio-economic inequality and poverty will be further exacerbated.  

This project will investigate the impact of ICT on rural welfare in the Indian state of Karnataka by giving selected farmers from some villages new information on key agricultural related services. Data from surveys and randomised experiments will be used to study the impact of information dissemination on agricultural practices, household incomes, social network, risk coping mechanism and caste disparity.

Industrial productivity, health sector performance and policy synergies for inclusive growth in Tanzania and Kenya

Professor Maureen Mackintosh, Open University

Start Date: Jun 2012   |   End Date: Mar 2015

Project webpage
Research Councils UK project page

This project studies the supply chains of essential medicines, medical equipment and supplies from local industries, and imports into the health systems in Tanzania and Kenya. Shortages and the high cost of health-related commodities are persistent causes of exclusionary and poor quality health care in low-income Africa.  

The research hypothesis is that better integration between industrial and health policies could contribute to higher employment, industrial upgrading, and improved health system performance and accessibility. If this is correct, improved industrial production - higher productivity, more appropriate and cheaper products, and innovative production methods - could improve health service performance while raising economic output: in other words, contribute to inclusive growth.

The project will interview heath facilities, shops and wholesalers in all sectors, in urban and rural contexts, about their procurement practices and problems. Mapping of supply chains will be followed by data collection at firm level. Private sector businesses and policy makers, and health sector managers and policy makers, will debate the scope for more integrated policy making.

Improving microfinance regulation to support growth and innovation in micro-enterprise

Professor Alison Brown, Cardiff University

Start Date: Nov 2012   |   End Date: Mar 2016

Research Council UK project page

This research focuses on strengthening consumer protection in microfinance (MF) to support growth and innovation in key urban sectors such as street vending, artisanal mining, tourism services, construction, and food processing. It will take the format of comparative studies in Rwanda, Tanzania, Kenya, Ethiopia and India.

The hypothesis is that poor regulation of MFIs (Microfinance Institutions) and lack of safety nets limit accessibility and take-up of MF services, creating excessive debt for poor borrowers and inhibiting micro-enterprise innovation and growth.

The objectives are to analyse comparatively:

  • national and local policies on MF consumer protection
  • barriers, benefits and risks to micro-enterprises of accessing MF
  • consumer protection in different MF packages, eg collateral requirements, interest rates, customer support
  • the impact of micro-finance on urban economic growth.

Methods include desk studies and key informant interviews with: government; advisory and regulatory agencies; and formal, semi-formal and informal MFIs; and semi-structured interviews with micro-enterprises in the identified economic growth sectors.

Agricultural supply chains, growth and poverty in Sub-Saharan Africa

Dr Nicolas Depetris Chauvin, African Centre for Economic Transformation

Start date: 25 April 2012   |   End date: 24 April 2015

Research Councils UK project page

In Africa, the agriculture sector has failed to become an engine of growth and economic transformation for most countries in the continent. Part of the problem lies in the market structures and in the poor institutions, policies, and infrastructure serving the agriculture sector.

This research will investigate if and how agricultural market structures and farm constraints affect the development of dynamic food and cash crop sectors and whether these sectors can contribute to economic transformation and poverty reduction in Africa.

Assessing the contribution of the dairy sector to economic growth and food security in Malawi

Dr Cesar Luis Jorge Revoredo-Giha, Scotland's Rural College

Start date: 01 June 2012   |   End date: 31 May 2015

    Project website
    Research Councils UK project page

    Fractured supply chains have been identified as a barrier to growth for the agricultural sector, in particular in Africa. Dairy is a key investment sector in Malawi, however domestic production response is unimpressive: a large part of the population are unable to access nutritious and safe dairy products, despite donors such as USA, Japan and Belgium focusing development aid on his sector.

    The project aims to boost the potential contribution of the dairy sector to aid economic growth and food security. Research will consist of assessing operations, identifying problems and proposing solutions, and integrating the different results into a model that will replicate the impact of different policy alternatives. The project is multidisciplinary and builds on the existing academic link between Scotland's Rural College and Bunda College of Agriculture in Malawi.

    A behavioural economic analysis of agricultural investment decisions in Uganda

    Dr Arjan Verschoor, University of East Anglia

    Start date: 20 February 2012   |   End date: 19 February 2015

    Project webpage
    Research Councils UK project page

    Farmers in developing countries operate in extraordinarily difficult environments. Policies that aim to increase agricultural productivity, for example agricultural lending, research and extension, rural infrastructure and crop insurance, need to take into account how farmers make agricultural investment decisions.  However, crucial elements of their decision-making habits that relate to risky choices are not well understood.

    This research project took place in east Uganda, and aimed to advance the understanding of how farmers who face numerous threats to their livelihoods take risky investment decisions. Participants responded to real monetary incentives to identify the significant features of their decision-making habits. Firstly potential biases in risky choice behaviour were studied by using lotteries to measure whether certain risks tend to be exaggerated (or alternatively, downplayed) in participants’ minds. Secondly the influence of social interaction on risky choice behaviour was studied.

    Financial regulation in low-income countries

    Balancing inclusive growth with financial stability

    Professor Stephany Griffith-Jones, Overseas Development Institute

    Start date: Mar 2012   |   End date: Sep 2015

    Project webpage
    Research Council UK project page

    In the wake of the global financial crisis, many developed and developing country governments are prioritising stability at the individual financial institutions and systemic level by strengthening financial regulation.

    Even though the latter is important to make financial systems more robust, its contribution to inclusive growth might be insufficient, especially in poor countries. This research project aimed to explore how the financial system should be regulated and structured to achieve the twin goals of inclusive growth and financial stability, with a focus on African low-income countries.

    The research was structured in two phases:

    •  First, a survey of the theoretical and empirical literature on the relationships between domestic financial structures and financial regulation, domestic and external financial regulations, and their implications for inclusive growth and stability will be carried out. In the second phase, econometric analysis on trade-offs between growth and stability when tightening financial regulation will be conducted.
    • This was complemented by in-depth country case studies by senior African researchers and focused policy analysis. Close interaction between researchers and senior policy-makers was a key feature of the project.

    Improving productivity in developing countries

    Professor Orazio Attanasio, Institute for Fiscal Studies

    Start date: Mar 2012   |   End date: Aug 2015

    Research Councils UK project page

    There is much evidence to show that productivity in developing countries can be extremely low, particularly for agricultural activities. Often, policy makers, practitioners and researchers have identified simple innovations and investment opportunities that would greatly improve productivity and offer a substantial rate of return but yet do not get adopted.

    The aim of this research is to identify imperfections and frictions that prevent the adoption of profitable technology and innovations or, more generally, that may impede investment opportunities with a potentially high rate of return. To achieve this, the research will use data that have been collected to evaluate a number of interventions in developing countries in order to estimate models of individual behaviour and investment choices. There will be four different projects, covering parts of Africa, India, and Pakistan.

    The use of different methods, ranging from impact evaluation to the estimation of economic (structural) models of behaviour will allow one to understand the mechanisms at play, and also for the extrapolation of what is learnt in a given context to a variety of different situations. This research is crucial for the design of policies aimed at improving productivity.