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Abid Raza Khan Terra Lawson-Remer Susan Randolph.

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Presentation on theme: "Abid Raza Khan Terra Lawson-Remer Susan Randolph."— Presentation transcript:

1 Abid Raza Khan Terra Lawson-Remer Susan Randolph

2  States have a duty to progressively realize economic and social rights to the maximum of available resources.  SERF index uses GDP per cap as measure of resource capacity.  Issue with use of GDP  GDP per capita may be affected by the same policy choices that determine performance on economic and social rights outcomes. Solution: An estimated measure of country’s resource capacity, using variables not amenable to policy choice.

3 Step I – Computing regression coefficient estimates  Panel of 105 countries categorized into OECD (25) and non-OECD (80) – same categories as SERF Index  Data set 1980-2008  OLS linear regression using between affects  Between affects examines cross country variations  Variables not affected by domestic policy are selected to avoid endogeneity Equation to be estimated: Ln(GDP per capita) = α + β1 ln(GDP per capita) 1970 + β2 (life expectancy) 1970 + β3 (malaria prevalence) 1966 + β4 (war deaths) t + β5 (years open) t + β6 (net oil rents per capita) t + e

4 Sr # ConceptVariableDescription and Source Used for OECD Non OECD 1 Initial Income level Natural log of GDP per capita in 1970 PPP converted GDP per capita at current prices. From Penn World Table 7.0 √√ 2 Initial health conditions Life expectancy in 1970 Number of years a newborn infant is expected to survive following prevailing patterns of mortality. From World Bank √√ 3 Geography and sanitary conditions Malaria prevalence in 1966 Percentage of country area with malaria in 1966. From Gallup et. al. (2001) √ 4Affects of wars War deaths in a year Total number of deaths in armed conflicts in a given year, using the low estimate of casualties. From UCDP/PRIO dataset √ 5 Economic openness Number of years since open economy. From Sachs and Warner (1997) updated according to Wacziarg and Welch (2008) √√ 6Natural resource wealth Oil rents per capita Ratio of oil rents and population. Oil rents are defined as difference between the value of crude oil production at world prices and total costs of production. (From World Bank) √√

5 VariableCoefficientStd. Errort ln(GDP per capita – 1970)0.64470.06210.39 Life expectancy in 19700.02850.006794.93 War deaths per year-0.00003990.0000228-1.75 Malaria in 1966-0.48050.1239-3.88 Number of years open0.02060.004664.42 Net oil rents per capita0.000510.0001373.72 Constant2.14250.36375.89 No. of Groups80R 2 (between) =0.8990 Obs. Per group29R 2 (overall) =0.8331

6 VariableCoefficientStd. Errort ln(GDP per capita – 1970)0.80450.08649.31 Life expectancy in 1970-0.0560.0149-3.76 Number of years open0.00610.00242.45 Net oil rents per capita0.0000690.0000322.15 Constant7.080160.658910.74 No. of Groups25R 2 (between) =0.9183 Obs. Per group29

7 Step 2 – Compute Predicted Resource Capacity Aforementioned estimates of per capita GDP are then used to compute resource capacity as follows: Non - OECD ln(GDP per Capita) = 2.1425 + 0.6447 * ln (GDP per capita) 1970 + 0.0285 x (life expectancy) 1970 - 0.0000399 x (war deaths) t - 0.4805 x (Malaria) 1966 + 0.0206 x (No. years open) t + 0.00051 x (Net Oil Rents per capita) t OECD ln(GDP per Capita) = 7.08016 + 0.8045 * ln (GDP per capita) 1970 - 0.056 x (life expectancy) 1970 + 0.0061 x (No. years open) t + 0.000069 x (Net Oil Rents per capita) t

8 ArgentinaBangladesh

9 Step 3 – Computing SERF Index a) Index computed for each indicator S = 100 [(actual value – minimum value) / (frontier value – minimum value)] Example Frontier equation: % Not stunted = -2.158 + 11.175 (Ln GDP per capita) b) Adjusted Index for countries with output greater than peak output Adjusted Indicator Score, c) Weighted Average to compute SERF Index Estimated Resource Capacity

10 45 o line

11 Trend line

12 Country Original SERF Index SERF Index using estimated valuesDifference SERF Index Percentiles Botswana60.3679.0218.6660 – 80 China79.7297.5617.8360 – 80 India56.0576.6020.5440 – 60 Cameroon56.9271.5114.5940 – 60 Swaziland50.5464.4213.8840 – 60 Senegal63.3177.1113.8160 – 80 Liberia63.1245.92-17.2060 - 80 * Significant is defined as a difference of more than two standard deviations

13  Are the set of variables correct and sufficient to estimate resource capacity of a country?  What are the major reasons for significant difference in estimated SERF Index as compared to original SERF Index?

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