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Economic growth isn't a tide that lifts all boats

Rohini Pande, Yale Professor of Economics Rohini Pande, Yale Professor of Economics

Rohini Pande, Yale Professor of Economics and Director of its Economic Growth Center, talks to journalist Rhoda Metcalfe at a podcast produced by the International Monetary Fund (IMF). Pande is one of the leading development economists of her time. Here is a written version of the talk:

Bruce Edwards: Welcome to this podcast produced by the International Monetary Fund (IMF). In this program, one of the most influential development economists of her time, Rohini Pande talks with journalist Rhoda Metcalfe about how better institutions can make life a little fairer.

Rhoda Metcalfe: So just starting off.... much of your current research focuses on what you call inclusion economics. Why make that your focus?

Rohini Pande: So I grew up in India. And India and neighbouring countries in Southeast Asia have been a focus of much of my work. And certainly, both as I grew up and saw India enter a period of say, trade liberalisation, and alongside it's often described as the world's largest democracy. And yet after more than two decades of fast growth since 1991 and a long history of being a democratic nation, India also is fast emerging as one of the most unequal countries now in recent times. And so I think it's both having grown up in India and just seeing how fast it's changed, yet how many people have failed to benefit from that growth. And so I think it became important for me to ask the question of "How do we go beyond simple reforms of liberalising markets or of reducing trade barriers?" To understand what more will be needed in terms of public policy to ensure that the benefits of economic growth, the benefits of having a democratic system are enjoyed by the country's citizens.

Rhoda Metcalfe: So what does inclusion economics look like?

Rohini Pande: Economics has a lot to say on how to have intentional policies that reach the poor and vulnerable, but I think we need to put it centre stage and not assume that it will follow automatically from say, free trade or just opening up markets. It has to be something maybe intentionally recognized that we want to see the wellbeing of some of the poorest, most disadvantaged individuals improve. And that requires us to, very often, specifically put in place policies that don't increase growth, that may not lead to less regulated freer markets, but serve the very specific purpose of ensuring inclusion.

Rhoda Metcalfe: So that's interesting. Can you give me an example from your own work that focuses on this idea of inclusion economics? What would be one of the studies that you've done that you think really focuses in this way?

Rohini Pande: So, one thing that I worked on right at the start of my career was looking at affirmative action policies and politics. And I was interested in the fact that at the time, when the Indian constitution was put in place, there was interest in having political affirmative action for disadvantaged social groups, which are known as scheduled castes and scheduled tribes. So you would have elections, but only members of these groups could stand for election and the seats in the constituencies reserved for them. And what I found was that it did have impacts... they were different. So for schedule castes, you saw affirmative action for political leaders translated into greater legislative activism by these leaders on affirmative action in the labour markets. But it seemed very clear from the data that representation mattered. Very recently, I've looked at similar questions in the context of Nepal, which is one of the world's youngest democracies, which put in place a new constitution and a decentralised government in 2017. And this was a point where Nepal had come out of a 10 year reasonably violent people's war. And there's a big question of whether a democratic governance could lead to representation for the ethnically disadvantaged groups that had actually been at the forefront of the people's war. And so in this case, the mechanism was different. It wasn't the use of political quarters in seats, but rather the fact that the insurgent group during the peoples war, the Maoist party now entered as a full-fledged party post-conflict that led to entry of these groups. They were in some ways mainstreamed by the Maoist party. It was interesting to think about who are the gatekeepers to power in different societies and how you can actually affect it, in some cases directly through policy in a democratic setting, in other cases, and actually designing how post-conflict negotiations take place. So those are two examples where I've actually tried to look at very explicitly how inclusion of disadvantaged groups happens through the political process. And then in both cases, we also ask, "What implications does this have for policies that are implemented after?"

Rhoda Metcalfe: So in the second case in the study in Nepal, what conclusions did you make in terms of the effect on the particular groups that you were looking at?

Rohini Pande: I think we had two sets of, I'd say, findings. The first was that we see the Jan Shakti, which is the ethnic group that had been largely been left out of the political representation process in the 1990s, gets very significant representation in local government. To a large extent, this was made possible by the Maoist party. The second thing that we look at is, did this representation come at possible by the Maoist party. The second thing that we look at is, did this representation come at the expense of other characteristics that you may want to see in your leaders like for instance, education. And we actually find that's not the case. So I think what's interesting here is that the Maoist party, if you want groomed a new set of leaders, but also ensured that they did well on other dimensions, especially education.

And education matters because the whole process of manoeuvring the bureaucracy and ensuring that citizens in your constituency get the benefits they need, I think requires not only that he wants to represent them, but also that you can do all the paperwork, make your way through the bureaucracy. And I think that's often a pitfall for a newly elected leaders from historically disadvantaged groups that often don't come with that kind of political capital or knowledge. So in 2017, when these leaders were newly elected, one of the main responsibilities was actually housing relief that the government had been setting up after the deadly earthquake that happened in Nepal in 2015. And then we do find that the local leaders from the Jan Shaktis who got elected were as competent as the other groups,

Rhoda Metcalfe: Right- so the fact that the leaders themselves are quite well educated and sort of plugged into how the system works, meant that they were able to translate that into helping their people.

Rohini Pande: That's exactly right.

Rhoda Metcalfe: So interesting. You mentioned at the beginning that you grew up in India and a lot of these issues were around you, but was there something in your upbringing that led you down this road to focus so much on these issues of inclusion?

Rohini Pande: I think, college years are important years in terms of big need to see what's happening politically around you. And when I was an undergraduate in Delhi University, there was a large movement towards introduction of affirmative action directly by the central government in jobs for historically disadvantaged groups. And I was in Delhi University, suddenly the reasonably privileged member of society in a college where most of my classmates had also been lucky enough to go to extremely good schools. And I think when you're 18 or 19, and you believe that the world should run on merit. So at that time, my reaction, as many of my classmates was, we should work on the pipeline, we should make sure people get good education, but we should not distort the job market by having affirmative action. And then soon after, just as soon as I finished my undergraduate degree, I went to Oxford to study. And there I suddenly went from being very much an insider to being someone who's come from outside, who is trying to understand what differences and accents of my classmates meant. And I think that's when I began to realize that you can't just wish an equal system. You can't just say that the job market should not be affected by historical inequities. That was a point at which I started thinking much more about how public policy has a role in reducing these inequities at various stages of a person's life cycle, not just at the age of six.

Rhoda Metcalfe: Right... Also in your work, a great deal of your focus has been on institutions and the need to build more effective institutions. And I guess the challenge is, how do you build good, functional institutions, especially in fragile low-income countries? What needs to be done to make institutions that really work to the benefit of the people?

Rohini Pande: I agree, but I think we should also remember that all countries and all societies do have institutions. And sometimes where you need to start, is perhaps a lot more locally. So going back again to the case of Nepal, Nepal came out of 20 years of insurgency and conflicts and 240 years of a monarchy. And I think in a lot of ways, whether Nepal's experiment with democracy will succeed is really going to depend on the extent to which it builds upon local institutions. So I think democracy, if it works, is going to be a bit bottom up. It's going to depend on how well the country gets decentralized and how much local institutions are able to respond. And I mention that because I think in many fragile and conflict prone countries, that perhaps is more the opportunity is to think about how to build local institutions rather than hoping that a new national government, which is not trusted by perhaps many in the country, is going to be able to push forward.

Rhoda Metcalfe: Right, so local institutions, grassroots, agricultural groups or something that has direct contact with the people...

Rohini Pande: Or even democratic institutions, so I think decentralized governments. Some of my work in India on women leaders looks at the role of having political affirmative action for women at the local level. And it's had important effects in terms of ensuring that women's preferences are represented and also in changing voter attitudes towards women. But this happened at a local level because the perceived cost of having quotas at the national level, or even the state level was seen as too high. But it has an incredible effect of creating a whole generation of local female leaders who hopefully over time will make it up through the state and national level.

Rhoda Metcalfe: Has there been any indication that more women are coming up? Moving up towards the state national level?

Rohini Pande: Yeah. There is some evidence it's now been more than 20 years. It was 1992 when the local level governments were mandated across India. And so there is some evidence now that in areas where there was exposure to female leaders, first, they're more likely to elect women leaders. And there's been some recent qualitative evidence suggesting that some of these women are moving up at least to the level of district leadership, if not state.

Rhoda Metcalfe: Interesting. Well, that brings me to my final question. Talking about women in economics, you're a strong advocate for women economists. Why is this important to you? And what approach do you take to help change the dynamics so that more women economists do rise through the ranks?

Rohini Pande: One of the things that attracted me to economics as a field was that it was a social science that was quite fearless about the questions it would take on. We were taught that we would be given a set of tools that would help us be relatively objective in how we seek answers to questions. Of course, what questions you choose to answer is always up to the person who does the research. And I think that's why it's incredibly important to have diversity in the field. Otherwise, you can have just an extremely narrow set of questions being asked. And so race or representation from lower income countries, these are all important aspects of diversity. The one that I have been more involved with is thinking about women in economics. I think that's certainly something as I've gotten more senior in the profession, I feel I have the luxury of being able to ask my colleagues to help make our departments ones where we can allow for more diversity, and people colleagues to help make our departments ones where we can allow for more diversity, and people don't feel like they're being told to, kind of shut up, if they don't speak what the mainstream speakers at that time.

Rhoda Metcalfe: So what do you think the global economy would look like if there were more women calling the shots? Would it be different?

Rohini Pande: Yeah, I mean, I think it's an interesting question. I don't know. And I think that's why we need to find out. It will probably have more diversity in terms of the kind of questions being asked. But I think beyond that, I don't think we need to know that in order to strive for it.

Rhoda Metcalfe: Interesting. Thank you so much for giving us a deeper insight into your work.

Rohini Pande: Thanks very much for having me.

[The piece is excerpted from www.imf.org/en/News/Podcasts]

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