Challenges to MDG achievement in low income countries: lessons from Ghana and Honduras

Maurizio Bussolo and Denis Medvedev

No 4383, Policy Research Working Paper Series from The World Bank

Abstract: This paper summarizes the policy lessons from applications of the Maquette for MDG Simulations (MAMS) model to two low income countries: Ghana and Honduras. Results show that costs of MDGs achievement could reach 10-13 percent of GDP by 2015, although, given the observed low productivity in the provision of social services, significant savings may be realized by improving efficiency. Sources of financing also matter: foreign aid inflows can reduce international competitiveness through real exchange appreciation, while domestic financing can crowd out the private sector and slow poverty reduction. Spending a large share of a fixed budget on growth-enhancing infrastructure may mean sacrificing some human development, even if higher growth is usually associated with lower costs of social services. The pursuit of MDGs increases demand for skills: while this encourages higher educational attainments, in the short term this could lead to increased income inequality and a lower poverty elasticity of growth.

Keywords: Population Policies; Achieving Shared Growth; Public Sector Economics&Finance; Public Sector Expenditure Analysis&Management (search for similar items in EconPapers)
Date: 2007-11-01
New Economics Papers: this item is included in nep-afr and nep-dev
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