Eric D. Werker

Associate Professor of Business Administration

Eric Werker is Associate Professor in the Business, Government, and the International Economy Unit at Harvard Business School. His research explores the political economy, macroeconomics, and business environments of emerging and frontier economies, particularly in Africa.

Professor Werker has written on fragile states, foreign aid, foreign investment, non-governmental organizations, conflict, and governance. His work has been featured in the Financial Times, Washington Post, BBC, NPR, and publications across the developing world.

Outside of academia, Werker is the Lead Academic for the International Growth Centre's program in Liberia and economic advisor to the President of Liberia. He has worked with the US Government’s Millennium Challenge Corporation on foreign aid projects and with the NGO Conservation International on low-carbon development. He serves on the Advisory Group of the Center for Global Development, is a Fellow at Harvard Kennedy School's Center for International Development, and has worked with corporations and nonprofits on their decisions and activities in emerging markets.

Werker earned his Ph.D. and AB in economics from Harvard University. In his spare time, he enjoys family, skiing, climbing, and mountain biking. He lives in Somerville with his wife Alana and two children, Jonathan and Dalia.

Journal Articles

  1. The Costs of Favoritism: Is Politically-Driven Aid Less Effective?

    As is now well documented, aid is given for both political as well as economic reasons. The conventional wisdom is that politically motivated aid is less effective in promoting developmental objectives. We examine the ex-post performance ratings of World Bank projects and generally find that projects that are potentially politically motivated—such as those granted to governments holding a non-permanent seat on the United Nations Security Council or an Executive Directorship at the World Bank—are no more likely, on average, to get a negative quality rating than other projects. When aid is given to Security Council members with higher short-term debt, however, a negative quality rating is more likely. So we find evidence that World Bank project quality suffers as a consequence of political influence only when the recipient country is economically vulnerable in the first place.

    Keywords: World Bank; aid effectiveness; political influence; United Nations Security Council; International Finance; Prejudice and Bias; Outcome or Result; Projects; Government and Politics; Power and Influence;

    Citation:

    Dreher, Axel, Stephan Klasen, James Vreeland, and Eric Werker. "The Costs of Favoritism: Is Politically-Driven Aid Less Effective?" Economic Development and Cultural Change 62, no. 1 (October 2013).
  2. South Sudan: The Birth of an Economy

    We discuss the birth of a new economy in a society that has only recently emerged from a 22-year-long civil war. The pace of growth so far has been fast but uneven. We find that aid and oil money are flowing rapidly into certain sectors, while other employment-generating areas of the economy, particularly agriculture, have barely changed their centuries-old ways. As a result, the recent windfall of wealth has yet to translate into tangible development benefits for the majority of the population. In order to achieve growth in these other sectors, there is a need for more innovation in both government policy and business strategy.

    Keywords: Sudan; developing markets; Foreign aid; conflict; oil prices; private sector development; Emerging Markets; Policy; Developing Countries and Economies; Innovation and Invention; Sudan;

    Citation:

    Werker, Eric D., Kelly Wyett, and Shannon Ding. "South Sudan: The Birth of an Economy." Innovations: Technology, Governance, Globalization 7, no. 1 (Winter 2012): 73–90.
  3. Do Voters Demand Responsive Governments? Evidence from Indian Disaster Relief

    Using rainfall, public relief, and election data from India, we examine how governments respond to adverse shocks and how voters react to these responses. The data show that voters punish the incumbent party for weather events beyond its control. However, fewer voters punish the ruling party when its government responds vigorously to the crisis, indicating that voters reward the government for responding to disasters. We also find evidence suggesting that voters only respond to rainfall and government relief efforts during the year immediately preceding the election. In accordance with these electoral incentives, governments appear to be more generous with disaster relief in election years. These results describe how failures in electoral accountability can lead to suboptimal policy outcomes.

    Keywords: Political Elections; System Shocks; Natural Disasters; Policy; Motivation and Incentives; Public Opinion; India;

    Citation:

    Cole, Shawn, Andrew Healy, and Eric Werker. "Do Voters Demand Responsive Governments? Evidence from Indian Disaster Relief." Journal of Development Economics, no. 97 (2012): 167–181.
  4. Corporate Governance at the World Bank and the Dilemma of Global Governance

    Most major decisions at the World Bank are made by its Board of Executive Directors. While some countries enjoy the opportunity to serve on this powerful body, most countries rarely, if ever, get that chance. This gives rise to the question: does board membership lead to higher funding from the World Bank's two main development financing institutions, the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA)? Empirical analysis shows that developing countries serving on the board can expect more than double the funding from the IBRD as countries not on the board. In absolute terms, countries on the board receive an average $60 million "bonus" in IBRD loans, an amount that rises in years when IBRD loans are in high demand, particularly for countries in the most influential seats. This effect is more likely driven by informal rules and norms in the boardroom than by the power of the vote itself. No significant effect is found in IDA funding. These results point to challenges of global governance through representative institutions.

    Keywords: Corporate Governance; Decisions; Governing and Advisory Boards; Banks and Banking; Financing and Loans; Management Analysis, Tools, and Techniques; Governing Rules, Regulations, and Reforms; Voting; Globalized Economies and Regions;

    Citation:

    Kaja, Ashwin, and Eric Werker. "Corporate Governance at the World Bank and the Dilemma of Global Governance." World Bank Economic Review 24, no. 2 (2010).
  5. How Is Foreign Aid Spent? Evidence from a Natural Experiment

    We use oil price fluctuations to test the impact of transfers from wealthy OPEC nations to their poorer Muslim allies. The instrument identifies plausibly exogenous variation in foreign aid. We investigate how aid is spent by tracking its short-run effect on aggregate demand, national accounts, and balance of payments. Aid affects most components of GDP though it has no statistically identifiable impact on prices or economic growth. Much aid is consumed, primarily in the form of imported noncapital goods. Aid substitutes for domestic savings, has no effect on the financial account, and leads to unaccounted capital flight.

    Keywords: Foreign aid; Money;

    Citation:

    Werker, Eric D., Faisal Z. Ahmed, and Charles Cohen. "How Is Foreign Aid Spent? Evidence from a Natural Experiment." American Economic Journal: Macroeconomics 1, no. 2 (July 2009): 225–244. (Reprinted in Geopolitics of Foreign Aid, ed. Helen Milner and Dean Tingley. Northampton: Edward Elgar, 2013.)
  6. The Political Economy of 'Natural' Disasters

    Natural disasters occur in a political space. Although events beyond our control may trigger a disaster, the level of government preparedness and response greatly determines the extent of suffering incurred by the affected population. We use a political economy model of disaster prevention, supported by case studies and preliminary empirics to explain why some governments prepare well for disasters and others do not. We show how the presence of international aid distorts this choice and increases the chance that governments will under-invest. Policy suggestions that may alleviate this problem are discussed.

    Keywords: History; Demographics; Natural Disasters; Policy; Economy; Government and Politics;

    Citation:

    Cohen, Charles, and Eric D. Werker. "The Political Economy of 'Natural' Disasters." Journal of Conflict Resolution 52, no. 6 (December 2008): 795–819.
  7. A Better Approach to Foreign Aid

    Frustration with U.S. foreign aid is widespread. At the same time, flows of private development finance—including foreign direct investment and remittances—have begun to dwarf official aid. We suggest a new approach that harnesses the power of private development finance to direct it towards developmental and foreign policy goals. Specifically, we argue that tax credits for companies, and tax breaks for individuals, can be used to incentivize productive investments while being a positive force for meaningful reform in the developing world.

    Keywords: Developing Countries and Economies; Foreign Direct Investment; International Relations; Taxation; Welfare or Wellbeing; United States;

    Citation:

    Muzinich, Justin, and Eric D. Werker. "A Better Approach to Foreign Aid." Policy Review 149 (June–July 2008).
  8. What Do Nongovernmental Organizations Do?

    Nongovernmental organizations are one group of players who are active in the efforts of international development and increasing the welfare of poor people in poor countries. Nongovernmental organizations are largely staffed by altruistic employees and volunteers working towards ideological, rather than financial, ends. Their founders are often intense, creative individuals who sometimes come up with a new product to deliver or a better way to deliver existing goods and services. They are funded by donors, many of them poor or anonymous. Yet these attributes should not be unfamiliar to economists. Development NGOs, like domestic nonprofits, can be understood in the framework of not-for-profit contracting. It is easy to conjure up a glowing vision of how the efforts of NGOs could focus on problem solving without getting bogged down in corruption or bureaucracy. But the strengths of the NGO model have some corresponding weaknesses—in agenda setting, decision making, and resource allocation. We highlight three factors in explaining the increased presence of NGOs in the last few decades: a trend towards more outsourcing of government services; new ventures by would-be not-for-profit "entrepreneurs"; and the increasing professionalization of existing NGOs.

    Keywords: Non-Governmental Organizations; Growth and Development; Welfare or Wellbeing; Poverty; Service Delivery; Crime and Corruption; Social Entrepreneurship; Decision Making; Resource Allocation; Product Development; Framework;

    Citation:

    Werker, Eric D., and Faisal Z. Ahmand. "What Do Nongovernmental Organizations Do?" Journal of Economic Perspectives 22, no. 2 (spring 2008).
  9. Review of Transforming the Development Landscape: The Role of the Private Sector, edited by Lael Brainard

    Keywords: Information; Transformation; Growth and Development; Private Sector;

    Citation:

    Werker, Eric D. "Review of Transforming the Development Landscape: The Role of the Private Sector, edited by Lael Brainard." Journal of Economic Literature XLV, no. 4 (December 2007): 1080–1082. (Full Text.)
  10. Refugee Camp Economies

    This paper describes the economy of a refugee camp. Key distortions to the economy of Kyangwali Refugee Settlement in Uganda are noted and the findings are used to construct a generic model of a refugee camp economy. Camp economies are influenced by host country policies, such as restrictions on refugees' movement and work, as well as by the physical and economic isolation of the site. Moreover, market outcomes interact with the nature of humanitarian assistance and the special demographic composition of the refugees to determine the prices and quantities that characterize the market. An awareness of the dynamics of the refugee camp economy has important implications for practitioners and scholars alike.

    Keywords: Refugees; Economy; Policy; Civil Society or Community; Human Needs; Societal Protocols; Uganda;

    Citation:

    Werker, Eric D. "Refugee Camp Economies." Journal of Refugee Studies 20, no. 3 (September 2007): 461–480.
  11. Local Company Politics: A Proposal

    Corrupt politicians, and poor government more generally, are commonly viewed as a primary barrier to economic progress. The roots to these problems run deep in many political systems across the developing world, and attempts at reform have rarely found much success. To combat this impasse, we suggest a radical new approach to local politics that, instead of proposing reforms to the electoral process, focuses on the political actors that might enter into this process. Specifically, we suggest that private firms be allowed to compete in elections to hold public office. That is, a corporate entity (e.g., Ernst and Young), rather than an individual representative of the firm, would be permitted to contest a local election. We argue that this is feasible: sufficient economic incentives could be put in place to induce firms to run for office, particularly if company officeholders prove to be competent in revenue collection. More importantly, we claim that there are many channels through which company politics should improve government, from breaking up entrenched old boys' networks to leveraging a company's existing organizational expertise. Private firms have realized efficiency and performance gains in areas such as infrastructure and many bureaucratic functions; we argue that the private sector can also attain results in politics, the most public of all realms.

    Keywords: Behavior;

    Citation:

    Fisman, Raymond, and Eric D. Werker. "Local Company Politics: A Proposal." Capitalism and Society 2, no. 1 (March 2007).
  12. How Much Is a Seat on the Security Council Worth? Foreign Aid and Bribery at the United Nations

    Ten of the fifteen seats on the U.N. Security Council are held by rotating members serving two-year terms. We find that a country's U.S. aid increases by 59 percent and its U.N. aid by 8 percent when it rotates onto the council. This effect increases during years in which key diplomatic events take place (when members' votes should be especially valuable) and the timing of the effect closely tracks a country's election to, and exit from, the council. Finally, the U.N. results appear to be driven by UNICEF, an organization over which the United States has historically exerted great control.

    Keywords: Foreign aid; Governance; Value;

    Citation:

    Kuziemko, Ilyana, and Eric D. Werker. "How Much Is a Seat on the Security Council Worth? Foreign Aid and Bribery at the United Nations." Journal of Political Economy 114, no. 5 (October 2006): 905–930. (Reprinted in Geopolitics of Foreign Aid, ed. Helen Milner and Dean Tingley. Northampton: Edward Elgar, 2013.)
  13. Portrait of a Failed Rebellion: An Account of Rational, Sub-optimal Violence in Western Uganda

    While newspaper reports typically describe anti-civilian violence in civil war as resulting from hatred or anarchy, there is an emerging literature that interprets these processes as calculated, strategic actions of war makers. We argue that this literature overestimates the strategic value of violence by focusing on conflicts where this strategy is used deliberately and on a massive scale. Our analysis examines the violence in a failed, peripheral rebellion in western Uganda and finds that the brutality was premeditated; however the gains to the Allied Democratic Forces (ADF) rebels were not military. Instead, we argue that anti-civilian violence in western Uganda stems from the financier-insurgent relationship that promoted a high level of violence in response to divergent interests, unequal access to information, and contracting limitations. In other words, civilians were victimized in order that the ADF could keep their outside funding.

    Keywords: civilian violence; civil war; insurgency; war financing; Uganda; Failure; Society; Uganda;

    Citation:

    Hovil, Lucy, and Eric D. Werker. "Portrait of a Failed Rebellion: An Account of Rational, Sub-optimal Violence in Western Uganda." Rationality and Society 17, no. 1 (February 2005): 5–34.

Book Chapters

  1. Assessing Potential Carbon Revenues from Reduced Forest Cover Loss in Liberia

    We conducted an analysis that explores the merits of a low-carbon development strategy for Liberia. This chapter describes both our cost-benefit analysis initiative and a plausible policy process for Liberia. We proposed a simple approach that models the costs and benefits of land placed under different uses. Policy scenarios then determine the amount of land under each land use and the implications for costs, benefits, and carbon emissions. A "low-carbon development strategy" for Liberia would include a number of cost beneficial policies, the most obvious being a transition to more efficient agriculture. Other beneficial policies include accelerating the establishment of Protected Areas, ensuring that tree crop plantations are located on degraded land rather than forest areas, and introducing energy-efficient stoves for charcoal and fuel wood.

    Keywords: carbon revenue; Liberia; deforestation; climate change; Weather and Climate Change; Environmental Sustainability; Liberia;

    Citation:

    Donovan, Jessica, Keith Lawrence, Christopher Neyor, Eduard Niesten, and Eric Werker. "Assessing Potential Carbon Revenues from Reduced Forest Cover Loss in Liberia." Chap. 19 in The Globalization of Cost-Benefit Analysis in Environmental Policy, edited by Michael A. Livermore and Richard L. Revesz, 293–304. Oxford University Press, 2013.
  2. The Political Economy of Bilateral Foreign Aid

    Despite its developmental justification, aid is deeply political. This paper examines the political economy of aid allocation first from the perspective of the donor country, and then the political economy of aid receipt and implementation from the perspective of the recipient country. When helpful, it draws from studies of multilateral aid. Following those discussions, the paper explores solutions, employed by the development community, to the distortions brought about by the political economy of bilateral aid—distortions that steer aid away from achieving economic development in the recipient country. As it turns out, none of these solutions can shield foreign aid from the heavy hand of politics. Developing countries heavily influenced by foreign aid end up with a different, and novel, governing apparatus.

    Keywords: Foreign aid; bilateral foreign aid; political economy; International Finance; Resource Allocation; Government and Politics; Economics;

    Citation:

    Werker, Eric D. "The Political Economy of Bilateral Foreign Aid." In Handbook of Safeguarding Global Financial Stability: Political, Social, Cultural, and Economic Theories and Models, edited by G. Caprio, 47–58. Academic Press, 2012.
  3. Innovations in Governance

    In this paper we explore the innovations in governance that have promoted investment and growth. Some policymakers have tinkered with their country's institutions, some have undertaken wholesale changes, while others have attempted to influence the rules in other countries. We survey past attempts at governance innovation, from private governance in India's industrial cities to cross-border government efforts, like Singapore's Suzhou Park, outside of Shanghai, from norm-changing mimes in Bogota to rule-of-law enforcing anti-corruption authorities in Hong Kong. From these recent experiences, we try to extract a few key principles that characterize governance innovations that encourage investment and growth. These include competition, which puts pressure on policymakers to improve institutions; information, which provides necessary knowledge to citizens that can help them push for improved governance; trade in institutions, which allows effective institutions to move across borders; and shifting culture, that is, the jolting of norms to be rule compliant. Finally, we use these principles combined with historical precedent to describe the potential consequences of some recent proposals for governance innovation.

    Keywords: Economic Growth; Investment; Governance; Governing Rules, Regulations, and Reforms; Policy; Government and Politics; Innovation and Invention;

    Citation:

    Fisman, Raymond, and Eric Werker. "Innovations in Governance." In Innovation Policy and the Economy, Volume 11, edited by Josh Lerner and Scott Stern. Chicago: National Bureau of Economic Research, 2011.
  4. Yes, But Weak States Can Be Coaxed Creatively

    Keywords: Government and Politics; International Relations; Negotiation; Creativity; Power and Influence;

    Citation:

    Werker, Eric D. "Yes, But Weak States Can Be Coaxed Creatively." In Creative Capitalism: A Conversation with Bill Gates, Warren Buffett, and Other Economic Leaders, edited by Michael Kinsley and Conor Clark, 170–171. Simon & Schuster, 2008.

Short Articles and Opinion

  1. A Market-based Mechanism to Improve Capital Expenditures

    Keywords: finance; infrastructure; debt; political risk; expenditure; Ghana; Africa;

    Citation:

    Werker, Eric D. "A Market-based Mechanism to Improve Capital Expenditures." Ideas for Africa (December 10, 2013).
  2. Detroit Has Filed For Bankruptcy. Now What? The Long View

    Keywords: bankruptcy; Detroit;

    Citation:

    Werker, Eric D., and Benjamin Kennedy. "Detroit Has Filed For Bankruptcy. Now What? The Long View." Forbes.com (July 24, 2013).
  3. Natural Disasters Hurt Incumbents

    Keywords: natural disasters; election outcomes; Natural Disasters; Political Elections;

    Citation:

    Cole, Shawn A., Andrew Healy, and Eric Werker. "Natural Disasters Hurt Incumbents." Politico (November 2, 2012).
  4. Disaster Politics: International Politics and Relief Efforts

    Keywords: Government and Politics;

    Citation:

    Werker, Eric D. "Disaster Politics: International Politics and Relief Efforts." Online Symposium August Harvard International Review (2010).
  5. The End of Foreign Investment in Russia?

    Keywords: Foreign Direct Investment; Russia;

    Citation:

    Fisman, Raymond, and Eric D. Werker. "The End of Foreign Investment in Russia?" Oct 13 Forbes.com (2009).
  6. How Globalization's Losers Win

    Keywords: Globalization;

    Citation:

    Werker, Eric D. "How Globalization's Losers Win." Atlantic.com (March 4, 2009).
  7. Power to the People

    Every nongovernmental organization has a mission statement. For example, CARE, one of the world's largest and best-funded NGOs, explains its mission as serving "individuals and families in the poorest communities in the world. Drawing strength from our global diversity, resources and experience, we promote innovative solutions and are advocates for global responsibility." Indeed, CARE has teams of experts with years of experience in more than 70 countries, and its efforts to tackle the "underlying causes of poverty" are impressive. Implicit in its mission statement, like those of most NGOs, is the notion that CARE is exceptionally knowledgeable about how to meet the needs of the world's poor. But does it know best?

    Take one of the most confounding global problems today: the skyrocketing cost of food. Prices for staple crops such as rice and wheat have more than doubled since 2006, putting an enormous strain on the 1.2 billion people living on a dollar a day or less. In 2004, a typical poor farmer in Udaipur, India, was already spending more than half his daily dollar of income on food—and that was before grain prices went through the roof.

    NGOs and relief agencies are on the front lines of this global crisis, distributing food and other forms of assistance to the hardest-hit victims. But food handouts may be the last thing that poor countries need right now. In many of the worst-stricken places, agriculture is the top employer. High food prices are offering a rare opportunity for farmers in these countries to make a tidy profit. Dumping imported food onthe market will cut into many farmers' incomes and thus might do more harm than good. Low-wage work programs could help people avoid hunger, but they might also take farmers away from their fields just when farming is becoming lucrative.

    Keywords: Mission and Purpose; Food; Service Operations; Inflation and Deflation; Experience and Expertise; Economic Slowdown and Stagnation; Knowledge; Poverty; Agribusiness; Diversity Characteristics; Non-Governmental Organizations; Innovation and Invention; India;

    Citation:

    Werker, Eric D. "Power to the People." Foreign Policy (November–December 2008).
  8. KPMG for Mayor!

    Keywords: Government and Politics;

    Citation:

    Werker, Eric D. "KPMG for Mayor!" Forbes 179, no. 6 (March 26, 2007): 40.
  9. A Global Tax Credit

    Keywords: Taxation; Credit;

    Citation:

    Muzinich, Justin, and Eric D. Werker. "A Global Tax Credit." New York Times (October 20, 2007).
  10. The Search for Security

    Keywords: Safety;

    Citation:

    Fisman, Raymond, and Eric D. Werker. "The Search for Security." Mastering Uncertainty Financial Times (March 23, 2006).

Policy Papers

  1. Learning from Double-Digit Growth Experiences

    This extended memorandum identifies episodes of sustained double-digit growth in real GDP, defined as a compound annual growth rate of 10 percent or more over a period of 8 years or longer. Using a measure of real GDP reported in the World Development Indicators, we identify 33 country-episodes of double-digit growth since 1960. The narrative of each episode is presented, and key drivers of growth described. The double-digit growth episodes are then compared to episodes of sustained 6-7 percent growth on a number of economic and development indicators. Statistical tests show that differences in average episode values between the two groups are significant for: Amount of FDI received, the share of natural resource rents in GDP, investment, export growth, industrial composition, and public spending on education. Double-digit growth countries also tended to show worse performance on a number of business environment and governance indicators. From this analysis, lessons are drawn for Liberia. We conclude that with a continued inflow of aid, foreign direct investment, and a rapid increase in natural resource production, Liberia has the potential to achieve double-digit growth. However, as experiences of double-digit growth countries show, the challenge will be to convert the surge in unearned income into sustainable growth, sound policy reforms, and effective governance.

    Keywords: Growth; Liberia;

    Citation:

    Werker, Eric D. "Learning from Double-Digit Growth Experiences." International Growth Centre Working Paper, April 2013.
  2. Liberia: A Case Study

    Citation:

    Werker, Eric D., and Jasmina Beganovic. "Liberia: A Case Study." Growth in Fragile States Workshop , International Growth Centre, Oxford, England, July 5–6, 2011.
  3. Negotiating for Development: A New Paradigm for Natural Resource Agreements

    Keywords: Agreements and Arrangements; Development Economics; Natural Environment;

  4. Testimony on 'Foreign Assistance in the Americas'

    Keywords: International Finance; International Relations; North and Central America; Latin America; South America; West Indies;

    Citation:

    Werker, Eric D. "Testimony on 'Foreign Assistance in the Americas'." U.S. House of Representatives, Committee on Foreign Affairs, Subcommittee on the Western Hemisphere, September 2008.
  5. Refugees in Kyangwali Settlement: Constraints on Economic Freedoms

    Citation:

    Werker, Eric D. "Refugees in Kyangwali Settlement: Constraints on Economic Freedoms." Refugee Law Project Working Paper, No. 7, November 2002.
  6. Refugees in Arua District: A Human Security Analysis

    Keywords: Refugees; Safety; Human Needs; Uganda;

    Citation:

    Hovil, Lucy, and Eric D. Werker. "Refugees in Arua District: A Human Security Analysis." Refugee Law Project Working Paper, No. 3, September 2001.

Working Papers

  1. Profits and Economic Development

    Are rents, or excess profits, good for development? Using industry-level manufacturing data, this paper demonstrates a negative effect of rents, measured by the mark-up ratio, on productivity growth. The negative effect is strongest in poor countries, suggesting that high profits stymie economic development rather than enable it. Consistent with the rent-seeking mechanism of our model, we find that high rents are associated with a slower reduction in tariffs. A country’s average mark-up in manufacturing is a strong negative predictor of future economic growth, indicating that we may be measuring a phenomenon of the broader business environment.

    Keywords: firm performance; rent; mark-up; competition; manufacturing; economic growth; Development Economics; Profit; Economic Growth; Renting or Rental;

    Citation:

    Schwab, Dan, and Eric Werker. "Profits and Economic Development." Harvard Business School Working Paper, No. 14-087, March 2014. (Revised April 2014.)
  2. Developing the Guts of a GUT (Grand Unified Theory): Elite Commitment and Inclusive Growth

    Two key unanswered questions in theories of growth are (a) why some countries successfully initiate episodes of rapid growth while others suffer extended stagnation and (b) why some countries are able to sustain growth episodes over many decades of rapid (or steady) growth while other growth episodes end in reversion to stagnation or collapse. We create an analytical model that is capable of generating both transitory and sustained episodes of accelerated growth. The new feature is a feedback loop from existing economic conditions the pressures on policy implementing 'institutions.' This feedback loop can be positive (with economic growth leading to improved institutions for inclusive growth) or negative (with economic growth leading to worse conditions for further growth by shutting off the inclusiveness of growth and limiting economic opportunity to existing successes). Whether economic elites use their influence activities with political and bureaucratic elites to create more possibilities for economic structural transformation or, conversely, use their power to entrench their privileged position will, to a significant extent, determine whether episodes of rapid growth can be sustained, will peter out, or even be reversed. The mechanisms for elite commitment to sustained inclusive growth are discussed.

    Keywords: economic growth; elite commitment; inclusive growth; Status and Position; Rank and Position; Economic Growth;

    Citation:

    Pritchett, Lant, and Eric D. Werker. "Developing the Guts of a GUT (Grand Unified Theory): Elite Commitment and Inclusive Growth." ESID Working Paper Series, No. 16/12, December 2012.
  3. Unobserved State Fragility and the Political Transfer Problem

    Autocrats experiencing a windfall in unearned income may find it optimal to donate to other countries some of the windfall in order to make the state a less attractive prize to potential insurgents. We put forward a model that makes that prediction, as well as the additional predictions that the recipients of the aid may themselves become more repressive with high levels of aid and experience conflict with medium levels of aid. We call these joint phenomena the political transfer problem and argue that the largest windfall of the 20th century, the period from 1973 to 1985 during which oil prices were at all-time highs, produced long-run political dynamics consistent with the model. In particular, major oil exporters have been politically repressive, generous with foreign aid when oil prices are high, and free of civil war; in contrast, the recipients of petro aid were relatively repressive (and peaceful) during the period of high oil prices but subject to civil war when oil prices fell and aid was reduced. Surprisingly, the political transfer problem did not seem to materialize when oil prices again began to creep up in the 21st century; this nonexistence of the problem can be explained by the model against the backdrop of evolving geopolitics and economics.

    Keywords: International Finance; Non-Renewable Energy; International Relations; Economics;

    Citation:

    Ahmed, Faisal Z., and Eric Werker. "Unobserved State Fragility and the Political Transfer Problem." Harvard Business School Working Paper, No. 13-009, July 2012.
  4. Male Circumcision and AIDS: The Macroeconomic Impact of a Health Crisis

    Theories abound on the potential macroeconomic impact of AIDS in Africa, yet there have been surprisingly few empirical studies to test the mixed theoretical predictions. In this paper, we examine the impact of the AIDS epidemic on African nations through 2005 using the male circumcision rate to identify plausibly exogenous variation in HIV prevalence. Medical researchers have found significant evidence that male circumcision can reduce the risk of contracting HIV. We find that national male circumcision rates for African countries are both a strong predictor of HIV/AIDS prevalence and uncorrelated with other determinants of economic outcomes. Two-stage least squares regressions do not support the hypotheses that AIDS has had any measurable impact on economic growth or savings in African nations. However we do find weak evidence that AIDS has lead to a decline in fertility combined with a slow-down in education gains, as measured by youth literacy, and a rise in poverty, as measured by malnutrition.

    Keywords: Macroeconomics; Health Disorders; Welfare or Wellbeing; Poverty; Research; Education; Nutrition; Risk Management; Africa;

    Citation:

    Ahuja, Amrita, Brian Wendell, and Eric D. Werker. "Male Circumcision and AIDS: The Macroeconomic Impact of a Health Crisis." Harvard Business School Working Paper, No. 07-025, October 2006. (Revised March 2009.)
  5. The Urban/Rural Fertility Differential in The Gambia: Explaining the Gap

    Citation:

    Werker, Eric D. "The Urban/Rural Fertility Differential in The Gambia: Explaining the Gap." 2000. (Harvard College Senior Thesis.)

Cases and Teaching Materials

  1. Rio Tinto and Mining in Mongolia: The Oyu Tolgoi Deposit

    In 2013, Rio Tinto was expected to begin commercial shipments from Oyu Tolgoi, a copper and gold mine in the Gobi Desert of Mongolia. Oyu Tolgoi was one of the last great unmined deposits in the world, and, once operations were in full swing, was expected to constitute around a tenth of Rio Tinto's profits and over a quarter of Mongolia's GDP. But the terms of the deal were being threatened by elections in Mongolia and a change in voter sentiment towards the project. With around $6 billion invested, Rio Tinto had to figure out how to make its investment work out. Meanwhile the Mongolian government, facing scorching economic growth rates, had to lead the country through its most significant transformation since the time of Ghengis Khan nine centuries earlier.

    Keywords: mining; investment; Mining Industry; Mongolia;

    Citation:

    Werker, Eric, Battushig Batbold, Kelsey Kennedy, Zanna McComish, Shaloo Savla, and Nicole Shomair. "Rio Tinto and Mining in Mongolia: The Oyu Tolgoi Deposit." Harvard Business School Case 714-018, November 2013.
  2. Ayala Corporation & the Philippines: Asset Allocation in a Growing Economy (A) and (B)

    Keywords: Asset allocation; Philippines;

    Citation:

    Werker, Eric. "Ayala Corporation & the Philippines: Asset Allocation in a Growing Economy (A) and (B)." Harvard Business School Teaching Note 714-013, September 2013.
  3. Tax Havens

    Multinational corporations and wealthy individuals often use so-called tax havens to establish subsidiaries or holding companies in order to rebalance profits across borders with the primary purpose of lowering their effective tax rate. This note describes the use of tax havens, the implications for the financial sector in tax havens, as well as the debate around the effect of tax havens on welfare in other jurisdictions.

    Keywords: tax havens;

    Citation:

    Werker, Eric, Sebastian Berardi, Stelios Elia, Omar Muakkassa, and James Zumberge. "Tax Havens." Harvard Business School Technical Note 714-019, November 2013. (Revised March 2014.)
  4. Cyprus (A) and (B)

    Citation:

    Werker, Eric, Sebastian Berardi, Stelios Elia, Omar Muakkassa, and James Zumberge. "Cyprus (A) and (B)." Harvard Business School Teaching Note 714-012, October 2013.
  5. Cyprus (B)

    Keywords: tax havens; financial crisis; Cyprus;

    Citation:

    Werker, Eric, Sebastian Berardi, Stelios Elia, Omar Muakkassa, and James Zumberge. "Cyprus (B)." Harvard Business School Supplement 714-011, October 2013.
  6. Cyprus (A)

    Keywords: tax havens; financial crisis; Cyprus;

    Citation:

    Werker, Eric, Sebastian Berardi, Stelios Elia, Omar Muakkassa, and James Zumberge. "Cyprus (A)." Harvard Business School Case 714-010, October 2013.
  7. Ayala Corporation & the Philippines: Asset Allocation in a Growing Economy (B)

    Keywords: Asset allocation; Assets; Business Conglomerates; Philippines;

    Citation:

    Werker, Eric, Yasmin Mandviwala, Henry Motte-Munoz, and Arthur Wit. "Ayala Corporation & the Philippines: Asset Allocation in a Growing Economy (B)." Harvard Business School Supplement 713-094, June 2013. (Revised March 2014.)
  8. Ayala Corporation & the Philippines: Asset Allocation in a Growing Economy (A)

    While the Philippines are located in the vicinity of many of the “Asian Tigers,” its development has followed a unique path. The country suffered for years under a dictatorial political regime and protectionist economic policies. Remittances were the largest source of hard currency and the industrial sector was marked by significant concentration and rent seeking. Recent economic reforms have shaken up many sectors of the economy and stimulated rapid economic growth. Conglomerates, which account for a substantial portion of large, organized business activity, need to decide how to adapt to this new environment. Ayala Corporation is one of the largest and most important conglomerates in the Philippines and has been controlled by the Zobel de Ayala family for seven generations. Company leadership must decide whether to alter their strategy in the wake of an election that could dramatically transform the political and business climate of the Philippines in a positive way.

    Keywords: Asset allocation; Assets; Business Conglomerates; Philippines;

    Citation:

    Werker, Eric, Yasmin Mandviwala, Henry Motte-Munoz, and Arthur Wit. "Ayala Corporation & the Philippines: Asset Allocation in a Growing Economy (A)." Harvard Business School Case 713-093, June 2013. (Revised March 2014.)
  9. MYTO New Entrant IPP

    Keywords: Privatization; Energy Industry; Nigeria;

    Citation:

    Werker, Eric D. "MYTO New Entrant IPP." Harvard Business School Spreadsheet Supplement 713-703, August 2013.
  10. Privatization of the Power Sector in Nigeria (A and B)

    Keywords: Privatization; Energy Industry; Nigeria;

    Citation:

    Werker, Eric D., and Ian Cornell. "Privatization of the Power Sector in Nigeria (A and B)." Harvard Business School Teaching Note 713-053, May 2013.
  11. Pittsburgh

    The case narrates the development of Pittsburgh from the 1940s to 2012. It analyzes the collapse of the steel industry in the early 1980s, the city's subsequent decline, and the city's later re-emergence as a hub for higher education, the tech sector, and the healthcare industry. Attention is given to the public-private partnerships that emerged in Pittsburgh, as well as the economic development and taxation initiatives pursued by different mayors.

    Keywords: google; population; city growth; shale; PNC; Tom Murphy; Luke Ravenstahl; Public-private partnership; Tax increment financing; brownfields; Renaissance; Industry Clusters; Industry Growth; City; Business and Government Relations; Taxation; Giving and Philanthropy; Nonprofit Organizations; Higher Education; Technology Industry; Health Industry; Steel Industry; Education Industry; Pittsburgh;

    Citation:

    Werker, Eric D., Meg Rithmire, Benjamin Kennedy, and Andrew Knauer. "Pittsburgh." Harvard Business School Case 713-035, January 2013.
  12. Liberia (TN)

    From 1989 to 2003 civil war raged in Liberia, causing GDP per capita to drop an unprecedented 90% from peak to trough. The roots of Liberia's conflict and economic decline are complex and intertwined, resting on over a century of discriminatory elite rule and twisted by ethnic politics during a military dictatorship. By late 2011, eight years of post-conflict government have restored basic order, re-opened the country to foreign investors, and jump-started the small economy. But the country's business model may unsettle its political stability. As Africa's first democratically elected female head of state (and a recipient of the Nobel peace prize) Ellen Johnson Sirleaf goes into her reelection campaign for Liberia's presidency, she must decide how to keep the country on its fragile but quick recovery, sowing the seeds for peace and prosperity rather than renewed conflict. Liberia examines the transition of a country from violent military rule, through devastating conflict, to post-conflict recovery and stable democratic governance. Liberia is a useful country in which to examine the rebuilding of an economy after a war, particularly since the country's economic structure and its politics are so inter-connected.

    Citation:

    Werker, Eric, and Ian Cornell. "Liberia (TN)." Harvard Business School Teaching Note 713-001, October 2012.
  13. Angola and the Resource Curse (TN)

    Keywords: Resource management; African history; angola; dutch disease; least developed countries;

    Citation:

    Musacchio, Aldo, Eric Werker, and Ian Cornell. "Angola and the Resource Curse (TN)." Harvard Business School Teaching Note 713-002, October 2012.
  14. Privatization of the Power Sector in Nigeria (B)

    Keywords: privatization; Energy; Nigeria;

    Citation:

    Werker, Eric, Onyechi Ezekwueche, Olatomiwa Igun, and Alice Wei. "Privatization of the Power Sector in Nigeria (B)." Harvard Business School Supplement 713-043, October 2012. (Revised March 2014.)
  15. 4M: Four-Markets Analysis for Emerging Economies

    Keywords: emerging markets; frontier markets;

    Citation:

    Werker, Eric. "4M: Four-Markets Analysis for Emerging Economies." Harvard Business School Technical Note 713-026, August 2012. (Revised March 2014.)
  16. GEM 15: Country Development Strategies in 15 Statistics

    Keywords: country analysis; country development strategies; macroeconomics;

    Citation:

    Musacchio, Aldo, and Eric Werker. "GEM 15: Country Development Strategies in 15 Statistics." Harvard Business School Technical Note 713-025, August 2012. (Revised October 2012.)
  17. Kaesong Industrial Complex (A) and (B) (TN)

    Keywords: foreign investment; country risk; bilateral trade; special economic zones;

    Citation:

    Werker, Eric, and Dante Roscini. "Kaesong Industrial Complex (A) and (B) (TN)." Harvard Business School Teaching Note 713-023, September 2012.
  18. Foreign Direct Investment and South Africa (B)

    Incoming and outgoing foreign direct investment in an environment of politics, geography, globalization, and history. Updates the 2006 case to 2012. The subsequent six years only reinforce the message of the original case. Since the end of apartheid, South Africa had undertaken substantial economic reforms in order to attract more foreign direct investment, but it was slow in coming. At the same time, South African firms had become major players in sub-Saharan Africa and beyond. Collectively, these investment decisions could have a major long-run impact on South Africa's economic growth and political stability. South African policymakers needed to decide what they wanted from the private sector, and how to achieve it.

    Keywords: global business; developing countries; foreign direct investment; business government relations; South Africa;

    Citation:

    Werker, Eric, and Ian McKown Cornell. "Foreign Direct Investment and South Africa (B) ." Harvard Business School Supplement 712-054, June 2012. (Revised May 2013.)
  19. Liberia

    Keywords: Liberia;

    Citation:

    Werker, Eric, and Jasmina Beganovic. "Liberia." Harvard Business School Case 712-011, September 2011. (Revised March 2014.)
  20. Hermitage's Russian Quandary (TN) (A) and (B)

    Keywords: Russia;

    Citation:

    Werker, Eric, and Ray Fisman. "Hermitage's Russian Quandary (TN) (A) and (B)." Harvard Business School Teaching Note 712-043, February 2012.
  21. The Kaesong Industrial Complex (B): Global Manufactures GmBH's Dilemma

    Keywords: North Korea; South Korea;

    Citation:

    Roscini, Dante, Eric Werker, and Han-koo Yeo. "The Kaesong Industrial Complex (B): Global Manufactures GmBH's Dilemma." Harvard Business School Supplement 710-023, April 2010. (Revised February 2014.)
  22. The Kaesong Industrial Complex (A)

    Keywords: Country; Risk and Uncertainty; International Relations; Trade; Agreements and Arrangements; Policy; North Korea; South Korea;

    Citation:

    Roscini, Dante, Eric Werker, and Han-koo Yeo. "The Kaesong Industrial Complex (A)." Harvard Business School Case 710-022, October 2009. (Revised February 2014.)
  23. Barack Obama and the Bush Tax Cuts (A)

    As his inauguration approached, President-elect Obama faced a financial sector meltdown, a costly bailout, and massive government deficits. With the economy in recession, interest rates near zero, and joblessness on the rise, Obama needed to decide whether, and how much, to use fiscal stimulus to resuscitate the economy. To help students understand Obama's options, the case reviews both the recent tax cuts under President George W. Bush, including the supply-side and demand-management justification given for them, and the broad history of fiscal policy in the United States.

    Keywords: Decision Choices and Conditions; Financial Crisis; Borrowing and Debt; Financial Management; Policy; Government Administration; Taxation; United States;

    Citation:

    Weinzierl, Matthew C., and Eric D. Werker. "Barack Obama and the Bush Tax Cuts (A)." Harvard Business School Case 709-037, January 2009. (Revised October 2011.)
  24. Barack Obama and the Bush Tax Cuts (A) (TN)

    Teaching Note for 709037.

    Keywords: Government and Politics; Taxation;

    Citation:

    Weinzierl, Matthew C., and Eric D. Werker. "Barack Obama and the Bush Tax Cuts (A) (TN)." Harvard Business School Teaching Note 709-049, January 2009. (Revised October 2011.)
  25. Hermitage's Russian Quandary (B)

    Supplements the (A) case.

    Keywords: Problems and Challenges; Russia;

    Citation:

    Werker, Eric, Ray Fisman, and Lauren Weber. "Hermitage's Russian Quandary (B)." Harvard Business School Supplement 711-055, May 2011.
  26. Hermitage's Russian Quandary (A)

    In June 2007, the offices of Russian hedge fund Hermitage Capital were raided by Moscow police; in the months that followed, Hermitage founder Bill Browder found himself banned from Russia and fending off efforts to expropriate the fund's Russian assets. This case describes the challenges faced by Hermitage in responding to these threats, and more broadly discusses the perils of doing business in a business environment with weak legal and political institutions. This case was co-authored with Columbia Business School.

    Keywords: Crime and Corruption; Private Equity; Investment; Law Enforcement; Laws and Statutes; Crisis Management; Risk Management; Business and Government Relations; Financial Services Industry; Moscow;

    Citation:

    Werker, Eric, Ray Fisman, and Lauren Weber. "Hermitage's Russian Quandary (A)." Harvard Business School Case 711-054, April 2011.
  27. Angola and the Resource Curse

    Since emerging from decades of conflict in 2002, Angola has been growing at a scorching double-digit rate, led by its oil industry. But the nation remains beset with seemingly intractable problems: immense inequality, low life expectancy, a non-diversified economy, and constant grumblings of corruption. The global financial crisis and subsequent fall in state oil revenue drives a loan-seeking Angola towards either the IMF, who demand extensive reforms, or the Chinese, who seek to take a direct stake in the nation's recovery. The case explores the dynamics of post-conflict recovery as well as the challenges associated with a reliance on oil wealth, including the resource curse and Dutch disease.

    Keywords: Crime and Corruption; Developing Countries and Economies; Financial Crisis; Borrowing and Debt; Financial Institutions; Globalized Economies and Regions; Policy; Government Administration; Emerging Markets; Natural Environment; Angola;

    Citation:

    Musacchio, Aldo, Eric D. Werker, and Jonathan Schlefer. "Angola and the Resource Curse." Harvard Business School Case 711-016, September 2010.
  28. The World Food Programme during the Global Food Crisis (B)

    Keywords: Crisis Management; Food; Non-Governmental Organizations;

    Citation:

    Mikes, Anette, Peter Tufano, Eric D. Werker, and Jan-Emmanuel De Neve. "The World Food Programme during the Global Food Crisis (B)." Harvard Business School Supplement 709-052, May 2009.
  29. The World Food Programme during the Global Food Crisis (TN) (A) and (B)

    Teaching Note for [709024] and [709052].

    Keywords: Non-Governmental Organizations; Nutrition; Food; Crisis Management; Problems and Challenges; Poverty;

    Citation:

    Werker, Eric D. "The World Food Programme during the Global Food Crisis (TN) (A) and (B)." Harvard Business School Teaching Note 709-053, May 2009.
  30. The World Food Programme during the Global Food Crisis (A)

    Rising food prices threatened an unprecedented number of people around the world with malnutrition or starvation in 2008. The new Executive Director of the United Nations' World Food Programme (WFP)—the world's largest food relief agency—must not only address this challenge but also must rethink the WFP's strategy in the rapidly changing world of humanitarian assistance.

    Keywords: Food; Globalized Firms and Management; Nutrition; Crisis Management; Business and Government Relations; Nonprofit Organizations; Welfare or Wellbeing;

    Citation:

    Mikes, Anette, Peter Tufano, Eric D. Werker, and Jan-Emmanuel De Neve. "The World Food Programme during the Global Food Crisis (A)." Harvard Business School Case 709-024, December 2008. (Revised March 2009.)
  31. Aid, Debt Relief, and Trade: An Agenda for Fighting World Poverty (TN) (A) and (B)

    Keywords: Money; Borrowing and Debt; Trade; Poverty;

    Citation:

    Alfaro, Laura, Eric D. Werker, and Renee Kim. "Aid, Debt Relief, and Trade: An Agenda for Fighting World Poverty (TN) (A) and (B)." Harvard Business School Teaching Note 707-049, June 2007. (Revised February 2008.)
  32. Foreign Direct Investment and South Africa

    Incoming and outgoing foreign direct investment in an environment of politics, geography, globalization, and history. Since the end of apartheid, South Africa had undertaken substantial economic reforms in order to attract more foreign direct investment, but it was slow in coming. At the same time, South African firms had become major players in sub-Saharan Africa and beyond. Collectively, these investment decisions could have a major long-run impact on South Africa's economic growth and political stability. South African policymakers needed to decide what they wanted from the private sector, and how to achieve it.

    Keywords: Decision Choices and Conditions; Macroeconomics; Foreign Direct Investment; Governing Rules, Regulations, and Reforms; Business and Government Relations; Africa; South Africa;

    Citation:

    Werker, Eric D. "Foreign Direct Investment and South Africa." Harvard Business School Case 707-019, April 2007. (Revised July 2007.)
  33. Foreign Direct Investment and South Africa (TN)

    Teaching Note to 707019.

    Keywords: Foreign Direct Investment; Governing Rules, Regulations, and Reforms; Investment; Decisions; Economic Growth; Private Sector; Balance and Stability; South Africa;

    Citation:

    Werker, Eric D. "Foreign Direct Investment and South Africa (TN)." Harvard Business School Teaching Note 708-015, July 2007.
  34. Aid, Debt Relief, and Trade: An Agenda for Fighting World Poverty (A)

    At the 2005 Group of Eight summit, world leaders agreed to relieve the world's poorest countries' debt burdens and double aid to Africa by 2010. The announcement raised questions whether debt relief would really help the poor. By examining past aid trends and policies of multilateral institutions, such as the International Monetary Fund and the World Bank, this case also questions whether aid can allow poor countries to break the vicious cycle of poverty, and/or how aid can be used effectively.

    Keywords: Developing Countries and Economies; Borrowing and Debt; Capital; International Relations; Nonprofit Organizations; Poverty; Welfare or Wellbeing; Africa;

    Citation:

    Alfaro, Laura, Eric D. Werker, and Renee Kim. "Aid, Debt Relief, and Trade: An Agenda for Fighting World Poverty (A)." Harvard Business School Case 707-029, April 2007. (Revised July 2007.)
  35. Aid, Debt Relief, and Trade: An Agenda for Fighting World Poverty (B)

    Keywords: Money; Borrowing and Debt; Trade; Poverty;

    Citation:

    Alfaro, Laura, Eric D. Werker, and Renee Kim. "Aid, Debt Relief, and Trade: An Agenda for Fighting World Poverty (B)." Harvard Business School Supplement 707-040, April 2007. (Revised July 2007.)