Managing local and global externalities from growth

forthcoming

The burden of local and global externalities from growth - such as pollution, congestion and climate change - falls mainly on the poorest across and within countries. EXTGROW will break new ground by offering novel insights into the magnitude and distribution of key externalities in low income countries, and the design of policies that balance the dual imperatives of shielding vulnerable populations and continued growth. It is distinctive in five ways: (1) georeferenced data from innovative sources; (2) frontier spatial equilibrium modelling and econometric methods; (3) aggregate effects of externalities at scale; (4) informing transport, trade and social protection policy design; (5) focus on inequality. The proposed research comprises six projects across two themes which consider respectively the management of local and global externalities. The first theme considers how local externalities alter assessments of the aggregate and distributional impacts of trade facilitation, which is key for the design of transport and trade policies. The first project will examine how traffic pollution in Pakistan influences estimates of the gains from road building. The second assesses whether banning trade in waste products improves welfare when externalities from disposal are heterogeneous across space. The third estimates the impacts of public transit in Tanzania for alleviating congestion costs across income groups. The second theme studies how vulnerable populations respond to the global externalities from climate change and how policy can support these adaptive adjustments. The fourth project will draw on the rollout of a big-push anti-poverty program in Bangladesh to understand whether it can shield beneficiaries from climate shocks. The fifth studies how targeting of public adaptation investments in Pakistan should respond to firms’ private adaptation. The sixth will test whether sovereign natural disaster insurance in the Philippines induces moral hazard in adaptation.