“What keeps you up at night?” That was a question posed to a gathering of leaders from government institutions around Latin America and the Caribbean some 25 years ago.
In asking that question, the Research Department at the Inter-American Development Bank (IDB) laid down a mission that it has zealously pursued ever since. It’s not just asking government leaders what worries them. It’s also investigating the most difficult policy issues so that leaders can put their countries on the path to greater prosperity.
I mention this because of a recent controversy around whether research should be handled in-house by multilateral development organizations or contracted out to academia. As the newly-installed Chief Economist of the IDB I know where I stand, and it’s why I am so enthusiastic to lead its Research Department. I am convinced that the expertise of research departments at multilaterals in conducting path-breaking investigations and experimental trials makes them irreplaceable in the search for better policies.
A research mission different from that of academia
As the IDB’s Research Department celebrates its 25th anniversary, one lesson is echoed by policymakers and advisers from the region, our former chief economists and the numerous colleagues we have worked with over the years: The value of research departments like that at the IDB lies in the way they differ from academia.
Academia does exceptional work. That is unquestionable. But academics have different objectives, priorities, and incentives. They usually try to break new ground in economic theory and empirical modeling and have very personal goals. They tend to seek publication in academic journals irrespective of whether their contribution has a helpful policy implication for improving the state of a country or region. Moreover, their research is not necessarily based on policy questions. Indeed, academic researchers generally do not have a strong preference for consultancy work with a policy orientation.
By contrast, we let the most important policy issues guide our research with an institutionally common objective in mind. Depending on the multilateral organization, this could be related to ending extreme poverty and promoting shared prosperity in a sustainable way; improving lives in other ways, or ensuring the stability of the international monetary system, among others. We concentrate on the developing rather than the developed world. And we publish in journals, not as a principle goal, but to resolve policy issues that would not be of principle concern to an economist trying to make their name at an academic institution.
Consider our 2018 Development in the Americas report. Latin America and the Caribbean has long suffered from low levels of so-called capital goods, like roads, schools, and health clinics. Political pressures often mean that spending on things like salaries takes priority. But, until we undertook the task in our report, that bias towards current expenditures had never been quantified, nor had the extent to which it impedes the region’s long-term prospects for growth. We took on the challenge not because we only wanted to get published, but because we are in daily contact with policymakers and know what worries them.
A deep network of relationships with policymakers
The deep network of personal and professional relationships that our institution, like other multilaterals, has established in a decades-long history of lending, providing technical assistance, and consulting on policy questions gives us another advantage. Governments are most likely to trust us with their sensitive records.
Finally, our research, vital as it is, would not be possible without a continual, creative give-and-take with our operations departments. Operations at the IDB, like at other multilaterals, hone in on the essential tasks of lending and technical assistance. Research departments, meanwhile, use input from them to innovate and find long-term solutions that operations will then help to implement. In this productive and vital process of intra-institutional cross-fertilization, each element of the institution plays an essential role. It is our partners in the region that win.
An immense scope of policy-driven research and recommendations
In just the last few years, our research department has devised behavioral interventions that are being widely employed in the region to increase tax collection. It has worked on more effective ways to educate children. It has made a host of recommendations on macroeconomic policy and fiscal reform. And its work on political economy issues have been vital in helping government forge coalitions to get important policy legislation enacted.
Collaboration has been key to these successes. But equally crucial is the research department’s independence to look at the long-term big picture, conduct scientific trials, and discover new ways of approaching policy. This recipe has been astoundingly productive for the IDB. I know the same is true at other multilaterals, and I see no reason to change a good thing.