Identifying Policy Options for Developing Countries

Economic Growth and the Threat to the Environment

Around the world, nations have been grappling with the presumed trade-off between economic development and environmental protection. Based on an implicit assumption that conventional power-generating technologies (such as those using coal) are less expensive than more efficient, less-polluting technologies (e.g., renewables such as photovoltaics), industrialized and developing countries reached an impasse during recent United Nations climate change negotiations.

Developing countries are reluctant to reduce local pollution and greenhouse gases if it means sacrificing their economic development, especially when industrialized countries continue to emit greenhouse gases from their fossil-fuel-based economies.

To help the world's decision-makers resolve this dilemma, RAND's Science and Technology Program researchers developed a simulation model that included the effects on economic growth of all system-wide power generation costs (e.g., transmission and distribution, fuel and support infrastructure, and air emissions such as oxides of sulfur and nitrogen). The study showed that, under many circumstances in developing countries, renewable technologies are comparable in cost with fossil-based technologies, and they achieve significant local and global environmental benefits.

This groundbreaking research is likely to affect the decisionmaking of developing nations, lending institutions, and industrialized nations as they seek global opportunities to reduce greenhouse gas emissions. The 1999 report Developing Countries and Global Climate Change: Electric Power Options for Growth was issued in Washington at a press teleconference with a global audience and has been briefed to government representatives and the global media.

Effects of Economic Crisis on Quality of Life

Dramatic economic and political upheaval in Southeast Asia over the past two years brought instability to the Indonesian archipelago with rippling effects throughout the international economy. Researchers in RAND's Labor and Population Program were well-positioned to analyze the impact of this crisis. Having just completed the second wave of the Indonesian Family Life Survey at the end of 1997 when the Indonesian economy collapsed, they were able to launch a follow-up survey in 1998. Conducted in collaboration with the Demographic Institute of the University of Indonesia, both surveys have yielded unique insights into the complex effects on individual and family well being.

With skyrocketing food prices and an average decline of 25 percent in real purchasing power, the proportion of the average household budget allocated to rice and staples increased by about 50 percent between 1997 and 1998. Health and education expenditures were squeezed, particularly among the poorest households. The most long-lasting blow to the country's future may prove to be the dramatic decline in poor families' ability to provide their children with education and health care.

As described in The Real Costs of Indonesia's Economic Crisis: Preliminary Results from the Indonesia Family Life Surveys,policies keeping children in school and maintaining preventive health care services appear to be what is most needed. Dropout rates for poor students increased substantially, creating economic inequalities in education. Use of public health care facilities also declined between 1997 and 1998, with use of preventive health care by young children dropping the most. These findings will inform the debate on the consequences of the Indonesian crisis and the appropriate response by international donor agencies.