· Johan Fourie on “bigness is goodness” covers a new paper by Zhang Chen, forthcoming in Econometrica, that documents “as countries grow richer, the right tail of the firm size distribution thickens. In plain language: economic development means more large firms, and larger large firms.” And why this is important “This creates what economists call a ‘diffusion externality’. When a large firm innovates or adopts a better process, the benefits do not stop at its factory gates. Its suppliers learn. Its competitors are forced to adapt. Its former employees carry knowledge into new ventures. The entire economy benefits. Put differently, when a large firm in Johannesburg figures out how to do something better, that knowledge ripples through its suppliers, its competitors, and eventually the entire economy.
The problem is that large firms do not capture the full social value of this diffusion. They invest in idea search for their own benefit, not for the benefit of the firms that learn from them. The result: they under-invest relative to what would be socially optimal. Chen shows that policies favouring large firms can correct this market failure and improve welfare.”
· On the Let’s Talk Development blog, Claudia Ruiz and Martin Melecky discuss staggered DiD evidence from Kazakhstan on the relative effectiveness of interest rate subsidies, fully subsidized credit guarantees, and partial credit guarantees on SME firm growth. Only the partial credit guarantees appear to create jobs.
· On the CGD blog, Helen Dempster and Thomas Ginn discuss the World Bank’s Window for Host Communities and Refugees (WHR) – “one of the first instruments to formalize a credible, medium-term financial commitment for host governments. In exchange, it pushes for more inclusive policy environments, leading to long-term returns for refugees and more effective aid spending” and where they see it has succeeded and has scope to improve.
· A couple of interesting posts on AI:
o Dan Björkegren on how we know very little about how the poor use AI and his view on why the question of how AI will affect employment is not the main question for poor people “how AI will affect employment….is not the most important question for billions of the lowest income people around the world, who for the most part are not knowledge workers and predominantly live in low- and middle-income countries. Interviews conducted by Anthropic found that low- and middle-income countries’ residents were much less concerned that AI would displace jobs, and were much more optimistic about AI. For the world’s poorest residents, AI may improve access to advice on health, business, education, and countless other needs.” He then details a wishlist of data/statistics for the main AI labs to release.
o Oliver Hanney on how a lot of the questions around AI can’t be answered by impact evaluations and how “We desperately need speculative research, planning and thinking.”: “I’m sure there are hundreds of RCT’s underway testing how, now out-of-date, generative AI tools, perhaps used by some type of public servant (teacher, nurse, bureaucrat), improved a health or education outcome. Run the first draft through refine.ink and I’m sure we’ll learn a useful, if very specific, lesson from the working paper – even if it’s completely irrelevant by the time the paper ends up being published five years later. We should be running these types of experiments, but there is a huge gap on the more important, more ‘macro’ economic questions related to AI and development. And that is not a surprise. Development economics is not set up to grapple with these big picture questions.”
· Yale EGC round-up of recent work on trade and development, including how market power shapes the effects of trade policies, general equilibrium impacts of an import ban, industrial policy in a sector which is vertically integrated across multiple countries, and more…
· Call for papers: the Centre for Research in Economics and Business (CREB) and the Innovation and Technology Centre (ITC) at Lahore School of Economics in partnership with The International Growth Centre (IGC) and The Consortium for Development Policy Research (CDPR) will host the 8th Applied Development Economics Conference (ADE2026), in Lahore, from 17 - 19 August 2026. Submission deadline May 3.
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