Good afternoon Professor. Thank you for taking the time to join us for this conversation. Before we get into the questions, can you give a brief introduction about yourself?

Thanks for the interview and for giving me the space. I’m really happy to contribute to this revived issue of the NER. I’m a macroeconomist here at the School of economics and an assistant professor. I work on issues related to macroeconomics and macro-development, with a special focus on structural change as well as issues relating to human capital.

Given your experience across both academia and industry, particularly through your work with the Inter-American Development Bank (IDB), how does economic research translate into tangible policy decisions, particularly in developing economies?

I think at international organizations like the IDB, there has been a massive increase in demand for evidence-based policies, particularly because these development institutions are increasingly focusing on implementing policies that have impact. So, these institutions are doing a lot more impact evaluations to see that they are able to get a significant bang for their buck. Naturally, economic research has affected this policy direction where researchers have been introducing new methods in the last few years to be able to measure the impact of policies. Moreover, when it comes to the demand for human resources and economists, there has been an increase in the recruiting of professionals that are able to introduce policies that have a tangible impact, whilst also being evaluated through modern econometric methods.

At IDB, were there any policy projects you worked on that embodied this impact-driven direction?

In my experience, I was more focused in the Macro Oversight Office where we were concentrating on South American countries. The idea was that that the regional economic advisor looked at the macro stability of the region as a whole from the perspective of expanding or contracting the portfolio of loans. In a nutshell, based on economic tools and analysis, we would analyse the macroeconomic conditions of countries to observe their financial and economic strength. According to those insights, the IDB would decide if they wanted to expand the portfolio of credits to certain countries or keep it at certain levels.

Switching our focus to modern-day technologies in the development space, there is no doubt that the AI revolution is in full swing. With AI reshaping industries, how should policymakers in developing economies address labour market transformations to ensure inclusive growth?

That’s a very interesting question. I think it’s both a challenge but also an opportunity for development economists since the role of skill-based interventions that foster human capital is fundamental. In my opinion, there are undoubtedly skill gaps in developing economies with respect to advanced economies. Unfortunately, ineffective policy makers in developing economies exploit opportunities to shape the education systems to the detriment of beneficiary households. Fundamentally, inclusive growth cannot occur without early childhood policies to foster human capital, so that individuals become equipped to absorb new technologies that are more decentralised and readily available as they come along.

In recent years, an economic trend of isolationist policies from global powers has emerged. Recently, the Trump administration froze all funding for USAID. Does the development sector rely too heavily on a few influential nations? Should there be a shift toward a more decentralised or regionally led model?

Yeah, I agree with you. I think that development assistance is at risk because of the nature of how it is funded. The developed nations of the world are huge contributors in terms of the funds that countries are able to use. The financial engineering that goes into this is quite complex, so they don’t necessarily have to supply the funds, but more importantly, they can back these financial institutions when they need to issue new debt. I’m not sure if this implies that there is going to be an effective reduction in support to international organisations, but I think that we are entering extremely interesting times where there is a more pronounced role for decentralised funding of development assistance. Given the new progress in blockchain technology and decentralised finance, I think there is potential for international investors to get together and finance development in novel and interesting ways.

We often talk about economic inequality in terms of income, but in reality, disparities in access to education and skill development are some of the biggest determinants of economic mobility. Your research emphasises the role of human capital in development. What do you see as the most effective policy interventions to foster human capital in low- and middle-income countries?

That’s a great question. I think, first of all, policy makers need to understand that human capital accumulation is a multi-stage process: in order to acquire human capital in later stages, it is crucial that skills are fostered at earlier phases. I think what’s going to be needed in the future are comprehensive policies, particularly in developing economies, with special attention given to early childhood skill development. This can potentially expand into high quality primary and secondary education and beyond. This can also be enhanced by effective borrowing mechanisms for students or individuals who want to expand their education in the future, into tertiary education for example.

So, at a fundamental level, policy makers have to really think about early childhood development and ensure that the policies aiming to achieve this are fit-for-purpose. For instance, you may explore accessibility to resources for parents to support their children, facilities where skills can be developed, and access to quality healthcare. Individuals will only be able to freely climb the skill ladder if they have that high level of initial human capital.

What advice would you give to students aspiring to careers in development economics or academia?

I think for those readers who are interested in development economics or academia, it’s helpful to acknowledge that the way we conceive of education is going to significantly change in the future. Until now, we have lived in a world where technological advances have replaced mostly manual and routine tasks, but increasingly novel innovations in technology are replacing cognitive tasks as well. In light of this, I think developing critical thinking is going to be fundamental for readers, where we should be able to be in a position to supervise a potential legion of AI agents that can work for us. But in order to do that, we have to operate at very high levels of critical thinking such that we are adept at managing technological advancements. 

Lastly, if you could summarise in one sentence, what makes a good development economist?

I think being able to understand that things are different in advanced economies and developing economies, particularly when it comes to the institutional nuances in various countries and regions.

We thank Professor Vizcaino for his perspectives on development economics and look forward to following his work.