Teferi Mergo is an Associate Professor of Economics at the University of Waterloo (UW), with appointments at United College, the Economics department and the School of Environment, Enterprise and Development. He is a Research Fellow at Global Labour Organization and has been recognised for research excellence at UW. He earned his PhD in Economics from the University of California, Berkeley.

Can you please give us an introduction to your work and tell us why you wanted to study in this field?

My research explores the economic development outcomes of choices and actions people and institutions undertake in low-income countries, with a focus on the African continent.

The tragedies of famine and widespread civil wars that I witnessed and experienced growing up in Ethiopia in the 1980s and early 1990s have a lot to do with shaping my career. These tragedies and their consequences propelled me to major in Economics at Addis Ababa University, which led me to an academic career focused on studying the causal factors and channels that may enhance or slow economic progress.

Could you please tell us about your contribution to knowledge over the course of your career?

I have conducted studies on the impacts on economic development of demographic transition, international migration, ethnic favouritism, representative government, mother tongue instruction, and English medium instruction. I have ongoing research projects that build on these and investigate the impacts of housing development programs, financial deepening, and horizontal inequality on development.

Leveraging the random assignment of migration opportunities due to the US Diversity Visa lottery, I estimated the causal impacts of international migration on the wellbeing of the sending families. The study found that the treatment effects are higher in families with male emigrants, suggesting that female migrants might be facing adverse labour market conditions in the US compared to male migrants.

In a study published in Science, I show that part of Ethiopia’s success on the economic front in the last two decades can be attributed to the reduction in its fertility rate. I have explored the effects of English Medium Instruction (EMI) on education, contributing to the nascent empirical literature on the educational impacts of EMI in the African continent. A study for which I was a lead co-author contributes to an important area of research in development economics, the link between ethnic favouritism and development, by investigating the distribution of public goods in Ethiopia under ethnic federalism.

I have also published several articles exploring the causes of civil conflicts. Using insights from the new political economy theory, I have argued that civil wars in Ethiopia are manifestations of power imbalances among the country’s ethnic communities and how they might be resolved with a considered devolution of power from the centre to the peripheries.

How do you view the link between academic research and policy?

Academic research can guide policy in two major ways. Academic models and theories synthesise complex reality in a way that allows us to gain deeper insights into how the world works, which in turn can suggest new policy solutions to critical problems we face. Further, rigorous empirical research should – in the best-case scenario – guide the implementation of new policies and the evaluation of the effectiveness of implemented policies.

What is your understanding of the difference between developmental economics and “traditional” economics, and why is that distinction important?

Development economics is concerned with uncovering the intricate factors that may inhibit economic development and/or enhance living standards in developing countries. Unlike traditional economics, development economics is concerned not just with the optimal allocation of resources and economic growth, but also with issues of social equity (e.g. poverty and inequality), political liberty, institutional stability, and environmental sustainability. Economic growth may be an important piece of the puzzle in promoting any of these objectives, but it is by no means sufficient to achieving these goals. Development economics is thus inherently more interdisciplinary in its approaches and the type of questions that it seeks to answer than the broader field of traditional economics.

Traditional economic theories are insufficient to explain the multifaceted problems developing nations are facing. For instance, contemporary theories of development postulate that widespread coordination failure leads to inferior development outcomes in developing regions. Models of market behaviour used in traditional economics would not predict such outcomes, as they are based on a different set of assumptions reflecting market conditions in more developed markets.

What has your work taught you about the impact of phenomena such as migration and demography on economies?

First, the impact of migration and fertility decisions on economic outcomes hinges on the availability of appropriate microdata, which can’t always be taken for granted, particularly in developing countries. 

I have learned that in low-income countries with high fertility, a reduction in fertility rates yields a demographic dividend (i.e. increases economic growth) under the right set of circumstances. I have also discovered that institutional constraints might be more important than income constraints to optimise the developmental effects of migrant remittances. Migration can improve the sender’s spending on consumer goods and improve their wellbeing, without any measurable impact on savings and investment.

Can you explain how you think the processes of federalism and colonialism have impacted Ethiopia?

Ethiopia is a country that is plagued with conflicts, struggling to undo its colonial roots. The modern Ethiopian state was founded by the Amhara ruling class as an empire toward the end of the 19th century (the Amhara are the second largest ethnic group in the country). They militarily conquered the Oromo, the Somali, and dozens of other ethnic groups that currently make up Ethiopia. The Amhara politically outflanked the other key Abyssinian group, the Tegaru, which claim to be the rightful heirs of the Ethiopian state as the custodians of the ancient Axumite civilization. Hence, whereas substantial political forces in Oromia and the Ethiopian south emphasise the imperial legacy of Ethiopia, and the Tegaru elite blame the concentration of power at the centre for their misfortunes (although they were at the helm between 1991 and 2018) Amhara political forces maintain that Ethiopia is an exceptional state that ought to be preserved at any cost.

The devastating wars the current Ethiopian government has been (and is) waging in Tigray, Oromia and the Amhara regional states, can be viewed from this perspective. The Amhara camp fosters the view that a strong central government is the only guarantee for the unity and territorial integrity of the country, with the rest seeking to establish some sort of federal or confederal arrangements granting their ethnic regions different levels of autonomy.

After the defeat of a highly centralised Ethiopian government of military officers in the early 1990s by rebel forces from Tigray, Eritrea (now an independent country) and Oromia, ethnic federalism was instituted with expectations that it would rectify the country’s colonial edifice. It was hoped that the reorganisation of the country along ethnonational lines would settle the destructive centre-periphery disputes in the country. However, the governments that have been installed since have failed to reconcile the demands of political forces (e.g. the federalists and those seeking confederal arrangements) with those of the unionists, posing continuing risks of violent disintegration of the country.

What knowledge or insights have you gained from your research that you wish you had known when you started?

One of the lessons I have learned from my experience as a researcher pertains to data collection in developing countries. It is not always easy to navigate bureaucracies in nations with weak institutions while gathering data for research activities. I’ve collected both primary and secondary data for my research from Ethiopia, and some of my experiences have taught me that soft skills are highly essential to persuade government authorities to support the endeavour.

I faced several obstacles initially when I was trying to gather the background data of Ethiopian winners of the US Diversity Immigrant Visa Program lottery from Ethiopian authorities for my PhD dissertation, and it took a persistent determination on my part to overcome these problems. The experience also taught me lessons that have served me well in my subsequent undertakings.

What about your area of study do you wish more people knew?

The paper for which I am the lead co-author links ethnic favouritism to uneven regional development, finding that Tigray (one of the federated states) had higher access to public goods when the political party from the region dominated the centre. I have another study (a working paper) that shows that uneven regional development might have exacerbated ethnic polarisation, contributing to the ongoing conflicts and civil wars in the country. My wish is that policymakers would consider the lessons of these studies more seriously to put Ethiopia on a more stable trajectory.

I have co-authored two related studies (one published and the other under review), investigating the effects of random geographic variations in EMI and Mother Tongue Instruction in Ethiopia. The studies suggest that the use of local languages in education in a federal state with multiple languages has positive developmental outcomes, and my hope is that ongoing debates regarding the suitability of ethnic federal arrangements for Ethiopia’s future can be informed by these studies.

How has your background and ethnicity influenced your work?

My work has certainly been influenced by my background. My lived experiences during my formative years have a lot to do with shaping my career. Therefore, it stands to reason if the type of questions I seek to answer in my research deal with issues I had to confront as a young person.

If you had infinite time and resources what understudied area would you want to research and why?

Since 2006, Ethiopia has built – through its Integrated Housing Development Program (IHDP) – hundreds of thousands of heavily subsidised housing units and allocated them to eligible applicants on a lottery basis. Ethiopia has also embarked upon the modernisation of its cities by investing heavily in its physical infrastructure. My colleagues, Maximillian Kasy (University of Oxford) and Nicholas Li (Toronto Metropolitan University), and I are planning to study the direct and indirect effects of the IHDP through its effects on consumption, physical and human capital accumulation, labour markets and entrepreneurship.

We are also planning a study that identifies the heterogeneous effects of winning the IHDP lottery by gender of the applicant. This is particularly important as the program reserved slots for female applicants who had a better chance of winning, and only one person could apply per household. The combination of household choice correlated with gender attitudes and randomised wealth/assets via lottery provides a rich setting to study gender, intra-household bargaining and female empowerment.

I have been able to raise seed money to begin implementing these research projects (the University of Waterloo has given me an initial grant from the Social Science and Humanities Research Council fund to facilitate the launching of the project). However a more successful implementation of these projects and similar others requires additional resources, which we are actively seeking to raise from various funding agencies.

Ethiopia aims to upscale these programs in other cities, and several African countries are seeking to emulate what Ethiopia is doing in its urban space. It would be very useful to rigorously gauge the impacts of what Ethiopia is doing in its capital, to offer some guidance as to what works and can thus be upscaled to different regions, and my hope is that I will be able to raise the required funding to contribute to these areas of knowledge.

Which African Thinkers and/or books by African authors would you recommend people read?

Among novels by African authors, I recommend the following:

• Ngũgĩ wa Thiong'o’s Petals of Blood.

• Wole Soyinka’s A Dance of the Forests.

• Chinua Achebe’s Things Fall Apart.

I also think people should read the works of the following African-born economists, whose works have inspired my own.

• Yaw Nyarko – Professor of Economics at New York University and the Director of NYU Africa House and the Centre for Technology and Economic Development.

• Leonard Wantchekon – Professor of Politics, International Affairs and Economics at Princeton University and Founder and President of African School of Economics.