World Bank Research E-Newsletter [May 2009]
*********************************************************************** IMF-WB conference on managing systemic crises and redesigning financial systems Evaluating the efficiency of post-crisis bankruptcy reform in Colombia A new strategy for cleaning up stockpiles of obsolete pesticides Stronger import competition can improve product quality The effectiveness of Partial Credit Guarantees depends on a blend of design features Uncivil societies - a theory of sociopolitical change New database on income sources for rural households New posts from our blogs
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IMF-WB conference on managing systemic crises and redesigning financial systems
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A recent conference on “Managing Systemic Crises and Redesigning Financial Systems,” organized by the World Bank and the IMF in Washington, D.C., focused on financial regulation, insolvency resolution, and innovation and risk-taking. The first session on reforming regulation and supervision featured a lively debate between Charles Calomiris and Joseph Stiglitz (a former World Bank Chief Economist and currently chair of the UN Commission of Experts), both of Columbia University. While both experts agreed that distorted incentives and failure to regulate banks’ risk management were among the main causes of the current financial crisis, and that rich countries have much to learn from countries such as Colombia and Malaysia that have dealt with crises in the past, they disagreed on the effects of the repeal of the Glass Steagall Act in the United States and on the idea of creating a global economic coordinating council. Speakers in subsequent sessions included Andrei Schleifer (Harvard University), Luigi Zingales (University of Chicago), Jagdish Bhagwati (Columbia University), and Daron Acemoglu (MIT). Conference papers and presentations are available online, as well as a short summary of the proceedings by Miriam Bruhn.
Conference summary
Papers and presentations ***********************************************************************
Evaluating the efficiency of post-crisis bankruptcy reform in Colombia
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At a time when the financial crisis has pushed many firms to the brink of bankruptcy, a key policy question is whether bankruptcy laws are efficient. While there is a growing literature estimating the costs of bankruptcy, there is little empirical evidence assessing how these costs affect the ability of the bankruptcy system to separate viable businesses from unviable ones, a key to ensuring efficiency. In a new impact note, Xavier Gine and Inessa Love shed light on this issue for the first time by presenting evidence from a bankruptcy reform in Colombia that was adopted in 1999, in the midst of a financial crisis. The law—which only concerned reorganizations by mandating shorter resolution times—succeeded in reducing the average reorganization process, which resulted in viable firms being more likely to be reorganized and unviable ones to be liquidated. In addition, the authors find significant improvements in a firm’s recovery after reorganization. They conclude with a number of policy recommendations, most notably that a financial crisis provides a good opportunity for serious bankruptcy reform.
Impact note
Policy research working paper 3970 ***********************************************************************
A new strategy for cleaning up stockpiles of obsolete pesticides
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Obsolete pesticides have accumulated in almost every developing country or economy in transition over the past several decades. The FAO estimates a total of approximately 440,800 to 551,000 metric tons of obsolete pesticides exist across these countries. Public health and environmental authorities are eager to reduce health threats by removing and decontaminating stockpiles, but there are many sites, cleanup can be costly, and public resources are scarce. To help decision makers set priorities, Susmita Dasgupta, Craig Meisner, and David Wheeler present a new approach that develops clean-up priority indices for Tunisia, which has more than 1,900 metric tons of obsolete pesticides that are spread across numerous sites. The new methodology integrates information on populations at risk, their proximity to stockpiles, and the relative toxic hazards of each site. What emerges from the Tunisia results is a strategy for sequentially addressing all 197 sites to rapidly and cost-effectively decrease potential damage to health and the environment.
Policy research working paper 4893
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Stronger import competition can improve product quality
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Low-price producers in China and India have cornered the global market on “mundane” labor-intensive products. Since production costs and wages can drop only so far, manufacturing firms in other emerging economies can either compete in domestic and international markets by upgrading product quality (the “high road”) or by reducing prices and squeezing revenues (the “low road”). A new study by Ana Fernandes and Caroline Paunov shows that import competition—particularly from less advanced economies—has a strong positive effect on product quality in Chilean manufacturing plants, especially non-exporting ones. Competition from more advanced economies does not evoke the same response. While the overall evidence underlines the benefits of trade openness for product innovation, it also suggests that competitive pressure alone is not enough for domestic plants to keep pace with leading world producers. Other policy tools will be necessary for more radical innovations. Middle-income countries increasingly exposed to import competition may benefit by encouraging producers to follow the “high road” to competitiveness.
Policy research working paper 4894 ***********************************************************************
The effectiveness of Partial Credit Guarantees depends on a blend of design features
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Partial Credit Guarantees (PCGs) have become an important policy instrument for increasing access to lending to credit-constrained firms, such as small and new enterprises. To examine differences in ownership, governance, and operational characteristics, data were collected from surveys for 76 PCG schemes across 46 developed and developing countries. Analysis by Thorsten Beck, Leora Klapper, and Juan Carlos Mendoza suggests an important role for government in funding and management. However, governments do less well in the credit risk assessment and recovery role, which is usually confined to the private sector. This may be preferable, since government involvement in credit risk assessment is associated with higher default rates. Older schemes are more likely to be government funded and managed and have higher loan losses, consistent with the notion that the costs and liabilities of a PCG scheme become more obvious over time. A comparison of PCG schemes reveals a surprisingly low incidence of risk-based pricing and limited use of risk management mechanisms. However, funds that have taken on more risk seem to have compensated for this with better risk management.
Policy Research Working Paper 4771 ***********************************************************************
Uncivil societies - a theory of sociopolitical change
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In times of crises, it is useful to revisit some of the paradigms that underlie collective thinking and action. For nearly 200 years, most social science has relied on the assumption that the emergence of strong and nurturing social capital through a vibrant civil society yields all kind of positive externalities to society. Following intuition and anecdotal observations from Alexis de Tocqueville, a large body of theoretical and empirical research has attempted to confirm that societies strive politically and economically when they are able to build strong non-state actors and community organizations. Many disciplines—mainly political science, economics, law, and international relations—have constructed influential analytical frameworks in support of that general proposition. A new paper by Celestin Monga examines the philosophical foundations of conventional wisdom and observes that it often fails to take into account the dark side of some civil society groups. While acknowledging the potential contribution of civil society to the development process, the paper also cautions again the rush to circumvent the state, which sometimes sustains community-based initiatives in poor countries. It suggests the possibility of the production of negative social capital by non-state actors.
Policy Research Working Paper 4942 ***********************************************************************
New database on income sources for rural households ***********************************************************************
Rural households engage in a vast array of income-generating activities. Devising policies that can unpack complex relations between livelihoods and poverty, inequality, and overall household well-being is often complicated by a lack of data and inconsistent methodologies. It is now possible to disentangle these relationships in a methodologically consistent manner, using the new Rural Income Generating Activities (RIGA) database. The database is the result of a collaborative effort by the FAO, the World Bank, and American University to better understand the roles, relationships, and synergies of on-farm and off-farm income-generating activities among rural households. It offers cross-country comparable indicators of household-level income from 26 nationally representative surveys covering 16 countries across four regions (Africa, Asia, Eastern Europe, and Latin America). RIGA data have already been used to analyze patterns of rural income diversification; asset activities and rural income; the welfare and nutrition effects of rising food prices; adoption patterns of modern seed varieties; and gender and rural employment.
Data available free of charge through the RIGA project website: www.fao.org/es/esa/riga
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FROM OUR BLOGS
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Development in a Changing Climate
In a post on our climate change blog (hosted by the authors of the upcoming World Development Report 2010), Shanta Devarajan, Chief Economist of the World Bank’s Africa Region, discusses a new policy research working paper that explores costs to the South African economy of a tax on carbon emissions.
Read Shanta’s post
Policy research working paper 4933 Migration and Remittances (People Move)
Gero Carletto blogs about the effects of migration, mostly by men, on the local labor market behavior of women. With Mariapia Mendola of the University of Milan, he explores (in a new paper) the gender aspects of migration and economic development in Albania over the past 15 years
Read Gero’s post
Policy research working paper 4900
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New Policy Research Working Papers
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These papers, and all older papers, are also available using the Document Search on the Bank's Development Economics Research website and on the Social Sciences Research Network.
4930. The Better You Are the Stronger It Makes You: Evidence on the Asymmetric Impact of Liberalization by Leonardo Iacovone 4931. Simple Model Frameworks for Explaining Inefficiency of the Clean Development Mechanism by Knut Einar Rosendahl and Jon Strand 4932. Household Welfare and Natural Resource Management around National Parks in Zambia by Sushenjit Bandyopadhyay and Gelson Tembo 4933. Tax Policy to Reduce Carbon Emissions In South Africa by Shantayanan Devarajan, Delfin S. Go, Sherman Robinson, and Karen Thierfelder 4934. Innovative Firms or Innovative Owners? Determinants of Innovation in Micro, Small, and Medium Enterprises by Suresh de Mel, David McKenzie, and Christopher Woodruff 4935. Entrepreneurship in Post-Conflict Transition: The Role of Informality and Access to Finance by Asli Demirgüc–Kunt, Leora F. Klapper, and Georgios A. Panos 4936. Optimal Pre-Merger Notification Mechanisms. Incentives and Efficiency of Mandatory and Voluntary Schemes by Aldo González and Daniel Benítez 4937. The impact of the Business Environment on the business creation process by Leora Klapper, Anat Lewin, and Juan Manuel Quesada Delgado 4938. Beyond Mitigation: Potential Options for Counter-Balancing the Climatic and Environmental Consequences of the Rising Concentrations of Greenhouse Gases by Michael C. MacCracken 4939. Social and Governance Dimensions of Climate Change: Implications for Policy by Roberto Foa 4940. Cognitive and Behavioral Challenges in Responding to Climate Change by Kari Marie Norgaard 4941. Climate change governance by James Meadowcroft 4942. UNCIVIL SOCIETIES - A Theory of Sociopolitical Change by Célestin Monga 4943. Financial Institutions and Markets across Countries and over Time—Data and Analysis by Thorsten Beck and Asli Demirgüç-Kunt 4944. Impact Assessments in Finance and Private Sector Development: What have we learned and what should we learn? by David McKenzie 4945. Modeling migration dynamics in Albania: A hazard function approach by Carlo Azzarri and Calogero Carletto 4946. Mind the Gap?A Rural-Urban Comparison of Manufacturing Firms by Bob Rijkers,Måns Söderbom, and Josef Loening 4947. A StructuralModel of Establishment and Industry Evolution: Evidence from Chile by Murat Seker 4948. Does Regulatory Supervision Curtail Microfinance Profitability and Outreach? by Robert Cull, Asli Demirgüç-Kunt, and Jonathan Morduch 4949. Social Networks among Indigenous Peoples in Mexico by Emmanuel Skoufias,Trine Lunde, and Harry Anthony Patrinos 4950. Labor Skills and Foreign Investment in a Dynamic Economy: Estimating the Knowledge-Capital Model for Singapore by Gnanaraj Chellaraj, Keith E. Maskus, and Aaditya Mattoo 4951. What Explains the Low Survival Rate of Developing Country Export Flows? by Paul Brenton, Christian Saborowski, and Erik von Uexkull 4952. Aid, Natural Disasters and the Samaritan’s Dilemma by Paul A. Raschky and Manijeh Schwindt 4953. On the Channel and Type of International Disaster Aid by Paul A. Raschky and Manijeh Schwindt 4954. The Mauritanian Labor Market through the Lens of the 2004 National Household Survey by Tania Rajadel, Nicola Pontara, and Maria Laura Sanchez Puerta 4955. Addressing Educational Disparity: Using District Level Education Development Indices for Equitable Resource Allocations in India by Dhir Jhingran, and Deepa Sankar 4956. The Impacts of International Migration on Remaining Household Members: Omnibus Results from a Migration Lottery Program by John Gibson, David McKenzie, and Steven Stillman 4957. Substitution and Technological Change under Carbon Cap and Trade: Lessons from Europe by Timothy J. Considine and Donald F. Larson 4958. Scaling up Aid or scaling down: The Global Economic Crisis And Rwanda’s MDGs by Hans Lofgren, Hannah Nielsen, and Kene Ezemenari 4959. The Impact of Climate Change on Catastrophe Risk Models:Implications for Catastrophe Risk Markets in Developing Countries by John Seo and Olivier Mahul 4560. The ASEAN Free Trade Agreement: Impact on Trade Flows and External Trade Barriers by Hector Calvo-Pardo,Caroline Freund, and Emanuel Ornelas 4961. Working Long Hours and Having No Choice: Time Poverty in Guinea by Elena Bardasi and Quentin Wodon 4962 Stigma and the Take-up of Social Programs by Jacques Ewoudou, Clarence Tsimpo, and Quentin Wodon
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