World Bank Research E-Newsletter [June-July 2009]
*********************************************************************** World Bank partners with Stata Corp LP to benefit developing country users of ADePT Why aren’t the poorest developing countries reducing poverty the fastest? Back to global imbalances in a post-crisis world? EU experience suggests the path to low-carbon growth is long and best begun early Services trade has been more robust than goods trade during the crisis Indian women’s self-help groups bring significant longer-term social and economic benefits When do legislators fail to pass on funds earmarked for local infrastructure? OECD experience shows reason for caution in adopting social health insurance Annual Bank Conference on Development Economics (Seoul) – papers online From the blogs
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World Bank partners with StataCorp LP to benefit developing country users of ADePT
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The World Bank’s Development Research Group has partnered with StataCorp to provide free state-of-the-art computational tools for applied economic research to practitioners and policymakers in developing countries. Until now, users of the Bank’s automated platform for applied economic analysis (ADePT) have needed their own copy of the Stata program. The new partnership, effective mid-September 2009, allows the Bank to distribute ADePT free of charge as a standalone program to users around the world. ADePT has so far been widely used both in the Bank and by the government and research institutions in developing countries. The cooperation of the World Bank with Stata Corporation combines the computational power of Stata with the expertise of World Bank researchers to help developing country governments fight poverty, improve health and educational outcomes for children, design efficient and well-targeted systems of social protection, and address many other issues of economic development.
www.worldbank.org/adept *********************************************************************
Why aren’t the poorest developing countries reducing poverty the fastest?
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Widely accepted stylized facts about development imply that we should see “poverty convergence”—a catching up process by which countries starting out with a high incidence of poverty (reflecting a lower mean) will enjoy a higher subsequent growth rate and so a faster pace of poverty reduction. In a new working paper, Martin Ravallion notes that while overall poverty is indeed falling in the developing world, faster progress is not seen in the poorest developing countries. His explanation of why previous assumptions are flawed is based on analysis of a new data set for 100 developing countries. This reveals that high initial poverty incidence at a given initial mean has an adverse effect on consumption growth. It also entails a lower subsequent rate of progress against poverty at any given growth rate. Thus, for many poor countries, the growth advantage of starting out with a low mean is lost due to their high poverty rates. Clearly, a development strategy that ignores this handicap could have disappointing outcomes. Finally, Ravallion notes that the size of the middle class—measured by developing-country, not Western, standards—appears to be an important channel linking current poverty to future growth and poverty reduction. However, high current inequality is only a handicap if it entails a high incidence of poverty relative to mean consumption.
Policy research working paper 4974 *******************************************************************
Back to global imbalances in a post-crisis world?
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Forces unleashed by the 2008-2009 financial crisis have kept U.S. assets attractive and the dollar strong, contrary to what many expected. In a new brief, Augusto de la Torre, Sergio Schmukler, and Luis Serven anticipate that, to the extent that the U.S. is expected to outperform other major industrial countries in the medium term, it might continue receiving foreign capital and the previous pattern of global imbalances might be gradually restored, at least in part. In that case, just as pre-crisis capital inflows to the United States led to a real estate bubble, other risky assets may well appreciate. However, post-crisis real and financial adjustments suggest that the previous distribution of large imbalances will be difficult to restore and even more difficult to sustain over the long run. It would be unwise to dismiss the prospects of an eventual major depreciation of the U.S. dollar against different world currencies and of a correspondingly much higher diversification of emerging market holdings into non-U.S. assets.
Brief **********************************************************************************
EU experience suggests the path to low-carbon growth is long and best begun early
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The path to low-carbon growth typically begins with limits on emissions from carbon-intense fuels used in the power sector to induce a switch to less carbon-intensive fuels. Timothy Considine and Donald Larson find that the European Union’s cap-and-trade program for greenhouse gases is instructive for both developed and developing countries facing prospects of fuel-switching in electricity production. They used monthly data on fuel use, prices, and electricity generation in 12 EU countries to study the demand for carbon permits, carbon-based fuels, and carbon-free energy production. The results show how prices for permits and fuels affect the composition of the fuel mix. The analysis also suggests that opportunities for fuel-switching and the scope for introducing new technologies are limited in the short run because of past irreversible investments in power-generating capacity. Moreover, when fuel substitution opportunities are limited, electricity prices can jump significantly if fuel prices increase together with carbon permit prices. Estimates suggest that for every 10 percent rise in carbon permit and fuel prices, the marginal cost of electric power generation increases by 8 percent. The European experience points to the importance of starting early and designing a flexible system for achieving emission reductions.
Policy research working paper 4957 ***********************************************************************
Services trade has been more robust than goods trade during the crisis
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An analysis of recent trade data suggests services trade is weathering the crisis much better than goods trade. As of April 2009, the value of U.S. goods imports declined year-on-year by 34 percent and the value of goods exports by 26 percent; services imports and exports had each declined by about 10 percent. Trade in goods-related transport services and crisis-related financial services has shrunk along with expenditure on tourism abroad, but trade in business, professional, and technical services is still moderately increasing. This is why developing countries like India, which are relatively specialized in business process outsourcing and IT services, have suffered smaller declines in exports to the United States than countries like Brazil and China and regions like Africa. In a new paper, Ingo Borchert and Aaditya Mattoo suggest that services trade is more resilient than goods trade because demand for a range of services is less cyclical, and services trade and production are less dependent on external finance. They note that although few explicitly protectionist measures have so far been taken in services, the changing political climate and larger government role now seen in many crisis countries could introduce bias in firms' procurement and location choices.
Policy research working paper 4917 ***********************************************************************
Indian women’s self-help groups bring significant long-term social and economic benefits ***********************************************************************
To overcome high levels of social stratification and gender bias, the Indian Government, with World Bank support, has promoted women’s self-help groups (SHGs), and their federation at various levels. These groups combine traditional micro-credit with capacity building and social empowerment to ensure broad-based participation. However, there has been virtually no rigorous evaluation of the impact of such programs in the past. Using household survey data to evaluate a SHG program in the state of Andhra Pradesh, Klaus Deininger and Yanyan Liu find that, after three years, the program had significantly improved women’s social capital, economic empowerment, and political participation, both for group members and non-members in villages with SHGs. Nutrition and consumption improved for members only, most likely because of better opportunities for insuring against shocks. Six years later, SHG members also had significantly higher consumption and asset accumulation. Even assessed conservatively, overall program benefits appear to exceed costs. The fact that benefits clearly reached the poor suggests that capacity building can enhance the impact and outreach of micro-credit initiatives. An ongoing study is assessing the sustainability of these effects after termination of Bank support.
Policy research working paper 4884
Policy research working paper 4886 *********************************************************************
When do legislators fail to pass on funds earmarked for local infrastructure?*********************************************************************
Constituency development funds (CDF) are a new type of spending program in many poor democratic countries. These funds allow individual legislators to finance local public infrastructure in their electoral districts. Unlike all other government programs, legislator effort is the main determinant of whether CDFs are actually used to build infrastructure. In theory, CDFs provide a direct connection between voters’ demands and political responsiveness in delivering development infrastructure. In practice, however, voters are often not informed enough about legislator efforts to ensure that CDFs are used appropriately. Philip Keefer and Stuti Khemani confirm that in India, the most populous democracy in the developing world, politicians are less likely to spend their CDF entitlement when media coverage of the program is low and in constituencies where voters care more about the party affiliation and caste identity of candidates. This finding contradicts commonly held beliefs about the political economy of developing democracies. It underscores the value of using rigorous empirical analysis of political constraints on development policies to identify innovative institutional solutions. One such solution suggested by the findings is improving oversight by independent mass media. This is being examined in ongoing research.
Policy research working paper 4929 ***********************************************************************
OECD experience shows reason for caution in adopting social health insurance ***********************************************************************
A lively debate is taking place about the relative merits of using social health insurance (SHI) versus general revenues to finance health care. Skeptics argue that SHI reduces employment and encourages informal labor markets because it increases hiring costs. They also point to lack of coverage among certain groups during the transition to universal coverage, and systematic variations in benefit packages and quality of care across subpopulations. By contrast, SHI advocates say it can provide an important additional source of revenue, and that by separating the purchasing of health care from its provision and by encouraging selective contracting between providers (including private ones), SHI systems can achieve better quality care at a lower cost. In a study of 14 countries that switched from one financing model to the other between 1990 and 2006, Adam Wagstaff finds that adopting SHI in preference to tax financing appears to have increased per-capita national health spending by 3-4 percent, and to have reduced the formal sector share of employment by 8-10 percent and total employment by up to 6 percent. SHI adoption has not significantly reduced deaths from conditions amenable to medical care.
Policy research working paper 4821 ***********************************************************************
Annual Bank Conference on Development Economics, Seoul—papers online
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Lessons from the East Asian crisis underpinned a discussion of today’s most pressing issues—big stimulus plans, shifting economic power, greening growth amidst the crisis, and an exit strategy from today’s worldwide meltdown—at the 20th Annual World Bank Conference on Development Economics (ABCDE) held in Seoul in late June. All papers and presentations are available online.
http://econ.worldbank.org/abcde ***********************************************************************
FROM OUR BLOGS
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Africa Can…
Martin Ravallion talks about his new paper, “Why don’t we see poverty convergence?” in the context of Sub-Saharan Africa, which has the highest poverty incidence in the world.
Read Martin’s post Development in a Changing Climate
Marianne Fay writes about the evolving messages of the upcoming World Development Report on development and climate change (to be published mid-September)
Read Marianne’s post Vox (hosted by the Center for Economic Policy Research, Europe)
Caroline Freund attempts to demystify the collapse in world trade over the past year, re-examining the link between trade and income.
Read Caroline’s post ***********************************************************************
New Policy Research Working Papers
*********************************************************************** 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. 4963. Impact Estimation of Disasters: A Global Aggregate for 1960 to 2007 by Yasuhide Okuyama and Sebnem Sahin 4964. Do International Treaties Promote Development? The Convention on the Rights of the Child and Basic Immunization by Varun Gauri 4965. The Microeconomic Determinants of Emigration and Return Migration of the Best and Brightest: Evidence from the Pacific by David McKenzie and John Gibson 4966. Identifying spatial efficiency–equity tradeoffs in territorial development policies: Evidence from Ugand by Somik V. Lall Elizabeth Schroeder, and Emily Schmidt 4967. Finance and Inequality: Theory and Evidence by Asli Demirgüç-Kunt and Ross Levine 4968. Assessing the Macroeconomic Impacts of Natural Disasters: Are There Any? by Stefan Hochrainer 4969. Inflation Dynamics and Food Prices in an Agricultural Economy: The Case of Ethiopia by Josef L. Loening, Dick Durevall, and Yohannes A. Birru 4970. How should fiscal policy respond to the economic crisis in the low income Commonwealth of Independent States? Some pointers from Tajikistan by Martin Brownbridge and Sudharshan Canagarajah 4971. Can Malaysia Escape the Middle-Income Trap? A Strategy for Penang by Shahid Yusuf and Kaoru Nabeshima 4972. Remittances and Natural Disasters: Ex-post Response and Contribution to Ex-ante Preparedness by Sanket Mohapatra, George Joseph, and Dilip Ratha 4973. Does Financial Openness Lead to Deeper Domestic Financial Markets? by César Calderón and Megumi Kubota 4974. Why Don’t We See Poverty Convergence? by Martin Ravallion 4975. The Economics of Teacher Supply in Indonesia by Dandan Chen 4976. Educational and Health Impacts of Two School Feeding Schemes: Evidence from a Randomized Trial in Rural Burkina Faso by Harounan Kazianga, Damien de Walque, and Harold Alderman 4977. Lessons from European Union Policies for Regional Development by Raja Shankar and Anwar Shah 4978. Governance Matters VIII: Aggregate and Individual Governance Indicators 1996-2008 by Daniel Kaufmann, Aart Kraay, and Massimo Mastruzzi 4979. The health impact of extreme weather events in Sub-Saharan Africa by Limin Wang, Shireen Kanji, and Sushenjit Bandyopadhyay 4980. Natural Disasters and Growth – Going beyond the Averages by Norman Loayza, Eduardo Olaberría, Jamele Rigolini, and Luc Christiaensen 4981. The Economic Impact of Banking the Unbanked: Evidence from Mexico by Miriam Bruhn and Inessa Love 4982. More on the Energy/Non-Energy Commodity Price Link by John Baffes 4983. Remittances and Banking Sector Breadth and Depth: Evidence from Mexico by Asli Demirgüç-Kunt, Ernesto López Córdova, María Soledad Martinez Pería, and Christopher Woodruff 4984. Diasporas by Michel Beine, Frédéric Docquier, and Çağlar Özden 4985. Put Your Money Where Your Butt Is: A Commitment Contract for Smoking Cessation by Xavier Giné, Dean Karlan, and Jonathan Zinman 4986. POST-MACROECONOMICS: Reflections on the Crisis and Strategic Directions Ahead by Célestin Monga 4987. System-Wide Impacts of Hospital Payment Reforms: Evidence from Central and Eastern Europe and Central Asia by Rodrigo Moreno-Serra and Adam Wagstaff 4988. Disasters and Economic Welfare: Can National Savings Help Explain Post-disaster Changes in Consumption? by Reinhard Mechler 4989. Managing East Asia’s Macroeconomic Volatility by Eduardo Olaberria and Jamele Rigolini 4990. Adjusting to Trade-Policy Changes in Export Markets: Evidence from U.S. Antidumping Duties on Vietnamese Catfish by Irene Brambilla, Guido Porto, and Alessandro Tarozzi 4991. Aid for Trade: Matching Potential Demand and Supply by Elisa Gamberoni and Richard Newfarmer 4992. Tax Compliance Perceptions and Formalization of Small Businesses in South Africa by Jacqueline Coolidge and Domagoj Ilic 4993. Evaluating the Impact of Egyptian Social Fund for Development Programs by Hala Abou-Ali, Hesham El-Azony, Heba El-Laithy, Jonathan Haughton, and Shahidur R. Khandker 4994. Procurement in Infrastructure: What Does Theory Tell Us? by Antonio Estache, Atsushi Iimi, and Christian Ruzzier 4995. The Uncertainty Channel of Contagion by Prakash Kannan and Fritzi Köhler-Geib 4996. The Power of Information: The Impact of Mobile Phones on Farmers’ Welfare in the Philippines by Julien Labonne and Robert S. Chase 4997. Competition, Imitation, and Technical Change: Quality vs. Variety by Ana Cusolito 4998. School Enrollment, Selection and Test Scores by Deon Filmer and Norbert Schady 4999. Are There Diminishing Returns to Transfer Size in Conditional Cash Transfers? by Deon Filmer and Norbert Schady 5000. World Bank Policy Research: A Historical Overview by Jean-Jacques Dethier 5001. Own and Sibling Effects of Conditional Cash Transfer Programs: Theory and Evidence from Cambodia by Francisco H. G. Ferreira, Deon Filmer, and Norbert Schady 5002. The Growth Aftermath of Natural Disasters by Thomas Fomby, Yuki Ikeda, and Norman Loayza 5003.Trade Finance in Crisis: Market Adjustment or Market Failure? by Jean-Pierre Chauffour and Thomas Farole 5004. Forecasting Local Climate for Policy Analysis: A Pilot Application for Ethiopia by Brian Blankespoor, Kiran Dev Pandey, and David Wheeler 5005. Aid and Trust in Country Systems by Stephen Knack and Nicholas Eubank 5006. Implications for climate-change policy of research on cooperation in social dilemmas by Timothy Irwin 5007. Measures of Investor and Consumer Confidence and Policy Actions in the Current Crisis by Mansoor Dailami and Paul Masson 5008. Enhanced Financial Mechanisms for Post 2012 Mitigation by Christiana Figueres and Charlotte Streck 5009. Crisis in Latin America: Infrastructure Investment, Employment and the Expectations of Stimulus by Jordan Z. Schwartz, Luis A. Andres and Georgeta Dragoiu 5010. How Land Title Affects Child Labor? by Mauricio Jose Serpa Barros de Moura, Rodrigo De Losso da Silveira Bueno, and Larissa Leony 5011. Does the Village Fund Matter in Thailand? by Jirawan Boonperm, Jonathan Haughton, and Shahidur R. Khandker
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