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World Bank Research E-Newsletter, January 2017
  Feb 01, 2017

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January 2017 — Economic Geography
Arrow-bullet High-density cities hold the key to transforming economic geography
Arrow-bullet Declining transport costs can boost sustainable growth but success depends on a variety of factors
Arrow-bullet Digital technologies can address some but not all of the barriers faced by farmers in poorer countries
Arrow-bullet The spatial impacts of hukou and highways in China are very different
Arrow-bullet African cities with industry may provide an escape from declining farm conditions
Arrow-bullet Improved market access from road investments in Sub-Saharan Africa increased cropland
Arrow-bullet Will gold-mining lead to self-sustaining towns in Ghana?
Arrow-bullet Rural transport infrastructure investments in India facilitate reallocation of labor out of agriculture
Arrow-bullet Announcements
Arrow-bullet Upcoming Events
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High-density cities hold the key to transforming economic geography

Location is one of the most important determinants of welfare. Someone who moves from a village of 5,000 to a city of 5 million can expect to see, on average, a wage increase of 25 percent. New insights into economic geography — including the drivers of urbanization and the payoff from transportation investments — are helping policy makers better manage this process. In this policy research talk, Uwe Deichmann, a Senior Urban Specialist at the World Bank, discussed how cities are driving differential rates of development through economies of scale. High-density cities allow industries to flourish through processes of sharing, matching, and learning that could not happen as efficiently at a smaller scale. And as countries urbanize, incomes go up.

Story | Video | Presentation

Declining transport costs can boost sustainable growth but success depends on a variety of factors

In developed economies, transport investments and improved transport technology have resulted in a continuous decline in transport costs, which in turn stimulated growth and economic development. In low- and middle-income countries, the current potential for transport investments and policies to boost sustainable and inclusive growth through declining transport costs also appears to be large. This is especially the case given significant backlogs of transport infrastructure investment in both rural and urban areas, weak governance and inadequate regulations in the transport sector, and rising social costs in terms of congestion, pollution and accidents, especially in emerging large cities. Transport investments can be very large and transformative in their nature, and their success depends on a variety of factors. Because these factors are not well understood and may not be taken into account by policy makers, there is often a risk that transport investments are not cost-effective and do not produce the range of expected outcomes. Thus, understanding and assessing how transport policies can produce growth-inducing effects and reduce social costs will be important for setting priorities in the strategic use of scarce resources. This survey reviews the current state of the economic literature, assessing the impact of transport investments and policies on growth, inclusion, and sustainability in a developing country context. It also discusses the specific implementation challenges of transport interventions in developing countries.

Berg, Claudia N., Uwe Deichmann, Yishen Liu, and Harris Selod. 2016. “Transport Policies and Development.” Journal of Development Studies (published online).

Digital technologies can address some but not all of the barriers faced by farmers in poorer countries

Mobile phones and the internet have significantly affected all sectors of the economy and agriculture is no exception. Digital technologies promote greater inclusion in the broader economy, raise efficiency by complementing other production factors, and foster innovation by dramatically reducing transaction costs. The article reviews the recent literature on corresponding technology impacts in the rural sector in developing countries. Digital technologies overcome information problems that hinder market access for many small-scale farmers, increase knowledge through new ways of providing extension services, and they provide novel ways for improving agricultural supply chain management. While there are many promising examples of positive impacts on rural livelihoods — or “digital dividends” — these have often not scaled up to the extent expected. The main reason is that technology can always only address some, but not all of the barriers faced by farmers in poorer countries.

Deichmann, Uwe, Aparajita Goyal, and Deepak Mishra. 2016. “Will digital technologies transform agriculture in developing countries?” Agricultural Economics 47 (S1): 21-33. | Video with Uwe Deichmann on the WDR 2015: Digital Dividends Report.

The spatial impacts of hukou and highways in China are very different

OChina has used two main spatial policies to shape its geographic patterns of development: restricted labor mobility through the Hukou residential registration system and massive infrastructure investment, notably a 96,000-kilometer national expressway network. A structural economic geography model examines the impacts of these policies. Fitting the model to available data allows simulating counterfactual scenarios comparing each policy’s respective impact on regional economic development and urbanization patterns across China. The results suggest large overall economic benefits from constructing the national expressway network and abolishing the Hukou system. Yet, the spatial impacts of the two policies are very different. The construction of the national expressway network reinforced existing urbanization patterns. The initially lagging regions not connected to the network have not benefitted much from its construction. By contrast, removal of the Hukou restrictions, which Chinese policy makers are considering, would result in much more widespread welfare gains, allowing everyone to gain by moving to where he or she is most productive. Removal of the Hukou restrictions would also promote urbanization in currently lagging (inland) regions, mostly by stimulating rural to urban migration. 

Hukou and Highways: The Impact of China’s Spatial Development Policies on Urbanization and Regional Inequality, Maarten Bosker, Uwe Deichmann, and Mark Roberts, World Bank Policy Research Working Paper 7350, June 2015.

African cities with industry may provide an escape from declining farm conditions

The impact of climate on urbanization in Sub-Saharan Africa has intensified as rural lands have become more arid over the past fifty years. In regions where cities are likely to be manufacturing centers (25% of the sample under consideration in this study), drier conditions increase urbanization and total urban incomes. There, urban migration provides an “escape” from negative agricultural climate shocks. However, in the remaining market towns (75% of the sample), cities just service agriculture. Reduced farm incomes from negative shocks reduce demand for urban services and derived demand for urban labor. There, drying has little impact on urbanization or total urban incomes. Lack of structural transformation in Africa inhibits a better response to climate change.

Henderson, J. Vernon, Adam Storeygard, and Uwe Deichmann. 2017. “Has climate change driven urbanization in Africa? Journal of Development Economics 124 (1): 60-82, January.

Improved market access from road investments in Sub-Saharan Africa increased cropland

Africa’s backlog in agriculture has been attributed to low adoption of modern technologies, poor access to credit, insecure property rights, and lack of access to markets due to poor transport infrastructure. The relation between access to markets via roads and cultivated land in Sub-Saharan Africa is assessed using geo-referenced panel data from 1970 to 2005, when the road network was significantly improved. The analysis finds a modest but significant positive association between increased market accessibility and local cropland expansion. It also finds that cropland expansion, in turn, was associated with a small but significant increase in local gross domestic product, suggesting that agricultural activities developed at the extensive margin — mostly to serve local demand — but not as commercial agriculture serving external markets.

Roads and Rural Development in Sub-Saharan Africa, Claudia N. Berg, Brian Blankespoor, and Harris SelodWorld Bank Policy Research Working Paper 7729, June 2016.

Will gold-mining lead to self-sustaining towns in Ghana?

The birth of a town has often been associated with the intersection of two ancient roads or the location of a shrine or sacred place. This study looks at whether an urban settlement can arise from a temporary concentration of economic activity (gold mining) in an arbitrary location. While gold has been extracted from Ghanaian soil for centuries, the current boom started after the sector was liberalized and foreign investors entered gold mining. Steady economy growth and an expanding population makes for ideal conditions to study the initial stages of town formation, or proto-urbanization. The analysis of economic activities that catalyze urbanization show that the presence of a gold mine is associated with more light at night (within 10 kilometers) and proportionally higher employment in industry and services and in the wage sector, as well as a decrease in non-farm employment (within 20–30 kilometers). Over time, an increase in gold production is associated with more wage employment and apprenticeship, and fewer people employed in private informal enterprises. And while agricultural employment continues to shrink after gold production decreases, employment in informal gold mining increases. Although older and larger mines are associated with large urban settlements, it is too soon to tell if gold mining in Ghana will trigger self-sustaining towns.

Gold Mining and Proto-Urbanization: Recent Evidence from Ghana, Marcel Fafchamps, Michael Koelle, and Forhard Shilpi, World Bank Policy Research Working Paper 7347, June 2015.

Rural transport infrastructure investments in India facilitate reallocation of labor out of agriculture

One billion people, or thirty-one percent of the world’s rural population, live in settlements more than 2 km from a paved road. This study looks at the labor market effect of a national rural road construction program in India that built paved roads to over 100,000 villages since 2000. Road construction to previously unconnected villages leads to a 10-percentage point reduction in the share of households and workers in agriculture, with an equivalent increase in wage labor market participation. This sectoral reallocation is concentrated among males and households with small plots of land, precisely those groups who have the lowest costs and highest returns to sectoral reallocation. Rather than facilitating growth of nonfarm firms in treated villages, rural roads enable workers to access external labor markets, with measureable gains in multiple measures of economic outcomes. These results suggest that poor rural transportation infrastructure is a major constraint on the sectoral allocation of labor in low-income countries.

Market Access and Structural Transformation: Evidence from Rural Roads in India, Sam Asher and Paul Novosad, April 2016.


Quantitative Methods for Macroeconomic Research
The World Bank Development Research Group based in Kuala Lumpur, Malaysia, is hosting a short course on Quantitative Methods for Macroeconomic Research by Professor Roberto Chang, Rutgers University. The course will run from Monday to Friday, March 6–17, 2017, for three (3) hours every morning during the two weeks. The course is open to all qualified participants, whether or not staff of the World Bank. To qualify you must have an advanced degree in Economics and, importantly, be able to commit to participating for the duration of the course. Although the course is provided free of charge, participants are required to cover their own travel and accommodation expenses, if needed. Please confirm your availability for the whole duration of the course, using this link and email us a brief CV or bio by Wednesday, February 8, 2017, 12:00 pm. All successful participants will be notified by Friday, February 17, 2017.

New open data portal on trade & competitiveness
The TCdata360 portal aggregates 2,000+ indicators from 20+ organization on one website. The portal includes data on innovation, entrepreneurship, exports, imports, gender & business. You can make charts on any country, or any combination of countries.

Press Release | Feature Story | Brief | Blog

Bangladesh: Increasing salinity in a changing climate likely to alter Sundarban’s ecosystem
Recent World Bank studies predict the progressive salinization of water and soil in a changing climate will alter the UNESCO World Heritage Site Sundarban’s fragile ecosystem and affect the surrounding poor population. Increased water salinity will alter the aquatic ecosystem and the mangrove forest, along with significant shortages of water for drinking and irrigation in the southwest coastal area, while soil salinization is likely to lead to a significant decline in the output of high-yielding-variety rice. Progressive water salinization will also change the availability of many freshwater fish species — a staple food of the poor.

This feature story is a follow-up to our Policy Research Talk on climate change threats to poor of coastal Bangladesh in May 2016.


All upcoming events


Do cash transfers have sustained effects on human capital accumulation?

Development Impact, 30 January 2017

Cash transfers are great — lots of people are telling you that on a continuous basis. However, it is an open question as to whether such programs can improve the wellbeing of their beneficiaries well after the cessation of support. As cash transfer programs continue to grow as major vehicles for social protection, it is increasingly important to understand if these programs break the cycle of intergenerational poverty, or whether the benefits simply evaporate when the money runs out…

The extant evidence on this question is growing, albeit still scant, and it is not particularly promising. For example, a recent paper by Araujo, Bosch, and Schady (2016), evaluating the 10-year effects of Nicaragua’s Bono de Desarollo Humano cash transfer program, concludes that “…any effect of cash transfers on the inter-generational transmission of poverty in Ecuador is likely to be modest.”

In a recent paper, co-authored with Sarah Baird and Craig McIntosh, we report the effects of a cash-transfer experiment in Malawi more than two years after it ended, tracking a broad range of outcomes for females aged 18–27.

Read the blog by Berk Ozler.


Rise in soil salinity may cause fall in rice yield: World Bank

The Daily Sun, 28 January 2017

Increase in soil salinity may lead to decline in yield by 15.6 percent of high-yielding-variety rice and significant changes in the aquatic ecosystems in the Southwest coastal areas of Bangladesh during dry season by 2050, according to recent studies of the World Bank (WB).

The studies said climate change is likely to increase river salinity leading to shortages of drinking water and irrigation. The changes in river salinity and the availability of freshwater will affect the productivity of many capture fisheries.

It will adversely affect the wild habitats of fresh water fish and giant prawn and in addition, salinity increase may induce a shift in the Sunderbans mangrove forest from Sundari (the single most dominant and important species, with the highest market value) to Gewa and Guran, the WB said.

“Estimates from the research indicate that Bagerhat, Barguna, Barisal, Bhola, Khulna, Jhalokati, Pirojpur and Satkhira districts will be most adversely affected,” it said.

“The region is already facing problems from salinization and the situation will worsen as climate change continues.”

To look more closely at the impacts of climate change on salt-water intrusion in the coastal region of Bangladesh, the WB recently conducted five research studies. River Salinity in Coastal Bangladesh in a Changing Climate, Soil Salinity in Coastal Bangladesh in a Changing Climate, the Economics of High-Yield Rice Production in a Changing Climate, Groundwater Salinization and Road Maintenance Costs in a Changing Climate, and Livelihood Threats, Family Structure and Economic Welfare in a Changing Climate.

The coastal population in Bangladesh will become more vulnerable to salinity intrusion in a changing climate, it said, adding that the coastal community in southern Bangladesh will be on the “front line” of climate change because of continued sea-level rise (SLR) beyond 2100, even if greenhouse gas emissions are stabilized today.

Read the article.


Experiments in development from every angle: A review of Tim Ogden’s new book

Development Impact blog, 23 January 2017

Randomized controlled trials are kind of a big deal in development economics right now. A recent article in The Economist shows a sizeable rise in the use of RCTs in economics overall over the last 15 years, and recent analysis by David McKenzie shows that RCTs make up a large minority of development papers in top journals. In his new book Experimental Conversations: Perspectives on Randomized Trials in Development EconomicsTim Ogden has assembled interviews with a distinguished group that interacts with RCTs in every imaginable way: you have those who pioneered the use of the method in development economics, the next generation of researchers, the chief critics of the method, and consumers of development RCTs at organizations like GiveWell, the Ford and Grameen Foundations, and the Center for Global Development. You also hear from one broader observer of economics as a field (Tyler Cowen) and one of the scholars who pioneered the use of RCTs in U.S. policy (Judy Gueron), to give added perspective.

Read the blog by Tim Evans.


China’s Rural Poor Bear the Brunt of the Nation’s Aging Crisis

Bloomberg, 4 January 2017

Chinese farmers typically toil in the fields past 70, says John Giles, lead economist in the Development Research Group at the World Bank and an expert on aging in China. “This isn’t just puttering around in the garden,” he says. “This is arduous work. And if the elderly have children who have migrated, then they are more likely to be working longer and for more hours.”

China’s restrictive residency permit system makes it difficult for the rural elderly to join their children in cities, and their insurance usually doesn’t cover treatment at urban hospitals. Some children are returning home to care for their parents, a move that could hurt economic growth as younger Chinese take less productive work or even leave the workforce, says the World Bank’s Giles. “Later I will have to return to my hometown because my parents are getting older,” says 25-year-old Zhang Chi, who works at a toy factory in Dongguan more than 825 miles from his hometown of Xi’an, in central China. “Working far away, you can only see them infrequently, which isn’t good.”

Read the article.


We gave Sri Lankan microenterprises wage subsidies to hire workers: 8 years after starting, here’s what happened

Development Impact blog, 9 January 2017

In my very first experiment, Suresh de Mel, Chris Woodruff, and I gave small grants of capital to microenterprises in Sri Lanka. We found that these one-time grants had lasting impacts on firm profitability for male owners. However, despite these increases in firm profits, few owners made the leap from self-employed to hiring others.

In 2008 we therefore started a new experiment with a different group of Sri Lankan microenterprises, trying to see if we could help them make this transition to becoming employers. Eight years later, I’m delighted to finally have a working paper out with the results.

Read the blog by David McKenzie.


Tony Atkinson (1944–2017) and the measurement of global poverty

Let’s Talk Development, 4 January 2017

Sir Anthony Atkinson, who was Centennial Professor at the London School of Economics and Fellow of Nuffield College at Oxford, passed away on New Year’s Day, at the age of 72. Tony was a highly distinguished economist: He was a Fellow of the British Academy and a past president of the Econometric Society, the European Economic Association, the International Economic Association and the Royal Economic Society. He was also an exceedingly decent, kind and generous man.

Read the blog by Francisco Ferreira and Ana Revenga.


People are escaping poverty with the help of digital finance. How should we measure that?

World Economic Forum blog, 16 December 2016

Today, a mobile phone can be used by women in Hyderabad to pay their gas bill, by young people in Hanoi to quickly send money to their parents living in a rural village, and by farmers in Kampala to receive payments for the sale of coffee beans.

Formal financial services, including those accessed through a phone, are connecting people to economic opportunities and helping them escape poverty. Without a savings account, it can be difficult for poor people to put away money for future investments in education or business. Without insurance, a crop failure can push farmers and their families into destitution.

Many of the world’s 2 billion adults who lack formal financial services can’t get a bank account because they live far away from traditional bank branches. For the unbanked, paying routine bills or collecting salaries in cash can require lengthy and expensive trips to a city. Digital financial services shrink the distance between people and the services they need. These are some of the reasons why groups like the G20 believe measuring access to digital financial services is critical for global development.

Read the blog by Jake Hess and Leora Klapper.


5 ways digital finance can help people escape poverty

World Economic Forum blog, 16 December 2016

Almost half of adults in emerging economies still lack basic financial services. Here are five ways to help more people benefit from digital finance.

  1. Make sure digital technology is available to everyone.
  2. Take advantage of biometrics to serve the poor.
  3. Ramp up use of direct deposit by the private sector.
  4. Stop using cash to distribute social benefits and pay government employees.
  5. Treat customers fairly and tailor products to their specific needs.

Read the blog by Jake Hess and Leora Klapper.


Financial incentives in health: supply- vs. demand-side. We need your help!

Let’s Talk Development, 13 December 2016

A blogpost on financial incentives in health by one of us in September 2015 generated considerable interest. The post raised several issues, one being whether demand-side financial incentives (like maternal vouchers) are more or less effective at increasing the uptake of key maternal and child health (MCH) interventions than supply-side financial incentives (variously called pay-for-performance (P4P) or performance-based financing (PBF).

The four of us are now hard at work investigating this question — and related ones — in a much more systematic fashion. And we’d very much welcome your help.

Read the blog by Adam Wagstaff, Damien de Walque, Jed Friedman, and Sven Neelsen.


Private versus Public Health Care in India

Marginal Revolution, 6 December 2016

In an important paper in the latest AER, Das, Holla, Mohpal and the excellent Karthik Muralidharan compare private and public health care in India. (I once asked, “Is any economist doing more important work with greater potential for real improvement in the lives of millions than Karthik Muralidharan?” See previous posts on Karthik’s work for the answer.)

The AER paper examines health care in villages in Madhya Pradesh, one of the poorer states in India (GDP per capita of $1,500 PPP). In India, primary health care is ostensibly available free from public health clinics and hospitals manned by professionally trained nurses and physicians. As with teachers at public schools, however, it’s very common for doctors at public clinics to be absent on any given day (40% were absent on a given day in 2010) and public clinics are not highly regarded. As a result, some 70% percent of primary care visits nationally — and an even higher percentage in Madhya Pradesh — are to private, fee-charging health-care providers. Most of the private providers do not have a license or medical degree although they may have some health-care training.

The authors sent trained actors, “standardized patients” to public and private clinics to evaluate provider effort and accuracy in response to the presentation of textbook symptoms of common illnesses (angina, asthma, and dysentery in a child at home). Standardized patients are used to train medical students in the United States and in India and the Indian SPs were trained by professionals including medical doctors, and a medical anthropologist familiar with local forms of presenting illnesses and symptoms.

Read the blog.

List of New Policy Research Working Papers