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World Bank Research E-Newsletter, May 2014
  Jun 04, 2014

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In this Issue
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Note from  Director
WPS Latest Media and Blog Posts
Blogs List of New Policy Research Working Papers
Policy Research Talk: Five Growth Mysteries in Search of a Broader Innovation Policy

Why did immigrants often dominate the industrialization process in Latin America, despite facing the same weak business climates and institutions as the locals? Why is it that the quality of developing country exports does not seem to catch up to that of advanced countries? And why do poor countries seem to invest so little in R&D despite the potentially enormous returns to investment? William Maloney, a lead economist in the World Bank’s research department, explored these and other questions during May’s Policy Research Talk.

Read the story | Watch the video | Policy Research Talk Series

Which World Bank Reports Are Widely Read?

Knowledge is central to development. Still, there is little research about the demand for World Bank knowledge products and how internal knowledge flows affect their demand. This study uses information on downloads and citations of certain types of policy reports produced primarily by operational units in the World Bank (those classified as Economic and Sector Work or Technical Assistance) to assess whether they meet the objective of informing the public debate or influencing the development community. During the period 2008-2012, about 13 percent of policy reports were downloaded from the Documents and Reports database at least 250 times while more than 31 percent of policy reports were never downloaded. Almost 87 percent of policy reports were never cited. More expensive, complex, multi-sector, core diagnostics reports on middle-income countries with larger populations tended to be downloaded more frequently. Multi-sector reports also tended to be cited more frequently. Internal knowledge sharing matters as cross support provided by the research department consistently increased downloads and citations. However, the study did not examine a number of other categories of influential World Bank knowledge products, including flagship reports such as the World Development Report and the Doing Business Report, both of which are heavily downloaded. It also did not consider research outputs such as the Policy Research Working Paper series. Strong overall demand for the Policy Research Working Paper series can be seen from the World Bank's top ranking in the RePEC bibliographic database.    

World Bank Policy Research Working Paper 6851 by Doerte Doemeland and James Trevino | Read the blog by Merrell Tuck-Primdahl, Senior Communications Officer in the Development Economics Vice Presidency | Read the blog by Nena Stoiljkovic and Keith Hansen, Global Practices Vice Presidents at the World Bank Group. 

Too Small to Regulate

Informal industries and markets, with many small producers and suppliers, are generally more difficult to regulate than their organized counterparts, dominated by larger corporations. To achieve compliance of firms with regulations such as product quality or environmental or health standards, it is arguably better to have industries with a few large corporations than numerous small firms. A model is constructed to show that limited liability constraints bind more easily in competitive industries, making it harder to impose sufficiently severe penalties and costlier to send sufficient monitors. Having large corporations allows the government effectively to delegate some of its monitoring functions to the managers of the corporation. The tradeoff between this issue and the usual argument in favor of competition is considered.

World Bank Policy Research Working Paper 6860 by Kaushik Basu and Avinash Dixit | Read the blog.

Disappointing Results for Vocational Training for the Unemployed in Turkey

The global economic recession that began in 2007 dramatically increased interest in policies to reduce unemployment. The persistence in labor market imbalances suggested that unemployment could be more structural in nature. The idea that vocational training could reduce skills mismatches led to a resurgence of vocational training programs. How successful were they? A randomized experiment is used to evaluate a large-scale, active labor market policy in Turkey that offered vocational training programs to the unemployed. A detailed follow-up survey of a large sample with low attrition enables precise estimation of treatment impacts and their heterogeneity. The average impact of training on employment proved positive, but close to zero and statistically insignificant, which is much lower than either program officials or applicants expected. Over the first year after training, training had statistically significant effects on the quality of employment, and positive impacts were stronger when training was offered by private providers. But the data show that after three years these effects dissipated.

World Bank Policy Research Working Paper 6807 by Sarojini Hirshleifer, David McKenzie, Rita Almeida, and Cristobal Ridao-Cano

Microfinance Expansion Still Good for Poor Households in Bangladesh

Microfinance lending in Bangladesh served 30 million members and disbursed over $2 billion over the past two decades. Are borrowing households better or worse off twenty years later? Using a dynamic model to estimate the long-term effects of microcredit programs, this analysis addresses whether credit effects are declining over time, whether market saturation and village diseconomies are taking place, and the impact of multiple program membership, which is rising as a consequence of microcredit expansion. The results confirm that microcredit programs continued to benefit the poor by raising household welfare. Moreover, beneficial effects remained higher for female than male borrowers simply because females are more credit constrained than males in resource allocation. There are diseconomies of scale caused by higher levels of village-level borrowing, especially for male members. Multiple program membership is also growing with competition from microfinance institutions, but this has raised assets and net worth more than it has contributed to indebtedness.

World Bank Policy Research Working Paper 6821 by Shahidur R. Khandker and Hussain A. Samad

Son Preference Increases the Mortality Risk of Women with First-Born Daughters in India

Repeated and closely spaced pregnancies, medically known to increase the risk of maternal mortality and morbidity, are more common among women who have only daughters and want to conceive a son in India. This research uses survey data and compares the age structure and anemia status of women by the sex of their first-born. It shows that the share of living women with a first-born girl is a decreasing function of the women's age. And while there are no systematic differences at the time of birth, women with a first-born girl are significantly more likely to develop anemia under the age of 30. The findings are consistent with a selection effect in which maternal and adult mortality is higher for women with first-born girls, especially the poor and uneducated with limited access to health care and prenatal sex diagnostic technologies. Excess mortality among adult women can therefore be partly explained by strong preference for male children, the same cultural norm widely known to cause excess mortality before birth or at young ages. The observed sex ratios for first births imply that between 2 and 8 percent of women between the ages of 30 and 49 with first-born girls are missing because of son preference.

World Bank Policy Research Working Paper 6802 by Annamaria Milazzo

How REDD+ Might Contribute to Forest Management in Tanzania

REDD+, a United Nations program for reducing deforestation and forest degradation, seeks to reduce greenhouse gas emissions, protect forest ecosystems, and improve the economic well-being of forest communities. Analysis of lessons derived from Tanzania’s national forest management program finds that addressing land ownership is important for success in implementing REDD+. While the national program has encouraged forest users to maximize profit from the sustainable use of the forest, the program varies in terms of the success of forest conservation. REDD+ may complement the national forest program by bringing new resources for local projects as well as payments for maintaining forests. However, it is necessary to determine how REDD+ activities can generate additional economic and environmental benefits over what the national program is already achieving. Because fuelwood demand for charcoal is a major source of pressure on forests, moreover, there is a need to consider how REDD+ can be implemented by modifying fuelwood demand.

World Bank Policy Research Working Paper 6815 by Paula Cordero Salas

Equal Access to Inputs May Not Be Enough to Close the Gender Gap in Agricultural Productivity in Nigeria

Female farmers in Sub-Saharan Africa have lower yields compared to male farmers. Given that smallholder agricultural productivity is low in the region, reducing the gender gap by increasing female productivity could increase overall productivity, and lead to higher incomes, poverty reduction, and better food security and nutritional outcomes. This study examines the size of the differences in agricultural productivity between male and female plot managers in Nigeria and decomposes the gender gap into the portion explained by differences in the level of inputs and the portion explained by differences in returns to the same inputs. The analysis is conducted separately for the North and South due to the broad socio-economic diversity in the country. In the North, not only do women produce 28 percent less than men after controlling for input levels, but also obtain lower returns with the same inputs. So if women in the North had the same level of inputs as men, the gender gap might still exist. While in the South, after controlling for level of inputs, no gender gap exists, suggesting that if women had the same level of inputs as men the gap might close. The different regional results suggest that agricultural policies targeting women need to take into account the regional-specific cultural roles of men and women and the institutional factors that support them.

World Bank Policy Research Working Paper 6809 by Gbemisola Oseni, Paul Corral, Markus Goldstein, and Paul Winters

Missing Complements Reduce Efficacy of R&D and Catch-Up Gains for Poor Countries

Most poor countries do far less research and development (R&D) than rich countries as a share of gross domestic product (GDP). This is arguably counter intuitive, since the gains from investments in R&D required for technological catch up are thought to be very high and increasing with distance from the frontier. So why do developing countries fail to address market failures impeding private sector R&D investment, or even undertake it directly? Recent advances show rates of return follow an inverted “U.” The rates rise with distance to the frontier and fall thereafter, potentially even turning negative for the poorest countries. These findings are consistent with the absence of complementary factors: the quality of scientific infrastructure, the overall functioning of the national innovation system, and the capacity of the private sector, which become increasingly scarce with distance from the frontier, and can retard the catch-up effect and the efficacy of R&D. In China and India the explosive growth in R&D investment trajectories despite expected low returns may be justified by partnerships with multinational corporations (and the complementary factors they embody) to gain access to patentable research.

World Bank Policy Research Working Paper 6811 by Edwin Goñi and William F. Maloney

The Impact of Exporting on Firm Performance Differs by the Income Level of the Destination Country

Turkey presents a unique opportunity to revisit the inconclusive export destination-productivity link because it has a very high number of exporters and export entrants to both high-income and low-income destinations. To evaluate the role of export destinations on productivity, employment, and wages, similar firms are matched using their propensity scores, computed using a number of observable firm characteristics. Several important results emerge: (1) export entry has a positive causal effect on firm total factor productivity and employment and this effect is strengthened as a firm continues to export; (2) export entry has a moderate wage effect that emerges only with a lag; (3) exporting to low-income destinations does not result in significantly higher firm total factor productivity and wages, unlike exporting to high-income destinations; and (4) the employment effect of exporting to low-income destinations is comparable to that of exporting to high-income destinations.

World Bank Policy Research Working Paper 6743 by Tolga Cebeci


Ending Poverty and Boosting Prosperity: Development Goals and Measurement Challenges

The World Bank recently adopted the twin goals of ending extreme poverty (reducing to no more than 3 per cent the fraction of the world’s population under $1.25 per day) and boosting shared prosperity (focusing on economic growth among the bottom 40 percent of people in every country). A forthcoming Policy Research Report—Ending Poverty and Boosting Prosperity: Development Goals and Measurement Challenges—will lay out the conceptual underpinnings of the World Bank’s two goals, and propose empirical approaches to tracking progress. The report will serve as a complement to the Global Monitoring Report, which tracks progress on the Millennium Development Goals. The study team will be led by Peter Lanjouw, manager in the World Bank’s research department, and include Shaohua Chen, Dean Jolliffe, Aart Kraay, and Espen Prydz. The report is slated to be released this fall.

Media and Blogs

Global income distribution: From the fall of the Berlin Wall to the Great Recession (Let’s Talk Development blog, May 27, 2014)
“The period between the fall of the Berlin Wall and the Great Recession saw probably the most profound reshuffle of individual incomes on the global scale since the Industrial Revolution. This was driven by high growth rates of populous and formerly poor or very poor countries like China, Indonesia, and India; and, on the other hand, by the stagnation or decline of incomes in sub-Saharan Africa and post-communist countries as well as among poorer segments of the population in rich countries.”

Read the blog by Christoph Lakner.


Playing With and Understanding Purchasing Power Parities (Let’s Talk Development blog, May 7, 2014)
“A fascinating feature of purchasing power parity (PPP) is more people hold an opinion on it than know what it means. This was in ample display last week, when the Global Office of the International Comparison Program (ICP), hosted by the World Bank, announced the latest PPP data for the world, pertaining to 2011.”

Read the blog by Kaushik Basu, Chief Economist, World Bank.


China’s Economy Surpassing U.S.? Well, Yes and No (Wall Street Journal Real Time Economics blog, April 30, 2014)
“There are a number of reports around Wednesday (here and here) that China’s economy, by one measure at least, is likely to surpass the U.S. in size sometime this year. The headlines will surprise many people, used to hearing China’s economy will overtake the U.S. sometime in the 2020s, or even later. On Wednesday, the International Comparison Program, a statistical project coordinated by the World Bank, announced new data on the size of economies by purchasing power parity that suggests China’s economy is bigger than previously thought. But the latest news is anything but surprising.”

Read the blog.


Growth, Top Incomes, and Social Welfare (Development Impact Blog, April 30, 2014)
“Trends in income inequality are at the center of development policy discussions these days. Part of this renewed attention is no doubt a tribute to Thomas Piketty’s pioneering work to measure top income shares using income tax data, as well as his much-discussed new book. Piketty’s work shows some dramatic trends in inequality at the top end of the income distribution. For example, in countries such as China, Singapore, and the United States, the share of income earned by the top 10% has increased by more than 10 percentage points over the past 30 years. How much do these trends in inequality at the top end of the income distribution matter?”

Read the blog | Access the related working paper by Aart Kraay.

List of New Policy Research Working Papers