Transition Economies 116

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Public Disclosure Authorized 1998 Public Disclosure Authorized

Public Disclosure Authorized ABSTRACTSOFCURRENT STUDIES RX . . .. THE WORLD BANK RESEARCH PROGRAM 1998

ABSTRACTS OF CURRENT STUDIES

THE WORLD BANK WASHINGTON, DC Definition of World Bank Research

Research at the Bank encompasses analytical work designed to produce results with wide applicability across countries or sectors. Bank research, in contrast to academic research, is directed toward recognized and emerging policy issues and is focused on yielding better policy advice. Although motivated by policy problems, Bank research addresses longer-term concerns rather than the immediate needs of a particular Bank lending operation or of a particular country or sector report. Activities classified as research at the Bank do not, therefore, include the economic and sector work and policy analysis carried out by Bank staff to support operations in particular countries. Economic and sector work and policy studies take the product of research and adapt it to specific projects or country settings, whereas Bank research contributes to the intellectual foundations of future lending operations and policy advice. Both activities-research and economic and sector work-are critical to the design of successful projects and effective policy.

Copyright © 1998 International Bank for Reconstruction and Development/THE WORLD BANP 1818 H Street, NW, Washington, DC 20433, U.S.A. All rights reserved. First printing September 1998 Manufactured in the United States of America ISSN 0258-3143 ISBN 0-8213-4176-6

This report has been prepared by the staff of the World Bank. The judgments expressed do not necessarily reflect the views of the Board of Executive Directors or of the governments they represent. CONTENTS

Introduction 1

Studies by Subject Area 3

Abstracts of Current Studies 9

Poverty and Social Welfare 11

Labor Markets and Education 34

Environmentally Sustainable Development 48

Infrastructure and Urban Development 69

Macroeconomics 78

International Economics 87

Domestic Finance and Capital Markets 107

Transition Economies 116

Private Sector Development and Public Sector Management 125

Bank Research Output 139

Index of Studies by Department 167

iii INTRODUCTION

The World Bank's research program has four basic objec- consistency in the evaluation's findings. The study tives: to broaden understanding of development, to assist showed that operational staff do know about research in developing research capacity in its member coun- in their field, use it in their jobs, and find it valuable. But tries, to improve the Bank's capacity to advise its mem- they say that some studies are not relevant to their work, bers, and to support all aspects of its own operations. The and they would like reports to directly explain the oper- program's success is evaluated across all these objectives. ational implications of research findings. Operational Past evaluation of Bank research has focused primar- staff also would like to have more input in setting the ily on the first two objectives, judging its external influ- Bank's research agenda. They would like to see more ence. Reviews by international experts, surveys of readers research in such areas as social issues in economic devel- of research reports, and bibliometric measures have all opment, public sector and civil service reform, political been used to assess the contributions of Bank research economy and institutional development, and adaptation to knowledge about international, regional, and domes- of lessons for the small countries that make up most of tic policy issues and the value of Bank support of the Bank's clients. They valued briefs on research pro- local research institutions and initiatives in developing jects, which make results quickly accessible. And they countries. suggested that mailing lists be developed to direct A recent evaluation program investigated the suc- research results to specialist audiences both within and cess of World Bank research in fulfilling the other two outside the World Bank. objectives-meeting the needs of the Bank's lending oper- The evaluation's findings suggest ways to build on ations staff and thus improving the advice and assistance existing strengths of the research program and to to member countries. The aim was to determine whether strengthen weak areas in support of the Bank's opera- operational staff are aware of Bank research in their area tions. The results have been discussed by the World Bank's of expertise, whether they value it, and whether they management and its Executive Directors and will be use it in their jobs. reflected in the future research program and in the Using several techniques, the evaluation compiled evi- abstracts of research projects in future editions of this dence on operational staff's use of the information gen- report. erated by research and their views on the value of that information. Through focus group discussions, opera- What Research Is Now Under Way? tional staff first identified the key issues to be covered in the evaluation and considered methods for compiling This volume reports on research projects initiated, under information on those issues. These discussions resulted way, or completed in fiscal 1998 auly 1, 1997, through in a wide-ranging questionnaire, administered to oper- June 30, 1998). The abstracts in the volume describe, for ational advisers and experts, on the service that research each project, the questions addressed, the analytical meth- provides to operations. A second questionnaire, distrib- ods used, the findings to date, and their policy implica- uted to task managers in the regional offices, asked about tions. Each abstract also identifies the expected completion the value of Bank researchers' assistance in lending and date, the research team, and any reports or publications advisory work. A third exercise tracked more than 60 produced. To make it easier to obtain information and research projects, querying operational staff about their data, each abstract gives the email address for the research use of the studies' results in analyzing developing coun- project's supervisor. tries' policies and needs, in advising clients, in design- The abstracts cover 193 research projects from through- ing lending projects and programs, and in developing out the Bank, grouped under nine major headings: operational policies and practices. In addition, interviews * Poverty and social welfare, including equity, demo- of most of the Bank's lead specialists and lead economists graphics, and health and nutrition. elicited suggestions of changes in Bank research that could * Labor markets and education. enhance its value. * Environmentally sustainable development, includ- Despite the diversity among the operational staff sur- ing environmental economics, energy, agriculture, and veyed and the Bank's research projects, there was much natural resources.

I Introduction

* Infrastructure and urban development. to-date information on Bank research projects and their * Macroeconomics, including monetary and fiscal pol- findings may wish to subscribe to the quarterly Policy icy and adjustment. and Research Bulletin. Each issue includes information * International economics, including trade, finance, on recent World Bank publications and working papers, and debt. abstracts of newly initiated research projects and sum- * Domestic finance and capital markets. maries of recent research findings, a column identifying * Transition economies. electronic information available from the Bank, and a * Private sector development and public sector man- form for ordering reports featured in that issue. The bul- agement, including industrial organization, regulation, letin is available free of charge. For information on how institutions, political economy, and privatization. to subscribe, see the subscription request form at the back An appendix lists reports and publications produced of this volume. from Bank research and explains how to obtain them. The bulletin, Abstracts of Current Studies, abstracts of Finally, the abstracts are indexed by the sponsoring articles in the Bank's two journals, the World BankResearch unit. Observerand World Bank Economic Review, and a host of Bank reports are available on the World Wide Web at How to Get More Information http://www.worldbank.org.Research reports and information on the World Bank's research branch, the Develop- This is the annual compendium of current Bank research. ment Economics Senior Vice Presidency, are available at Readers interested in obtaining more frequent and up- http://www.worldbank.orglhtml/dec/home.html.

2 STUDIES BY SUBJECT AREA

Poverty and Social Welfare 11

Decentralizing SafetyNets: Community Choices and Their Impact on Households (680-98C) 11 Policies for Poor Areas (681-39) 12 Incentives for DoctorPlacements in Rural and RemoteAreas (681-56C) 13 Poverty and Income Distribution Dynamics in a High-Growth Economy:The Case of Chile, 1987-94(681-59C) 13 Does SchoolingExpansion Equalize Income? (681-67C) 14 The Measurement and Prediction of Poverty in an Aging World (681-73C) 15 Poverty and the International Economy:What Are the Links? (681-83) 16 Quantifying the Net EconomicLoss or Gain from TobaccoUse (681-95) 16 A New Approach to ValuingMortality Risk Reductions (682-12) 17 The Political Economyof Pension Reform (682-17) 17 Best Practices in Public-Private Health Program Design (682-20) 18 Socialand EconomicDeterminants of Poverty in India's Poorest Regions: Qualitative and Quantitative Assessments(682-21) 19 Evaluation of the Impact of Investments in Early Child Development (682-34) 20 Operating Costs and Investment Retums of Pension Funds (682-50) 20 Risk Management Options in the Health Sectorin East Asia (682-71C) 21 Combining Census and Survey Data to Study Spatial Dimensions of Poverty and Inequality (682-73) 21 The Impact of Deworming Treatmenton Primary SchoolPerformance (682-75) 22 The Impact of Population Aging on Health Care Systems (682-82) 22 Does It Matter How We Estimate Annual Expenditures? An Empirical Comparison of Methods (682-84) 22 Long-TermImpacts of MicrocreditPrograms: A Study of the Grameen Bank and Other Programs in Bangladesh (682-93) 23 Democracy,Redistribution, and Inequality (683-00) 24 Africa New Product DevelopmentFund 24 SafetyNets in an Emerging Market Economy 24 Household Willingnessto Pay for Malaria Prevention in Tigray,Ethiopia 25 Improving the Policy Relevanceof LSMSSurveys 25 Socialand.Environmental Consequencesof Growth-Oriented Policies 27 Assessing WelfareImpacts of Public Spending 29 The EconomicImpact of Fatal Adult Illness from AIDS and Other Causes in Sub-SaharanAfrica 29 Private Transfersand PublicPolicy 30 What Causes Violent Crime? A Cross-Country Study 31 Africa Nutrition Database Initiative 32 Core WelfareIndicators Questionnaire 32

Note:The numbersin parenthesesare referencenumbers for projectsfunded centrallyfrom the ResearchSupport Budget. A "C" suffixdenotes a projectcompleted during fiscal1998. Projects with no referencenumbers are fundedby departments.

3 Studies by Subject Area

Labor Markets and Education 34

Impact Evaluation of Education Projects: Decentralization and Privatization Issues (679-18C) 34 The Impact of Child Health and Nutrition on Education Outcomes in Cebu, Philippines (679-57) 35 Gender and the Rural Economy: Evidence from Mexico (680-95C) 36 The Impact of Labor Market Policies and Institutions on Economic Performance (680-96C) 36 Improving Primary Education in Kenya: A Randomized Evaluation of Different Policy Options (681-14) 38 Explaining Gender Disparity in South Asia: A Cross-Sectional Approach (681-29C) 38 Child Diet and Academic Achievement in Cebu, Philippines (681-78) 39 Child Labor and Schooling in Latin America (681-79) 39 When Leaming Makes Reform More Productive: An Agenda for Analysis (682-02C) 40 El Salvador's School-Based Management Reforms (682-08) 41 Improving the Quality of Preschool Education in Kenya (682-16) 41 Evaluating the Impact of Supplementary Teachers in Nonformal Education Centers (682-18) 42 The Impact of Colombia's Voucher Program: Using Randomization through a Lottery for Program Evaluation (682-56) 42 Evaluation of Active Labor Market Programs in China (682-78) 43 Economic Analysis in Education Projects (682-95) 44 Cross-Country Study of Active Labor Market Programs 44 Pay and Grade Differentials at the World Bank 45 Public Sector Retrenchment and Efficient Compensation Schemes 45 Research on the Rural Nonfarm Economy 47

Environmentally Sustainable Development 48

Cost-Effectiveness Analysis of Coral Reef Management and Protection: A Least-Cost Model for the Developing Tropics (680-08) 48 Marine System Valuation: An Application to Coral Reefs in the Developing Tropics (681-05) 49 Spatial Environmental Processes (681-35) 50 Public Involvement in Industrial Pollution Control in Argentina and Brazil (681-46) 51 Gender, Property Rights, and Resource Management in Ghana (681-47) 51 Modern Water Control and Management Practices in Irrigation: Impact on Performance (681-50C) 52 Land Tenure, Land Markets, and Land Productivity in Rural China (681-76C) 53 Regulatory Capacity across Indian States: An Institutional Perspective on the Effectiveness of State Pollution Control Boards (681-86) 53 The Role of Agriculture in Venezuela's Economic Rise and Decline (682-33) 54 Environmental and Economic Analysis Incorporating Macroeconomic Issues (682-38) 54 Pollution Control in China: The Role and Impact of Inspection and Complaints (682-44) 54 Nature Tourism's Contribution to Economic Development and Conservation Finance (682-54) 55 Measuring the Efficiency and Productivity of National Agricultural Research Systems: A Quantitative Approach (682-60) 56

4 Studies by Subject Area

Small Plants, Pollution, and Poverty (682-66) 56 Colombia's Pollution Charge System: Implementation, Impact, and Implications (682-69) 57 Air Quality Measurement in Asia Using Passive Samplers 57 Integrated Acidification Study in China 57 International Trade in Carbon Emission Entitlements 58 Agricultural Price Reform Experience 58 Assessing the Sustainability of the Green Revolution in Bangladesh 58 Risks, Lessons Leamed, and Secondary Markets for Greenhouse Gas Reduction 59 Impact of Policy Reform on Farm Performance 60 Technology Diffusion: The Effectiveness of Agricultural Extension 60 Estimating the Extent of Corrosion Damage Caused by Acid Rain in China 61 Causes and Consequences of Tropical Deforestation 61 Common Property Resource Management Issues in World Bank Projects 62 Economic Instruments for Greenhouse Gas Reduction 62 Market-Based Instruments for Environmental Policymaking in Latin America and the Caribbean: Lessons from 11 Countries 63 Constraints and Opportunities for Agricultural Growth in Sub-Saharan Africa 64 Ecosystem Preservation 65 Environmental Change and Adaptive Resource Markets: A Computer-Assisted Market for Water Allocation 65 Rural Sector Economics: Dynamics of Rural Sector Growth 66 Land Markets 66 Land Reform 67 Environmental Data Accounting 67

Infrastructureand Urban Development 69

Infrastructure and Growth: A Multicountry Panel Study (680-89) 69 Infrastructure Productivity: Direct and Indirect Effects (681-54) 69 Database on Infrastructure Privatization (681-66) 69 Institutions, Politics, and Contracts: Private Sector Participation in Urban Water Supply (681-87) 70 Pilot Study of City Economic Growth (682-39) 70 Revisiting Development: Urban Perspectives (682-40) 71 Competition and Privatization in Urban Water Supply (682-64C) 71 The Sustainable Financing of Investments in Municipal Infrastructure: Cost Recovery for Solid Waste Management in the Philippines (682-77) 72 Privatization of Telecommunications in Africa (682-92) 72 The Financing of the Hub Power Project in Pakistan 73 Bidding for Private Concessions: The Use of World Bank Guarantees 74 Private Power Study 74 Private Provision of Water and Sanitation 75 Comparative Study of Water Institutions and Their Impact on Water Sector Performance in Selected Countries 75 Motorization and the Pricing of Externalities 76 Motorization and Road Provision 77 Impact of Rural Roads 77

5 Studies by Subject Area

Macroeconomics 78

Decentralization, Fiscal Systems, and Rural Development (679-68C) 78 Economic Liberalization and Industrial Restructuring: The Sri Lanka Experience (681-03C) 79 Comparative Analysis of Growth (681-37C) 80 The Impact of Intergovernmental Grants on the Level and Composition of Local Government Spending (681-58C) 80 Currency Crises, Financial Intermediation, and Nominal Rigidities (682-27) 81 Fiscal Decentralization in Latin America (682-97) 81 Africa Region Public Expenditure Review 83 Tools for Fiscal Analysis 83 Applied Macroeconomic Models for Developing Countries 84 Crisis, Polarization, and Reform 85 Macroeconomic Interdependence in Latin America 85 Structural Adjustment Participatory Review Initiative 86 Joint Development Research Group-Africa Region Work Program on African Development 86

International Economics 87

Foreign Direct Investment Spillovers in Developing Countries (680-07) 87 Revenue Consequences of Trade Reform (680-93) 87 A Strategic Approach to Asset and Liability Management in Developing Countries (681-23) 88 Effectiveness of World Bank Nonlending Services (681-26C) 89 The Dynamic Impact of Trade Liberalization in Developing Countries (681-40C) 89 Aid Allocation in a Federal System: A Case Study of India (681-41) 90 World Price Signals, Policy Reforms, and Domestic Commodity Price Behavior (681-49C) 91 Implementation of the Uruguay Round Agreement on Agriculture: New Issues and Progress in Post-Round Liberalization (681-69C) 91 Economic Policies and the Effectiveness of Foreign Aid (681-70C) 92 The Implications of Rapid Growth in Large Developing Countries (681-75C) 93 Understanding Capital Market Crises in Emerging Economies: The Role of Announcements and News in Spreading Crises and Stopping Contagion (682-26) 94 The Impact of the Revival of the Andean Pact and the ASEAN Group on Their Member Countries' Industrial Growth (68243) 95 Real Exchange Rate Misalignment in Latin America 95 Regionalism and Development 95 Commodity Marketing Systems 98 Controlling Recidivism 98 International Comparison Programme Analysis 98 Microeconomic Evidence on Trade and Growth 99 Monitoring and Implementation of the Uruguay Round 99 Trade and Labor Standards 101 The World Trade Organization and Developing Countries 101 Economic Integration: The Americas 101

6 Studies by Subject Area

Africa and the International Economy 102 Commodity Risk Management and Commodity Exchanges 103 Estimating Equilibrium Exchange Rates in Developing Countries 104 The Internationalization of Financial Services 105 Banking Crises 106 Developing Countries and the WTO 2000 Negotiations 106

Domestic Finance and Capital Markets 107

Saving in Developing Countries (681-36) 107 The Financial Structure and Governance of Venture Capital Funds in Developing Countries (681-51C) 108 The Effects of Urban Land Titling and Tenure Security on Investments, Property Value, and Credit Access in Ecuador (681-60C) 108 Bank Reform, Concentration, and Costs (681-90) 109 Peru Pilot Project (682-04C) 109 Financial Structure and Economic Development (682-41) 109 Deposit Insurance: Issues of Principle, Design, and Implementation (682-90) 110 Primary Financial Markets: Macroeconomic Conditions and Market Development (682-98) 110 Bond Spreads in Emerging Markets 111 Postal Financial Services Reform 111 Sustainable Banking with the Poor 112 Financial Liberalization 113 Rural Finance in Pakistan 113 Benchmarking Financial Systems 114 Capital Markets 114 Measuring Financial Regulation and Supervision 114

Transition Economies 116

The Impact of Market-Oriented Policy Reforms on Households in Rural China (677-16) 116 Labor Market Adjustment in Estonia (679-71C) 116 The Consequences of Large-Scale Privatization in Mongolia (680-27C) 117 Poverty and the Targeting of Social Assistance in Eastern Europe and the Former Soviet Union (680-33C) 118 Household Welfare Change during the Transition in Poland (681-21) 119 Changing Ideas about Poverty in Russia (681-42) 119 The Determinants of Agri-Food Market Integration in the Transition Economies, Phase 2 (681-45C) 120 Enterprise Restructuring in Bulgaria and Romania (681-96) 121 External Financing, Macroeconomic Stability, and Government Policy in Eastern European Countries (682-35) 121 Reform along the Volga (682-42) 122 The Political Economy of Social Policy in Transition Countries (682-52) 123 Trade Policy in Transition Economies 123 Privatization and Corporate Governance in Transition Economies 123

7 Studies by Subject Area

Private Sector Development and Public Sector Management 125

Cross-Country Indicators of Institutional Uncertainty (680-51C) 125 Regulating Technology Transfer in Agriculture: Impact on Technical Change, Productivity, and Incomes (680-61C) 125 African Politics and African Development (680-86C) 127 Investment Activity in the Corporate Sector (681-25C) 127 Science Parks and Firm-Level Productivity in China (681-43) 127 Decentralization and Participatory Planning in Bolivia (681-62C) 128 Dealing with Public Risk in Private Infrastructure (681-81C) 129 Government-Business Consultative Mechanisms and Economic Governance: A Three-Country Comparison (681-83) 129 Political Credibility and Economic Reform (681-85) 130 Delay in Disposition: Judicial Performance in Developing Countries (681-92) 130 A Firm-Level Database for Analyzing Industrial Competitiveness in Thailand (682-15C) 131 Efficient Network Access Rules for Developing and Transition Economies (682-36) 132 Optimal Choice of Industry Structure in the Network Utilities of Transition and Developing Economies (682-37) 132 Does More Intense Competition Lead to Higher Growth? (682-47) 133 Auctions and Infrastructure (682-58C) 133 The Role of Interfirm Linkages in Emerging Industrial Clusters (682-61) 134 A Firm-Level Database for Analyzing the Impact of the Regional Crisis and Longer-Run Issues of Productivity Growth in East Asia (682-65) 134 The Introduction of Pharmaceutical Product Patents in India (682-88) 135 Social Capital in Africa 135 Regional Program on Enterprise Development in Africa 136

8 ABSTRACTS OF CURRENT STUDIES

POVERTY AND SOCIAL WELFARE

Decentralizing Safety Nets: Community grants from the center to communes and by the limited Choices and Their Impact on Households information that might be used to implement such a criterion. Block grants to the communes are not based on Ref. no. 680-98C fixed funding rules and appear tobe partially determnined A number of countries in Eastern Europe and North Africa by voting patterns, particularly in swing areas. have begun to expand their cash-based safety nets. A key A parallel study in Hungary was based primarily on obstacle to improving means-tested or indicator target- a panel of household records from 35 municipalities col- ing of safety nets is the cost of obtaining accurate infor- lected between 1994 and 1996, augmented by case stud- mation on incomes and need. Ideally, decentralizing the ies of local regulations for administration of social welfare finance and administration of safety nets through block programs. Both sources of data indicate that communi- grants could alleviate this problem-presuming that local ties have only moderate leeway for discretion on lorng- authorities can monitor poverty and need more accu- term assistance but considerable leeway on the type and rately than can more distant administrators. But the poten- amount of assistance for short-term support, including tial advantages of block grants may be overstated, and housing and fuel allowances and medical support. While even their real advantages may not be realized because the long-term assistance goes primarily to individuals or of inherent drawbacks. So there is a need for further infor- households with no visible means of support, short-term mation on their performance in practice. assistance tends to be used more by individuals with This research used three related approaches to study moderate incomes and where local determination of efforts to decentralize safety nets in Eastern Europe by whether a household is deserving may be more critical. means of block grants to local governments. First, it stud- The results of the research were presented in Tirana ied the range of targeting rules used for distribution by as well as at social protection and decentralization work- analyzing the budgetary decisions of communities. It also shops in the Bank. used data on these decisions to study what determines Responsibility:Development Research Group, Poverty the types of investments made with the block grants. and Human Resources-Harold Alderman (halderman Second, the research used household data to identify @worldbank.org) and Carlo del Ninno; and Europe and the levels and incidence of social assistance under alter- Central Asia Region, Country Department II, Human native distribution mechanisms that have delivered the Resources Operations Division-Sandor Sipos. With same level of funding, providing a perspective on the Rafaelli Nanetti, University of Illinois; Robert Leonardi, effects of the mechanisms themselves. Third, it used qual- London School of Economics; Artan Agolli; Anne Case, itative research techniques to study the community deci- Princeton University; Robert Ackland; Leka Bezhani, sionmaking processes, to determine whether they are Consulente Albania; and Maria Zam, Social Policy and participatory or exclusive. Development Enterprise. All three approaches were used to study decentral- Completion date:November 1997. ization in Albania, which legislated the use of block grants Reports: to urban and rural communities in October 1995 as part Agolli, Artan. 1997. "Decentralization and SocialAssistance: The of the reorganization of the country's network of social Impact of Social Capital-The Case of Albania." The Albania assistance and insurance. Analysis of household survey Institute, Tirana. data collected by the Ministry of Labor and Social Alderman, Harold. 1997."Decentralization and Targeted Transfers: Protection in August 1996 indicates that relative to other Social Assistance in Albania." World Bank, Development safety net programs in low-income countries, social assis- Research Group, Washington, DC. Draft. tance in Albania is fairly well targeted to the poor. Case, Anne. 1997. "The Decentralization of Social Assistance: Moreover, the poverty targeting exceeds that which could Evidence from Albania." Princeton University, Princeton, N.J. be expected on the basis of proxy indicators of targeting . 1997. "Election Goals and Income Redistribution: Recent alone; communes appear to be using local information. Evidencefrom Albania." Princeton University, Princeton, N.J. Nevertheless, a large number of poor are excluded from Harsca, Istvan. 1997."Social Care Provided by LocalGovernments." social assistance. The system is hampered by the lack of . 1998."Characteristic Features of Settlements and the Need a clear, objective criterion for determining the size of the for Welfare Benefits."

11 Poverty and Social Welfare

- 1998."Fluctuations and Mobilityin the Circleof Those and the outcomes of past policies and projects. There typ- ReceivingAssistance." ically is also a spatial variance in poverty indicators. Mezei,Istvan. 1998. 'Social Policy of Local Governments in Borsod." By exploiting this spatial variation in the incidence of Monostori,Judit.1998. "The Practice of Local GovernmentRegarding poverty and in area characteristics, this project aims to WelfareAid, 1995-96." understand what part lack of geographic capital and the Zam,Maria. 1998. "The Situation and Perspectives of Means-Tested performance of local governments play in creating poor AssistanceSystem from the Pointof SocialIntegration." areas, as opposed to such factors as residential differen- - 1998. "SocialAid Strategies of the Hungarian Local tiation, whereby people who lack "personal capital" end Governmentsand the Developmentof the Decentralization up being spatially concentrated. By identifying specific Process." policy interventions-or their immediate outcomes in terms of community-level attributes-the analysis assesses the gains from poor-area policies and projects Policies for Poor Areas and trie implications for the design of future projects. The project is studying the dynamics of the geogra- Ref. no. 681-39 phy of poverty from a microeconomic level so that it can Most countries have well-recognized "poor areas" in help in understanding how various governmental and which the incidence of absolute poverty is unusually high nongovernmental area-based actions as well as other vari- by national standards. In China, for example, there is a ables affect households' prospects of escaping poverty. high incidence of poverty in rural areas of the south- Its approach, a microeconometric investigation of the eco- west and northwest. Similar examples in other coun- nomic geography of poverty in selected countries inAsia tries abound. and Latin America, entails a substantial increase in the Are specific policy interventions called for in response policy-relevant variables included in micro-empirical to such poor areas? One would hope, and under certain models of poverty. conditions expect, that the growth process would help Responsibility:Development Research Group, Poverty these poor areas catch up. But that does not appear to be and Human Resources-Martin Ravallion (mravallion happening in some countries. Poor areas appear to per- @worldbank.org), Shaohua Chen, Jyotsna Jalan, and sist even with robust economic growth. Quentin Wodon. With Shankar Subramanian, Cornell Governments and donors are regularly called on to University. do something about these lagging poor areas, and area- Completiondate: June 1999. based interventions are now found in most countries. Reports: The World Bank has assisted more than 300 area devel- Jalan,Jyotsna, and Martin Ravallion.1998. "Are ThereDynamic opment projects since the early 1950s, most designed to Gainsfrom a Poor-AreaDevelopment Program?" Journal ofPublic develop a rural area for the benefit of poor people. Other Economics67:65-85. agencies also provide substantial support for such devel- . "Geographic Poverty Traps?" World Bank, Development opment programs. ResearchGroup, Washington, DC. How much impact do these efforts have on living stan- Ravallion, Martin. 1998."Poor Areas." In David Giles and Aman dards? To answer this question, we must be able to assess Ullah,eds., The HandbookofApplied Economic Statistics. New York: what would have happened to living standards in the MarcelDekkar. absence of the interventions. It should not be assumed . 1998. "Reaching Poor Areas in a Federal System." Policy that such schemes will bring net gains to poor people; Research Working Paper 1901. World Bank, Development by acting against the flow of labor from low- to high- ResearchGroup, Washington, DC. productivity areas, they may actually make matters worse - . Forthcoming. "Does Aggregation Hide the Harmful Effects in the longer term. of Inequality on Growth?" Economics Letters. Properly assessing the benefits (net of hidden costs) Ravallion, Martin, and Jyotsna Jalan. 1996. "Growth Divergence of these programs is problematic. But the geographic vari- Dueto SpatialExternalities." Economics Letters 53(2):227-32. ation in initial conditions and in the evolution of living Ravallion, Martin, and Quentin Wodon. 1997. "Banking on the Poor? standards over time offers scope for disentangling the Branch Placement and Nonfarm Rural Development in effects of poor-area programs from other factors. Even Bangladesh." Policy Research Working Paper 1858. World Bank, within poor countries geographic areas differ widely in Development Research Group, Washington, DC. their endowments of "geographic capital," including . 1997. "Poor Areas, or Just Poor People?" Policy Research locally provided public services and access to area- WorkingPaperl798.WorldBank,DevelopmentResearchGroup, specific subsidies. These differences are both geo-climatic Washington, DC.

12 Poverty and Social Welfare

Incentives for Doctor Placements Doctors born outside Java require much lower compen- in Rural and Remote Areas sating differentials for service in very remote areas compared with those from Java, suggesting an impor- Ref. no. 681-56C tant role for local training and recruiting in staffing out- In most countries rural areas are underserved by physi- lying areas. cians. The problem is particularly acute for countries that The project design and results were instrumental in have poor populations living in remote areas, such as developing a component on incentives in the Indonesia Indonesia. If physicians could be induced to relocate to Health Professionals Project that allowed experimenta- these areas and effectively manage health services there, tion with altemative compensation and benefit packages. the access of the poorest to health care and public health The findings were formally presented to policymakers services could be substantially improved. The cost- atseminarsinJakartaandinformallydisseminatedwithin effectiveness of this strategy depends on the cost of induc- the Indonesian Ministry of Health. ing physicians to relocate. Responsibility: East Asia and Pacific Region, Health, This project's objectives were both methodological Nutrition, and Population Sector Unit-Howard Barnum and substantive. It aimed to develop and demonstrate a ([email protected]); and Development Research new revealed preference methodology for assessing the Group, Infrastructure and Environment-Kenneth preferences of health service providers-or any labor Chomitz. With Margareta Kettner, Forum One market participant-among assignments with different Communications; Yvonne Ying; Dr. Mawarwati, Dr. combinations of cash and noncash compensation Muharso, Gunawan Setiadi, and Dr. Ibnu, Indonesian and locational attributes. And it aimed to inform project Ministry of Health; Dr. Triono, Bappenas Ministry of and policy design in Indonesia by determining how Planning; and Azrul Azwar, Indonesian Medical responsive doctors' decisions on location might be Association. The Indonesian Ministry of Health con- to the level and composition of different compensation tributed funding for the research, and the Indonesian packages. Medical Association collaborated in the study. The project used a utility-theoretic framework to assess Completion date:June 1998. the sensitivity of doctors' decisions about job postings Report: to such attributes as cash salaries, locational amenities Chomitz,Kenneth M., with Gunawan Setiadi, Azrul Azwar, Nusye and disamenities, and working conditions. The frame- Ismail,and Widiyarti. 1998. "What Do Doctors Want? Developing work was applied to three data sets. The first describes Incentivesfor Doctors to Servein Ifidonesia'sRural and Remote actual choices made by recent medical graduates when Areas." Policy ResearchWorking Paper 1888.World Bank, choosing among locations for compulsory service. The DevelopmentResearch Group, Washington, DC. data cover two time periods with different incentive structures. Because the range of actual choices is limited, two surveys were conducted to assess doctors' preferences Poverty and Income Distribution between pairs of hypothetical assignments. This approach, Dynamics in a High-Growth Economy: often used in environmental and market research, per- The Case of Chile, 1987-94 mits estimation of a utility function defined over a wider set of prospective compensation and locational packages Ref: no. 681-59C than now exists. One survey covered graduating med- The past decade saw persistent, high rates of economic ical students currently facing a decision among locations growth in Chile in the context of a market-oriented pol- for their compulsory service. The second survey covered icy environment, coupled with a deliberate government doctors currently performing compulsory service. emphasis on targeted interventions to ensure "growth The research found that the revealed preference with equity." Nevertheless, a wide-ranging debate has method yields sensible results consistent with those from ensued on whether the fruits of economic growth are ben- a revealed preference natural experiment. The method- efiting all, or whether large segments are being left behind ology provides a relatively inexpensive way to assess the as a result of increasing poverty and inequality. This potential response of health, education, and other pub- discussion was influenced, in turn, by a broader debate lic service providers to innovations in benefits, incen- about the impact of trade liberalization on wage disper- tives, or locational amenities. sion in developing countries, a debate drawing on pre- The research also found that the offer of paid specialist liminary empirical results that appeared to contradict the training had a very large cash-equivalent value, suffi- Stolper-Samuelson theorem in a few countries, includ- cient to recruit volunteers for the most remote areas. ing Chile.

13 Poverty and Social Welfare

This study sought to establish the facts for a better- Does Schooling Expansion Equalize Income? informed debate. It relied on a detailed analysis of four waves of the CASEN (Caracterizaci6n Socioecon6mica Ref. no. 681-67C Nacional) household surveys (for 1987, 1990, 1992, and This project explored the interaction between education 1994), using methods and techniques not previously and the distribution of income to determine to what applied to Chilean data. Special care was taken to degree a massive expansion of education can be used to control for regional differences in cost of living, for improve income distribution. Because few high- differences in needs among households, and for inequality countries have embarked on rapid expansion economies of scale within households. In addition to of education, this research required a counterfactual. The scalar measures of poverty and inequality and three dif- project constructed a counterfactual by decomposing the ferent poverty lines, the study brought to bear stochas- changes in income distribution in countries with rapid tic dominance techniques to establish robust intertemporal expansion in education using comparable cross-sections comparisons. of household income data at various points of time. The results show that there was a substantial reduc- The project used a traditional eamings equation frame- tion in the incidence, depth, and severity of poverty from work to construct a conditional distribution of school- 1987 to 1994, although the last years in the sample saw ing and earnings that would allow isolation of the impact some losses for the poorest decile because of increasing of education-and education policies-on distributional unemployment. There were no robust changes in Chile's outcomes. Appropriate adjustment for endogenous labor high level of inequality over the period, although force participation and family rather than individual there is some evidence of a slight compression (improve- incomes allowed construction of a counterfactual that ment) at the lower tail, compensating for an increase could answer the research question in a partial equilib- in dispersion at the upper tail. Decomposition analyses rium context. suggest that the distribution of educational opportuni- This methodology was applied to data for Taiwan ties is an important determinant of the continuing high (China) derived from a series of household surveys in inequality. Overall, the evidence seems to favor an inter- 1979-95. The project also produced a complete picture pretation of distributional dynamics driven, if anything, of the evolution of the distribution of income in the econ- by technological change, rather than by changes in trade omy during that period and an in-depth explanation of policy. that evolution. By establishing the facts about poverty and inequal- The project estimated earnings equations, farm profit, ity in Chile, the research has contributed to a reassess- and self-employment income functions for 1979-94. It ment of the targeted interventions through which the estimated labor force participation and occupational equity side of the "growth with equity" objective has choice models for various categories of household mem- been pursued in Chile. bers over the same period. And it decomposed the Thefindingswerepresentedatthel997LatinAmerican observed changes in the distribution of individual earn- Meetings of the Econometric Association, in Santiago, ings and household incomes that can be imputed to Chile; a University of London conference, the Chilean changes during the period in the remuneration rates of Economy in the 21st Century, in May 1998; and the 1998 human capital variables, in labor supply and occupa- LatinAmericanMeetingsoftheEconometricAssociation, tional choice behavior (changes that were either in Lima, Peru. autonomous or induced by the preceding change in earn- Responsibility: Poverty Reduction and Economic ings), in the sociodemographic structure of households, Management Network, Poverty Division-Francisco and in the population's education structure. H. G. Ferreira ([email protected]). With Julie A. This methodology explained an apparent puzzle in Litchfield, London School of Economics; and Oswaldo the evolution of income distribution in Taiwan (China): Larranaga, University of Chile. the distribution of individual eamings became more equal Completion date:June 1998. while at the same time the distribution of household Report: incomes became less equal. That evolution is explained Ferreira, Francisco H.G., and Julie A. Litchfield. 1998. "Calm in large part by factors related to education. Returns to after the Storms: Income Distribution in Chile: 1987-94." education tended to increase over the period under analy- Policy ResearchWorking Paper 1960.World Bank, Poverty sis for all wage-earners, farmers, and nonfarm self- Reductionand EconomicManagement Network, Washington, employed workers. This clearly contributed to an increase DC. in inequality for both individual earnings and household incomes. But the increase in the population's mean edu-

14 Poverty and Social Welfare cation level and, implicitly, in the equality of the distri- or 50 years from now, we have much less information bution of schooling helped increase equality in individ- on how many of them are likely to be poor. But there are ual earnings and, to a lesser extent, in household incomes. many reasons to expect an increase in poverty in older The unequalizing effect of higher returns to education age groups. The size of the baby boom generation affects were more than offset by the expansion of education for its wage earning potential and savings opportunities. The individual earnings, but less than offset by this factor skills of older groups may fast become obsolete as Asian for household incomes. Other effects linked to the evo- economies undergo rapid change. Changing family struc- lution of the sociodemographic structure of the popula- tures may also affect the proportion of the elderly in tion reinforced the resulting worsening of inequality in poverty. household income distribution. This project investigated two questions. First, how The differential effect of the expansion of schooling should poverty among the elderly be measured? In par- on disparities in individual earnings and household ticular, what can we say about the poverty of the elderly incomes is due to several factors, among them education- as a group in countries where the elderly typically live induced changes in labor force participation, particularly with family members? Second, what are the implications for women. But the most important cause of the adverse of rapid population aging for poverty and inequality effect on household income distribution seems to be the among the elderly? negative effect of longer schooling on young people's The first question was addressed through an analysis participation in the labor force and the consequent drop of data from Ghana, Pakistan, South Africa, Taiwan in potential income for some households. At the bottom (China), Thailand, and the Ukraine. The results indicate of the income scale this phenomenon clearly contributed that the use of per capita household expenditures as a to a worsening of the distribution. The expansion of edu- welfare measure will probably overstate poverty among cation in Taiwan (China) probably would not have been children and understate it among the elderly. Because the possible if household incomes had not at the same time elderly generally live in smaller households, the rank- been increasing at an annual rate of 6 percent. ing of poverty in this group is affected by economies of The main question left unanswered by the study is scale as well as by allowances for the lower costs of chil- why the returns to education increased despite the dren. Without further information on scale economies a extremely rapid increase in the supply of educated work- clear ranking of the poverty among the elderly is not pos- ers. This can be explained mostly by drastic changes in sible. However, nonelderly adults are less likely to be the economy's sectoral structure, which may have induced poor than either children or the elderly. an even faster increase in the demand for educated work- To address the second question, the study used time- ers. Thus an important conclusion of this study is that series data from 14 Asian countries to investigate whether policies affecting the skill structure of the demand for national savings rates are influenced by the share of labor are potentially as important as the expansion of elderly or children in the population. If so, countries with education in changing the distribution of individual earn- a falling birthrate may see a boost to income growth and ings and household incomes. This finding points to a those with rising shares of elderly may see a slowdown. need to broaden the methodology so as to endogenize But while pooled regressions support the view that demo- the determination of earnings. graphic change will affect growth, more detailed disag- The findings have been disseminated through Bank gregated analysis calls this view into question. seminars and papers. This analysis also used 20 years of national income Responsibility: Office of the Senior Vice President, surveys from Taiwan (China) to analyze the earnings of Development Economics-Lyn Squire (Isquire cohorts of workers and to investigate whether being part @worldbank.org). With Francois Bourguignon, Delta; of ababyboom depresses lifetime income. The results do and Marc Gurgand, Lamia. not support the proposal that with imperfect substitu- Completiondate: June 1998. tion between age cohorts in labor, members of a large cohort will receive lower wages. Responsibility:Development Research Group, Poverty The Measurement and Prediction and Human Resources-Harold Alderman (halderman of Poverty in an Aging World @worldbank.org); and Poverty Reduction and Economic Management Network, Poverty Division-Michael Ref. no. 681-73C Walton. With Angus Deaton and Christina Paxson, Although we have relatively good predictions on how Princeton University. many elderly there will be in South and East Asia 10, 25, Completion date:January 1998.

15 Poverty and Social Welfare

Reports: simulated. For Indonesia the household data span cer- Deaton,Angus, and Christina Paxson."Aging, Saving, and the tain reforms, so responses and consequences can be Welfareof the Elderlyin DevelopingAsia." observed. The Indonesia case study will experiment with - 'Poverty among Childrenand the Elderlyin Developing highly data-intensive, nonparametric approaches to the Countries." estimation. Both case studies will recognize that the poor are not a homogeneous group. Responsibility:Development Research Group, Trade- Poverty and the International Economy: L. Alan Winters ([email protected]) and Will What Are the Links? Martin, ShantayananDevarajan and Public Economics- Shantayanan Devarajan, and Poverty and Human Ref. no. 681-83 Resources-Martin Ravallion. With Steven Berry, Yale This research investigates the effects of increased eco- University; Anne Case, Princeton University; and W. Fan nomic openness on the very poor. As countries liberal- and James Levinsohn, University of Michigan. The ize their trading regimes and allow dramatic exchange Swedish International Development Authority is con- rate adjustments, prices change, wages adjust, and tributing funding for the research. resources are reallocated. The study uses multiple econo- Completiondate: June 1999. metric methodologies and data sets to investigate the effects of these changes on poverty, with Indonesia and South Africa as case studies. Quantifying the Net Economic Loss The links between poverty and trade reform are an or Gain from Tobacco Use important policy issue, but one for which evidence is lacking. The heightened emphasis on addressing poverty Ref. no. 681-95 in the development process suggests that evidence on This study tests the hypothesis that tobacco production the links between internationalization and poverty is and use result in a global economic loss and that this desirable both in its own right and to help with the design loss remains over a range of discount rates, mortality and of policy packages or compensation policies. The issues morbidity effects, and prices. The study proposes a novel are of particular relevance to South Africa, where a cost-benefit analysis and is preparing a framework for vigorous policy debate about liberalization is under assessing the net benefits of global production and con- way. sumption. The methodology builds on initial work by In an ideal world this study would investigate the Howard Barnum ("The Economic Burden of the Global impact of internationalization on the very poor using a Trade in Tobacco," TobaccoControl 3[4]:358-61, 1994), well-specified and econometrically estimated general refining the estimates of benefits and costs arising equilibrium model. This analysis would encompass both from tobacco consumption. It involves estimating the link between policy and prices (of goods, services, the total consumer and producer surplus associated and factors) and the link between prices and household with tobacco consumption, taking into account the welfare. But this has never been done in one step-for external and internal costs; the main costs are the direct fairly obvious practical reasons. This study too will sep- and indirect costs of morbidity and mortality. To incor- arate the two links. porate these costs, the annual number of disability- The study starts by asking how trade liberalization adjusted life years (DALYs)associated with tobacco use affects the prices of the goods consumed and produced is estimated and converted into a dollar value by multi- and the wages and other incomes of the poor. It will plying the number by the external value of the loss of a examine detailed time-series data from particular liber- year of life. The study's main objective is to determine alizations to establish a basis of evidence on these the minimum dollar amount that needs to be placed on pass-throughs and couple this work with computable the external value of a human life (willingness to pay general equilibrium modeling to derive implications per DALY) so that the net benefits of tobacco consump- for a wider set of policy shocks than have actually tion are zero. In other words, it aims to determine the been observed. It will then perform a careful household- minimum external cost associated with the loss of human level analysis of demand and supply to explore how life that would result in zero net benefit from tobacco households adjust to these shocks and what the net effects consumption. are. Data for calculating the consumer and producer sur- For South Africa only one year of household data are pluses are drawn from Food and Agriculture Organization available, so responses to price changes will need to be (FAO), World Bank, and World Health Organization

16 Poverty and Social Welfare

(WHO) sources. The indirect costs of premature death The purpose of this research is to see whether more are estimated on the basis of tobacco consumption data reliable answers to risk valuation questions can be from the FAO and WHO, data on deaths and years of obtained by translating changes in risk of death into life lost from the recent work quantifying the global dis- changes in life expectancy. The impetus for the approach ease burden and smoking-related mortality (C. J. L. is the belief that people can deal more easily with time Murray and A. Lopez, GlobalBurden of Disease,Cambridge, than with small probabilities-that is, that they can more Mass.: Harvard University Press, 1996, and R. Peto and easily value an extra day of life expectancy than a 1 in others, Mortalityfrom Smoking in Developed Countries, 10,000 change in their probability of dying during the 1950-2000, New York: Oxford University Press, 1994), coming year. and Bank projections of income. To estimate the indirect The study is developing and pretesting a survey instru- costs of morbidity, the study uses correlations of tobacco ment that can be used to value reductions in risk of death, consumption and disability from the Murray and Lopez stated in terms of changes in life expectancy. Changes in book, adjusted by disability weights for the different life expectancy are presented through the concept of a regions. The study estimates the direct costs of morbid- survival function, which plots the probability of surviv- ity using Bank data on hospital budgets and data from ing to future ages as a function of age. Preliminary results the literature on treatment costs per year for tobacco- suggest that laypeople can understand these changes and attributable diseases, average number of years until the are able to value them. onset of tobacco-related disease, and average expected Responsibility: Development Research Group, Infra- years of life after the onset of disease. structure and Environment-Maureen L. Cropper Results will be disseminated through the Bank's ([email protected]) and Nathalie Simon. health, nutrition, and population lecture series starting Completiondate: December 1998. in September 1998. The analysis should provide approaches that countries could use in preparing tobacco control projects. The Political Economy Responsibility:Human Development Network, Health, of Pension Reform Nutrition, and Population Team-Prabhat Jha (pjha @worldbank.org). With Frank Chaloupka, Rich Peck, and Ref. no. 682-17 Ayda Yurekli. This research will put together a database on pension Completiondate: September 1998. reform that will make it possible to use econometric analysis to explain why the mix of public and private, and of pay-as-you-go and funded plans, varies among the coun- A New Approach to Valuing tries that have reformed their social security systems. The Mortality Risk Reductions study hypothesizes that a major explanatory variable is the size of the preexisting implicit pension debt. Countries Ref. no. 682-12 with large pay-as-you-go obligations are likely to retain In evaluating health and safety projects, it is often nec- a large public pay-as-you-go pillar in their reformed essary to value reductions in risk of death. Empirical esti- systems to contain transition costs, illustrating the path mates of what people would pay for such risk reductions dependency of pension policy. Preliminary statistical are usually obtained in one of two ways-from com- analysis performed in this study in fiscal 1998 is consis- pensating wage differentials in the labor market or from tent with this hypothesis. contingent valuation studies, in which people are asked The research is also carrying out case studies of six directly what they would pay to reduce their risk of dying. countries that have reformed-three in Latin America One difficulty with labor market studies is that they value (Argentina, Mexico, and Uruguay) and three transition risk reductions for prime-aged males. They may there- economies (Hungary, Kazakhstan, and Poland)-to throw fore not be applicable in all contexts, especially in eval- further light on the obstacles to reform, how these obsta- uating health programs that save the lives of older people. cles were overcome, and what lessons can be learned for Contingent valuation studies can, in theory, be tailored other countries now planning pension reform. to value risks in any context. But studies that have asked Responsibility: Development Research Group, Pov- people to value small reductions in their probability of erty and Human Resources-Estelle James (ejames dying have often produced answers that are internally @worldbank.org). With Sarah Brooks, Duke University; inconsistent, probably because people find it difficult to and Mitchell Orenstein, Brown University. deal with small probabilities. Completiondate: June 1999.

17 Poverty and Social Welfare

Best Practices in Public-Private accountability and incentive issues. And it examined Health Program Design the infrastructure requirements for creating a managed care system from the ground up and for monitoring com- Ref. no. 682-20 pliance with regulations and standards. Few developing or industrial countries have discovered The project's results show that the U.S. Medicaid man- the optimal balance of public and private sector roles in aged care model has many applicable tools for Bank client health care provision and financing. Yet there is grow- countries reforming their health systems and moving ing pressure to attain that balance. Bank clients are search- toward greater private sector participation. Although ing for alternative and innovative ways to finance, wholesale importation of the U.S. model would not be organize, and provide health services, especially for advisable, many aspects of the system would be helpful underserved, low-income populations. Increasingly, they as countries move forward. are interested in program design options that link pub- The project also yielded a number of specific conclu- lic finance to private provision, exploit private sector sions and lessons, including the following: strengths, and introduce better incentive structures in * Before deciding to pursue a managed care program, health markets. Bank health specialists seek in-depth it is necessary to carefully examine the health status and information on design features that can be incorporated needs of the prospective beneficiary population and assess in health lending operations or a toolkit for policymak- existing safety net infrastructure and access requirements. ers. Both groups are interested in lessons learned during * Benefits must reflect both the needs of the publicly the implementation of changes in health systems. insured population and the outcomes desired. The Medicaid managed care experience in the United * All types of specialists should be included in each States may be relevant to Bank client countries, especially plan's provider network to avoid skewed specialist d is- middle-income countries and those planning social insur- tribution and thus adverse selection and inequitable risk ance reform and testing demand-side subsidies for cov- sharing. ering low-income populations. Medicaid, an entitlement * Oversight mechanisms should be kept basic, trans- programjointlyfinancedbythefederalgovernmentancd parent, and enforceable, and to the extent possible the states, provides payment for medical services to 37 oversight responsibility should be centralized in a sin- million low-income people. Programs are designed and gle agency to avoid communication and coordination managed by the states within broad federal guidelines problems. and thus vary considerably in design features related to e The absence of an active consumer watchdog func- the type and use of managed care organizations, cover- tion in the media has a great impact on the public's accep- age, provider payment systems, eligibility requirements, tance and understanding of managed care, its process, and beneficiary enrollment mechanisms. and its goals and on the quality of care. This project examined the lessons learned in the man- a As the cost and complexity of management infor- aged care experience under Medicaid and assessed how mation systems and a coordinated infrastructure can be these lessons might benefit health care delivery systems prohibitive, viable alternative solutions (such as leas- in middle-income and developing countries. The research ing, or contracting out) should be explored. focused onArizona, Califomia, Tennessee,and Wisconsin. * Pilot programs in carefully selected areas are the The research methodology was qualitative, consisting preferred method of rollout for a publicly financed man- of case studies, site visits, telephone interviews, focus aged care plan; this allows "working out the bugs" with- groups, and meta-analysis of published data and reports. out risking the success of the entire effort. In addition, comprehensive interviews were carried out * Incentives for early enrollment (before the onset of with 30 experts on the U.S. experience and 10 experts on illness) should be created to involve enrollees in pre- international experience. ventive programs and thus lower costs and improve the The research looked at a wide range of issues. It exam- health status of the beneficiary population. ined the salient design features of the managed care mod- * As all regulatory and oversight mechanisms rest on els under implementation in the states, the main strategies appropriate data, it is advisable to take great care in estab- used in launching the programs, and the major results lishing what data are to be collected and how they will be and outcomes (quality, coverage, access, and the cost- exchanged between providers, plans, and regulators. quality ratio). It looked at the institutional relationships * For bidding and contracting competitive bid is underlying the models and at the constraints at the fed- favored over a fixed capitation rate, but prices should not eral, state, and local levels. It identified challenges and be allowed to go below a threshold at which quality care processes in public sector contracting. it investigated can be delivered.

18 Poverty and Social Welfare

* Rate setting should be a collaborative process of the survey questionnaire and the analysis of the results between private providers, health plans, and public reg- have been greatly enriched by the qualitative findings. ulators, allowing risk adjustment for high-risk and high- Initial results indicate that poverty in the region is a cost populations. complex phenomenon based on a network of interlock- * In the transition fromna public delivery systemn to ing economic, social, cultural, political, and geographic managed care it is crucial to protect the continued avail- and environmental dimensions. Three distinct groups ability of services for the uninsured and of such core func- of poor were identified-the destitute poor, who have tions as epidemiological surveillance and communicable usually experienced an idiosyncratic shock; the struc- disease control. tural poor, whose poverty is linked to social identity; and Findings will be presented at a World Bank staff sem- the mobile poor, who have a strong potential for upward inar as part of a managed care training program. The mobility. findings will also be included in a plenary session pro- The potential and likely path for upward mobility dif- gram at the International Managed Care Summit in fers for each group; each faces different constraints and December1998 in Miani Beach, Florida. Many Bankclient different opportunities, and each has different coping countries will be represented at the summit, which is strategies. The presence or absence of social capital, par- organized by the Academy of International Health Studies ticularly links outside the village, proved to be an impor- and the American Association of Health Plans and cospon- tant deterrninant of mobility. Social factors found to be sored by the World Bank. associated with persistent poverty include very low caste Responsibility:Europe and Central Asia Region, Humnan status, dependency relationships, vulnerability, and risk Development Sector Unit-Armin Fidler (afidler adversity. Poor households in "attached labor" relation- @worldbank.org); and Private Sector Development ships gain a measure of security, but those that have opted Department-Jeff Ruster and Randee Schneiderman. for "casual labor" have better opportunities to negotiate With Andrew Barrer, Susan Harmeling, Jake Garcia, and higher wages or to migrate to employment centers. Laura Reichenbach. Diversification out of land-based agriculture was a com- Completiondate: August 1998. mon pattern; many poor households saw greater potential for economic betterment outside the traditional village economy. Social and Economic Determinants of Poverty Govemment services and antipoverty programs could in India's Poorest Regions: Qualitative and potentially ease the transition from a traditional land- Quantitative Assessments based system to one characterized by greater income diversification by reducing vulnerability and facilitating Ref. no. 682-21 risk-taking. But most of the programns in operation were This study is aimed at deepening the understanding of described by survey respondents as unsatisfactory the key characteristics of the poor, and of recent changes because of poor management and misappropriation of in the conditions and characteristics of poverty, in one resources. Among antipoverty programs, the Public of India's most impoverished regions, eastern .Lttar Distribution System was cited most often as essential to Pradesh and Bihar. It explores the multiple dimensions the well-being of the poor, while others were generally (both economic and noneconomic) of poverty and seeks found to be nonfunctional in the villages surveyed. to better understand the barriers and opportunities that Among services, schools and water systems were deemed determine economic mobility. It also assesses the impact most valuable, and government health services most dys- of the government's basic services and antipoverty pro- functional. grams in improving the well-being of the poor. These findings have significance for the Bank's pol- The study has used both qualitative and quantitative icy dialogue and assistance program in India, and fur- research methods in a phased, iterative approach. Derived ther analysis and work are planned to better identify from participatory rural analysis and rapid rural analy- pivotal factors in the failure of programs and policies. sis, its qualitative techniques include focus group dis- The research will contribute to a poverty paper being pre- cussions, case history interviews, social mapping and pared for presentation at the next donors' consortium in wealth ranking exercises, a social capital inventory, and India. In addition, four research papers are under prepa- a gender roles and issues exercise. These methods are ration, and a dissemination workshop will be held in complemented by a household and community sample India in fiscal 1999. survey, a modified Living Standards Measurement Responsibility: South Asia Region, Poverty Reduction Survey, with a sample size of 2,250households. The design and Economic Management Sector Unit-Valerie Kozel

19 Poverty and Social Welfare

([email protected]); and Poverty Reduction and vice providers but functions as a center-based program, Economic Management Network, Poverty Division- that case study will compare the cost-effectiveness of that Giovanna Prennushi. With Barbara Parker; Salman Zaidi; approach with the cost-effectiveness of new, indirect Madhavi Kuckreja, Vanangana, India; Nisha Srivastava approaches that will be implemented on a pilot basis. and Ravi Srivastava, Allahabad University, India; Sashi The Uganda case study will separately evaluate the Bhushan; Ajay Kumar, Center for Action Research and impact of deworming on children under the age of six. Development Initiatives; and Sandeep Khare, Vigyan, While deworming programs worldwide are targeted to India. The Dutch Poverty Trust Fund is contributing fund- school-aged children, for whom worm loads are high- ing for the research. est, work in progress in Lucknow, India, shows the poten- Completion date:June 1999. tial for dramatic increases in weight for younger children following a mass deworming campaign. As no comparable evaluation has been undertaken for this age group Evaluation of the Impact of Investments in other countries or for other indicators, the Uganda in Early Child Development experiment will be particularly informative. The deworming pilot in Uganda will follow a stan- Ref. no. 682-34 dard experimental methodology in which there will be Investments in early child development are a rapidly a random assignment of treatment and control commu- growing part of Bank lending; projects totaling $745 mil- nities. But all three case studies include components lionarebeingplannedforlaunchbetweenl997and2000. that are demand-driven. So the approach used for the These programs combine nutrition, health care, and cog- projects in which communities select the programs they nitive development to offset the disadvantages of grow- will support will employ longitudinal data and coming up in poverty. Substantial evidence shows that poor munity fixed effects to address selection bias. health and an inadequate early learning environment Responsibility:Development Research Group, Poverty lead to handicaps difficult to reverse later in life. There and Human Resources-Harold Alderman (halderman are many children who may never go to primary school @worldbank.org) and Elizabeth King; and Human without interventions that reach them in the earliest years Development Network, Office of the Vice President and of their lives. If they do attend primary school, they may Head of Network-Jacques van der Gaag. With Jere be at high risk of dropping out early or repeating grades. Behrman, University of Pennsylvania; Patrice Engle, That lowers the return to both public and private school- California Polytechnic State University; Donald Bundy, ing. So early child developmen t programs may serve both Partnership for Child Development, Oxford University; to increase the efficiency of a range of other investments and N. B. Kabaterein, Vector Control Division, Uganda. in human capital and to promote equity in the popula- Oxford University has provided funding and in-kind tion they serve. support. This research will apply a strategy of early coordina- Completion date:January 2001. tion with Bank operations to evaluate the impact of investments in early child development. It will study three projects: the Bolivian Integrated Child Development Operating Costs and Investment Project, the Uganda Nutrition and Early Child Develop- Returns of Pension Funds ment Project, and the Philippine Early Childhood Development National Investment Program. All three of Ref no. 682-50 the case studies will investigate the effect of early child This study is investigating the determinants of admin- stimulation and coaching on the age of school enrollment istrative costs in the decentralized pension plans often and on indicators of cognitive development. They will included in pension reforms, such as those in Chile and also relate indicators of early cognitive development to other Latin American countries. These programs have early primary school grade progression and performance. been criticized for their high administrative costs. By And the research will assess the suitability of measures examining the cost function of private pension plans, the of cognitive development and achievement for project study aims to target the determinants of costs that can evaluation. be influenced and reduced by public policy. The case studies include both home (center)-based and The study uses two approaches. First, it will carry parental education approaches to child stimulation. out an econometric analysis of U.S. mutual funds, which Moreover, as Bolivia is considering the sustainability of often run retirement plans and are a close analogue to its day care program, which operates in the homes of ser- an individual account system. The research will model

20 Poverty and Social Welfare costs as a function of assets, number of accounts, mar- functions for the net medical care expenditures incurred keting expenses, active or passive fund management, size by households. The analysis drew on household survey of fund family, rate of return, and risk. It will look for data for Indonesia and Thailand. the incremental cost associated with each individual The research found that the empirical distribution of account, economies of scale stemming from larger funds financial risks exhibits the stylized lognormal density of and fund families, and the relationship between cost and underlying medical care costs, indicating that public pol- retums. The study is assembling a data set to be used for icy is generally ineffective in smoothing the long tail of this purpose. It will use data from the United States and major risks faced by households. Risk management is possibly from Australia, Sweden, and the United worse for the poor: both social insurance and budget sub- Kingdom. sidies tend to be targeted toward better-off users of med- Second, the study will carry out more careful analy- ical care. ses of a small number of mutual funds that agree to coop- The findings have been disseminated at two confer- erate, to gain greater insight into how they make decisions ences on designing health care financing systems, one relating to costs, fees, marketing expenses, and the allo- sponsored by the Chinese Academy of Social Sciences cation of joint costs among several jointly produced prod- and the Chinese Economists Society in Beijing on June ucts. So far two funds, Fidelity and State Street Bank, 23-25, 1998, the second sponsored by the Institute for have agreed to provide access to detailed information. Health Policy and Systems Research in Hong Kong on The study will provide a menu of steps that policy- June 15-16,1998. makers could take to reduce administrative costs in pen- Responsibility: East Asia and Pacific Region, Health, sion reforms that include a mandatory private pillar, as Nutrition, and Population Sector Unit-Nicholas Prescott well as a better understanding of what services would ([email protected]). With Menno Pradhan, Free be forgone if these cost-reducing measures are adopted. University, Amsterdam. Responsibility: Development Research Group, Pov- Completion date:June 1998. erty and Human Resources-Estelle James (ejames @worldbank.org). With Gary Ferrier, University of Arkansas. Combining Census and Survey Data Completiondate: June 1999. to Study Spatial Dimensions of Poverty and Inequality

Risk Management Options Ref. no. 682-73 in the Health Sector in East Asia Policymakers need information about the geographic distribution of households living in poverty to guide the Ref: no. 682-71C allocation of resources. Such information is often pre- The recent financial crisis in East Asia has had two major sented in poverty maps. A difficulty in constructing finely adverse effects on the health sector. Currency deprecia- disaggregated maps is that good-quality income or expen- tion has raised the price of imported pharmaceuticals, diture measures generally are not available for a suffi- increasing the financial risks of ill health. And the drop cient number of households. But recent research using in household income has reduced the affordability of data from Ecuador has shown that it is possible to com- these financial risks. Designing an appropriate policy bine high-quality household surveys that have good con- response to this crisis-induced combination of increased sumption measures but cover few households with census risks and reduced affordability requires a good under- data that cover most households but have no consump- standing of the financial risk problem in the health section measures or only poor ones. The research derived tor and of the options for managing those risks. This study detailed geographic poverty estimates based on a con- aimed to contribute to the understanding of those issues. sumption welfare indicator. It addressed two questions: What is the empirical den- This study will refine and improve that methodol- sity of net financial risks due to obtaining medical care, ogy, to accommodate poverty measures other than the particularly of major, potentially catastrophic financial headcount rate and to test analytical techniques for risks in different income groups? And how effective are constructing confidence intervals around poverty esti- public interventions, such as budget subsidies or social mates. It will apply the methodology in Nicaragua, insurance, in providing insurance against these risks? Panama, and South Africa, assessing its reliability across To answer these questions, the research estimated prob- countries. Finally, the study will use a poverty map as a ability density functions and cumulative distribution research tool, analyzing the relationship between local

21 Poverty and Social Welfare inequality and the operation of a demand-driven social The Impact of Population Aging fund program aimed at alleviating poverty in Ecuador. on Health Care Systems It will investigate the association between income distribution and both the type of project proposed by a com- Ref. no. 682-82 munity and the success of the project. Population aging can have an important impact on health Responsibility:Poverty Reduction and Economic Man- expenditures (both public and private) as well as on the agement Network, Poverty Division-Jesko Hentschel optimnaldesign of health care systems. The technologies ([email protected]) and Francisco Ferreira; and associated with diseases of the old tend to be more expen- Development Research Group, Poverty and Human sive than the technologies associated with diseases of the Resources-Peter Lanjouw and Berk Ozler. With Jenny young. So developing countries will have to reexamine Lanjouw, Yale University. their health care budgets and priorities as their popula- Completiondate: June 1999. tions age. In addition, in planning health insurance systems, they will need to take into account the different types and degrees of moral hazard and cream-skimming The Impact of Deworming Treatment problems that older populations may generate. on Primary School Performance This project will investigate these issues in developing countries. It will undertake a quantitative analysis Ref no. 682-75 of existing data sets from several countries in East Asia This study is an exploratory one to determine the feasi- and Latin America and the Caribbean to throw light on bility of conducting a larger research project to evaluate how health status and health care utilization and expen- the effect on education outcomes of mass (untargeted) ditures vary across age groups, and a preliminary explo- deworming treatment provided to 15,000primary school ration of why these age-health patterns may differ across children in Busia District, Kenya. Because the treatment countries with different types of health care systems. It will be provided at randomly selected schools, the schools will project how public and private health expenditure not selected for treatment will serve as a control group, would change in the sample countries as their popula- allowing unbiased estimation of the effect of deworm- tions age, under the assumption that the age-spending ing treatment on education outcomes. relationships remain constant and under the assumption This pilot project will measure the prevalence and that they change as a function of growth in income and intensity of infection among schoolchildren in Busia and, education. Case studies will examine in greater depth the most important, determine whether such characteristics insurance market problems associated with older popu- as socioeconomic status, access to sanitation, and per- lations, the different forms these problems take in pub- sonal hygiene are highly correlated with infection status. lic and private systems, and ways these problems have Information on such characteristics will be collected been or might be resolved. The project is also expected through a brief oral questionnaire given to pupils and to lead to a proposal for a larger research project on the through observations by interviewers. impact of population aging on health care systems. The Once the relationship between observed characteris- research is in the initial stage of determining which house- tics and infection status has been estimated, the propen- hold-level data set would best suit its purposes. sity scores of infection for all pupils will be computed. Responsibility: Development Research Group, Pov- The propensity score is the conditional probability of erty and Human Resources-Estelle James (ejames being moderately or heavily infected given a pupil's aworldbank.org).WithLenNicholls,UrbanInstitute.The observed characteristics. If effective, the propensity score Pan-American Health Organization is participating in method will make it possible for the larger research pro- the research. ject to identify pupils likely to be moderately or heavily Completion date:June 1999. infected in the control schools without collecting medical and parasitological information. If propensity scores turn out not to be accurate predictors of infection status, Does It Matter How We Estimate the research will not be carried out. Annual Expenditures? An Empirical Responsibility: Human Development Network, Comparison of Methods Education Team-Donald Bundy (dbundy@worldbank. org); and Development Research Group, Poverty and Ref. no. 682-84 Human Resources-Paul Glewwe. This research is designed to help in understanding how Completion date: December 1998. survey design affects the measurement of consumption

22 Poverty and Social Welfare and thus of poverty. The use of survey-based consump- tant objectives in World Bank operations. Recent expe- tion as the monetary measure of welfare is now a well- rience with microcredit programs shows that with proper established standard in Bank poverty assessments and incentives and monitoring, loan defaults can be kept to analytic work. Moreover, the Bank has an active program a minimum and affordable credit can be delivered to the of advising countries on the implementation of surveys. poor and to women even if they lack physical collateral. But methods have varied greatly in this body of work An earlier study (Credit Programs for the Poor: and there is little understanding of the sensitivity of the Household and Intrahousehold Impacts and Program results to the method used. Sustainability, ref. no. 676-59) that conducted a house- In this research four different sets of consumption and hold and community survey in Bangladesh in 1991-92 poverty estimates will be calculated using data repre- found that microcredit programs have a substantial effect senting four different options for designing a consump- in reducing poverty and that credit given to women has tion survey. Three sets of aggregates will be built from a substantially larger effect than credit given to men. the Chinese household expenditure survey for the But how sustainable are microcredit programs, and provinces of Hebei and Liaoning, which visits house- how sustainable are their benefits? This research pro- holds every month to measure their consumption. The ject, building on the findings of the earlier study, explores first set of aggregates will be based on the full 12 months these and related issues. It addresses these questions: of data. The second will mimic a one-visit survey by using Do the estimated effects of microcredit programs remain only one month of data for each household. The third over time? Are there diseconomies of scale in villages as will use two separate months of data for the same house- microcredit programs expand over time? Do microcre- hold to mimic a revisit; this approach will help to dis- dit programs have any spillover effects? Do they have tinguish within-household from between-household noncredit effects? Does the group play an essential part variation and provide a basis for the adjustment of sam- in group-based microcredit? The study will investigate ple moments. The fourth set will be built from single- these questions by resurveying the households and com- visit year-long recalls in the Hebei and Liaoning Living munities surveyed in the earlier study in Bangladesh dur- Standards Measurement Study survey. ing 1991-92. The results of the workwill help guide the advice given The survey will try to revisit all 1,798 households in the Bank's data collection efforts. And the light they surveyed earlier, in 72 program villages and 15 control shed on the sensitivity of consumption and poverty mea- villages. Afew new control villages may have tobe added sures to method will help analysts judge how much stock to the survey if programs have moved into some of the they can put in comparisons of surveys that use different original control villages. A few more villages will be added methods. The results will be disseminated through pub- to the original program villages to allow comparison lication, through the training courses for Bank staff on between program impacts in old and new program vil- poverty and on household surveys, and through the con- lages. And in each program village a few new partici- ferences and training courses on survey methods for Latin pants will be interviewed to allow a comparison of American statistical offices sponsored jointly by the Inter- impacts between old and new participants. American Development Bank, the Economic Commission The study is expected to contribute to the under- for Latin America and the Caribbean, and the World Bank. standing of the role of microcredit in poverty reduction, Responsibility:Development Research Group, Poverty human capital development, economic growth, and thus and Human Resources-Margaret E. Grosh (mgrosh the overall development process. Knowledge about the @worldbank.org). With Scott Rozelle, Stanford University long-term effects of microcredit on income and other wel- and University Waikato; and John Gibson, University of fare indicators will help in analyzing how much poverty California at Davis. reduction is possible with microcredit. By quantifying Completion date: March 1999. the effect of the group, the study is expected to help in understanding the necessity of the group mechanism in microcredit. And by quantifying the noncredit effects of Long-Term Impacts of Microcredit Programs: microcredit programs, the study should shed light on the A Study of the Grameen Bank and Other importance of providing noncredit inputs through these Programs in Bangladesh programs. Responsibility: Poverty Reduction and Economic Ref. no. 682-93 Management Network, Gender Division-Shahidur R. Providing affordable credit to the poor and improving Khandker ([email protected]) and Hussain institutionsthatdeliversuchcredithavelongbeenimpor- Samad; and Development Research Group, Rural

23 Poverty and Social Welfare

Development-Gershon Feder. With Mark Pitt, Brown and leverage the positive results into regionally funded University; Jonathan Morduch, Harvard University; and activities that alleviate poverty. It examined experience Binayak Sen and M. Abdul Latif, Bangladesh Institute with pilot activities in Cameroon, Ethiopia, Ghana, Kenya, of Development Studies. Mali, Mozambique, Tanzania, Uganda, and Zambia. The Completion date: December 2000. research drew on detailed studies available in each activity area, using analytical methods that varied depending on the pilot activity. Democracy, Redistribution, and Inequality The findings reveal that small grassroots initiatives stand a good chance of building capacity, nurturing devel- Ref. no. 683-00 opment, and fostering a sense of ownership among The current thinking about the relationship between the stakeholders. For example, building the capacity of distribution of political power and the distribution of communities at the grassroots level to set up informal economic resources has invariably led to the conclusion financial networks is an effective way of addressing that when the poor acquire political power, they use it the problem faced by potential borrowers with limited to massively redistribute economic resources in their or no collateral, who are unlikely to obtain loans favor, which should result in lower inequality. This study from established banks. For the Bank the findings looks at the link between political democracy and inequal- suggest that such pilots are a useful way to test innova- ity, to assess how and through what mechanisms democ- tive approaches and leverage the positive results into racy affects income distribution. It asks the following larger investments. The findings of these pilot activities questions: Do democratic countries really redistribute will be used to guide and influence larger investments more income to the poor? And do democratic countries in development. tend to be more equal? The results will be disseminated through the Africa The study will undertake cross-country analysis using Region's Findings and Best Practice Infobriefs series indicators of democratization, level of redistribution, and and made available on the Internet. degree of inequality. It will also carry out more detailed Responsibility: Africa Region Technical Families, analysis of countries that have experienced a recent tran- Regional Initiatives Group-Prasad C. Mohan (pmohan sition to democracy (Greece, the Republic of Korea, @worldbank.org), Human Development 4-Venanzio Portugal, and Spain), to try to find out how the political Vella, Human Development 2-Richard Seifman and change has affected redistribution and education poli- Anwar Bach-Baouab, Macroeconomics 1-Jeffrey G. cies in these countries, as well as income inequality. Special Lewis, Private Sector Finance-William Steel, A. Amuah, attention will be devoted to formerly socialist countries, Tyler Biggs, lain Christie, and Paul Ballard, Environ- where, unlike in other cases, the introduction of democ- ment-Shimwaayi Muntemba, and Agriculture 1- racy was accompanied by massive increases in inequality. Vishva Bindlish and David Nielson; and Europe and The study will draw on available data on political Central Asia Region, Private and Financial Sectors democracy, data on educational achievements and Development Sector Unit-Onno Ruhl, Institutional and inequality from the World Bank, and data on redistrib- Social Policy-Antoine Simonpietri, and Regional ution and social spending from the United Nations, the Initiatives Group-0. Dupriez. World Bank, and the Luxembourg Income Study. An Completion date:June 1998. important source of data will be the 1996 income distribution database created in an earlier research project (Income Distribution, ref. no. 679-78)and its recent update. Safety Nets in an Emerging Responsibility:Development Research Group, Poverty Market Economy and Human Resources-Branko Milanovic (bmilanovic @worldbank.org). With Mark Gradstein, University of Transition to a market economy has stimulated strong Pennsylvania and Ben Gurion University. growth in many parts of Vietnam since the late 1980s, Completion date: May 1999. and continued broad-based growth will help raise living standards for most people. But the country is starting from an extremely low base with extensive poverty Africa New Product Development Fund and underdeveloped institutional structures. Many people will continue to be poor and most will remain vul- This research assessed whether it is possible to use small nerable to risk in the foreseeable future. Some people will amounts of money to fund pilot activities across sectors be slower to respond to market incentives, and others,

24 Poverty and SocialWelfare even among those who respond quickly to market incen- Household Willingness to Pay for Malaria tives, will face catastrophic shocks. Households also con- Prevention in Tigray, Ethiopia front shifting levels of productivity and needs over their life cycle. This study compared estimates of the value of prevent- Many of these issues were of less concern under the ing malaria, as measured by household willingness to former command economy, where lack of mobility pay for a hypothetical malaria vaccine, with cost-of-ill- fostered community and family solidarity and house- ness estimates of the burden of the disease. A compan- holds belonged to local cooperatives that provided for ion survey estimated household willingness to pay for the welfare of their members. Developing safety nets to bednets, to see whether cost recovery for a bednet pro- replace these faltering institutions is an important part gram was possible and to find outwhichhousehold mem- of the successful transition to a market economy. Vietnam bers would be covered by such a program. is improving its poverty alleviation and safety net pro- Although the cost-of-illness estimates were hampered grams, but much more needs to be done to modify the by imperfect estimates of the value of time, it appears design of existing programs and fill large gaps in the that willingness to pay for a malaria vaccine is no larger systems and resources needed to protect Vietnam's poor than the value of medical costs plus time spent ill. At a and vulnerable. cost of 40 birr ($6.30) per bednet, 60 percent of house- This project carried out a critical overview of the pub- holds would purchase at least one bednet and 90 per- lic safety net programs in Vietnam that aim to protect cent of those households would purchase enough bednets those outside the formal employment sectors, notably for all family members. those in the rural economy and urban informal sector. Responsibility: Development Research Group, Infra- It began by examining the principal sources of vulnera- structure and Environment-Maureen L. Cropper bility for Vietnamese households and what is known ([email protected]) and Nathalie Simon. With about household coping strategies. It reviewed the Anna Alberini, University of Colorado at Boulder; Seema transfers and safety nets that address low incomes and Arora, Vanderbilt University; P. K. Sharma, New Delhi vulnerability for individuals not covered by the gov- Municipal Committee; and Dale Whittington, University emnment's social security benefits. It examined the virtues of North Carolina at Chapel Hill. and weaknesses of the government's proposed flagship Completiondate: December 1998. program, the Hunger Eradication and Poverty Reduction Program. And it proposed an agenda for strengthening the design and implementation of the main safety net Improving the Policy Relevance programs. of LSMS Surveys The study drew on numerous field visits to Vietnam, meetings with govemment ministries in Hanoi, and exten- The World Bank has assisted developing countries in sive discussions with people's committees and local gov- implementing Living Standards Measurement Study ernment representatives at the provincial, district, and (LSMS) surveys for more than 10 years. This research commune levels. It also drew on the results of the 1992-93 draws on that work and the work of other household sur- Vietnam Living Standards Survey, a nationally repre- vey programs to synthesize the lessons of experience so sentative, integrated household survey, and on other stud- that countries can incorporate them in the design of their ies of living standards in Vietnam. survey programs. The research focuses on the following The findings of the study are being used in the Vietnam questions: Can LSMS surveys be modified to cover pol- country assistance strategy and in poverty work in icy issues that are difficult or impossible to analyze using Vietnam. existing LSMS data? Can the reliability and accuracy of Responsibility:Development Research Group, Public the data currently gathered in LSMS surveys be further Economics-Dominique van de Walle (dvandewalle improved? And can implementing LSMSsurveys be made @worldbank.org). easier? Completiondate: June 1998. The research includes detailed analysis of all major Report: sections (modules) of LSMS questionnaires, including van de Walle, Dominique. Forthcoming."Safety Nets in an those on health, education, fertility, migration, housing, EmergingMarket Economy."In Jennie Litvackand Dennis anthropometrics, employment, agriculture, nonagricul- Rondinelli,eds., From Economic Transition to Social Transformation: tural enterprises, credit and savings, and consumption. Institution Building in Vietnam. Westport, Conn.: Quorum Data from LSMS surveys and other pertinent surveys Books. are being analyzed for quality, literature on relevant

25 Poverty and Social Welfare analytical issues is being reviewed for the implications Responsibility:Development Research Group, Poverty for data requirements, and field experiments have been and Human Resources-Margaret Grosh (mgrosh set up for the consumption module. @worldbank.org),Paul Glewwe, Harold Alderman, Dean The interim results of the research support a re- Jolliffe, Carlo del Ninno, Kinnon Scott, Diane Steel, endorsement of the original modular, multitopic approach Tilahun Temesgen, Lynn Tsoflias, and Yvonne Ying; and of the LSMS surveys. Guidance will be given on how to Infrastructure and Environment-Maureen Cropper; combine modules more flexibly into different kinds of Poverty Reduction and Economic Management Network, surveys with different purposes, samples, and periodic- Gender Division-Nobuhiko Fuwa, Shahidur Khandker, ities. The largest modifications will be made to the old Andrew Mason, and Tara Viswanath; and Europe and health and agriculture modules. Options for environ- Central Asia Region, Country Department IV,Moldova mental modules are being explored, and questions Resident Mission-Wlodek Okrasa. With Jere Behrman, about how to better define the community for the University of Pennsylvania; Indu Bhushan, Asian community questionnaire are being addressed. For most Development Bank; Kim Chung, Brown University; modules, short and long versions will be suggested Central Statistical Bureau, Latvia; Angus Deaton and Eric to help in combining them into surveys for different Edmonds, Princeton University; Elizabeth Frankenburg, purposes. Rand Corporation; Paul Gertler, University of California The interim results were discussed at two workshops at Berkeley; Andrew Harvey, St. Mary's University, in Washington, DC, on April 17-19,1996, and June 11-13, Canada; Hanan Jacoby, University of Rochester; Anjini 1997, each attended by about 75 participants. The work- Kochar and Julie Schaffner, Stanford University; Robert shops were meant principally to bring together the Lucas, Boston University; Fiona Mackintosh; Stephen authors participating in the project to agree on a vision Malpezzi, University of Wisconsin; Andrew McKay, for the final output and to detect gaps and overlaps in University of Nottingham; Donald Mead and Thomas the work. Representatives of eight client agencies in devel- Reardon, Michigan State University; Juan Muinoz, oping countries attended to ensure that the product would Sistemas Integrales, Chile; Raylynn Oliver; Elaina Rose, meet their needs. World Bank operational staff imple- University of Washington; Wim Vijverberg, University menting surveys and policy advisers in all sectors cov- of Texas at Dallas; and Dale Whittington, University of ered in the questionnaire were also invited, to ensure that North Carolina at Chapel Hill. their needs too were met. Representatives of otfier agen- Completion date: December 1998. cies involved in survey work in developing countries and Reports: the United States were also invited, to benefit from their Blank, Lorraine, and Margaret E. Grosh. 1997."Building Analytical experience and make them aware of the research. Capacity in Developing Countries." World Bank, Development The Manual for Planning and Implementing the LSMS Research Group, Washington, DC. Survey, produced under this project, was disseminated Blank, Lorraine, Margaret E. Grosh, and Pauline Knight. 1996. at an international survey workshop for all Latin "Building AnalyticCapacity in Conjunctionwith LSMSSurveys: American countries in Aguascalientes, Mexico, on April The Jamaica Story." Improving the Policy Relevance of LSMS 1-3, 1998. The workshop was sponsored jointly by the Surveys Research Paper 1. World Bank, Policy Research Inter-American Development Bank (IDB),the World Bank, Department, Washington, DC. and. the Economic Commission for Latin America and Contreras, Manuel E. 1995."Building Analytic Capacity in Bolivia: the Caribbean (ECLAC). The manual was also presented The Social Policy Analysis Unit (UDAPSO)." Improving the at a sampling course for representatives of 30 franco- Policy Relevance of LSMS Surveys Research Paper 2. World phone countries on June 12-21, 1997. The manual serves Bank,Policy Research Department, Washington, DC. as the textbook for the Bank's annual training course on Drummond, Lisa B.W. 1995. "Building Analytic Capacity in household surveys. It has been translated into Russian ConjunctionwithLSMSSurveys:AReportontheVietnamLiving and Spanish. Standards Survey." Improving the Policy Relevance of LSMS The project's work is expected to influence how sur- Surveys Research Paper 3. World Bank, Policy Research vey projects funded by the Bank and other agencies are Department, Washington, DC. carried out. Project materials have already affected the Grosh, Margaret E., and Paul Glewwe. 1996. "Household Survey design or implementation of Bank-sponsored surveys Data from Developing Countries: Progress and Prospects." in Azerbaijan, Cambodia, Jamaica, the Kyrgyz Republic, American Economic Review 86(2):15-19. Nicaragua, and Panama. They also are being used as . 1998. "Data Watch: The World Bank's Living Standards training materials by the new joint IDB-World Measurement Study Household Surveys." Journal of Economic Bank-ECLAC survey program for Latin America. Perspectives 12(1):187-96.

26 Poverty and Social Welfare

"Designing Household Survey Questionnaires for The first of the three research components constitutes Developing Countries: Lessons from Ten Years of LSMS cross-national analysis. This analysis is intended to set Experience." World Bank, Development Research Group, the stage by examining the relationship, across coun- Washington, DC. Draft. tries and over time, between macroeconomic policy Grosh, Margaret E., and Juan Muftoz. 1996.A Manualfor Planning indicators and indicators of growth, environmental con- andImplementing the LSMS Survey. LivingStandardsMeasurement ditions, and poverty or equality. Study Working Paper 126.Washington, DC: World Bank The second component, centered on structural mod- Grosh'Margaret E., Qing-hua Zhao, and HenriJeancard. 1995."The els, is the heart of the project. The research attempts to Sensitivity of Consumption Aggregates to Questionnaire rnodel three sets of issues in which tradeoffs between Fornulation: SomePreliminary Evidencefrom the Jamaicanand growth, poverty reduction, and environmental protec- Ghanaian LSMSSurveys." Improving the Policy Relevance of tion are thought to be especially acute. The first set of LSMSSurveys Research Paper 6. World Bank, Policy Research issues concerns industrial pollution and the behavior of Department, Washington, DC. industrial firms. The research analyzes regional and firm- Jolliffe,Dean. 1995."Review of the Agricultural Activities Module level data on industrial output, employment, and emis- from the Living Standards Measurement Study Survey." sions. Policy levers examined include macroeconomic Improving the PolicyRelevance of LSMS Surveys ResearchPaper policies affecting the sectoral composition of industry- 7. World Bank, Policy Research Department, Washington, DC. such as trade, industrial, and energy policies-and pol- Oliver,Raylynn. 1995."Building Analytic Capacity in Conjunction lution regulation policies. Study sites include Brazil, with LSMSSurveys: The Kyrgyz Republic."Improving the Policy China, Ecuador, India, Indonesia, and Pakistan. Relevanceof LSMSSurveys ResearchPaper 4. World Bank,Policy The second set of issues relates to land use conflicts Research Department, Washington, DC. between agricultural expansion and natural habitat Wilson,Francis, and Dudley Homer. 1996."Lessons from the Project preservation. The research analyzes the incentives to con- for Statistics on Living Standards and Development: The South vert tropical forests and other habitats to agriculture, AfricanStory." Improving the PolicyRelevance of LSMSSurveys the ecological consequences, the magnitude and persis- Research Paper 5. World Bank, Policy Research Department, tence of economic gains, and the distribution of those Washington, DC. gains. Policies investigated include energy pricing, agricultural pricing (including exchange rates), and regional development strategies, especially the siting of infra- Social and Environmental Consequences structure. Study sites include Belize, Indonesia, Mexico, of Growth-Oriented Policies and tropical Africa. The third set of issues centers on poverty, fertility, The World Bank has long maintained that economic and household use of environmental resources. Because growth is good for people and good for the environment. of the diversity of households and their environmental Yetskepticism persists aboutwhether this "win-win-win" problems, this set of models also is diverse. One line of scenario applies in all places at all times. In some cases research studies the links between poverty, fertility, edu- there are tradeoffs that clearly have to be considered: A cation, technology, and use of fuelwood and other envi- new factory that brings higher incomes may also foul the ronmental resources in Nepal and Pakistan, and the air and water. Expansion of smallholder farming may relationship between tenure and poverty in Uganda. result in the loss of natural habitats. How significant Another line of research concentrates on the respon- and widespread are these tradeoffs? Do win-win-win siveness of decisionmaking and urban sanitation to solutions become fewer as an economy becomes more changes in tenure conditions in Ecuador and Indonesia. efficient? Are there instances in which economic growth In the project's third component, case studies build on is at odds with improved human and ecological wel- the structural models, placing them in a historical, envi- fare, or in which poverty can be reduced only by harm- ronmental, and policy context and exploring cross- ing the environment? sectoral links. Case studies include economic liberaliza- This project addresses these and other questions about tion in China and trade reform in Mexico. the relationships between poverty, growth, and the envi- Finally, the research is addressing the political econ- ronment. It uses a systematic, quantitative approach omy and sociological implications of the findings of the and draws on extensive data reflecting a wide range of project case studies. country experience that have recently become available. Most of the data used in the project come from exist- The study seeks to derive lessons from this experience ing sources. The project has also successfully merged to guide future policy, using three analytical methods. databases and has collected data for some of the studies.

27 Poverty and Social Welfare

The research done to date suggest the following con- Chomitz, Kenneth M., and Charles Griffiths. 1996."Deforestation, clusions: A more even income distribution is more impor- ShiftingCultivation, and Tree Crops in Indonesia: Nationwide tant than initial income levels in determining the extent Patterns of Smallholder Agriculture at the Forest Frontier." to which economic growth reduces poverty. Enforcement Poverty, Environment, and Growth Working Paper 4. World of pollution regulations increases with income and edu- Bank, PolicyResearch Department, Washington, DC. cation in China and Indonesia, and informal pressures Dasgupta, Susmita,Hua Wang,and David Wheeler.1997. "Surviving play an important part in determining pollution levels. Success: Policy Reform and Industrial Pollution in China." On communal lands in Mexico poverty increases defor- Poverty, Environment, and Growth Working Paper 12. World estation, while liberalizing agricultural pricing policies Bank, Policy Research Department, Washington, DC. has the opposite effect. In Indonesia deforestation is sen- Dasgupta, Susmita, and David Wheeler. 1996. "Environmental sitive to macroeconomic policies such as exchange rates, RegulationviaCitizenProtest in DevelopingCountries: Evidence and in tropical Africa the location of infrastructure plays from China.' Poverty,Environment, and Growth Working Paper an important part in deforestation. In Pakistan the rela- 7. World Bank, Policy Research Department, Washington, DC. tionship between fertility and environmental degrada- Deininger, Klaus, and Bart Minten. 1996.'"Determinants of Forest tion varies between regions, and in Nepal environmental Cover and the Economics of Protection: An Application to degradation adversely affects schooling. In Ecuador and Mexico."Poverty, Environment, and Growth Working Paper 10. Indonesia investments in sanitation are found to improve World Bank,Policy Research Department, Washington, DC. with more secure tenure. In Brazil and Pakistan small- . 1996. "Poverty, Policies and Deforestation: The Case of scale industries do not play as significant a part in pol- Mexico." Poverty,Environment, and Growth Working Paper 5. lution as previously thought. World Bank, Policy Research Department, Washington, DC. The findings will be disseminated in a major work- Easterly, William. 1997."Life during Growth: A Compendium of shop in the fall or winter of 1998 and are expected to Social, Political and Environmental Indicators of What Gets feed into the World Bank's World Development Report Better and What GetsWorse fromLow toHighlncome." Poverty, 2000. Environment,and Growth WorkingPaper 17.World Bank,Policy Responsibility:Development Research Group, Poverty Research Department, Washington, DC. and Human Resources-Emmanuel Jimenez (ejimenez Filmer,Deon, and Lant Pritchett. 1996."Environmental Degradation @worldbank.org), Martin Ravallion, Lant Pritchett, Peter and the Demand for Children:Searching for the Vicious Circle." Lanjouw, Deon Filmer, and Annika Haksar, Infrastructure Poverty, Environment, and Growth Working Paper 2. World and Environment-David Wheeler, Kenneth Chomitz, Bank, PolicyResearch Department, Washington, DC. (Also pub- and Hua Wang, Macroeconomics and Growth-William lished as Policy Research Working Paper 1623,July 1996.) Easterly and Giuseppe larossi; Economic Development Heil, Mark, and Quentin Wodon. 1997."Cross-Country Inequality Institute, Environment and Natural Resources Division- by Energy Source,1960-90." Poverty, Environment, and Growth Muthukumara Mani; Environment Department-David Working Paper 21. World Bank, Policy Research Department, Gray and Gi-Taik Oh; and East Asia and Pacific Region, Washington, DC.

Social Development Sector Unit-Chaohua Zhang. With . 1997."Future Inequality in CO2 Emissionsand the Impact David Coady; Jean Lanjouw and Arun Aggrawal, Yale of Abatement Proposals." Poverty, Environment, and Growth University; Jorge Eguiguren; Jan Gunning, Free Working Paper 20. World Bank, Policy Research Department, University; David Loughran; Javier Poggi; Angus Deaton, Washington, DC. Princeton University; Robert Lucas, Boston University; Hoy, Michael, and Emmanuel Jimenez. 1997."The Impact on the Mark Heil; Qingying Kong; Jean-Philippe Platteau and Urban Environment of Incomplete Property Rights." Poverty, Quentin Wodon, University of Namur; Thomas Environment,and GrowthWorking Paper 14.World Bank, Policy Tietenberg, Colby College; Alain de Janvry, University ResearchDepartment, Washington, DC. of California at Berkeley; Bart Minten; Charles Griffiths; Lanjouw, Peter. 1997. "Small-Scale Industry, Poverty and the Ayo Heinegg; Xiawen Huang; Binayak Sen; Rebecca Grey; Environment:ACase Study of Ecuador." Poverty,Environment, and William Hawthorne. and Growth Working Paper 18. World Bank, Policy Research Completion date:February 1999. Department, Washington, DC. Reports: Loughran, David, and Lant Pritchett. 1997."Environmental Scarcity, Chomitz, Kenneth M., and David A. Gray. 1996."Roads, Land Use, Resource Collection, and the Demand for Children in Nepal." and Deforestation:A Spatial Model Applied to Belize."Poverty, Poverty, Environment, and Growth Working Paper 19. World Environment, and Growth Working Paper 3. World Bank,Policy Bank, Policy Research Department, Washington, DC. Research Department,Washington, DC. (Also forthcoming in Lucas, Robert.1996. "Pollution Leviesand the Demand for Industrial WorldBank Economic Review.) Labor: Panel Estimates for China's Provinces." Poverty,

28 Poverty and Social Welfare

Environment, and Growth Working Paper 9. World Bank,Policy than would emerge from more theoretically sound meth- Research Department, Washington, DC. ods. Should resources be invested in more thorough Mamingi, Nlandu, Ken Chomitz, David Gray, and Eric Lambin. assessments? 1996."Spatial Patterns of Deforestation inCameroon and Zaire." The research has examined these issues for irrigation Poverty, Environment, and Growth Working Paper 8. World investments in Vietnam, using data from the Vietnam Bank, Policy Research Department, Washington, DC. Living Standards Survey of 1992-93. The study tested the Mani, Muthukumara, Sheoli Pargal, and Mainul Huq. 1997. "Is simplest feasible quick and dirty method for estimating There an Environmental 'Race to the Bottom?' Evidence on the benefits from irrigation investments-a method similar Role of Environmental Regulation in Plant Location Decisions to that routinely used in irrigation project appraisals- in India." Poverty, Environment, and Growth Working Paper and compared the results with those of a more sophisti- 15. World Bank,Policy Research Department, Washington, DC. cated econometric modeling of marginal returns to Mani, Muthukumara, and David Wheeler. 1997. "In Search of irrigation that allows for household and area hetero- Pollution Havens: Dirty Industry in the World Economy, geneity. It examined potential biases and drew implica- 1960-95." Poverty, Environment, and Growth Working Paper tions for policy choices. 16.World Bank, PolicyResearch Department, Washington, DC. The study found that the quick and dirty method Ravallion,Martin. 1996."CanHigh-Inequality DevelopingCountries performs well in estimating average benefits nationally Escape Absolute Poverty?" Poverty,Environment, and Growth but can be misleading for some regions, and it overesti- Working Paper 11. World Bank, Policy Research Department, mates the progressivity of a policy of irrigation expan- Washington,DC. sion in Vietnam. It is adequate for low-cost projects-at Ravallion,Martin, and Shaohua Chen.1996. "What Can New Survey cost levels where most projects are deemed to be worth- Data Tell Us about Recent Changes in Living Standards in while-and for projects where distributional outcomes Developingand TransitionalEconomies?" Poverty, Environment, are not a major concern. Otherwise, the quick and dirty and Growth Working Paper 1. World Bank, Policy Research method can be quite deceptive. Department, Washington,DC. (Also published as PolicyResearch Responsibility: Development Research Group, Public Working Paper 1694,December 1996.) Economics-Dominique van de Walle (dvandewalle Ravallion, Martin, Mark Heil, and Jyotsna Jalan. 1997. "A Less @worldbank.org). With Dileni Gunewardena, University Poor World, But a Hotter One?" Poverty, Environment, and of Peradeniya, Sri Lanka. Growth Working Paper 13. World Bank, Policy Research Completion date:June 1999. Department,Washington, DC. Report: Wang, Hua, and David Wheeler. 1996. "Pollution Control and van de Walle, Dominique, and Dileni Gunewardena. 1998."How Provincial Development in China: An Analysis of the Levy DirtyAre'Quickand Dirty'Methods?"PolicyResearchWorking System." Poverty,Environment, and Growth Working Paper 6. Paper 1908. World Bank, Development Research Group, World Bank, Policy Research Department, Washington, DC. Washington, DC.

Assessing Welfare Impacts The Economic Impact of Fatal Adult of Public Spending Illness from AIDS and Other Causes in Sub-Saharan Africa Justifications for rural infrastructure investment projects often rely on predicted gains to the poor, yet there are This project addressed two broad research questions: scant data for assessing such distributional impacts. This What are the economic effects of AIDS-related illness and research takes a critical look at current project appraisal death among adults on households in northwest and evaluation techniques from the point of view of dis- Tanzania? And what are the implications of these effects tribution. Project appraisals often resort to rapid assess- for survivor assistance programs? ments that simplify reality. Such quick and dirty methods The project carried out a detailed socioeconomic sur- frequently appeal to distributional arguments to sup- vey in the Kagera region of Tanzania, an area with a plement their analysis. For example, appraisals com- high rate of H[V infection. A sample of both healthy and monly argue that since a project is to be located in a poor severely affected households was followed over 18 region, it will be poverty-targeted. But the determinants months, at 6- to 7-month intervals. of effects on poverty are more complex than that. A key The research confirmed that adult mortality and mor- question is whether such quick and dirty techniques result bidity rates are extremely high in Kagera. The economic in different policy recommendations or project choices consequences for households of the high mortality can

29 Poverty and Social Welfare be summarized under three general themes, each with 1995, and September 1996) and at intemational confer- implications for policies related to AIDS and poverty alle- ences, including the annual meetings of the Population viation in Kagera and in Tanzania. Association of America (1993 and 1995), the American First, some households are more vulnerable than oth- Economics Association -(1995), the African Studies ers to an adult death. The average household suffering Association (1993), and global and regional AIDS con- an adult death had to reduce the consumption of sur- ferences (1993, 1994, and 1995). In the next 12 months vivors, but the size of the reduction varied, depending reports on the analysis of the project data will be com- on the characteristics of the household and of the deceased pleted and the data from the study will be made avail- adult. able on a World Bank Website (http://www.worldbank. Second, household coping strategies succeed in lim- org/html/prdph/lsms/lsmshome.html). iting the short-term impact of an adult death only at the At the Bank the results of the research are helping to expense of serious longer-term consequences. For exam- increase awareness of the urgent need to prevent the ple, when prime-aged women die, malnutrition increases spread of AIDS. The research is also related to ongoing among their orphaned daughters under age three, and efforts by the Poverty Reduction and Economic Man- the schooling of older children is sacrificed. agement Network to understand household coping Third, adult mortality from AIDS and other causes is behavior and to define the concept of the "vulnerable only one among many roots of poverty and low living household" for purposes of improving the efficiency of standards in Kagera, and it is not the most important one. antipoverty programs. What do these findings say about the implications of Responsibility: Development Research Group, Infra- the AIDS epidemic for antipoverty policy? Since analy- structure and Environment-Mead Over (meadover sis of the Kagera survey data shows that per capita con- @worldbank.org), and Poverty and Human Resources- sumption in the better-off households is not depressed Martha Ainsworth. With Phare Mujinja, Innocent Semali, by an adult death, and many poor households have had George Lwihula, and Godlike Koda, University of Dar no adult death, the project results do not support the idea es Salaam; Indrani Gupta, Institute for Economic Growth, of targeting assistance to all Kagera households that have Delhi; Susmita Ghosh; Kathleen Beegle, Rand Cor- suffered an adult death. This criterion would lead to inef- poration; Daniel Dorsainvil, Ministry of Finance, Haiti; ficient distribution of the scarce resources available to and Paurvi Bhatt, U.S. Agency for International fight poverty. Development (USAID), Washington, DC. The USAID Nevertheless, the findings suggest an important syn- and the Danish International Development Agency ergy between AIDS mitigation and antipoverty programs. (DANIDA) are contributing funding for the research. The For example, the finding that poor households are more University of Dar es Salaam is contributing staff time. vulnerable to the impact of an AIDS death implies that Completion date:June 1999. general antipoverty policies can also be AIDS mitiga- Reports: tion policies. If poor households were strengthened by Ainsworth, Martha, Mead Over, and others. 1992. Measuring the general antipoverty policies, they would be able to cope Impact of Fatal Illness in Sub-Saharan Africa: An Annotated with AIDS deaths at a smaller cost to the survivors. Questionnaire.Living Standards Measurement Study Working But the finding that an adult death depresses the per Paper 90. Washington, DC: World Bank. capita food consumption of the poorest households by World Bank. 1997. ConfrontingAIDS: Public Prioritiesin a Global 15 percent implies that AIDS deaths in poor households Epidemic.New York: Oxford University Press. exacerbate poverty. So when AIDS mitigation policies are World Bank and University of Dar es Salaam. 1993. "Report of a targeted to households that were poor before an AIDS Workshop on the Economic Impact of Fatal Adult Illness in Sub- death, they are likely to prevent the households from slip- Saharan Africa." World Bank, Policy Research Department, ping even further into misery as a result of a death. In Washington, DC. sum, the preliminary results of the research project suggest integrating antipoverty and AIDS mitigation programs in Kagera. Private Transfers and Public Policy The study's findings made a major contribution to the analysis of the impact of AIDS on poverty in the World Remittances and other household transfers constitute a Bank Policy Research Report Confronting AIDS: Public significant share of income for many households. Prioritiesin a GlobalEpidemic (New York:Oxford University Knowing the extent and magnitude of such transfers is Press, 1997). In addition, findings were disseminated at important for policy design because they may affect the three workshops in Tanzania (September 1992, December incidence and effectiveness of public transfer programs.

30 Poverty and Social Welfare

This research project is aimed at adding to the under- This methodology allows an interpretation of the results standing of the part private transfers play as a safety net as causal relationships between socioeconomic variables instrument and their interaction with public transfers and crime rates, not only as mere correlations between through a cross-country analysis of the issue. The pro- the two. The study uses a new data set of national inten- ject has two parts. The first focuses on the collection and tional homicide and robbery rates for a large sample of systematic analysis of relevant data for a large number countries for 1970-94. The data set was assembled using of countries. Standard statistical techniques are applied. information from the United Nations World Crime Surveys. This task will lead to the creation of a database on pri- The empirical results show that economic downturns vate transfer variables and will allow a comprehensive and other social shocks, such as a rise in drug traffick- cross-country study of the issue. ing (as in Colombia in the 1970s), can raise violent crime The second part of the research focuses on the ana- rates. The econometric results also indicate significant lytical improvements that can be gained from the use of inertia-that is, a rise in violent crime rates may last panel data sets over a cross-section of studies. The panel long after the initial shock. That suggests that policy- study econometric analysis is based mainly on logit mod- makers should act to counter an increase in crime rates els and Chamberlain fixed effect logit models. Findings as soon as it occurs. thus far indicate a considerably larger response of trans- Two policy-sensitive variables-income inequality fers to income changes once panel techniques are adopted and the strength of the police and judicial system-are in the analysis. important determinants of violent crime. One of the most The research has focused on Armenia, Bulgaria, robust findings of the study is that higher income inequal- Estonia, Hungary, the Kyrgyz Republic, Poland, Romania, ity, proxied by the Gini index, increases the incidence of Russia, and the Slovak Republic. The study is based on both homicides and robberies. The study also finds evi- the HEIDE database (a Bank database on household dence of the crime-deterring impact of a strong police expenditure and income data in selected transition and judicial system, proxied by the ratio of police to inhab- economies) and the Romanian Integrated Household itants and the conviction rate. Policymakers facing a crime Survey of 1994-95. wave could thus consider a combination of redistribu- Responsibility:Development Research Group, Poverty tive policies (such as targeted safety nets) and increases and Human Resources-Emmanuel Jimenez (ejimenez in the resources devoted to apprehending and convict- @worldbank.org) and Stefano Paternostro. The Italian ing criminals. Trust Fund is funding the research. The study's findings offer a cautionary note about Completiondate: June 1999. the effect of education on crime prevention. The study shows that educational effort has a delayed effect on crime alleviation; the crime-reducing effect materializes not What Causes Violent Crime? while the young are being educated but mostly after they A Cross-Country Study become adults. The findings have been presented in seminars at the A growing incidence of criminal and violent behavior is 1997 Latin American Meetings of the Econometric a major concern in countries ranging from the United Association (Bogota, Colombia, October 1997) and of States to the transition economies of Eastern Europe to the Economic Commission for Latin America and the the developing countries of Sub-Saharan Africa and Latin Caribbean (Santiago, Chile, October 1997),and at the con- America and the Caribbean. But we do not know what ference Asset Distribution, Poverty, and Econornic Growth economic, social, institutional, and cultural factors cause (Brasilia, Brazil, July 1998). some countries to have higher crime rates than others. Responsibility:Development Research Group, Macro- This study is aimed at identifying the economic and social economics and Growth-Norman Loayza (nloayza determinants of two types of violent crime, intentional @worldbank.org); and Latin America and the Caribbean homicides and robberies. It began with a cross-country Region, Poverty Reduction and Economic Management analysis and will follow this with a series of city case Sector Unit-Daniel Lederman and Pablo Fajnzylber. studies in Latin America. Completion date:June 1999. The econometric methodology used in the cross- Report: country analysis, a generalized method of moments esti- Fajnzylber, Pablo, Daniel Lederman, and Norman Loayza. 1998. mator applied to dynamic models of panel data, is "QueCausaelCrimeViolento?"lnRobertoSteinerandMauricio designed to efficiently use the information in crime rates Cardenas, eds., Crimen y Violencia. Bogota, Colombia: and their determinants across countries and over time. Fedesarrollo.

31 Poverty and Social Welfare

Africa Nutrition Database Initiative participating agencies. Data quality is the responsibility of each agency assigned to maintain and update speci- Lack of access to good-quality nutrition information for fied indicators according to certain criteria, while com- Africa limits the formulation of effective policies and parability is ensured through the query engine. Thus strategies and impedes proper planning, monitoring, and the ANDI should yield savings in both cost and time in evaluation of nutrition programs. To address this prob- obtaining good-quality information. lem, the Africa Nutrition Database Initiative (ANDI) was The ANDI has provided a good foundation for the launched in February 1997 to create a user-friendly nutri- Nutrition Information System (NIS), which will collect tion database accessible through the Internet. The data- information on nutrition activities in three pilot coun- base will include indicators related to anthropometry, tries, Eritrea, Mali, and Zambia. The country focus of micronutrient deficiencies, food security, demography, the NIS combined with the international focus of the and poverty. Because the ANDI will use already avail- ANDI will provide the link between sectoral and oper- able data that are continuously updated by the partici- ational indicators and build local capacity to use the infor- pating agencies, the maintenance costs are expected to mation for better research and more effective planning, be negligible. monitoring, and evaluation of nutrition programs. The World Bank has served as a catalyst for the ini- Responsibility: Africa Region Technical Families, tiative, proposing the effort and funding work on tech- Human Development 4-Venanzio Vella (vvella nical aspects of developing the interagency database. @worldbank.org), and Human Development 2-Richard The United Nations Administrative Committee on Seifman. With Dario Berardi. The Italian Trust Fund is Coordination, Subcommittee on Nutrition (ACC/SCN) contributing funding for the research. is coordinating the participating United Nations agen- Completion date:June 2000. cies, which include the Food and Agriculture Organi- zation, the United Nations Development Programme, the United Nations High Commissioner for Refugees, Core Welfare Indicators Questionnaire and the World Health Organization. The database will function through an update engine This project is developing the Core Welfare Indicators and a query engine. Each participating agency will be Questionnaire (CWIQ), a market research tool designed responsible for maintaining and updating a set of indi- to enable countries to generate key leading indicators cators according to established quality and comparabil- rapidly and to help them strengthen their capacity to ity criteria. At regular intervals an update engine will use such indicators in designing and monitoring pro- extract key indicators from all the databases and put them grams and projects. The CWIQ leading indicators not in a standardized electronic format in a common data- only provide a snapshot of current living conditions, but, base. The common database will then be copied to the more important, indicate which population groups are, local area network (LAN) of each agency. The query and which are not, benefiting from development pro- engine, placed in the LAN of each agency, will then access grams and actions. The CWIQ can provide information the common database to produce specific outputs (such that will simplify the Bank's work in preparing and mon- as tables, graphs, and maps). The query engine will be itoring country assistance strategies. The need for such programmed with the routines needed to ensure data a tool has been discussed inside and outside the Bank, comparability. and its development has benefited greatly from inputs The ANDI's methodology has been finalized, partic- from the United Nations Development Programme, ipating databases have been evaluated, and prototype United Nations Children's Fund, and International software for the query engine has been programmed. Labour Organisation. After the query and update engines are finalized, the The CWIQ system incorporates a number of techno- ANDI will be up and running and the interagency data- logical and innovative features, including a large sam- base will be accessible to participating agencies through ple of households for more effective targeting, a simple an intranet. If the participating agencies agree, access will questionnaire with multiple choice questions for easy later be expanded to the general public. and rapid data collection, a strong emphasis on high- The ANDI has developed a novel approach to data- quality fieldwork, the use of optical scanners to speed bases. While the traditional approach has been for each data entry, preprogrammed validation procedures to agency to build its own database, in part from data ensure a high quality of data, "push-button" standard- obtained from other agencies, the ANDI will produce a ized outputs, and a CD-ROM with survey documenta- virtual database from databases physically located in the tion and survey data available for further analysis.

32 Poverty and Social Welfare

Pilot applications in Ghana and Kenya have estab- survey. In addition, a presentation was made in Addis lished the viability of the CWIQ as a survey instrument Ababa at the seventh meeting of the Coordinating and the value of focusing on the simple indicators of Committee for African Statistical Development in May access, usage, and satisfaction. Although initially con- 1998. ceived as a survey for use in the framework of a poverty Responsibility: Africa Region Technical Families, monitoring program, the CWIQ may have even greater Regional Initiatives Group-Timothy Marchant potential as a sector and project monitoring and evalu- ([email protected]) and Diana Masone, ation tool for determining who is and who is not bene- Institutional and Social Policy-Antoine Simonpietri, and fiting from project services. The CWIQ survey system Human Development 3-Sudharshan Canagarajah. With could potentially also be used to measure social capital, 0. Dupriez; H. Fofack; J. Otto; P. Romand-Heuyer; and an issue that is of wide interest but that has been rarely E. Fiadzo. The Norwegian Africa Poverty Trust Fund and quantified. the Belgian Africa Poverty Trust Fund are contributing A workshop was held in Washington, DC, in January funding for the research. 1998 to present the experiences and results of the Ghana Completion date:Ongoing.

33 LABOR MARKETS AND EDUCATION

Impact Evaluation of Education Projects: stakeholders (directors, teachers, and parents) appears Decentralization and Privatization Issues to have produced internal tensions within schools, but schools that are truly exercising more decisionmaking Ref. no. 679-18C power than before are producing students who perform There is a growing awareness that central governments better on tests. are limited in their ability to address local needs and to Second, using the private sector to deliver education use local capacity to meet those needs. In the education services to disadvantaged groups (to the poor in Colombia sector this awareness has led to such policies as trans- and to girls in Pakistan) promotes equity. In Colombia ferring decisionmaking from central to local governments, municipalities that face a larger demand for secondary increasing autonomy for schools, involving communi- education than their public schools can meet participated ties in school management and resource mobilization, in a voucher program; within these municipalities schools introducing voucher schemes, and offering incentives for that serve poorer students were more likely to partici- private school providers. pate. Preliminary findings suggest that the voucher This study related how schools operate and how stu- program increased net enrollment in participating munic- dents learn in a decentralized setting to the characteris- ipalities. In Balochistan Province, Pakistan, the net enroll- tics of schools-and of their directors, teachers, and school ment of girls has increased significantly in program councils-and the family background of students using communities relative to control communities. In Tanzania new survey data on schools, students, and their fami- the opening of the secondary education system to pri- lies. The research also drew lessons on how effective the vate providers has notably increased enrollment at that nongovernmental sector can be in increasing enrollment level. among targeted groups such as girls and the poor. The The findings have been disseminated through a spe- research studied education reforms relating to decen- cial working paper series available on the Bank's Website tralization and privatization in five countries: Colombia, (http://www.worldbank.orglhtml/prddr/prdhome/Projects/ El Salvador, Nicaragua, Pakistan, and Tanzania. impact.htm);through presentations of the papers within To assess the impact of the reforms on school effec- the Bank and in the ministries of education of Colombia, tiveness and student performance, the research identi- El Salvador, Nicaragua, and Tanzania; and through cross- fied changes in institutions (schools or communities) and support to Bank operations. education indicators that can be attributed to the reform- Responsibility: Development Research Group, Pov- which requires identifying and measuring the counter- erty and Human Resources-Elizabeth King (eking factual. To define and measure the counterfactual, the @worldbank.org),Harold Alderman, Emmanuel Jimenez, research used different impact evaluation strategies- Dan Levy, Berk Ozler, Laura Rawlings, and Diane Steele; including matched comparison designs, reflexive com- Human Development Department, Education Team- parisons, and experimental design-depending on how Jee-Peng Tan; and Latin America and the Caribbean the reform was implemented and on the timing of the Region, Human and Social Development Group-Donald research relative to the start of the reform. Winkler. With Hideo Akabayashi, Keio University, Japan; The study yielded two main findings. First, reforms Bruce Fuller, University of California at Berkeley; Peter that transfer greater decisionmaking power to schools Orazem, Elizabeth Paterno, and Jooseop Kim, Iowa State are transforming the management of public schools and University; Vanessa Castro and Magdalena Rivarola, having a positive impact. In El Salvador the enhanced Harvard University; Yasuyuki Sawada, Stanford accountability of the local school council has led to higher University; Carlos Torres; Julia Lane, American teacher attendance rates in schools participating in the University; D. Morganstein and K. Rust, Westat, Australia; reform program (EDUCO) compared with traditional R. M. Rakotomalala and Gerard Lassibille, Institut de schools. There is as yet no significant difference in stu- Recherche sur l'Economie de l'Education (IREDU),France; dent performance between EDUCO schools and tradi- P. P. Gandye; Suleiman Sumra, National Exams Council tional rural schools, but the increase in teacher attendance of Tanzania; A. Bryk, University of Chicago; Rodrigo promises to lead to better student outcomes in the future. Villar; F.Akbar; P. Gupta; S. Khemani; and local evalua- In Nicaragua the change in the relative power of local tion teams in Colombia, El Salvador, Nicaragua, Pakistan,

34 LaborMarkets and Education and Tanzania. The National Testing Service, Colombia; Nicaragua Study Team. 1996. "Nicaragua's School Autonomy the ministries of education of Colombia, El Salvador, Reform: A First Look." Working Paper 1 on Impact Evaluation Nicaragua, and Tanzania; and the Japan Trust Fund have of Education Reforms. (Also issued in Spanish.) contributed staff time and funding for the research. Completion date:June 1998. Reports: The Impact of Child Health and Nutrition Alderman, Harold, Peter Orazem, and Elizabeth Paterno. 1996. on Education Outcomes in Cebu, Philippines "School Quality, School Cost, and the Public/Private Choices of Low-Income Households in Pakistan." Working Paper 2 on Ref. no. 679-57 Impact Evaluation of Education Reforms. Episodes of malnutrition during early childhood are often El Salvador Evaluation Team,Emmanuel Jimenez, Laura Rawlings, thought to have serious implications for a child's school and Diane Steele. 1997. "El Salvador's EDUCO Program: A performance later in life. But research on this issue has First Report on Parents'Participation in School-BasedManage- been ambiguous, in part because of a lack of high- ment." Working Paper 4 on Impact Evaluation of Education quality data with which to address the issue. This Reforms. research project uses new data collected in Cebu, Fuller, Bruce, and Magdalena Rivarola. 1998. "Nicaragua's Philippines, to assess the impact of early childhood nutri- Experiment to Decentralize Schools:Views of Parents, Teachers, tion on subsequent school attendance and performance. and Directors." Working Paper 5 on Impact Evaluation of The data were first collected in the 1980s, during the Education Reforms. first two years of life of about 3,000 children. A follow- Jimenez, Emmanuel,and YasuyukiSawada. 1998."Do Community- up survey was done in 1991, when the children were Managed SchoolsWork? An Evaluation of ElSalvador's EDUCO about eight years old. In 1994-95 this research project Program." Working Paper 8 on Impact Evaluation of Education helped fund a second follow-up survey, which collected Reforms. data on current school enrollment and performance for Kim, Jooseop, Harold Alderman, and Peter Orazem. 1998. "Can these children, almost all of whom were enrolled in pri- Cultural Barriers Be Overcome in Girls' Schooling? mary school. The research examines several schooling The Community Support Program in Rural Balochistan." outcomes-age of enrollment, grade repetition, and per- Working Paper 10 on Impact Evaluation of Education formance on tests of cognitive skills (mathematics, Programs. English, and Cebuano)-and investigates the impact of - . 1998."Can Private School Subsidies Increase Schoolingfor early childhood nutrition, as measured by low height the Poor? The Quetta Urban Fellowship Program." Working for age, on these outcomes. Paper 11 on Impact Evaluation of Education Reforms. The findings indicate that children who are mal- King,Elizabeth. "Impact Evaluation of Education Projects Involving nourished do perform relatively poorly in school. They Decentralization and Privatization." Working Paper 0 on Impact are more likely to enroll late, to repeat grades, and to learn Evaluation of Education Reforms. less per year of schooling. But the effects are not partic- King, Elizabeth, Peter Orazem, and Darin Wohlgemuth. 1998. ularly large, suggesting that health and nutrition pro- "Central Mandates and Local Incentives: The Colombia grams aimed at very young children will have at best Education Voucher Program." Working Paper 6 on Impact only a modest impact on schooling outcomes. So other Evaluation of Education Reforms. approaches for improving school outcomes, such as King, Elizabeth,and Berk Ozler.1998. "What's DecentralizationGot improving school quality, may be more efficient. to Do with Learning?The Case of Nicaragua's SchoolAutonomy The research also examines the impact of the timing Reform." Working Paper 9 on Impact Evaluation of Education of malnutrition during early childhood on subsequent Reforms. cognitive development. It finds no evidence supporting King,Elizabeth, Laura Rawlings, Marybell Gutierrez, Carlos Pardo, the hypothesis that children's cognitive development is and Carlos Torres.1997. "Colombia's Targeted Education Voucher most vulnerable to poor nutrition during the first six Program:Features, Coverage,and Participation."Working Paper months of life. Good nutrition during the second year of 3 on Impact Evaluation of Education Reforms. life is at least as important, if not more so. Lassibille, Gerard, Jee-Peng Tan, and Suleiman Sumra. 1998. Responsibility: Policy Research Department, Poverty "Expansion of Private Secondary Education: Experience and and Human Resources-Paul Glewwe (pglewwe Prospects in Tanzania." Working Paper 12 on Impact Evaluation @worldbank.org) and Elizabeth King. With Hananjacoby, of Education Reforms. University of Rochester and International Food Policy Nicaragua Reform Evaluation Team. 1998. "1995 and 1997 Research Institute; Linda Adair, University of North Questionnaires:Nicaragua SchoolAutonomy Reform."Working Carolina at Chapel Hill; and Azot Derecho, Office of Paper 7 on Impact Evaluation of Education Reforms. Population Studies, University of San Carlos, Cebu,

35 LaborMarkets and Education

Philippines. The Asian Development Bank is contribut- tural productive factors, such as household constraints, ing funding for the research. productivity, and access to education and credit services. Completion date: September 1998. These results suggest that policies attempting to reduce Reports: earnings disparities should focus on reducing the unequal Glewwe,Paul, Hanan Jacoby,and ElizabethKing. 1998. "Early distribution of productive characteristics, particularly Childhood Nutrition and Academic Achievement: A in rural areas, and addressing differential structural LongitudinalAnalysis." World Bank, Development Research constraints. Group,Washington, DC. Most microenterprises have limited access to credit Glewwe,Paul, and Elizabeth King. 1998."The Impact of Early services, and gender does not seem to affect the likeli- ChildhoodNutritional Status on CognitiveDevelopment: Does hood of receiving formal or informal credit. But with the Timingof Malnutrition Matter?" World Bank, Development women constituting a growing share of microentrepre- ResearchGroup, Washington, DC. neurs, financial intermediaries should remain sensitive to gender-related differences in the demand for credit services. Gender and the Rural Economy: The study has influenced the way rural finance stud- Evidence from Mexico ies are being conducted in the region, particularly in Guatemala and Nicaragua. Its recommendations were Ref no. 680-95C taken into account in the Mexico Rural Finance loan and This study aimed to identify gender differences in the the Bank's research on ejidos in Mexico. The study also rural economy of Mexico that have development and has provided input into the design of a gender and rural policy implications. It examined the determinants of finance activity in Mexico's Ministry of Agriculture. gender differences in workforce participation and self- Preliminary and final results of the study were dis- employment in rural Mexico,the causes and consequences seminated in workshops held in Mexico City in April of gender differences in earnings in Mexico's microen- 1997 and in June 1998 for government officials and pol- terprise sector, and the factors affecting microenterprises' icymakers from the National Program for Women, the participation in credit markets. These issues were ana- Ministry of Labor, the Ministry of Agriculture, and the lyzed using data from the Survey of Rural Entrepreneurs Ministry of Finance. and Financial Services conducted in rural Puebla, Responsibility:LatinAmericaandtheCaribbeanRegion, Guanajato, and Veracruz in the summer of 1994 and the Poverty Reduction and Economic Management Sector 1992 National Survey of Urban Microenterprises. Unit-Maria Correia ([email protected]), and In the rural areas studied men's workforce participa- Finance, Private Sector, and Infrastructure Sector Unit- tion is 86.5 percent, while women's is only 28.5 percent. Susana M. Sanchez; and Europe and Central Asia Region, But the self-employment rates of men and women are Rural Development and Environment Sector Unit- roughly identical (slightly below 30 percent). A decom- Rodrigo Chaves. With Jos6 A. Pagan, University of Texas, position analysis of gender-specific selectivity-corrected Pan American. bivariate probit models of employment and self- Completiondate: May 1998. employment choices found that almost all the employ- Reports: ment gap between men and women can be explained by Pagan,Jose, and SusanaM. SAnchez.1998. "Gender Differences in structural factors. This finding suggests that policies that LaborMarket Decisions: Evidence from Rural Mexico." World focus on boosting individual endowments (such as Bankand Universityof Texas,Pan American. increasing human capital through formal education) could SAnchez,Susana M. 1998."Gender Earnings Differentials in the have a limited impact in reducing gender inequality if they MicroenterpriseSector: Evidence from Rural and Urban Mexico." are not accompanied by policies addressing structural sup- WorldBank, Latin America and theCaribbean Region, Finance, ply and demand factors that influence women's deci- PrivateSector, and InfrastructureSector Unit, Washington, DC. sions to enter and remain in the workforce in rural Mexico. Gender disparities in the microenterprise sector in Mexico are similar to those in other countries. Female- The Impact of Labor Market Policies headed microenterprises eam 64 percent less than male- and Institutions on Economic Performance headed microenterprises in rural areas, and 50 percent less in urban areas. In urban areas about 35 percent (42 Ref. no. 680-96C percent in rural areas) of the earnings gap can be explained This was the second phase of a broader study whose main by differences in productive characteristics, while 62 per- goal was to assess the effect of labor market interventions cent (59 percent in rural areas) can be attributed to struc- on wages, employment, and economic growth. A related

36 LaborMarkets and Education

objective of this research was to understand how the Butcher,Kristin, and CeciliaRouse. 'The UnionWage Gap in South reform of those interventions should be approached. Africa." Princeton University,Princeton, N.J. Rather than discussing the consequences of labor mar- Currie, Janet, and Ann Harrison. 1997. "Sharing the Costs: The ket rigidity in general, the study focused on a series of Impact of Trade Reform on Capital and Labor in Morocco." well-defined departures from the undistorted, partial Journalof LaborEconomics 15(3):S44-71. equilibrium model of the labor market: minimum wages, Daveri, Francesco, and Guido Tabellini. 1997. "Unemployment, mandated benefits (or nonwage costs), payroll taxation Growth, and Taxation in Industrial Countries." Innocenzo (including social security contributions), public sector Gasparini Institute for Economic Research (IGIER),Milan. employment, job security, and unionization. Freeman, Richard. 1994. "A Global Labor Market? Differences in The research combined detailed case studies using Wages among Countries in the 1980s." World Bank, Policy household- and plant-level data, cross-country analysis, ResearchDepartment, Washington, DC. and theoretical work. For each labor market distortion Gruber,Jonathan. 1997."TheIncidenceof PayrollTaxation:Evidence considered, a couple of studies were carried out, focus- from Chile." Journalof LaborEconomics 15(3):S72-101. ing on countries where the distortion was thought to be MacIsaac, Donna, and Martin Rama. 1997. "Do Labor Market particularly acute. The cross-country analysis was made RegulationsAffect Labor Earnings in Ecuador?" PolicyResearch possible by the construction of a cross-country, time-series Working Paper 1717.World Bank,Policy Research Department, database of labor indicators. This database includes infor- Washington,DC. mation on employment and wage structures, the extent . 1997. "Determinants of Hourly Earnings in Ecuador: The of govemment intervention in the labor market, the degree Role of Labor Market Regulations." Journalof Labor Economics of unionization, and other variables. The data were col- 15(3):S136-65. lected from existing cross-country sources and a variety Rama,Martin. 1994."Flexibility in Sri Lanka's LaborMarket." Policy of country-specific sources. The database was used to Research Working Paper 1262.World Bank, Policy Research extend the now standard growth regression analysis so Department,Washington, DC. as to take labor market policies and institutions into -. 1995."Determination des salaires au paradis: une analyse account. Other cross-country studies focused on short- du marche du travail a l'Ile Maurice." Revue d'Economiedu run adjustment and on the determinants of public sec- Developpement2:3-27. tor employment. The theoretical work dealt with the . 1995. "Do Labor Market Policies and Institutions Matter? political economy of labor market distortions and its TheAdjustmentExperienceinLatinAmerica and theCaribbean." implications for the design of economic reforms. Labour,pp. S243-69. Findings have been disseminated through workshops, . 1995. "Unions and Employment Growth: Evidence from training, and seminars for researchers, government offi- Jamaica."World Bank,Policy Research Department, Washington, cials, and trade union leaders. The cross-country data- DC. base will be made available at its marginal cost to - 1996."The Consequences of Doubling the Minimum Wage: researchers interested in labor market issues in devel- The Case of Indonesia." Policy Research Working Paper 1643. oping countries. World Bank, Policy Research Department, Washington, DC. Responsibility:Development Research Group, Pov- . 1997."Imperfect Rent Dissipation with Unionized Labor." erty and Human Resources-Martin Rama (mrama PublicChoice 93:55-75. @worldbank.org) and Raquel Artecona. With Jean-Paul .1997."Labor Market Institutions and the Second-BestTariff." Azam, Universite d'Auvergne; Ann Bartel and Ann Scandinavian Journal of Economics 99(2):299-314. Harrison, Columbia University; Kristin Butcher, Boston .1997."Organized Labor and the PoliticalEconomy of Product College; Alex Cukierman, Tel Aviv University; Francesco Market Distortions." WorldBank Economic Review 11(2):327-55. Daveri, Universita di Brescia; lyabode Fahm; Alvaro .1997."Trade Unions and Economic Performance: East Asia Forteza, Universidad de la Republica, Uruguay; Anna and Latin America." In James McGuire, ed., Rethinking Fruttero and Guido Tabellini, Bocconi University; Donna Development:East Asia and Latin America.Los Angeles: Pacific MacIsaac, Inter-American Development Bank; Dani Councilon InternationalPolicy. Rodrik, Harvard University; Cecilia Rouse, Princeton . 1998. "How Bad Is Tunisian Unemployment? Assessing University; and Manisha Singh, University of Maryland. Labor Market Efficiencyin a Developing Country." WorldBank Completiondate: December 1997. ResearchObserver 13(l):59-78. Reports: - 1998."Wage Misalignment in CFA Countries: Are Labor Bell, Linda. 1995. "The Impact of Minimum Wages in Mexico and Market Policiesto Blame?"Policy Research Working Paper 1873. Colombia." Policy Research Working Paper 1514.World Bank, World Bank, Development Research Group, Washington, DC. Policy Research Department, Washington, DC. (Also published . "Distortions des Marches des Biens et du Travail: in Journalof LaborEconomics 15(3):S102-35, 1997.) Determinants et Consequences." In Jaime de Melo and Patrick

37 LaborMarkets and Education

Guillaumont, eds., Commerce Nord-Sud, migration et ddlocalisa- benefited from the provision of textbooks. In future work tion: consequences pour les salaires et l'emploi. Paris: Economica. results of the interventions will be compared with find- Rama, Martin, and Guido Tabellini. 1995. "Endogenous Distortions ings based on standard econometric techniques to see in Product and Labor Markets." Policy ResearchWorking Paper whether those techniques yield biased results. 1413. World Bank, Policy Research Department, Washington, In 1997 another 25 of the 100 schools were selected to DC. (Also published as Centre for Economic Policy Research receive block grants that could be spent on several options, Working Paper 1143,London, 1995;and forthcoming in European such as textbooks, other school supplies, and construc- Economic Review.) tion of new classrooms. The purpose of this interven- Revenga, Ana. 1997. "Employment and Wage Effects of Trade tion is to see whether funds are used more effectively Liberalization: The Case of Mexican Manufacturing." Journal of when schools are given a choice on how to spend them. LaborEconomics 15(3):S20-43. The data from this intervention will be examined in 1998. Rodrik, Dani. 1997. "What Drives Public Sector Employment?" Findings have been presented at Brown, Cornell, Harvard University,KennedySchoolof Government, Cambridge, Harvard, Toronto, and Yale Universities, at the MacArthur Mass. Foundation, and at the Intemational Food Policy Research Weiss, Yoram. 1994. "Growth and Labor Mobility." Working Paper Institute. 8/95. Foerder Institute for Economic Research, Tel Aviv. Responsibility: Development Research Group, Pov- erty and Human Resources-Paul Glewwe (pglewwe @worldbank.org). With Michael Kremer, Massachusetts Improving Primary Education in Kenya: Institute of Technology; Dan Levy, Northwestern A Randomized Evaluation of Different University; Sylvie Moulin; and Stacy Nemeroff. The Policy Options International Christian Humanitarian Services, the Netherlands; and the National Science Foundation, Ref. no. 681-14 United States, are contributing funding for the research. Many econometric studies have tried to estimate the effect Completion date: October 1999. of education policies on school performance in industrial Reports: countries. But even the most sophisticated econometric Glewwe, Paul, MichaelKremer, and SylvieMoulin. "Textbooks and techniques may yield biased estimates if schools with dif- Test Scores:Evidence from a Prospective Evaluation in Kenya." ferent levels of inputs also differ systematically in other, Draft. unobserved ways. Randomized experiments overcome Kremer,Michael, Sylvie Moulin, David Myatt, and RobertNamunyu. many of the statistical problems inherent in these econo- "The Quantity-Quality Tradeoffin Education: Evidence from a metric studies, but they are rarely done because of their Prospective Evaluation in Kenya." Draft. high costs and because of public officials' reluctance to vary the level of inputs among schools. This research takes advantage of an opportunity to perform random- Explaining Gender Disparity in South Asia: ized evaluations of several different education policy A Cross-Sectional Approach options in collaboration with an international nongovernmental organization. Ref no. 681-29C The study began with a small number of schools in That gender disparity is a large problem in South Asia 1995.Out of 14 schools, 7 were randomly chosen to receive is well known. But understanding the root causes of gen- the nongovernmental organization's standard package der disparity across countries, and within countries in of assistance. Pretests were administered at the begin- South Asia, so thatprograms and policies canbe designed ning of 1995, and posttests in the fall of 1995. The results to address it is more problematic. are now being analyzed. This research took a small step forward by creating a The project expanded in 1996 to 100 schools, of which new database that allows consistent comparisons of a 25 were randomly chosen to receive a large number of range of indicators of gender disparity both across coun- textbooks. Pretests were administered in early 1996, and tries and within the large countries of South Asia (India posttests near the end of that year. The children will be and Pakistan). Outcomes for states of India, for exam- followed for at least two more years to assess whether ple, can be directly compared with those for other states the initial effects endure for several years. of India, provinces of Pakistan, and other countries. Preliminary results suggest that the impact of text- The database has led to three main findings. First, books is not as strong as some previous studies have indi- certain regions of South Asia, particularly a crescent run- cated. Of particular interest is the finding that only better ning through Pakistan and northern India, consistently students, as identified by the scores on the 1996 pretests, have among the worst indicators of gender disparity in

38 Labor Markets and Education the world. Second, the variations in gender disparity they are in school. This project has therefore collected within India are as large as those across countries. Third, new data in Cebu so that the data set includes achieve- there is no correlation between average income and gen- ment test scores one to two years apart for the same chil- der disparity in the sample, either across nations or within dren. Some of these children participate in school-based India. nutrition programs; others do not. Some of the programs These findings suggest that while gender disparity is are based on grade in school, providing a credible instru- pervasive, its worst manifestations are regionally con- mental variable to control for the endogeneity of school- centrated and that efforts therefore need to focus first on based nutrition programs. understanding and eliminating its adverse consequences One finding so far relates to the "fungibility" of benin those places. Additional results show that variables efits from school feeding programs: when schools pro- that have been proposed in the literature as determinants vide feeding programs for children, do parents cut back of the degree of disparity (share of population that is on the food provided to those children at home? In the Muslim, share of population that works in agriculture, case of the Philippines the answer appears to be no. rural population density, share of land that is devoted to Responsibility: Development Research Group, Pov- each of wheat, rice, and maize) do indeed explain some erty and Human Resources-Paul Glewwe (pglewwe of the disparity. However, there remain strong unex- @worldbank.org) and Elizabeth King. With HananJacoby, plained effects specific to South Asia even after control- University of Rochester and International Food Policy ling for these variables. Research Institute. This research has contributed to a poverty assessment Completiondate: December 1998. in India. The database is available electronically to Report: researchers who wish to analyze it. Jacoby,Hanan. 1997."Is There an Intrahousehold 'Flypaper Effect'? Responsibility:Development Research Group, Poverty Evidence from a School Feeding Program." FCND DiscuLssion and Human Resources-Lant Pritchett (lpritchett Paper 31. International Food Policy Research Institute, @worldbank.org), Elizabeth King, and Deon Filmer; and Washington, DC. Asia Region Technical Department, Human Resources and Social Development Division-Benu Bidani. Completiondate: December 1997. Child Labor and Schooling in Latin America Report: Filmer, Deon, Elizabeth King, and Lant Pritchett. 1998. "Gender Ref. no. 681-79 Disparity in South Asia: Comparisons between and within Child labor is recognized as a serious problem in many Countries." Policy Research Working Paper 1867.World Bank, developing countries. But little information is available Development Research Group, Washington, DC. on how many children are working, what types of activities they are involved in, where they work and under what conditions, and how child labor affects educational Child Diet and Academic Achievement attainment. And there is scant information on the labor in Cebu, Philippines force participation of primary school age children (aged 6-12). Ref. no. 681-78 This study looks at child labor in Latin America, where School-based nutrition interventions such as school lunch it is important to examine child labor issues for several programs are widely viewed as a cost-effective approach reasons. First, the problem of child labor is quite severe. to improving academic achievement in developing coun- Although children's participation rate in the labor mar- tries. Yet there is little evidence to support this view. ketisabout10percentintheregion, itvarieswidelyacross This study will examine the impact of current diet on aca- countries. In Brazil it is as high as 16 percent, and in demic achievement using an unusually rich data set from Nicaragua it is 14 percent. Second, the quality of educa- Cebu, Philippines. tion in the region is poor. Only 50 percent of graduates Another World Bank research project has drawn on are capable of written communication at the level required the Cebu data to examine the cumulative impact of chronic by modern society. The low quality and high inefficiency malnutrition on learning (The Impact of Child Health of education may be related to the prevalence of child and Nutrition on Education Outcomes in Cebu, Phil- labor. Third, age heterogeneity in the classrooms, which ippines, ref. no. 679-57).Much of this malnutrition occurs is often associated with repetition and dropout, is high. before children reach school age. To examine the impact So understanding child labor is important not only of school-based nutrition programs requires data on because of the significance of the issue, but also because changes in the academic performance of children while of its potential impact on educational attainment and its

39 LaborMarkets and Education implications for the design of education policies for the forms of human capital accumulation-basic education, region. research, training, learning-by-doing, and capacity Four countries-Brazil, Ecuador, Nicaragua, and building. Peru-were selected for this study. Living Standards History also tells us that education does not guaran- Measurement Study surveys conducted in these coun- tee successful development. For example, the former tries in the early 1990s provide comparable information Soviet bloc countries maintained high levels of educa- in such areas as employment, education, household con- tion, but because they were closed to ideas and products sumption, and household characteristics. The informa- from the outside, their economies stagnated. The tion covers nationally representative household samples. Philippines, Sri Lanka, and the Indian states of Kerala The study is being undertaken in two stages. In the and West Bengal have experienced long periods of lack- first stage the study has used the household surveys to luster growth even though their education levels out- describe the labor market activity of children, including stripped those of their peers. The question is, then, when their rate of participation in the labor market, the hours and how can education bring high payoffs? they work, the earnings they receive, and the sectors in While theories suggest a strong causal link from edu- which they work. The description is disaggregated as cation to growth, the empirical evidence has not been much as possible by age, gender, poverty level, enroll- unanimous or conclusive. This research investigated the ment status, and area (urban and rural). relationships between education, policy reforms, and eco- In the second stage the study has examined the deter- nomic growth using panel data from Brazil, Chile, China, minants of children's participation in the labor market Colombia, India, the Republic of Korea, Malaysia, Mexico, and of their school enrollment. Two approaches have Peru, the Philippines, Thailand, and Venezuela from 1970 been used. The first is the traditional approach that to 1994. The research yielded two main findings. assumes that the decision to work and the decision to First, distribution of education matters. A threshold attend school are made separately. For this approach the of equal access seems key, but once this is achieved, dis- univariate probit model is the econometric technique tributing equally does not seem to provide the additional used. The second approach assumes that the two deci- impact. Beyond this threshold calibrating the depth of sions are made jointly, and the bivariate probit model is education to ability and to market needs pays off. The used. Both approaches take into account characteristics correlation between ability and education does not appear of children, their parents, their households, and their to be statistically significant in Latin America, while it is community and consider the effects of the direct costs of highly significant in EastAsia. That suggests that in Latin schooling and the distance to school in labor market and America education is overconcentrated. Countries in this schooling decisions. region could increase their per capita income by pro- The study's results-on the reasons for children's labor moting broader basic and secondary education and market activities, the relationship between labor market broader access to college. In Asia deepening education activity and school enrollment, and the types of incen- would increase efficiency. tives that work in favor of education and against chil- Second, the policy environment matters a great deal. dren's labor market participation-should be useful in The results indicate that economic policies that suppress designing education policies and in targeting vulnerable market forces tend to dramatically reduce the impact of children through Bank-financed projects. human capital on economic growth. And the economies in Responsibility:Latin America and the Caribbean Region, the sample are ina phase of diminishing growth as the stock Human and Social Development Sector Unit-Donald of physical capital increases relative to human capital. Winkler ([email protected]); and Human Devel- Investment in human capital will have little impact opment Department, Office of the Director-Hailu on growth unless people can use education in competi- Mekonnen. tive and open markets. The larger and more competitive Completiondate: October 1998. markets are, the greater the prospects for using education and skills. In many ways the policy environment could also help to induce quality improvements in edu- When Learning Makes Reform More cation and to calibrate the distribution of education to Productive: An Agenda for Analysis pattems that make for the greatest welfare improvements. Responsibility:Economic Development Institute, Office Ref. no. 682-02C of the Director-Vinod Thomas (vthomas@worldbank. No country has achieved sustained economic develop- org), and Macroeconomic Management and Policy ment without substantial investment in human capital. Division-Yan Wang. With Ram6n Lopez and Gustavo Studies have shown the handsome returns to different Anriquez, University of Maryland; and Xibo Fan.

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Completion date:June 1998. In November 1996 a school-household survey and Report: grade 3 achievement tests were applied to 315 randomly Lopez, Ram6n, Vinod Thomas, and Yan Wang. "Solving the selected EDUCO schools, traditional public primary Education Puzzle: Economic Reforms and Distribution of schools,and private primary schools.The school-house- Education." hold survey was reapplied in May-June 1998 to generate longitudinal data for evaluating the impact of both EDUCO and the School Management Councils Program. El Salvador's School-Based Initial results from a study of EDUCO schools using Management Reforms the 1996 data indicate that parents serving on community education associations are more active participants Ref. no. 682-08 in school affairs, feel that they have more influence over El Salvador's rural Community-Managed Schools decisionmaking, and have a more direct relationship with Program (EDUCO) and urban School Management the teachers compared with parents who serve on par- Councils Program seek to improve the quality and effi- ents associations in traditional rural schools. The rapid ciency of education by giving schools greater autonomy growth of rural schools through EDUCO has not and responsibility for their administration. EDUCO was adversely affected student achievement. And EDUCO introduced in El Salvador in 1991 following years of has reduced student absences due to teacher absences, civil strife that left much of the country's social infra- which may have longer-term effects on achievement. structure debilitated and dysfunctional, with a basic edu- Responsibility:Development Research Group, Poverty cation enrollment rate of only 76 percent. EDUCO and Human Resources-Emmanuel Jimenez (ejimenez introduced a model of education administration based @worldbank.org), Elizabeth King, Laura Rawlings, and on self-management by an elected community education Diane Steele. With Yasuyuki Sawada, Stanford University; association composed of students' parents and other Vanessa Castro, Harvard University; Francisco Gavidia, respected members of the community. The associations University of El Salvador; and FEPADE, El Salvador. The have substantial managerial and financial control over Research and Evaluation Department, Ministry of their schools, including hiring and firing teachers, equip- Education, El Salvador, is participating in the research. ping and maintaining their schools, and negotiating pro- Completiondate: December 1998. jects with national and international agencies. They meet Reports: teachers' salaries and operating costs through monthly Jimenez, Emmanuel, Laura Rawlings, Diane Steele, and the El block grants from the Ministry of Education and mobi- Salvador Evaluation Team. "El Salvador's EDUCO Program: A lize parents and the community for financial contribu- First Report on Parents' Participation in School-Based tions and volunteer service. Management." EDUCO inspired urban reforms introducing school Jimenez,Emmanuel, and YasuyukiSawada. "Do Community- management councils in all urban public schools in El ManagedSchools Work? An Evaluation of El Salvador's EDUCO Salvador, while EDUCO is begin expanded to all rural Program." schools. The urban school-based councils are responsi- Researchand EvaluationDepartment, Ministry of Education,El ble for approving and administering the school's annual Salvador,and Francisco Gavidia University. "Qualitative Process plan and budget, maintaining and equipping the school, Evaluationof Local SchoolAdministration Models." and making some personnel decisions. This research, carried out in collaboration with the Research and Evaluation Department of the El Salvador Improving the Quality of Preschool Ministry of Education, is examining to what extent the Education in Kenya schools have adopted these management reforms and whether the reforms have an impact on resource alloca- Ref: no. 682-16 tion and schooling outcomes. It is addressing these ques- Early childhood development programs are becoming a tions: Does shifting the locus of decisionmaking to the major part of the World Bank's policy dialogue with devel- school affect either the process or the outcomes of school- oping countries. Yet there has been little research on the ing? What factors determine the extent to which parents impact of such programs on education outcomes for participate-through financial and in-kind contributions preschool children in developing countries, and no sys- to the school and through direct involvement with the tematic research in Sub-Saharan Africa. school's management and programs? What is the cost of Analysis of preschool interventions is hampered by parents' participation? Who are the winners and losers the endogeneity of preschool characteristics. Preschools in decentralization? that make improvements in observable characteristics

41 LaborMarkets and Education are also likely to differ from other preschools in their The project is compiling a database of attendance fig- unobservable characteristics. For example, preschools ures for all students attending all nonformal education with well-trained teachers may also have highly moti- centers (treatment and nontreatment) in Kherwara Block, vated directors. One way to get around this problem of covering not only the period of the intervention but also endogenous preschool characteristics is to conduct ran- the previous year. It is also constructing a database on domized trials of education interventions. the students' achievement scores. This research project is using this approach to assess Preliminary results indicate that adding a second the effect of a preschool intervention in Kenya. The teacher to a nonformal education center significantly research is being conducted in collaboration with a Dutch increases both enrollment rates and attendance during nongovernmental organization, the International Christ- the months the school is open. These preliminary results ian Support Fund, which is currently working with 100 suggest that the impact on school attendance of adding primary schools in westem Kenya. All these schools have a second teacher at a one-teacher school may be more a preschool attached. Half these preschools were ran- pronounced than has typically been found in studies of domly selected to receive a typical package of improve- the impact of class size changes in industrial countries ments, consisting of teacher training, instructional (which have not typically looked at single-teacher materials, and incentives for teacher attendance, begin- schools). This finding has important policy implications ninginApril 1997.At the end of the school year, in October for countries where enrollment is still far below 100 per- 1997, preschool children were given simple tests of cog- cent, such as India, where there is great concern with find- nitive skills (word recognition, counting objects, and so ing ways of raising it. on). Ir addition, data were collected on attendance, drop- Further analysis will probe the robustness of these ini- ping out, and classroom activities. The impact of the inter- tial observations, add an assessment of the impact on vention will be measured using several outcome variables: education outcomes, and try to provide some sense of daily attendance (of children and of teachers), teaching the cost of the intervention against which any benefits methods used, cognitive achievement, dropping out, and should be compared. progression to primary school. Responsibility:Development Research Group, Poverty The full set of data will become available in early 1999, and Human Resources-Peter Lanjouw (planjouw and full results should be available later that year. @worldbank.org). With Abhijit Banerjee and Michael Responsibility: Development Research Group, Pov- Kremer, Massachusetts Institute of Technology; and Jenny erty and Human Resources-Paul Glewwe (pglewwe Lanjouw, Yale University. @worldbank.org) and Sylvie Moulin. With Michael Completiondate: June 1999. Kremer, Massachusetts Institute of rechnology. The International Christian Support Fund is collaborating in the research. The Impact of Colombia's Voucher Program: Completion date: June 1999. Using Randomization through a Lottery for Program Evaluation

Evaluating the Impact of Supplementary Ref. no. 682-56 Teachers in Nonformal Education Centers Vouchers have been touted as a means to harness market forces to compel public and private schools to provide Ref no. 682-18 good-quality education efficiently. Proponents claim that Studies in industrial countries tend to find little effect by allowing parents to choose where their children attend on student performance from, reducing pupil-teacher school, vouchers will force schools to compete with one ratios. But this effect could be significant in schools in another for students. Vouchers have also been used to which a single teacher must teach students at all levels enable poor and disadvantaged children to enroll in pri- and which operates only when the single teacher is pre- vate schools when public provision is limited or unavail- sent. Such schools are common in developing countries. able. In Colombia-as in Bangladesh, Tanzania, and in the Using randomized evaluation, this research is assess- United States (in Milwaukee)-a special subsidy transfer ing the impact on attendance and achievement scores of program is allocating public resources for use in private hiring a second teacher in 46 randomly chosen rural non- schools by targeted groups. How successful these pro- formal education centers, now with a single teacher, in grams have been in increasing enrollment among targeted Kherwara Block,Udaipur District, Rajasthan. The research groups and, more generally, improving educational out- is being undertaken in collaboration with SEV7AMANDIR, comes is typically unknown. The relevant empirical liter- a nongovernmental organization based in Udaipur. ature is meager, especially in developing countries.

42 LaborMarkets and Education

Examining the experience with the Colombian pro- social benefits to workers. A practical response to this gram, this study addresses the following questions: How problem has been the emergence of a new category of do vouchers affect the quantity and quality of education workers, xiagangworkers, who are laid off but retain their obtained by students? Does the program induce more links to their enterprises and benefit from subsistence students to attend school, or does it mainly subsidize wages and continued access to housing and medicalben- families who would have sent their children to school efits. The government's main response to the unem- even in the absence of the program? ployment threat has been the Reemployment Project, The Colombia program is interesting not only from a which was launched as a pilot in 30 cities in 1994 and policy perspective but also from a methodological per- expanded to200 cities in 1995-96.The project encompasses spective, because it has used a lottery in some areas to a range of active labor market policies, including retrain- allocate the vouchers to eligible applicants. This ran- ing, job search assistance and counseling, wage subsidies domization in the program addresses the issue of self- and tax breaks for enterprises that employ laid-off work- selection and allows the study to measure the impact of ers, and assistance for self-employment designed to rede- the program on enrollment and the quality of education ploy unemployed workers in productive activities. that voucher students receive. This research will evaluate the cost-effectiveness of Data are being collected through a survey of equal retraining and employment services in three cities in numbers of lottery winners and losers in at least two cities China with different economic environments (Shanghai, of Colombia. A questionnaire to collect information on Shenyang, and Wuhan). The study will use a quasi- the socioeconomic background and enrollment status of experimental evaluation design. This will involve col- the lottery participants has been developed. An achieve- lecting data from individuals who participated in retrain- ment test will also be administered. ing and data from a comparison group drawn randomly Completion of the survey has been delayed by prob- from the workers eligible for such programs-that is, a lems in obtaining complete lists of participants with full sample of retrenched and unemployed workers. The study addresses and in locating the addresses, which in some will then compare such outcomes as probability of reem- cases are no longer relevant because of citywide changes ployment and earnings after reemployment for the groups in street names and house numbers. A national election to derive the net impact of the programs. Finally, it will in the middle of 1998 also caused delay. collect data on the costs of administering theprograms and Whether targeted student subsidies that allow the poor compare the cost-effectiveness of different interventions. to use private services can have a substantial impact in The random sample of participants in retraining will overcoming economic barriers to enrollment is a ques- be drawn from program lists kept at the Labor Bureau. tion relevant to Bank operational projects. Several projects For the comparison group a random sample will be drawn are funding student subsidy schemes meant to increase from the lists of redundant and unemployed workers enrollment among the rural poor, in Bangladesh, Brazil, maintained at the municipal labor bureaus. Data will be Pakistan, and Tanzania, and similar schemes are being collected from the sample of participants and the com- considered in Bolivia and in Indonesia. Another policy- parison group by the State Statistical Bureau between relevant question that the study will investigate is the October and December 1998. Data on program costs will amount of leakage in targeted programs such as these. be collected by the Institute of Labor Studies of the Responsibility:Development Research Group, Poverty Ministry of Labor and Social Security. and Human Resources-Elizabeth M. King (eking Dissemination plans include a conference in Beijing @worldbank.org). With Joshua Angrist and Michael in March 1999. The conference will disseminate the Kremer, Massachusetts Institute of Technology; and Erik results of this research as well as bring international expe- Bloom and Gabriel Lopez, Javeriana University, Colombia. rience in implementing and evaluating active and pas- Completion date:June 1999. sive labor market policies to policymakers and practitioners in China. In addition, the results of the research will feed into a study on urban labor market adjustment Evaluation of Active Labor Market in China. Programs in China The World Bank already funds projects with active labor market components, and suchprograms are increas- Ref. no. 682-78 ingly being considered in several East Asian economies Addressing labor redundancy in state enterprises has affected by the economic crisis. This study will add to the gained urgency in China with the acceleration of reforms body of research on the evaluation of active labor mar- of state-owned enterprises. One of the major obstacles ket policies, and its results will be useful in designing to downsizing has been enterprise-based provision of and evaluating such interventions in other countries.

43 LaborMarkets and Education

Responsibility:East Asia and Pacific Region, Poverty Cross-CountryStudy of Active Reduction and Economic Management Sector Unit- LaborMarket Programs Tamar Manuelyan Atinc ([email protected]) and Benu Bidani. With Christopher O'Leary, W. E. Upjohn This study evaluated five active labor market programs Institute for Employment Research; and State Statistical in four countries-the Czech Republic, Hungary, Poland, Bureau, Beijing. and Turkey. The objective was to determine whether there Completion date: March 1999. was any significant difference in outcomes such as employment and wage levels between people who participated in the programs and similar people who did not Economic Analysis participate (the comparison group). The study compared in Education Projects results for several subgroups of program participants and, when appropriate and possible, different socioeco- Ref. no. 682-95 nomic categories (such as high- and low-unemployment Project economic analysis is moving away from a regions). concern with precise rate-of-return calculations toward In the selection of the programs to be studied the aim a broader examination of the rationale for public was to include the most widely used active labor mar- provision. In education, where the benefits of investment ket programs in each country and, to the extent possi- are hard to quantify, it has always been difficult to ble, to include similar programs in the participating undertake good economic analysis. Rate-of-return cal- countries to provide a basis for cross-country compari- culations for investments in education have tended to son. The programs included in the study were retrain- concentrate on labor market outcomes. In other sectors ing, wage subsidy, self-employment initiatives, general more direct, project-related benefits are used. The sec- employment services, and public works and temporary toral rates of return usually calculated for education community employment. Despite the attempt to identify investments are not always a useful measure of the pro- similar programs, significant differences in definitions ject benefits. and programs among countries made it difficult to make This research project will review current practice in direct comparisons. While this impeded quantitative economic analysis in the education sector, primarily using cross-country comparisons, it did not preclude all qual- Bank project documents. The study will look for discus- itative comparisons and it facilitated evaluation of diff- sions of externalities from education investments and of ferent alternatives for similar programs. the demand for education. It will compare economic The study used a quasi-experimental design (matched analysis in education with that in other sectors. It will pair comparison methodology). The sampling method review World Bank guidelines for economic analysis to consisted of randomly drawing a representative group assess their appropriateness for education projects. To from the relevant population. The main outcomes exam- judge the relationship between economic analysis and ined were the duration of unemployment, the propor- the ultimate objective of projects, the study will under- tion in employment, reemployment earnings, the duration take a statistical analysis of education projects and their of unemployment compensation, and secondary effects ratings. The project will also look at other considera- such as new jobs resulting from self-employment. To esti- tions critical to proper project appraisal, such as the coun- mate program impacts, the study used simple unadjusted terfactual private sector supply response, the fiscal impact differences between outcomes, differences between means of the project, and the fungibility of lending, as well as using a comparison group formed by matched pairs, and considerations on the demand side. regression-adjusted impact estimates. The project aims to provide guidance for future prac- The study built on previous work in Hungary and tice in the education sector, including with regard to the Poland, supported by World Bank projects, which facil- appropriate role of project rates of return, and to develop itated the development of national performance indica- methods of improving economic analysis. Issues for fur- tor evaluation systems for active labor market programs. ther research will be identified. These systems provide a systematic method of identify- Responsibility: Human Development Network, ing gross program impacts, including defining perfor- Education Team-Harry Anthony Patrinos (hpatrinos mance indicators and participant follow-up procedures. @worldbank.org) and Ayesha Vawda; Africa Region Such data and procedures are a necessary first step toward Technical Families, Human Development 2-Nicholas a more complex quasi-experimental design evaluation. Burnett; and East Asia and Pacific Region, Education The project was implemented by the national employ- Sector Unit-Peter Moock. With Price Gittinger. ment services of the ministries of labor in the four par- Completion date:June 1999. ticipating countries. Overall direction was provided by

44 LaborMarkets and Education a project steering committee consisting of representatives sity in gender and nationality is more conducive to high from the World Bank, the four participating countries, performance by the people against whom there may pre- the external financing agencies, and two technical assis- viously have been bias. tance contractors. The study used an econometric approach standard in Responsibility:Europe and Central Asia Region, Human the labor economics literature. Data were drawn from Development Sector Unit-David Fretwell (dfretwell the World Bank's human resource database, with iden- @worldbank.org). With ABT Associates and W. E. Upjohn tification deleted. The findings were disseminated at sem- Institute for Employment Research. The U.S. Agency for inars for World Bank human resource staff and to International Development and the European Union's members of the Bank's Human Development Network European Training Foundation provided funding for the Council. research. Participating countries also provided funding Responsibility:Development Research Group, Poverty and in-kind support. and Human Resources-Elizabeth M. King (eking Completion date:June 1998. @worldbank.org), Deon Filmer, Margaret Grosh, and Dominique van de Walle. With Jonathan Cox and Jackie Toolan, Pilat Ltd. Pay and Grade Differentials Completion date:June 1998. at the World Bank Report: Deon Filmer, Margaret Grosh, Elizabeth King, and Dominique van Large internationalorganizations such as the WorldBank de Walle. 1998. "Pay and Grade Differentials at the World Bank." pursue many objectives in hiring policies, including PolicyResearch Working Paper 1912.World Bank, Development reduced costs, cultural diversity, and the avoidance of ResearchGroup, Washington, DC. discrimination. There can be sharp tradeoffs among these objectives. Diversity is enhanced by recruiting from an international labor market, for example, but international Public Sector Retrenchment organizations face unusually large differences in reser- and Efficient Compensation Schemes vation wages for staff capable of doing the same work. But one way to reduce costs would be to pay employees Economic reforms often include shrinking the public sec- their reservation wages, which implies unequal pay for tor, which in turn sometimes requires massive layoffs. equal work. But what are the best mechanisms for shedding redun- This study investigated how these tradeoffs are dant public sector workers? If severance pay packages resolved in the World Bank's hiring processes. It esti- are offered to induce voluntary departures, how should mated disparities in salaries and grades between men they be designed to minimize the total cost? And are there and women and by country of origin that cannot be attrib- ways to prevent the most valuable workers from leav- uted to differences in the productive characteristics of ing the public sector, and the least productive ones from workers. The results indicate that about half the salary staying? and grade differentials between men and women and This study investigated the optimal design of down- between staff from high- and low-income countries are sizing operations, combining three approaches. It used attributable to differences in worker characteristics. the public economics perspective to assess the financial The study explored a number of alternative explana- and economic returns to downsizing. It used the labor tions for the rest of the salary and grade differentials, economics perspective to predict the losses public sec- including omitted variable bias, quotas imposed to ensure tor workers may experience as a result of displacement. diversity, and discrimination in hiring and promoting. And it used the principal-agent approach to identify the It found that neither omitted variable bias nor quotas self-selection mechanisms appropriate when individual are compelling explanations for disparities and that dis- productivity is not observable in the public sector. crimination probably exists, although certainly less than Data on individual earnings, expenditures, and other, would be implied by a cost-minimizing hiring policy. related variables were used to evaluate the losses from A shift has been occurring in the hiring process at the displacement in several country case studies. For Bank. There are several possibe reasons: The applica- Argentina these data referred to public sector workers tion pool, including women and developing country who had received a severance pay offer and either nationals, has significantly improved in quality. accepted or rejected it. For Ecuador and Turkey they Information gathering during hiring has intensified, referred to workers separated from their public sector reducing guesswork. There is more incentive to hire staff job. For Egypt and Kazakhstan they related to the entire from minority groups. And the Bank's increasing diver- labor force. The welfare losses from displacement were

45 LaborMarkets and Education estimated on the basis of these data by comparing two separated workers should be allowed to choose between states (staying and leaving, before and after, in and out). getting those services and receiving the cash equivalent A cross-country analysis of experience with retrench- of their cost. ment used data on 41 downsizing operations supported Findings of the project have been disseminated through by the World Bank. These data, assembled from opera- presentations on public sector downsizing for policy- tional reports and meetings with Bank task managers, makers in Africa, Europe and Central Asia, and Yemen. cover program characteristics, such as the shares of Presentations have also been made at the 1997 Latin voluntary and involuntary job separations, the amounts American Meetings of the Econometric Association in of severance offered, and the use of training and Santiago, Chile, and in World Bank training seminars. other support mechanisms. The analysis related the finan- And a two-day conference for researchers involved in cial and economic returns of these programs to their the project and about 100 Bank operational staff was held characteristics. in Washington, DC, in November 1996. The main find- The project led to four main findings. First, downsiz- ings of the project and the papers it has produced are ing programs in the civil service usually entail signifi- available on the Website http.//www.worldbank.orgl cant adverse selection. By offering severance pay packages html/prdph/downsize/home.htm. across the board, they encourage the best civil servants The project has had a significant operational impact, (who have the best outside alternatives) to leave the gov- providing input and materials for downsizing operations ernment, so that no efficiency gain is achieved. A better in almost 20 countries, including operations managed by outcome could be achieved through a menu of contracts, the Asian Development Bank and the Inter-American with each contract combining a wage offer and a sever- Development Bank. Because of the operational interest ance pay offer, or through at least some targeting of the in this research, a follow-up project is planned. separations. The targeting mechanism could focus on Responsibility:DevelopmentResearch Group, Poverty agencies that need to be closed, services that can be con- and Human Resources-Martin Rama (mrama tracted out, and occupations and skills that are clearly @worldbank.org), Alberto Chong, and Kinnon Scott; and redundant. Middle East and North Africa Region, Social Develop- Second, downsizing programs should be appraised ment Group-Elizabeth Ruppert. With Ragui Assaad, on economic terms. Typical assessments adopt a finan- University of Minnesota; Kaushik Basu and Gary Fields, cial approach, by comparing the up-front cost in sever- Cornell University; Jose Manuel Campa, New York ance pay to the savings in future wages. But an economic University; Julia Gonzalez, Central Bank of Ecuador; John appraisal needs to take into account labor productivity Haltiwanger and Manisha Singh, University of Maryland; in and out of the public sector, the deadweight losses or Anat Levy, Bank of Israel; Richard McLean, Rutgers gains resulting from changes in the equilibrium level of University; Donald Robbins, Harvard University; Aysit taxes, and the labor market externalities that public Tansel, Middle East Technical University; Nadia Francis, sector downsizing may generate (particularly in a "one- George Washington University; Jean-Jacques Laffont, company town"). Universite de Toulouse; and Donna MacIsaac, Inter- Third, the rules of thumb on which severance pay American Development Bank. packages are usually based fail to appropriately com- Completion date:June 1998. pensate the displaced workers. These rules involve only Reports: a few observable characteristics of the workers (typically, Assaad, Ragui. Forthcoming. "Matching Compensation Payments wages and seniority). But other characteristics, such as to WorkerLosses from Displacement in VoluntarySeverance age and education, are better predictors of the loss result- Programs: An Application to the State-Owned Enterprise Sector ing from job separation. Labor market data can be used in Egypt." World Bank Economic Review. to more accurately predict the earnings displaced work- Basu, Kaushik, Gary Fields, and Shub Debgupta. "Retrenchment, ers can make outside the public sector and therefore to Labor Laws, and Government Policy: An Analysis with Special tailor compensation based on appropriate individual Reference to India." Cornell University, Ithaca, N.Y characteristics. Campa, Jos6 Manuel. "Public Sector Retrenchment: Spain in the Fourth, significant resources are wasted in redeploy- 1980s."New YorkUniversity. ment programs that are not valued by the displaced work- Haltiwanger, John, and Manisha Singh. Forthcoming. "Cross- ers. On average, for every dollar spent on compensation, Country Evidence on Public Sector Retrenchment." World Bank two are spent on enhancing safety nets. Part of the down- EconomicReview. sizing budget is often captured by ailing vocational train- Jeon, Doh-Shin, and Jean-Jacques Laffont. "The Efficient ing agencies to provide outdated and ineffective training Mechanism for Downsizing the Public Sector." Universite de and support services. To minimize the waste of resources, Toulouse.

46 LaborMarkets and Education

Levy, Anat, and Richard McLean. "Optimal and Sub-Optimal ing about 40-50 percent of total household income in Retrenchment Schemes: An Analytical Framework." Rutgers rural areas. The activities that rural populations engage University. in are heterogeneous, ranging from agro-processing Rama, Martin. 1997."Efficient Public Sector Downsizing." Policy and manufacturing to construction and services. Self- Research Working Paper 1840. World Bank, Development employment and household enterprises are as important Research Group, Washington, DC. (Also forthcoming in World as wage labor activities. As total income rises, the share Bank EconomicReview.) of income from nonfarm activities also tends to rise, Rama, Martin, and Donna MacIsaac. Forthcoming. "Earnings and suggesting that this sector represents a potential route Welfare after Retrenchment: Central Bank Employees in out of poverty. But employment in nonfarm activities Ecuador." World BankEconomic Review. appears to be strongly associated with higher education Rama, Martin, and Kinnon Scott. Forthcoming. "Labor Eamings in levels and better access to infrastructure, factors that may One-Company Towns: Theory and Evidence from Kazakhstan." limit participation by the poor. WorldBank EconomicReview. Much of the nonfarm economy remains closely linked Robbins, Donald, MairtinGonzalez Rosada, and Alicia Menendez. to agriculture. So agricultural policies can have an impor- "Public Sector Retrenchment and EfficientSeverance Payment tant impact on the nonagricultural sector. The hetero- Schemes: A Case Study of Argentina." Harvard Institute for geneity of the sector makes it difficult to prescribe general InternationalDevelopment, Cambridge, Mass. policies, and may point to a need to reflect on the process Ruppert, Elizabeth. Forthcoming. "The Algerian Retrenchment of policymaking. For example, decentralized policy for- System: A Financial and Economic Evaluation." World Bank mulation and implementation may produce policies bet- EconomicReview. ter tailored to local conditions and needs. Although Tansel,Aysit. "Earnings of Turkish Workersbefore and after promoting the rural nonfarm sector is often seen as a way Dismissaldue toPrivatization." Middle EastTechnical University. to reduce rural poverty, particularly where agricultural potential is low, the constraints on participation by the poor suggest that the direct benefits might be captured Research on the Rural Nonfarm Economy more easily by the nonpoor. Thus the choice of subsector to promote, and of the way the promotion is carried This research seeks to add empirical grounding to the out, is important. understanding of the size, nature, evolution, and impor- Findings were discussed at a workshop, Strategies for tance of the nonagricultural sector in rural areas of devel- Stimulating Growth of the Rural Nonfarm Economy in oping countries. It pays particular attention to the current Developing Countries, on May 17-21, 1998, cohosted and potential contribution of this sector to poverty reduc- by the International Food Policy Research Institute and tion objectives and to identifying policy levers that could the World Bank's Development Research Group. The enhance that contribution. workshop was attended by 25 participants from acade- The research uses household-level survey data to mia, nongovernmental organizations, and multilateral examine the empirical relationship between the economic institutions. activities and earnings of household members, and indi- Responsibility:Development Research Group, Poverty vidual welfare levels measured on the basis of per capita and Human Resources-Peter Lanjouw (planjouw income or per capita consumption. To develop robust Cworldbank.org). With Abusaleh Shariff, National measures of individual welfare, the research adjusts for Council for Applied Economic Research, New Delhi. such factors as spatial cost-of-living variation and equiv- Completiondate: September 1998. alence scales. For Ecuador the research draws on Living Reports: Standards Measurement Study (LSMS) survey data cov- Lanjouw, Peter. 1998. "Ecuador's Rural Nonfarm Economy as a ering about 5,000 households in 1995. For El Salvador it Route out of Poverty." Policy Research Working Paper draws on two household surveys-one for 4,300 house- 1904.World Bank,Development Research Group, Washington, holds in 1994 and one for 630 households in 1996. For DC. India it draws on a 33,000-household survey for 1994. .1998."Poverty and the Nonfarm Economyin Mexico'sEjidos: And for Mexico it draws on a 1,500-household panel 1994-97." World Bank, Development Research Group, dataset for 1994 and 1997 relating to the ejido sector. Washington,DC. Results for Ecuador, El Salvador, and Mexico show . 1998."Rural Nonfarm Employment and Poverty: Evidence that the rural nonfarm economy is important in these fromHousehold Survey Data in LatinAmerica." World Bank, countries, with income from nonfarm activities averag- DevelopmentResearch Group, Washington, DC.

47 ENVIRONMENTALLY SUSTAINABLE DEVELOPMENT

Cost-Effectiveness Analysis global economic optimization of economic interventions. of Coral Reef Management The nonlinear optimization procedures rely on step- and Protection: A Least-Cost Model wise optimization to find an optimal set of economic for the Developing Tropics policies. Preliminary simulations of the economic optimization Ref. no. 680-08 model point to several operationally important conclu- This project asks two main questions: What is the most sions. Because of the nonlinear response surfaces in the cost-effective means for achieving a given level of coral ecological and economic model, the lowest-cost single reef health? And hcw can the limited ecological data avail- interventions do not necessarily appear in the set of least- able in developing countries be used most efficiently in cost optimized interventions. In effect, the traditional identifying least-cost solutions? cost-curve approach for policy planning is not valid for There are many practical issues in devising cost- such nonlinear systems. Operationally, therefore, more effective policy interventions to manage and protect coral attention will need to be paid to the cumulative impacts reefs. There is also a key conceptual barrier: a lack of of a set of interventions rather than just the stand-alone quantitative models for comprehensive economic and effects of single interventions. The optimal policy set and ecological analysis of the effects of economic activity on the interventions that make up this policy set depend coral reefs. This lack has made it difficult to rank policy closely on the target quality that is to be achieved, itself and investment iniLerventions by cost-effectiveness and an economic optimum dependent on the benefits of inter- thus to develop least-cost plans to manage and protect vention. This underlines the importance operationally of coral reefs. addressing benefits as well as costs. The central focus of this research is to develop a least- The dissemination strategy focuses on in-country cost model of coral reef management and protection. A workshops and seminars for user groups and stake- key output of this model will be an optimized cost func- holders, government agencies, and private and non- tion, relating marginal costs of reef conservation to coral governmental organizations involved in coastal zone reef quality. The cost function can be used to identify a management. It also includes activities to foster cooper- set of least-cost interventions for any target of coral reef ation among countries on coordinated environmental quality. policies, strategies, and action plans in the coastal zone, The project developed a prototype model that is capa- and to provide a consultation mechanism for formulat- ble of measuring the cost-effectiveness of single policy ing, strengthening, harmonizing, and enforcing envi- interventions. Preliminary estimates of unit costs have ronmental laws and regulations. Workshops were held been prepared for 10 policy interventions, using data in Montego Bay,Jamaica, in November1995, March1997, loosely based on M:ontego Bay, Jamaica. In this case of a and February 1998, and in Curacao in November 1995 poor reef with potential for improvement, the key fac- and April 1996. Preliminary results were made available tors believed to be responsible for deterioration of the in other regions, such as in November 1997 through the reef are sediment and nutrient loads. The most cost- EnvironmentandEconomyProgramforSoutheastAsia, effective intervention is a sewage outfall and pump sta- which is partially sponsored by the Economic Develop- tion that takes the sediment beyond the reef edge. Other ment Institute. case studies include the southern coast of Curacao and This study is complemented by the research project the Maldives. All these studies describe least-cost solu- Marine Resource Valuation: An Application to Coral Reefs tions in terms of independent single interventions. in the Developing Tropics (ref. no. 681-05),which is deriv- The project has also completed a three-stage fuzzy ing improved estimates of coral reef benefits to be used ecological model that relates reef input parameters to reef in conjunction with the cost function. quality in terms of coral abundance and reef fish abun- Responsibility: Latin America and the Caribbean dance. The model permits translation of such factors Region, Environmentally and Socially Sustainable as algae cover, nutrient loads, and grazing pressure Development Sector Unit-Richard M. Huber (rhuber into an index of reef quality. The basic fuzzy ecological @worldbank.org), Maria Donoso Clark, and Carl model has been expanded and optimized to permit Lundin; Jamaica Resident Mission-Sam Wedderburn;

48 Environmentally Sustainable Development

East Asia and Pacific Region, Environment Sector Unit- Marine System Valuation: An Application Herman Cesar; and Environment Department-Marea to Coral Reefs in the Developing Tropics Hatziolos and Jan Post. With H. Jack Ruitenbeek, H. J. Ruitenbeek Resource Consulting Limited; Frank Ref. no. 6.81-05 Rijsberman, Rolf P. M. Bak, J. Peter M. Kouwenhoven, This project is working to develop improved methods Susie Westmacott, and Danielle Hirsch, Resource Analysis for deriving estimates of coral reef benefits. Such esti- Consulting; and Steve Dollar and Mark Ridgely, mates can be used in conjunction with the cost function University of Hawaii. The Netherlands Environment being developed in a related study (Cost-Effectiveness Consultant Trust Fund, the Norway Consultant Trust Analysis of Coral Reef Management and Protection, ref. Fund, the Swedish Consultant Trust Fund, and the no. 680-08) to help in identifying an optimal set of inter- Canadian Consultant Trust Fund have contributed fund- ventions for improving coral reef health. ing for the research. Staff time has been contributed by The project adapts and refines existing valuation meth- the Natural Resource and Conservation Authority, ods so that they take account of the key characteristics Montego Bay Marine Park Trust, and Greater Montego of coral reefs and derive more accurate estimates of coral Bay Redevelopment Corporation in Jamaica. In Curacao reef benefits for selected sites. To keep the analysis staff time is being contributed by a large number of orga- tractable, the study focuses on three methods for valu- nizations, including the Environment Department of ing the benefits: direct use valuation, contingent valua- the Netherlands Antilles, Curacao Underwater Park, tion, and marine system biodiversity valuation. The study Curacao Marine Biology Institute, University of the will apply and refine each of these valuation methods Netherlands Antilles, Centraal Bureau voor Juridische and then develop a synthesized benefits function. It will en Algemene Zaken, Curacao Diving Operators Asso- also identify appropriate policy and institutional reforms ciation, Curacao Tourism Development Bureau, Reef Care, for improving the capture of resource values associated Curacao Ports Authority, Ministry for Public Health and with coral reefs in developing countries, and the poten- Environmental Hygiene, Department of Public Works, tial role of the World Bank and other development assis- Department of Spatial Planning and Public Housing, and tance agencies in helping to effect these reforms. Department of Agriculture, Animal Husbandry, and The direct use valuation work has focused on local Fisheries. economic benefits accruing from the Montego Bay reef, Completion date: December 1998. such as fisheries, aquarium trade, coral mining, local Reports: crafts, and shoreline erosion control. This work was com- Dollar, Steve, and Mark Ridgely. 1997. "A Least-Cost Model plemented by socioeconomic surveys to capture the social for Coral Reef Management and Protection, Phase II: The dimensions of coral reef use. Fuzzy Ecological Model." World Bank, Latin America and The contingent valuation work has focused on mon- the Caribbean, Country Department III, Washington, etizing the economic benefits of biodiversity through sur- DC. veys in Curaqao and Jamaica. The survey instrument was Huber, Richard, Jack Ruitenbeek, Steve Dollar, Mark Ridgely, designed to avoid problems associated with lexical pref- Frank Rijsberman, and Subodh Mathur. 1996. "A Least- erences, cases where the respondent assigns an infinite Cost Model for Coral Reef Management and Protection, value to a resource. Preliminary survey results indicate Phase I: A Prototype Model." World Bank, Latin America that the survey design reduced lexical responses to less and the Caribbean, Country Department III, Washington, than 5 percent of the total. DC. The project's work on marine system biodiversity val- Resource Analysis. 1995."Costs Model for Waste Water Treatment, uation will be more involved. It requires identifying CORAL." World Bank, Latin America and the Caribbean, appropriate physical or biophysical indicators in marine Country Department EII,Washington, DC. systems to which economic values might be attached, Rijsberman,Frank, Richard Huber, SusieWestmacott, and Danielle and appropriate, quantifiable indicators of biodiversity. Hirsch. 1995. "Cost-Effectiveness Analysis of Coral Reef A methodological framework has been developed that Management and Protection: A Case Study of Curacao." World classifies potential valuation approaches as utility- Bank, Latin America and the Caribbean, Country Department function-based, production-function-based, or rent-based. III,Washington, DC. The framework will be used to identify appropriate empir- Westmacott, Susie, Frank Rijsberman, and Richard Huber. 1996. ical analyses, to be started in mid-1998. "Cost-Effectiveness Analysis of Coral Reef Management and The dissemination strategy centers on in-country work- Protection: A Case Study of the Maldives." World Bank, Latin shops and seminars targeting those involved in coastal America and the Caribbean, Country Department III, zone management. Workshops in Jamaica in February Washington,DC. 1998 focused on preliminary results of the direct use work.

49 Environmentally Sustainable Development

Many recommendations arising from the socioeconomic Spash, Clive L., Jasper D. van der Werff ten Bosch, and Susie analysis have been integrated into the Montego Bay R. Westmacott. 1998. "Lexicographic Preferences and the Marine Park Authority planning process. Contingent Valuation of Coral Reef Biodiversity in Curacao and Responsibility:Latin America and the Caribbean Region, Jamaica." Environmentally and Socially Sustainable Development Sector Unit-Richard M. Huber ([email protected]), Tom Wiens, Maria Donoso Clark, and Carl Lundin; Spatial Environmental Processes Jamaica Resident Mission-Sam Wedderbum; East Asia and Pacific Region, Environment Sector Unit-Herman Ref. no. 681-35 Cesar; and Environment Department-Marea Hatziolos This project is undertaking two studies of land use in and Jan Post. With Andy Hooten; H. Jack Ruitenbeek and northern Thailand using spatially disaggregated data. Cindy Cartier, H. J. Ruitenbeek Resource Consulting The first study examines the impact of socioeconomic Limited; Frank R. Rijsberman, Peter M. Kouwenhoven, and physiographic factors on land use in northern Susie R. Westmacott, and Danielle Hirsch, Resource Thailand in 1986 using geographic information systems Analysis Consulting; Kent R. Gustavson; Daniel M. (GIS) data. The study is based on a model that predicts Putterman, Biotechnology Biodiversity Technology the probability that a plot of land will be devoted to Transfer Center; Clive Spash, Cambridge University; Leah agriculture and, conditional on being cultivated, will be Bunce, National Oceanic and Atmospheric Adminis- devoted to a specific crop. Key variables explaining equi- tration (NOAA); and Malden Miller and Jill Williams, librium land use include socioeconomic characteristics Montego Bay Marine Park Trust. The Netherlands of the district in which the plot is located (population Environment Consultant Trust Fund is contributing fund- density, education, and fertility) and the soil quality, slope, ing for the research. Staff time is being contributed by the and elevation of the plot. The only specifically economic Natural Resource and Conservation Authority, Montego variable measured is market access (travel time to the Bay Marine Park Trust, and Greater Montego Bay nearest market). Redevelopment Corporation in Jamaica. In Curasao staff Preliminary results from the first study suggest that time is being contributed by a large number of organi- market access has played a relatively minor part in the zations, including the Environment Department of the conversion of forestland to agriculture in northern Netherlands Antilles, Curacao Underwater Park, Curacao Thailand. Socioeconomic variables such as population Marine Biology Institute, University of the Netherlands density and fertility rates appear to have a larger impact Antilles, Centraal Bureau voor Juridische en Algemene on deforestation. Butbecause these variables could proxy Zaken, Curacao Diving Operators Association, Curacao wage rates and output prices, it is difficult to determine Tourism Development Bureau, Reef Care, Curacao Ports from the analysis how large a part price instruments could Authority, Ministry for Public Health and Environmental play in deforestation. Hygiene, Department of Public Works, Department of The second model uses village-level data on land use Spatial Planning and Public Housing, and Department in Chiang Mai Province to study the impact of agricul- of Agriculture, Animal Husbandry, and Fisheries. tural prices and wages on the conversion of forests to Completion date: December 1999. agriculture. The availability of time-series data on prices Reports: and land use, together with information on the geographic Gustavson, Kent R. 1998."Values Associated with the Local Use of location of villages, makes it possible to study the impact the Montego Bay Marine Park." of price instruments on deforestation. Gustavson, Kent R., and Leah Bunce. 1998."Coral Reef Valuation: Prelimninary results from the first study were presented A Rapid Socioeconomic Assessment of Fishing, Watersports, at the Global Change and Terrestrial Ecosystems-Land and Hotel Operations in the Montego Bay Marine Park, Jamaica, Use and Cover Change Open Science Conference in and an Analysis of Reef Management Implications." Barcelona in March 1998. Huber, Richard M., H. Jack Ruitenbeek, and Daniel M. Putterman. Responsibility: Development Research Group, Infra- 1997."Marine ResourceValuation: An Application to Coral Reefs structure and Environment-Maureen L. Cropper in the Developing Tropics."World Bank,Latin America and the ([email protected]) and Jyotsna Puri; and Caribbean Region, Environmentally and Socially Sustainable Economic Development Institute, Environment and Development Sector Unit, Washington, DC. Natural Resources Division-Muthukumara Mani. With Putterman, Daniel M. 1998."Access to Marine Genetic Resources Charles Griffiths, U.S. Environmental Protection Agency; inJamaica-AStudy of Policiesand Institutions for Incorporating William Salas, University of New Hampshire; and David Genetic Resources Utilization into Integrated Coastal Zone Skole, Michigan State University. Management." Completiondate: December 1998.

50 Environmentally Sustainable Development

Public Involvement in Industrial Pollution the citizens' concerns to the attention of the media, par- Control in Argentina and Brazil liamentarians,and state environmental agencies. Finally, the research suggests that the sustainability Ref. no. 681-46 and effectiveness of citizen and community actions with A growing body of empirical and historical research regard to industrial pollution are determined largely by shows that conventional command-and-control and mar- their synergistic relationship with state environmental ket instruments are insufficient by themselves to prevent policies and programs. and control pollution in rapidly industrializing countries. The Brazilian research team that has been conduct- When formal government standards are lacking or mon- ing the study has received additional funding from the itoring and enforcement are weak, citizen or commu- Ford Foundation's Brazil Office, which will enable it to nity groups often serve as informal regulators of industrial conduct a more systematic survey of citizens' attitudes pollution. toward the environment, a comparative study of state This research project investigates the nature and environmental policies and popular participation in envi- efficacy of citizen and community efforts in regulating ronmental issues in Minas Gerais, and more extensive industrial pollution in Argentina and Brazil. The study's dissemination of the findings among local citizen groups, analytical approach draws on several concepts in the con- municipal authorities, and state environmental agencies. temporary social science literature. These include the idea A report on the findings of the research is expected in of informal regulation as developed in the economic lit- October 1998. erature on industrial pollution control, the social and cul- Responsibility: Social Development Department- tural construction of risk as studied by antlhropologists Shelton H. Davis ([email protected]); Environ- and sociologists, and the growing political science liter- ment Department-David Hanrahan; and Economic ature on civil society. Based on this literature, the study Development Institute, Environment and Natural has developed a set of hypotheses to explain the social Resources Division-Sergio Margulis. With Jose Sergio causes, dynamics, and consequences of citizen and com- Leite Lopes and Beatriz M. Alasia de Heredia, Federal munity response to industrial pollution issues in differ- University of Rio de Janeiro; Rosane M. Prado, State ent local and national contexts. It tests these hypotheses University of Rio de Janeiro; Glaucia Oliveira da Silva, using an array of sociological techniques-community Federal University of Fluminense; Myriam Mousinho case studies, questionnaire surveys, citizen complaint Furtado Gomez, Development Bank of Minas Gerais; and analysis, and cross-state and cross-national comparisons. Leandro Piquet Carneiro, University of Sao Paulo. The The first of several workshops on the findings of the Federal University of Rio de Janeiro and the Ford research project was held in Rio de Janeiro in October Foundation, Brazil Office, are contributing funding for 1997. The workshop brought together all the researchers the research. working on the project in Argentina and Brazil, Brazilian Completiondate: October 1998. state environmental authorities, and Bank staff involved in the research or in the preparation of industrial pollution control projects in the two countries. Three major Gender, Property Rights, and Resource themes arose from the workshop and subsequent research Management in Ghana that could contribute to the Bank's work in industrial pollution control. Ref. no. 681-47 First, the research has discovered that socioeconomic This research focuses on individual property rights and variables alone (such as income, education, and labor individual decisions on use of land resources in Ghana. dependency) cannot explain the demand for environ- The study will test the hypothesis that cultivation deci- mental quality and actual environmental outcomes in sions are influenced by individual (as well as household) particular communities. Instead, communities appear access to credit and estimate the extent to which women's to have different cultural perceptions of environmental farm productivity can be influenced by credit market risks that may be determined as much by their historic interventions. It will also document the extent of partic- relations with industry as by their exposure to physical ipation in contract farming by both men and women, pollutants and their socioeconomic characteristics. explore the links between contract farming and finan- Second, the research has found that spontaneous pub- cial transactions, and examine the implications for farm- lic responses to industrial pollution are usually short- ing practices of involvement in contract schemes. The lived and ineffective unless intermediary groups-such focus of the study is on areas near Nsawam, in the east- as labor unions, environmental nongovernmental orga- ern region of Ghana, where farming has shifted from an nizations, and scientists and other professionals-bring established system of cassava and maize intercropping

51 Environmentally Sustainable Development to intensive vegetable production. The primary challenge Although only partially modernized, these projects did in this transition is to find techniques that will maintain not exhibit the chaos and anarchy that have been widely soil fertility under the new cropping system. documented in nonmodernized irrigation projects (and Three central economic issues arise. First, the devel- that existed in the one nonmodernized project in the opment of innovative methods of maintaining soil fer- study). The results were much more positive than tility is characterized by social learning (farmers know expected, given the preponderance of negative reports about one another's experiments) and thus by external- about irrigation projects. ities. Second, there is a close relationship between prop- The study found that the quality of water delivery ser- erty rights (vested, critically, in the individuals in the vice to individual farmers is inversely related to the num- household) and incentives to apply techniques to main- ber of farmers who must cooperate on the final tain soil fertility. Finally, decisionmaking with respect to distribution of water. Modernized projects that provide soil fertility maintenance depends critically on charac- good service have 20-80 turnouts (offtakes) per opera- teristics of the markets, particularly the capital markets, tor, compared with about 5 turnouts per operator on pro- available to farmers. jects with poor service. The study's methodology is based on a simultaneous In most projects farmers and managers appear to be and interactive process of detailed observation, theory satisfied with service that eliminates anarchy and pro- construction, and statistical testing. On the basis of pre- vides "sufficient" water to farms using traditional and liminary fieldwork, models have been developed on the often inefficient on-field irrigation techniques. Project three core economic issues. The goal is to model indi- hardware and software improvements targeted to these vidual incentives in the context of a given set of institu- simple goals can be incompatible with improvements tions rather than to model the evolution of the institutions. that will be necessary to provide proper water delivery Data are being collected through a survey in four village service for pressurized irrigation systems such as drip clusters near Nsawam, from 240 randomly selected house- and sprinkler in the future. holds. The survey has completed 10 rounds of interviews Irrigation projects have achieved good operations with each of the adult respondents in these households. through proper training, adequate funding, strong staff, Four more rounds are planned in the next few months. and good design and management. Modemization efforts In addition, two rounds of soil testing (soil organic car- that emphasized computer programs for predicting canal bon content and pH) have been completed on each of gate movements and deliveries were generally ineffec- the plots cultivated by or owned by the respondents. tive (or worse) and a poor use of time and money. Global positioning system (GPS) mapping of these plots Each irrigation project is unique, and there is no one has been completed in three clusters and is under way best set of management or hardware tools for improv- in the fourth. ing projects. Future needs of the projects studied centered Responsibility: Poverty Reduction and Economic on hardware, management, and a combination of the two. Management Network, Gender Division-Shahidur R. There is a general lack of understanding of moderniza- Khandker ([email protected]). With Christopher tion strategy, even where there is a good understanding Udry, Northwestern University. of the details of modernization. Completion date:June 1999. In all projects a better understanding of hardware design and management principles would improve performance. Interestingly, the staff most eager to obtain bet- Modern Water Control and Management ter information and training work in the projects with Practices in Irrigation: Impact on Performance the best performance. But there is a serious shortage of trainers who can provide focused and pragmatic train- Ref. no. 681-50C ing and of consultants who can provide designs that prop- The fundamental question this research addressed is erly incorporate both the strategies and the details of whether modernization of irrigation projects can effec- hardware and management modernization. tively improve their performance, and if so, what types Responsibility:Rural Development Department-Ariel of modernization are most beneficial. It also aimed to Dinar ([email protected]), Randall Purcell, and identify the surrounding circumstances (economic, legal, Francois Gadelle. With Charles Burt; Stuart Styles; and labor) that might help determine the success or failure David Molden, International Irrigation Management of modernization efforts. Institute (IIMI). The IIMI and the International Program The study examined 16 irrigation projects in 10 devel- for Technology Research in Irrigation and Drainage oping countries, of which 15 projects have experienced (IPTRID) contributed funding for the research. partial modernization in hardware, management, or both. Completiondate: June 1998.

52 Environmentally Sustainable Development

Land Tenure, Land Markets, and Land Anning Wei; East Asia and Pacific Region, Rural Productivity in Rural China Development and Natural Resources Sector Unit- Juergen Voegele; and Development Research Group, Ref. no. 681-76C Rural Development-Klaus Deininger. With Michael This study of land tenure arrangements in China Carter, University of Wisconsin at Madison; Charles addressed three sets of questions with key policy rele- Krusekopf; Shouying Liu, Development Research vance for China and for other developing countries. First, Council, China; Yang Yao, Beijing University; and Min how large is the output-reducing effect of administrative Zhu, People's Bank, China. restrictions on land ownership and transferability? How Completiondate: April 1998. much of this effect is due to disincentives to invest and how much is due to inefficient allocation of labor? By implication, what would be the expected effect of Regulatory Capacity across Indian States: improved transferability of land rights within the exist- An Institutional Perspective on the ing tenure arrangements (that is, long-term leases) com- Effectiveness of State Pollution pared with measures that are specifically aimed at Control Boards increasing tenure security? Second, to what degree can the informal land rental Ref: no. 681-86 arrangements used in the study villages be relied on to There is a large body of literature on environmental eco- bring about efficiency-enhancing reallocation of land? nomics that relates to monitoring and enforcing pollu- Is the amount of land rental constrained by restrictions tion control laws. But little work has been done on the on land transferability that are inherent in the current institutional dimensions of environmental regulation. tenure systems or by village-level factors unrelated to While policymakers agree that institutional capacity is a land tenure, such as limited off-farm employment and vital factor in a well-performing regulatory system, this failure by local enterprises to sufficiently differentiate consensus is based largely on case studies and has not wages by skill level? relied on coherent measures of such capacity. Thus there Third, what is the scope for outside intervention to appears to be a need for objective measures of institutional contribute to (or prevent) a smooth evolution of land capacity and for empirical work that rigorously links these tenure arrangements toward enhanced productivity? Can measures to well-defined performance indicators. insights on how fast and how efficiently land tenure has This research focuses on developing preliminary mea- adjusted in the past to changing economic conditions be sures of institutional capacity for environmental regula- used to design productivity-enhancing interventions? tory agencies in six Indian states. The validity of these The study was based on analysis of a panel data set measures will be assessed largely by their ability to pre- covering 800 households in four Chinese provinces. dict an agency's effectiveness as indicated by the com- Preliminary results indicate that restrictions on tenure pliance rates of polluting facilities in its jurisdiction over security have a significant output-reducing effect. The a five-year period. The analysis is based on plant-level research found that land transfers through rental mar- data from environmental regulatory agencies and state- kets during the period studied were extremely limited level published data. Standard discrete choice econo- and could be explained only insufficiently by economic metric techniques are used to estimate the effect of factors. While administrative reallocation of land appears regulatory capacity on compliance rates in a panel of to be able to substitute to some degree for the missing plants, controlling for plant characteristics. The variables land rental markets, it does so imperfectly and appar- proxying regulatory capacity vary by state as well as over ently at high cost. The potential tradeoff between equity time, and the study focuses on compliance with water and efficiency, and the factors that allow the emergence pollution regulation. of localized land markets, need to be further explored. The research has direct practical relevance in identi- The preliminary results were discussed with top fying areas where institutional strengthening efforts could Chinese and international researchers and policymak- most usefully be focused. It will also produce a set of indi- ers during a workshop in China cosponsored by the Bank cators of institutional capacity that could be used for and the Ford Foundation. Chinese policymakers ex- assessing agency effectiveness. pressed interest in further research, particularly to eval- Responsibility: Development Research Group, Infra- uate the impact of land tenure reform experiments structure and Environment-Sheoli Pargal (spargal implemented in some counties starting in 1987. @worldbank.org). With Mainul Huq; Nlandu Mamingi; Responsibility:Rural Development Department-Shem and the state pollution control boards. Migot-Adholla ([email protected]) and Completiondate: October 1998.

53 Environmentally Sustainable Development

The Role of Agriculture in Venezuela's measure of the determinants of productivity in agricul- Economic Rise and Decline ture and nonagriculture, including the effects of technology, infrastructure, and human capital on productivity Ref. no. 682-33 and out-migration from agriculture. The results are In growing economies labor productivity often increases expected to be useful in designing Bank country assis- more rapidly in agriculture than in other sectors. And tance strategies for countries with rural sectors that are there is a long-standing view that rising labor produc- poorly integrated with the rest of the economy. tivity in primarily agricultural economies and an out- Responsibility: Development Research Group, Rural migration of agricultural labor to other sectors has been Development-Donald Larson ([email protected]); an essential dynamic mechanism that brings equilibrium and Africa Region Technical Families, Agriculture 1- to differences in average sector incomes. David Nielson. With Yair Mundlak and Rita Butzer, Historical developments in Venezuela offer an espe- University of Chicago; and John Devereaux, University cially good opportunity to examine the determinants of of Miami. The Israeli Trust Fund and the Irish Trust Fund large differences in sector productivity and the effects are contributing funding for the research. that changes in agricultural productivity have on eco- Completiondate: December 1998. nomic growth. From 1920 to 1958 Venezuela was the fastest growing economy in the world. By 1958 it had the seventh highest average income in the world, slightly Environmental and Economic Analysis greater than that in the United Kingdom and significantly Incorporating Macroeconomic Issues higher than incomes in France and Germany But the next 38 years were characterized first by stagnation and then Ref. no. 682-38 by decline, and Venezuela now ranks 46th in per capita Despite the growing concem about environmental issues, income. relatively few of the Bank's country assistance strate- This study hypothesizes that poor rural development gies have linked environmental and macroeconomic strategies contributed significantly to that decline. The analysis. The main reason may be the lack of appropri- protective policies meant to assist the rural sector in ate tools. Although several analytical frameworks link- Venezuela after 1958 led ultimately to stagnation and ing environmental and macroeconomic variables have decline because they failed to address fundamental devel- been developed, there are few well-articulated frame- opment issues in rural education, transport, and the works that could be readily applied in most developing dissemination of new technologies in agriculture. Conse- countries because of data and resource constraints. quently, rural labor was ill suited for the nonagricul- This study builds on a preliminary framework devel- tural sector. The study also hypothesizes that the oped from earlier work in Jamaica that allows estimation determinants of labor productivity in Venezuela are no of the macroeconomic effect of environmental initia- different from those in countries in general. Rather, the tives and the environmental effect of macroeconomic poli- low productivity in agriculture compared with manu- cies. Most of the work to date has focused on quantifying facturing can be explained by the relative lack of invest- the relationship between the environment, human cap- ments in technology dissemination, in infrastructure, and ital, and growth. in physical and human capital in rural areas. (For exam- Responsibility: Development Research Group, Infra- ple, in 1970, 40 percent of the agricultural labor force structure and Environment-F. Desmond McCarthy was illiterate, while 94 percent of the labor force in man- ([email protected]). With Rose Marie Garcia, ufacturing was literate.) Finally, the study hypothesizes Wolf Holger, and Yi Wu. that large differences in sector income did not lead to Completiondate: December 1998. greater out-migration for the same reasons. The study will test these hypotheses by modeling productivity for agriculture and nonagriculture in Venezuela Pollution Control in China: The Role using an approach similar to that used in the research and Impact of Inspection and Complaints project Determinants of Agricultural Growth: Country and Cross-Country Analysis (ref. no. 679-03). The Ref. no. 682-44 approach recognizes the role of technology and policy Govemments of industrial and developing countries have states in the underlying choice of factor and thus will enacted a large number of environmental laws to improve allow the study to capture the effects of policy on pro- environmental quality. But imposing a ceiling on a plant's ductivity. The study will also model intersectoral migra- emissions does not necessarily mean that emissions will tion. The combined models will provide an empirical fall and environmental quality will improve. The behav-

54 Environmentally Sustainable Development ior of the regulated community must be monitored, and to conservation and to the economy. The research will its compliance with environmental standards enforced. also delve more deeply into the choices that determine The monitoring and enforcement of environmental reg- the sustainability of nature tourism assets and the process ulations have generally been weak, however. of their exploitation in developing countries. The research Monitoring and enforcement issues in environmen- will explore these questions: tal regulation have so far attracted little research effort. * Is it better to raise conservation funds through Most of the literature on these issues has been theoreti- changes in destination pricing or through taxes on the cal. There have been very few empirical studies on mon- tourism trade? itoring and enforcement issues at the plant level, and all * How should park entrance fees be structured? have been in industrial countries. Should differential pricing be used? This study will perform a plant-level empirical analy- * At what level should entrance fees be set so as to sis of the impact and determinants of the monitoring and maximize the economic returns to both the site and the enforcement activities of environmental agencies in two tourism services sector? industrial cities in China, Tianjin and Zhenjiang. Its objec- * At what level should entrance fees at particular sites tives are to provide a comprehensive understanding of be set in order to minimize environmental degradation the nature of the monitoring and enforcement activities and its associated costs and to maximize revenues? pursued by the cities' environmental regulators, to ana- * What are the net local economic benefits from nature lyze the impact of citizens' complaints on the behavior tourism? That is, what are the leakages and local multi- of the regulators and on the environmental performance pliers involved? of plants, and to measure the effectiveness of the regu- There is a lack of applied economic analysis of the sup- lators' monitoring and enforcement activities in chang- ply and demand relationships in these nature tourism ing the behavior of industrial polluters. markets, as well as of the relationships among the mar- The study's analytical approach is based on probit and kets. So the project will focus on a multimarket model instrumental variable regression methods. It will draw approach. The research will attempt to incorporate envi- on plant-level data on environmental performance and ronmental damage functions into the analytical frame- enforcement of environmental regulations from Tianjing work, methodology, and case studies where possible and and Zhenjing. appropriate. The evaluation of the links between nature The findings should deepen the understanding of tourism and the environment will attempt to highlight the plant-regulator relationship in China and should be potential threshold effects and critical features of the relevant not only for China but for other countries where relationship. resources devoted to monitoring activities are severely Political, institutional, and managerial contexts are limited. fundamental to the tradeoffs in nature tourism and will Responsibility: Development Research Group, determine the choice of policy or control variables that Infrastructure and Environment-Susmita Dasgupta may be reasonably manipulated. The project will thus ([email protected]), Hua Wang, and Benoit seek collaboration and cooperation with state agencies, Laplante. With Craig Meisner; Genfa Lu, Nanjing the private sector, nongovernmental organizations, and University; and the Tianjing Environmental Protection civil society so as not to misstate what may be local lim- Bureau, China. itations on the realm of the possible. Nonetheless, as an Completion date:June 1999. effort in applied economic research, the project will question these limitations. The first phase of the research will develop a general Nature Tourism's Contribution to Economic sectoral multimarket analytic framework that clarifies Development and Conservation Finance the principal direct and indirect links between the economic, environmental, social, and policy variables Ref. no. 682-54 involved in nature tourism. The model will attempt to Through overuse or inappropriate use, nature tourism respond to three key issues: the sustainability of resource can lead to degradation or destruction of the environ- use, the relative benefits from and interactions among mental assets on which it is based and thereby go through multiple users, and the roles of the public and private a boom-and-bust cycle. But if managed wisely, it offers sectors in nature tourism activities. The goal is to develop potentially valuable opportunities for generating revenues a framework that will allow policy analysts to assess these not only for development but also for conservation. issues in different circumstances and different regions. This study is the first phase of research that will inves- The draft framework will be applied in a "back-of- tigate the contribution that nature tourism can make both the-envelope" manner to cases in southern Africa (such

55 Environmentally Sustainable Development as the Hluhluwe Umfolozi Park). This application will competing methods. And it will explore the potential attempt to illustrate the utility of the model, particularly for extending these techniques from within-country appli- in shedding light on the relative importance of different cations to cross-country comparisons. policy variables in a particular ecological and economic Responsibility: Environmentally and Socially Sus- context. It is expected to demonstrate how parameters tainable Development Vice Presidency, Agricultural for the model relationships will be estimated and what Research and Extension Group-Uma Lele (ulele data can reliably be found for this purpose. The frame- @worldbank.org) and Derek Byerlee. With Robert work and initial application (along with other "building Emerson, University of Florida; Greg Traxler, Auburn blocks" produced in the first phase) will be used in design- University; Wallace Huffman, Iowa State University; Scott ing the second phase of the research. Rozelle, University of Califomia at Davis; and Geraldo Responsibility: Environment Department, Environ- da Silva e Souza and Antonio Flavio Dias Avila, mental Economics and Indicators Unit-Ernst Lutz EMBRAPA. ([email protected]) and John Dixon. With Bruce Completiondate: June 1999. Aylward; Geert Creemers, Kwa-Zulu-Natal Nature Conservation Service, South Africa; Kreg Lindberg, Charles Stuart University, Australia; Kwa-Zulu-Natal Small Plants, Pollution, and Poverty Nature Conservation Service; and John Wagner, State University of New York. Ref. no. 682-66 Completiondate: December 1998. Small enterprises are controversial in the literature on environment and development. Some economists have touted small plants as the agents of choice for sustain- Measuring the Efficiency and Productivity able development. Others have argued that they are pol- of National Agricultural Research Systems: lution-intensive, costly to regulate, and, in the aggregate, A Quantitative Approach far more environmentally harmful than large enterprises. While the second view is widely shared, it is based almost Ref no. 682-60 entirely on anecdotal evidence. Most agricultural research systems have an ongoing More empirical research is clearly justified, because process of evaluation toreview research programs, almost the issue of small enterprises is critical for the design always relying heavily on qualitative information. While and implementation of pollution control policies in devel- such evaluations can yield useful recommendations for oping countries. If small enterprises are generally clean, improving efficiency in the programs reviewed, they regulators can focus on large, polluting facilities. Even if are poorly suited for comparing the performance of pro- small enterprises are pollution-intensive, they may be grams and for allocating resources. What is needed are dominant only in poor regions where total industrial pro- systematic quantitative indicators that would provide duction, emissions, and pollution damage are small. In benchmarks for comparing the efficiency and effective- this case liberalization and rapid growth will solve much ness of research programs across an organization, among of the problem. But if small enterprises are highly com- organizations, and even among countries. petitive, liberalization may result in serious environ- This need has become more pressing as new research mental damage from these enterprises. Pollution issues have come to the fore, new types of institutions management strategies will have to focus on state enter- have entered the field, and new opportunities for inter- prises if they are dirty, highly competitive under condi- national collaboration have emerged. And research insti- tions of rapid development, and, in the aggregate, a major tutions everywhere, facing increasing budgetary and source of pollution damage. competitive pressures and growing demand for account- This research project uses new data from Latin America ability in the use of resources, need a method for allo- to improve the understanding of the relationships cating resources to improve efficiency and impact. between economic development, small-scale industry, Brazil's national agricultural research institution, Em- and pollution. It focuses on Brazil, where a collabora- presa Brasileira de Pesquisa Agropecuaria (EMBRAPA), tive relationship with the Instituto Brasileiro de Geografia has developed and tested a method for estimating the tech- e Estatistica (Brazil's census bureau) provides access to nical efficiency of research organizations, with quantita- a large volume of relevant information. The research tive management indicators for defining and monitoring addresses four questions: research production goals. This study, in collaboration * Are small plants generally more pollution-intensive with experts from EMBRAPA and other organizations, than large facilities in developing countries? If so, by what will review the experience with the method and assess margin?

56 Environmentally SustainableDevelopment

* What is the effect of economic development on the the performance of the charge system. It will also pro- small enterprise share of industrial activity? vide a prototype for future evaluations by Colombian * What is the effect of economic development on small, policy researchers. enterprises in pollution-intensive sectors? Responsibility:Development Research Group, Infra- * What happens to pollution damage from small enter- structure and Environment-David Wheeler (dwheeler prises as development proceeds? How does it compare @worldbank.org), Susmita Dasgupta, Benoit Laplante, with pollution damage from large enterprises? and David Shaman. With Thomas Black Arbelaez, Responsibility: Development Research Group, Infra- Colombian Ministry of the Environment, Office of structure and Environment-Susmita Dasgupta (sdasgupta Economic Analysis and Policy. @worldbank.org), David Wheeler, and David Shaman. Completiondate: June 1999. With Andrew Sunil Rajkumar. Completiondate: June 1999. Air Quality Measurement in Asia Using Passive Samplers Colombia's Pollution Charge System: Implementation, Impact, and Implications This research is the first phase of a larger research project that will set up an air quality measurement program Ref. no. 682-69 in Asia using passive samplers. In this first phase diffu- Economists have long argued that pollution charges are sive samplers were prepared and several sampling tech- superior to command-and-control regulation of indus- niques were tested. In the next phase about 34 stations trial emissions, and the World Bank has advocated the in 12 countries will measure ambient sulfur dioxide as use of pollution charges in a variety of settings. But pol- well as ammonia and ozone levels. In about 10 cities the lution charges have seldom been implemented outside precursors to ozone will also be measured. OECD countries and Eastern Europe. Furthermore, exist- Responsibility:South Asia Region, Environment Sector ing systems generally use charges to finance regulatory Unit-Jitendra Shah ([email protected]); and East administration, not to provide significant incentives for Asia and Pacific Region, Environment Sector Unit, Tanvi pollution reduction. Nagpal. With Martin Ferm, Swedish Environment Colombia's new pollution charge system provides a Research Institute. The Swedish Environment Trust Fund strong and promising contrast to earlier efforts. It is (BITS) contributed funding for the research. national in scope, focused on significant incentives for Completion date: March 1998. pollution control, and designed according to textbook principles of environmental economics. Moreover, it reflects the Pigovian design by eliminating emissions Integrated Acidification Study in China standards and charging for all units of pollution. This makes the Colombian program a unique experiment, and This project addressed several questions relating to acid sets the stage for a policy research program with strong rain in China: Is ecological damage occurring as a result international interest. of acidification? What is the extent of the damage? Which This research will assess the charge program, draw- ecosystems are most affected? The analysis was carried ing on several new data sources: census bureau records out by a team of Norwegian scientists who visited a num- for individual plants, a special census survey of plant- ber of sites in China that were either affected or expected level pollution abatement expenditures, databases at to be harmed by acidification. The team measured sur- the Colombian Ministry of the Environment, and plant- face water pH and net photosynthesis (mainly of Masson level records of emissions and pollution charges main- pine and Chinese fir) and analyzed needle, soil, and water tained by regional authorities. samples. Supplementary information was obtained from The research will address the following questions: Chinese scientists and other collaborative projects involv- What factors determine regional differences in ambient ing Chinese and Norwegian scientists. quality goals and discharge reduction targets? What deter- While China has extensive plans for reducing sulfur mines regional differences in implementation of the charge dioxide (SO2 ) and particulate emissions, emissions of program? And how do charges affect polluters' behav- nitrogen oxides (NO,) and the photochemical forma- ior? The research will use case studies and econometric tion of ozone (03) have so far received little attention. analysis based on probit and cross-section regression. Although emissions of NOx are still relatively low, they The study will provide immediate feedback to the are expected to increase dramatically with the increase Ministry of the Environment and regional councils on in motor vehicles and the construction of new coal-fired

57 Environmentally Sustainable Development power projects. The study's measures of net photosyn- The study identified the factors that need to be taken thesis confirm that coniferous trees in the worst affected into account in evaluating proposed joint implementa- areas are already being damaged. But it is not yet possi- tion projects and suggested some rules of thumb for such ble to assess whether the damage is a result of the direct evaluations. effects of SO2 and 03. Responsibility:Development Research Group, Trade- The study team collaborated with central and munic- Will Martin ([email protected]). ipal government officials and university professors and Completion date:April 1998. is developing further research proposals with Chinese Report: counterparts to carry forward the work on the impact of Martin, Will.1998. "Achieving Carbon EmissionReductions through acid rain in China. Joint Implementation." Paper presented at the World Bank con- Responsibility:South Asia Region, Environment Sector ferenceTrade, GlobalPolicy, and the Environment, Washington, Unit-Jitendra Shah ([email protected]); and East DC, April 21-22. Asia and Pacific Region, Environment Sector Unit-Tanvi Nagpal. With Espen Lydersen, Norwegian Institute for Water Research; Hans Martin Seip, University of Oslo; Agricultural Price Reform Experience Jan Mulder, Norwegian Forest Research Institute; Ame Semb, Norwegian Institute for Air Research; Ivar Pors Drawing on the experience of the direct income support Muniz, Norwegian Institute for Nature Research; Xiong programs recently introduced in Mexico, the United Jiling, Guizhou Institute of Environmental Studies; Zhao States, and the European Union, this study examined Dawei, Chongqing Institute of Environmental Science problems that may arise when the agricultural sector of and Monitoring; Wen Dazhi and Yu Meng De, South a developing economy moves from price-based subsi- China Institute of Botany; and G. J. Lee, Institute of Social dization to less distorted income support. It concludes Science, China. The Norwegian Environment Consultant that while such programs are a step in the right direc- Trust Fund contributed funding for the research. tion, they have many shortcomings. Moreover, devel- Completion date:March 1998. oping countries may lack the necessary supporting arrangements needed to make the programs effective. To make the programs more effective, the study sug- International Trade in Carbon gests that there should be no restrictions regarding the Emission Entitlements use of land, there should be an explicit duration for the program, and the fiscal costs should be contained by link- Efficient reductions in emissions of greenhouse gases ing the direct support to world prices. require some form of international trade mechanism to The findings have been presented at two Bank allow the reductions to take place at the lowest possible seminars. cost. Under the Kyoto Protocol industrial countries can Responsibility: Development Research Group, Rural undertake some of these reductions through joint imple- Development-John Baffes([email protected]); and mentation projects under a Clean Development Mecha- Operations Evaluation Department-Jacob Meerman. nism, which reduce the overall cost of emission reductions Completion date:June 1998. by creating new, tradable carbon credits. The World Bank Reports: plans to be directly involved in this process through the Baffes,John, and Jacob Meerman. 1997. "From Prices to Incomes: Prototype Carbon Fund. This project focused on evalu- AgriculturalSubsidizationwithoutProtection?" PolicyResearch ating the effectiveness of joint implementation proce- WorkingPaper 1776.World Bank,DevelopmentResearch Group, dures as a means of reducing emissions of greenhouse Washington, DC. gases. .1998."Agricultural Subsidizationwithout Protection."World Evaluating the reductions under joint implementation Bank ResearchObserver 13(2):191-211. projects involves complex issues on both the demand and the supply side. On the demand side, improvements in the efficiency of use of greenhouse gas-generating prod- Assessing the Sustainability of the Green ucts clearly provide direct benefits, but they also tend to Revolution in Bangladesh reduce the effective price of these products and may therefore stimulate their use. If the supply of greenhouse The driving force behind the gains in food supply over gas-generating products is not perfectly responsive to the past two to three decades has been the spread of green price, reductions in demand may reduce their price and revolution technology-the replacement of traditional stimulate demand. or local varieties with high-yielding modern varieties.

58 Environmentally SustainableDevelopment

But this source of growth seems to have reached its lim- The simulations underscore the need to focus its. In most East Asian countries, for example, almost all attention on raising yields. They also show that the area planted with rice is under cultivation with mod- assessing self-sufficiency in isolation from other ern varieties. welfare or performance indicators can be misleading. Understanding and assessing the potential sources For example, a slowdown in GDP growth or a more of future growth thus requires a detailed examination of unequal distribution of income would be likely to pro- how growth has evolved. How much of past growth is duce a higher surplus (or lower deficit) because of the a result of conversion from local to modern high-yield- effect on demand. A country could thus appear to be ing varieties and how much a result of increasing yields? doing well in terms of food self-sufficiency while its eco- This research found that in Bangladesh during 1973-94 nomic performance was deteriorating and poverty was almost all the growth in rice production came from increasing. increases in average yields, due almost entirely to the The simulations also help to explain why studies have rapid conversion from local to modern varieties. Yield often reached such different conclusions despite the use improvements in local varieties contributed a little over of the same historical evidence. Holding all other para- a fourth to the growth in rice production, while conver- meters constant while varying the period over which sion of acreage from local to modern varieties accounted yield growth rates are estimated gives dramatically dif- for the rest. ferent outcomes-ranging from a Malthusian outcome The country's severe land constraint makes it highly for Bangladesh to a "no problem" outcome. unlikely that area expansion will be a source of future Responsibility: Development Research Group, Rural growth in rice production. With only about half the land Development-John Baffes ([email protected]);and allocated to rice under cultivation with modern varieties, Operations Evaluation Department, Sector and Thematic conversion from local to modern varieties is likely to con- Evaluation Division-Madhur Gautam. tinue to contribute to growth. But conversion will slow Completiondate: June 1998. as expanding irrigation becomes progressively more expensive. The likely contribution of increasing yields of modern Risks, Lessons Learned, and Secondary varieties of rice is more complex. On average, their yields Markets for Greenhouse Gas Reduction did not increase in 1973-94. But in the mid-1980s the government implemented reforms that eventually led to In Kyoto governments proposed limiting greenhouse gas a rapid expansion in irrigated land. To account for the emissions by international treaty. Although subject to fur- effect of policy reforms on yields, the study recalculated ther debate in Buenos Aires, the Kyoto Protocol allows the growth in yields, allowing for a structural break in for potential trading in emission reduction units-also 1987.Yields of local varieties showed no change, but yields known as carbon credits-as a mechanism for reducing of modern varieties showed a 0.41 percent decline dur- the costs of the limits on emissions. The protocol also pro- ing 1973-87 and a 1.42 percent increase during 1987-94. vides for a Clean Development Mechanism that would To assess the domestic availability of rice in the next allow new carbon credits to be created through jointimple- 10-20 years, the study considered four scenarios. Three mentation projects. Under the protocol, joint implemen- are based on historical evidence for modern variety yields: tation could take place in countries that do not themselves the 0.41 percent average annual decline in 1973-87, the face emission limits. stagnation in 1973-94, and the 1.42percent average annual This research examined the incentives and risk of trad- increase in 1987-94. In the fourth scenario yields are ing in emission credits created under the protocol from assumed to increase 2 percent a year, not unrealistic since an investor's point of view. Much of the analysis was nec- Bangladesh achieved a 2 percent growth in rice yield in essarily speculative, since there are no significant mar- 1987-91. The study also considered future demand and kets for carbon credits nor infrastructure for trading population growth. credits, either domestically or internationally. But some Not surprisingly, the negative and zero yield growth key elements likely in future systems can be inferred from scenarios result in deficits under all assumptions. When the Kyoto Protocol, earlier country proposals, and a few yields grow at 1.42 percent, a surplus is generated under pilot projects. In addition, there is a growing literature the assumption of constant demand, but a deficit results on experiences related to emission trading. if demand increases. Only with yields growing at 2 per- The research speculated about how joint implemen- cent is a surplus generated under both demand scenar- tation and an international market for carbon credits ios. Achieving a balance by 2014 requires at least a 1.48 might work and analyzed different components of risk percent increase in yields. along the marketing chain. It drew risk management

59 Environmentally Sustainable Development lessons from other markets, including markets for trad- fered in effectiveness, what institutional arrangements able emission permits and tradable quotas, and exam- have evolved, and how did they affect different popula- ined the risk mitigating features of the World Bank's tion groups? proposed Carbon Fund. It also surveyed potential mar- * How did policies aimed at liberalizing rural land ket participants about their perceptions of future mar- and credit markets affect land sales and rental transac- kets for carbon credits and associated risks. tions and the productive efficiency and equity of differ- The study's findings suggest that domestic use regimes ent groups of producers? will differ among countries, so that potential users of car- * What are the implications for government policies bon credits will face differing incentives. Consequently, and programs aimed at improving the functioning of the pricing today of investments leading to future car- rural factor markets? If liberalizing land markets turns bon offsets will be problematic until national policies in out not to be enough to promote equity- and efficiency- industrial countries become better defined and forward enhancing transactions, what complementary policies markets evolve. Covariant risks associated with baselin- should be recommended? ing, certification, and host-country institutions will be The research relies on panel data econometric meth- important. Consequently, issues relating to policies on ods to analyze the land market participation decisions trade in offsets and to government oversight and insti- of rural households that are quite heterogeneous in terms tutional capacity need to be resolved in developing and of wealth, education, and access to credit, technology, transition economies. and input and output markets. The analysis is based on The findings were discussed at an Environment a panel data set of about 1,500 households, constructed Department seminar in April 1998 and at a Carbon Fund from the results of household surveys conducted in the Consultative Group meeting in Porvoo, Finland, in June ejido sector of Mexico in 1990,1994, and 1997. The panel 1998. The results of the research will be incorporated in structure of the data makes it possible to explain changes the Bank's pricing strategy for pipeline projects targeted in households' land accumulation decisions and income for Carbon Fund investments. generation strategies as a function of their relative wealth Responsibility: Development Research Group, Rural before reform. Development-Donald Larson ([email protected]). This research is expected to add to the understand- With Paul Parks. ing of how macroeconomic and sectoral policy reforms Completion date:June 1998. have affected the Mexican smallholder sector. And it will help identify operational policies and investment strategies that could be used to promote the growth of the rural Impact of Policy Reform economy and to alleviate poverty. on Farm Performance Responsibility: Development Research Group, Rural Development-Pedro Olinto ([email protected]). During the past 10 years Latin America has undergone Completiondate: August 1998. a major economic transformation. In most countries in the region sweeping reforms have led to the emergence of an economic systembased on market orientation, open- Technology Diffusion: The Effectiveness ness, and competition. This research project is investi- of Agricultural Extension gating how these recent market-oriented reforms have affected agricultural production and the lives of the rural This study aims to identify generic difficulties encoun- poor in the Mexican ejido (smallholder) sector. tered by public extension systems worldwide and to ana- The study focuses on the effects of recent property lyze their root causes in order to assess solutions that rights reforms-reforms that affect rural land use and have emerged over recent decades. A review of the lit- ownership rights-on the functioning of rural land and erature and of World Bank experience suggests that incen- credit markets in Mexico. The research addresses the tive and information failures underlie much of the mixed following questions: performance and spotty sustainability of public exten- * How do common credit and labor market imper- sion systems. Using an induced institutional change fections affect producers' demand for cultivated and framework, the study examines the designs of exten- owned land? sion activities and modes of operations. The analysis high- * In the presence of these imperfections, how effec- lights the effectiveness (or lack thereof) with which the tive have land sales and rental markets been in efficiently institutional innovations address the generic problems. allocating land across households that differ in various The findings will be presented at an international con- dimensions? How have land sales and rental markets difference at the University of California.

60 Environmentally Sustainable Development

Responsibility: Development Research Group, Rural change in land cover on both biodiversity and poverty Development-Gershon Feder (gfederCworldbank.org); depends strongly on where the change takes place. and Rural Development Department-Willem Zijp. With Accordingly, the research has pioneered in the statistical Anthony Willet. analysis of geographic information systems data. These Completion date:August 1998. include remote sensing data on land cover and topogra- phy, data from soil surveys, and geo-referenced socioeconomic data from censuses and household surveys. Estimating the Extent of Corrosion Damage Study areas include Belize, Brazil, Chad, Indonesia, and Caused by Acid Rain in China the tropical belt of Africa. Research results for Belize,Brazil, Mexico,and Central This study is estimating the extent of corrosion damage Africa emphasize the key impact of road networks, but caused by acid rain in China and its cost to that country. show that these are highly sensitive to soil characteris- Data have been gathered on materials and stock at risk tics and market proximity. This suggests that well- of damage by acid rain. Available dose response equa- informed regional planning can enhance rural deve- tions have been reconciled to Chinese conditions. And lopment while preserving the environment. Analysis of the cost of materials replacement and repair are being village-level data for Indonesia suggests that high- estimated for different acid rain scenarios. value tree crop cultivation, rather than subsistence- The analysis draws on secondary data on population oriented food crop production, plays a major part in distribution in polluted areas; a completed analysis of smallholder-related forest conversion in that country. stock at risk in the Guangzhou, Chonging, and Guiyiang A model of fuelwood extraction and woodland degra- regions; corrosion data from the Central Iron and Steel dation in the Sahel provides a generally applicable exam- Research Institute in Beijing; and dose response equa- ple of a methodology for representing the interaction of tions available for Europe. markets and spatially explicit land use change. Empirical Responsibility: East Asia and Pacific Region, Environ- applications show that woodland degradation rates are ment Sector Unit-Herman Cesar (hcesar@worldbank. relatively insensitive to price changes in modern fuels. org) and Tanvi Nagpal. With Vladimir Kucera and Johan Responsibility: Development Research Group, Tidblad, Swedish Corrosion Institute. The Swedish Infrastructure and Environment-Kenneth M. Chomitz Environment Trust Fund (BITS)is contributing funding ([email protected]), Klaus Deininger, David Gray, for the research. Charles Griffiths, Nlandu Mamingi, and Bart Minten. Completion date:November 1998. With Vivi Alatas, Princeton University; Upik Rosalina Wasrin, SEAMEO/Biotrop; and Xiaowen Huang. The International Center for Research in Agroforestry, Bogor, Causes and Consequences Indonesia, is participating in the research. The United of Tropical Deforestation Kingdom and Swedish Trust Funds for the Social and Environmental Consequences of Growth-Oriented Although tropical deforestation is a major global envi- Policies are contributing funding for the research. ronmental concern, its causes remain poorly understood. Completion date: December 1998. In connection with a larger project (Social and Environ- Reports: mental Consequencesof Growth-Oriented Policies) look- Chomitz, Kenneth M., and David A. Gray. 1996."Roads, Land Use, ing at links among growth,poverty, and the environment, and Deforestation: A Spatial Model Applied to Belize." World this study examines the causes, correlates, and conse- Bank EconomicReview 10(3):487-512. quences of forest conversion in the tropics. A particular Chomitz, Kenneth M., and Charles Griffiths. 1996."Deforestation, focus is the economicand environmental effectsof road ShiftingCultivation, and Tree Crops in Indonesia: Nationwide building, since roads are thought to help the rural poor Patterns of Smallholder Agriculture at the Forest Frontier." but also to lead to deforestation.The research also seeks Poverty, Environment, and Growth Working Paper 4. World to elucidate the nature ofsmallholder activitiesat the for- Bank,Policy Research Department, Washington, DC. est margin and the degree to which these activities are . 1997."An EconomicAnalysis of Woodfuel Management in affected by macroeconomicand sectoralpolicies. the Sahel:The Case of Chad." Policy Research Working Paper The researchstrategy emphasizes the spatial analysis 1788.World Bank, Development Research Group, Washington, of deforestation patterns, for two reasons. Important for DC. analytical purposes is that spatial variation in the causes Chomitz, Kenneth M., and Kanta Kumari. 1998. "The Domestic of deforestation makes it possible to disentangle these Benefitsof Tropical Forests: A Critical Review." World Bank causes. And important for policy is that the impact of ResearchObserver 13(1):13-35.

61 Environmentally Sustainable Development

Chomitz, Kenneth M., Charles Griffiths, and Jyotsna Puri. 1998. It is hypothesized that in a situation with a weak state "Fuel Prices, Woodlands, and Woodfuel Markets in the Sahel: and a weak civil society the Bank has no incentives or An Integrated Economic-EcologicalModel." Paper presented at comparative advantages in being involved in or orga- the conferenceTrade, Global Policy, and the Environment, World nizing comanagement arrangements, whereas in a situ- Bank, Washington, DC, April. ation with a strong state and a strong civil society the Deininger, Klaus, and Bart Minten. 1996. "Poverty, Policies, and opposite would hold. Furthermore, comanagement mod- Deforestation: The Case of Mexico." Poverty, Environment, els are not static; they are likely to change over the life- and Growth Working Paper 5. World Bank, Policy Research time of a project, ideally toward decreasing roles and Department, Washington, DC. responsibilities for the Bank. Mamingi, Nlandu, Kenneth M. Chomitz, David A. Gray, and Eric The data for the research will come from Bank pro- Lambin. 1996. "Spatial Patterns of Deforestation in Cameroon jects, multilateral development banks, and nongovern- and Zaire." Poverty, Environment, and Growth Working Paper mental organizations. A particularly rich source of data 8. World Bank, Policy Research Department, Washington, DC. from nongovernmental organizations is the 300-400 Pfaff, Alexander S.P. 1997. "What Drives Deforestation in the community-based natural resource management case Brazilian Amazon? Evidence from Satellite and Socioeconomic studies prepared in connection with the Economic Data." PolicyResearch Working Paper 1722.World Bank,Policy Development Institute workshop on the subject, held in Research Department, Washington, DC. Washington, DC, in May 1998. The findings of the research will be disseminated by the Bank's Common Property Resource Management Common Property Resource Management Network (CPRNet) through the CPRNet Seminar Series Issues in World Bank Projects and through regional and country-level activities. For example, a local chapter of CPRNet has been set up in The first phase of this project, completed in 1997, Dhaka, Bangladesh, to serve the CPRNet members in that addressed several issues relating to natural resource man- country, several of which are involved with the Bank's agement. It focused on traditional property rights regimes, work in the fisheries sector. including the issues that arise when they coexist with The preliminary findings should be helpful to Bank oper- other property rights regimes. ational staff in addressing natural resource management This second phase of the project focuses on institu- issues, both in operational work and in natural resource tional aspects of common property resource management management and institutional reform training. In partic- issues in Bank projects, within the context of commu- ular the results are expected to contribute to the Bangladesh nity-based natural resource management. It addresses the Fourth Fisheries Project, now under preparation. emerging issue of comanagement by the stakeholders, Responsibility: Economic Development Institute, including the Bank, involved in operational and policy- Environment and Natural Resources Division-Dennis related work. For the purposes of this research, coman- Mahar ([email protected]), Christopher D. agement is understood as the sharing of power and Gerrard, and Lars T. Soeftestad. The Dutch Consultant responsibility for resource use among government and Trust Fund is contributing funding for the research. local resource users. The research is aimed at identifying Completiondate: December 1998. and analyzing a set of models for comanagement, both Reports: with and without Bank participation, and the local and Soeftestad,Lars T. 1998."From Management of Fish to Management national contexts in which these models can operate. of Fisheries:Emerging Experiences with Comanagement in the The research will explore a general set of hypotheses World Bank." Paper presented at the annual conference of the relating to the set of constraints and incentives under International Association for the Study of Common Property, which World Bank-and multilateral development banks Vancouver,Canada, June 10-14. more generally-operate in pursuing comanagement - . 1998."On Institutional Reform in the Fisheries Sector in models in operations. Comanagement is likely to be highly Bangladesh." Paper presented at the World Bank Rural Week, dependent on local circumstances and national-level fac- Washington,DC, March25-27. tors, as well as on the interplay between the two. The interplay between the position of the state relative to the positionI of civil society will largely determine the form Economic Instruments for Greenhouse and content of the Bank's involvement in comanagement Gas Reduction arrangements. Such comanagement models are likely to run the gamut from close collaboration with local and The cost of reducing global greenhouse gas emissions national stakeholders to a fairly limited role for the Bank. can be greatly lowered by involving developing coun-

62 Environmentally Sustainable Development tries in greenhouse gas reduction. That is because the cost and the Caribbean, focusing-on Barbados, Bolivia, Brazil, of reducing (or absorbing) emissions is significantly lower Chile, Colombia, Ecuador, Jamaica, Mexico, Peru, Trinidad in such countries as China and India than it is in such and Tobago, and Venezuela. Applications investigated economies as Japan, the United States, and the European include noise, energy, agriculture, air quality, water qual- Union. The trading of rights to emit greenhouse gases ity, water supply and extraction, and solid and liquid has been proposed as a method of compensating devel- waste management (including toxic substances). oping countries for their efforts while reducing the cost The study defines a market-based instrument as an of meeting emission targets in industrial countries. Two instrument that reduces externalities by aligning pri- forms of trading have been suggested: at the project level vate costs with social costs. The strength of a market- (joint implementation) and through permit markets. based instrument depends on the degree of flexibility The purpose of this research is to estimate the size of that a polluter has in achieving an environmental tar- potential cost savings from the trading of emission rights get-that is, the degree to which social (or state) deci- and the distribution of these savings between develop- sions are transferred to the private (individual) level. ing and industrial countries. A second objective is to mea- A weak market-based instrument uses regulations, sure the macroeconomic impact on developing countries while a strong one uses market forces to decentralize of global greenhouse gas reduction schemes such as the decisionmaking. Kyoto Protocol. Even if developing countries do not par- In theory market-based instruments are economically ticipate in such schemes, they will be affected through efficient and environmentally effective. They have low changes in the demand for their exports and in the world private compliance costs and can provide government price of oil resulting from greenhouse gas reductions in revenue. But in practice the costs of administering, mon- industrial countries. The research will compare the costs itoring, and enforcing market-based instruments maybe of meeting the Kyoto Protocol targets under a variety of as high as the costs for traditional command-and-control trading schemes and examine the impact of these schemes regulation. on the incomes of developing countries. The study's examination of experience with market- Because addressing these issues requires computable based instruments in Latin America and the Caribbean general equilibrium models with adequate detail in mod- has led to several conclusions. First, market-based instru- eling the energy sectors of all major emitters, the project ments can be an important means for introducing added has commissioned the Massachusetts Institute of efficiency to existing command-and-control mechanisms. Technology's Center for Energy and Environmental Policy But their scope must match the institutional capacity to Research to examine the issues using its Emissions implement them. Market-based approaches that intro- Prediction and Policy Analysis (EPPA) model. duce gradual and flexible reforms are therefore more This work was preceded by surveys of the literature likely to be consistentwith ongoing institutional changes. on economic instruments for greenhouse gas reduction Second, while the revenue collection task of market-based and a survey of computable general equilibrium mod- instruments is often highlighted, there is a strong need els developed to examine the cost of greenhouse gas to channel the revenues to local authorities to assist in reduction. building institutional capacity. Finally, international donor Responsibility: Development Research Group, Infra- agencies are prone to recommending OECD solutions structure and Environment-Maureen L. Cropper with little regard to institutional issues. While most of ([email protected]), Kenneth Chomitz, and the information flow on market-based instruments has Zmarak Shalizi. With Lawrence Goulder, Stanford been "north-south," increased information sharing in a University; Raymond Kopp, Resources for the Future; "south-south" dialogue would benefit all parties. Denny Ellerman and Henry Jacoby, Center for Energy The Economic Development Institute sponsored two and Environmental Policy Research, Massachusetts seminars to discuss the research issues, one in July 1997 Institute of Technology. in Argentina, attended by representatives from 8 Latin Completiondate: December 1998. American and Caribbean countries, and the other in March 1997 in Trinidad and Tobago, attended by representatives from 15 countries of the English-speaking Market-Based Instruments for Environmental Caribbean. The objectives were to promote the use Policymaking in Latin America and the of cost-effective pollution control mechanisms and Caribbean: Lessons from 11 Countries coordinate regulatory policy and reforms related to private sector development and environmental manage- This study investigates the use of market-based instrument, assess the impact of the use of economic instruments ments for environmental management in Latin America in Latin America, examine institutional constraints in

63 Environmentally Sustainable Development implementing such instruments and determine how to a Contextof Institutional Fragility: The Case of Latin America overcome them, and discuss examples of best practice and CaribbeanEnvironmental Management." from other countries and regions. .1996."Economic Instnuments for Environmental Management Responsibility:Latin America and the Caribbean Region, in LatinAmerica and the Caribbean:Brazil Background Paper." Environmentallyand SociallySustainable Development Tolmos,R. 1995. "Economic Instruments for Environmental Sector Unit-Richard M. Huber ([email protected]), Managementin LatinAmerica and theCaribbean: Peru Country John Redwood, and Joachim von Amsberg, and Poverty BackgroundPaper." Reduction and Economic Management Sector Unit- Dennis Mahar and Norman Hicks; Economic Development Institute, Environment and Natural Constraints and Opportunities for Resources Division-Adriana Bianchi and Sergio Agricultural Growth in Sub-Saharan Africa Margulis; and Environment Department-Magdolna Lovei and Kseniya Lvovsky. With H. Jack Ruitenbeek, H. While significant progress has been made in reducing the J. Ruitenbeek Resource Consulting Limited; and Ronaldo excessive taxation (both explicit and implicit) of agri- Seroa da Motta, Research Institute of Applied Economics. culture in Sub-Saharan Africa, these and other policybar- The Netherlands Consultant TrustFund and the Canadian riers continue to constrain agricultural growth. The Consultant Trust Fund are contributing funding for the objective of this study is to take stock of current reforms research. relative to a policy frontier and to develop a stronger con- Completion date: December 1998. sensus on an appropriate policy stance to get agricul- Reports: ture moving, accelerating policy reforms in Africa and Belausteguigoitia,J.C., H. Contreras, and L. Guadarrama. 1995. leading to a perceptible rise in average agricultural growth "Mexico: La Gesti6n Ambiental y el Uso de Instrumentos rates and farm incomes. Econ6micos." The study assesses the constraints inhibiting com- Escobar,J.,and J.A. Mufnoz. 1996. "Marco Regulatorio eInstrumentos parative advantage and allocative efficiency in agricul- de Mercadode la PoliticaAmbiental en Bolivia." tural production. An array of price ratios, policy scores, Huber, Richard M. 1995."Ecuador: Economic Instruments for and growth performance indexes are calculated and used EnvironmentalManagement in the Sectorsof Water,Air, and to construct a price policy diamond. Macroeconomic poli- IndustrialPollution and SolidWaste Disposal." World Bank, cies (monetary, exchange rate, fiscal) and agricultural sec- LatinAmerica and the CaribbeanRegion, Environmentally and tor policies (relating to exports, food crops, and fertilizer) SociallySustainable Development Sector Unit, Washington, DC. are used for the evaluation. Orlando,M.B. 1995. "Economic Instruments for Environmental The first phase of the study uses data on some 20 Managementin LatinAmerica and the Caribbean:Venezuela African countries from the International Monetary Fund, Country Background Paper." World Bank, and Food and Agriculture Organization. Persaud, B., M. Wright, and W. Benfield.1995. "Market-Based Preliminary results suggest that while progress has been Instrumentsfor Urban EnvironmentalManagement: A Case made, several significant policy constraints remain. While Study of Jamaica."University of the WestIndies Centre for macroeconomic policies have improved significantly in Environmentand Development,Kingston, Jamaica. the 1990s, overvalued exchange rates still exist in sev- Ramirez,J., and R. Cubillos.1995. "Economic Instruments for eral countries. Restrictions in the marketing and pricing EnvironmentalManagement in LatinAmerica and theCaribbean: of exports for some agricultural commodities continue ColombiaCountry Background Paper." to inhibit the exchange rate pass-through to producer Rios,M. 1995. "Economic Instruments for Environmental Manage- prices. Comparisons with relevant worldwide bench- ment in Latin America and the Caribbean:Chile Country marks corroborate these results. BackgroundPaper." The second phase of the study will examine several of Ruitenbeek,H. Jack,and D. Sawyer.1995. "Special Project Study the more pressing policy issues that continue to constrain on InstitutionalStructure and EconomicInstruments for Urban farm incomes. The final part of the study will include draw- EnvironmentalManagement in LatinAmericaand the Caribbean: ing up the unfinished agenda for policy reform. Barbadoswith SelectedComparisons to Jamaica,Trinidad and The study will produce a synthesis report in various Tobago,and LatinAmerica and the Caribbean." formats, including brief policy notes. The work will serve Ruitenbeek,H. Jack,Ronaldo Ser6a da Motta,and RichardM. Huber. two audiences: first, World Bank staff, to update knowl- 1995."Special Project Study on InstitutionalStructure and edge; and second, African policymakers and academics, EconomicInstruments for Urban EnvironmentalManagement to stimulate debate and reflection. in LatinAmerica and the Caribbean:Phase I Background Paper." Responsibility:Africa Region Technical Families, Macro- Ser6a da Motta, Ronaldo. 1996."Applying Economic Incentives in economics 4-Charles Humphreys (chumphreys

64 Environmentally Sustainable Development

@worldbank.org) and Tatsushi Adachi, and Rural such as the "smart" market, before they are actually Development 1-Robert Townsend. implemented. For example, it allows a smart water mar- Completion date:June 1999. ket to be developed and tested in the laboratory under simulated drought conditions during years of sufficient water. If the results are positive, such a market could be Ecosystem Preservation implemented during years of water scarcity. The study is developing and testing a smart water As the demand for agricultural land increases and nat- market framework in the California context using a sim- ural habitats become scarcer, the potential for land use plified approach. The approach is based on several com- conflicts between development and conservation grows. ponents, including a water quantity and quality Command-and-control tools for conservation-such as production function model of major agricultural crops, forestry regulation and agroecological zoning-are estimates of a demand function for urban centers, envi- increasingly seen as ineffective, because enforcement ronmental water quantity and quality requirements, and costs are high and incentives for compliance low. There the costs of conveyance between water supply and water is growing interest in the use of economic instruments, consumption centers. Laboratory experiments have been such as the sale of environmental services, as a means of carried out to study the efficiency and price performance efficiently achieving conservation goals. characteristics of a uniform price, double-auction mech- This research program examines the economics of for- anism for the simultaneous allocation of water and trans- est and land use regulation, with particular attention to portation capacity rights among buyers, transporters, the design of economic instruments for conservation. and sellers. The 13 experiments were divided into two Using both case studies and bioeconomic simulation treatments: Southem California conveyance links con- methods, the research will examine the tradeoffs and trolled by a single subject (six experiments, yielding 134 complementarities among biodiversity, carbon seques- market observations), and cotenant rights to transporta- tration, and private returns to landholding introduced tion capacity (seven experiments, yielding 136 market by alternative regimes of land use and forestry regula- observations). A computer algorithm maximizes total tion and taxation. It will examine innovations in economic gains from exchange based on the submitted bids and instruments, such as the nascent markets for carbon offers, and determines allocations and nondiscrimina- sequestration and other environmental services, and tory prices at all nodes. The research draws on data assess the performance of existing command-and- from the California Department of Water Resources, control systems. And it will examine issues in the design previous studies on water in California, and surveys and and implementation of novel economic instruments, interviews. including markets for carbon sequestration services and In the experiments conducted in fiscal 1998 the tradable development rights. uniform price double auction yielded substantially Responsibility: Development Research Group, Infra- competitive outcomes despite a rather thin market charac- structure and Environment-Kenneth Chomitz (kchomitz terized by a limited set of trading opportunities for each @worldbank.org). With the Harvard Institute for Inter- agent. Efficiency increases when monopoly control over national Development and Conservation Intemational. conveyance is replaced by cotenancy. The markets were Completion date: June 2000. somewhat volatile, especially in terms of quantity traded. Reports: Attempts to act strategically resulted in a number of Boscolo,Marco, and Jeffrey Vincent. 1998. "Promoting Better Logging forgone trading opportunities. Increasing the number Practicesin TropicalForests: ASimulationAnalysis ofAltemative of participants, even if only to the size of the recent Regulations." water banks, should improve efficiency and reduce Chomitz, Kenneth M., Esteban Brenes,and Luis Constantino. 1998. volatility. 'FinancingEnvironmental Services: The Costa Rican Experience Because of the relatively thin nature of the market and and Its Implications." other characteristics of the setup, certain agents still have more bargaining power over the transportation and initial water allocation than do other agents. But the Environmental Change and Adaptive performance of many of the agents was very close to Resource Markets: A Computer-Assisted the perfectly competitive equilibrium solution, with Market for Water Allocation some (those with the bargaining power) realizing profits in excess of the perfectly competitive equilibrium. Experimental economics can yield a formal and replica- The convergence of the agents in the experiment to the ble system for analyzing alternative market structures, optimal values was faster than expected, reducing the

65 Environmentally Sustainable Development

establishment cost of the market through fewer trial This research will examine the mechanisms of rural sessions. sector development in Indonesia, the Philippines, and The conclusion from the experiments with reward- Thailand in a historical context. First, the research will motivated subjects and from other experience in network review the development of policies that have had direct experiments is that water networks using a computer- or indirect effects on the rural sector, particularly on rural coordinated smart allocation mechanism will yield essen- income growth, over the past three decades. It will use tially competitive outcomes and therefore should be quantitative analysis to evaluate the impact of different further tested. In the next stage this project will apply the policies on rural income and examine the political, social, approach to test additional institutional rules, such as the and economic background of policy choices. Second, continuous double a uction and variations on the uniform the research will undertake an intercountry comparative price, double-auction rules, to analyze whether these will study focusing on investment and productivity, and trade reduce the volatility. The research will also evaluate the and domestic markets. Applying quantitative and com- impact of adding more agents, decoupling ownership parative institutional economic analysis, the study will of storage and conveyance from the sale and consump- examine the dynamics of rural development and the tion of water, introduce groundwater pumping exter- impact of policies on it. Third, the research will synthe- nalities, and water quality. In a later stage the study plans size the mechanisms of rural development, the impact to apply the approach to a group of actual agents repre- of policies on the rural sector, and the political, social, senting the players in each sector and to compare the and economic background of these policies. market solution in that experiment with the market solu- Responsibility: Development Research Group, Rural tion in the experiments with trained students. Development-TakamasaAkiyama (takiyamaEworldbank. Responsibility:Rural Development Department-Ariel org) and Donald Larson; and Office of the Senior Vice Dinar ([email protected]). With Vernon L. Smith President, Development Economics, Development and Steven Rassenti, University of Arizona; and Richard Prospects Group-Nanae Yabuki. With Maria Amelina; E. Howitt, University of California at Davis. The National Toshihiko Kawagoe and Masa Honma, Seikei University; Science Foundation is contributing funding for the Jun Teranishi, Hitotsubashi University; Professor Hayami, research through a grant to the University of Arizona and Aoyama Gakuin University; Nobuhiko Fuwa and Kikuchi, the University of California. Chiba University; Yair Mundlak, University of Chicago; Completion date:June 2000. Peter Timmer, Harvard University; and Shin Shigetomi, Reports: Institute of Developing Economies, Japan. Dinar,Ariel, RichardE. Howitt, J.J.Murphy, S.J. Rassenti, and Vernon Completiondate: December 2000. L. Smith. 1998."How Might Future Water Markets Look? The Use of Experimental Economics to Design Markets for Water." Paper presented at the World Congress of Environmental and Land Markets Resource Economists, Venice, Italy, June 23-27. Dinar, Ariel, Richard E. Howitt, Steven Rassenti, and Vernon L. This research project investigates how recent property Smith. Forthcoming. "Development of Water Markets Using rights reforms aimed at improving the functioning of ExperimentalEconomics. In K.W.Easter, M. Rosegrant,and Ariel rural factor markets in Honduras, Mexico, and Nicaragua Dinar, eds., Marketsfor Water:Potential and Performance.Kluwer have affected agricultural productivity and the lives of Academic Publishers. the rural poor. The study is part of a broader research agenda to assess the effectiveness of land (rental and sales) markets as a mechanism for allocating land effi- Rural Sector Economics: Dynamics ciently across heterogeneous households; assess the of Rural Sector Growth impact of imperfections in rural markets on the direction of land transfers, the type of contracts adopted, and Many studies have analyzed the spectacular economic the ensuing changes in the agrarian structure; and iden- growth of Asian countries, but they have focused little tify policies that can help make land markets function on the rural sector, the mechanisms of its growth, and the better and contribute to increased productivity and equity. impact of government policies on the sector. Agricultural The project relies on microeconometric analysis of and rural development performance has been impres- panel data that have been collected recently or will be sive in Asian countries, and the Bank and its client coun- established in the course of the project. Data for Mexico tries would benefit from a comprehensive study of the are from a survey of about 1,500 ejiditarios (and ejido-level policies, institutions, and mechanisms of rural develop- information on about 400 ejidos), undertaken by the Food ment in the region. and Agriculture Organization (FAO), the Mexican

66 Environmentally Sustainable Development

Ministry of Agriculture, and the University of California Using data for Colombia that have just become avail- at Berkeley in 1994 and 1997. For Nicaragua data come able, the project is analyzing land prices and their deter- from a 1996 survey of 1,500 producers by the FAO and minants, the farm size-productivity relationship, and the the University of California at Berkeley that is represen- degree to which markets can be relied on to correct it, tative of the main agricultural areas of the country and and comparing targeting in the traditional land reform that will be complemented by a resurvey of the respon- program with that in the pilot mounted with World Bank dents in 1999. For Honduras data from a 1992 survey by assistance. Initial evidence suggests that land reform can the University of Wisconsin will be used as the basis for be an economically sound investment, but that the tra- constructing a panel. ditional approach did not realize the potential for gains The analysis has so far been limited to Mexico, where in productivity. While assessment of the impact of the preliminary results indicate that elimination of rental pilot must await production results, the decentralized restrictions has significantly reduced the transaction costs model used appears to be associated with significantly associated with land rentals. But because of credit mar- higher beneficiary satisfaction and technical assistance ket imperfections, the poor were often unable to take coverage. advantage of the increased market opportunities. The research has identified key elements critical for Workshops with key policymakers and researchers the success of land reform programs (such as integrated are being held in August and October 1998 to dissemi- productive projects, involvement of financial interme- nate preliminary results and to fine-tune the approach diaries, and use of a decentralized approach) and pro- and review the appropriateness of the research questions. vided a framework for monitoring and evaluating the Dissemination workshops will be organized upon com- impact of such programs. pletion of the research. And it has helped to clarify the potential and limits Responsibility: Development Research Group, Rural of land reform, to focus discussions with client coun- Development-Pedro Olinto ([email protected]) tries on critical issues, and to establish a basis for further and Klaus Deininger. collaboration in the evaluation of programs. Completiondate: June 2001. The project's dissemination activities have helped Bank staff to respond to the increasing interest in land reform issues in client countries (such as Honduras, Malawi, and Land Reform Zimbabwe). And they have provided developing country technical staff with guidance on basic methodolo- New opportunities and lingering problems have renewed gies for designing, implementing, and evaluating land the interest of governments in agrarian reform: reform efforts. The dissernination activities have included * The inability to address rural violence, deep-rooted a technical workshop in Bogota in October 1997 for about poverty, and inequality of opportunity through conven- 20 technical staff involved in land reform and land admin- tional means, and the expectation that a redistribution istration in Brazil, Nicaragua, and South Africa and about of productive assets would improve the access of the poor 50 researchers and staff involved in land reform in to economic opportunities. Colombia. In addition, papers have been presented at * The potential for improving productivity and equity several conferences in Latin America attended by given the large tracts of unutilized or underutilized land researchers and policymakers. And a manual on the mon- on large farms, the inverse farm size-productivity rela- itoring and evaluation of market-assisted land reform is tionship, and the desire of large landlords to liquidate being prepared for Bank operations staff. their landholdings. Responsibility: Development Research Group, Rural * The failure of old-style land reform, the continuing Development-Klaus Deininger (kdeininger@worldbank. political pressure, and the drop in land prices following org) and Pedro Olinto; and the Economic Development the elimination of many distortions favoring agriculture. Institute. The Swiss Trust Fund and the Brazilian govem- This research aims to quantify the scope for and eco- ment are contributing funding for the research. nomic potential of land reform, help in the design of Completiondate: June 2001. programs that would realize this potential, and mount monitoring and evaluation systems that would allow in-depth evaluation of the impact of such programs on Environmental Data Accounting both productivity and poverty reduction. The project combines ex ante analysis of land reform based on farm This project investigates how, using a conventional budget analysis with econometric analysis of survey data national accounts framework, the depletion of natural to be collected in Brazil, Colombia, and South Africa. resources and degradation of the environment by

67 Environmentally Sustainable Development pollution could be incorporated in a system designed to research organizations concerned with developing the measure economic performance. InJthe past fiscal year environmental accounting agenda. Supported by the the main focus of attention has been developing, in con- Bank, work is under way to revise the United Nations' junction with the Environment Department, draft chap- recommended System of Integrated Environmental and ters for the Economic Development Institute's proposed Economic Accounts, and DECDG is playing an impor- training manual on integrated environmental and eco- tant part in defining the scope and direction of this work. nomic analysis. New work in this area was incorporated Together with the Environment Department, DECDG is in the World Bank's World Development Indicators 1998 assisting in an effort to implement a natural resource (Washington, DC, 1998). In addition, a background paper accounting framework in South Africa under the aus- was prepared for the 1997 Kyoto Conference discussions. pices of the Development Bank of South Africa. In addi- The Development Research Group's Development Data tion, DECDG is serving as a peer reviewer for the Nairobi Group (DECDG) also contributed to the identification Group's draft handbook on environmental accounting of appropriate environmental measures to be included practices in selected developing countries. in the Bank's country assistance strategies and the OECD Responsibility: Office of the Senior Vice President, Strategy 21 Development Goals. Development Economics, Development Data Group- Efforts now are being channeled through the London Michael Ward ([email protected]), Mohammad H. Group as the key coordinating body of experts repre- Ordoubadi, and Yi Chen. senting governments, international agencies, and private Completiondate: Ongoing.

68 INFRASTRUCTURE AND URBAN DEVELOPMENT

Infrastructure and Growth: The study will address three main questions: First, in A Multicountry Panel Study addition to direct effects on output and growth, does physical infrastructure have significant indirect effects? Ref. no. 680-89 Second, what are the economic rates of return of differ- This study has developed a database of world infra- ent kinds of infrastructure investment, and how do they structure stocks and estimated the growth effects of four compare with the social rates of return to other uses of types of infrastructure-roads, rail, telephone lines, and capital? Third, is infrastructure a necessary condition electricity-generating and transmission capacity-over for growth? the past three decades for about 100 countries. It has rnod- The study has been focusing on extensive data gath- eled these four types of infrastructure separately in a stan- ering efforts. Once the necessary data have been assem- dard growth framework, including private capital and bled, the study will estimate growth effects separately human capital as additional explanators of output and for roads, rail, telephone lines, and electricity generat- productivity growth. ing and transmitting capacity. The growth effects will be In looking at how different kinds of infrastructure measured in manufacturing and in domestic product first affect growth, the study has paid particular attention to at the state and then at the district level. The study will whether private capital is crowded in or out by infra- try to determine at what level the effects operate and structure investments and whether the growth effect is through what channels-for example, urbanization or mediated through structural change of the economy and change in the organization of manufacturing. urbanization. The study has also addressed questions on Responsibility: Development Research Group, Pub- the speed with which growth effects occur, whether infra- lic Economics-Shantayanan Devarajan (sdevarajan structure investment affects the level of GDP or the rate @worldbank.org) and Sethaput Suthiwart-Narueput; of growth, and whether infrastructure acts as a normal and Transportation, Water, and Urban Development input into production and whether as a bottleneck. Department, Office of the Director-Christine Kessides. Responsibility: Development Research Group, Pub- With Esra Bennathan; Subhashis Gangopadhyay; Sylaja lic Economics-Shantayanan Devarajan (sdevarajan Srinivasan; Charles Hulten; Paul Seabright; and Martin @worldbank.org); and Transportation, Water, and Urban Robert Weale. Development Department, Office of the Director- Completiondate: June 1999. Christine Kessides. Completion date:October 1998. Report: Database on Infrastructure Privatization Canning,David. Forthcoming. "A Database of World Infrastructure Stocks." WorldBank Economic Review. Ref. no. 681-66 Lack of data about infrastructure privatization has severely constrained the Bank's ability to carry out a Infrastructure Productivity: systematic analysis of the relationship between the pol- Direct and Indirect Effects icy alternatives in privatizing infrastructure and the institutional environment in which these alternatives exist. Ref: no. 681-54 This project, in line with the recommendations of the Over the past decade studies have repeatedly reported Bank's World Development Report 1994:Infrastructure for rates of return to public capital far exceeding those to pri- Development (New York: Oxford University Press, 1994), vate capital or those emerging from cost-benefit analy- is developing a database of variables crucial to the under- sis or project evaluation for infrastructure investments. standing of experience in infrastructure privatization. In part to investigate these still controversial returns The aim is to enable policymakers and Bank staff to learn and to find out whether the operation of indirect effects from the successes and failures of infrastructure reform. may help explain them, this study will identify and mea- The acceleration in infrastructure privatization and the sure the growth and productivity effects of infrastruc- rapid disappearance from the Bank's shelves and insti- ture in India using time-series data for roughly 1960-90. tutional memory of much of the information on utilities'

69 Infrastructure and Urban Development performance as these entities are privatized make the as the cost and scarcity of water and the unmet demand. need for this effort especially pressing. Early efforts to It will then analyze the design and performance of reform collect information from Bank sources identified sub- (including the process of selecting the contractor, the stantial gaps that maustbe filled through country visits. design of the contract, and the regulatory framework), The database covers sales in electricity and telecom- looking at how the different types of reforms addressed munications and includes information on performance possible problems of incentives, information asymme- before and after sale, the terms and conditions of the tries, and credibility. Finally, the research will assess the privatization transaction, and details on the regulatory results of the reform, looking at different indicators of framework. The database will fill important gaps in the performance and measuring the welfare effects of each Bank's institutional memory and allow staff preparing reform compared with a counterfactual (using the and supervising infrastructure projects to quickly com- methodology developed by Ahmed Galal and others, pare performance measures and regulatory frameworks Welfare Consequences of Selling Public Enterprises: An with those for successful and unsuccessful privatized Empirical Analysis, New York: Oxford University Press, firms. Subsequent analysis using the data will develop 1994). detailed guidelines based on what worked and what The study aims to provide Bank task managers and failed in privatizing infrastructure. client governments with a better set of tools for thinking Responsibility: Development Research Group, Regu- through when and how best to involve the private sec- lation and Competition Policy-Mary Shirley (mshirley tor in the reform of water and sanitation utilities, includ- @worldbank.org) and Luke Haggarty. With Roger Noll, ing guidelines for the design and implementation of a Stanford University. successful reform. Completion date: September 1999. The findings of the case studies will be disseminated through working papers and a synthesis paper on the policy and operational lessons of the research. The Bank's Institutions, Politics, and Contracts: Private Economic Development Institute will use the cases for its Sector Participation in Urban Water Supply training programs on the water sector and on regulation. Responsibility: Development Research Group, Regu- Ref. no. 681-87 lation and Competition Policy-Mary M. Shirley Reforms promoting private sector participation in the ([email protected]), George Clarke, Luke provision of urban water supply are often cited as suc- Haggarty, Colin Xu, and Ana Maria Zuliaga; and Private cess stories, but these reforms have followed many dif- Sector Development Department, Private Participation ferent approaches, including leases, concessions, and in Infrastructure-Penelope Brook-Cowen. With Claude management contracts. Lacking has been a rigorous analy- Menard, ATOM, Sorbonne University; Manuel Abdala; sis of outcomes that would enable development practi- Lorena Alcazar, University of the Pacific; Douglas North, tioners to choose the most efficient reform for their Washington University in St. Louis; Scott Masten and circumstances. This study will analyze the effect of polit- Keith Crocker, University of Michigan; Roger Noll, ical and contracting institutions on the design and per- Stanford University; Dale Whittington, Northeastern formance of contracts for reform of urban water supply, University; and Matthew McCubbins, University of comparing different forms of private participation and California at San Diego. reforms under public ownership. Completion date:June 1999. Using a case study approach, the research will systematically analyze experience with private participation in the provision of urban water services in six Pilot Study of City Economic Growth countries: Argentina (concession in 1992), C6te d'Ivoire (lease in 1962 and concession in 1987), Guinea (lease in Ref. no. 682-39 1989), Mexico (management contract in 1993), and Chile This research addresses two main questions: Which eco- and Peru (continued public operation). The sample rep- nomic subsectors and activities grow particularly rapidly resents the main contracting options used in water sup- or slowly in cities? And how does this growth interact ply, provides significant variation in the institutional with the policy environment? setting, and allows comparison with countries that have The study examines the experience of several devel- not used private participation. oping country cities that have seen rapid growth in a The study will analyze the political motivation for and key economic subsector or industry. It constructs the feasibility of reform, the commitment to reform, and the history of how and why the industry or subsector devel- role played by the political importance of water, as well oped and analyzes its impact on the city economy and

70 Infrastructure and Urban Development the position of the poor. It traces the history of the national Interim work on the papers was discussed at Bank work- economic regime and provincial and local public inter- shops in May and July 1998. ventions. And it assesses the contribution of local inter- It is hoped that the research, together with other activ- ventions to the development of the industry and the extent ities to which it will contribute (such as the Bank's urban to which public authorities were able to shield the pop- strategy paper and World Development Report 2000), will ulation from the deleterious effects of rapid industrial- persuade the Bank that "urban" should be considered an ization. The research is conducted through interviews important level of policy formulation and application, with a sample of employers in each industry studied and rather than a sector; that macroeconomic analyses should with officials of public agencies relevant to the industry, make room for urban analyses; and that cities' roles are relevant business associations, and the city management. of fundamental importance in realizing national devel- The study is expected to provide a set of policy point- opment goals and should be treated accordingly. The ers for national and local governments on the precondi- research will support the assertion that the Bank should tions for developing a high-growth city industry. It will learn to assist cities through the development of city strate- produce a framework of analysis and indicators to assist gies and city lending programs. And it will cast impor- Bank staff in rapid economic assessment of city economies, tant light on issues of project selection and design and the sectoral potential for high output growth, and meth- policy reform. ods public authorities can use to facilitate growth. It will Responsibility: Transportation, Water, and Urban also develop a set of hypotheses for testing on a broader Development Department, Office of the Director- sample of cities and more than a single industry. Christine Kessides ([email protected]). With Responsibility: Transportation, Water, and Urban Douglas Hamilton Keare, Lincoln Institute of Land Policy; Development Department, Global Urban Unit-Tim Jeffrey G. Williamson, Edward L. Glaeser, and John Robert Campbell ([email protected]). With Nigel Harris. Meyer, Harvard University; and Edwin S. Mills, Completion date:December 1998. Northwestern University. Completiondate: December 1998.

Revisiting Development: Urban Perspectives Competition and Privatization Ref. no. 68240 in Urban Water Supply This research aims to shed light on some of the most fundamental issues involved in formulating an urban Ref. no. 682-64C perspective on national and regional development for Privatization in urban water supply has proceeded the 21st century. It seeks to do this by tracing, reflecting more slowly and been characterized by less private on, and extrapolating the historical influences of impor- sector involvement than privatization in other infra- tant global developments on cities; exploring the inter- structure sectors. One plausible reason for this is that it actions of these exogenous influences and the efficiency is much harder to introduce product market competition of internal management of cities, and again assessing and in the water sector than in other infrastructure sectors. projecting these interactions; and observing, evaluat- As a result, competition mustbe introduced indirectly- ing, and projecting the effects of city management and through competition for the market (that is, competitive operations on broader regions, including their nation- bidding), yardstick competition (benchmarking), states and the global economy. and competition in the capital market. The most com- The research consists of a linked set of tasks (five mon form of indirect competition in developing coun- papers, one by each of the participating researchers) tries' urban water sectors is competition for the market taking several interrelated "cuts" at the issues. Each task (used, for example, in Argentina, Cote d'lvoire, and consists of a common set of subtasks: reviewing the state Guinea). of the art and, where gaps exist, attempting to bridge Since full privatization prevents repeated competition these gaps conceptually; developing hypotheses on the for the market, lease and concession contracts might have evolving roles of cities; and examining and analyzing rel- a distinct advantage over full privatization. This project evant, readily accessible data. The research draws on assessed how well other methods of competition have three types of data sources: those identified in the state- substituted for competition for the market in the United of-the-art searches, data already being used in the Kingdom-the only case of full privatization in this sec- researchers' related work, and new data sets such as the tor. By comparing outcomes in the United Kingdom with urban indicators being compiled and extended by the outcomes under lease and concession contracts, the pro- United Nations Centre for Human Settlements (UNCHS). ject assessed the relative success of full privatization.

71 Infrastructure and Urban Development

Using data from company balance sheets and income might therefore need to subsidize solid waste collection statements, the research used a partial equilibrium cost- and disposal. Knowing how much can realistically be benefit analysis (developed by Ahmed Galal and others, raised through charges is important for budgeting appro- Welfare Consequences of Selling Public Enterprises: An priately and for determining which parts of the service Empirical Analysis, New York: Oxford University Press, can be "unbundled" and charged for and which would 1994) to assess the total welfare gains and to identify need to be subsidized. which groups gained from privatization and which This research is developing and analyzing econo- groups lost. In addition, using a framework based on metrically a contingent valuation survey of the willing- the principles of New Institutional Economics, the ness to pay for appropriate solid waste collection and research attempted to assess the institutional character- disposal in two medium-size cities in the Philippines, istics that affected the success or failure of water priva- Iloilo and Naga. It is examining the determinants of will- tization in the United Kingdom. ingness to pay, including the role of information, educa- Responsibility: Development Research Group, Regu- tion, and altruism; looking at different payment vehicles; lation and Competition Policy-George R. Clarke and assessing the acceptability of different modes of ser- ([email protected]). With Simon Cowan, Oxford vice provision. The results of the research will provide a University. basis for setting charges and indicate possibilities for Completiondate: June 1998. cost recovery, as well as shed some light on the costs and benefits of investments in solid waste management. Since these issues are of critical importance to Bank opera- The Sustainable Financing of Investments in tions, the research is being conducted in close consulta- Municipal Infrastructure: Cost Recovery for tion with, and is partly financed by, Bank operational units. Solid Waste Management in the Philippines Responsibility: Development Research Group, Infra- structure and Environment-Sheoli Pargal (spargal Ref. no. 682-77 @worldbank.org) and Maureen Cropper. With Nathalie Cost recovery for municipal investments has become Simon and the Local Government Center, University of the increasingly important with the worldwide trend toward Philippines. Partial funding for the research comes from a the devolution of responsibility for providing public ser- grant from the Japanese government. vices. Municipalities frequently need to finance large Completion date:December 1998. investments in core service areas such as water supply and sanitation or solid waste management. While these services have traditionally been provided by the gov- Privatization of Telecommunications emnment,often at no charge or at highly subsidized rates, in Africa many of them could efficiently be provided by the private sector. But the private sector is usually reluctant to Ref. no. 682-92 enter the arena in the absence of cost recovery guaran- Much of the policy advice on privatization and regula- tees. For solid waste management in particular, there is lit- tion of telecommunications is based on the experience tle evidence on how much people value these services and of high- and middle-income countries. But by the end of therefore on how much they would be willing to pay for 1997, 13 of the 49 Sub-Saharan African countries had them. privatized their telecommunications firms, and another Economists have traditionally used revealed prefer- 5 planned to do so in 1998. In addition, 19 Sub-Saharan ence (indirect) methods or the more direct contingent African countries had allowed private cellular opera- valuation method to infer the value attached to many tors to enter their domestic market. Abetter understanding such nonmarket services. But for solid waste manage- of this experience will help donors develop policy advice ment indirect methods are not very useful. People who tailored to the institutional environments and market are not served tend to dispose of their garbage through conditions of countries in Sub--Saharan Africa, avoiding burial, burning, or simple dumping, so it is difficult to "one-size-fits-all" approaches to reform. calculate the costs they incur for collection and disposal. This research will analyze Sub-Saharan African coun- It is also more difficult to monitor and enforce a charge tries' experience with telecommunications reform in depth system for solid waste management than for other munic- and track changes over the next four years. The rigorous ipal services. The imposition of charges that exceed the empirical analysis not only will assist donors but also population's true willingness to pay can lead to wide- will help the proponents of reform make their case. It will spread evasion, with dire public health consequences. To strengthen policy and regulatory skills in the region by the extent that cost recovery is not possible, governments joining African research institutes with senior researchers

72 Infrastructure and Urban Development

from academia and the World Bank in close partner- higher prices and costs, lower investment, and less rev- ship, all using a single methodological and conceptual enue to the government in the long run from taxes, div- framework. Over the four years the participating African idends, and reduced debt support. research institutes-the Center for Research in Micro- * Privatization is less likely to be opposed when the economics of Development (CIRES) in C6te d'Ivoire and workers and managers of the incumbent telecommuni- the Economic and Social Research Foundation (ESRF)in cations provider are not part of the core constituency of Tanzania-will take on more and more lead responsi- the ruling coalition or when they are offered minority bility for the research, with the goal of creating an insti- shares in the privatized firm, generous redundancy pack- tutionalized regional capacity to advise on tele- ages, or other compensation. communications reform and on infrastructure regulation Responsibility: Development Research Group, Regu- more broadly. Finally, the research will provide a com- lation and Competition Policy-Mary M. Shirley prehensive database on telecommunications in Sub- ([email protected]), Luke Haggarty, George Saharan Africa, a set of detailed case studies, and a series Clarke, and Ana Maria Zuluaga. With David Sappington of analytical papers, which will be presented in two major and Mark Jamison, University of Florida; Jean-Jacques conferences in Africa. Laffont and Jean-Paul Azam, University of Toulouse; The research will explore three key questions faced by Tchetche N'Guessan, Gulbert Marie N'Gbo, and Mathieu policymakers in Sub-Saharan Africa: How can greater Meleu, CIRES, Cote d'Ivoire; and Samuel Wangwe, Haji competition be encouraged by facilitating efficient entry? Semboja, and David Christian, ESRF,Tanzania. The U.S. How can the incumbent telecommunications provider Agency for International Development is contributing be motivated to use its existing assets better and to invest funding for the research. in additional capacity? How can telecommunications Completiondate: June 2002. reform be structured so that it gains the support of key stakeholders and fits well with the country's institutional capacity? The Financing of the Hub Power Project The research will analyze these questions though its in Pakistan broad dataset and through case studies of countries that have tried a mix of reform approaches, including no The Hub Power Project is a 1,292-megawatt oil-fired reform (the proposed set of countries include C6te power station in Balochistan Province, Pakistan, some 40 d'Ivoire, Ghana, Malawi, Senegal, Tanzania, and Uganda). kilometers northwest of Karachi. This private sector pro- The work will begin with a pilot case study, followed by ject was undertaken by a single-purpose company, listed team meetings to ensure consistency in the conceptual on the Karachi and Luxembourg stock exchanges, that framework and quality of the work. By June 2000 the has a concession to build, own, and operate the power initial case studies and synthesis report will be finalized station. The project has become a landmark in infra- and disseminated through a regionwide conference in structure finance because it demonstrated the viability Africa. Additional developments will be tracked and ana- of private finance for a major infrastructure project in a lyzed over the next two years, resulting in a second set developing country. of updated cases and papers for a conference in June2002. This study examined the lessons learned from the The research will test a set of hypotheses, including World Bank's participation in the Hub Power Project, these: where the Bank played a catalytic role in the financing * A country with limited power to commit credibly of the project, in the development of the energy sector to not expropriating private investment will be more and local institutions in Pakistan, and in the international likely to generate improved performance (lower prices, market for private sector infrastructure. Because of its greater investment to meet demand, reasonable returns pioneering nature, the project probably encountered most to shareholders) by reducing the fixed costs of entry- problems likely to face a private infrastructure project in for example, by facilitating cellular entry. a developing country during implementation, thus the * Where regulatory resources are limited, better per- solutions developed and the lessons learned have wide formance will come from contracts or licenses that more application. The study focused on the solutions and fully and clearly specify regulatory outcomes in advance lessons that generally apply to similar private infra- of privatization, rather than specifying regulatory pro- structure projects, emphasizing the financial instruments cedures to be undertaken after the fact. used by the Bank and its management of the project devel- * Privatizations that constrain competition will likely opment process. generate more sales proceeds, but any such benefit is The Hub Power Project has become a landmark in likely to be more than offset by the welfare costs-from project finance not only because it was the first private

73 Infrastructure and Urban Development infrastructure project and the first lirnited recourse financ- To assist in this effort, the Bank has worked closely ing for Pakistan, but also because of the experience it gave with governments and public entities to structure bid- the Bank in project finance and use of guarantees. The ding and project documents. It has also provided tech- successful financial closure of the Hub Power Project nical support to governments in the preparation, nego- demonstrated that complex deals such as this one are tiation, and award of private concessions for high- possible. Based on the experience, this study identified priority infrastructure projects. In addition, governments recommendations that should help reduce the risk of have asked the Bank to provide loan guarantees in the delay or failure in fiuture projects: bidding process to facilitate viable financing proposals * Save time by properly clarifying what is required on the best possible terms. Recognizing the increased par- from the project technically and commercially before ticipation of the World Bank in this area, this study aimed inviting private sector proposals. to provide general guidance on how governments can * Try to postpone as many nonessential activities as award a competitively bid private concession. possible until after financial closure (that is, split the pro- Drawing on a survey of bidding experience in eight ject into two or more phases). Debt syndication can usu- water and toll road projects in seven countries, the study ally be deferred until after financial close. identified the critical issues involved in the tendering and * Match sponsors' resources to the nature and scale evaluation of bids for private concessions. It proposed of the project. an approach for integrating a World Bank guarantee * Keep the number of project participants-contract into the bidding process so as to provide the optimal level counterparties, contractors, and cofinanciers-to a of credit enhancement necessary to attract responsive minimum. and competitive bids. a Denominate or determine the power purchase agree- Responsibility: Project Finance and Guarantees ment tariff in the same currency as the project funding. Department-Suman Babbar ([email protected]), a Strive for continuity in the advisers who provide David Baughman, and Ramzi Al-Bader. With West specialized expertise to contract counterparties. Merchant Bank Limited, United Kingdom. * For projects with fragmented financing plans, Completiondate: January 1998. create a formal cofinanciers steering committee, chaired Report: by the Bank, during project development. World Bank, Project Finance and Guarantees Department. 1998. Responsibility: Project Finance and Guarantees "Biddingfor Private Concessions: The Use of World Bank Department-Suman Babbar ([email protected]). Guarantees." ResourceMobilization and CofinancingDiscussion Completiondate: August 1997. Paper 120. Washington, DC. Report: Gerrard, Michael.1997. "Review of the Hub Power Project."Resource Mobilization and Cofinancing Discussion Paper 118. World Private Power Study Bank, ProjectFinance and Guarantees Department, Washington, DC. Private power continues to face many challenges in developing countries. Contract renegotiations and inadequate risk assumption by governments may erode investor con- Bidding for Private Concessions: fidence and restrain private investment. Continued The Use of World Bank Guarantees growth may require greaterprivaterisk taking. This study analyzed the 1994-96 private power market to assess With the move toward private provision of public ser- trends in market competition, risk allocation, and struc- vices, governments are increasingly using competitive tures and sources of financing. The analysis was aimed bidding to award infrastructure concessions to private at providing governments and investors insights that can sponsors. But financing these projects has often been help them to maintain or expand the role of private power difficult for countries with a less than investment grade in developing countries. credit rating and with limited access to the capital Nearly two-thirds of the capital raised for private markets. Furthermore, preparing and launching a com- power projects between 1994 and 1996 was provided petitive bid for the award of a private infrastructure under project finance, under which project cash flows, concession is a complex and resource-intensive under- rather than sponsors' balance sheets, provide lenders taking, the outcome of which will affect not only the their primary source of security. This study focused on project that is the subject of the concession, but the one part of the project-financed market-power project credibility of the government in relation to projects that finance-where privately controlled power projects sell it plans to implement in the future. power to utility off-takers for distribution to a national

74 Infrastructure and Urban Development power grid. The study examined trends in regulation, Comparative Study of Water Institutions project structure, debt sources, and development times and Their Impact on Water Sector in this power project finance market. Performancein Selected Countries The study evaluated trends in power projectrisk management by examining 10 power project financedeals in In response to increasing water scarcity, water institu- Asia, Latin America, and the Middle East. The analysis tions-formal and informal water policy,water law, and showed that these power projects largely reflecta ratio- water administration-are undergoing far-reaching nal allocation of risks among public and private sector changes worldwide. What is the cross-country experi- participants. ence in the evolution of water institutions, and do the Responsibility: Project Finance and Guarantees changes advance or impede the financial viability and Department-Suman Babbar([email protected]). resource sustainability of the water sector?This project With John Schuster and Hagler Bailly Consulting. addressed these questions through a comparative study Completiondate: January 1998. ofwater institutionsand their impact on the performance Report: of the water sectorin selectedindustrial and developing Babbar, Suman, and John Schuster. 1998. "Private Power Study." countries. Since water institutions are a domain inter- Resource Mobilization and Cofinancing Discussion Paper 119. sected by economics, law, and public policy and are World Bank, Project Finance and Guarantees Department, strongly influenced by resource endowment, demogra- Washington, DC. phy, and scienceand technology,the study's approach was necessarily interdisciplinary. Thestudy comparedthe water institutions ofthe sam- Private Provision of Water ple countries within a common framework defined by a and Sanitation set of institutional (legal, policy, and administrative) features focusing on economic and operational perfor- This study reviewed recent experiencewith private ini- mance.It then carried out a comparativeanalysis of water tiative and capital in the water and sanitation sector.It sectorperformance based on certainqualitative and quan- addressed two main questions:What is the extent of pri- titative variables. Linking the comparative analysis of vate involvement in water and sanitation?And what fac- water institutions with the analysis of water sector per- tors make private involvement in the sector productive formance allowed identification of both common and and successful? unique featuresin "bestpractice cases" and "worst cases." The study found that there is a surprisingly large The resultsprovide the basis for deriving strategicoptions amount of private activity in water and sanitation in and action plans for strengthening institutional compo- developing countries-despite the serious regulatory nents and improving their performance. challenges in the sector. Through case studies in both The basic data for the study were derived from industrialand developingcountries (including Argentina, personal interviews on key water sector challenges Australia, Guinea, Malaysia, Mexico, Turkey, and the and recent institutional responses, and a detailed ques- United Kingdom), the study identified the many risks tionnaire administered to a sample of key water sector associatedwith investment and service provision in the experts (including policymakers,water law specialists, water and sanitation sector.It also identified pragmatic academics,and international consultants)to obtain both solutions that many countries are adopting to mitigate factual and subjectiveinformation on water institutions these risks. The huge growth in demand for water and and water sector performance.Data from published and sanitation services will require continuing institutional, unpublished sources supplemented the primary data. regulatory,and financialinnovations to manage the risks Preliminaryevaluations of water institutionsand water in the sector. sectors across the sample countries identified common Responsibility: Project Finance and Guarantees trends and patterns, despite variations in resource and Department-Ashoka Mody ([email protected]). political economysituations. The key issue is no longer With David Haarmeyer. resource development and water quantity but resource Completiondate: February 1998. allocation and water quality. The notion of water provi- Report: sion as a publicgood and welfare activityis being replaced Mody, Ashoka, and David Haarmeyer. 1998."Tapping the Private by the concept of water as an economic good and as an Sector:Approaches to Managing Risks in Water and Sanitation." input in economicactivity. And the old developmentpar- Resource Mobilization and Cofinancing Discussion Paper 122. adigm centered on centralized decisionmaking,admin- World Bank, Project Finance and Guarantees Department, istrative regulation, and bureaucratic allocation is fast Washington, DC. giving way to a new paradigm rooted in decentralized

75 Infrastructure and Urban Development allocation, economic instruments, and stakeholder real price trends are expected to cause both motor vehi- participation. cle ownership and use to grow at a faster pace than pop- For the World Bank and other international develop- ulation or GDP worldwide. While the growth of motor ment agencies, the findings suggest that while the cur- vehicle ownership will slow in OECD countries, it will rent emphasis is on formulating water policy and water accelerate in developing countries. The accelerated growth law and reorganizing water administration, there is a crit- of motorization in developing countries has resulted in ical need to concentrate efforts in countries, areas, and more cars in those countries than there were in OECD subsectors that already have a critical mass of institu- countries when their per capita income was at the same tional capacity. Here, the probability of success is higher level. So developing countries have to cope with a higher than elsewhere because of lower transaction costs. The level of motor vehicle ownership with less developed institutional changes occurring across countries suggest public infrastructure and institutional capacity. that the opportunity costs (the potential net gain) of insti- There are also qualitative differences in developing tutional change are becoming higher than the corre- countries (such as proportionately more two-stroke engine sponding transaction costs in most contexts. vehicles and mixed right of way) that have created For water sector reform strategy, the multidimensional unprecedented negative externalities. The World Health links among key sector problems suggest two crucial pol- Organization (WHO) predicts that by 2020 about 2.4 mil- icy tips. First, although reforms in one dimension will lion people worldwide will die annually in road traffic certainly have effects in other dimensions, an integrated accidents, 88 percent of them in developing countries, approach will have the maximum effects through syn- making traffic accidents in developing countries the sec- ergy. Second, at the heart of such an integrated approach ond worst "epidemic" in terms of years of life lost. The lie the institutional changes to strengthen and modern- adverse effects of vehicle-related pollution at the local ize the legal, policy, and administrative arrangements level are also much worse in developing countries. While governing the water sector. the ambient level of suspended particulate matter meets While country-specific studies of water institutions the WHO standard in most industrial country cities, it and water sector performance are common, studies of exceeds that standard in such developing country cities institutional underpinnings of water sector performance, as Beijing, Delhi, Mexico City, and Xian by as much as particularly in a comparative context, are rare. This study five times. Accelerated motorization is also clogging cities not only helps fill this gap in the literature on institu- in developing countries with traffic congestion. As a result tional economics and water institutions, it can also pro- of congestion in Bangkok, Cairo, and Manila, the most vide useful inputs to the Bank's institutional strengthening cited examples of urban gridlock, these cities have aver- and capacity building initiatives. And the best practice age commuting speeds that are a fraction of the speeds cases it identifies can help promote institutional changes in industrial country cities, despite much lower motor by enabling countries to learn from one another's expe- vehicle ownership. rience without incurring the cost of experimenting with These negative externalities of motorization in devel- new or unfamiliar institutions. oping countries pose a challenge for public policy and The results of the study will be disseminated through the allocation of public expenditures. This research will reports and publications and through seminars within use theoretical and empirical analyses and comparative and outside the Bank. A seminar has been given at the case study analyses to address concrete operational issues. Water Resources Center, University of Illinois at Urbana. It will address such questions as these: How much empha- Responsibility:Rural Development Department-Ariel sis should be given to policies and programs that may Dinar ([email protected]). With R. Maria Saleth, reduce the need for transport infrastructure investments? Institute of Economic Growth, Delhi. How effective are different policies in accommodating Completion date:July 1998. large populations and economic growth in urban areas Report: with minimum negative motorization-related external- Saleth,R. Maria, and Ariel Dinar. "Water Challenge and Institutional ities? What is the benefit in encouraging a more appro- Response:A Cross-CountryPerspective." priate pace of motorization-that is, one that better balances private decisions on small capital outlays with society's ability to mobilize resources and implement Motorization and the Pricing of Externalities complementary capital investments? How should transport infrastructure investments be allocated? Should In the past 50 years the number of motor vehicles world- investments be made in the urban core or the urban wide has grown from about 60 million to about 700 mil- periphery, in rail or roads, in ring roads or in arterials or lion. Between 1995 and 2010 urbanization, income, and corridors, in motorized or nonmotorized networks,

76 Infrastructureand Urban Development in networks favoring personal or collective modes of ability and developing variables that measure prices of transport? inputs. The research will focus initially on neglected areas of Responsibility: Research Advisory Staff-Gregory analysis such as the role of land use and urban form and Ingram ([email protected]); and Transportation, the availability of alternative transport modes in deter- Water, and Urban Development Department, Transport mining the pace of motorization at different stages of Division-Zhi Liu. development in Asia (differentiating among countries Completion date:June 2000. at the mature stage of motorization, those midway in Report: the process, and those at the initial stage). The research Ingram, Gregory,and Zhi Liu. 1997."Motorization and the Provision will later expand to developing countries in other regions. of Roads in Countries and Cities." Policy Research Working The program is a collaborative effort by the World Paper 1842.World Bank, Research Advisory Staff, Washington, Bank, national and city government agencies, universi- DC. ties and independent research groups, nongovernmental organizations, and other international development agencies. Impact of Rural Roads Responsibility: Development Research Group, Infra- structure and Environment-Zmarak Shalizi (zshalizi@ Rural roads can boost agricultural growth and invest- worldbank.org), Debu Talukdar, Ming Zhang, Kenneth ment, household food security, and investment in human Chomitz, and Mead Over. capital. And they can improve access to markets for rural Completion date: January 2000. products and reduce transaction costs. But the returns to rural road investments are not known, in part because of methodological problems. Even if the returns are cal- Motorization and Road Provision culated using the internal rate of return approach, the estimates are generally so low that the investments do Panel data at the national level (for 50 countries) and the not appear viable. And the impacts of rural roads are long urban level (for 35 cities) are being analyzed to summa- term and cannot be captured through cross-sectional sur- rize trends and determinants of motorization (the num- vey data. ber of vehicles) and of road provision (the total length of This research program has designed a long-term roads). Since both vehicles and roads are inputs to the impact study of a Bank-financed rural roads project in production of road transport services, the determinants Bangladesh. It is providing technical help to the of the ratio of vehicles to roads are examined in a pro- Bangladesh Institute of Development Studies (BIDS) to duction function framework. carry out baseline and follow-up surveys. And it will Preliminary results indicate strong empirical regu- carry out a rigorous analysis of the data and provide sup- larities across countries and urban areas and over time. port to BIDS in analyzing the descriptive data. Based on At the national level both motorization and the provi- the panel data on households and communities, the study sion of paved roads increase at approximately the same will calculate the economic and social returns of rural rate as income. In urban areas motorization increases at roads. the same rate as income, but roads increase much less BIDS has collected the baseline survey data and will rapidly than income. This means that vehicles per length carry out follow-up surveys in 1998 and 1999. The data of road (a proxy for congestion) increase with income in will be available in 2000. urban areas. The annexation of surrounding developed Responsibility: Poverty Reduction and Economic area appears to play a big part in expanding urban road Management Network, Gender Division-Shahidur R. length and moderating congestion. For specific urban Khandker ([email protected]) and Hussain areas per capita road length is positively associated with Samad; and South Asia, Infrastructure Sector Unit- national income level but changes little over time, indi- Thampil Pankaj. With M. A. Latif, Bangladesh Institute cating that history or urban endowments matter. of Development Studies. Additional work is focusing on improving the cover- Completiondate: December 2000. age of the data, adding variables such as transit avail-

77 MACROECONOMICS

Decentralization, Fiscal Systems, These findings suggest that the Bank and the devel- and Rural Development opment communityshould focuson maximizingthe benefits that decentralization can help bring about, monitor Ref. no. 679-68C carefully issues that could go either way and intervene Policies and processes that encourage decentralization through various mechanisms, and ensure an appropri- are frequently an integral part of initiatives aimed at ate role for central government in addressing areas where bringing about rural development. Although decentral- decentralization offers little promise. ization activities have a long history, much more The dissemination of the program's findings is being needs to be understood about the different aspects continued by the Bank's Community-Based Rural of decentralization if sound advice is to be given to Development (CBRD)Thematic Team. Activities include policymakers. providing operational support to Bank projects and sec- This program of research aimed to add to that under- tor work; developing an interactive online sourcebook standing. It investigated the hypothesis that more decen- on decentralization and local development, in partner- tralized decisionmaking and resource allocation would ship with other international development agencies; facil- improve the responsiveness and accountability of pub- itating workshops, seminars, and training courses on lic institutions and strengthen the capacity of local gov- decentralization; and preparing papers and other publi- ernments and communities to manage development cations. In addition, the research program has created a programs. database on the status of decentralization in 20 countries, The research program consisted of six components produced dissemination notes aimed at program and pol- covering three main areas of investigation: political decen- icy managers in developing countries, and organized a tralization, fiscal decentralization, and administrative technical consultation in Rome in partnership with the decentralization. It used a variety of quantitative and Food and Agriculture Organization, International qualitative instruments to analyze issues of participation, Fund for Agricultural Development, German Agency accountability, responsiveness, political economy, the for Technical Cooperation, Swiss Agency for Develop- capacity of local governments, and the efficient and sus- ment and Cooperation, and United Nations Capital tainable delivery of public goods. Development Fund. It is also preparing additional train- The research found that decentralization holds promise ing materials for seminars for policymakers and Bank for: staff. * Reinforcing national-level democracy and central Reports are available electronically from Christianna government commitment to rural development. Johnnides (email: [email protected]; tel.: 202- * Reversing "urban bias." 522-1142). Information about the database is available * Solving the coordination problems associated with from Melissa Williams (email: mwilliams4@worldbank. integrated rural development projects and improving org; tel.: 202-458-7297). their sustainability. Responsibility:Rural Development Department-Hans * Reducing poverty that arises from regional dispar- Binswanger ([email protected]), Community- ities and giving attention to socioeconomic factors. Based Rural Development Team-Graham Kerr, Suzanne * Facilitating the scaling-up of development efforts Piriou-Sall, Keith McLean, Wendy Ayres, and TalibEsmail; and promoting cooperation between government and and Agriculture, Knowledge, and Information Systems nongovernmental organizations. Team-Willem Zijp; Operations Evaluation Department, * Increasing the transparency, accountability, and Country Policy, Industry, and Finance Division-Anwar responsiveness of institutions. Shah; Social Development Department-Gloria Davis; Decentralization seems to hold little promise for: Environment Department-Ernst Lutz; Latin America * Reducing poverty that arises from disparities within and the Caribbean Region, Human Development Sector localities. Unit-Mike Garn and Donald Winkler, and Environ- * Easing excessive rates of agricultural taxation. mentally and Socially Sustainable Development Sector * Ensuring macroeconomic balance. Unit-Thomas Weins and Maurizio Guadagni; Human * Reducing overall government expenditure. Development Network, Office of the Vice President and

78 Macroeconomics

Head of Network-Jacques van der Gaag; and South Asia . 1996. "Is There an Optimal Structure for Decentralized Region, Infrastructure Sector Unit-Frannie Humplick. Provisionof Roads?"Policy Research Working Paper 1657.World With Johan van Zyl, Pretoria University; Justin Yifu Lin, Bank, Policy Research Department, Washington, DC. Peking University; James Manor, University of Sussex; Kerr, Graham, and Douglas Tinsler.1997. "Building Local Capacity Dave Riper; Fernando Bernal; and Tarsicio Castafieda. to Deliver Basic Services in Egypt: The Government of Egypt, The Swiss Development Cooperation Consultant Trust United States Agencyfor InternationalDevelopment Local Funds I and II and the Norwegian Royal Ministry of DevelopmentProgram 1977-93."World Bank, Washington, DC. Foreign Affairs Consultant Trust Fund contributed fund- Lin, Justin, and Funning Zhong. 1997."Fiscal Decentralization and ing for the research. Rural Development in China." World Bank,Washington, DC. Completion date: December 1997. Lutz, Ernst, and Julian Caldecott, eds. 1996.Decentralization and Reports: BiodiversityConservation: Issues and Experiences:A World Bank Asesoria y Gesti6n Companiia. 1996. "Evaluaci6n del Sector Symposium.Washington, DC: World Bank. Descentralizado en Materia de Adquisiciones y Gesti6n Manor,James.1997. "Explaining the Popularity ofDecentralization." Financiera." Bogota, Colombia. World Bank, Washington, DC. Bebbington, Anthony 1996. "Local-Level Institutions and Social . 1997. "The Promise and Limitations of Decentralization." Capital." World Bank, Washington, DC. World Bank, Washington, DC. Bemal, Fernando. 1997. "Colombia: Rural Decentralization, Local Parker, Andrew.1995. "Decentralization: The Way Forward for Rural Government Performance and Its Determinants." World Bank, Development?" Policy Research Working Paper 1475.World Rural Development Department, Washington, DC. Bank, Agriculture and Natural Resources Department, Binswanger, Hans P., and Klaus Deininger. 1997. "Explaining Washington, DC. Agricultural and Agrarian Policies in Developing Countries." Piriou-Sall,Suzanne. 1997."Decentralizationand RuralDevelopment: Journalof EconomicLiterature 35(December). A Review of Evidence." World Bank, Washington, DC. Campbell, Tim. 1991. "Decentralization to Local Government in van Zyl, Johan, Tulio Barbosa, Andrew Parker, and Loretta Sonn. LatinAmerica and the Caribbean: National Strategies and Local 1995. "Decentralized Rural Development and Enhanced Response in Planning, Spending, and Management." World Community Participation:A Case Study from Northeast Brazil." Bank, Washington, DC. Policy Research Working Paper 1498.World Bank, Agriculture Carrasco, T., Talib Esmail, and Suzanne Piriou-Sall. 1997. and Natural Resources Department, Washington, DC. "Decentralization and the Promotion of Productive Projects: Wiens, Thomas, and Maurizio Guadagni. 1998.Designing Rulesfor Cases Studies of Community-Based Natural Resource Demand-Driven Rural Investment Funds: The Latin American Management and Income-Generating Projects in Oaxaca and Experience.World Bank TechnicalPaper 407. Washington, DC. Hidalgo, Mexico."World Bank,Rural DevelopmentDepartment, Winkler, Donald. 1997."Education Decentralization and the Rural Washington, DC. Poor." World Bank,Washington, DC. Castafieda, Tarsicio.1997. "Health Sector DecentralizationReforms: World Bank. 1995. LocalGovernment Capacity in Colombia:Beyond Case Studies of Colombia, Brazil, and Chile." World Bank, TechnicalAssistance. World BankCountryStudy. Washington,DC. Washington, DC. Esmail, Talib. "Designing and Scaling Up Productive Natural Resource Management Programs: Decentralization and Economic Liberalization and Industrial Institutions for Collective Action." World Bank, Washington, Restructuring: The Sri Lanka Experience DC. Faguet, Jean-Paul. 1997."Decentralization and Local Government Ref. no. 681-03C Performance." World Bank,Washington, DC. Sri Lanka's economic liberalization, which began in 1977, Fiszbein, Ariel. 1997. "Decentralization and Local Capacity: Some provides an important and continuing experiment for Thoughts on a Controversial Relationship." World Bank, examining how trade finance and exchange rate reforms Washington, DC. affect a country's industrial structure. Using firm-level Garn, Harvey. 1997."Lessons from Large-Scale Rural Water and data, this study analyzed the impact of the reforms on Sanitation Projects: Transition and Innovation." World Bank, industrial structure, growth of output, exports of man- Washington, DC. ufactures, factor proportions, employment, and produc- Humplick,Frannie, andAzadehMoini-Araghi. 1996."Decentralized tivity. The Sri Lanka case is interesting in part because it Structures for Providing Roads:ACross-Country Comparison." is a newcomer to industrialization. Policy Research Working Paper 1658. World Bank, Policy Five key findings emanate from the study that have Research Department, Washington, DC. general validity for other newcomers to industrialization - . 1996. "A Double-Cost Hidden Level of Effort Approach to among developing countries. First, the economic liber- Decentralizationof Road Provision."World Bank, Washington, DC. alization, which was neutral among activities, was largely

79 Macroeconomics successful in changing the structure of industry, raising put of recent research on growth and to bring into the both the output and the export growth rate of manufac- analysis suggestions from the development literature tures. Second, as trade barriers were reduced, resource largely ignored in Barro-type regressions. The main focus allocation improved, with greater utilization of labor per was on Sub-Saharan Africa, especially East Africa. unit of output, conforming to a Heckscher-Ohlin pat- The results confirm the fragility of many of the impor- tern of trade. There was also significant total factor pro- tant results of growth regressions. The magnitude of esti- ductivity growth following the economic liberalization. mated effects and their statistical significance appear to Third, industrial growth and export success were closely be very sensitive to small variations in the sample. related to private foreign direct investment, which Most of the recent models of economic growth seem increased in response to policy changes welcoming for- to be concerned with the more modern sectors of mar- eign investment. Fourth, the liberalization of imports ket economies. But in East Africa the agricultural sector, increased access to better-quality and cheaper interme- some of it subsistence agriculture, is still dominant. diate inputs, reducing the reliance on state-owned enter- Standard variables and specifications of growth analy- prises, which had provided high-cost, low-quality inputs sis have very weak explanatory power at the sectoral before the liberalization. Finally, a more stable macro- level, but initial sectoral composition seems to have a sig- economic environnment during the early phase of the eco- nificant effect on aggregate growth. Economic size and nomic liberalization, along with the absence of ethnic the availability of natural resources were shown to be conflict during the later phase, would have led to even useful for explaining growth. better performance. Analysis of sustained periods of high growth suggest These findings suggest that overall incentive struc- that countries that have managed to grow for a prolonged tures deserve attention despite the shift away from adjust- period at an annual rate of 7 percent have remarkably ment lending. The Sri Lanka case shows that neutral few things in common. incentives, rather than the selective promotion of par- An important limitation of the vast majority of growth ticular industries, can provide a large measure of success studies is the assumption of linearity and additivity. The in economic liberalization. study suggests that threshold effects are important and The findings have been presented at a conference in that effective policies come in packages. This explains Sri Lanka attended by economists, govemment officials, why piecemeal approaches have often proved to be and faculty members from the major universities in Sri disappointing. Lanka. In addition, seminars are planned at the Center The burgeoning literature on cross-country analyses for Development Policy, Stanford University, Palo Alto, of growth is potentially useful if we interpret the results California; the Institute of Policy Studies in Colombo, as suggestive measures of partial correlations. Attempting Sri Lanka; and the American Enterprise Institute, to derive strong policy implications of universal applic- Washington, DC. ability does not seem to be warranted. Responsibility: Operational Core Services Network, Two papers are in preparation, one on the robust- Operational Services Team-Sarath Rajapatirana ness (or lack of it) of growth regressions, and a second ([email protected]). With Premachandra one on the growth in East Africa. Athukorala, Australian National University. The Institute Responsibility: Research Advisory Staff-Moshe of Policy Studies of Sri Lanka provided data and assisted Syrquin ([email protected]). With Charles Kenny with data processing. Completiondate: September 1997. Completiondate: May 1998. Report: Athukorala, Premachandra, and Sarath Rajapatirana. 1998. The Impact of Intergovernmental Grants "EconomicLiberalization and Industrial Transformation in Sri on the Level and Composition of Local Lanka." Paper presented at the conference Independent Sri Government Spending Lanka: EconomicDevelopments 1948-98and Prospects, Central Bankof SriLanka, Colombo, March 23-24. Ref. no. 681-58C Every attempt at fiscal decentralization involves the assignment of taxes and expenditures to different levels Comparative Analysis of Growth of government and a system of intergovernmental grants. In theory these instruments should be used to improve Ref. no. 681-37C allocative efficiency, equity, and macroeconomic stabil- The main objectives of this study were to establish the ity. Central governments have tended to transfer more limitations for development policy of much of the out- spending responsibilities to local governments than rev-

80 Macroeconomics enue, using intergovernmental grants to fill the result- Tao Zhang. With Jan Brueckner, University of Illinois; ing gap. By their nature, intergovemmental grants tend Ling Li, Towson State University; Biyun Hu, Stanford to divorce local spending from local revenues and to sep- University; and Liutang Gong, Wuhan University. arate the benefits of providing local public services from Completion date: December 1997. the costs. They may also lead to inefficient and inequitable delivery of social services. These problems can become more severe, the more local governments rely on inter- Currency Crises, Financial Intermediation, govemmental grants and the less accountable they are and Nominal Rigidities to local residents. Because of the limited ability of local governments in developing countries to raise revenue Ref. no. 682-27 from their own sources, however, intergovernmental Recent events in Indonesia, the Republic of Korea, grants will continue to be a heavily used instrument of Malaysia, the Philippines, and Thailand highlight the fiscal decentralization. So it is crucial to evaluate the effect need to understand the causes and consequences of cur- of intergovernmental grants on the behavior of local rency crises. This project focuses on the consequences of governments. a currency crisis in these countries. The project has three Through lending and nonlending advice, the World parts. First, it documents the effects of rapid, substantial Bank is helping clients reform their systems of inter- devaluations on the level and configuration of economic governmental grants as part of a program to improve activity. Second, it studies the role of the financial sector intergovemmental fiscal relations and macroeconomic in propagating and amplifying the effects of currency management. But the Bank's advice is based on analysis crises. And third, it evaluates the role that nominal rigidi- of primarily industrial countries' experience with inter- ties may play in these episodes. governmental grants and so may be of little relevance to The second and third parts involve the analysis of a developing countries. Compared with industrial coun- multisector open economy model using formal statisti- tries, developing countries tend to have a much more cal methods. The project uses a case study approach to limited set of intergovernmental grants, greater separa- assess the strengths and weaknesses of this model, an tion of taxing and spending decisions, and weaker insti- important step because models inevitably abstract from tutional capacity to carry out intergovernmental fiscal institutional differences that affect the experiences of arrangements. countries undergoing a currency crisis. The study draws This research produced a positive analytical frame- on data from a number of sources, mainly the Intemational work more suitable for evaluating the impact of inter- Monetary Fund's International Financial Statistics and governmental grants on the level and composition of Bloomberg financial data. local public spending in developing economies. The Tentative findings suggest that the financial sector has research was based on panel data sets for Bangladesh played a critical role in causing and propagating the and Russia that include regional GDP, population, area, currency crises in East Asia. These findings suggest an local public expenditures, and intergovernmental grants. important continuing role for the World Bank in empha- Preliminary findings from panel data estimations indi- sizing financial sector reform in industrializing economies. cate that intergovernmental grants are fungible among Responsibility:Development Research Group, Macro- various local public expenditures at the district level in economics and Growth-Craig Burnside (cburnside Bangladesh. In Russia federal grants to regions have a @worldbank.org. With Martin Eichenbaum and Sergio larger impact on regional or local public spending than Rebelo, Northwestern University. the increase in local income-a confirmation of the fly- Completion date: November 1998. paper effect. In addition, when there is a cut in federal grants to regions and localities, there is no correspond- ing cut in local spending-a confirmation of the asym- Fiscal Decentralization in Latin America metric response of local spending to federal grants. The study provided background materials for two Ref. no. 682-97 Bank operational projects: a municipal finance project This research project investigates the effects of fiscal decen- in Bangladesh and a regional development project in tralization on macroeconomic management and equity Russia. The findings were presented at a Bank seminar and on the efficiency of resource allocation in the edu- in April 1997 and at a Bank training seminar on fiscal cation sector. It focuses on the cases of Argentina, Brazil, decentralization in June 1997. and Colombia for both these issues and also includes Responsibility: Development Research Group, Public econometric investigation of a wider sample of indus- Economics-Heng-fu Zou ([email protected]) and trial and developing countries. The three case study

81 Macroeconomics

countries were chosen because they are among the most and the changes in the mechanism for subnational polit- decentralized developing countries today and because ical accountability (election or appointment of mayors, they share many cultural and political traits, including for example). In Latin America these aspects of decen- democracy, which allows the study to control for these tralization have typically occurred to different degrees variables and focus on the effects of decentralization. The and not simultaneously, and the lack of coordination country analyses are not stand-alone case studies but seems to have caused many of the problems experienced. integrated comparisons. Thus the study investigates the effects of different designs Developing countries have carried out decentraliza- for decentralization. tion mainly as part of a broader political agenda, but with The study uses the tools of political economy and new assurances from economists that decentralization should institutional economics to explain the success and fail- improve efficiency of service delivery, that appropriately ures of decentralization. It examines how the institutional designed transfers can avert more inequality, and that arrangements affect the power, incentives, options, and appropriate rules on local spending and borrowing can information of the participants-national and subna- keep overall fiscal and macroeconomic management tional politicians, bureaucrats, creditors, school princi- intact. Research in industrial countries has investigated pals, teachers, unions, and parents. For some issues it which arrangements for decentralization are most likely uses the interest group analysis of traditional political to lead to these positive outcomes. Studies in develop- science; for other issues the new institutionalist con- ing countries have described the new institutional rules cepts of incentive-compatible contracts, principle-agent for decentralization, recommended revisions to bring relations, information asymmetries, and exit voice will them into line with received wisdom, and noted where be more useful. The case study approach is best suited problems with macroeconomic management seem to arise for investigating these subtle issues and for generating from decentralization or where the hoped-for improve- and refining hypotheses; the study will use the econo- ments in efficiency did not come. But few studies have metric analysis to test a few of the hypotheses. systematically investigated the outcomes of decentral- The case studies of Argentina and Brazil have found ization, which this study does. that in the 1980s the two countries faced similar prob- The main macroeconomic question about decentral- lems, with subnational deficits adding to excess public ization is whether it has led to ursustainable fiscal deficits. deficits and high inflation. In the 1990s both countries These concerns contrastwith earlier arguments for decen- continued with fiscal decentralization and with the strug- tralization based on the expectation that it would lead gle to achieve macroeconomic stability. Argentina had to smaller total governments, easing fiscal management. greater success, because it imposed a harder budget con- Those arguments presumed that rules or market disci- straint on the public sector at the national level and the pline would impose a hard budget constraint on subna- national executive has stronger party control of the sub- tional governments and limit their borrowing. But in national governments and of the national legislators. many countries the softness of the constraints seems to Establishing the right incentives for subnational gov- be a problem. The case studies investigate this question ernments and their creditors, as in Argentina, proved in depth, and the multinational econometric analysis uses more effective for restraining local and state borrowing panel data to further test some hypotheses. than rules for prior approvals of credit by the central The second main issue relates to the effects on the government, as in Brazil. efficiency of service delivery, alleged to be the primary The multinational econometric analysis, with a panel economic benefits of decentralization. While the recent of 32 industrial and developing countries for 1980-94, experiences with decentralization are too short to allow finds that subnational spending and deficits lead to higher a long-term assessment of these effects, existing data and spending and deficits at the national level. The relation- data that the study is collecting permit some preliminary ships are strong economically as well as statistically sig- assessments. The project focuses on the effects in edu- nificant. The findings refute the idea that subnational cation because it is always one of the most important sec- governments tend to conduct their fiscal policy inde- tors being decentralized and there is rarely much pendent from central government fiscal policy. They also privatization going on at the same time. refute the hypothesis that the transfers between central Decentralization varies along several dimensions: the and subnational governments are usually determined functional responsibilities being devolved to lower lev- exogenously by the center. Institutional variables-such els of government, the recipient level of government as having a less independent central bank or a unitary (municipal or provincial), the amount and nature of rather than federal constitutional organization-make changes in subnational financing (tax reassignment, con- the central government more likely to bail out subna- ditions of intergovernmental transfers, borrowing rules), tional governments. Major political transitions, such as

82 Macroeconomics between authoritarian and democratic regimes, lead to affect the allocation of resources by client countries (caus- higher central government deficits, on average, but make ing a shift toward social sectors), undertake institutional the central government less likely to aid subnational gov- analysis, and provide input to macroeconomic policy dia- ernments in the year in which they occur. logue. The survey also brought to light information about The results of the research will be presented at semi- budgetary procedures in client countries and disparities nars in the case study countries and at the 1999 Annual between planned and actual expenditures. Bank Conference on Development in Latin America and The survey findings suggest several conclusions: the Caribbean, tobe held in Chile. Findings have already To improve the quality of public services, the results of been presented at a Bank seminar and at the American public expenditure analysis need to be systematically Political Sciences Association annual meetings in 1998. operationalized by governments. The absence of There will be several publications targeted to policy- effective monitoring and information systems in client makers and the academic community in countries that countries contributes to poor expenditure performance. have undertaken or are contemplating decentralization. And an integral part of improving the effectiveness of Responsibility:Latin America and the Caribbean Region, public expenditure is ensuring that there are adminis- Poverty Reduction and Economic Management Sector trative and incentive systems to implement recommended Unit-Steven B. Webb ([email protected]) and procedures. William Dillinger; and Development Research Group, The work will be disseminated through Bank publi- Public Economics-Heng-fu Zou and Gunnar Eskeland. cations and a Bank workshop in the fall of 1998. With Barry Weingast, Stanford University; Ricardo Paes Responsibility:Africa Region TechnicalFamilies, Macro- de Barros, Instituto de Pesquisa Economica Aplicada economics 3-Luca Barbone ([email protected]). (IPEA); and Francesca Fornasari, Georgetown University. Completion date:June 1998. Completion date: December 1999.

Tools for Fiscal Analysis Africa Region Public Expenditure Review The Development Research Group has developed a sim- Improving public expenditure management is a high pri- ple yet flexible tool for the quantitative analysis of fiscal ority among Sub-Saharan African governments. The policies. Called the 1-2-3 model, this general equilibrium Bank's assistance in this area, in the form of public expen- model of an open economy enables policy economists, diture reviews (PERs),represented an investment of some using a popular spreadsheet format and little more than $4.3 million in fiscal 1997 and 1998. Yet PERs are often national accounts data, to calculate the likely impact of weak in relating inputs to outputs in several areas, includ- proposed policy changes, such as the effect of trade lib- ing the vital social sectors. This project investigated and eralization on the real exchange rate or the revenue impact addressed the shortcomings of PERs using two distinct of replacing trade taxes with domestic indirect taxes. The methodologies: dissemination and assessment of work model has been adopted in several countries in Africa, conducted by the Special Program of Assistance (SPA) including the CFA countries, Botswana, Ethiopia, Working Group on Public Expenditures (WGPE), and Swaziland, Zambia, and Zimbabwe, and in such coun- investigation of PER issues through a survey of Bank tries as India, Latvia, and Morocco. economists involved in such work. A practical, time-series version is now available for The dissemination work centered on discussions of use in country economic work at the World Bank to gen- changes in broad expenditure patterns in Africa and erate policy scenarios or standard tables for country assis- assessment of the findings of the Netherlands Economic tance strategies and unified surveys. A dynamic version Institute's study of nine countries' PER work (Burkina of the framework also has been developed to examine Faso, C6te d'Ivoire, Ghana, Mali, Mozambique, Senegal, the impact of fiscal policy on investment and growth. Tanzania, Uganda, and Zambia). Thatexercise contributed Econometric estimation of key parameters of the model to guidelines for public expenditure reviews aimed at has been done for several countries. More disaggregated increasing client countries' ownership of PERs, improv- versions have been developed to look at trade policy ing the impact of PERs, and orienting more of the analy- reform in India and to examine the link and interaction sis in PERs toward expenditure management and between macroeconomic policies and income distribu- outcomes. tion in Zimbabwe. The survey of economists in the Bank's Africa Region More than 500 copies of the fiscal analysis tool (on who work on PERs found that PERs vary widely in cost, computer diskettes) and 700 copies of the correspond- frequency, and form of output. It also found that PERs ing documentation have been distributed in training

83 Macroeconomics seminars and research fairs and to individuals in gov- This research consists of the preparation of a book ernments and the academic community. reviewing and evaluating these models. It has four objec- Responsibility: Development Research Group, tives. The first is to put the Bank models in a broader Public Economics--Delfin S. Go ([email protected]), perspective by comparing them with other applied macro- Shantayanan Devarajan, Bernardin Akitoby, Sethaput economic frameworks for developing countries used by Suthiwart-Narueplat, Vinaya Swaroop, and Shankar international institutions and the policymaking com- Acharya; Europe and Central Asia Region, Poverty munity. The research has carried out a comparative ana- Reduction and Economic Management Sector Unit- lytical review of applied macroeconomic models, taking Pradeep Mitra; and Office of the Senior Vice President, stock of the field and providing the necessary reference Development Economics, Development Data Group- for evaluating the Bank models. The review encompassed Jos Verbeek. With Hongyi Li, Hong Kong University; policy-oriented analytical frameworks, ranging from rudi- Tarhan Feyzioglu, Georgetown University; Suehail Issa; mentary financial programming devices to relatively and Etusyo Michida. sophisticated macroeconomic models embodying a care- Completion date: December 1998. ful treatment of expectations and dynamics. Reports: The second objective is to describe and document the Devarajan,Shantayanan. 1997. "Real Exchange Rate Misalignment structure of the Bank models and their application to spe- in the CFAZone." Journal of African Economies6(March):35-53. cific countries. The research is completing the applica- Devarajan,Shantayanan, and Delfin S. Go. Forthcoming."The tion of prototype versions of Bank models to the analysis SimplestDynamic General Equilibrium Model of an Economy." of macroeconomic policies in specific developing coun- Journalof PolicyModeling. tries, comparing the outcomes of policy experiments, and Devarajan,Shantayanan, Delfin S. Go, JeffreyD. Lewis,Sherman relating them to the structure and features of the ana- Robinson,and PekkaSinko. 1997. "Simple General Equilibrium lytical frameworks. Modeling."In J. Francoisand K. Reinert,eds., Applied Methods The third objective is to evaluate the application of for TradePolicy Modeling. Cambridge: Cambridge University models at the Bank from the point of view of users. For Press. this purpose the study conducted a survey of model users Devarajan,Shantayanan, Delfin S. Go, and Hongyi Li. 1998. focusing on the objectives, structure, cost, and perfor- "Quantifyingthe Fiscal Consequences of Trade Liberalization." mance of models. The study's fourth objective is to draw WorldBank, Development Research Group, Washington, DC. methodological and practical lessons from the Bank's Devarajan,Shantayanan, Delfin S. Go, Sethaput Suthiwart-Narueput, experience with the design and use of applied macro- and John Voss.1997. "Direct and IndirectFiscal Effects of the economic models. Euro-MediterraneanFree Trade Agreements." Paper presented On the whole, users of applied models at the World at the MediterraneanDevelopment Forum, Knowledge and Bank report high satisfaction with them. But more com- Skills for Developmentin the InformationAge, Marrakech, plex models-those with richer behavioral content-are Morocco,May 12-17. typically found more satisfactorybecause of their superior Go,Delfin S., and PradeepMitra. 1998. "Trade Liberalization, Fiscal ability to portray an economy's response to policy changes Adjustment,and RealExchange Rate in India."Paper presented and extemal shocks. They also require more resources for atthe conference Trade, Growth, and Development,held in honor development and maintenance. From the user's point of of T.N.Srinivasan, Yale University, New Haven,Conn., March view, there is a steep tradeoff between a model's sophis- 27-28. tication-its behavioral content and capacity to trace through the impact of policy and external disturbances- and its cost. That suggests that upgrades to more complex Applied Macroeconomic Models policy-oriented models should be highly selective. for Developing Countries Responsibility:Development Research Group, Macro- economics and Growth-Luis Serven (lserven Applied macroeconomic models are an essential tool @worldbank.org). With Klaus Schmidt-Hebbel, Banco for evaluating countries' policy options and growth Central de Chile; Peter Montiel, Oberlin College; Jaume prospects under different scenarios. In recent years the Ventura, Harvard University; Rodney Chun, Cornell World Bank has put significant effort into developing a University; and Douglas Smith, Columbia University. family of policy-oriented macroeconomic models for use Completiondate: June 1999. in its operational work. These models range from Reports: simple accounting frames to more complex tools with Montiel, Peter. 1994. "Applied Macroeconomic Models for Deve- rich behavioral content firmly grounded in economic loping Countries." World Bank, Policy Research Department, principles. Washington, DC.

84 Macroeconomics

Schmidt-Hebbel, Klaus, and Luis Serven. 1994. "Fiscal Policy in Easterly, William. 1998. "When Is Fiscal Adjustment an Illusion?" Classical and Keynesian Open Economies." Policy Research World Bank, Development Research Group, Washington, DC. Working Paper 1299.World Bank,Policy Research Department, Easterly,William, and Ross Levine.1997. "Africa's Growth Tragedy: Washington, DC. Policies and Ethnic Divisions." QuarterlyJournal of Economics 1995."Dynamic Response to External Shocks in Classical (November). and Keynesian Economies."In D. Curie and D. Vines,eds., North- SouthLinkages and InternationalMacroeconomic Policy. Cambridge: Cambridge University Press. Macroeconomic Interdependence -1995. "Fiscal Adjustment and the Exchange Rate under in Latin America Rational Expectations in Chile." World Bank, Policy Research Department, Washington, DC. In Latin America, as in most other regions, national eco- -1995."Fiscal and Monetary Contraction in Chile:ARational nomic performance is closely related to external condi- Expectations Approach." Policy Research Working Paper 1472. tions such as the allocation of foreign investment, the World Bank, PolicyResearch Department, Washington, DC. pattern of international trade, the cross-country diffu- -. 1995."Hacia una menor inflacionen Chile:contraccion mon- sion of technological progress, and the imitation of eco- etaria bajo expectativas racionales." In F. Morande and A. nomic policy and reforms. The objective of this project Rosende, eds., Analisisempirico de la inflacionen Chile.Santiago: is to shed light on the macroeconomic interdependence ILADES. both among Latin American countries and between them - 1996. "Adjuste fiscal y tipo de cambio bajo expectativas and industrial and East Asian economies. racionales en Chile." In E Morande and R.Vergara, eds., Analisis The project attempts to characterize both the comove- empiricodel tipode cambioen Chile.Santiago: Centro de Estudios ment of GDP and other macroeconomic variables among Puiblicos. country groups and the transmission of shocks to these Ventura, Jaume. 1995. "World Bank Macroeconomic Models: variables across countries. It also attempts to character- Findings and Suggestions." World Bank, Policy Research ize the effects that the recent trade liberalization and Department, Washington, DC. removal of capital controls are having on macroeconomic interdependence. It asks whether the patterns of interdependence among Latin American countries have Crisis, Polarization, and Reform changed in the aftermath of liberalization, whether the links among these countries have become stronger, and This project looks at countries' policy decisions as deter- whether vulnerability to economic conditions outside the mined by two opposing forces: crisis and polarization. region have become more important. Macroeconomic Crisis tends to spur reform, while polarization of soci- interdependence will be studied both in the whole of ety between opposing interest groups tends to delay Latin America and in three trade agreement areas- reform. The project has produced several papers explor- Mercosur, the Andean Group, and Central America and ing aspects of these issues. Several other papers are under the Caribbean. preparation or are planned. One examines the ability of The analysis, quantitative estimates, and policy lessons policymakers to postpone true reform by engaging in resulting from the project should support the Bank's oper- illusory reforms. Another will examine who minds infla- ational tasks in several ways. They will improve the assess- tion more, the poor or the rich. And another will test the ment of each country's vulnerabilities to external hypothesis that crisis leads to reform for a number of conditions and shocks, from both within and outside alternative crisis indicators. the region. They will also improve the assessment of each Responsibility:Development Research Group, Macro- country's integration in the regional economy, permit- economics and Growth-William Easterly (weasterly ting a better evaluation of the cross-country externali- @worldbank.org). ties of stabilization and reform programs of key economies Completion date:June 1999. in the region. They will increase the understanding of the Reports: role of macroeconomic policy coordination in the region, Alesina,Alberto, R. Baqir,and William Easterly.1998. "Public Goods including the role of trade agreements, commodity price and Ethnic Divisions." World Bank, Development Research stabilization funds, and capital controls. And they will Group,Washington, DC. enhance the capacity to estimate macroeconomic pro- Bruno, Michael, and William Easterly. 1996."Inflation's Children: jections and formulate macroeconomic analysis. Tales of Crises That Beget Reforms." AmericanEconomic Review Findings will be presented at the 1998 Latin American (May). Meetings of the Econometric Association, to be held in Drazen, A. 1998."Political Contagion in Currency Crises." Buenos Aires in October. In March 1999 a conference

85 Macroeconomics will be organized, and a volume of conference proceed- phase. The other countries are planning forums to be held ings will be issued shortly thereafter. by early fall of 1998. Responsibility:Development Research Group, Macro- In the past year the project was substantially delayed economics and Growth-Norman Loayza (nloayza as a result of the desire of nongovernmental partners to @worldbank.org); and Latin America and the Caribbean allow the civil society networks in each country more Region, Central A.merica Country Management Unit- time to organize and the resolution of a special agree- Humberto Lopez, and Poverty Reduction and Economic ment that allows participating representatives of non- Management Unit-Lin Liu. With Ernesto Talvi, CERES, governmental organizations and civil society to have Uruguay; Mauricio Cardenas, Fedesarrollo, Colombia; access to internal World Bank documents. and Luis Hall and Edgar Robles, Instituto de Responsibility: Development Research Group, Office Investigaciones en Ciencias Economicas (IICE), Costa of the Director-Constance Newman (cnewman Rica. @worldbank.org). Completion date: June 1999. Completion date: December 1999.

Structural Adjtustment Participatory Joint Development Research Group- Review Initiative Africa Region Work Program on African Development This is a joint project with seven governments and an international network of nongovernmental and civil soci- Achieving accelerated economic growth and poverty ety organizations. The objective is to examine the impact reduction in Sub-Saharan Africa may be the biggest chal- of structural adjustment through a broad-based consul- lenge for the development economics profession and tative process involving both public forums and field the World Bank. The Bank's Development Research Group investigations. The project aims to improve understanding and Africa Regional Office initiated a joint effort to not only about the effects of adjustment policies but also develop a work program on salient issues on which fur- about how broad participation of local civil society can ther analytical work could lead to improved policy out- improve policymaking. The initiative will attempt to iden- comes in Africa. Preliminary work has identified several tify practical changes in economic policies for both gov- issues: debt, finance, country selectivity, public resource ernments and the Bank. management, equitable rural development, and trade The seven countries participating in the exercise are and industrial policy. Bangladesh, Ecuador, Ghana, Hungary, Mali, Uganda, The work program consists of a set of research pro- and Zimbabwe. In each country nongovernmental and jects on these topics carried out in 10 sample countries civil society organizations have set up local networks and so that the interaction among the topics can be assessed. representative committees to work with representatives The work involves collaboration with African researchers from the Bank and from different parts of the govern- and outside institutions. ment in designing the work. The tripartite steering com- Current research projects focus on early childhood mittee in each country is responsible for planning first education in Kenya, regional integration in Africa, an opening public forum, then a field investigation into bank insolvency in Zambia and Zimbabwe, the the impact of selected policies, and finally a closing forum impact of African debt on investment, the political where the results of the analysis are presented. The pro- economy of aid and reform in Africa, and telecommuni- ject was officially launched by a global forum in cations privatization in C6te d'Ivoire, Ghana, and Washington, DC, in July 1997 that was attended by all Tanzania. the country participants. The project will end with a Responsibility: Development Research Group, Public similar global forum once all the country studies have Economics-Shantayanan Devarajan (sdevarajan been completed. @worldbank.org) and Howard Pack, Regulation and The fieldwork forms the core of the project's research. Competition Policy-Mary Shirley, Finance-Gerard Consistent with the consultative, participatory nature Caprio Jr.,Poverty and Human Resources-Paul Glewwe, of the project, the research will use an innovative approach and Macroeconomics and Growth-David Dollar; and to ensure that several methods of analysis-from quali- Africa Regional Office,Office of the Vice President-Alan tative to quantitative to new participatory methods-will Gelb. With Ndjuguna Ndungu, Tunji Osobudi, Samuel be used. Wangwe, Tchetche Nguessan, Mathieu Meleu, Jean-Paul Hungary and Uganda recently carried out their open- Azam, and Jean-Jacques Laffont. ing public forums and are now beginning the fieldwork Completion date: June 2000.

86 INTERNATIONAL ECONOMICS

Foreign Direct Investment Spillovers The study is augmenting the cross-section analyses in Developing Countries with panel analyses, but only in Malaysia; a change in the establishment identification system in Mexico pre- Ref. no. 680-07 cludes the linking of the 1992 and 1995 firm surveys. For Many developing countries see foreign direct investment Malaysia the 1994 survey has been linked to a 1997 sur- (FDI) as a key element of their development strategies vey that elicits a wealth of information about interfirm and seek to attract it through a variety of financial incen- linkages. Preliminary tabulations of the 1997 survey data tives. They view FDI as a source of important direct ben- indicate the presence of dense networks of interfirm link- efits for the host country-financing new firns or business ages with both formal and informal flows of technology expansions, creating jobs, and generating tax revenues. and assistance among firms in some sectors, and few They also believe that FDI produces important indirect interactions in other sectors. Econometric analysis using benefits for domestic firms-spillovers-from the accel- these panel data is focusing on the effects of interfirm erated transfer of superior technology, tumover of skilled linkages on growth in the technical efficiency of local and labor, and increased export opportunities through links foreign firms. with multinational corporations and foreign buyers. This This research project should provide developing coun- study seeks to quantify the most important spillovers try policymakers and Bank staff with new insights into from FDI and to investigate the mechanisms through the nature of FDI spillovers, the role of interfirm links which these spillovers occur. and industry clusters in technology diffusion and skills In the course of the research the study has shifted its upgrading, and potentially useful policy instruments for focus to just two developing economies-Malaysia and promoting these links and boosting growth in technical Mexico-where firm-level cross-section and panel data efficiency. are available on foreign ownership, research and devel- Responsibility: Private Sector Development Depart- opment (R&D) spending, training, and production. Data ment, Business Environment Unit-Hong Tan (htan on the production, R&D spending, and worker training @worldbank.org) and Geeta Batra. of foreign firms are used to characterize the presence and Completiondate: December 1998. importance of FDI and to estimate the potential tech- Reports: nology and skill spillovers of FDI for a sample of domes- Tan,Hong. 1998. "Interfirm Linkages and TedcnologyTransfer in tic firms. The effects of FDI on domestic firms are Malaysia:Annotated Tabulations." World Bank, Private Sector measured through frontier production function model DevelopmentDepartment, Washington, DC. estimates of the efficiency-enhancing effects of FDI on Tan,Hong, and GeetaBatra. 1995. "Technology Spillovers from FDI: domestic firms, through aggregate measures of FDI pres- Evidencefrom Mexico." PSD Working Paper. World Bank, Private ence, and through measures of the technological and SectorDevelopment Department, Washington, DC. training activities of foreign firms. World Bank. 1997. Malaysia: Enterprise Training, Technology, The cross-section production function analyses-based and Productivity. World Bank Country Study. Washington, on data from 1992 for Mexico and 1994 for Malaysia- DC. indicate that the larger the foreign presence, as measured by the FDI share of industry output or employment, the higher the efficiency levels of local firms. In Mexico the Revenue Consequences of Trade Reform evidence also suggests that R&D by foreign firms raises the productivity of local firms in the same industry, sug- Ref. no. 680-93 gesting that technology spillovers are important. In Trade liberalization can cause fiscal problems, especially Malaysia it is R&D by joint ventures that has the most in countries where tariffs are a major source of revenue. significant effect on domestic firms. In Mexico no evi- Many economists have discussed this issue, generally dence was found for skill spillovers from training by taking an aggregative and macroeconomic perspective. foreign firms. In Malaysia, by contrast, the intensity of But projecting the probable effects of trade reform training provided by multinational corporations has a is difficult because of the lack of detailed data linking positive impact on the efficiency of local firms. imports and revenue collections. This problem is

87 International Economics particularly important where high tariff rates are com- A Strategic Approach to Asset bined with a pervasive system of exemptions and quan- and Liability Management titative restrictions. in Developing Countries This project is supporting improved design and implementation of trade reform programs by exploiting new Ref: no. 681-23 data that have recently become available in a standard Developing countries regularly seek advice on the man- format for a large number of developing countries. agement of their external assets and liabilities. But that The new data come as a result of a customs administra- advice often is nonoptimal or simply wrong. Although tion system, the Auatomated System for Customs Data many tactical tools for active risk management in devel- (ASYCUDA), that was developed and implemented oping countries have been developed in the past decade, by UNCTAD. Roughly 76 countries have adopted a framework for developing a strategy that incorporates the system since 1985, and 14 more are in the process of country-specific factors has lagged far behind. Typical doing so. The data include all the information from the approaches to asset and liability management exclude customs entry documents and an exhaustive coding of trade and fiscal flows, for example, resulting in strate- the system of rates and exemptions, including historical gies that are unrelated to any measure of the country's changes. earnings potential and that ignore the natural hedges in Data have been collected for five countries-Belize, the import and export sector. Benin, Ghana, Guatemala, and Zimbabwe-for 1995, This project has developed tools and guidelines that 1996, and 1997. Data for the first two years have been incorporate country-specific factors to assist countries processed, and data for 1997 will be processed shortly. in devising an asset and liability management strategy. For each country the tax rate file, the exemption code file, A general modeling process has been completed that and the customs entry file have been extracted, converted includes trade and fiscal flows and estimates of the sen- to DOS, and loaded into a database program (Foxpro). sitivity of imports and exports and revenues and expenses The data have been subjected to exhaustive screening to commodity prices, interest rates, exchange rates, and and cleaning to render them suitable for analysis. other macroeconomic factors. The data for Zimbabwe were used to analyze the The project has finished a case study of the applica- impact of proposed trade reforms by combining the new tion of the methodology and model to Colombia, rates with the existing trade and exemption patterns emphasizing significant paradigm shifts over existing under alternative assumptions about import elasticities. methodologies. Using the practical input acquired in part The data and the analysis were instrumental in assisting during a mission to the Colombian Central Bank and the government in framing its final tariff reform. Further Ministry of Finance, the project has formulated an asset analysiswasdonetoassesstheconformityofthechanges model for the Central Bank, a liability model for the with Zimbabwe's commitments under the Cross-Border Ministry of Finance, and a combined asset and liability Initiative, a regional trade agreement. model to ease financial coordination between the two A similar analysis is under way for Ghana. Estimates institutions. For the asset model the project has devel- of the revenue costs of the exemption system are being oped techniques for capturing the uncertainty structure formulated and will be shared with the government and of the joint stochastic movements of interest and exchange the Intemational Monetary Fund. In addition, in response rates for use in the stochastic dynamic optimization to interest in the Bank's Africa Region, similar work is model. Macroeconomic factors and commodity price risk being done in southern Africa to support analysis of the have been added. Specific computing tools for the solu- provisions of the Southern African Development tion of stochastic dynamic optimization problems have Community agreement. Data have been collected for been developed and linked to a modeling system. Malawi, South Africa, Tanzania, and Zambia. All the data The model is portable to a PC, and the project has trans- are available to interested parties. ferred the methodology and model to the country. The A seminar was held in January 1996 to inform Bank ability to work with a modeling system on a PC allows staff and others about the project and to disseminate users in Colombia to introduce changes to the equation preliminary results. Twenty-five Bank and Intemational system (constraints, policies, and the like) and eases the Monetary Fund staff attended. tree generation process capturing the stochastic nature Responsibility:Development Research Group, Trade- of the problem. Alexander Yeats ([email protected]) and John Nash. Feedback has indicated that the strategic tools and With Ronald D. Hood, Ron Hood Associates; and Daniel guidelines will greatly enhance Colombia's (and perhaps Radack. other countries') capacity for asset and liability man- Completion date:Jlne 1999. agement and provide new techniques for risk analysis.

88 International Economics

Active use of the model is planned at the Central Bank To address these issues, the project constructed a large and the Ministry of Finance. database from internal Bank sources that includes staff The project is further refining the tools and solution resources spent on nonlending services (economic and process developed for understanding and analyzing risk sector work) and preparation and supervision of lend- and model solutions and will publish the results. The ing projects; total loan commitments; project-specific dis- project is also investigating more generally how best to bursement profiles; dates of initiation, approval, integrate these tools into developing countries' opera- effectiveness, and closure for projects; and project eval- tions and to accommodate their policy objectives, and to uation ratings from the Annual Review of Portfolio ensure that the model will be treated as a tool for deci- Performance and by the Operations Evaluation Depart- sionmaking and not as a substitute for it. ment. The database was used to examine whether, hold- The project has involved intense collaboration with ing other factors constant (such as country-specific policies teams from the Colombian Central Bank and Ministry and institutional indicators that might affect project suc- of Finance and several training programs, including a cess), nonlending services have an appreciable impact one-week, hands-on course in Washington, DC, in May on the success of Bank projects. 1998.Besides the six participants from Colombia's Central Results indicate that economic and sector work has Bank and Ministry of Finance, the workshop was attended had a significant and positive impact on the two most by 16 participants from central banks and ministries of commonly used indicators of success-the ratings of pro- finance in developing countries. Presentations were also jects (as satisfactory or unsatisfactory) and their reesti- made at the Training Course on Debt Management (World mated economic rate of return. Converted into monetary Bank), Moscow, May 1997; Forum on Sovereign Debt measures, the results show that the benefits from eco- Management (World Bank), Washington, DC, October nomic and sector work far outweigh the costs and that 1997; Debt Management Seminar (UNCTAD), December projects in countries and sectors where more economic 1997, Geneva; and EU-Accession and Sovereign Debt and sector work had been performed require significantly Management Seminar (World Bank and European Union), fewer resources for preparation and supervision. Brussels, December 1997. The project was part of a departmentwide research Responsibility: Poverty Reduction and Economic effort on aid effectiveness, and results are being dissem- Management Network, Economic Policy Division-Stijn inated in this context. Findings were presented at a Bank Claessens ([email protected]); and Information workshop in December 1996. The database is being used and Technology Services Department, Information in other efforts in the Development Research Group and Engineering Unit-Jerome Kreuser. With Roger J.-B.Wets, elsewhere in the Bank. University of California at Davis; and Philippe Jorion, Responsibility: Development Research Group, Rural University of California at Irvine. Development-Klaus Deininger (kdeininger@worldbank. Completion date:July 1998. org); and Office of the Senior Vice President, Development Report: Economics-Lyn Squire. Claessens, Stijn,Jerome Kreuser, Lester Seigel,and Roger J.-B.Wets. Completion date:August 1997. Forthcoming. "A Tool for Strategic Asset and Liability Management." In Proceedingsof Debt Management Seminar. Geneva: UNCTAD. The Dynamic Impact of Trade Liberalization in Developing Countries

Effectiveness of World Bank Ref. no. 681-40C Nonlending Services International trade economists and Bank policy advice have typically argued that an open trade regime is very Ref. no. 681-26C important for economic growth and development. This The increased private capital flows to developing coun- view has been based in part on neoclassical trade theory, tries have led many to suggest that the Bank's compar- which generally finds that trade liberalization improves ative advantage will shift to nonlending services. But a country's welfare; in part on casual empirical observa- empirical evidence on the impact and effectiveness of tion that countries that remain highly protected for long nonlending services is thin. This research examined the periods appear to suffer significantly and perhaps cumu- effect of nonlending services on the success of Bank lend- latively; and in part on empirical work that also finds trade ing projects and investigated whether nonlending ser- liberalization beneficial to welfare and growth. vices have an impact on sectoral policies or the efficiency Yet numerical estimates of the impact of trade liber- of government spending. alization have generally found that it increases the

89 International Economics welfare of a country by only about 1 percent of GDP. These These results provide support for the strong version estimates have been based on comparative static mod- of the link between trade liberalization and economic els, however, and researchers typically claim that they growth. They should buttress the intellectual case in the would be much larger if they incorporated the dynamic development community for the importance of openness gains from trade liberalization. These gains have not yet for growth. been quantified. This project developed models that will Responsibility:Development Research Group, Trade- quantify the relationship between trade liberalization David Tarr ([email protected]). With Thomas and growth. Rutherford, University of Colorado. The development of endogenous growth theory has Completiondate: June 1998. provided a clear theoretical link from trade liberalization Reports: to economic growth. Because of the complexity of the Rutherford, Thomas, and David Tarr. 1997. "Trade Liberalization models, the theoretical literature has necessarily been and Endogenous Growth in a Small Open Economy:An based on rather aggregate models, and it has focused on IllustrativeModel." Paper presented at theconference Trade and the steady-state growth path, so it is difficult to gain Technology Transfer: The Evidence with Implications for insight into the dynamic growth path of the key vari- DevelopingCountries, Milan, April. ables. This project developed applied general equilib- . 1998. "Regional Trading Arrangements for Chile: Do the rium endogenous growth models that would make it Results Differ with a Dynamic Model?" Paper presented at the possible to obtain a number of important insights into conference Using Dynamic Computable General Equilibrium the relationship between trade liberalization and growth. Modelsfor PolicyAnalysis, Assens, Denmark, June 14-17. It focused on the class of models that are relevant to developing countries-small open economies with technological change generated primarily in the rest of the Aid Allocation in a Federal System: world. A Case Study of India The research first quantified the dynamic gains from trade liberalization, taking into account the adjustment Ref. no. 681-41 costs associated with forgone consumption, so as to assess Among developing countries, India continues to be one the claim that the dynamic welfare gains from trade lib- of the largest recipients of foreign aid. The average annual eralization are considerably larger than the comparative disbursement of aid (official grants and concessionary static estimates. Using a numerical model, it then inves- loans) to India in the first half of the 1990s was close to tigated the importance of the availability of a variety of $2.9 billion. On a yearly basis aid financed roughly 4.2 imported inputs into domestic production as well as tech- percent of the combined spending of the central gov- nological spillovers on domestic production deriving ernment, state governments, and public sector enter- from imported goods. After developing somewhat styl- prises. Public spending has long been considered one of ized models, the study applied the model to a small open the main channels through which foreign aid influences developing economy that has recently undertaken trade development outcomes. What has been the influence of liberalization and signed an important regional trade foreign aid on the level and composition of public spend- agreement. The analysis drew on the Global Trade ing in India? Has aid been spent on the purposes intended Analysis Project database, the Trade Unit's database on by the donors? What has been the impact of aid resources tariffs, and input-output tables as appropriate. -particularly those for specific state government pro- Two papers have been produced. The first extends a jects-on fiscal transfers from the central to the state gov- comparative static analysis of Chile's trade policy options ernments? Is foreign aid monitoring effective at the to a Ramsey-type d,ynamic model of Chile with constant country level? At the state level? These are the questions returns to scale and perfect competition. It shows that this research addresses. simply adding a dynamic element to the analysis does The research incorporates the intergovernmental fis- not increase the welfare gains from trade liberalization cal link in examining the economic fungibility of exter- much. The second paper develops a stylized, somewhat nal assistance and models three dimensions of fungibility aggregate computable general equilibrium model of a -two at the federal level and one at the subsidiary level. small open economy with endogenous growth entering Using data on India, the study does not find evidence through an Ethier-Dixit-Stiglitz variety productivity mul- that foreign aid funds are being spent for the purpose tiplier. Trade liberalization in this model dramatically intended by the donor agencies. Most funds at both the increases welfare because it results in a significant increase central and the state level-are fungible and are spent in the number of varieties (technologies) available in the on activities that would have been undertaken anyway; economy. foreign aid merely softens the budget constraint.

90 International Economics

Thus the results show that external assistance to India ability except in Chile and Mexico. Furthermore, in only has had no perceptible impact on the composition of pub- a few cases have policy reforms accelerated the trans- lic spending. One approach to increase aid's develop- mission of price signals. ment impact might be to link aid with an overall public The research results were presented at the October expenditure program that provides adequate resources 1997 Latin America and the Caribbean Economics to crucial sectors. Association conference in BogotA,Colombia. The findings were discussed at two workshops in Responsibility: Development Research Group, Rural November 1997, one at the Indira Gandhi Institute of Development-John Baffes [email protected])and Development Research, with 50 participants from the Panos Varangis. With Bruce Gardner, University of development community, and another at the National Maryland; and Mohamed Ajwad, University of Illinois. Institute of Public Finance and Policy in New Delhi, Completion date:June 1998. attended by 30 participants from academia and the development community. Responsibility: Development Research Group, Public Implementation of the Uruguay Round Economics-Vinaya Swaroop (vswaroop@worldbank. Agreement on Agriculture: New Issues org) and Andrew Sunil Rajkumar. With Shikha Jha, Indira and Progress in Post-Round Liberalization Gandhi Institute of Development Research. Completion date: December 1998. .Ref. no. 681-69C Report: The achievements of the Uruguay Round in bringing Jha, Shikha, and Vinaya Swaroop. 1998."Fiscal Effects of Foreign agricultureunder GATTdisciplines are well documented. Aid:ACaseStudyof India."World Bank,Development Research New rules on market access were developed to control Group, Washington, DC. import barriers, reduce tariffs, and convert nontariff barriers into ordinary customs duties. But it is the implementation of the commitments made under the Uruguay World Price Signals, Policy Reforms, Round that will determine both the economic impact of and Domestic Commodity Price Behavior the Round and the starting point of future multilateral liberalizations, and only now is it apparent how coun- Ref no. 681-49C tries have implemented their generalized commitments. Agricultural policies in many developing countries have This research provides an ex post evaluation of coun- tended to isolate domestic prices from world price move- tries' implementation of Uruguay Round commitments ments either directly, through tax or subsidy mechanisms, in market access in 1995-96. Based on actual implemen- or indirectly, through quantitative restrictions. These tation by 33 countries, the analysis evaluated whether interventions have shifted resources into or out of agri- countries are choosing to implement their commitments culture, depending on whether the effect was to implic- according to the spirit of the agreement or taking advan- itly subsidize or implicitly tax the sector. A number of tage of the opportunities it provides to manage trade and studies have found that both taxation and subsidization maintain protection. The study covered Australia, Canada, through these policies have harmful effects in develop- the European Union, Japan, New Zealand, Norway, the ing as well as industrial countries. United States, and selected countries in Asia (India, the During the mid-1980s and early 1990s many devel- Republic of Korea, and the Philippines), Central Europe oping countries embarked on policy reforms under struc- (Poland), Latin America (Chile, Colombia, Costa Rica, tural adjustment programs, usually with the assistance Guatemala, and Mexico), the Middle East (Egypt and of multilateral and bilateral lending institutions. One of Morocco), and Africa (Tunisia and Zimbabwe). The study the objectives of such programs has been to move domes- estimated applied nominal protection based on price com- tic prices close to international ones. The transmission parisons and a trade restrictiveness index for selected of world price signals to domestic markets allows more case study countries. It drew on data from World Trade efficient allocation of resources not only in the commodity Organization (WTO) country notifications, tariff sched- sector directly affected but also in the overall economy. ules from governments, and UNCTAD sources. This study examined the extent to which domestic The results show that the newly established tariff rate prices move closer to world prices following policy quotas created new opportunities for rent seeking and reforms, using data on 31 commodities in Argentina, government intervention in agricultural trade. The new Chile, Colombia, Egypt, Ghana, Indonesia, Madagascar, tariff rate quotas are allocated to particular countries, and Mexico. The results indicate that world price sig- domestic producer groups, or state trading enterprises nals account for only a small part of domestic price vari- with monopoly or exclusive rights. Thus the new trade

91 International Economics regimes have resulted in coalitions to preserve the sta- of MultilateralNegotiations in Agriculture."Paper presented tus quo. The applied protection above the tariff quotas at the FirstAnnual Conference on GlobalEconomic Analysis, during the first year of implementation of the Uruguay Purdue University,Center for GlobalTrade Analysis,West Round is high in many products. The amount of liberal- Lafayette,Indiana, June 8-10. ized trade is controlled by the tariff quotas, and market Ingco,Merlinda, and FrancisNg. 1997."Distortionary Effects of access is subject to administrative rather than market StateTrading in AgriculturalTrade: Issues for the Next Round forces in these products. In some products under state of Negotiations."Policy Research Working Paper 1915.World trading in several countries, the operations of the state Bank,Development Research Group, Washington DC. (Also trading enterprise effectivelynullify the intended objec- forthcomingin WorldBank EconomicReview.) tives of the market access concessions reached under the Uruguay Round. Significant price distortions remain in trade in products subject to state trading. Economic Policies and the Effectiveness For industrial countries the findings of high applied of Foreign Aid protection in agricultural products suggest that further reforms in multilateral trade rules are required. For devel- Ref no. 681-70C oping countries the findings suggest that opportunities This research, part of a larger Development Research to gain from multilateral trade liberalization were lost Group study on aid effectiveness, aimed to answer sev- because of lack of binding commitments. eral questions: Does aid have a positive effect on growth The research outputs will be helpful in formulating in the presence of good economic policies? Have donors policy advice in the context of Bank country assistance systematically allocated assistance in favor of good eco- strategies for the rural and agricultural sector. They will nomic policies? Has aid affected policies-for good or also be helpful in identifying issues of interest to client for ill? What factors influence the success or failure of countries and enhancing their participation during the structural adjustment programs supported by the World next round of multilateral negotiations. Bank and the International Monetary Fund? How can we The findings have been disseminated at conferences reform aid to strengthen its support of policy reform and workshops, including a Bank training seminar, and of growth? International Trade and the WTO: Implications for The research included a theoretical explanation of how Developing Countries, in February 1998. The seminar aid might affect growth in the context of a neoclassical was attended by Bank economists and staff from the growth modeland looked atthe sensitivity of these effects International Monetary Fund and the Inter-American to the introduction of strategic behavior by policymak- Development Bank. ers. It used an empirical approach to measure the effects Responsibility:Development Research Group, Trade- of aid on growth and the interactions between aid and Merlinda D. Ingco ([email protected]) and Francis policy. Ng. With Dale Hathaway, National Center for Food and The research showed that aid has a positive effect on Agricultural Policy. growth in a good policy environment but no effect in a Completiondate: June 1998. poor policy environment. It found a similar result for Reports: the change in infant mortality. These findings suggest Ingco,Merlinda. 1997. "Agricultural Protection." In R.McDougall, that foreign aid would have a greater impact on growth ed.,Global Trade, Assistance, and Protection:The GTAP 3 Database. and poverty reduction if it were more systematicallyallo- Purdue University, Center for Global Trade Analysis, West cated to poor countries with good reform programs. The Lafayette,Indiana. research also showed that there has been some tendency .1997. "Has Agricultural LiberalizationImproved the Welfare for multilateral aid to be allocated to poor countries with of Least-Developed Countries? Yes." Policy Research Working good policies, but no such tendency for bilateral aid. Paper 1748.World Bank, International Economics Department, The study also examined the factors affecting the suc- Washington,DC. cess or failure of reform programs supported by World .1997. "Market Access in Agricultural Trade: Issues for the Bank adjustment loans. It showed that for 75 percent of Next Round of Negotiations." Paper presented at the work- reform programs the outcome can be predicted success- shop Agricultural Policies in Africa and the Next Round of fully with underlying political economy variables. In par- Negotiations, German Agency for TechnicalCooperation (GTZ) ticular, a democratically elected leader who has recently and German Foundation for International Development (DSE), taken office has a far higher probability of success than Feldafing, Germany, December 17-19. an authoritarian ruler in power for a long time. Factors -1998."Implementation of Market Access Commitments in under the World Bank's control have no significant effect Agriculture: Welfare Evaluation of Issues for the Next Round on the success or failure of reform.

92 International Economics

Findings have been presented at workshops at Analysis Project database and a model constructed and the Bank and the International Monetary Fund and at maintained at Purdue University. academic meetings. They were also featured at a Model simulations suggest that the emergence of the symposium, cohosted by the Bank and Japan's Over- Big5 countries will generate significantbenefits for indus- seas Economic Cooperation Fund, held in Tokyo in trial countries and for most other developing countries. September 1997 and at a seminar at the World Bank- These benefits include generally rising real wages for International Monetary Fund Annual Meetings in Hong both skilled and unskilled workers, resulting from broader Kong. The results also contributed to the World Bank opportunities for specialization along lines of compara- Policy Research Report AssessingAid-What Works, What tive advantage and from improved terms of trade. Doesn't, and Why (New York: Oxford University Press, Moreover, half the growth in industrial country exports forthcoming). in the next 25 years is expected to be in exports to devel- Responsibility: Development Research Group, oping countries, based in part on growing specializa- Macroeconomics and Growth-David Dollar (ddollar tion in service exports. @worldbank.org), Craig Burnside, and Jakob Svensson. Among developing regions, the Middle East and North Completion date:June 1998. Africa, Sub-Saharan Africa, and Latin America and the Reports: Caribbean will derive the largest welfare gains from the Bumside,Craig, and DavidDollar. 1997. "Aid, Policies, and Growth." emergence of the Big 5. Lower relative prices for some Policy Research Working Paper 1777. World Bank, Policy labor-intensive products as a result of trade liberaliza- ResearchDepartment, Washington, DC. tion and increased participation by countries with abun- .1998."Aid, the IncentiveRegime, and PovertyReduction." dant unskilled labor, such as China and India, may, PolicyResearch Working Paper 1937. World Bank, Development however, generate some pressures on unskilled wages in ResearchGroup, Washington, DC. a few countries with a closely similar structure of endow- Dollar,David, and Jakob Svensson. 1998. 'What Explains the Success ments. But these countries can offset such pressures by or Failureof Structural Adjustment Programs?" Policy Research accelerating trade liberalization, a policy that tends to ben- WorkingPaper 1938. World Bank, Development Research Group, efit the most abundant factor of production (unskilled Washington,DC. labor), and by undertaking other policy reforms to improve the efficiency of their allocation and use of resources. The analysis also suggests that fears that fast growth in The Implications of Rapid Growth the Big 5 will generate significant increases in world food in Large Developing Countries and energy prices do not appear to be well founded. The information and analysis from this research should Ref no. 681-75C prove useful to developing country policymakers in Several large developing and transition economies- designing policies to take advantage of the market oppor- Brazil, China, India, Indonesia, and Russia-have tunities and potential gains from specialization and trade achieved or are likely to achieve more rapid growth and that will arise as a result of the emergence of the large integration into the world economy as a result of policy developing countries-as well as policies to ease adjust- reforms undertaken in recent years. These countries- ment to intensifying competitive pressures and reduce the Big 5-contain about half the world's labor force.This undue exposure to potential market risks. research assesses which countries or groups of coun- Research results are summarized in the World Bank's tries are likely to be most affected by the emergence of GlobalEconomic Prospects and the DevelopingCountries 1997 these large developing countries and derives broad quan- (Washington, DC, 1997) and were presented as part of titative estimates of the potential size of changes in world an extensive international program of dissemination of and national resource allocation, production, trade, and the publication in September 1997. A background report product and factor prices over the next 25 years as a result on the assumptions underlying model simulations has of this process. Taking these effects into account, the study been prepared by consultants at Purdue, and a final report then explores what remedial policy measures affected on the project will be completed during the fourth quar- countries can take to mitigate adjustment costs or take ter of 1998. advantage of new opportunities. Responsibility: Office of the Senior Vice President, Because of the critical importance of intersectoral Development Economics, Development Prospects resource allocation effects in the problem being studied Group-Milan Brahmbhatt (mbrahmbhatt@worldbank. and the need for global macroeconomic consistency, the org), T. G. Srinivasan, and E. Mick Riordan. With Thomas research uses a multiregion, applied general equilibrium Hertel, Purdue University. approach. The main data sources are the Global Trade Completiondate: January 1998.

93 International Economics

Understanding Capital Market Crises lation.But all emergingmarkets havebecome more closely in Emerging Economies: The Role of integrated in the 1990s,with financial cyclesmore syn- Announcements and News in Spreading chronized within and across regions. Crises and Stopping Contagion In sum,capital market integration has resulted in closer synchronization of financial cycles,.with the onset of finan- Ref. no. 682-26 cial booms and the timing of the recoveries in the 28 coun- This research project looks at the issue of contagion in tries examined becoming more aligned across countries. financial crises. The project consists of two studies. The But the boom-bust cycle of financial markets has not first focuses on financial cycles, characterizing upturns changed substantially over time. In some cases, such as and downturns in stock market prices in countries that Latin America, the amplitude of financial cycles has have recently faced a severe currency and banking cri- diminished. sis. The study includes seven East Asian economies (Hong The second study looks at the role of news stories in Kong, Indonesia, the Republic of Korea, Malaysia, the spreading contagion to other countries and in isolating Philippines, Taiwan [China], and Thailand), seven Latin an economy from an external crisis. It tries to determine American countries (Argentina, Brazil, Chile, Colombia, whether daily movements in stocks, exchange rates, and Mexico,Peru, and Venezuela), and seven European coun- interest rates in the East Asian economies during the 1990s tries (Denmark, Finland, Ireland, Norway, Portugal, Spain, are related to daily economic news stories published in and Sweden). As a benchmark the study also includes newspapers. It examines whether changes in the corre- the G-7 countries (Canada, France, Germany, Italy, Japan, lations between interest and exchange rates are related the United Kingdom, and the United States). to certain news about the economy. The study also exam- The study assesses whether the last crisis in East Asia ines whether announcements and information released is different from previous contractions in the region. Then by Asian governments after the Thai crisis helped to avert it compares the East Asian stock market cycles with the contagion from abroad. And it tries to identify what types European, G-7, and Latin American cycles. It looks at of announcements seemed to be adequate to contain the whether financial c ycles are coordinated across countries, spillover and what types accelerated the spillover. and if so, how. It also examines whether stock markets Because of the large number of news stories recorded comove differently throughout cycles. And it looks at the during the East Asian crisis, observing the market reac- cross-country comovement in different sample periods tion to each piece of news would be difficult. Thus the to investigate whether stock markets move more closely study uses a methodology that involves looking at what together when capital markets are more integrated. happens on the days when the markets reacted strongly. To isolate fluctuations of variables at business cycle For a large but manageable number of stock market frequencies, the study uses an approach pioneered by changes, the study identifies the news stories released on researchers at the National Bureau of Economic Research those days. By tracing the country originating the news, and constructs an algorithm that identifies business cycle the study can then examine the cross-country spillover turning points. The evidence on financial crises shows effects. The analysis uses data sets from Bloomberg, the that they are preceded by boom-bust cycles in financial Federal Reserve Board, and the International Monetary markets of an intermediate duration-between two and Fund's International Financial Statistics. three years. Thus the study examines stock market fluc- The findings show that liberalizing capital markets tuations at intermediate frequencies. does not generate excess volatility in local equity mar- The study's main results are as follows: kets. But open markets are more closely correlated with Financial cycles in Latin America (both booms and world financial markets, so taking measures to prevent busts) are always more pronounced than cycles elsewhere, contagion becomes very important. The findings also shed but recent financial cycles appear to be much less severe light on which news stories affect markets during crises. than those in the 1970s and 1980s. Estimates show that The results suggest that markets welcome agreements the volatility of stock prices (at business cycle frequen- with multilateral and bilateral organizations. They also cies) in the 1990s is about a third that in the earlier decades. react positively to reforms such as financial sector restruc-

e Stock price fluctuations in Asia in the 1990sare some- turing and liberalization of capital account restrictions. what larger than the fluctuations in that region in the past, The papers produced by the project have been accepted with the crashes in 1997 similar in magnitude to those in at conferences of the Society for Economic Dynamics, the Latin America around the time of the debt crisis. Latin American and Caribbean Economic Association, * Financial markets move together. Among the sam- the Econometric Society, and the American Economic ple countries industrial markets tend to move most closely Association. The data collected for the news analysis will together, while Asian capital markets move more in iso- be available on request, in spreadsheets and tables.

94 International Economics

Responsibility:Development Research Group, Macro- Mexico, Peru, the United States, and Venezuela using a economics and Growth-Sergio Schmukler (sschmukler model in which the balance of payments equilibrium is Cworldbank.org). With Graciela Kaminsky,Federal Reserve associated with conditions in asset markets. Using coin- Board; Arun Sharma and Kelvin Wang, University of tegration analysis, it found that for all eight countries Maryland; Miana Plesca, Georgetown University; there is a long-run relationship between the real exchange Bernadette Ryan; and Pushan Dutt, New York University. rate, the stock of net foreign assets, and a measure of trad- Completion date: October 1998. able sector productivity. It used an unobserved compo- Reports: nents model to estimate the equilibrium value of the Schmukler,Sergio, and GracielaKaminsky. 1998. "On Booms and real exchange rate and the degree of misalignment. Crashes: Are Financial Cycles Changing?" World Bank, The results suggest that in 1996 the real exchange rates DevelopmentResearch Group, Washington, DC. in Argentina and Peru were in equilibrium, and those in - .1998."SpilloverEffectsand News duringtheEastAsianCrisis." Chile and Colombia were close to equilibrium, though WorldBank, Development Research Group, Washington, DC. with some room for further appreciation. Real exchange rates in Mexico and Venezuela were slightly overvalued, and Brazil's real exchange rate was clearly over- The Impact of the Revival of the Andean valued. The exchange rate in the United States in 1995 Pact and the ASEAN Group on Their was undervalued by about 5 percent. Member Countries' Industrial Growth The results were presented at the 1997 Latin American Meetings of the Econometric Society in Lima, Peru. Ref. no. 682-43 Responsibility:Development Research Group, Macro- In the past decade there has been increased interest in economics and Growth-Norman Loayza (nloayza and revival of regional preferential trade agreements Cworldbank.org) and J. Humberto Lopez. With Femando among developing countries. The policy question this Broner, Massachusetts Institute of Technology. study asks is, How is a developing country's industrial Completiondate: December 1997. growth affected by its adherence to a regional preferen- Reports: tial trade agreement? The research studies the impact of Loayza, Norman, J. Humberto Lopez, and FermandoBroner. 1997. the revival of two regional trade arrangements, the "Desalineaci6n y v7ariables fundamentales: tasas de cambio de Andean Pact and the Association of Southeast Asian equilibrioensietepaiseslatinoamericanos."CoyunturaEcon6mica Nations (ASEAN), on the industrial growth of their mem- (Fedesarrollo,Bogota, Colombia). ber countries. The preferential treatment given to mem- . 1997. "Misalignment and Fundamentals: Equilibrium ber country imports may affect the variety of goods Exchange Rates in Seven Latin American Countries." World available. To the extent that inputs are affected, this can Bank, Development Research Group, Washington, DC. have an impact on the dynamic growth of industries. The study covers four Andean Pact countries (Bolivia, Colombia, Ecuador, and Venezuela) and four ASEAN Regionalism and Development countries (Indonesia, Malaysia, the Philippines, and Singapore). Its analytical framework relies on endoge- Nearly every developing country is in or is discussing a nous growth models based on goods variety. Its empiri- regional integration arrangement. Policymakers have to cal approach combines qualitative and econometric decide not only whether to pursue regional arrangements analysis. The main data sources are Intemational Monetary but also how best to manage them (including those that Fund and United Nations Industrial Development already exist). Many developing countries are seeking Organization (UNIDO) databases and national sources. advice from the World Bank on whether to j oin a regional Responsibility:Development Research Group, Trade- arrangement or on how best to organize one. The Bank Maurice Schiff ([email protected]) and Dorsati has also been asked to respond to initiatives such as the Madani. Cross-Border Initiative in Africa and the development Completion date:January 1999. of the Free Trade Area of the Americas and to work with other multilateral agencies on regional matters. Proponents of regional integration arrangements pre- Real Exchange Rate Misalignment sent them as a means of stimulating competition, reap- in Latin America ing economies of scale, attracting capital inflows, and promoting technology transfer. They claim that such This study examined the degree of misalignment of the arrangements allow some liberalization by countries real exchange rate in Argentina, Brazil, Chile, Colombia, unwilling to open up on a nondiscriminatory basis and

95 International Economics facilitate liberalization in areas too complex to be nego- Blomstrom, Magnus, C. Syropoulos, and L. Alan Winters. 1996. tiated successfully in the World Trade Organization. "Deepening of Regional Integration and Multilateral Trade Opponents see regional arrangements as fostering dis- Agreements." CEPRDiscussion Paper 1317.Centre for Economic criminatory trade restrictions, causing governments to Policy Research, London. look inward rather than outward, and undermining the Bond, Eric W. 1997."Transportation Infrastructure Investments and multilateral trading system. Regional Trade Liberalization."Policy Research Working Paper This research, and research undertaken elsewhere, is 1851. World Bank, Development Research Group, Washington, starting to shed light on such questions as the effect of DC. trading blocs on growth and on policy credibility, the . 1997. "Using TariffIndices to Evaluate Preferential Trading diplomatic and political benefits of regional integration, Arrangements: An Application to Chile." Policy Research whether and how to harmonize standards or industrial Working Paper 1751. World Bank, International Economics policy, and whether regional blocs are undermining the Department, Washington, DC. multilateral trading system. De Bonis, Valeria. 1997. "Regional Integration and Commodity Responsibility:Development Research Group, Trade- TaxHarmonization." Policy Research Working Paper 1848.World L. Alan Winters ([email protected]), Maurice Bank, Development Research Group, Washington, DC. Schiff, Bernard Hoekman, David Tarr, and Will Martin. . 1997."Regional Integration and Factor Income Taxation." With Soamiely Andriamananjara; Dani Ben-David, Tel PolicyResearch Working Paper 1849.World Bank, Development Aviv University; Magnus Blomstrom; Eric Bond, Research Group, Washington, DC. Pennsylvania State University; Won Chang; D. de Rosa, Fernandez, Raquel, and Jonathan Portes. 1997. "Returns to ADR International; Valerie de Bonis, Sapienza University, Regionalism: An Evaluation of Nontraditional Gains from Rome; Raquel Fernandez, New York University; Anju Regional Trade Agreements." Policy Research Working Paper Gupta; J. Hayden; Bartlomiej Kaminski, University of 1816. World Bank, International Economics Department, Maryland; Ari Kokko, Stockholm School of Economics; Washington,DC. (Also published in World Bank Economic Review Patrick Messerlin; Marcelo Olarreaga, World Trade 12[2],1998.) Organization; J. F. Ruhashyankiko; Isidro Soloaga; and Galal, Ahmed, and Bernard Hoekman, eds. 1997. Regional Partners Anthony Venables and Diego Pugo, LSF. in GlobalMarkets: Limits and Possibilities of the Euro-Med Initiative. Completiondate: March 1998. London: Centre for Economic Policy Research. Reports: Gupta, Anju, and Maurice Schiff. 1997. "Outsiders and Regional Amjadi, Azita, and L. Alan Winters. 1997. "Transport Costs and Trade Agreements among Small Countries." Policy Research 'Natural' Integration in Mercosur." Policy Research Working Working Paper 1847. World Bank, International Economics Paper 1742. World Bank, International Economics Department, Department, Washington, DC. Washington, DC. Harrison, Glenn, Thomas Rutherford, and David Tarr. 1996. Amjadi, Azita, L. Alan Winters, and Alexander Yeats. 1995. "Increased Competition and Completion of the Market in the "Transport Costs and Economic Integration in the Americas." European Union: Static and Steady State Effects." Journal of Swiss Journal of Economics and Statistics 131(3). Economic Integration 11(3):332-65. Andriamananjara, Soamiely, and Maurice Schiff. 1998. "Regional . 1997. "Economic Implications for Turkey of a Customs Union Groupings among MIicrostates." Policy Research Working Paper with the European Union." -European Economic Review 1922. World Bank, Development Research Group, Washington, DC. 41(3-5):861-70. Bakoup, Ferdinand, and David Tarr. 1998. "How Integration into . 1997. "Trade Policy Options for Chile: A Quantitative the Central African Economic and Monetary Community Affects Evaluation." Policy Research Working Paper 1783. World Bank, Cameroon's Economy: General Equilibrium Estimates." Policy International Economics Department, Washington, DC. Research Working Paper 1872. World Bank, Development Hoekman, Bernard. 1995. "Trading Blocs and the Trading System: Research Group, VWashington, DC. The Services Dimension." Journal of Economic Integration Blomstrbm, Magnus, and Ari Kokko. 1997. "Competition Policy in 10(1):1-31. Customs Unions: Theory and an Example from U.S. History." . Forthcoming. "Free Trade Agreements in the Mediterranean: Pennsylvania State University, State College. A Regional Path towards Liberalization?" Journal of North African .1997. "How Foreign Investment Affects Host Countries." Studies. Policy ResearchWorking Paper 1745. World Bank, International . Forthcoming. "Trade and Competition Policy in Regional Economics Department, Washington, DC. Agreements." Brookings Trade Policy Forum. - 1997. "Regional Integration and Foreign Direct Investment: . Forthcoming. "The WTO, the EU, and the Arab World: Trade A Conceptual Framework and Three Cases." Policy Research Policy Priorities and Pitfalls." In Nemat Shafik, ed., Prospects Working Paper 1750. World Bank, International Economics for Middle Eastern and North African Economies. London: Department, Washington, DC. Macmillan.

96 International Economics

Hoekman, Bernard, and Simeon Djankov. 1996. "The European Michalopoulos,Constantine, and David Tarr.1997. "The Economics Union's Mediterranean Free Trade Initiative." World Economy of Customs Unions in the Commonwealth of Independent 19(4):387-406. States." Post-SovietGeography and Economics38(3):125-43. - 1996."Intra-Industry Trade,Foreign Direct Investment, and Olarreaga, Marcelo, and Isidro Soloaga. 1998."Endogenous Tariff the Reorientation of Eastern European Exports." PolicyResearch Formation: The Case of Mercosur." WorldBank Economic Review Working Paper 1562. World Bank, International Economics 12(2). Department, Washington, DC. Padoan, Pier Carlo. 1997."Technology Accumulation and Diffusion: .1997. "Determinants of the Export Structure of Central and Is There a RegionalDimension?" PolicyResearch Working Paper Eastern European Countries." World Bank Economic Review 1781.WorldBank, International Economics Department, Wash- 11(3):471-90. ington, DC. - 1997. "Effective Protection and Investment Incentives in Puga, Diego, and Anthony Venables. 1997."Trading Arrangements Egypt and Jordan: Implications of Free Trade with Europe." and Industrial Development." Policy Research Working Paper WorldDevelopment 25:281-91. 1787. World Bank, International Economics Department, .1997. "Towards a Free Trade Agreement with the European Washington,DC. (Alsopublished in WorldBank Economic Review Union: Issues and Policy Options for Egypt." In Ahmed Galal 12[21,1998.) and Bernard Hoekman, eds., RegionalPartners in GlobalMarkets: Rutherford, Thomas F.,and David Tarr. 1997."Morocco's Free Trade Limits and Possibilitiesof the Euro-MedInitiative. London: Centre Agreement with the EU:A Quantitative Assessment." Economic for Economic Policy Research. Modelling14:237-69. Hoekman, Bernard,Denise Konan, and Keith Maskus.Forthcoming. . 1997."Regional Trading Arrangements for Chile: Do the "Economic Effects of a Free Trade Agreement between Egypt Results Differ with a Dynamic Model?" Paper presented at the and the United States." InA. Galal and R. Lawrence, eds., A U.S.- ASSAmeetings in New Orleans, January. Egypt Free Trade Agreement? Washington, DC: Brookings .1998."Regional TradingArrangments: The Implications for Institution. Chilean Economic Growth." Paper presented at Coloquio Kaminski, Bartlomiej. 1996. "Impediments to Establishing Eco- Academico de las Americas, Costa Rica, March 12-14. nomicFoundations for a ViableState of Bosniaand Herzegovina: Schiff, Maurice. 1997. "Small Is Beautiful: Preferential Trade Issues and Policies." World Bank, International Economics Agreements and the Impact of Country Size, Market Share, Department, Washington, DC. and Smuggling." Journalof EconomicIntegration 12:359-87. - 1997. "The Role of Foreign Direct Investment and Trade Schiff,Maurice, and C. Sapelli,eds. 1996.ChileenelNAFTA:Acuerdos Policies in Poland's Accession to the European Union." de librecomercio versus liberalizacionunilateral. Santiago, Chile, Background paper toWorld Bank, "Poland:Strategies and Policy and San Francisco: Centro International para el Desarrollo Options on the Road to European Union Membership." Economico. International Economics Department, Washington, DC. Schiff,Maurice, and L. Alan Winters. 1997."Regional Integration - 1998. "Foreign Trade: Performance, Institutions, and as Diplomacy." Policy Research Working Paper 1801. World Policies." In R. Staar, ed., Challengesto Democracyin Poland. Bank, International Economics Department, Washington, DC. New York: St. Martin's Press. (Also published in WorldBank EconomicReview 12[2],1998.) .1998. "Foreign Trade Policy and Institutions: Getting Ready Stephenson, Sherry.1997. "Standards and ConformityAssessment for Accession." GreaterEurope, Natolin Review 1(1). as Nontariff Barriers to Trade." Policy Research Working Paper 1998. "Poland's Transition from the Perspective of 1826.World Bank, Development Research Group, Washington, Performance in EU Markets." CommunistEconomies and Economic DC. Transformation10(2). Vamvakidis,Athanasios. 1998."Regional Integration and Economic Leipziger, D., and L. Alan Winters. 1996. "Chile and Nafta." In Growth." WorldBank EconomicReview 12(2). Maurice Schiff and C. Sapelli, eds., Chileen el NAFTA:Acuerdos Winters, L. Alan. 1996. "Integration Europeenne et bien-etre de librecomercio versus liberalizaci6nunilateral. Santiago, Chile, Economique dans le Reste du Monde." EconomieInternationale and San Francisco: Centro International para el Desarrollo 65:123-42. Economico. . 1996."Regionalism versus Multilateralism."Policy Research Majd, Nader, and L. Alan Winters. "EU-Egyptian Association Working Paper 1687. World Bank, International Economics Agreement." World Bank,International EconomicsDepartment, Department, Washington, DC. (Also forthcoming in R. Baldwin, Washington, DC. D. Cole,A. Sapir,and Anthony Venables,eds., RegionalIntegration. Martin, Will. "Assessing the Implications for Lebanon of Free Trade Cambridge: Cambridge University Press.) with the European Union." World Bank, Development Research . 1997."Assessing Regional Trade Arrangements." Paper pre- Group, Washington, DC. sented at the Annual World Bank Conference on Development Maskus,Keith E., and Denise EbyKonan. 1997."Trade Liberalization in Latin America and the Caribbean, Montevideo, Uruguay, in Egypt." Review of DevelopmentEconomics 1:275-73. June.

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-1997."Experiencias y Leccionesde laIntegracion Europea." guard mechanism suitable for the administrative capac- InLas Americas: Integracion Economica en Perspectiva. Washington, ity of a developing country. An application of this mech- DC:Inter-American Development Bank. anism was included in an export development project -1997."Lebanon's Euro-Mediterranean Agreement: Possible being prepared with the government of Ecuador. DynamicBenefits." In W.Shahin and K.Shehadi, eds., Pathways Responsibility:Development Research Group, Trade- to Integration: Lebanionand the Euro-Mediterranean Partnership. J. Michael Finger ([email protected]). KonradAdenauer Foundation. Completiondate: June 1998. -1997."Regionalism and theRest of the World: The Irrelevance of the Kemp-WanTheorem." Oxford Economic Papers 49:228-34. -1997.'Regionalism and the Restof theWorld: Theory and International Comparison the Effectsof European Integration."Review of International Programme Analysis Economics 5(4,supplement):134-47. - 1997."What Can EuropeanExperience Teach Developing The Bank's work on the International Comparison Countriesabout Integration?" World Economy 20:889-912. Programme (ICP) is broadly split between two tasks: Winters,L. Alan,and WVonChang. 1997. "Regional Integration and the statistical activities of data collection and accompa- the Prices of Imports: An Empirical Investigation."Policy nying quality control of price and expenditure informa- Research Working Paper 1782.World Bank, International tion obtained from surveys in the 120 participating EconomicsDepartnent, Washington,DC. countries and six core regions, and the use and analysis of the resulting estimates. The scope of analytical studies has been expanding Commodity Marketing Systems rapidly as the global ICP data collection exercise for the latest phase draws to a close and more basic data, by Pricing policies play a vital part in the performance of region, become available to calculate purchasing power agriculture. But they have often had negative effects on parities (PPPs) for components of GDP and expenditures. the development of the sector and on farmers' incomes. These data were drawn on for the World Bank's World In response, many cotntries have undertaken reforms Development Indicators 1998 (Washington, DC, 1998), to that aim to revitalize production by liberalizing farm produce new tables on the structure of consumption in prices, bringing them to world levels. Research has shown PPP terms and relative prices in PPP terms and policy- that, overall, market liberalization has raised producer relevant PPP numbers relating to health, income, and prices and incomes and stimulated production. other areas. The most important Bank use of PPP data is But some aspects of liberalization have received inad- in the compilation of the internationally comparable equate attention-the set of issues that emerge follow- poverty thresholds based on a dollar per head per day ing liberalization. These include price risk management, and in calculations of the true size of economies. quality inspection and control, and the need for new insti- A significant research initiative has been the compar- tutions, legal and regulatory reforms, and systems for ative poverty assessment using PPPs for low-income financing crop production, marketing, and exports. If households. This research reviews the question of poverty these issues do not receive the necessary attention, prob- measurement on the basis of the actual prices people pay lems may arise during the transition from a government- for goods and services and seeks to answer the ques- controlled marketing system to a free market system. tion, Do poor people pay more for the things they buy? During the past fiscal year this research looked at these An early study in this research used ICP data to focus on issues in the context of the reforms of the Ivorian cocoa Zambia and made the initial step to create expenditure marketing system. profiles for low-income groups that were then matched Responsibility: Development Research Group, Rural with detailed price information to study differences across Development-Panos Varangis (pvarangis@worldbank. income groups and geographic areas. The price data have org). also been used to carry out a study of "core inflation" in Completion date: June 1998. China. More recently, research has looked at the treatment of the net foreign balance in the calculation of real values, Controlling Recidivism addressing the difficulties of calculating national and sectoral-level PPPs in countries where there is a large (pos- This project examined the record on GATT members' use itive or negative) current account balance. Work is also of safeguard mechanisms. It applied knowledge gained proceeding to add refinements to the "ICP Toolpak," from that study to outline an economically sensible safe- which enables researchers and analysts to run alterna-

98 International Economics tive aggregations of the raw data to answer questions of dence that learning effects are external to firms, with firms comparative analysis. leaming from the export experience of related firms. A number of seminars and presentations have been These results provide microeconomic evidence of the organized in and outside the Bank on the 1993 ICP bench- efficiency gains from trade, and thus further rationale for mark study and on the use of PPPs for operational pol- reducing impediments to trade. To the extent that learn- icy and research purposes. The ICP results have been ing effects are external to firms, export promotion poli- shared with United Nations agencies and committees, cies maybe justified, since firms do not internalize all the including the United Nations Development Programme benefits of export market participation. (for its Human Development Report and human develop- Responsibility: Development Research Group, ment index calculation) and the United Nations Secretariat Macroeconomics and Growth-Aart Kraay (akraay (Committee on Contributions and Development Aid @worldbank.org). Committee). Results have also been shared with the Completion date:June 1998. Organisation for Economic Co-operation and Develop- Report: ment and the International Monetary Fund (World Kraay,Aart. 1997."Exports and EconomicPerfonnance: Evidence Economic Outlook estimates). Presentations have been froma Panelof ChineseEnterprises." World Bank, Development made to the regional economic commissions of the United ResearchGroup, Washington, DC. Nations. Responsibility: Office of the Senior Vice President, Development Economics, Development Data Group- Monitoring and Implementation Michael Ward ([email protected]), Sultan Ahmad, of the Uruguay Round and Yonas Biru. With Yuri Dikhanov. Completion date:June 1998. This project included a number of studies spanning the Report: enormous range of issues addressed under the Uruguay Ahmad,Sultan. "International Comparison of Incomes:Why Should Round. Some of the studies were pure research; others One BotherUsing PPP Conversion?" World Bank, Office of the were more applied studies, undertaken in cooperation SeniorVice President,Development Economics, Washington, with Bank operational staff to obtain the best assess- DC. ment of the country-specific implications of the Round. The project focused on the implementation of the commitments made under the Uruguay Round, which will Microeconomic Evidence determine both the long-run economic impact of the on Trade and Growth Round and the base from which future trade liberalization will be undertaken. This research investigated whether there is evidence that A key element of the project was the ongoing work firms "learn" from exporting, in the sense that past export on the implementation of the Uruguay Round agreement market participation is positively correlated with current on agriculture. This study drew on members' notifica- measures of firm performance, controlling for both past tions to the World Trade Organization to assess each coun- performance and unobserved firm characteristics. The try's implementation of key trade policy reforms. The research focused on a large sample of state-owned enter- analysis addressed two questions: How have countries prises in China over the period 1988-92. The data were been implementing their market access commitments drawn from an ongoing survey of large and medium- under the Uruguay Round agreement on agriculture? size industrial enterprises conducted by China's State And what has actually happened in agricultural trade Statistical Bureau. liberalization since 1995? The results show that while The study used a dynamic panel data regression many countries are faithfully implementing their mar- methodology that permits the identification of a causal ket access commitments, the new rules have been less relationship running from export market participation successful in actually liberalizing agricultural trade. to subsequent performance. In this respect the study Several studies focused on the implications of the abo- improved on much of the existing work on exports and lition of the Multifibre Arrangement (MFA) for devel- productivity, which fails to control for potential reverse oping countries and for particular sectors. Much of this causation from firm performance to the decision to export. work focused on South Asia, expected to be one of the Preliminary results indicate that there are strong learn- largest gainers. Since up-to-date data on the restrictive- ing effects, with past exports significantly correlated with ness of the MFA were unavailable, a survey of Indian subsequent performance, and with economically signif- exporters was undertaken to assess the export tax equiv- icant magnitudes of coefficients. There is also some evi- alent of the MFA.

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Country studies of the implications of Uruguay Round . 1997. "The Multilateral Agreement on Investment: From liberalization were undertaken for a number of countries OECDto WTO?"In Peter Rashish, ed., Developinga New and regions, including China, Egypt, the Middle East, Consensusforthe InternationalTreatment oflnvestment. Washington, and South Asia. Much attention was devoted to the DC:The European Institute. implications of China's potential accession to the World .1998. "The WTO, the EU, and the Arab World: Trade Policy Trade Organization (WTO). Studies also looked at Priorities and Pitfalls." In Nemat Shafik, ed., Perspectiveson the operation of the Agreement on Government Procure- MiddleEastern and NorthAfrican Economies.London: Mcmillan. ment, providing the most comprehensive assessment . Forthcoming. "Developing Countries and Multilateral available. Disciplines on Government Procurement." WorldBank Research During 1998 the project's focus turned from the con- Observer. text created by the Uruguay Round to the issues and Hoekman,Bernard, and PatrickLow. Forthcoming. "State Trading opportunities for liberalization in the negotiations sched- and Access to Markets: Alternative Approaches to Rule Making uled to begin by 2000. The agenda for these negotiations for Entitieswith ExclusiveRights." In Thomas Cottierand Petros includes services and agriculture and may also extend Mavroidis,eds., State Trading.AnnArbor: University ofMichigan to issues of trade facilitation, competition policy, invest- Press. ment, and government procurement. A number of stud- Hoekman,Bernard, Patrick Low, and PetrosMavroidis. Forthcoming. ies analyzed the economics of these issues from a "Regulation, Competition Policy, and Market Access Nego- developing country perspective. tiations:Lessons from the TelecommunicationsSector." In Einar Much of the research was undertaken at the request Hope, ed., CompetitionPolicies for an IntegratedWorld Economy. of Bank operational staff and was disseminated in large London:Routledge. part through the Bank's ongoing dialogue with its mem- Ingco, Merlinda. 1998. "Implementation of Uruguay Round bers. Results were also disseminated through extensive Commitments in Market Access in Agricultural Trade." World dissemination programs for major reports on South Asia Bank, Development Research Group, Washington, DC. and China to which the research provided inputs: South . 1998."Welfare Evaluation of New Issues in Market Access Asia's Integrationinto the WorldEconomy (Washington, DC: in Agricultural Trade." World Bank, Development Research World Bank, 1997) and the China 2020 series of reports Group, Washington, DC. (Washington, DC: World Bank, 1997). And results have Ingco, Merlinda, and Francis Ng. 1998. "Distortionary Effects of been extensively disseminated in developing countries State Trading in Agriculture: Issues for the Next Round of Trade through Economic Development Institute seminars. Negotiations." PolicyResearch Working Paper 1915.World Bank, Responsibility:Development Research Group, Trade- DevelopmentResearch Group, Washington, DC. Bernard Hoekman ([email protected]), Kathuria, S., and Anjali Bharwaj. 1998."Export Quotas and Policy Merlinda Ingco, Will Martin ([email protected]), Constraints in the Indian Textileand Garment Industries." World and Garry Pursell. With Aziz Elbeheri and Tom Hertel, Bank,India ResidentMission, New Delhi. Purdue University; Tim Josling, Stanford University; Martin, Will. 1997."A Review of Uruguay Round Modeling." In D. Denise Konan, University of Hawaii; and Keith Maskus, Robertson, ed., East Asian Trade after the Uruguay Round. University of Colorado. Cambridge: Cambridge University Press. Completion date:June 1998. Martin, Will,and C. Bach. 1997."State Trading in China." In Thomas Reports: Cottier and Petros Mavroidis, eds., State Trading.Ann Arbor: Elbehiri,Aziz, Tom Hertel, and WillMartin. 1997."Estimating the University of Michigan Press. Impact of Trade Reforms on the Indian Cotton and TextileSectors: . 1998."The Importance of State Trading in China's Trade A General Equilibrium Approach." World Bank, Development Regime." In F.Abbott, ed., Chinain the WorldTrading System. The Research Group, VVashington,DC. Hague: Kluwer Law International. (Also presented at the Hoekman, Bernard. 1997. "Competition Policy and the Global Chicago-KentCollege of Law Conference on China in the World Trading System." WorldEconomy 20(4):383-406. TradingSystem: Defining the Principlesof Engagement, Chicago, .1997. "Developing Countries and the Multilateral Trading November 6-7,1997.) SystemaftertheUruguayRound." InAlbert Berry,RoyCulpeper, Martin, Will, and J. Francois. 1997."Bindings and Rules as Trade and Frances Stewart, eds., GlobalDevelopment Fifty Yearsafter Liberalization." In Keith Maskus, ed., Quiet Pioneering:Robert Bretton Woods.London: Macmillan. M. Stern and His International Economic Legacy.Ann Arbor: 1997. "Focal P'oints and Multilateral Negotiations on the University of Michigan Press. Contestability of Markets." In Keith Maskus, Peter Hooper, Ed Michalopoulos, Constantine. 1998. "Developing Countries' Leamer, and J.D. Richardson, eds., Quiet Pioneering: The Participation in the World Trade Organization." PolicyResearch International EconomicLegacy of Robert M. Stern. Ann Arbor: Working Paper 1906.World Bank and World Trade Organization, University of Michigan Press. Washington, DC.

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Stephenson, Sherry. 1997."Standards and ConformityAssessment in 1999 under the project Developing Countries and the as Nontariff Barriers to Trade." Policy Research Working Paper WTO 2000 Negotiations. The project provides a better 1826.World Bank, Development Research Group, Washington, analysis of the issue than was previously available to DC. developing country representatives concerned about the Wang, Zhen Kun, and L. Alan Winters. 1997. "Africa's Role in increasing pressures for international policy action on Multilateral Trade Negotiations."Policy Researdi WorkingPaper this issue. 1846.World Bank, Development Research Group, Washington, Responsibility: Development Research Group, Trade- DC. Will Martin ([email protected]) and L. Alan Yang, Y., Will Martin, and K. Yanagishima. 1997."Evaluating the Winters. With Keith Maskus, University of Colorado at Benefitsof Abohshing the MFAin the Uruguay Round Package." Boulder. In TomHertel, ed., GlobalTrade Analysis: ModelingandApplications. Completion date:June 1998. Cambridge: Cambridge University Press. Reports: Martin, Will, and Keith Maskus. 1997."The Impact of Core Labor Standards on Competitiveness." World Bank, Development Trade and Labor Standards Research Group, Washington, DC, Maskus,Keith. 1997. "Should Core Labor StandardsBe Imposed This project addressed the new and highly controversial throughInternational Trade Policy?" Policy Research Working issue of whether labor standards should be incorpo- Paper 1817.World Bank, Development Research Group, rated in multilateral trade agreements. Recent propos- Washington,DC. (Alsoabstracted electronicallyby SocialScience als to include labor standards in trade agreements have ResearchNetwork, 1998.) focused on a set of core labor standards, including such Maskus,Keith, and J. Holman.1997. "Core Labor Standards and basic human rights as freedom of association, collective InternationalTrade Policy." University of Coloradoat Boulder. bargaining, and the absence of discrimination. Much of the support for these proposals has been based on a perception that weak labor standards give exporters a com- The World Trade Organization petitive advantage. and Developing Countries The study focused on developing simple, robust analytical models to analyze the consequences of core labor At the Uruguay Round the developing countries for the standards for workers in different situations. A key con- first time took an active interest in the multilateral clusion is that deficient provision of core labor stan- system as a means for advancing their own programs of dards typically reduces the competitiveness of exporting policy reform. This project reviewed the Uruguay Round countries rather than increases it. One possible exception agreements that allow trade restrictions (such as safe- is the exploitative use of child labor, which could expand guards and antidumping) from the perspective of how exports of some highly labor-intensive goods in the short well they would serve as guidelines for interventions run. that serve the national economic interest of a develop- The study concluded thatweak provision of core labor ing country. standards cannot be treated effectively by imposing trade The results have been disseminated through seminars sanctions, but should instead be approached through for regional staff and officials from developing country programs that aim directly at poverty reduction, educa- governments. The findings have served as guidelines for tional improvement, and information disclosure. Bank participation in the multiagency Integrated Program The results of this project were presented to Bank oper- for Least Developed Countries Trade Development. ational staff at a Bankwide seminar. In addition, there has Responsibility:Development Research Group, Trade- been active collaboration with the staff of the Social J. Michael Finger ([email protected]) and L. Alan Protection Unit, who deal with similar problems from Winters. the human resources perspective. Completion date:June 1998. External dissemination has been oriented in part toward industrial countries, where the pressures for policies on labor standards largely emanate. Findings have Economic Integration: The Americas been disseminated through participation in an OECD meeting on this issue and through presentations to such The economic effects of Mercosur, a trade arrangement audiences as the Bar Association of New York. Results between Argentina, Brazil, Paraguay, and Uruguay, could will be disseminated to researchers and policy analysts be substantial. The new market encompasses 200 million in developing countries at a series of meetings to be held people, a GDP of almost $1 trillion, and more than half

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of Latin America's market. The proposed reductions in Jr.;Energy, Mining, and Telecommunications Department, tariffs and nontariff barriers under Mercosur are sub- Information DevelopmentAdministration Unit-Carlos stantial and are expected to expose its member economies Primo Braga; Poverty Reduction and Economic to vigorous competition. Management Network, Economic Policy Division-Homi Traditional static computations of welfare gains from Kharas; LatinAmerica and the Caribbean Region, Finance, trade do not predict great benefits from Mercosur. But Private Sector, and Infrastructure Sector Unit-Margaret they address only the effect of tariff changes on the likely Miller and Malcolm Rowat; Economic Development pattern of trade. The changes under Mercosur are Institute, Regulatory Reform and Private Enterprise expected to go far deeper. If Mercosur is a harbinger of Division-Danny Leipziger and Antonio Estache; and a broader philosophy of open trade and freer competi- International Finance Corporation, Central Capital tion to encourage g:rowth, itwould represent a sea change Markets Department, Securities Market Development in its members' development strategies and have impor- Group-Mike Lubrano. With Julio de Brun and Jose tant implications for the World Bank's country assistance Mauro de Morais. strategies. Completion date:December 1998. The research is intended to develop a better under- Reports: standing of the implications of Mercosur-to help shape Amjadi, Azita, and L. Alan Winters. 1997. "Transport Costs and World Bank views on macroeconomic prospects, the con- 'Natural' Integrationin Mercosur." Policy Research Working straints of policymaking, and the risks of recidivism. The Paper 1742.World Bank, International Economics Department, work highlights key sectoral issues likely to arise with Washington, DC. adjustment to the new regime-issues relating to trans- Frischtak, Claudio, Danny M. Leipziger, and J.F. Normand. port costs, agriculture, and services-as well as regional "Industrial Policy in Mercosur: Issues and Lessons." World issues. A hypothesis of the study is that improvements Economy. will be required in all these areas to maximize the hoped- Laird, S. "Mercosur: Objectives and Achievements." World for allocative efficiency gains; they are all elements of Bank, International Economics Department, Washington, "getting the prices right." The work will inform consid- DC. eration of the kinds of competition policies and institu- Miller,Margaret, and Gerard Caprio Jr. "Small Business Finance in tions that need to emerge to support the new paradigm Mercosur."WorldBank, Latin Americaand the Caribbean Region, of competitive, private sector-led development. CountryDepartment I, Washington, DC. The work is oriented less toward govemment insti- Rowat, Malcolm, Mike Lubrano, and Rafael Porrata Jr. 1997. tutions than toward the ongoing local dialogue on CompetitionPolicy and Mercosur. World BankTechnicalPaper385. Mercosur. Its aim is to develop a World Bank position Washington,DC. on key issues that can be discussed in broad, strategic Rutherford, Thomas F., and David Tarr. 1997."Regional Trading terms in each Mercosur member country, and to build Arrangements for Chile: Do the Results Differ with a Dynamic knowledge to support the Bank's ability to respond to Model?"PaperpresentedattheASSAmeetings inNew Orleans, requests for assistance. For these purposes the project has January. produced papers cn an overview of Mercosur, trade pat- . 1998. "RegionalTrading Arrangments: The Implications terns developing in Mercosur, integration and intrare- for Chilean Economic Growth." Paper presented at gional transport costs, trade in food and agriculture, small Coloquio Academico de las Americas, Costa Rica, March 12- and medium-size enterprise finance, professional 14. services, financial services, trade policy, and the scope Yeats,AlexanderJ. 1998."Does Mercosur's Trade PerformanceRaise for harmonization, competition policy, and industrial Concerns about the Effectsof Regional Trade Arrangements?" policies. WorldBank Economic Review 12(1). The research also considers Chile's prospective accession to the North American Free Trade Agreement (NAFTA) and to Mercosur. It assesses the arguments that Africa and the International the trade benefits are likely to be small since both Chile Economy and the NAFTA countries have relatively low trade barriers, but that advantages might arise from locking in In the mid-1950s Sub-Saharan Africa accounted for 3.1 Chile's reforms and from increasing the security of its percent of global exports. By 1990 this share had fallen access to U.S. markets. to 1.2 percent. What are the reasons for this decline? One Responsibility: Development Research Group, Trade- view is that falling commodity prices and external pro- L. Alan Winters ([email protected]), Alexander tection in OECD markets are largely to blame. If so, the Yeats and Maurice Schiff; and Finance-Gerard Caprio solution to Africa's problems would be liberalization of

102 International Economics industrial countries' trade barriers. Another view is that Commodity Risk Management Africa's marginalization is due primarily to inappropri- and Commodity Exchanges ate domestic policies that reduced the region's ability to compete. If true, changes in Africa's own policies would Commodity markets are volatile, and all countries be essential to reverse the adverse trade trends. This have probably engaged in some type of public effort research attempts to determine which of these explana- to manage commodity price risks. This research project tions is correct. reviews the development of international efforts to tame Using newly collected information on international commodity markets and the economic thought that trade and trade barriers, the study found that loss of inter- is behind those efforts. The study draws distinctions national competitiveness played a key part in Africa's among the categories of risk faced by producers, con- declining importance in international trade. If Africa had sumers, and governments in developing countries and merely maintained its 1962-64 OECD market shares for suggests appropriate roles for governments and for the its major products, the value of its exports today would international community. And it assesses whether the be more than twice their current value. Also a factor is commodity price risk markets that have developed so that global demand for the region's exports grew ata con- rapidly over the past decade offer promising market- siderably slower pace than demand for most other goods. based policy alternatives. Africa therefore suffered from a two-pronged problem- Overall, the research has found that developing it experienced declining market shares for its key exports, countries are hurtby commodity price volatility and that which were of declining relative importance in world early efforts to deal with price volatility were unsatis- trade. But individual African countries that undertook factory. Many institutions are looking for new solutions, important trade and other structural reforms have recently and a growing number of private companies and gov- shown signs of improved competitiveness in interna- ernments in developing countries use commodity deri- tional trade. vatives to hedge price risks. But commodity-dependent Empirical evidence provides no support for the propo- developing countries face problems in gaining access sition that external protection contributed to Africa's mar- to market-based commodity risk management instru- ginalization in global trade. The share of African exports ments, with counterparty risk and lack of institutional subject to nontariff barriers is far lower than the share and legal and regulatory frameworks among the most for other developing countries, some of which launched serious ones. successful, sustained, export-oriented industrialization Roundtable discussions were conducted on April drives. In addition, tariff preferences under the European 28, 1998, to address issues of commodity price uncer- Union's Lome Convention or under OECD members' tainty in developing countries. About 40 international generalized system of preference schemes provide Africa experts participated in the discussions, including with more favorable terms of market access than those academics, providers of risk management instruments, for many other exporters. Even so, the OECD countries and representatives of consulting firms, international have policy options available that could further enhance commodity organizations, international financial insti- market access for African exports. tutions, UNCTAD, the European Union, and the Responsibility:Development Research Group, Trade- African, Caribbean, and Pacific States. A proceedings vol- AlexanderYeats ([email protected]),AzitaAmjadi, ume based on the roundtable discussions is under and Ulrich Reincke. preparation. Completiondate: February 1999. Responsibility: Development Research Group, Rural Reports: Development-Panos Varangis (pvarangis@worldbank. Amjadi, Azita, Ulrich Reincke, and Alexander Yeats. 1997. Did org), Takamasa Akiyama, Donald Larson, and Nanae ExternalBarriers Cause the Marginalizationof Sub-SaharanAfrica Yabuki; and Strategy and Resource Management, in WorldTrade? World Bank Discussion Paper 346.Washington, Partnerships Group-Nawal Kamel and Kangbin Zheng. DC. Completion date: June 1999. Amjadi, Azita, and Alexander Yeats. 1996."Have Transport Costs Reports: Contributed to the Relative Decline of Sub-Saharan African Akiyama, Takamasa, and Jeffrey Christian. 1998. "Effective Risk Exports?" Policy Research Working Paper 1559.World Bank, Management Strategies: Cases of Hedging by Governments, International Economics Department, Washington, DC. Firms, and Smallholders." World Bank,Development Research Yeats, Alexander, Azita Amjadi, Ulrich Reincke, and Francis Ng. Group, Washington, DC. 1997.Did DomesticPolicies Marginalize Africa in International Trade? Larson, Donald, Panos Varangis, and Nanae Yabuki. 1998. Directions in Development Series. Washington, DC: World "CommodityRiskManagementand Development."World Bank, Bank. Development Research Group, Washington, DC.

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Estimating Equilibrium Exchange Rates empirically. The first discusses traditional approaches in Developing Countries to estimating the LRER.It sets out updated versions of the purchasing power parity-base year and constant trade A central problem in empirical macroeconomics in low- elasticities methodologies and considers general analyt- income countries is to determine when and by how much ical problems involved in determining sustainable cap- the exchange rate is misaligned. Decisions to devalue or ital flows and a target resource or current account balance. to implement any exchange rate policy other than a clean The second paper presents a simple general equilibrium float require both measuring the actual real exchange rate model employing constant elasticities. The simplified (RER) and estimating the equilibrium RER. In addition, approaches in these two papers have several virtues: they when considering a devaluation, policymakers want to draw on a substantial body of empirical work on trade know what its effects on inflation, the RER, and output elasticities, impose minimal data requirements, and are growth will be. Quantitative answers to these questions computationally straightforward. Although they do not are essential for implementing exchange rate policy and do justice to the general equilibrium nature of real for designing accornpanying reforms. exchange rate adjustments, they can still provide useful The objective of this research project is to set out, for estimates of misalignment and benchmarks for more use by Bank economists and others, practical method- sophisticated analyses. ologies for assessing exchange rate misalignment in low- The third and fourth papers in the set consider full income developing countries where data, time, and general equilibrium methodologies for estimating the professional capacity are limited. The research draws equilibrium RER. The third paper examines the use of a together methodologies from disparate sources and doc- representative macroeconomic model for estimating the uments empirical innovations in applying them. It equilibrium RER in developing countries and concludes addresses three methodological issues that are central that, as desirable as such an approach may be theoreti- to measuring exchange rate misalignment: the definition cally, it is not likely to be practical empirically except in and measurement of the actual RER, the theoretical and special circumstances. The fourth paper discusses reduced empirical determinants of the equilibrium RER, and form single-equation econometric estimates of the equi- empirical estimation of the equilibrium RER. The pro- librium RER. This methodology makes it possible to take ject also examines two closely related operational ques- into account the interaction of the key macroeconomic tions: the use of the parallel market premium as an variables in a sound theoretical framework. It is the most indicator of the equilibrium exchange rate and the rela- promising avenue for further research on estimating equi- tionship between nominal devaluations, inflation, and librium exchange rates, although its usefulness in pol- the RER. icy applications depends on the availability of fairly long The research has produced 12 technical papers orga- and reliable series of data for the RER and the key vari- nized in four sets. The first set of four papers examines ables determining it. alternative concepts and measures of the actual RER to The last two papers address operational questions determine how best to measure it in developing coun- relating to parallel and nominal exchange rates. The first tries and summarizes the empirical evidence on the effects examines the usefulness of the parallel market premium of RER movements on trade flows in developing coun- as a guide for setting the official exchange rate, distin- tries. These papers show that movements in RER indexes guishing between the problems of unifying at a short- must be carefully analyzed when the home country is run equilibrium rate and estimating the long-run experiencing trade liberalization, fluctuations in its terms equilibrium rate. The paper finds that the parallel rate of trade, or different productivity growth rates than its will usually be more depreciated than the LRER and thus trading partners-Dr where there are significant parallel will be a biased estimator of it. Even if an accurate esti- markets, unrecorded trade, or shifts in trade patterns. In mate of the LRER is available, policymakers cannot such circumstances calculating separate RER indexes for change the RER directly; they can only adjust the official imports and exports is particularly important. Empirical nominal exchange rate and monetary and other nomi- evidence shows that changes in the RER have important nal policy instruments that may affect the domestic price effects on trade flows even in low-income countries with level. Although extensive work has been done on method- undiversified structures of production. ologies for estimating the equilibrium RER, little has been The second set of two papers considers the theoreti- done on methodologies for determing the nominal cal and empirical determinants of the long run equilib- exchange rate adjustments required to achieve a given rium RER (LRER).The third set of four papers is the heart realignment of the RER. Thus the last paper in the study of the project. These papers assess alternative method- summarizes the stylized facts relating to the effects of ologies for estimating the long-run equilibrium RER nominal devaluations on inflation and the RER and sets

104 International Economics out a reasonably accurate consistency framework for Montiel, Peter J., and Lawrence E. Hinkle. 1998. "Estimating quantifying these effects that can be used until more Equilibrium Exchange Rates: An Overview." World Bank, sophisticated approaches are developed. Washington,DC. An overview paper summarizes the findings of the -. 1997. "The Theory of the Long-Run Equilibrium Real project. The overview and the 12 technical papers are Exchange Rate." World Bank, Washington, DC. being prepared for publication in a university press book. Responsibility:Africa Region Technical Families, Macro- economics 3-Lawrence E. Hinkle (lhinkle@worldbank. The Internationalization of Financial Services org), Macroeconomics 4-Ingrid Ivins, and Country Director Group, West Central Africa 4; and Development The World Bank is often asked for advice on whether Research Group, Rural Development-John Baffes,Public domestic financial service sectors should be opened to Economics-Shantayanan Devarajan, and Poverty and competition from foreign providers of financial services- Human Resources-Lant Pritchett. With Ibrahim and if so, how to do it in a way that minimizes transition Elbadawi, African Economic Research Consortium; costs and risks and maximizes the benefits. Such advice Nadeem Ul Haque and Fabien Nsengiyumva, Inter- is sought in the context of overall reform programs, national Monetary Fund; Nita Ghei; Steven Kamin, U.S. regional trade agreements, and, most recently, the nego- Federal Reserve Board; Peter Montiel, Williams College; tiations on financial services under the General Agreement and Steven O'Connell, Swarthmore College. on Trade in Services (GATS). As countries continue to Completion date:June 1999. review their policies toward foreign competition, finan- Reports: cial services liberalization will remain an important issue Ahlers, Theodore O., and Lawrence E. Hinkle. 1998. "Estimating on which many countries will seek policy advice from the Equilibrium Real Exchange Rate Empirically: Traditional the World Bank. Approaches and Operational Techniques." World Bank, This project aims to inform the Bank's policy advice Washington, DC. by investigating several related issues: the effects of alter- Baffes, John, Ibrahim A. Elbadawi, and Stephen A. O'Connell. native approaches to opening domestic financial service 1998. "Single-Equation Estimation of the Equilibrium Real sectors to foreign competition, the complementary steps Exchange Rate." World Bank, Washington, DC. needed to obtain the maximum benefit and minimum Devarajan, Shantayanan. 1998. "Estimates of Real Exchange Rate costs from opening financial sectors to foreign competi- Misalignmentwith a SimpleGeneral EquilibriumModel." World tion, and the nature and strength of economic and polit- Bank,Washington, DC. ical economy arguments against opening. Ghei, Nita, and LawrenceE. Hinlde. 1998."ANote on Devaluations, Much of the information and evidence available on Inflation,and the Real ExchangeRate." World Bank,Washington, these issues is partial or anecdotal. The project seeks to DC. generate practical yet analytically rigorous information Ghei, Nita, and Steven B. Kamin. 1998. "The Use of the Parallel on the internationalization of financial services using Market Rate as a Guide for Setting the Official Exchange Rate." theoretical, case study, descriptive, and econometric WorldBank, Washington, DC. approaches. Early work has examined the experience of Ghei, Nita, and Lant Pritchett. 1998."The Three Pessimisms: Real the intemationalization of banking in the European Union Exchange Rates and Trade Flows in Developing Countries." under the Single Market Program, Asian experience in WorldBank, Washington, DC. financial regulation, and the effects of entry on domes- Haque, Nadeem Ul, and Peter J. Montiel. 1998. "Long-Run Real tic banking markets. In Europe significant restructuring Exchange Rate Changes in Developing Countries: Simulations occurred as countries opened their banking sectors, with from an Econometric Model." World Bank,Washington, DC. some evidence of efficiency improvement. Simulta- Hinkle, Lawrence E., and Fabien Nsengiyumva. 1998. "External neously, however, banking regulations were tightened, Real Exchange Rates: Purchasing Power Parity, the Mundell- which probably reduced systemic risk but also resulted FlemingModel, and Competitiveness in Traded Goods." World in smaller declines in banking costs than might have been Bank, Washington, DC. expected. Further evidence that liberalization boosts effi- - 1998. "The Two-Good Internal Real Exchange Rates for ciency is found in Asia. Foreign bank entry is associated Tradables and Nontradables." World Bank, Washington, DC. with higher bank profits-but it is not yet clear whether .1998.'TheThree-GoodIntemalRealExchangeRatesforExports, causation runs from profits to increased entry or from Imports,and DomesticGoods." World Bank,Washington, DC. entry to increased efficiency and profits. Montiel, Peter J. 1998."The Long-Run Equilibrium Exchange Rate: Several further studies are under way. One is a data Conceptual Issues and Empirical Research." World Bank, collection and analysis exercise focusing on the interna- Washington, DC. tionalization of financial services, which is being

105 International Economics conducted jointly with the World Trade Organization. Responsibility:Development Research Group, Finance Others focus on evaluating GATS and assessing the -Ash Demirgiiu-Kunt ([email protected]) implementation issues arising from the opening of finan- and Anqing Shi. With Enrica Detragiache, International cial sectors to foreign competition, including transition Monetary Fund. issues and regulatory and legal matters. Another will Completiondate: July 2000. be based on case studies of the effects of sector opening on the contestability of the financial services in five countries. Developing Countries and the Dissemination plans include a conference cosponsored WTO 2000 Negotiations by other international institutions and the private sector in early 1999, papers, and a Website. Negotiations on agriculture are scheduled to begin under Responsibility:Development Research Group, Trade- the auspices of the World Trade Organization by the end L. Alan Winters ([email protected]), and Finance of 1999,and negotiations on services by 2000. These nego- -Ash Demirgiu--Kunt and Ross Levine; and Poverty tiations are expected to form the basis for a wider set of Reduction and Economic Management Network, negotiations, including on industrial tariffs and on a range Economic Policy Division-Stijn Claessens. With Roberto of other areas, such as trade and investment, and trade Steiner; Jose Pastor; M. van Empel; Julia Kiraly; Brian and competition policy. Hindley; Jordi Guail;Ying Qian; Edward Gardner; Patrick The Uruguay Round was the first of the eight multi- Honohan; Xavier Vives; Robert Cull; and George Clarke. lateral rounds of trade negotiations in which develop- Completion date: June 1999. ing countries played an active part in the core business Reports: of the negotiations-the exchange of market access con- Claessens, Stijn,Asll Demirgilc-Kunt,and Harry Huizinga. "How cessions. The World Bank's evaluation of this Round con- Does Foreign Entry Affectthe DomesticBanking Market?" World cluded that the developing countries in general had made Bank, Washington, DC. substantial gains, and that the largest gains went to the Claessens, Stijn, and Thomas Glaessner. "Internationalization of countries that liberalized their own policies. Financial Services in Asia." World Bank, Washington, DC. This research project is designed to help developing Gardener, Edward, P. Molyneux, and B. Moore. "The Impact of the countries maximize their gains from participation in these Single Market Programme on EU Banking: Select Policy negotiations. During 1998 two initial papers were pre- Experiences for Developing Countries." Institute of European pared-one focusing on the likely agenda and options Finance, United Kingdom. for developing countries, and the other concentrating Honohan, Patrick. "Consequences for Greece and Portugal of the on the best approach for developing countries to follow Opening Up of the European Banking Sector." The Economic in the negotiations. This work has prepared the way for and Social Researdh Institute, Dublin, Ireland. a much larger research and dissemination effort begin- Pastor, JoseM., Francisco Perez, andJavier Quesada. "The Opening ning in 1999. of the Spanish Banking System: 1985-96." Universidad de The project is being undertaken in coordination with Valencia,Spain. a project that focuses on the issues involved in the agricultural negotiations. Responsibility:Development Research Group, Trade- Banking Crises Will Martin ([email protected]), Bernard Hoekman, and L. Alan Winters. With John Croome, The past two decades have seen a proliferation of sys- University of Geneva; and Anne Krueger, Stanford temic banking crises. Most recently, the economic crises University. experienced by the East Asian countries were accompa- Completiondate: June 2003. nied by deep financial sector problems. While in some Reports: cases the troubles were foreseen, in others the problems Croome,John. 1998."Trade Negotiations in the WTO: The Present caught most observers by surprise. Outlook." World Bank, Development Research Group, The purpose of this research is to identify features of Washington,DC. the economic environment that tend to breed problems Krueger, Anne. 1998. "The Developing Countries and the Next in the banking sector. Another objective is to develop an Round of Multilateral Trade Negotiations." World Bank, early warning system that will provide a quantitative Development Research Group, Washington, DC. assessment of fragility in the banking sector.

106 DOMESTIC FINANCE AND CAPITAL MARKETS

Saving in Developing Countries The research methodology is based both on relatively narrow analytical frameworks derived from intertem- Ref. no. 681-36 poral optimization and on broader models not derived Over the past three decades the world has witnessed a from first principles but encompassing a number of alter- large and growing divergence in savings rates. The gap native consumption and savings motives. Empirical appli- between industrial and developing country savings rates cations of the analytical models use both microeconornic has widened since the mid-1970s, and there has been a and macroeconomic data. The aggregate data for the dramatic divergence in the developing world: savings cross-country analysis are drawn from the savings data- rates have doubled in East Asia, stagnated in Latin base. The empirical models and data coverage vary, America, and collapsed in Sub-Saharan Africa. These depending on data availability and the need to tailor the regional disparities have been closely reflected in growth samples to the questions under investigation. performance: with higher savings rates has come higher The project will contribute to Bank operational work income growth. in several ways. Clarifying what drives saving and how Even apart from any direct effect on growth, there saving relates to growth will assist in policy diagnosis are other reasons that an adequate supply of savings is and the selection of policy targets. The quantitative assess- a central policy objective. A national savings rate broadly ment of the relative effectiveness of different policies in in line with an economy's investment needs is key to promoting saving will aid in the selection of policy tools, reducing the economy's vulnerability to unexpected shifts identifying the instruments likely to have the biggest in international capital flows. In conditions of increas- effect under different circumstances. These results will ing intemational financial integration, high domestic sav- help to determine the priority and sequencing of reform ing helps ensure macroeconomic stability-although it measures. Finally, the development of empirically vali- cannot provide full insurance against the consequences dated savings functions with firm analytical foundations of unsustainable exchange rates or fragile financial sys- will contribute to the formulation of country analyses, tems. Yet little is known about the relative effectiveness projections, and strategies. of different policies in encouraging saving, even for pol- The research findings will be disseminated to Bank icy measures that have often been advocated for their country economists through a conference and a seminar positive effect on saving, such as pension system reform on savings policies, to policymakers in developing coun- or financial sector liberalization. tries through regional conferences in Latin America This research addresses three broad questions: Why and Eastern Europe or the former Soviet Union, and to do savings rates differ so much across countries and time the broader development community through articles periods? How much do higher savings rates contribute in Bank and academic journals and a volume of col- to growth? And what policy measures are most effective lected papers. in raising national savings rates? Responsibility: Development Research Group, The project is structured in five parts. The first part Macroeconomics and Growth-Norman Loayza (nloayza involves the construction of an international macro- @worldbank.org), Luis Serv6n, Craig Burnside, and Aart economic database on saving and related variables. A Kraay, and Finance-Gerard Caprio Jr.; and Economic preliminary version of the database is complete. Using Development Institute, Macroeconomic Management this new macroeconomic information and household and Policy Division-Cevdet Denizer. With Patrick surveys, the second part seeks to explain differences in Honohan; Klaus Schmidt-Hebbel, Central Bank of Chile; saving across space and time and the link between sav- Timothy Besley and Costas Meghir, London School of ing and growth. The third part focuses on the effects of Economics; Angus Deaton and Christina Paxson, specific policies on saving, using a cross-country com- Princeton University; Andrew Samwick, Dartmouth parative approach. The fourth assesses the savings per- College; Alejandro L6pez, International Monetary Fund; formance of different countries to draw lessons from Fabio Schiantarelli, Boston College; Peter Montiel, policy experience. The last part will provide a policy- Williams College; Janine Aron and John Muellbauer, oriented synthesis of the main results and lessons from Oxford University; Antonello Scorcu and Lucio Picci, the research. Universita de Bologna; Orazio Attanasio, University

107 Domestic Finance and CapitalMarkets

College of London; Carmen Reinhart, University of fund organization, deal screening, capital structure, Maryland; and Dani Rodrik, Columbia University. agency cost characteristics of asset structure, measures Completiondate: December 1998. of entrepreneur human capital, and investment moni- Reports: toring and control. The study found that deal flow, invest- Schmidt-Hebbel,Klaus, and LuisServ6n. 1996. "Income Inequality ment policies, and the actions of the fund management and AggregateSaving: The Cross-CountryEvidence." Policy team are all critical to venture fund investment perfor- ResearchWorking Paper 1561.World Bank,Policy Research mance in particular ways. Department,Washington, DC. Responsibility: International Finance Corporation, -. 1997."Does Income Inequality Raise Aggregate Saving?" Economics Department-Jack Glen ([email protected]) and WorkingPaper 97-08. Central Bank of Chile,Santiago. Robert Miller. With Anthony Aylward. -1997.Saving across the World: Puzzles and Policies. World Bank Completiondate: September 1997. DiscussionPaper 354.Washington, DC. Report: -Forthcoming."Income Inequality and AggregateSaving." Aylward, Anthony. 1998. Trends in Venture Capital Finance in In Andr6s Solimanao,ed., Social Inequality, Values, Growth, and Developing Countries. IFCDiscussion Paper 36. Washington, DC: theState. AnnArbor: University of MichiganPress. InternationalFinance Corporation. Schmidt-Hebbel,Klauas, and Luis Serv6n,eds. Forthcoming.The Economics of Saving: Theory, Evidence and Implications for Policy. Cambridge:Cambridge University Press. The Effects of Urban Land Titling and Tenure Schmidt-Hebbel,Klaus, Luis Serven,and Andr6sSolimano. 1996. Security on Investments, Property Value, and "Savingand Investment:Paradigms, Puzzles, Policies." World Credit Access in Ecuador Bank Research Observer 11(1):87-117. .1996. "Saving,Investment, and Growth in Developing Ref. no. 681-60C Countries:An Overview."In Andres Solimano,ed., RoadMaps This research project examined the importance of tenure to Prosperity: Essays on Growth and Development. Ann Arbor: security for access to credit, investments in homes and Universityof MichiganPress. in the community, and property values in Ecuador. It paid particular attention to the effects of tenure security on investments in local public goods, such as sewers and The Financial Structure and waste removal. Governance of Venture Capital Funds The research used a stratified sampling technique to in Developing Countries collect data and estimated the effects of land tenure security using an instrumental variable approach. It estimated Ref.no. 681-51C environmental quality, investments in public goods, and This research sought to identify recent trends in venture property values as functions of title, other tenure vari- capital finance in developing countries-including those ables, and control variables, and access to formal credit evident in the organizational structure and incentive as a function of these variables as well as of assets and design of venture capital intermediaries, the extent of access to other sources of credit. managerial discretion they have, and the investment poli- Preliminary findings indicate that there are informal cies they follow--and how these relate to the invest- barriers to obtaining tenure security. Age and education ment performance of venture capital funds in developing of head of household are not significant predictors of countries. The study analyzed new data on venture cap- whether title could be or had been obtained, but whether ital in developing countries gathered from two main the neighbors have title is a good predictor. Title appears sources: regional venture capital associations in Asia and to add value to the property, but the effect diminishes Europe, and a suarvey by the International Finance over time, and the marginal effects of titling vary widely Corporation of more than 200 venture capital fund man- among communities. Informal property rights can sub- agers, who were asked for detailed information on the stitute for formal property rights. Households with a structure of their funds and the investments they have stronger claim to their property are significantly more made. The survey produced a final sample of 52 usable likely to participate in activities to improve the commu- returns that furnis]heddetailed data on the portfolio struc- nity. Households that are less able to assert informal prop- ture of some 410 investments made in 19 developing erty rights, such as households headed by women, are countries. The data from the regional venture capital asso- more likely to benefit from formal tenure security. ciations detail sources and uses of venture financing flows The study will generate data with unique detail on by region, country; industry, type of investing institution, responses to tenure security and should yield useful and stage of venture investment. The survey data detail insights for the design of sector policies. Preliminary

108 Domestic Financeand CapitalMarkets results were presented at a workshop on the research pro- tant because they provide the link between the invest- ject Social and Environmental Consequences of Growth- ment needs of the issuers and those of the investors. Oriented Policies, held May 1-2,1997. The 35 participants This study examined the primary markets in Peru. were academics and Bank specialists. The Peruvian economy has experienced tremendous Responsibility:Development Research Group, Poverty changes in recent years, and those changes have played an and Human Resources-Emmanuel Jimenez (ejimenez important part in the development of the country's capital @worldbank.org). With Jean Lanjouw, Yale University; markets. For years the economy languished as a result of and Jorge Alfredo Eguigueren. The Social and radicalpoliciesthatnationalizedmuchof theindustrialand Environmental Consequences of Growth-Oriented financial sectors. Since assuming power, President Alberto Policies Trust Fund, Ministry of Foreign Affairs, the Fujimora has implemented policies, including capital mar- Netherlands; the Yale Center for International and Area ket reform, that have resulted in high GDP growth, low Studies; and the German Agency for Technical inflation, and a stable currency-factors that have helped Cooperation contributed funding for the research. boost private investment and savings. The much higher Completiondate: June 1998. investment and savings rates, combined with capital market reform and increased access for foreign investors, set the stage for a rapid increase in primary market activity. Bank Reform, Concentration, and Costs Public offers in the primary market have increased sharply in recent years. Near zero in 1980-84,public offers Ref. no. 681-90 increased for a few years in the mid-1980s before drop- This project investigates the effects of financial reform on ping off again in 1990. But with economic growth and competition and efficiency in the banking sectors of sev- stability, the amount raised through public issues eral countries, including Chile, Colombia, and Italy. In increased to $631 million in 1996, equal to just over 1 particular, it examines banks' behavior to find out whether percent of GDP. Equity issues have accounted for a very interest rates are determined in a competitive manner small amount, only 1.2 percent of total public issues in and whether they represent a significant obstacle to eco- 1991-96. By contrast, the market for bonds has developed nomic growth. The project uses the most disaggregated rapidly, growing from $9.5 million in 1990 to $595.8 mil- data to analyze in which sectors these obstacles are great- lion in 1996. Corporate bonds account for most of this est. The analysis is based mainly on data on individual market, totaling $454.2 million in 1996. banks (from financial statements collected in Bankstat) The rapid increase in activity in the primary markets and aggregate data collected primarily from central banks. and the relative importance of different instruments can Use of a common methodology allows the study to be explained in part by five factors: carry out cross-country comparisons and assess the suc- * The overall level of economic activity. cess of reforms in improving the competition and effi- * The liberal, market-oriented attitude adopted by the ciency of banking sectors. The research should yield government, including the government body that regu- insights on the effect of financial reforms on different lates capital market activity. kinds of borrowers and provide policy recommendations * The adoption of a new capital market law that makes relating to finance for small and medium-size firms. operation of the markets easy and transparent. The results will be presented at seminars and confer- * The financial condition of the issuers, which had ences and through one or two working papers. The study suffered from years of inflation. will also produce an Excel database containing all the sta- * The development of private pension funds. tistical information used. Responsibility: International Finance Corporation, Responsibility: Mexico Resident Mission-Fernando Economics Department-Jack Glen ([email protected]).With Montes-Negret ([email protected]). With Ananth Madhavan. A University of South Carolina grant Luca Papi, University of Ancona. contributed funding for the research. Completiondate: June 1999. Completiondate: September 1997.

Peru Pilot Project Financial Structure and Economic Development Ref. no. 682-04C While secondary capital markets are where existing secu- Ref no. 682-41 rities are traded between investors, primary markets are What legal, regulatory, and policy changes can govern- where securities are issued. Primary markets are impor- ments implement to produce financial systems that

109 Domestic Finance and CapitalMarkets encourage economic development? To shed light on this and the stability of the financial system. Looking at cross- issue, this researchnproject will study the determinants country data, the research will investigate whether hav- of financial structure-defined as the mix of banks, secu- ing a certain type of deposit insurance scheme makes rities markets, and nonbanks in an economy-and the banking crises more likely, recovery more difficult, and importance of financial structure for economic develop- recurrence unavoidable. To the extent that data are avail- ment. The research will be based on firm-level, country- able, the research will also investigate the impact of level, and cross-country analyses. deposit insurance on bank efficiency and riskiness. First, the project will construct measures of financial Theoretical papers will synthesize the considerable work structure and document how financial structure changes on deposit insurance and reach policy conclusions on the as countries develop. In measuring financial structure, optimal design of deposit insurance schemes. Given the it will emphasize the classic distinction between bank- amount of policy advice the Bank provides on deposit based and market-based financial systems. Second, the insurance and the lack of consensus on the issues, project will examine some of the legal, regulatory, and the results of the project will be important for Bank policy determinants of stock market development, bank- operations. ing development, and the overall structure of financial Responsibility:Development Research Group, Finance systems. Third, it will evaluate the implications of dif- -Ash Demirgiiu-Kunt ([email protected]). ferent financial structures for economic development. With Edward Kane, Boston College. Although past research suggests that well-functioning Completiondate: September 2000. banks and stock markets spur growth of firms and of overall economies, there is little analysis of the links between financial structure and economnicperformance Primary Financial Markets: Macroeconomic in developing countries. Conditions and Market Development Responsibility:Development Research Group, Finance -Ash Demirguc,-Kunt ([email protected]) Ref. no. 682-98 and Ross Levine. With Rene Stulz; Vojislav Maksimovic; This project focuses on the relatively unexplored area of Sheridan Titman; and Mustafa Gultekin. primary debt and equity markets in developing coun- Completion date:January 2000. tries. Its broad goal is to begin the process of understanding how and why primary markets develop. Primary markets are where firms raise capital through Deposit Insurance: Issues of Principle, the issuance of financial securities, while secondary mar- Design, and Implementation kets are those where financial securities trade after issuance. The research will examine the development of Ref. no. 682-90 domestic primary markets, focusing on macroeconomic Most countries haive some form of protection for bank factors. The analysis will use annual aggregate issuance deposits, but the arrangements vary considerably in data gathered from original sources. It will cover 24 devel- design. While there are formal systems that explicitly oping countries and, for comparative purposes, a set of guarantee deposits, implicit systems-in which partici- industrial countries. pants simply take it for granted that the government The research will address the following questions: will step in if there is a crisis-are also widespread. Explicit First, to what extent can variation in aggregate issuance systems vary in coverage, in whether membership is vol- activity be explained by macroeconomic factors? Second, untary or mandatory, in funding and premium struc- what is the relative growth of activity in debt and equity tures, and in management. Some deposit insurance primary markets, and can macroeconomic factors and institutions are ailso responsible for supervising the liberalization explain differences in growth rates across insured institutions. While most policymakers consider countries? Third, are there observable factors that explain deposit insurance a stabilizing tool that spares countries the concentration of debt and equity issuance in a few from banking crises, a growing literature emphasizes the developing markets, and can these factors be used to pre- destabilizing effects of deposit insurance systems that scribe policy for accelerating primary market growth? end up exacerbating the very crises they were meant to Fourth, what factors explain why significant short-term prevent. debt markets exist in even fewer developing countries This research project will analyze the impact of deposit than do equity markets, and does this disparity matter insurance systems both empirically and theoretically. in the raising of capital in developing economies? Fifth, Empirical papers will seek to provide evidence on the what macroeconomic factors influence the decision to links between different types of deposit insurance schemes raise equity and debt overseas rather than only domes-

110 Domestic Financeand CapitalMarkets tically? Does this decision have implications for domes- Reports: tic growth and development? And sixth, what part does Eichengreen,Barry, and Ashoka Mody. 1998."Interest Rates in the government privatization activity play in all these issues? North and Capital Flows to the South: Is There a Missing Link?" The analysis will center on a structural vector autore- World Bank, Project Finance and Guarantees Department, gressive framework. This econometric methodology Washington, DC. allows analysis of a combined cross-section and time . 1998."What Explains Spreads on Emerging Market Bonds: series of both dependent and independent variables in Fundamentals or Market Sentiments?" Resource Mobilization a framework that is free of a rigid economic model. and Cofinancing Discussion Paper 123. World Bank, Project The macroeconomic factors considered will include Finance and Guarantees Department, Washington, DC. economic growth, inflation, private investment, the level of privatization activity, and the relative prices of debt and equity. Collectively, these factors should encom- Postal Financial Services Reform pass much of what explains aggregate issuance activity. However, other factors will also be investigated, Financial services provided by postal organizations can including openness to foreign investment and the type play a significant part in establishing a healthy financial of information available to investors. Autonomous infrastructure in developing countries. Through the exten- dynamics in equity and debt offerings over time may also sive national network of postal service outlets, develop- play an important part. Preliminary analysis of privati- ing countries can provide an effective channel for savings zation data suggests, for example, that multiyear equity mobilization and a convenient means for payments and issuances have been common in Africa, Asia, and Latin funds transfer, particularly for rural and low-income America. communities. Responsibility: International Finance Corporation, This research project addresses several questions: Economics Department-Jack Glen ([email protected]).With Could the national postal network provide an effective Ian Domowitz, Pennsylvania State University; and financial infrastructure in countries with a weak finan- Ananth Madhavan, University of South Carolina. cial sector? Even in developing countries with a reason- Completion date: December 1999. ably developed financial sector, could the postal network provide efficient basic financial services to rural areas, low-income communities, and small businesses and Bond Spreads in Emerging Markets traders? What are the major issues and constraints in developing or improving the performance of postal finan- This study attempted to explain spreads on bonds issued cial services? And what steps are effective in reforming by emerging markets since 1991. It analyzed data on and developing postal financial services? nearly 1,000 developing country bond issues during The research is based on case studies of countries that 1991-96, a period that spans the recent episode of heavy have successful postal financial services systems, includ- reliance on bonded debt. Both the issue decisions of ing Australia, Belgium, Canada, Greece, Ireland, Japan, debtors and the pricing decisions of investors were con- the Netherlands, Sweden, and Switzerland; developing sidered, minimizing the potential for selectivity bias. country experience in the provision and reform of postal Overall, the results of the study confirm that measures financial services; the literature on postal financial ser- of higher credit quality lead to a higher probability of vices; experience in Bank operations in this area; and a issue and to a lower spread. But observed changes in fun- statistical survey of postal financial services around the damentals explain only a small portion of the spread com- world. The survey is meant to fill gaps in existing data- pression in the period leading up to the recent crisis in bases, which contain limited and sporadic information. emerging markets. The other primary sources of data are the Universal Postal The study also assessed the impact of U.S. interest Union and the World Savings Banks Institute. rates on flows of bond funds to emerging markets. It The research is expected to raise awareness within the found that a rise in U.S. interest rates significantly reduces Bank and among borrowers of the appropriateness and the volume of new bond issues. But the impact on spreads the benefits of postal financial services for rural devel- charged on the bonds is modest. opment and financial sector development in rural or low- Responsibility: Project Finance and Guarantees income areas. The findings will be disseminated mainly Department-Ashoka Mody ([email protected]). through publications and at least two conferences to be With Barry Eichengreen, University of California at organized jointly with the Universal Postal Union. Berkeley. Responsibility: Private Sector Development Depart- Completiondate: June 1998. ment, Privatization Services Group-Kumar Ranganathan

111 Domestic Finance and CapitalMarkets

(kranganathanEworldbank.org), Aurora Ferrari, and a microfinance loan or loan component and provides Andrea Fernandez. With La Poste, Switzerland; the extensive advice on such nonlending activities as policy Universal Postal Union; and ING-Barings, the dialogue and technical assistance. Netherlands. The Swiss Agency for Development and In April 1998 the project completed the Microfinance Cooperation; the Swiss Special Studies Trust Fund; the Handbook (Washington, DC: World Bank, forthcoming), Universal Postal Union; and the Postal Development a technical guide targeted to a wide audience, including Action Group are contributing funding for the research. client country govemments, financial institutions, donor Completion date: November 1998. agencies, and practitioners. The handbook offers a comprehensive overview of the main issues in microfinance and an update on the lessons learned and best practices Sustainable Banking with the Poor inthefield.Adraftwasdiscussedataregionalworkshop in Thailand in November 1997, organized in cooperation This research project aims at improving the ability of with the Foundation for Development and Cooperation donors, governments, and practitioners to design and (Australia). implement policies and programs for building sustain- Comparative analyses of case studies were presented able financing institutions that are effective in reaching at two regional conferences in Africa and at professional the poor. The project is carrying out a series of case stud- meetings in Latin America. A methodological develop- ies of microfinance institutions in Africa, Asia, and Latin ment emerging from this analytical work, the depth of America that have pioneered innovative approaches for outreach index, has been identified as possible subject reducing the costs and risks of providing financial ser- for a World Bank Technical Paper. vices to a large number of low-income clients. The case The project has established a Bank seminar series to studies cover a wide range of institutions, including com- disseminate best practice and to discuss issues and prob- mercial banks, specialized banks, nongovemmental orga- lems emerging in the rapidly growing field of microfi- nizations, nonbank financial institutions, and government nance. So far it has held 32 seminars. It has also established development finance institutions. a Website to disseminate case studies and other publi- The project draws on several disciplines-economics, cations (http://www-esd.worldbank.org/html/esd/agr/sbp/). finance, and anthropology-and uses both quantitative While the project is not yet complete, its outputs have and qualitative approaches to analyze why some had a substantial influence on the design and imple- programs have successfully delivered financial services mentation of rnicrofinance projects supported by the Bank. to the poor while others have fallen short. Success is The case studies and examples of good practice presented defined by financial sustainability and by access and out- in the seminar series have prompted follow-up discus- reach. Financial sustainability is measured in terms of sions with operational staff interested in applying the key financial performance indicators, including the lessons to project designs. The inventories of institu- Subsidy Dependence Index widely used in the Bank. tions and organizations active in microfinance in differ- Access and outreach are measured by assessing how far ent countries have also provided useful information to beyond the "frontier of finance" a program has gone to task managers. Most important, the "Microfinance reach those who have been unable to use formal finan- Practical Guide" produced in fiscal 1998 for Bank staff cial services-whether because of gender, income, illit- has helped ensure that the design of financial sector, rural eracy, ethnic identity, geographic location, or lack of finance,andsocialfundoperations,ortheirmicrofinance collateral. components, reflects best practice. On the basis of the case studies, the project is pro- The regional conferences, each attended by more than ducing documents that provide lessons for policy for- 100 policymakers and practitioners, have conveyed key mulation, program design, and implementation. These messages on regulatory frameworks and institution build- include an integrated analysis and critical review of the ing for microfinance and rural finance. Broad dissemi- role of nongovemmental organizations in microfinance nation of the case studies, microfinance inventories, and and a thorough analytical assessment of the current state other documents in three languages have helped policy and potential of credit union outreach to the poor. In analysts and government officials worldwide acquire a collaboration with the Consultative Group for Assisting better understanding pf critical issues in sustainable bank- the Poorest (CGAP), the project produced the "Micro- ing with the poor. finance Practical Guide," designed to assist Bank task Responsibility:South Asia Region, Social Development managers in formulating and implementing microfinance Sector Unit-Lynn Bennett ([email protected]); activities. Launched at a Bank seminar in November 1997, Africa Region Technical Families, Private Sector Finance the guide presents a step-by-step approach to designing Carlos E. Cuevas, Laura Gomez, and Febbie Piersol; and

112 Domestic Finance and CapitalMarkets

Private Sector Development Department, Microfinance cial liberalization can be seen in heightened asset mar- and Small and Medium-Size Enterprise Unit-Cecile ket volatility, distributional shifts, and a net deteriora- Fruman and Jacob Yaron. With Tom Dichter; Joanna tion in the incentives for sound risk management and Ledgerwood; Julia Paxton; J. D. Von Pischke; Jeffrey Poyo; corporate governance of financial intermediaries. This Gloria Almeyda; Anne-Marie Chidzero; and Jorge study will analyze the pros and cons of moving to mar- Rodriguez-Meza. The Swiss Agency for Development ket rates and assess the degree to which complementary and Cooperation; the Royal Ministry of Foreign Affairs, policies need to be in place for improved performance Norway; and the Ford Foundation are contributing fund- of the financial sector in the liberalized environment. ing for the research. The analysis will include country studies and cross- Completiondate: December 1998. country econometrics. The country studies will be quan- Reports: titative and qualitative, and based on published national CEPES,Peru. 1997."Servicios Financieros y Desarrollo Rural." In statistics.The cross-countryeconometrics will use a pro- CarlosCuevas,"MercadosFinancierosRuralesenAm6ricaLatina."prietary database of bank accounts as well as the pub- Churchill,Craig. 1998. "SouthAfrica: GetAhead Foundation." Case lished statistics. Among the countries the study will cover Studiesin Microfinance. are Colombia, Hungary, India, Indonesia, Kenya, the Dichter,Tom. 1997. "Egypt: TheAlexandria Business Association Republic of Korea, Poland, Tanzania, and Venezuela. Smalland Microenterprise Project." Case Studies in Microfinance. The results will be presented in a book-length report. Fruman, Cecile.1998. "Mali: caisses villageoises d'epargne et de Introductory chapters will review both the case for finan- creditautogerees du paysdogon." Case Studies in Microfinance. cial liberalization and the caveats, including a develop- (Alsoissued in English.) ment of the new theory of optimal financial restraint. Fruman,Ccile, andMichael Goldberg. 1997. "Microfinance Practical They will also present cross-country econometric evi- Guide." dence on the determination of interest rates and interest Kantor,Paula, Alicia Robb, and ChristineRobinson Parajuli. 1998. spreads. Separate chapters will describe the liberaliza- "Laautosuficiencia financiera: una guiabasicapara programas tion experience of chronically high-inflation countries, de micro-creditoen AmericaLatina." transition economies, industrial economies, low-income Kantor, Paula, and Christine Robinson. 1997. "Financial countries, countries that have relied heavily on directed Sustainabilityfor CreditPrograms: A Travel SurvivalGuide." credit, and economies with severe fiscal problems. Lapenu,Cecile. 1998. "Indonesia's Rural Financial System: The Role Another chapter will interpret the relevance of the 1997 of the Stateand Private Institutions." (Alsoissued in French.) crash in the high-growth Asian economies. A conclud- Ledgerwood, Joanna. Forthcoming. Microfinance Handbook. ing chapter will draw policy lessons both for countries SustainableBanking with the Poor Series.Washington, DC: that have already liberalized and for those that now need WorldBank. to manage the transition. Paxton, Julia. 1997. "Burkina Faso: PPPCR." Case Studies in Responsibility:Development ResearchGroup, Finance Microfinance. -Gerard Caprio Jr. ([email protected]). With - 1997."Guatemala: CARE Village Banks." Case Studies in PatrickHonohan; Yoon Je Cho, Sogang University; David Microfinance. (Alsoissued in Spanish.) Cole; Betty Slade; and Charles Wyplosz, Graduate - . 1998."Costa Rica: FINCA Village Banks." Case Studies in Institute of International Studies, Geneva. Microfinance.(Also issued in Spanish.) Completiondate: June 1999. -. 1998."Inventaire des institutionsde microfinanceen Afrique de l'Ouest et du Centre Ouest." -. 1998."Inventaire mondiale des institutionsde microfinance." Rural Finance in Pakistan (Also issued in English and Spanish.) .1998."Inventario Regional de Institucionesde Microfinanzas As a result of a lack of data, little has been known about en Latinoamericay el Caribe." the extent and nature of rural financial markets in Pakistan Paxton,Julia, and Ccile Fruman.1997. "Outreach and Sustainability: and about the role of formal financial institutions such A ComparativeAnalysis of Savings-Firstand Credit-First as the Agricultural DevelopmentBank of Pakistan.As a FinancialInstitutions in Africa." first step toward improving the understanding of the country's rural credit market, the World Bank and the government of Pakistan collected household and com- Financial Liberalization munity survey data as well as data on the functioning of informal, cooperative, and formal lenders. Pakistani Many countries have encountered difficulties in mov- research institutions have undertaken a descriptive analy- ing to market-based interest rates. The downside of finan- sis of these data.

113 Domestic Finance and CapitalMarkets

This study is ca:rrying out a rigorous econometric a problem. But informed cross-country comparisons can analysis of the data to address the following questions: help identify irregularities needing more rigorous analy- What is the extent and nature of rural credit transactions? sis (such as an inactive stock exchange). But the Bank What is the extent and nature of credit constraints for lacks a database for simple cross-country comparisons rural producers? What impact does formal and infor- of financial systems. mal credit have on agricultural growth, investment, and To allow a comparison of financial systems at differ- productivity? What is the cost of delivering credit to rural ent benchmark dates, this initiative will help start com- producers for the Agricultural Development Bank of pilation of a data set on financial institutions for a large Pakistan and for other government-controlled financial sample of industrial and developing countries through institutions? What is the likely impact of policy and insti- time. Data will be collected on the size, activity, and effi- tutional reform on rural growth and welfare? And what ciency of different types of financial intermediaries and is the potential of microfinance, provided by non- markets (banks, nonbank financial institutions, insurance governmental organizations and other agencies, as a companies, pension funds, developmentbanks, and stock method for delivering credit to the poor, women, and and bond markets). This database will simplify cross- small producers? country comparisons for country officials and Bank staff Preliminary findings indicate that the rural credit mar- and facilitate additional research. ket in Pakistan is highly segmented. Formal institutions Responsibility:Development Research Group, Finance such as the Agricultural Development Bank of Pakistan -Ash Demirgiiu-Kunt (ademirguckunt@worldbank. and cooperative societies serve the rich, while small and org), Ross Levine, and Beck Thorsten. medium-size farmers and producers depend entirely on Completion date: September 1999. informal lenders. While the cost of borrowing is low for formal finance, the interest rate for informal finance is extremely high. But the loan recovery rate for formal Capital Markets lenders is quite low, averaging less than 40 percent over time. The loan default costs are too high for the banks to This research aims to look at second-generation issues absorb through their interest and other income alone, and in the setting up of pension funds, such as diversifica- they can continue functioning only as a result of the tion and competitiveness, to improve the quality and util- government subsidies they receive. ity of the advice provided by the Bank. A second part of Research findings will be disseminated through sem- the research will focus on mutual funds, which are small inars and workshoips both in Pakistan and in the Bank in many countries today but are expected to grow sig- and through a book for policymakers and practitioners. nificantly over the next decade. The study will compile Responsibility: Poverty Reduction and Economic a database on mutual funds, analyze the necessary pre- Management Network, Gender Division-Shahidur R. conditions for their success, assess their impact on finan- Khandker (skhandcker@worldbank. org) and Hussain cial sector development, and produce a best practice paper Samad; and South Asia Region, Rural Development Sector on the regulation of mutual funds and other nonbank Unit-Rashidur R. Faruqee. With Annaya Basu; Dan financial intermediaries. Millimet, Brown University; and Tulika Narayan, Responsibility:Development Research Group, Finance University of Maryland, College Park. -Dimitri Vittas ([email protected]). With Patrick Completiondate: June 1999. Honohan and Deepthi N. Femando. Completion date:June 2000.

Benchmarking Financial Systems Measuring Financial Regulation World Bank staff often seek to compare a country's finan- and Supervision cial system with those of benchmark countries. This involves comparing the size and mix, and the activity The World Bank, the International Monetary Fund, and and efficiency, of financial intermediaries and markets in other international financial institutions promote finan- countries at similar or higher stages of economic devel- cial stability and economic development by urging coun- opment. Taken in isolation, such cross-country evalua- tries to adopt and then to implement appropriate tions do not yield a clear financial sector development regulations and supervisory standards for the financial strategy. For example, finding that a country's insur- sector. Yet there is relatively little empirical evidence to ance industry is small relative to that of other countries support advice regarding specific regulatory and super- with a similar GDP per capita does not necessarily imply visory reforms. The reason is that no detailed cross-

114 Domestic Finance and CapitalMarkets country comparisons of national financial systems in parts. Data collection will cover the broad financial sys- developing countries exist. tem, not only because the definition of banking varies To address this problem, this study aims to create a widely, but also because financial crises can originate global database on how financial systems are regulated among nonbank financial intermediaries, as seen most and supervised. It will collect detailed information from recently in Thailand. In addition, Bank research has shown central banks and supervisory agencies on the regula- that both banking and nonbank financial development tory and supervisory environments in different countries is important for growth. and then identify the features that produce efficient and Second, the project will use the information collected stable financial systems. to investigate whether a particular mix of regulations and The project has three main objectives. First, it will supervisory standards is closely associated with suc- collect comprehensive data for a broad cross-section of cessful banking operations and, more generally, with industrial and developing countries on financial regula- well-functioning financial systems. Finally, the project tions and supervisory standards, on the structure of reg- will trace the effect of different regulatory and supervi- ulatory and supervisory agencies, and on the capabilities sory features initially on the financial system and then of the regulatory and supervisory authorities to improve on overall economic performance. discipline over financial market participants. Information Responsibility:Development Research Group, Finance on the supervisory function will include the types of data -Gerard Caprio Jr. ([email protected]) and Ross and information collected, supervisory powers, number Levine. WithJames Barth, Auburn University; and Iffath of on-site inspections, budget for supervisory work, and Sharif. supervisory compensation relative to market counter- Completion date:June 2000.

ll5 TRANSITION ECONOMIES

The Impact of Market-Oriented Reports: Policy Reforms on Households Jacoby,Hanan, Guo Li,and ScottRozelle."Hazards of Expropriation: in Rural China Tenure Insecurity and Investment in Rural China." Rozelle, Scott, Guo Li, and Loren Brandt. "Land Tenure, Property Ref. no. 677-16 Rights, and Productivity in China's Agricultural Sector." In the 1980s China dismantled the commune system, in which land was communally owned and farmed, and replaced it with the household responsibility system, in Labor Market Adjustment in Estonia which land is leased to and worked by individual households. In the early 1980s agricultural production increased Ref. no. 679-71C dramatically. No further large increases are expected, Many economies in transition have experienced massive however, as it appears that the gains from this new pol- dislocation of workers and painfully high unemploy- icy have now been reaped. ment. Few, if any, will avoid these outcomes. In contrast This research project intends to obtain answers to the to Central and Eastern Europe, little is known about recent following questions: What are the main determinants of labor market adjustments in the former Soviet republics. the productivity of agricultural households in rural China? This research aimed to fill that void. Using the data gen- Would removal of restrictions on factor markets (credit, erated by the Estonian retrospective labor force survey labor, and land) produce further increases in agricultural of 1995, it assembled hard evidence on the patterns of output? How has the household responsibility system labor mobility and wage changes during the transition affected income distribution, and what are the principal of one former Soviet republic-Estonia. The country not determinants of the variation in incomes across rural only is implementing distinctive labor market policies, households in China? generally in the direction suggested by the World Bank, Answering these questions requires detailed house- but also is in the forefront among the former Soviet hold-level information, data that are rare for China. To republics in implementing policy reforms. obtain such information, this project collected data from The project focused on three main issues: labor mobil- about 800 households in 30 villages in Hebei and Liaoning ity across labor market states, job creation and job destruc- Provinces in the sum:mer of 1995. tion, and changes in the structure of wages. The analysis The project's results are expected to shed light on two relied on the estimation of probit, logit, and hazard mod- broad policy questions. First, what would be the effect els for analyzing determinants of labor market transi- on productivity of further liberalization of the rural econ- tions, and estimation of earnings functions for analyzing omy (ending restrictions on hiring labor, on private pro- changes in wages. vision of credit, and on buying, selling, and renting land)? The study's main empirical findings are as follows: And second, what avenues are available for further reduc- * The transition in Estonia led to a massive increase ing poverty in rural China? in worker flows driven especially by an increase in job Preliminary results have shown that clear property flows. By 1993 the worker reallocation rate exceeded 35 rights lead to more investment in land improvements, percent, and more than two-thirds of this was accounted but the increase in investment may not be very large. for by job reallocation. Responsibility:Development Research Group, Poverty * The dramatic increases in job flows were led by very and Human Resources-Paul Glewwe (pglewwe large increases in separations due primarily to an increase @worldbank.org). With Hanan Jacoby; Guo Li; Loren in job destruction. Later in the transition hires and job Brandt and Dwayne Benjamin, University of Toronto; creation surged as well, and by 1994 the hiring rate Scott Rozelle, Stanford University; and the Research exceeded the separation rate and the job creation rate Center in Rural Economy, China. The National Academy exceeded the job destruction rate. of Sciences, United States, and the International * Large, state, manufacturing employers took the brunt Development Research Centre, Canada, are providing of destruction-led separations. Smaller, private, service funding for the research. and trade-oriented employers led the surge in hires and Completion date: October 1998. job creation. Virtually all the gross job creation came from

116 Transition Economies private enterprises. State and collective enterprises exhib- Iowa State University; Allan Puur, Population Research ited substantial hiring rates but this primarily reflected Center, Estonian Interuniversity, Tallinn; Ylle Pettai, the replacement of departing workers. Statistical Office of Estonia; and Debabratah Das. - The dramatic increase in job reallocation during Completiondate: June 1998. the transition was associated with large shifts of employ- Reports: ment between and within sectors defined on the basis of Haltiwanger, John C., and Milan Vodopivec. 1998."Gross Worker a variety of employer characteristics. Most of the employ- and Job Flowsin a TransitionEconomy: An Analysis of Estonia." ment shiftswere withinbroad industrial categories.There Noorkoiv,Rivo, Peter F.Orazem, Allan Puur, and Milan Vodopivec. was substantial reallocationbetween sectors defined by 1997."How Estonia'sEconomic Transition Affected Employment enterprise type (state or private) and by size class.High and Wages(1989-95)." Policy Research Working Paper 1837. rates ofjob reallocation were also observed among busi- World Bank, Development Researdc Group, Washington, DC. nesses of the same type. For example,even though small (Alsoforthcoming in TransitionEconomics.) and private sector businesses dominated job creation, Orazem, Peter, 1996."Analysis of Wage Structure." Paper presented they also exhibited high rates of job destruction. at the workshop Methods of Labor Market and FertilityAnalysis, * The burst of destruction-led separations led to a large PopulationResearch Center, Estonian Interuniversity, Tallinn, increase in inflows to unemployment, but it also led to March 8-9. a large increase in direct job-to-jobtransitions, from less Orazem, Peter F., and Milan Vodopivec. 1997. "Male-Female than 5 percent in 1989to 15 percent in 1994. Differences in Labor Market Outcomes during the Early The analysis of the evolution of the wage structure Transition to Market: The Cases of Estonia and Slovenia." produced four main empirical findings: Puur,Allan, Peter F. Orazem, Rivo Noorkoiv, and MilanVodopivec. * The relative returns to education rose rapidly dur- 1996. "Employment and Wage Dynamics in the Estonia ing transition, as did the relative employment of more Transition,1989-95."WorldBank,PolicyResearchDepartment, educated workers. The advantages of more education Washington, DC. occurred for all experience cohorts and across all sectors Vodopivec,Milan. 1996. "Analysis of Worker Transitions." Paper of the economy. presented at the workshop Methods of Labor Market and Fertility i Returns to experience rose for most experience Analysis, Population Research Center,Estonian Interuniversity, cohorts, most rapidly for the young (relative employ- Tallinn, March 8-9. ment also rose for younger workers). -. 1997. "Studying LaborMarket Flowsin a TransitionPeriod." e Women's employment share declined in most sec- Paper presentedat the OECD conference Use of Labor Force tors, but their relative wages increased. Ethnic minori- Surveys in Policymaking, Tallinn, October 26-27. ties lost in both employment share and relative wages; . 1997."What Can We Learnabout LaborMarket Policies some of this decline may be due to rising relative returns from Labor Force Surveys?" Paper presented at workshop for to Estonian language abilityin most sectors of the econ- Estonian parliamentarians, Haapsalu, May 30-31. omy. * Relative wages declined in sectors with the largest reductions in employment and rose in sectors with the The Consequences of Large-Scale largest gains in employment. The consistency of this pat- Privatization in Mongolia tern of rising relative wages associated with rising relative employment for human capital and ethnic groups Ref no. 680-27C suggests a well-functioning labor market responding to Using data collected through surveys of large priva- demand shocks. tized enterprises in Mongolia, this study tested hypothe- The results show that Estonia's dramatic opening of ses on the channels through which privatization affects product and labor markets allowed intense restructur- enterprises, on the significance and speed of these effects, ing, with a surge in worker and job reallocation that was and on their relationship to the ownership structure accommodated without massive increases in unem- impartedbyprivatization. Bytestinghypotheses derived ployment. The evidence suggests that labor market flex- from economic theories relating enterprise behavior and ibility plays a vital part in successful transition, parti- performance to ownership patterns, the study sought to cularly for a rapid reformer. produce insights into the determinants of behavioral Responsibility:Development Research Group, Poverty change in organizations and the institutional prerequi- and Human Resources-Branko Milanovic (bmilanovic sites of effective corporate governance. It assessed how @worldbank.org). With Milan Vodopivec, GEA College different types of share ownership patterns-worker, of Entrepreneurship, Portoroz, Slovenia; John managerial, institutional, governmental, and outsider Haltiwanger, University of Maryland; Peter Orazem, -vary in their ability to promote change, effective

117 Transition Economies governance, and improved enterprise performance. And of Maryland,Center for InstitutionalReform and theInformal it examined the links between enterprises and govern- Sector,College Park. ment, the forces that cause these links to change, and their - 1998."Which Enterprises (Believe They) Have Soft Budgets effect on enterprise performance. afterMass Privatization? Evidence from Mongolia. IRIS Working The study found that core owners are in place in a Paper 212.University of Maryland,Center for Institutional significant number of enterprises. Some ownership Reformand the InformalSector, College Park. changes have been occurring, and the move away from insider ownership has been greatest where insider control seemed to have been a relative failure. Many enter- Poverty and the Targeting of Social prises follow the cormpany law and adhere to elementary Assistance in Eastern Europe criteria of good governance, even though enforcement and the Former Soviet Union mechanisms are almost nonexistent. The most troubling finding is the poor quality of governance mechanisms Ref no. 680-33C in outsider plurality enterprises, suggesting that the exit Declining incomes and growing income inequality have of small shareholders is necessary before governance led to a rise in poverty in the transition economies of through internal mechanisms such as boards of directors Eastern Europe and the former Soviet Union. But the can take hold in these enterprises. effects have been uneven across different population The study found that enterprise-state interactions are groups, regions, and types of households. heavily concentrated in enterprises that have some state The objective of this research was to establish associ- ownership and that the intensity of these interactions is ation, and even causality, between different factors and related to the degree of state ownership. This suggests household vulnerability during the period of transition. the presence of a policy mechanism that takes account The factors considered include education, locality, age of ownership when decisions are made on interventions of household head, and number of household members. in the enterprise sector. The study covered four countries in Eastern Europe Finally, with regard to soft budget constraints, the (Bulgaria, Hungary, Poland, and the Slovak Republic) study found that central government ownership is of and four countries in the former Soviet Union (Armenia, overwhelming importance in determining the percep- Estonia, the Kyrgyz Republic, and Russia). tions of soft budgets. Local government ownership is of Increased poverty causes difficulties for social assis- much less consequence. Although its significance varies tance agencies in transition economies, both because fis- across regions, in most regions it does not encourage enter- cal resources are usually insufficient and because many prises to think that they have softbudgets. The only excep- people apparently qualify. This leads to the presence of tion is a locality that received a soft budget from the central many small programs with large "leakages" to the less government in the previous year. Very little else seems needy. If social assistance is not provided effectively, important in explaining perceptions of soft budgets. scarce resources will be wasted, and chances to reduce Responsibility: East Asia and Pacific Region, Private poverty missed. Sector Development Unit-Hongjoo Hahm (hhahm Using household income and expenditure data (from @worldbank.org). With Peter Murrell, Georges Korsun, regular or Bank-sponsored household budget surveys) and James Anderson, University of Maryland at College from the eight countries for 1993-95, the study attempted Park. to answer two questions: What are the determinants of Completiondate: December 1997. poverty in transition economies? And what types of Reports: households are systematically favored or discriminated Anderson, James H. 1998. "The Size, Origins, and Character of against in the allocation of social assistance? Mongolia's Informal Sector during the Transition." Policy The study found that education and unemployment Research Working Paper 1916. World Bank, Development play an important part throughout the region (the first Research Group, Washington, DC. by raising income, the second by reducing it). The impor- Anderson, James H., Georges Korsun, and Peter Murrell. 1997."The tance of locality (large city or rural area), age of the house- Effects of Government Decentralization during Transition: hold head (pensioner or employed), and gender of the Evidence on Enterprise-State Relationsin Mongolia." Post-Soviet household head differs among the countries, reflecting Geographyand Economics38(4):230-46. differences in such policies as those toward pensioners -1997."Enterprise-State Relations after Mass Privatization: or protection of the real value of family benefits. Their Character in Mongolia." MOCT-MOST 7(4):81-99. In some countries the study found systematic dis- -1998."Ownership, Exit,and Voiceafter Mass Privatization: crimination in the allocation of social assistance-that Evidence from Mongolia." IRISWorking Paper 213. University is, higher or lower access to social assistance than pre-

118 Transition Economies dicted. Access to social assistance varies depending on ing on the options and choices of Polish households. It place of residence (for example, rural areas are helped more pays particular attention to redistributive policies, espe- than expected in Hungary, but less than expected in Russia). cially social expenditures. It also varied according to ownership of such household Changes in income and consumption during the tran- durables as a car or color television, clearly indicating an sition period are estimated at selected points in time, to implicit means-testing of social assistance (which is par- characterize the evolution of the socioeconomic condi- ticularly strong in Poland). In almost all the countries, tions of Polish households. The effect of human capital everything else equal, female-headed households are more is analyzed by comparing the results of regressions of likely to be helpted than are male-headed households. households' income and consumption on a set of house- The study has created a large database with data from hold characteristics (including education levels). the eight country surveys. The database contains 82 vari- Households' utilization of their human capital and other ables, identically defined (to the extent possible) across assets is explored by regressing the year-to-year change the surveys. The variables include the level and compo- in household expenditure on a set of explanatory vari- sition of income and expenditures, and such personal ables, such as household characteristics; ownership of and household attributes as education level, place of land, housing, and durable goods; income composition; residence, and ownership of consumer durables. The and changes in income composition. The trajectories of database, which consists of about 4 million data points, household welfare during the four-year period (in terms is available to researchers in STATAsoftware for a nom- of number of years in poverty) are explored using logit inal handling fee. It has already been used in research loglinear models in order to identify combinations of pol- inside and outside the Bank. icy-relevant characteristics of households that lost and Responsibility:Development Research Group, Poverty households that gained during the transition. and Human Resources-Branko Milanovic (bmilanovic The research uses data from the Polish Household @worldbank.org) and Yvonne Ying; Europe and Central Budget Survey conducted by the Central Statistical Office Asia Region, Poverty Reduction and Economic (obtained from the Institute of Economic Science of the Management Sector Unit-Jeanine Braithwaite, and Polish Academy of Sciences). In addition to cross- Croatia Resident Mission--Sandros Sipos; and Social sectional data sets for 1993-96, the database contains a Development Department-Christiaan Grootaert and Gi- four-year panel (1993-96) covering households partici- Taik Oh. With Robert Ackland; Mark Foley; Thesia pating in the survey in each of the four years. The panel Gardner, U.S. Bureau of Labor Statistics; Sassoun data set includes all types of households (workers, farm- Tsirounian, University of Yerevan, Armenia; Alexandra ers, pensioners, self-employed workers, and those living Posarac; and Maria Balaz. The U.S. Department of Labor on social benefits). contributed staff time. The results of the research should assist policymak- Completion date: March 1998. ers in identifying those most likely-and those least Report: likely-to be hurt by the reform, facilitating the design Braithwaite,Jeanine, Christiaan Grootaert, and BrankoMilanovic. and implementation of targeted programs. "Determinantsof Povertyand Targetingof Social Assistance in Responsibility:Development Research Group, Poverty EasternEurope and the FormerSoviet Union." Draft. and Human Resources-Emmanuel Jimenez (ejimenez @worldbank.org) and Wlodzimierz Okrasa. With the Institute of Economic Science of the Polish Academy of Household Welfare Change Sciences. during the Transition in Poland Completiondate: July 1998.

Ref. no. 681-21 The welfare effects of distributional changes brought Changing Ideas about Poverty in Russia about by the transition to a market-based system are among the best-established stylized facts on the Eastern Ref. no. 681-42 European economies undergoing reform. Between 1989 In the transition to a market system the Russian econ- and 1993 the Gini coefficient in Poland increased by 5 omy has experienced a series of shocks-a sharp fall in percent, and almost all Polish families experienced output, rapid and continuing inflation, and the appear- declines in real income after 1989. This research investi- ance of open unemployment. These shocks have led to gates the effect of human capital on changes in the dis- a substantial fall in real wages. There has also been a tribution of income and consumption, and the marked increase in income inequality as the enterpris- determinants of changes in families' well-being, focusing have taken advantage of new opportunities-and the

119 Transition Economies lucky have reaped windfall gains. While some Russians tions of supply and demand. It applied models of mar- have prospered, most have seen a fall in their standard ket margin determination, price transmission, and coin- of living. tegration to selected commodity markets, typically pork, This research looks at how the ideas about poverty in wheat and wheat flour, and milk and dairy products. The Russia-particularly the subsistence minimum and the analysis relied on statistical data published by govern- subjective poverty line-have evolved during this period ment and nongovernment institutions and the results of of unprecedented changes. The sharp decline in income field interviews and case studies. makes it possible to see, within a very compressed period, The first phase of the study focused on Poland, where how ideas about poverty respond to abrupt changes in it found that agri-food markets are reasonably well inte- overall income and in income distribution. The study grated. Effective market liberalization led to the emer- explores how these ideas differ among socioeconomic gence of a strong private sector and intensive competition and demographic groups. It also assesses the importance -and thus relatively high efficiency-in the agri-food of various factors in explaining the speed with which atti- markets. Market risk and a market structure dominated tudes toward poverty respond to changes in the exter- by processors are the two primary obstacles to further nal environment. The study should yield important market integration. findings for policymakers about which social and demo- This second phase of the study extended the analysis graphic groups adjust their expectations more slowly and to Hungary, Romania, and Ukraine. Preliminary results where the gaps between at least nominally guaranteed for Ukraine suggest that liquidity, rather tlhan a state minimums and the perception of what a minimum should monopoly, is the primary challenge in developing an inte- be are the widest. grated agri-food market. The research is based on the results of a survey by the The findings of the first phase contributed to the Bank's All-Russian Center for Monitoring of Public Opinion agricultural sector adjustment loan operation in Poland, (VCIOM). In this survey a representative sample of and the results of the second phase are expected to con- Russian households was asked a Leyden-type question tribute to agricultural adjustment programs in Hungary, (on the subjective subsistence minimum) monthly Romania, and Ukraine. The summary of experience in between March 1993 and January 1994 and about every Poland should be helpful to other transition economies other month from then until late 1996. The research uses in developing their agri-food market systems. the information from this repeated cross-sectional sur- The findings from the first phase were disseminated vey, covering three years, to establish a series of subjec- through two Bank seminars in August and October 1995, tive poverty lines for Russia. through presentations to government officials in Warsaw Responsibility:Development Research Group, Poverty in January 1996, and through presentations at the 1995 and Human Resources-Branko Milanovic (bmilanovic American Association of Agricultural Economists @worldbank.org). 'With Alastair McAuley, University of Conference and the 1996 European Association of Essex and New Moscow Economic School; Svetlana Agricultural Economists Conference. Sidorenko, VCIOM, Moscow; and Branko Jovanovic, The first phase produced an Excel database contain- Texas A&M University. ing monthly agri-food price data for Poland for 1990-96. Completion date: March 1999. Responsibility: Rural Development Department- Alberto Valdes ([email protected]) and Anning Wei.With William Tomek, Comell University; Constantine The Determinants of Agri-Food Market Ciupagea; Virginia Campeanu; Jozsef Toth; Geza Tar; Integration in the Transition Economies, Marotn Szabo; Yuri Nechayev; Svitlana V. Zhurova; Phase 2 Waldemar Guba; Jerzy Dabrowski; and Wanda Chmielewska. The Budapest University of Economic Ref no. 681-45C Sciences; the Ministry of Agriculture, Hungary; In transition economies agri-food markets are typically the Ministry of Agriculture and Food Industry, Poland; segmented among different vertical chains, market loca- the National Commission of Statistics, Romania; the tions, and types of owners and between domestic and Institute of World Economy, Bucharest; and the Ukrainian international markets. This project investigated to what Institute of Agricultural Economics collaborated in the extent the segmentation of agri-food markets has been research. overcome through reform and what kind of government Completiondate: June 1998. policies would facilitate further market integration. Reports: The project's analytical approach was based on the Guba, Waldemar, Anning Wei, Jerzy Dabrowski, and Wanda solid understanding of market institutions and fluctua- Chmielewska. 1995. "Emerging Trends in Polish Agri-Food

120 Transition Economies

Markets: A Report of Field Investigation." World Bank, The second paper investigates the selection of enter- Agriculture and Natural Resources Department, Washington, prises in the isolation programs in Bulgaria and Romania, DC. building a theoretical model that explicitly accounts for Wei,Anning, and RichardBurcroff 11. 1996. "Poland ASAL: Inter- the links between politicians and enterprise managers, Country Agricultural Policy Performance Review."World Bank, and the enterprise programs that result, which may serve Europe and Central Asia, Country Department III,Washington, to shield politically influential enterprises from liquida- DC. tion and closure. Enterprise data are then used to test Wei,Anning, Waldemar Guba, Richard BurcroffII, Jerzy Dabrowski, the model. and Wanda Chmielewska. 1996. "Market Efficiency and The third paper looks at the link between (the lack of) Government Policy in the Polish Wheat Market." Paper pre- hard budgets and (the lack of) enterprise restructuring. sented at the European Association of Agricultural Economists A simple model is used to distinguish different types of Conference, Edinburgh, Scotland. (Also published in Polish. creditors and their behavior during the transition period. Forthcoming as a World Bank Discussion Paper.) A flow-of-funds analysis is used to show the dynamics Wei, Anning, Waldemar Guba, Jerzy Dabrowski, Wanda of credit from altemative sources (banks, customers, sup- Chmielewska, Magdalena Opalka, and Richard Burcroff II. pliers, wage arrears, tax arrears). The paper is based on Forthcoming. The Emergenceof IntegratedAgricultural Markets: panel regressions over the entire population of firms Price Comovementsince Liberalizationin Poland'sHog and Pork (4,430)in Romania for 1992-96. Sector.World Bank Discussion Paper. Washington, DC. (Also The fourth paper compares enterprise restructuring publishedin Polish.) in Bulgaria and Romania with that in Hungary and Wei,Anning, WaldemarGuba, and Z. Krzyzanowska.1997. "Market Poland, two leading reformers. Sector-level production Developmentand Government Policyin the Polish Dairy Sector." and trade data are used to compare the dynamics of prod- World Bank, Agriculture and Natural Resources Department, uct changes for goods exported to European Union mar- Washington,DC. kets. The paper is based on earlier work for OECD Zhurova, Svitlana V., Anning Wei, and Yuri Nechayev. 1997. countries on quality upgrading of exports. "Agricultural Marketing in Ukraine:A Case Study of a Dairy Responsibility: Europe and Central Asia Region, Private Enterprise." World Bank, Agriculture and Natural Resources and Financial Sectors DevelopmentSector Unit-Simeon Department,Washington, DC. Djankov ([email protected]) and Stijn Claessens. With Fabrizio Coricelli, University of Sienna, Italy; Enrico Perrotti, University of Amsterdam; and Simon Evenett, Enterprise Restructuring in Bulgaria Rutgers University. and Romania Completiondate: October 1998. Report: Ref no. 681-96 DLankov,Simeon. 1998."Enterprise IsolationPrograms in Transition This project documents the degree of enterprise restruc- Economies:Evidence from Romania." PolicyResearch Working turing in Bulgaria and Romania and the relationships Paper 1952.World Bank, Financial Sector Practice,Washington, between enterprise restructuring and access to credits, DC. and between restructuring and enterprise surveillance (or isolation) programs. The project consists of four papers, one of which is completed. External Financing, Macroeconomic The first paper provides comprehensive analysis of Stability, and Government Policy the isolation program for financially distressed firms in in Eastern European Countries Romania. The results indicate that the isolation program did not deliver any tangible improvements in operational Ref. no. 682-35 performance, nor did it enhance the process of privatiz- This research project focuses on the relationships between ing or liquidating large loss-making enterprises. Firms capital flow reversals, banking system sustainability, and included in the program faced softer budget constraints prudential regulation in Central and Eastern Europe. It than their comparators outside the program, few man- explores the channels for transmission of volatility agement changes took place in poorly performing firms, between external financing flows and banks' performance, and managers of enterprises outside the program received both in principle and in the context of transition. It assesses confusing signals about the urgency of the restructuring prudential bank regulation in a sample of countries in effort. These findings call into question whether suc- the region (the Czech Republic, Hungary, Poland, the cessful enterprise restructuring programs can be cre- Slovak Republic, and Slovenia), using as a benchmark ated under government auspices. the European Union's banking directives. This assess-

121 Transition Economies ment focuses on regulation's role in strengthening the such jurisdictions, little information is readily available resilience of the banlcing sector to capital flow reversals. at the city level. The uniqueness of this project thus lies Against this backgrouand,the project addresses a core pol- primarily in its focus on the role and comparative expe- icy question: Should Central and Eastem European coun- rience of cities in shaping the transition from plan to mar- tries tighten their current regulatory systems to ensure ket. The study focuses on eight cities along the Volga that banks can withstand increased turbulence in the River, stretching from the west of Moscow to the Caspian international financ ial markets? If so, how should that Sea and spanning 3 of the 11 traditional areas (or regional tightening be implemented? groupings) of Russia-Yaroslavl (central region); These questions are at the top of the financial Cheboksary (Volga-Vyatka region); and Astrakhan, regulation agenda in the region, especially in the Kazan, Samara, Saratov,Ulyanovsk, and Volgograd (Volga aftermath of the East Asian crisis and the more recent region). It is hoped that the study can add two more cities: financial instability in Russia. While theoretical and empir- Tver (central region) and Nizhny Novgorod (Volga- ical literature of a general nature is available in this Vyatka region). area, none specifically addresses Central and Eastern These cities provide a cross-section of the Russian expe- Europe. rience with reform at different income levels, but in many The study's results will be disseminated through a ways they are similar. Each city is an oblast center or the technical paper directed to public officials, academics, capital of an autonomous republic and has a population and development practitioners in and outside the region. of 0.5-1.5 million. The cities typically account for about Findings will also be disseminated through presentations a third of their region's population. Historical similari- and workshops. The aim is to inform policymaking in ties in the information and technology to which the cities the region and Bank project design and advice. had access, and in their cultural influences, suggest that Responsibility:Europe and Central Asia Region, Poverty less diversity will be observed among these cities than Reduction and Economic Management Sector Unit- among cities more widely dispersed across Russia or Marcelo Giugale ([email protected]), Stephen more varied in size and function. So while some diver- Everhart, and RossarnaPolastri, and Office of the Regional sity in these cities' experience with reform will be due to Vice President-Marcelo Selowsky and Ricardo Martin. differences in initial conditions, it is likely that much of With Samuel Talley. the variation in experience will be due to differences in Completion date: December 1998. political and institutional change, governance, and economic policies. During the first phase of the project case studies were Reform along the Volga prepared for the eight cities. An effort was also made to develop a database with comparable indicators across Ref. no. 682-42 the cities and their surrounding regions, although little This research project looks at the transition experience statistical information is available after 1993. In the sec- of major Russian cities beyond Moscow and St. ond phase the case studies and database will be used to Petersburg. The study will try to identify policy levers define indicators of initial conditions, political develop- and local government programs effective in making a ments, and reform. In addition, the project will support successful shift to a market economy. The research has up to six master's theses on topics relating to the city as three main objectives: economy and the city as government. Two overview * To document the experience with transition in cities papers will be prepared using a systematic but relatively along the Volga River and to develop some hypotheses unsophisticated methodology relying on simple statisti- about the determinants and the effects of reform that will cal summaries and results from a small survey of pri- help in better understanding the cities' problems and in vate enterprises. developing further research to address these problems. Responsibility: Development Research Group, * To involve graduate students at the New Economic Public Economics-Martha de Melo (mdemelo School in Moscow and thereby help train a new genera- @worldbank.org). With Gur Ofer, Hebrew University; tion of Russian economists and fan interest in practical Daniel Berkowitz, University of Pittsburg; Katia problems. Zhuravskaya, Harvard University; Elena Lukoyanova, * To contribute to the discussion among officials and Maxim Ivanov, Yuri Andrienko, Alexander Piskunov, concerned individuials from the cities about common Nina Baranchuk, and Nina Parphinnko, NewEconomics problems and possible solutions to these problems. School, Moscow; VICOM, Moscow; and the New While considerable statistical and other information Economics School. is available on oblasts, autonomous republics, and other Completiondate: January 1999.

122 Transition Economies

The Political Economy of Social Policy This project has looked at trade policy reform issues in Transition Countries in the countries of the former Soviet Union. A report sum- marizing trade performance and the experience with Ref. no. 682-52 trade policy reform in these countries recommended A simple political economy model might conceptualize strategies for increasing their integration with the inter- economic reform and social policy in transition economies national economy-strategies that entail actions by the as the outcome of decisions by self-interested politicians countries as well as by their main trading partners, the weighing the expected payoffs of favoring rent recipi- OECD countries. ents (state enterprise workers and managers) against A paper on customs unions showed that, although those of favoring transfer recipients (mostly pensioners). preferential trade areas in the Commonwealth of Such a model might predict similar social policy out- Independent States (CIS)may have served a useful pur- comes in the Czech Republic, Poland, and Russia, which pose in the past as a transitional device, the time for cus- started transition with similar conditions and with sim- toms unions and free trade areas in the CIS is over. ilar shares of pensioners in the population. Yet that has Integrating with the world economy should be the high- not been the case. est priority now, and customs unions will retard that inte- In Russia there has been massive redistribution of gration. Work on the issue of accession to the World Trade income and wealth, with privatization favoring insiders Organization (WTO) by the transition economies empha- (managers and workers), tax revenue falling, and pen- sized that WTO accession provides a unique opportu- sioners losing much ground relative to workers. In Poland nity for the acceding country to "lock in" a trade policy privatization has proceeded more slowly, there has been that is beneficial to that country, providing it adopts a much less redistribution and rent seeking, and pension- less than minimalist approach in its accession offer. ers have fared better than workers. The Czech Republic In fiscal 1998 research examined issues relating to has seen some rent seeking, but privatization has bene- tariff policy and tariff uniforrmityfor transition economies fited the population much more broadly and pensioners' focusing on Russia. Findings will be discussed in semi- incomes have kept pace with workers' incomes. nars in Russia and Belarus in fiscal 1999. This study will seek to explain these disparate out- The study's findings and recommendations have been comes for pensioners through case study analysis of social communicated to the governments in the context of pol- policy formulation in these transition economies, draw- icy dialogue with the Bank on international trade reform, ing on official documents, secondary sources, and inter- discussed with representatives of a number of transi- views. It will then attempt to enrich the simple political tion economies, and presented at conferences. economy models of policy decisionmaking. Responsibility:Development Research Group, Trade- Responsibility:Development Research Group, Poverty David Tarr ([email protected]) and Bernard and Human Resources-Branko Milanovic (bmilanovic Hoekman; and Europe and Central Asia Region, Country @worldbank.org). Department III, Office of the Director-Constantine Completiondate: June 1999. Michalopoulos. Completion date:June 1998. Reports: Trade Policy in Transition Economies Michalopoulos, Constantine, and David Tarr. 1996. TradePerformance andPolicy in theNew Independent States. Directions in Development Integration with the international economy is an Series. Washington, DC: World Bank. (Also issued in Russian.) essential element of the transition from central planning . 1997. "The Economics of Customs Unions in the to a market system. Price distortions, so common Commonwealth of Independent States." Post-Soviet Geography under central planning, can be maintained only and Economics 38(3):125-43. (Also published as Policy Research through formidable trade and foreign exchange con- Working Paper 1786. World Bank, Europe and Central Asia trols that divorce the domestic from the international Region, Country Department III, and International Economics market. Dismantling these barriers promotes efficient Departrnent, Washington, DC. domestic resource allocation. International prices pose a competitive challenge to domestic producers and signal needed structural changes. Trade policy reform allows Privatization and Corporate Governance the link between domestic and international prices in Transition Economies and markets and is thus a key determinant of the pace and scope of the structural change necessitated by the Using data provided by Dun & Bradstreet on a sample transition. of privatized companies in the Czech Republic, this

123 Transition Economies research will examine how changes in firm ownership Responsibility: Development Research Group, affected corporate governance as reflected in firm per- Regulation and Competition Policy-Mary Shirley formance. The data set is being cleaned, and analysis will ([email protected]) and Robert Cull. With Jana begin soon. Additional country studies may follow in Matesova. 1999. Completion date: December 1999.

124 PRIVATE SECTOR DEVELOPMENT AND PUBLIC SECTOR MANAGEMENT

Cross-CountryIndicators show a way to measure the reliability of institutions on of Institutional Uncertainty a cross-country basis. A regular survey on institutional reliability could help formulate effective programs to pro- Ref. no. 680-51C mote private sector-driven development. The original aim of this project was to develop, and then Responsibility: International Finance Corporation, to test on a small scale, a method for conducting cross- Economics Department-GuyPfeffermann (gpfeffermann country surveys of the institutional framework in devel- @ifc.org). With Aymo Brunetti and Beatrice Weder, oping countries as perceived by private entrepreneurs. University of Basel. But the project had an opportunity to implement the Completion date:June 1998. method on a large scale, to provide background infor- Reports: mation for the World Bank's World Development Report Brunetti, Aymo, Gregory Kisunko, and Beatrice Weder. 1997. 1997:The State in a ChangingWorld (New York: Oxford "Credibilityof Rulesand EconomicGrowth: Evidence from a University Press, 1997). To collect this information, the WorldwideSurvey of the Private Sector."Policy Research project used a short version of the questionnaire it had Working Paper 1760. World Bank, Office of the Senior Vice developed for a survey in a large number of countries to President, DevelopmentEconomics, Washington, DC. (Also get comparable results on institutional climate. Detailed forthcomingin WorldBank Economic Review.) analysis of the resulting data set-drawn from more than - . 1997. "Institutional Obstacles to Doing Business: Region- 3,600 questionnaires from 69 countries-was the focus by-RegionResults from a WorldwideSurvey of the Private of the project's work in fiscal 1997. These data can be Sector."Policy Research WorkingPaper 1759.World Bank,Office downloaded from a World Bank Website (http://www. of the Senior Vice President, Development Economics, worldbank.org/html/prdmg/grthweb/wdr97.htm). Washington, DC. In fiscal 1998 the project was developed in four areas. . 1997."Institutions in Transition: Reliability of Rules and The data assembled in the survey for World Development EconomicPerformance in FormerSocialist Countries." Policy Report1997 were used as the basis for a number of empir- ResearchWorking Paper 1809.World Bank, Development ical studies on investment, growth, and the overall busi- ResearchGroup, Washington, DC. ness environment. Additional surveys were undertaken . 1998. "How Business Sees Government: Responses from in five economies that had not been covered by the orig- PrivateSector Surveys in 69 Countries."International Finance inal survey-Brazil, Hong Kong, the Republic of Korea, CorporationDiscussion Paper 33.Washington, DC. Singapore, and Thailand. An alternative survey method Weder, Beatrice,and Aymo Brunetti. 1998. "Institutions in Hong was tested by asking a small number of executives in Kong and Singapore:Another Tale of Two Cities." WWZ multinational firms to evaluate the institutional frame- DiscussionPaper 9807.University of Basel. work of countries in which they operate; this methodology did not prove to be as reliable as the larger surveys of local firms. Finally, in cooperation with a private con- Regulating Technology Transfer sulting firm, a proposal was developed on how a pri- in Agriculture: Impact on Technical vate business survey could be undertaken on a regular Change, Productivity, and Incomes basis for a large number of countries. Econometric analysis confirmed that countries with Ref. no. 680-61C institutions that are perceived as uncertain and unpre- This research continued work, begun in a pilot project, dictable have significantly lower rates of investment and on regulatory barriers thatblock private technology trans- growth. In addition, the research for World Development fer in agriculture. The pilot research developed a method- Report 1997 showed that a mailed survey seems to be the ology to estimate the effect of regulatory reforms. Using most appropriate and cost-effective survey method except this method, it studied the impact of Turkey's regula- in OECD countries, where the experience suggests using tory reforms in the 1980s, testing and confirming the telephone interviews. hypothesis that removing barriers to private technology The results of the project highlight the importance of transfer accelerates technical change, boosting produc- a re]iable institutional framework for doing business and tivity and incomes.

125 Private Sector Development and Public SectorManagement

This research further tested the hypothesis in other .1997."Inputs Trade and TechnologyTransfer for Third World countries by investigating the effect of regulatory reforms Agriculture." Paper presented at the workshop Trade and in Bangladesh and India since the late 1980s and more Technology Diffusion: The Evidence with Implications for recently in Zimbabwe. It collected and analyzed infor- Developing Countries, World Bank and Foundation Eni Enrico mation on sales of agricultural machinery, seeds, pesti- Mattei, Milan, April 18-19. cides, and other inputs, especially through private - 1997. "Private Commercial Varieties and Seeds: companies, to demonstrate the effect of regulatory reform Opportunities and Obstacles." In Robert Tripp, ed., New Seed on technology transfer, input sales, yields, production, andOld Laws:Regulatory Reform and the Diversificationof National and incomes. Drawing on country studies and other Seed Systems. London: Overseas Development Institute and sources, the study proposed and discussed options for Intermediate Technology Publications. regulatory reformns that remove obstacles to private tech- . 1997. "Regulatory Constraints to Seed Multiplication and nology transfer while strengthening policies and pro- Distribution through Alternative Seed Systems." In D.D. grams that limit externalities. Further confirmation of the Rohrbach, Z. Bishaw, and A.J.G. van Gastel, eds., Alternative hypothesis that removing regulatory barriers blocking StrategiesforSmallholderSeedSupply. International Crops Research private technology transfer in agriculture boosts pro- Institute for the Semi-Arid Tropics (ICRISAT). ductivity suggested a need to focus more attention on . 1997."WhereReformsAreLeadingRomania:InputSupply reform of such regulations. Systems in Developed Market Economies." Paper presented at The project's research activities were designed on the the conferenceAgricultural Inputs: Trade and Technology,World basis of discussions with Bank operational staff. The study Bank and Hungarian Ministry of Agriculture and Chamber of made suggestions to help improve Bank agricultural pol- Commerce, Bucharest,September 11-13. icy advice in general and for specific countries and to -. 1998."Elements of a SuccessfulSeed Policy and Regulatory build capacity within the Bank to address regulatory Reform." Paper presented at the Seed Sector Development issues through collaboration with sector and project activ- Meeting,Malawi Ministryof Agriculture, Lilongwe, March 4-6. ities. By subcontracting research activities to local con- . 1998."Options for Strengthening Poland's Research and sultants, the project also built capacity in client countries Seed Industry for EU Integration." Paper presented at the sem- to address regulatory issues. inar Seed Policy Options for Poland in the Context of EU Results from both the pilot project and this project Integration and Global Markets, World Bank and Fund for the are being disseminated through participation in opera- Development of Polish Agriculture, Warsaw, February 3. tional missions (the work made an important contribu- Gisseiquist, David, and Charles Benbrook. 1996. "Technology tion to the design of an agricultural sector adjustment Transfer,Competition, and Trade Liberalization for Low-Risk program in Romania), through many workshops at head- Pest Management." UNDP-World Bank Trade Expansion quarters and in the field, and through Bank and outside Program Occasional Paper 11.World Bank, Washington, DC. publications. Gisselquist, David, and Jean-Marie Grether. Forthcoming. "Why Responsibility:Development Research Group, Trade- Agricultural Technology Transfers to Developing Countries L. Alan Winters ([email protected]); and Europe Should Be Deregulated." World BankEconomic Review. and Central Asia Region, Environmentally and Socially Gisselquist,David, and Jitendra Srivastava,eds. 1997.Easing Barriers Sustainable Development Sector Unit-John Nash and toMovement of Plant Varietiesfor Agricultural Development. World David Gisselquist. With Carl Pray, Rutgers University; Bank Discussion Paper 367. Washington, DC. Bharat Ramaswami, Indian Statistical Institute; Joseph Gisselquist,David, and RobertTripp. 1996. A FreshLookat Agricultural Rusike, University of Zimbabwe; Harun-ar-Rashid, Inputs Regulation. Natural Resource Perspectives 8. London: Agricultural Advisory Society, Bangladesh; and Tim Kelly. Overseas Development Institute. The Intemational Crops Research Institute for the Semi- Pray, Carl. 1996. "Turkey: Transferring Hybrid Maize through Arid Tropics (ICRISAT), India, contributed staff tirne for Multinational Corporations." Paper presented at the workshop the research. Maize Seed Industry, Centro Internacional de Mejoramiento de Completion date: December 1997. Maiz y Trigo (CIMMYT),Mexico, April 25-27.

Reports: . 1997. "AgriculturalBiotechnology in Asia: A Progress Gisselquist, David. 1996. "Liberalizing Agricultural Inputs Trade Report." Paper presented at the International Conference of in Bangladesh: Impact and Opportunity." South Asia Forum Agricultural Economists,Sacramento, Calif, August. Quarterly9(2). .1998."Country Case Study: Turkey."In M. Morris, ed., Maize -. 1996. "A Strategy for Modernizing Agricultural Technology Seed Industry.Boulder, Colo.: Lynne Riener. in Ghana."Paper presented at the conferenceAgricultural Inputs Pray, Carl, and Keith Fuglie. 1996."Private Food and Agricultural Regulationsand TechnologyTransfer in Ghana, World Bank and Research and Public Policyin APECCountries." Paper presented Ghana Ministry of Food and Agriculture, Accra, February 29. at the conference Food and Agriculture Challenges in the Asia-

126 Private Sector Developnientand Public Sector Management

Pacific, Asia-Pacific Economic Cooperation (APEC), Manila, December 1997 and in Zimbabwe in May 1997 to African October1-3. academics and policymakers. Pray,Carl, and RobertTrpp.1996. "Regulation andlndustrial Policy Responsibility: Development Research Group, Regu- for the Seed Industry." Paper presented at the workshop Maize lation and Competition Policy-Mary Shirley Seed Industry, Centro Internacional de Mejoramiento de Maiz (mshirley2worldbank.org). With Robert Bates, Harvard y Trigo (CIMMYT),Mexico, April 25-27. University. - 1997. "Public Policy, Public Investment, and Private Completiondate: June 1998. Investment in Seed Supply-Experiences in Turkey and India." Report: In D.D. Rohrbach, Z. Bishaw, and A.J.G van Gastel, eds., Ferree, Karen, Smita Singh, and Robert H. Bates. 1997."Political Alternative Strategiesfor SmallholderSeed Supply. International Institutionsand Economic Growth in Africa."HIID Development Crops Research Institute for the Semi-Arid Tropics (ICRISAT). Discussion Paper 583. Harvard Institute for International -1998."Policies That Influence Seed Industry Development: Development, Cambridge, Mass. Industrial Structure, Seed Prices, and Intellectual Property Rights." In M. Morris, ed., Maize Seed Industry. BoulderColo.: LynneRiener. Investment Activity in the Corporate Sector WorldBank. 1995."Reforn of Seed Regulations:Easing Barriers to Better Seed Varieties,"Agricultural Technology Notes 12. Rural Ref. no. 681-25C DevelopmentDepartment, Washington, DC. Despite the pivotal role that the public sector plays in -1997."Reform of PesticideRegulations: Helping Farmers many aspects of economic development, most observers Shiftto BiointensiveIPM." AgriculturalTechnology Notes 18. these days would agree that private investment is a pow- RuralDevelopment Department, Washington, DC. erful source of economic growth. This research project examined the investment activities of a set of private corporations in a group of 12 developing countries. Using African Politics and African Development a corporate finance database compiled by the Intemational Finance Corporation, the study compared the efficiency Ref no. 680-86C with which corporations use their physical and finan- This research developed a database to analyze how cial assets by analyzing the amount of capital employed, African political systems have been changing in order the size of the operating margins that those assets produce, to investigate how politics might influence Africa's pol- and the value of the asset-capital ratio, all relative to cor- icy choices. The data provide detailed information on the porations in other developing and industrial countries. legislative and executive branches of government for 46 The results allow characterization of the nature of the African states in 1975, 1980, 1991, and 1995. The time- assets held by corporations in developing countries and series nature of the data will allow researchers to explore the efficiency with which those assets are employed. the impact of causal factors on the rates and magnitudes Equally significant, the research sheds light on the nature of variation. and degree of competition facing firms in different coun- In addition to developing the database on African tries and how competition changes over time as a result political institutions, the project assessed the effect of of changes in the environment in which firms operate. political development on economic growth. The main The results indicate that there are considerable similari- finding is that making the executive more democratic ties across countries in corporate behavior. In addition, and accountable increases growth in Sub-Saharan African corporate behavior within any one country has gener- countries. Even modest increases in executive account- ally changed over time, with margins declining. ability have a significant effect on growth. For example, Responsibility: International Finance Corporation, the econometric analysis suggests that moving from Economics Department-Jack Glen ([email protected]).With single-party executive elections to elections allowing mul- Ajit Singh and Rudolph Matthias, Cambridge University. tiple parties to compete increases growth by 1.2 percent Completiondate: December 1997. a year. The research shows that, in general, there is no tradeoff between economic growth and political freedom in Science Parks and Firm-Level Africa and, indeed, that the reverse is true. In addition, Productivity in China it further demonstrates the importance of political institutions for economic outcomes. Ref. no. 681-43 Findings have been disseminated at a World Bank Like many countries, China has established national-level seminar and through papers presented in Nairobi in science parks in recent years as part of a strategy to boost

127 Private Sector Development and Public Sector Management economic and technological development. Its 52 science Completion date: December 1998. parks, called new- and high-technology development Report: zones, are designed to attract foreign direct investment Chen, Xiaomin. 1998. "Science Parks and Firm Productivity in and high-technology domestic companies and to create China."World Bank, Private Sector Development Department, an environment conducive to technological development. Washington,DC. This study investigates how effective these zones are in accelerating firms' technological development and productivity growth and whether there are lessons for other Decentralization and Participatory developing countries to be learned from China's experi- Planning in Bolivia ence with the zones. To address these questions, the study developed panel Ref. no. 681-62C data for 1992-95 on firms in zones and sought to com- Proponents of decentralization argue that it can over- pare those firms with firms located outside zones, the come the problems of poor information and skewed incen- control group. Although several such control groups were tives that undermine public spending decisions because identified, the strategy of comparing zone firms with a it makes decisionmakers more accountable to the gov- control group proved more difficult than expected. Firm- emed. While the theoretical basis of this argument is clear, level data sets available in the World Bank refer to an ear- counterarguments abound, empirical studies of the effects lier period, cover large firms and state-owned enterprises, of decentralization are still few in number, and general and are not directly comparable to data for zone firms, patterns have not yet emerged. which tend to be srnall and newly established. Another This study examined the effects of decentralization control group-a sample of firms located outside zones in Bolivia, which has gone from highly centralized to that were designated as high technology and therefore highly decentralized provision of public services. Reforms enjoyed the same incentives as firms in zones, though in 1994 doubled the share of national tax revenues going not the presumed benefits of location in a zone-also to municipalities, transferred to municipalities title to proved unsatisfactory, since it consisted primarily of large, and responsibility for local infrastructure, and set up long-established firms. This control group had higher grassroots committees to oversee municipal spending. productivity levels; than zone firms, though the study Before the reforms, citizens had an opportunity to help found evidence that zone firms narrowed the produc- decide investment priorities for each municipality through tivity gap with this control group over time. provincial-level "town meetings." As a result of the difficulty with control group com- The study addressed such questions as these: Is decen- parisons, the study focused on comparing the perfor- tralization improving allocative efficiency-that is, are cit- mance of firms across zones and investigating the izens getting what they want? How do the stated needs of economic and policy factors that explain differences in citizens compare with the "objective" needs (assumed to performance. The study found significant differences in be primary education and health care and infrastructure)? firm performance across zones, and some evidence that Is service provision more cost-effective after decentraliza- these differences were related to research and develop- tion? The research also examined decentralization more ment expenditures, the educational attainment of the closely through case studies in nine Bolivian municipali- workforce, numbers of scientists and engineers, and both ties. Drawing on data from interviews carried out in these zone and regional characteristics. The study has estimated municipalities, it analyzed the interactions between social, frontier production functions, which reveal a puzzling political, and institutional variables in a dynamic context. initial dip in productivity growth in 1992-94 (when infla- The study found that devolving power and resources tion in China soared), followed by a rise in 1994-95. The to independent local governments changes the compo- deflators used may understate productivity growth in sition of public spending and investment considerably. this initial period; the study is investigating alternative, Compared with the central govemment before the reform, and more appropriate, producer price indexes. local governments significantly increased investments in Responsibility: IPrivate Sector Development Depart- health, education, and civil works projects and invested ment, Business Environment Unit-Hong Tan (htan less in industry, tourism, communications, and the hydro- @worldbank.org) and Xiaomin Chen. With Lan Xue, carbon sector. Smaller, poorer, and more rural munici- George Washington University; and Chen Zhao-Ying, palities played an important part in bringing about this National Research Center for Science and Technology for result. Thus there is evidence that local government has Development, Beijing. The research is being conducted an understanding of its challenges, and the capability jointly with China's National Research Center for Science and the incentive structure to produce the public outputs and Technology for Development. that people want.

128 Private Sector Development and Public Sector Management

The study proposed an ordinal ranking of the most contributed to increased awareness among Bank staff of important problems facing local govemment in Bolivia, ways to reduce risks and government guarantees asso- identified the minimum conditions necessary for decen- ciated with infrastructure privatization; of ways to allo- tralization to work, and made general suggestions for cate risks among investors, taxpayers, and consumers; reorienting aid programs aimed at institution building. and of the importance of measuring and budgeting for Responsibility: Development Research Group, Public government guarantees, and ways to do so. Economics-Gunnar Eskeland (geskeland@worldbank. Responsibility:Latin America and the Caribbean Region, org) and Shantayanan Devarajan. With Jean-Paul Faguet. Office of the Chief Economist-Guillermo Perry (gperry Completion date:June 1998. @worldbank.org). Completiondate: December 1997. Report: Dealing with Public Risk Irwin, Tirmothy.1998. Dealingwith Public Risk in PrivateInfrastructure. in Private Infrastructure Latin Amencan and Caribbean Studies. Washington, DC:World Bank. Ref no. 681-81C Whether infrastructure privatization will realize its expected benefits depends on how governments allocate Government-Business Consultative risks facing the privatized enterprises. In many infra- Mechanisms and Economic Governance: structure privatizations governments have assumed risks A Three-Country Comparison that would be better borne by private investors, thus reducing incentives for efficiency and exposing the gov- Ref no. 681-83 emments to high contingent liabilities. While guarantees This research project aims to contribute to the under- are often necessary to attract investors, who are understanding of how different organizational practices and standably wary of taking on considerable risks, they have institutional structures influence the effectiveness of often been overused because governments have been able business-government consultative mechanisms. The to offer them without incurring immediate cash costs. study is testing four hypotheses: This study set out to summarize the existing knowl- * The effectiveness of a consultative mechanism is edge on how governments should approach risk alloca- positively related to the formation (supply) of an orga- tion and risk management in relation to private nization explicitly designed to facilitate economic reform infrastructure, to advance the conceptual thinking, and and restructuring by institutionalizing dialogue among to develop concrete policy proposals. Its findings sug- economic stakeholders. gest that a government can take two steps to improve the * The effectiveness of a consultative mechanism is situation. It can reduce the extent of risks investors face- positively related to the credibility of commitments under- by pursuing stable macroeconomic policies, disclosing taken by stakeholders. information, implementing good laws and sound regu- * The effectiveness of a consultative mechanism is lation, and liberalizing financial markets-thereby less- positively related to the creation of mutual monitoring ening the need for government guarantees. And it can mechanisms for the commitments undertaken by stake- improve the way that it measures, budgets, and accounts holders. for the guarantees that it does give, so that costs and risks * The effectiveness of a consultative mechanism is are clear at the time the guarantees are issued-not just positively related to a membership that legitimately and when the government pays up. Measurement and bud- authoritatively represents the major economic stake- geting are critical to improving decisions about whether holders. to provide guarantees, to improving project selection and The study is undertaking a comparative analysis of contract design, and to protecting governments from three countries-Ghana, Malaysia, and Mexico-that unknowingly entering into commitments that mightjeop- have recently experimented with consultative mecha- ardize future budgets. nisms as a means to enhance their regulatory reform The research results were disseminated through atten- and economic restructuring policies. The comparative dance at a seminar in Cartagena, Colombia, aimed pri- design allows empirical testing of the research hypothe- marily at Latin American policymakers, and a regional ses. Original field research has been conducted in all three seminar on contingent liabilities in Chile (sponsored by countries. Secondary materials also have been collected, the Economic Commission for Latin America and the and in-depth, semistructured interviews have been held Caribbean). Findings were also presented at Bank sem- with the major economic actors associated with the con- inars and during Economists' Week. The research has sultative mechanisms in each country. Drafts of the case

129 Private Sector Development and Public Sector Management studies have been presented at Bank seminars. After the ness for reform. Early findings have been used to pre- case studies are completed, theoretical generalizations pare trial checklists that have been reviewed and com- will be cross-checkecdthrough a review of a broader range mented on by members of the Poverty Reduction and of national experiences with consultative mechanisms. Economic Management Network and will be tested in An initial inquiry was sent out to collect information two or three pilot cases for different kinds of reform on Bank experiences with business-government consul- commitments. tative mechanisms, but the response was disappointing. Responsibility: Development Research Group, Regu- Another inquiry will therefore be sent out, and mem- lation and Competition Policy-Mary Shirley (mshirley bers of the Business Environment Thematic Group will @worldbank.org), Philip Keefer, and Luke Haggarty. With be tapped. Once a set of experiences has been identified, Arthur Lupia and Matthew McCubbins, University of task managers will be interviewed according to a proto- California at San Diego; and Roger Noll and Barry col closely paralleling the interview protocol used in the Weingast, Stanford University. country case studiies. The results of the research will Completiondate: August 1998. help clarify for the Bank when and how to promote consultative mechanisrns, identifying the national contexts that are promising for the promotion of these mecha- Delay in Disposition: Judicial Performance nisms and the organ,izational and institutional forms that in Developing Countries characterize effective ones. Responsibility: Private Sector Development Depart- Ref no. 681-92 ment, Business Environment Unit-Andrew Stone (astone This study carried out an international comparative analy- @worldbank.org). With Jessie Biddle, Permsylvania State sis of the performance of courts, developing performance University; Vedat Milor, Brown University; Michael indicators that measure the time and cost of litigation Lofchie, University of California at Los Angeles; Joseph and analyzing how reform programs affect time and cost. Ayee, University of Ghana; Jomo Kwame Sundaram, The study reviewed the efficiency and effectiveness of University of Malaysia; and Matilda Lunas, Autonomous courts in about a dozen developing and industrial University of Mexico. countries. Completion date: June 1999. Efficiency was assessed on the basis of the clearance rate (cases resolved as a percentage of those filed) and the ability to provide quality at a minimum cost. Indicators Political Credibility and Economic Reform were developed that show the change over time in case- load, backlogs, time taken to dispose of a case, and cost Ref. no. 681-85 of supplying court services. The measure of cost includes This research is developing a new conceptual framework not only operational costs but also the capital expendi- to help analysts draw reliable judgments about a coun- tures and opportunity costs of financing the system. These try's readiness for reform. It aims to identify the neces- indicators allow a comparison of the relative improve- sary political conditions for successful reform, extending ment or deterioration of courts. the analysis in the WNorldBank's Policy Research Report Effectiveness was assessed on the basis of the court's Bureauicratsin Bus ,ness (New York: Oxford University capacity to resolve conflicts for a reasonable cost and Press, 1995). within a reasonable time, as well as objective and sub- It investigates how analysts can judge whether the jective perceptions that justice is being delivered. The promises for reforrn that policymakers make are in their subjective perception of the quality of justice was based interests, whether they are capable of passing and imple- in part on information collected through a questionnaire menting the promised reform, and whether they can sus- administered to a stratified sample of judges and court tain the reform once it is implemented. The research personnel in the courts that deal with the most common identifies the kind of evidence that can be used to deter- types of cases reaching the judicial system. The objec- mine whether the necessary political conditions for reform tive measure of effectiveness was based on a weighted are met. A second phase of the research will involve sys- index that includes several objective variables captur- tematic and rigorous empirical work to apply the the- ing the capacity of the courts to satisfy the public's demand ory to case study countries. for court services. This work is part of a broad effort to improve the abil- The study found that the more managerial activism itv of the World Bank to design projects that are appro- by the judge, the greater the capacity of budgetary priate to the institutional conditions in countries and to resources to increase the supply of court services (that assess more rigorously and transparently countries' readi- is, cases disposed). Among the countries studied, those

130 Private Sector Developmentand Public Sector Management with the least activism are Argentina and Venezuela, and Washington College; Javier Said; Isabel Atencio; Flor de those with the greatest are Germany and Hungary. The Maria Meza Tananta; Frank Konig; Thomas Gunther; more days judges devote to administrative tasks, the Heike Scherff; and Alexandra Huneeus. lower the clearance rates are. The countries where the Completiondate: July 1998. judges devote the most days to administrative tasks include Argentina, Colombia, and Venezuela; those where the judges devote the fewest days to administrative tasks A Firm-Level Database for Analyzing include Chile and France (though France has seen a Industrial Competitiveness in Thailand decrease only in recent years). Court systems with larger capital budgets have higher Ref. no. 682-15C clearance rates and a shorter expected duration of cases. For the past decade Thailand has been among the fastest Countries with the greatest capital budget increases growing economies. But by 1996 signs of strain were include Germany and Singapore; the country with the apparent, and today Thailand is in the throes of severe least growth is Ecuador. Courts that use more informa- currency and financial crisis. With the technical assis- tion technology also have a shorter expected duration of tance of the World Bank, the Ministry of Industry under- cases. The countries that use the least information tech- took the Thailand Industrial Survey to better understand nology include Ecuador (where a debtor case takes on what led to the events of the past months and how firrns average about 800 days to decide) and Venezuela. have reacted to the crisis. The survey yielded a unique Germany uses the most information technology. More data set of detailed information on more than 1,200firms, information technology is also associated with lower including data on firm behavior during the three years operational costs per case. The less time spent on adju- before the crisis and the nine months after the onset of dicative duties, the longer the expected duration of cases the crisis. and the lower the clearance rates are. The countries where A major contribution of the study was its use of these judges devote the least time to adjudicative duties include microeconomic data to link the impact of substantial Argentina and Ecuador. macroeconomic changes to the real sector. The study used The ratio of judges to population was reviewed to the survey information to examine the immediate impact determine access to the courts. And the ratio of judges of the crisis on capacity utilization and employment. to administrative staff was reviewed to assess the admin- Using the financial data from the survey, it also looked istrative support provided to the judges. at borrowing practices, debt-equity ratios, and prob- Most of the data for the study were obtained from lems with financial services. judges, through the questionnaire that the study devel- The study then identified short-term and long-term oped. Information on types of cases and litigants was competitiveness issues in Thai industry, and policy rec- obtained from the statistical office of the supreme court, ommendations for increasing firms' global competitive- lower courts, or ministry of justice. Before data were gath- ness. Competitiveness was interpreted in its most popular ered in the countries studied, the research was explained current form as "the ability to produce goods and ser- to the chief judges. This phase of the research was used vices that meet the test of international competition while to establish relationships with judiciary officials that will citizens enjoy a standard of living that is both rising and allow yearly updating of the data. sustainable." For Thailand, an open economy, competi- The study is developing a method for cataloguing, tiveness entails productivity growth relative to other publicizing, and distributing the data collected on court countries, combined with favorable trade performance. structure, case statistics, procedural steps, and the like. The project was designed in part to assess the prospects A database that includes all the data has been designed of increasing exports as the primary means of overcom- andisbeingadaptedsothatitcanbeplacedonaWebsite. ing the shortfall in domestic demand and restoring Other countries will then have access to the question- growth. naire so that they can insert their own data, as well as Initial results from the study provide insight into the access to the data gathered from other countries. origins of the East Asian financial crisis and the current Workshops to discuss the results of the research are efforts to alleviate the crisis. Thai firms in the survey are planned. The results are expected to contribute to the showntobehighlyleveraged,relyingonshort-termbor- development of judicial reform programs in Bank client rowing to finance a high volume of fixed investment. countries. Despite the large real devaluation, even large exporters Responsibility:Legal Senior Vice Presidency, Operations were operating at lower capacity in the first half of 1998 Front Office-Maria Dakolias (mdakolias@worldbank. compared with a year earlier. Firms producing for the org). With Ed Buscaglia, Stanford University and domestic market were in worse shape. Firms perceive a

131 Private Sector Development and Public Sector Management sharp drop in demand, both domestic and foreign, as model that combines the two rules with the objective of the main immediate source of their distress. Among promoting both productive and allocative efficiency. The longer-term bottlen,ecks, the two most frequently cited study will translate the principles and theoretical rec- problems were labor market issues (lack of skilled labor, ommendations of the model into a set of tractable rules high wages of production workers) and a set of inter- and procedures, accommodating severe measurement related issues relating to red tape, corruption, and cus- problems for the relevant economic variables. Finally, it toms administration. will identify the conditions, if any, under which it is appro- Responsibility:Development Research Group, Macro- priate to use access pricing as an instrument for pro- economics and Growth-David Dollar (ddollar moting auxiliary goals (such as increased competition) @worldbank.org), Mary Hallward-Driemeier, and to supplement the pursuit of economic efficiency Giuseppe larossi. With Kenneth Sokoloff, University of Responsibility: Office of the Senior Vice President, California at Los Angeles. Development Economics-loannis Kessides (ikessides Completion date: June 1998. @worldbank.org). With Jean-Jacques Laffont, Institut Report: d'Economie Industrielle, Toulouse; Robert Willig, Dollar,David, Mary Hallward-Driemeier,Giuseppe larossi, and Princeton University; and Janusz Ordover, New York MitaChakraborty. "Short-Term and Long-Term Competitiveness University. Issues in ThaiIndustry." World Bank, Development Research Completion date:June 1999. Group,Washington, DC.

Optimal Choice of Industry Structure Efficient Netwo:rk Access Rules for in the Network Utilities of Transition Developing and Transition Economies and Developing Economies

Ref. no. 682-36 Ref. no. 682-37 With the progressive introduction of competition into the The historical model of operation in the network utili- traditional public utility industries, a greater number of ties is the monolithic organization, whereby a single entity rival firms will seek to interconnect to the utilities' net- controls all facilities and operating and administrative works than in the past. At each interconnection point an functions and determines what services to provide to access price will have to be determined. The terms of captive customers. As a result of technological and eco- access should not distort the process by which prices are nomic changes, however, the conditions that generated adapted to consum.er preferences and demands for ser- this model no longer exist in most countries. In the past vices. The access pricing and interconnection rules will few years there has been increasing recognition that the play a critical part in the future competitive develop- network utilities are not monolithic industries but encom- ments in these sectors. pass a number of distinct activities with entirely differ- The literature offers two major approaches to the effi- ent economic characteristics. This recognition has led cient pricing of essential input facilities such as utility many countries to restructure, or to consider restructur- networks: the efficient component pricing rule, or par- ing, their network utilities. ity pricing, and the Laffont-Tirole Ramsey pricing rule. The primary objective of this research project is to The first is the principle that the holder of the bottleneck develop a set of principles for the horizontal and verti- facility should offer its services at a price that yields it cal restructuring of network utilities in transition and the same contribution that it would earn from perform- developing economies. The study will first identify the ing the end-user service itself. The second recognizes economic characteristics of these industries (such as the the fact that the profit of the integrated incumbent is an nature of technology, costs, and demand; market size and increasing function of both the access charge and the final density; the extent of network development; initial con- retail price. ditions related to productive and allocative inefficien- The main objective of this research project is to develop cies; employment; and financial obligations) and analyze a regulatory architecture for network access that has real- their consequences for the design of optimal industry istic prospects of being effectively implemented in devel- structure. Taking into account these industry character- oping and transition economies. The research will assess istics, it will then seek to develop powerful analytic tools existing access pricing models and evaluate their applic- to clarify the relevant principles for structural reform and ability to the unique market circumstances of these reorganization and for restructuring the relationships economies. Building on the insights of the two main pric- between government and the network utilities. In par- ing rules, and those of their critics, it will develop a hybrid ticular, it will compare the leading structural options on

132 Private Sector Development and Public Sector Management the basis of their implications for efficiency and compe- cant barriers to competition and the benefits from eas- tition, coordination economies, scope economies, trans- ing such barriers. action costs, credible incentive structures, and regulatory Preliminary findings indicate that effective antitrust complexity. and competition policy enforcement may have a sub- There are generally several options for restructuring stantial impact on long-run growth. (These findings are network utilities. Which is the best choice in a specific based on a new qualitative variable reflecting direct feed- country and industry is a complex policy decision with back from business managers on the effectiveness of many important dimensions. The aim of the research is policy in promoting competition.) Future work will try to construct an economically rigorous and yet practical to uncover more intricate relationships between compe- framework for assessing these different policy options tition and other explanatory variables. Through this work, in developing and transition economies. This framework the study aims to provide evidence that could be used will provide clear guidance to Bank staff and to by World Bank operational staff and reform-minded pol- policymakers on determining the appropriate balance icymakers to make a stronger case for activist competi- between horizontal and vertical restructuring of a tion policies (including further trade reform). network utility. Responsibility: Office of the Senior Vice President, Responsibility: Office of the Senior Vice President, Development Economics-Mark Dutz (mdutz Development Economics-loannis Kessides (ikessides @worldbank.org). WithAydinHayri, Deloitte and Touche; @worldbank.org). With David Newbery, Cambridge Gregorio Impavido; Richard Caves, Harvard University; University; and Pablo Spiller, University of California at Ross Levine, University of Virginia; Patrick Rey,Universit6 Berkeley. des Sciences Sociales, Toulouse; and James Tybout, Completiondate: June 1999. Georgetown University. Completion date: October 1998.

Does More Intense Competition Lead to Higher Growth? Auctions and Infrastructure

Ref. no. 682-47 Ref no. 682-58C This research project is attempting to provide some empir- Auctions are playing an important part in the restruc- ical evidence on the impact of competition on aggregate turing and privatization of infrastructure industries, economic performance measures. The motivation is to reforms that have become widespread in developing quantify the aggregate gains from promoting competi- countries in the 1990s. Auctions can provide an efficient tion. The challenge is that existing theoretical work does way for governments to privatize industries, divest assets, not provide clear-cut answers to the question of whether and allocate scarce resources, such as concessions. But a monopolist's greater tendency to innovate is outweighed while auction theory for the sale of a single item is well by the productivity gains induced by competition. A num- developed, many of the newer applications involve the ber of empirical studies have attempted to settle this issue sale of multiple items, often with value interdependen- by using industry or firm-level data. These studies fail cies among them. to capture broader, economywide effects. This project aimed to extend the theory relating to auc- This research adopts a more direct approach. It tests tions for multiple items, through two papers. The first the relationship between competition and growth in cross- paper presents the rationale for and experience with the country time-series data without attempting to explore simultaneous ascending auction, which has been used to the relative importance of trade liberalization, domestic assign radio spectrum licenses in several countries. The regulatory reforms, and other procompetition policy mea- second paper develops the theory of auctions for multi- sures in affecting the intensity of competition. The research ple identical items, for which the most familiar applica- uses a methodology similar to that used by studies that tion is the auctioning of government securities and other isolate the impact of a particular factor on growth (such debt. The main finding of both papers is that detailed as financial depth, economic openness, or fiscal policy). auction design matters both for efficient resource allo- In that sense this research is the first step in a broader cation and for the revenues raised. contemplated research agenda on the importance of pro- The research points to clear guiding principles for moting competition. Subsequent and complementary the design of multiple-item auctions for infrastructure work will explore appropriate mechanisms for the privatization that will be increasingly useful as devel- promotion of competition by undertaking more oping countries proceed with policy reform and market detailed microeconomic case study analyses of signifi- liberalization. The two papers will be the subject of

133 Private Sector Development and Public Sector Management seminars and will contribute to best practice materials A Firm-Level Database for Analyzing the and training prograrns on introducing competition in the Impact of the Regional Crisis and Longer-Run provision of infrastructure services. Issues of Productivity Growth in East Asia Responsibility: Private Sector Development Depart- ment, Private Participation in Infrastructure Group-Neil Ref. no. 682-65 Roger ([email protected]). With Peter Cramton, Policymakers' response to the current crisis in East Asia Paul Milgrom, and Lawrence M. Ausubel. has been constrained by the weaknesses, both qualita- Completiondate: J[une 1998. tive and quantitative, of the available economic and finan- Reports: cial information. This project addresses these weaknesses Ausubel,Lawrence M., and PeterCramton. 1998. "The Optimality through the development and analysis of a database of of BeingEfficient." information collected through firm-level interviews in Milgrom, Paul. 1998. "Putting Auction Theory to Work: The Indonesia, the Republic of Korea, Malaysia, the Philip- SimultaneousAscending Auction." pines, and Thailand. The project also supports the monitoring and policymaking capability of these countries through the development of a new monitoring instru- The Role of Interfirm Linkages ment, the establishment of mechanisms for private sec- in Emerging Inclustrial Clusters tor feedback on public policy, and the pooling of country experiences at a regional level. Finally, the project will Ref. no. 682-61 support the development of a network of policymakers This research seeks to shed light on the factors that facil- and of private market participants in East Asia. itate or impede the formation of interfirm linkages within A survey instrument has been developed to gather industrial clusters and examine the role of those factors information on a range of issues important for assessing in enhancing productivity. If any of the factors identi- the impact of the crisis on firms, the obstacles to recov- fied are amenable to public policy or a private-public ery, and the principal challenges to upgrading. The sur- partnership, an action program will be designed that can vey, administered to a random sample of 800-1,200 firms be used as a tool in,promoting regional development in in four of the five countries, will provide a unique data- Bank client countries. base to analyze these issues. A related project (A Firm- Many studies have analyzed industrial clusters, but Level Database for Analyzing Industrial Competitiveness most have done so only after the clusters have become in Thailand, ref. no. 682-15C) has carried out a similar successful, not during their transformation. This study survey in Thailand; this project will draw on the survey focuses on an emerging industrial cluster in a Turkish results in building the database. industrial district known as Corum. A survey has col- The surveys are still ongoing, and the findings will lected data on the characteristics of firms and their modes not be available until early 1999. But the earlier survey of interacting. Regression analysis will be used to trace in Thailand suggests that significant and sometimes unex- the characteristics of firms that are prone to clustering, pected results are likely The firm responses in Thailand and estimate the effect of clustering or linkage deepen- strongly indicated that lack of domestic and foreign ingonfirmproductivity.Acasestudyhasbeencompleted demand was the primary current source of difficulty, that reveals that certain characteristics of traditional clus- dwarfing the problem of insufficient capital availability. ters are present in this region of Turkey and that some The survey also showed that labor costs continue to be sectors may be more prone to exploiting these linkages a difficulty, despite the extensive devaluation. And it than others. revealed how little awareness there is of government pro- The results will be disseminated through a workshop grams designed to assist firms. in the region that will discuss short-, medium-, and long- Two conferences in the region are planned for 1999 to term initiatives and the roles of the private and public present the information collected in the surveys. The first sector and of private-public partnerships. The research will focus on issues related to the crisis and recovery. The is expected to help shape the discussion on regional devel- second will discuss issues of longer-run upgrading and opment through interfirm cooperation in Bank client competitiveness. Both country papers and cross-cutting countries. thematic papers will be presented. Workshops will also Responsibility: Private Sector Development Depart- be held in the Bank. In addition, a database will be pre- ment, Business Environment Unit-R. Shyam Khemani pared for wider use in operational and research work. (skhemani&worldbank.org) and Hong Tan. With Manjula This unique database of comparable information on Luthria and Izak Atiyas. firms in five countries will be a rich resource for both Completion date:June 1999. research and operations. It could help guide discussions

134 Private Sector Development and Public Sector Management on productivity growth, financial and corporate restruc- for therapeutic categories where patenting is signifi- turing, the effectiveness of incentive programs, foreign cant. These estimations will be based on a nested probit direct investment, training, and the financial structure consumer choice model, a multistage budgeting model, of firms. or both. Insurance often complicates use of this approach Responsibility: East Asia and Pacific Region, Office of for industrial countries, since it means that consumers the Regional Vice President-Pieter Bottelier (pbottelier do not face the full price of drugs. Similarly, the pre- @worldbank.org), and Poverty Reduction and Economic scriptive power of physicians in industrial countries Management Sector Unit-Dominique Dwor-Frecaut and makes the concept of consumer choice problematic. Both Mary Hallward-Driemeier. With Ken Sokoloff, University these problems are much less important in India, of California at Los Angeles; and A. C. Nielsen. where few people are covered by insurance and pre- Completiondate: September 1998. scription drugs are almost always available without a prescription. The second task is to determine the range of plausible The Introduction of Pharmaceutical prices under a patented regime. This can be done with a Product Patents in India demand function to estimate the monopoly price of drugs. The project will also attempt to assess the distributional Ref. no. 682-88 impact of the predicted price change and the possible sup- Negotiation of the Agreement on Trade-Related Aspects ply response of the Indian pharmaceutical industry. of Intellectual Property Rights (TRIPs) gave rise to an The research will use data from Operations Research acrimonious debate between industrial and developing Group, a private industry organization in Bombay. These countries. Business interests in the industrial world data, a highly disaggregated set of prices and quantities claimed large losses from the imitation and use of their of products sold to pharmacies over the past 11 years, innovations in developing countries. They also asserted will allow estimation of the demand functions and the that establishing strong intellectual property rights would supply response. The distributional effects will be esti- benefit the developing countries by encouraging for- mated by comparing price changes to data from the Indian eign investment, the transfer of technology, and greater National Family Health Survey. domestic research and development. Developing coun- Responsibility: Development Research Group, Public try governments adamantly opposed this view, worry- Economics-Jeffrey S. Hammer (jhammer@worldbank. ing about the higher prices that stronger intellectual org). With Jean Olson Lanjouw, Yale University; and property rights would entail and about the harm Rakesh Basant, Indian Institute of Management. that these rights might cause to infant high-technology Completion date:June 1999. industries. As a result of World Trade Organization membership requirements, many countries that have kept drug prices Social Capital in Africa low by not granting property rights to pharmaceutical companies will have to begin doing so. Patent protec- Collective ethnic identities can have great social value. tion has many potential costs and benefits. Most of the Ethnic groups can defend their members' property rights, costs are static: a shift from domestic production to help members mobilize to build local public works, pro- imports, higher-cost pharmaceuticals, and possibly a mote human capital by securing investments in educa- slower diffusion of new drugs to developing countries tion for their members, and help overcome obstacles to as inventing firms gain monopoly control of sales. The collective action. In these and other ways ethnic identity potential benefits are dynamic and harder to measure: can help to build trust and social capital between people more research and development (R&D) directed toward in a given ethnic group. But it can also undermine social therapies for diseases prevalent in developing coun- capital in society as a whole. Although ethnic identity tries, and more R&D in developing countries, either by helps members of the same ethnic group work together multinational subsidiaries or by domestic firms, with for common goals, the goals they work toward might not associated positive spillovers. be beneficial for society. Rather than encouraging pub- This project is concerned primarily with estimating lic goods production that benefits everybody, groups the likely size of the consumer welfare losses that will might instead find themselves battling one another for be associated with the introduction of pharmaceutical scarce resources. In this way ethnic groups might actu- product patents in India and the extent of profit redis- ally reduce a country's social capital by undermining tribution from Indian companies to foreign patent hold- trust between groups and reducing the effectiveness of ers. The first task is to estimate drug demand functions political institutions.

135 Private Sector Development and Public Sector Management

This research will study how ethnic fragmentation in issues include labor markets, business strategy, finan- Africa affects political institutions, the potential for polit- cial markets, technological capabilities, the nature and ical violence, and economic outcomes. The research will determinants of entrepreneurship, the impact of infra- examine the circumstances in which ethnic diversity does structure on firm operations and growth, regulation and and does not lead to violence, the impact of ethnicity on the extent to which firms perceive regulation as con- political conflict, and whether ethnic conflict promotes straining their operations and growth, and how firms resistance to political reform. The researchwill also com- grow in these economies and why. The analyses of these bine data from published sources to produce a new data issues should contribute to evaluations of the impact of set on the scope and intensity of political violence. structural adjustment programs in Africa. Understanding the interaction between political insti- In 1997 the program was extended for an additional tutions and ethnic fragmentation will help government three years. By allowing more panel data collection and policymakers and World Bank operational staff to under- analysis, the extension permits further assessment of stand the potential for political violence and to design the impact of structural reform programs in Africa at local public goods projects while minimizing the possi- the microeconomic level. In addition to assessing the bility of regional ethnic conflict. impact of policy reforms, the extended program aims to Responsibility: Development Research Group, Regu- build local capacity to continue gathering information lation and Competition Policy-George R. Clarke after the program ends. A local base for continued mon- ([email protected]). With Robert Bates, Harvard itoring of the microeconomic effects of structural adjust- University. ment would make a significant contribution to the Bank's Completion date: December 1998. operational programs. The program's extension also allows additional analysis of African private sector growth problems and further dissemination of the findings of Regional Program on Enterprise this work. Development in Africa The program links its findings to the Bank's operational work in Africa through participation in regional One of the lessons emerging from structural adjustment and country private sector development strategies and efforts in Africa is -that macroeconomic reform is a nec- program designs. It also disseminates its findings in the essary but not a sufficient condition for private sector Bank through dissemination activities that include Bank growth. There are enterprise-level constraints that inhibit seminars, distribution of research papers, and publica- the growth of existing firms and impede the entry of new tion of the Findings newsletter. Outside the Bank, the ones. This research is designed to improve the under- program has hosted seminars and conferences in standing of the constraints on enterprise development in Cameroon, C6te d'Ivoire, Ghana, Kenya, Tanzania, Africa and to develop recommendations to ease those Zambia, and Zimbabwe, as well as in Belgium, Canada, constraints. Denmark, Finland, France, Germany, the Netherlands, The research is investigating these issues in three ways. Norway, Sweden, Switzerland, the United Kingdom, and First, it is collecting survey data through interviews con- the United States. In addition to the publications listed ducted annuallywith a panel of 200 large and small man- below, the program has produced more than 80 country ufacturing firms in Cameroon, C6te d'Ivoire, Ghana, studies, analytical reports, case studies, and discussion Kenya, Tanzania, Zambia, and Zimbabwe. The survey papers. focuses on four manufacturing sectors: food processing, Responsibility:Africa Region TechnicalFamilies, Private woodworking, metal working, and textiles and garments. Sector Finance-Tyler Biggs ([email protected]) and Survey questions seek general information on the firm Melanie Mbuyi. With Manju Kedia Shah; Vijaya and on issues relating to labor, technology, regulation, Ramachandran; Ray Fisman; John Nasir; Alfred Robinson; infrastructure, financial markets, conflict resolution, and Gerald Tyler; Mark Gersovitz, Johns Hopkins University; the use of business support services. Dipak Mazumdar, University of Toronto; Howard Pack, Second, it is carrying out a series of case studies of University of Pennsylvania; and Christina Paxon, firms selected from a stratified subsample of the panel Princeton University. Assistance in the field surveys and firms. These case studies focus on selected aspects of the country reports has been provided by the Ecole des Hautes research agenda, such as finance, business strategy, and Etudes Commerciales, Canada; Centre Universitaire de technological capa,bility, and are conducted to comple- Douala, Cameroon; Center d'Etudes et de Recherches sur ment quantitative information gathered in the survey. le Developpement International, France; CIRES and Third, it is conducting cross-country studies and stud- ORSTROM, Cote d'Ivoire; Oxford University; University ies of issues related to firm dynamics over time. These of Ghana; University of Goteborg, Sweden; University

136 Private Sector Development and Public Sector Management of Nairobi; Catholic University, Leuven, Belgium; Biggs,Tyler, Vijaya Ramachandran, and Manju Kedia Shah. 1998. University of Burundi; Helsinki School of Economics; "DoesGreater Local Competition Improve Firm Performance University of Dar es Salaam;Foundation for Researchin in Africa?" RPEDPaper 85. World Bank, Washington, DC. Economics and Business Administration, Norway; Biggs, Tyler, and Mayank Raturi. 1997. "Productivity and University of Zambia; Free University of Amsterdam; Competitiveness of African Manufacturing." RPED Paper 80. and the Universityof Zimbabwe. Funding for the research World Bank, Washington, DC. has been provided by the Belgian Administration for Biggs,Tyler, ManjuShah, and Pradeep Srivastava.1995. Technological Development Cooperation; the Canadian International Capabilitiesand Learning in African Enterprises. World Bank DevelopmentAgency;the DanishIntemational Develop- TechnicalPaper 288.Washington, DC. ment Agency; the Finnish International Development Biggs, Tyler, and Pradeep Srivastava. 1996. Structural Aspects of Agency;the Ministry of Cooperationand the Ministry of Manufacturingin Sub-SaharanAfnica:Findingsfroma Seven-Country Foreign Affairs, France; the Federal Ministry of Economic EnterpriseSurvey. World Bank DiscussionPaper 346.Washington, Cooperation, Germany; the Ministry of Foreign Affairs, DC. Italy; the Ministry of Foreign Affairs, the Netherlands; Lall, Sanjaya, Giorgio Barba Navaretti, Simon Teitel,and Ganeshan the NorwegianAgency for DevelopmentCooperation; the Wignaraja. 1994. Technologyand EnterpriseDevelopment: Ghana Swiss Development Cooperation; the Swedish Interna- under StructuralAdjustment. London: Macmillan;and New York: tional Enterprise Development Cooperation; and the St. Martin's Press. Overseas DevelopmentAdministration, United Kingdom. Ramachandran,Vijaya, and ManjuKedia Shah. 1997. "The Effects Completion date:June 2001. of ForeignOwnership in Africa:Evidence from Ghana, Kenya, Reports: and Zimbabwe." RPED Paper 81. World Bank, Washington, Biggs, Tyler, Margaret Miller, Caroline Otto, and Gerald Tyler. DC. 1996.Africa Can Compete! Opportunities and Challengesfor Garments . 1998. "Entrepreneurial Characteristics and Private Sector andHomeProductsin theEuropeanMarket. World BankDiscussion Growth in Sub-Saharan Africa." RPED Paper 86. World Bank, Paper 300. Washington, DC. Washington, DC. Biggs,Tyler, Gail R.Moody,Jan-Hendrik vanLeeuwen, and E. Diane Raturi, Mayank, and Anand Swamy. 1997. "Explaining Ethnic White. 1994.Africa Can Compete! Opportunities and Challengesfor Differentialsin Credit Market Outcomes in Zimbabwe." RPED Garments and Home Products in the U.S. Market. World Bank Paper 78. World Bank, Washington, DC. Discussion Paper 242. Washington, DC.

137

BANK RESEARCH OUTPUT

Below are listed various types of research output arising F. Policy Research Working Papers. These working from research and policy review activities at the Bank. papers are a vehicle for quick dissemination, sometimes To provide maximum coverage of such output, research in an incompletely polished format, of findings of work is defined for the purposes of this list in a broader rather under way in the Bank. The primary audience is Bank than a narrower sense. Copies of Bank publications (cat- staff, though some copies are circulated to interested egories A and E) can be purchased or ordered from the researchers outside the Bank. Bank's bookstore or distributors (see list on last page of G. Other Bank working papers. These papers are pro- this volume). Copies of working papers and background duced and distributed by departments, some divisions, papers (categories F-H) can be obtained from the authors and a vice presidency. They disseminate quickly findings or the associated Bank departments. Reprints of articles of departmental research and are targeted primarily to from the Bank's research journals (category C) may be specialists in the Bank. requested from the authors; other published material can H. Background papers to World Development Report be purchased from the publishers (categories B and D). 1998/99.These papers are comrnmissionedfrom researchers In addition, information about Bank publications and inside and outside the Bank. Some also come out as Policy papers, and the full text of some working papers series, Research Working Papers or in other forms. can be found on the Bank's Website (http:l/www. worldbank.org).Thefollowing types of fiscal 1998 research output are listed: A. Books by Bank Researchers A. Research-oriented books written by Bank staff and published either by the Bank or by other publishers. Abedian, I., R. van der Merwe, N. Wilkins, and Prabhat This list also includes periodic data publications, such Jha, eds. The Economicsof TobaccoControl: Tozvardsan as Global Development Finance, that feed subsequent Optimal Policy Mix. Cape Town: University of Cape research. Town. B. Researchby Bank staff published as part of collected Ahuja, Vinod, Benu Bidani, Francisco Ferreira, and volumes of research papers. Michael Walton. 1997. Everyone's Miracle? Revisiting C. Articles appearing in the Bank's two economics Poverty and Inequality in East Asia. Directions in journals, the World Bank EconomicReview and World Bank Development Series. Washington, DC: W/VorldBank. ResearchObserver. Borrini-Feyerabend, Grazia, and Dianne Buchan, eds. D. Articles related to Bank research and published in 1997. Beyond Fences: Seeking Social Sustainability in non-Bank professional journals. Conservation.Washington, DC: World Bank and World E. World Bank Discussion Papers, Technical Papers, Conservation Union (IUCN). and other Bank series publications. Campbell White, Oliver, and Anita Bhatia. 1998. * World Bank Discussion Papers. This series provides Privatization in Africa. Directions in Development an outlet in the public domain for a broad range of Bank Series. Washington, DC: World Bank. output that provides detailed results of interest to devel- Chong, Alberto, Giancarlo Gasha, and Enrique Schroth. opment practitioners-from work on narrow research 1998.Regimenes politicosy crecimientoenAnerica Latina. topics or country-specific studies. Lima: Consorcio de Investigaci6n Econ6mica. * World Bank Technical Papers. This series provides Claessens, Constantijn A., and Thomas C. Glaessner. 1997. an outlet in the public domain for research and studies Are Financial Sector Weaknesses Undermining the East that are highly technical and are aimed at a narrower Asian Miracle? Directions in Development Series. audience. Washington, DC: World Bank. * Other published series. Papers in such series as the Cleaver, Kevin M. 1997. Rural Development Strategiesfor Living Standards Measurement Study Working Paper Poverty Reduction and Environmental Protectionin Sub- and Economic Development Institute series typically Saharan Africa. Directions in Development Series. focus on a specialized topic and are designed to give Washington, DC: World Bank. prominence to Bank work on that topic or to work by a Dollar, David, Paul Glewwe, and Jennie I. Litvak, eds. particular Bank unit. 1998. Household Welfare and Vietnam's Transition to a

139 Bank ResearchOutput

Market Economy. World Bank Regional and Sectoral South Asia's Integration into the World Economy. Study. Washington, DC. Washington, DC: World Bank. Downing, Robert J., Ramesh Ramankutty, and Jitendra Pleskovic, Boris, and Joseph E. Stiglitz, eds. 1998.Annual J. Sha. 1997. RAINS-Asia: An Assessment Modelfor Acid World Bank Conferenceon Development Economics1997. Deposition in Asia. Directions in Development Series. Washington, DC: World Bank. Washington, DC: World Bank. Rietbergen-McCracken, Jennifer, and Deepa Narayan. English, E. Phillip, ed. 1998. East African Countries and 1998. Participation and Social Assessment: Tools and theGlobal Trading System. Washington, DC: World Bank. Techniques.Washington, DC: World Bank. Farvacque-Vitkovic, Catherine, and Lucien Godin. 1998. Schmukler, Sergio, and Bronwyn Hall. 1998.TSP Handbook The Future of African Cities: Challengesand Priorities in to AccompanyEconometric Models and EconomicForecasts. Urban Development.Directions in Development Series. New York: McGraw-Hill. Washington, DC: World Bank. (Also published in Shafik, Nemat, ed. 1998. Perspectiveson Middle Easternand French.) North African Economies.London: Macmillan. Florestal, Keleen, and Robb Cooper. 1997. Decentralization Shah, Jitendra J., Tanvi Nagpal, and Carter Brandon. 1997. of Education: Legal Issues. Directions in Development Urban Air Quality Management Strategy in Asia: Series. Washington, DC: World Bank. Guidebook.Washington, DC: World Bank. Galal, Ahmed, and Bernard Hoekman, eds. 1997.Regional Simpson, Lawrence, and Klas Ringskog. 1997. Water Partners in GlobalMarkets: Limits and Possibilitiesof the Markets in the Americas. Directions in Development Euro-Med Initiative. London: Centre for Economic Series. Washington, DC: World Bank. Policy Research. Thirsk, Wayne, ed. 1997.TaxReform in DevelopingCountries. Garcia, Jorge Garcia, and Sisira Jayasuriya. 1997. Courting World Bank Regional and Sectoral Study. Washington, Turmoiland DeferringProsperity: Colombia between 1960 DC. and 1990. Washington, DC: World Bank. World Bank. 1997. African Development Indicators 1997. Gaynor, Cathy. 1998. Decentralizationof Education:Teacher Washington, DC. (Also available on diskette.) Management. Directions in Development Series. . 1997. At China's Table: Food Security Options. Washington, DC: World Bank. Washington, DC. Gopal, Gita, and Maryam Salim, eds. 1998. Gender and - . 1997. China 2020: Development Challenges in the Law: Eastern Africa Speaks. Washington, DC: World New Century. Washington, DC. Bank. . 1997. China Engaged: Integration with the Global Hatziolos, Marea, Anthony J. Hooten, and Martin Fodor, Economy. Washington, DC. eds. 1998. Coral Reefs: Challengesand Opportunitiesfor - . 1997. Clear Water, Blue Skies: China's Environment SustainableManagement. Environmentally and Socially in the New Century. Washington, DC. Sustainable Development Series. Washington, DC: . 1997.ConfrontingAIDS: PublicPriorities in a Global World Bank. Epidemic. New York: Oxford University Press. Idelovitch, Emanuel, and Klas Ringskog. 1997. Wastewater . 1997.Financing Health Care:Issues and Optionsfor Treatmentin Latin America. Directions in Development China. Washington, DC. Series. Washington, DC: World Bank. . 1997. Old Age Security: Pension Reform in China. IUCN/World Conservation Union, and World Bank. 1997. Washington, DC. LargeDams: Learningfromthe Past, Lookingto the Future. . 1997. Sharing Rising Incomes:Disparities in China. Washington, DC. Washington, DC. Lieberman, Ira W., and Christopher D. Kirkness. 1998. -. 1997. TakingAction to ReducePoverty in Sub-Saharan Privatizationand EmergingEquity Markets.Washington, Africa. Washington, DC. DC: World Bank. .1997. ToolkitsforPrivate Sector Participation in Water Milanovic, Branko. 1998. Income, Inequality, and Poverty and Sanitation. Washington, DC. during the Transitionfrom Planned to Market Economy. . 1998. Emerging Stock Markets Factbook 1998. World Bank Regional and Sectoral Study. Washington, Washington, DC. DC. - . 1998. L'enseignement superieur Tunisien: enjeux et Patrinos, Harry Anthony, and David Lakshmanan avenir. World Bank Country Study. Washington, DC. Ariasingam. 1997. Decentralization of Education: . 1998.Evaluationand Development:The Institutional Demand-Side Financing. Directions in Development Dimension. Washington, DC. Series. Washington, DC: World Bank. . 1998. Global Development Finance 1998. 2 vols. Pigato, Miria, Caroline Farah, Ken Itakura, Kwang Jun, Washington, DC. (Also available on CD-ROM and Will Martin, Ki.m Murrell, and T. Srinivasan. 1997. diskette.)

140 Bank ResearchOutput

.1998. PovertyReduction and the World Bank:Progress Kreuger, ed., The WTO as an InternationalOrganization. in Fiscal 1996 and 1997. Washington, DC. Chicago and London: University of Chicago Press. .1998. PublicExpenditureHandbook. Washington, DC. Gisselquist, David. 1997. "Private Commerical Varieties -.1998. World Bank Atlas 1998. Washington, DC. and Seeds: Opportunities and Obstacles." In Robert 1998. World DevelopmentIndicators 1998. Washing- Tripp, ed., New Seed and Old Laws: Regulatory Reform ton, DC. (Also available on CD-ROM.) and the Diversificationof NationalSeed Systems. London: World Bank and Women's Affairs Office, Government Overseas Development Institute and Intermediate of Ethiopia. 1998. Implementing the Ethiopian National Technology Publications. Policyfor Women: Institutional and Regulatory Issues. . 1997. "Regulatory Constraints to Seed Multi- Washington, DC. plication and Distribution through Alternative Seed Yeats, Alexander. 1997. Did Domestic PoliciesMarginalize Systems." In D.D. Rohrbach, Z. Bishaw, and A.J.G. van Africa in InternationalTrade? Directions in Development Gastel, eds., Alternative Strategiesfor Smallholder Seed Series. Washington, DC: World Bank. Supply. International Crops Research Institute for the Yusuf, Shahid, and Weiping Wu. 1997. The Dynamics of Semi-Arid Tropics (ICRISAT). UrbanGrowth in ThreeChinese Cities. New York:Oxford Hoekman, Bernard. 1997."Developing Countries and the University Press. Multilateral Trading System after the Uruguay Round." In Albert Berry, Roy Culpeper, and Frances Stewart, eds., GlobalDevelopment Fifty Yearsafter Bretton Woods. B. Book Chapters by Bank Researchers London: Macmillan. .1997. "Focal Points and Multilateral Negotiations Ainsworth, Martha, Deon Filmer, and Innocent Semali. on the Contestability of Markets." In Keith Maskus, 1998. "The Impact of AIDS Mortality on Individual Peter Hooper, Ed Leamer, and J.D. Richardson, eds., Fertility: Evidence from Tanzania." In Barney Cohen Quiet Pioneering:The International Economic Legacy of and Mark R. Montgomery, eds., From Death to Birth: Robert M. Stern. Ann Arbor: University of Michigan Mortality Declineand ReproductiveChange. Washington, Press. DC: National Academy Press. .1997. "The Multilateral Agreement on Investment: Caprio, Gerard, Jr. 1997. "Safe and Sound Banking in From OECD to WTO?" In Peter Rashish, ed., Developing Developing Countries: We're Not in KansasAnymore." a New Consensus for the International Treatment of In FDICIA: Bank Reform Five Years Later and Five Years Investment. Washington, DC: The European Institute. Ahead. Greenwich, Conn.: JAI Press. . 1997. "Towards a Free Trade Agreement with Csaki, Csaba, and Zvi Lerman. 1998. "Land Reform and the European Union: Issues and Policy Options for Farm Restructuring in Hungary during the 1990s." Egypt." In Ahmed Galal and Bernard Hoekman, eds., In Stephen K. Wegren, ed., Land Reform in the Former RegionalPartners in GlobalMarkets: Limits and Possibilities Soviet Union and Eastern Europe. London: Routledge. ofthe Euro-MedInitiative. London: Centre for Economic Domowitz, Ian, and Ananth Madhavan. 1998. "Country Policy Research. and Currency Risk Premia: Evidence from the Mexican . 1998. "The WTO, the EU, and the Arab World: Sovereign Debt Market, 1993-94." In R. Levich, ed., Trade Policy Priorities and Pitfalls." In Nemat Shafik, The Future of Emerging Market Capital Flows. Kluwer ed., Perspectives on Middle Eastern and North African Academic Publishers. Economies.London: Macmillan. Fajnzylber, Pablo, Daniel Lederman, and Norman Loayza. Hoekman, Bernard, and Petros C. Mavroidis. 1997. 1998. "Que causa el crime violento?" In Roberto Steiner "International Antitrust Policies for High-Tech and Mauricio Cardenas, eds., Crimen y Violencia. Industries?" In Horst Siebert, ed., Towardsa New Global Bogota, Colombia: Fedesarrollo. FrameworkforHigh-Technology Competition. Tubingen: Feder, Gershon. 1997. "Agricultural Policies and Reforms: J.C.B. Mohr. Issues and Policies." In V.S.Vyas and P. Bhargava, eds., Hoekman, Bernard, and Arvind Subramanian. 1997. Policies for Agricultural Development. Jaipur, India: "Egypt and the Uruguay Round Agreements on'New' Rawat Publications. Issues: Laying the Groundwork for the Future." In Fetini, Habib. 1997. "Development Strategies and the Hanaa Keir El Din, ed., Implications of the Uruguay Environment." In Partha Dasgupta and Karl Maler, Round on the Arab Countries. Cairo: Dar Al-Mostaqbal eds., The Environment and EmergingDevelopment Issues. Al Arabi. Oxford: Clarendon. Jha, Prabhat. 1997. "Banking on Health." In P. Puska, L. Finger, J. Michael, and L. Alan Winters. 1998. "What Can Elovianio, and H. Vertio, eds., Smoke-FreeEurope: A the WTO Do for Developing Countries?" In Anne ForumofNetworks. FinnishCentreforHealthPromotion.

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. 1998. "The Role of Governments in Tobacco Patrinos, Harry Anthony. 1997. "Differences in Education Control." In I. Abedian, R. van der Merwe, N. Wilkins, and Earnings across Ethnic Groups in Guatemala." and PrabhatJha, eds., The EconomicsofTobacco Control: In Anne R. Pebley and Luis Rosero-Bixby, eds., Towardsan Optimal PolicyMix. Cape Town: University DemographicDiversity and Changein the CentralAmerica of Cape Town. Isthmus. Santa Monica, Calif.: Rand Corporation. (Also Kaminski, Bartlomiej. 1998."Foreign Trade: Performance, published in Spanish.) Institutions, and Policies." In R. Staar, ed., Challenges Pray, Carl. 1998. "Country Case Study: Turkey." In M. to Democracyin Poland. New York: St. Martin's Press. Morris, ed., Maize SeedIndustry. Boulder, Colo.: Lynne Kaufmann, Daniel. 1997. "The Missing Pillar of a Growth Riener. Strategy for Ukraine: Institutional and Policy Reforms." Pray, Carl, and Robert Tripp. 1998. "Policies That Influence In P. Cornelius and P.Lenain, eds., Ukraine:Accelerating Seed Industry Development Industrial Structure, Seed the Transitionto Market.Washington, DC: International Prices, and Intellectual Property Rights." In M. Morris, Monetary Fund. ed., Maize Seed Industry. Boulder, Colo.: Lynne Riener. . 1998. "Revisiting Anti-Corruption Strategies: . 1997. "Public Policy, Public Investment, and Towards Incentive-Driven Approaches." In P.Tamesis, Private Investment in Seed Supply: Experiences in ed., Corruptionand Integrity-Improvement Initiatives in Turkey and India." In D.D. Rohrbach, Z. Bishaw, and Development.New York: United Nations Development A.J.G. van Gastel, eds., Alternative Strategies for Programme. SmallholderSeed Supply. International Crops Research Kaufmann, Daniel, Simon Johnson, and 0. Ustenko. 1997. Institute for the Semi-Arid Tropics (ICRISAT). "Formal Employment and Survival Strategies under Rama, Martin. 1997. "Distorsions des marches des biens Economic Reforrn in the Former Soviet Union." In J.M. et du travail: determinants et consequences." In Jaime Nelson and others, eds., TransformingPost-Communist de Melo and Patrick Guillaumont, eds., CommerceNord- Political Economies. Washington, DC: National Sud, migration et delocalisation: consequences pour les Academy Press. salaireset l'emploi. Paris: Economica. Lerman, Zvi, and Karen Brooks. 1998. "Land Reform in . 1997."Trade Unions and Economic Performance: Turkmenistan." In Stephen K. Wegren, ed., Land Reform East Asia and Latin America." In James McGuire, ed., in the FormerSoviet Union and EasternEurope. London: Rethinking Development: East Asia and Latin America. Routledge. Los Angeles: Pacific Council on International Policy. Martin, Will. 1997. "A Review of Uruguay Round Ravallion, Martin. 1998. "PoorAreas." In David Giles and Modeling." In D. Robertson, ed., East Asian Tradeafter Aman Ullah, eds., The Handbook of Applied Economic the Uruguay Round. Cambridge: Cambridge University Statistics. New York: Marcel Dekkar. Press. Schillhom van Veen, Tjaart W. 1998. "New Challenges Martin, Will, and C. Bach. 1997. "State Trading in China." for the Livestock Sector in Central Asia: Overcoming In Thomas Cottier and Petros Mavroidis, eds., State Old Legacies and Adapting to New Policies, Markets, Trading. Ann Arbor: University of Michigan Press. and Farmers." In T.G. Demment, ed., Central Asia: .1998. "The ].mportance of State Trading in China's RegionalLivestockAssessment-Proceedings ofa Workshop Trade Regime." In F. Abbott, ed., China in the World in Tashkent.Davis: University of California. (Also pub- TradingSystem. The Hague: Kluwer Law International. lished in Russian, in T. Gilmanov and E. Vostrikova, Martin, Will, and J. Francois. 1997. "Bindings and Rules eds., New Challengesfor the Livestock Sector in Central as Trade Liberalization." In Keith Maskus, ed., Quiet Asia: Overcoming Old Legacies and Adapting to New Pioneering:Robert M. Stern and His InternationalEconomic Policies,Markets, and Farmers,Ankara: ICARDA Turkey Legacy.Ann Arbor: University of Michigan Press. Regional Office, 1998.) Pack, Howard, and Richard Nelson. 1998. "Firm Schmukler, Sergio, and Jeffrey Frankel. 1998. "Crisis, Competencies, Technological Catchup, and the Asian Contagion, and Country Funds." In R. Glick, ed., Miracle." In Gary Saxonhouse and T.N. Srinivasan, Managing CapitalFlows and ExchangeRates. Cambridge: eds., Development,Duality, and the InternationalRegime: Cambridge University Press. Essays in Honorof Gustav Ranis. Ann Arbor: University Shirley, Mary. 1998. "Bureaucracy in Eastern Europe and of Michigan Press. the Former Soviet Union." In Peter Newman, ed., The Pack, Howard, and Janet Rothenberg Pack. 1998."Foreign New Palgrave Dictionary of Economics and the Law. Aid and Fiscal Stress." In Gary Saxonhouse and T.N. London: Macmillan. Srinivasan, eds., Development,Duality, and the Interna- . 1998. "Performance Contracts: A Tool for tional Regime: Essays in Honor of Gustav Ranis. Ann Improving Public Services?" In Robert Picciotto and Arbor: University of Michigan Press. Eduardo Wiesner, eds., Evaluation and Development:

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The Institutional Dimension. New Brunswick, N.J.: Dar, Amit, and Indermit S. Gill. 1998. "Evaluating Transaction Publishers. Retraining Programs in OECD Countries: Lessons Wheeler, David, ShakebAfsah, and BenoitLaplante. 1997. Learned." World Bank ResearchObserver 13(l):79-101. "Public Information for Environmental Management." Eskeland, Gunnar S., and Tarhan Feyzioglu. 1997. In Public Policy and Governancein the Information Age. "Rationing Can Backfire: The 'Day without a Car' in Singapore: National University of Singapore. Mexico City." World Bank Economic Review 11(3): Wheeler, David, BenoitLaplante, and Shakeb Afsah. 1997. 383-408. "Controlling Industrial Pollution: From Theory to Fernandez, Raquel, and Jonathan Portes. 1998. "Returns Implementation." In Environmental Law and Adminis- to Regionalism: An Analysis of Nontraditional Gains tration: Enforcement of Environmental Law in Asian from Regional Trade Agreements." World Bank Countries. Tokyo: Institute of Developing Economies. Economic Review 12(2):197-220. Winters, L. Alan. 1997. "Experiencias y lecciones de la Feyzioglu, Tarhan, Vinaya Swaroop, and Min Zhu. 1998. integracion Europea." In Las Americas: Integracion "A Panel Data Analysis of the Fungibility of Foreign Economica en Perspectiva. Washington, DC: Inter- Aid." World Bank Economic Review 12(1):29-58. American Development Bank. Grosh, Margaret E. 1997. "The Policymaking Uses of - .1997. "Lebanon's Euro-Mediterranean Agreement: Multitopic Household Survey Data: A Primer." World Possible Dynamic Benefits." In W. Shahin and K. Bank ResearchObserver 12(2):137-60. Shehadi, eds., Pathways to Integration:Lebanon and the Haggarty, Luke, and Mary M. Shirley. 1997."A New Data Euro-Mediterranean Partnership. Konrad Adenauer Base on State-Owned Enterprises." World Bank Foundation. EconomicReview 11(3):491-513. Yang, Y., Will Martin, and K. Yanagishima. 1997. Hammer, Jeffrey S. 1997. "Prices and Protocols in Public "Evaluating the Benefits of Abolishing the MFA in Health Care." WorldBank EconomicReview 11(3):409-32. the Uruguay Round Package." In Tom Hertel, ed., Hoekman, Bernard, and Simeon Djankov. 1997. Global Trade Analysis: Modeling and Applications. "Determinants of the Export Structure of Countries in Cambridge: Cambridge University Press. Central and Eastern Europe." World Bank Economic Yeats, Alexander. 1997. "Export Prospects of Middle Review 11(3):471-87. Eastem Countries: A Post-Uruguay Round Analysis." Hyde, William F. 1998. "Deforestation and Forest Land In Raed Safadi, ed., Leading Toward the 21st Century: Use: A Reply." World Bank Research Observer 13(1): Opportunities and Challengesfor the Middle East. Paris: 141-45. OECD. Jolliffe, Dean. 1998. "Skills, Schooling, and Household .1998. "Factors Affecting the Export Performance Income in Ghana." World Bank EconomicReview 12(1): of Sub-Saharan African Countries." InPedro Belli, ed., 81-104. The Uruguay Round and Africa. Rome: Food and Agri- Keynan, Gabriel, Manuel Olin, and Ariel Dinar. 1997. culture Organization. "Cofinanced Public Extension in Nicaragua." World Bank ResearchObserver 12(2):225-47. Klugman, Jeni, and Jeanine Braithwaite. 1998. "Poverty C. Articles Published in the World Bank in Russia during the Transition: An Overview." World Economic Review and World Bank Bank ResearchObserver 13(1):37-58. Research Observer L6pez, Ram6n. 1998. "The Tragedy of the Commons in C6te d'Ivoire Agriculture: Empirical Evidence and Aw, Bee Yan, and Geeta Batra. 1998. "Technological Implications for Evaluating Trade Policies." WorldBank Capability and Firm Efficiency in Taiwan (China)." Economic Review 12(1):105-31. World Bank Economic Review 12(1):59-79. Olarreaga, Marcelo, and Isidro Soloaga. 1998. "Endoge- Bale, Malcolm, and Tony Dale. 1998."Public Sector Reform nous Tariff Formation: The Case of Mercosur." World in New Zealand and Its Relevance to Developing Bank Economic Review 12(2):297-320. Countries." World Bank ResearchObserver 13(1):103-21. Pargal, Sheoli, Hemamala Hettige, Manjula Singh, and Bindlish, Vishva, and Robert E. Evenson. 1997. "The David Wheeler. 1997."Formal and Informal Regulation Impact of T&V Extension in Africa: The Experience of Industrial Pollution: Comparative Evidence from of Kenya and Burkina Faso." World Bank Research Indonesiaandthe UnitedStates." WorldBank Economic Observer 12(2):183-201. Review 11(3):433-50. Chomitz, Kenneth M., and Kanta Kumari. 1998. Picciotto, Robert, and Jock R. Anderson. 1997. "Recon- "The Domestic Benefits of Tropical Forests: A Critical sidering Agricultural Extension." World Bank Research Review." World Bank ResearchObserver 13(1):13-35. Observer12(2):249-59.

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Posner, Richard A. 1998. "Creating a Legal Framework D. Articles Related to Bank Research and for Economic Development." World Bank Research Published in Non-Bank Professional Journals Observer 13(1):1-11. Puga, Diego, and Anthony J. Venables. 1998. "Trading Adamolekun, Lapido, M. Laleye, and Noel Kulemeka. Arrangements and Industrial Development." World 1997. "Malawi Institute of Management: A 'Partial Bank Economic Review 12(2):221-49. Success Story'." International Review of Administrative Rama, Martin. 1998. "How Bad Is Unemployment in Sciences 63(4):529-42. Tunisia? Assessing Labor Market Efficiency in a Adeyi, Olusoji, and R. Morrow. 1997. "Essential Obstetric Developing Country." World Bank ResearchObserver Care: Assessmentand Determinants of Quality." Social 13(1):59-77. Scienceand Medicine 45(11):1631-39. Schick, Allen. 1998.. "Why Most Developing Countries Agenor, Pierre-Richard. 1998. "Wage Contracts, Capital Should Not Try New Zealand's Reforms." World Bank Mobility, and Macroeconomic Policy." Journal of ResearchObserver 13(1):123-31. Macroeconomics20(1):1-25. Schiff, Maurice, and L. Alan Winters. 1998. "Dynamics Ahouissoussi, N.B.C., and Michael E. Wetzstein. 1998. and Politics in Regional Integration Arrangements: "A Comparative Cost Analysis of Biodiesel, An Introduction." World Bank EconomicReview 12(2): Compressed Natural Gas, Methanol, and Diesel for 177-95. Transit Bus Systems." Resourceand Energy Economics 1998. "Regional Integration as Diplomacy." World 20(1):1-15. Bank Economic Review 12(2):271-95. Alberini, Anna, Maureen L. Cropper, T.T. Fu, Alan Taylor, Mark P., and Lucio Sarno. 1997. "Capital Flows Krupnick, J.T. Liu, D. Shaw, and W. Harrington. 1997. to Developing Countries: Long- and Short-Term "Valuing Health Effects of Air Pollution in Developing Determinants." World Bank Economic Review 11(3): Countries: The Case of Taiwan." Journal of 451-70. EnvironmentalEconomics and Management34(2):107-26. Thobani, Mateen. -1997."Formal Water Markets: Why, Alderman, Harold, Jere R. Behrman, S. Khan, D.R. Ross, When, and How to Introduce Tradable Water Rights." and Richard Sabot. 1997."The Income Gap in Cognitive World Bank ResearchObserver 12(2):161-79. Skills in Rural Pakistan." Economic Development and Umali-Deininger, Dina. 1997. "Public and Private Cultural Change 46(1):97-122. Agricultural Extension: Partners or Rivals?" World Alm, James, and Robert Buckley. 1998."Are Government Bank ResearchObserver 12(2):203-24. Revenues from Financial Repression Worth the Costs?" Vamvakidis, Athanasios. 1998."Regional Integration and Public FinanceReview 26(3):187-213. Economic Growth." World Bank Economic Review Amacher, Gregory S.,W. Cruz, D. Grebner, and W.F.Hyde. 12(2):251-70. 1998. "Environmental Motivations for Migration: Vincent, Jeffrey R., and Malcolm Gillis. 1998. PopulationPressure,Poverty, and Deforestationinthe "Deforestation and Forest Land Use: A Comment." Philippines." Land Economics 74(1):92-101. World Bank ResearchObserver 13(1):133-40. Amacher, Gregory S., M. Rios, L. Constantino, and R.J. von Amsberg, Joachim. 1998. "Economic Parameters of Brazee. 1998. "The Design of Second Best Forest Deforestation." World Bank Economic Review 12(1): Incentives in Small Open Economies." Forest Science 133-53. 44(1):165-75. Waelbroeck, Jean. 1998. "Half a Century of Development Anderson, James H., Georges Korsun, and Peter Murrell. Economics: A Review Based on the Handbook of 1997. "Enterprise-State Relations after Mass Development Economics." World Bank Economic Review Privatization: Their Character in Mongolia." MOCT- 12(2):323-52. MOST 7(4):81-99. Wei, Anning, Waldemar Guba, and Richard Burcroff II. Anderson, Jock R. 1997. "Policy and Management Work 1998. "Why Has Poland Avoided the Price Libera- withinIntemationalAgriculturalResearch."Australian lization Trap? The Case of the Hog-Pork Sector." World Journalof Agricultural and Resource Economics 41(4): Bank EconomicReview 12(1):155-74. 521-39. Williamson, Jeffrey G. 1997."Globalization and Inequality, Annez, Patricia. 1998."Livable Cities for the 21st Century." Past and Present." World Bank ResearchObserver 12(2): Society 35(4):45-50. 117-35. Aw, Bee Yan, and Geeta Batra. 1998. "Firm Size and the Yeats, Alexander J. 1998. "Does Mercosur's Trade Pattern of Diversification." International Journal of Performance Raise Concerns about the Effects of Industrial Organization 16(3):313-31. Regional TradeArrangements?" World Bank Economic Bacon, Robert W., and John E. Besant-Jones. 1998. Review 12(1):1-28. "Estimating Construction Costs and Schedules:

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Experience with Power Generation Projects in Bruno, Michael, and William Easterly. 1998. "Inflation Developing Countries." Energy Policy 26(4):317-33. Crises and Long-Run Growth." Journal of Monetary Baffes, John, and Anwar Shah. 1998. "Productivity of Economics41(1):3-26. Public Spending, Sectoral Allocation Choices, and Buckley, Robert M., and Eugene N. Gurenko. 1998. Economic Growth." EconomicDevelopment and Cultural "Housing Demand in Russia: Rationing and Reform." Change46(2):291-303. Economicsof Transition 6(1):197-209. Baharoglu, Deniz, and Josef Leitmann. 1998. "Coping Burnside, Craig. 1998. "Solving Asset Pricing Models Strategies for Infrastructure: How Turkey's with Gaussian Shocks." Journalof Economic Dynamics Spontaneous Settlements Operate in the Absence of and Control22(3):329-40. Formal Rules." Habitat International 22(2):115-35. Buzina-Suboticanec, K., R. Buzina, A. Stavljenic, T.M.M. Belizan, J.M., J. Villar, E. Bergel, A. del Pino, S. di Fulvio, Farley, J. Haller, B. Bergman-Markovic, and M. S.V. Galliano, and C. Kattan. 1997. "Long-Term Effect Gorajscan. 1998. "Ageing, Nutritional Status, and of Calcium Supplementation during Pregnancy on the Immune Response." International Journalfor Vitamin Blood Pressure of Offspring: Follow Up of a Ran- and Nutrition Research68(2):133-41. domized Controlled Trial." British Medical Journal Byerlee, Derek, Peter Hazell, and J. Kerr. 1997. "Critical 315(7103):281-85. Resource, Technology, and Environmental Issues for Benton, B. 1998. "Economic Impact of Onchocerciasis Meeting Future Grain Production Needs in Asia." Control through the African Programme for Oncho- AmericanJournal ofAgricultural Economics 79(5):1480-84. cerciasis Control: An Overview." Annals of Tropical Cernea, Michael. 1997. "The Risks and Reconstruction Medicine and Parasitology92(1):33-39. Model for Resettling Displaced Populations." World Berman, J.D., R. Badaro, C.P. Thakur, K.M. Wasunna, K. Development 25(10):1569-87. Behbehani, R. Davidson, F. Kuzoe, L. Pang, K. Chaudhuri, K. 1997. "Cointegration, Error Correction, Weerasuriya, and A.D.M. Bryceson. 1998. "Efficacy and Granger Causality: An Application with Latin and Safety of LiposomalAmphotericin B. (AmBisome) American Stock Markets." Applied Economics Letters for Visceral Leishmaniasis in Endemic Developing 4(8):469-71. Countries." Bulletin of the World Health Organization Chung, R.C.Y., F.H. Walkey, and F. Bemak. 1997. "A 76(1):25-32. Comparison of Achievement and Aspirations of New Berquist, N.R., and D.G. Colley. 1998. "Schistosomiasis Zealand, Chinese, and European Students." Journal Vaccines:Research to Development." ParasitologyToday of Cross-CulturalPsychology 28(4):481-89. 14(3):99-104. Claessens, Stijn. 1997."Corporate Governance and Equity Binswanger, Hans P., and Klaus Deininger. 1997. Prices: Evidence from the Czech and Slovak "Explaining Agricultural and Agrarian Policies in Republics." Journalof Finance 52(4):1641-58. Developing Countries." Journalof EconomicLiterature Claessens, Stijn, Enrica Detragiache, Ravi Kanbur, and 35(December). Peter Wickham. 1997. "HIPCs' Debt Review of the Black, T.R., Denis Okkello-Atwaru, J. Kiwanuka, D. Issues." Journalof African Economies6(2):231-54. Serwadda, 0. Birabi, F. Malinga, A. Biumigishu, and Claessens, Stijn, and R. Kyle Peters. 1997. "State Enterprise A. Rodd. 1998."Science Education in Uganda: Progress Performance and Soft Budget Constraints: The Case and Possibilities." International Journal of Science of Bulgaria." Economicsof Transition5(2):305-22. Education 20(2):239-52. Clay, Daniel, Thomas Reardon, and Jaakko Kangasniemi. Bond, James, and Christophe Petit. 1998. "Financing 1998. "Sustainable Intensification in the Highland Telecommunications Investments in Developing Tropics: Rwandan Farmers' Investments in Land Countries." Issues in TelecommunicationsDevelopment: Conservation and Soil Fertility." EconomicDevelopment Finance and Trade (1998 review). and Cultural Change46(2):351-77. Borish, Michael S., Wei Ding, and Michel Noel. 1997."The Cortinovis, I., V. Vella, N. Ndiku, and S. Milani. 1997. Evolution of the State-Owned Banking Sector during "Weight, Height, and Arm Circumference of Children Transition in Central Europe." Europe-Asia Studies under 5 in the District of Mbarara, Southwest Uganda." 49(7):1187-1208. Annals of Human Biology24(6):557-68. . 1997. "A Review of Bank Performance during Cox, Donald, Zekeriya Eser, and Emmanuel Jimenez. Transition in Central Europe." Communist Economies 1998."Motives for Private Transfers over the Life Cycle: and Economic Transformation9(3):337-57. An Analytical Framework and Evidence from Peru." Broer,D.Peter, and WJosJansen. 1998."Dynamic Portfolio Journal of Development Economics55(1):57-80. Adjustment and Capital Controls: A Euler Equation Cox, Donald, and Emmanuel Jimenez. 1998. "Risk Sharing Approach." Southern EconomicJournal 64(4):902-21. and Private Transfers: What about Urban House-

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holds?" Economic Development and Cultural Change Antigen Capture Assay for Monitoring Parasite 46(3):621-37. Clearance after Drug Treatment of Plasmodium Falci- Cropper, Maureen L., Nathalie B. Simon, Anna Alberini, parum Malaria." Transactions of the Royal Society of S. Arora, and P.K. Sharma. 1997. "The Health Benefits TropicalMedicine and Hygiene 91(4):403-05. of Air Pollution Control in Delhi." American Journalof Djankov, Simeon, and Bernard Hoekman. 1998. "Trade Agricultural Economics 79(5):1625-29. Reorientation and Post-Reform Productivity Growth Csaki, Csaba, and Zvi Lerman. 1997. "Land Reform and in Bulgarian Enterprises." Journal of Policy Reform Farm Restructuring in East Central Europe and CIS 2:151-68. in the 1990s: Expectations and Achievements after Djankov, Simeon, and Gerhard Pohl. 1998. "The the First Five Years." European Review of Agricultural Restructuring of Large Firms in the Slovak Republic." Economics24(3-4):428-52. Economics of Transition 6(1):67-85. Currie, Janet, and Ann Harrison. 1997."Sharing the Costs: Dolgui, A., and D. Ofitserov. 1997. "A Stochastic Method The Impact of Trade Reform on Capital and Labor in for Discrete and Continuous Optimization in Manu- Morocco." Journalof Labor Economics 15(3):S44-71. facturing Systems." JournalofIntelligent Manufacturing Datt, Gaurav, and Martin Ravallion. 1998. "Farm 8(5):405-13. Productivity and Rural Poverty in India." Journal of Domowitz, Ian, and Ananth Madhavan. 1997. "Market Development Stuidies34(4):62-85. Segmentation and Stock Prices: Evidence from an -. 1998."Why Have Some Indian States Done Better Emerging Market." Journal of Finance 52:1059-85. than Others at Reducing Rural Poverty?" Economica . 1998. "Country and Currency Risk Premia in an 65(257):17-38. Emerging Market." Journalof Financialand Quantitative Davis, Mark S., and J. Ernest Tanner. 1997. "Money and Analysis 33:189-216. Economic Activity Revisited." Journal of International Dougherty, C., and J.P Tan. 1997. "Financing Training: Money and Finance 16(6):955-68. Issues and Options." InternationalJournal of Manpower Davoodi, Hamid, and Heng-fu Zou. 1998. "Fiscal 18(1-2). Decentralization and Economic Growth: A Cross- Dumanski, J., W.W. Pettapiece, and R.J. McGregor. 1998. Country Study." Journal of Urban Economics 43(2): "Relevance of Scale Dependent Approaches for 244-57. Integrating Biophysical and Socioeconomic Demirgui,-Kunt, Ash, and Enrica Detragiache. 1998."The Information and Development of Agroecological Determinants of Banking Crises in Developing and Indicators." Nutrient Cyclingin Agroecosystems50(1-3): Developed Countries." International Monetary Fund 13-22. Staff Papers 45(1):81-109. Easley, David, Maureen O'Hara, and PS. Srinivas. 1998. Demirgiiu-Kunt, Aslh, Ishac Diwan, and M.M. Spiegel. "Option Volume and Stock Prices: Evidence on Where 1997. "Heterogeneity in Bank Valuation of LDC Debt: Informed Traders Trade." Journal of Finance 53(2): Evidence from the 1988 Brazilian Debt-Reduction 431-65. Program." Journalof Monetary Economics39(3):535-50. Easterly, William, and Ross Levine. 1998. "Troubles with de Onis, M., J. Villar, and M. Gulmezoglu. 1998. the Neighbors: Africa's Problem, Africa's Oppor- "Nutritional Interventions to Prevent Intrauterine tunity." Journalof African Economies 7(1):120-42. Growth Retardation: Evidence from Randomized Easterly, William, Norman Loayza, and Peter Montiel. Controlled Trials." EuropeanJournal of ClinicalNutrition 1997. "Has Latin America's Post-Reform Growth Been 52(1):83-93. Disappointing?" Journal of International Economics Devarajan, Shantayanan, Dan Yang Xie, and Heng-fu 43(3-4):287-311. Zou. 1998. "Should Public Capital Be Subsidized or Eiswerth, Mark E., K.W. Abendroth, R.E. Ciliano, A. Provided?" Journalof Monetary Economics41(2):319-31. Ouerghi, and M.T. Ozog. 1998."Residential Electricity Diczfalusy, Egon, and G. Benagiano. 1997. "Women and Use and the Potential Impacts of Energy Efficiency the Third and Fourth Age." International Journal of Options in Pakistan." Energy Policy 26(4):307-15. Gynecology and Obstetrics 58(1):177-88. Eskeland, Gunnar S. 1997. "Air Pollution Requires Dion, Catherine, Paul Lanoie, and Benoit Laplante. 1998. Multipollutant Analysis: The Case of Santiago, Chile. " "Monitoring of Pollution Regulation: Do Local American Journal of Agricultural Economics 79(5): Conditions Matter?" Journal of Regulatory Economics 1636-41. 13(1):5-18. Eskeland, Gunnar S., and Tarhan N. Feyzioglu. 1997. "Is di Perri, G., P.Olliaro, S. Nardi, B.Allegranzi, R. Deganello, Demand for Polluting Goods Manageable? An S. Vento, M. Larizafame, A. Cazzadori, S. Bonora, and Econometric Study of Car Ownership and Use in E. Concia. 1997. "The ParaSight (TM)-F Rapid Dipstick Mexico." Journalof DevelopmentEconomics 53(2):423-45.

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Evans, D.B., and H.L. Guyatt. 1997. "Human Behavior, Guilkey, David K., and S. Jayne. 1997. "Fertility Transition Cost-Effectiveness Analysis, and Research and in Zimbabwe: Determinants of Contraceptive Use and Development Priorities: The Case of a Schistosomiasis Method Choice." Population Studies-A Journal of Vaccine." Tropical Medicine and International Health Demnography51(2). 2(11):47-54. Gwilliam, Kenneth M. 1997. "Can Developing Countries Farley, T.M.M., J. Collins, and J.J. Schlesselman. 1998. Learn from Our Mistakes?" Annals of the American "Hormonal Contraception and Risk of Cardiovascular Academy of Politicaland Social Science553(September): Disease: An International Perspective." Contraception 168-79. 57(3):211-30. -. 1997. "Sustainable Transport and Economic Feder, Gershon, and Akihiko Nishio. 1998. "The Benefits Development." Journalof TransportEconomics and Policy of Land Registration and Titling: Economic and Social 31(3):325-30. Perspectives." Land Use Policy 15(1):25-43. Harrison, Glenn W., Thomas F. Rutherford, and David Fiszbein,Ariel. 1997. "The Emergence of Local Capacity: G. Tarr. 1997. "Quantifying the Uruguay Round." Lessons from Colombia." World Development 25(7): EconomicJournal 107(444):1405-30. 1029-43. Harvey, P.W.J.,G.C. Marks, and Peter F. Heywood. 1998. Freund, Caroline L., and Christine I. Wallich. 1997."Public "The Dietary Intake of Chemical Residues in Brisbane Sector Price Reforms in Transition Economies: Who Adults." Australian and New Zealand Journalof Public Gains? Who Loses? The Case of Household Energy Health 22(2):266-68. Prices in Poland." Economic Developmentand Cultural Hatziolos, Marea E. 1997. "A World Bank Framework Change 46(1):35-59. for ICZM with Special Emphasis on Africa." Oceanand Garcia, J.G., and L. Soelistianingsih. 1998. "Why Do CoastalManagement 37(3):281-94. Differences in Provincial Incomes Persist in Heisey, Paul W., M. Smale, Derek Byerlee, and E. Souza. Indonesia?" Bulletin of Indonesian Economic Studies 1997. "Wheat Rusts and the Cost of Genetic Diversity 34(1):95-120. in the Punjab of Pakistan." American Journal of Ginarte, Juan C., and Walter G. Park. 1997. "Determinants Agricultural Economics 79(3):726-37. of Patent Rights: A Cross-National Study." Research Heyneman, Stephen P. 1997. "The Quality of Education Policy 26(3):283-301. in the Middle East and North Africa." International Glen, Jack D., and Mariusz A. Sumlinski. 1998. "Trends Journal of Educational Development 17(4):449-66. in Private Investment in Developing Countries: Hoekman, Bernard. 1997. "Competition Policy and the Statistics for 1970-96." Emerging Markets Quarterly Global Trading System."World Economy20(4):383-406. (summer). Hoekman, Bernard, and Carlos Primo Braga. 1997. Glewwe, Paul, and Gillette Hall. 1998. "Are Some Groups "Protection and Trade in Services: A Survey." Open More Vulnerable to Macroeconomic Shocks than EconomiesReview 8:285-308. Others? Hypothesis Tests Based on Panel Data from Howes, Stephen, and Jean Olson Lanjouw. 1998. "Does Peru." Journalof Development Economics56(1):181-206. Sample Design Matter for Poverty Rate Comparisons?" Graham, C., and C. Kane. 1998. "Opportunistic Govern- Review of Income and Wealth 1(March):99-109. ment or Sustaining Reform? Electoral Trends and Ingram, Gregory K. 1998. "Housing Demand in Russia: Public Expenditure Patterns in Peru." Latin American Rationing and Reform." Urban Studies 35(7):1019-35. ResearchReview 33(1):67-104. Jacoby,Hanan G., and E. Skoufias. 1998. "Testing Theories Grivetti, L., D. Leon, K. Rasmussen, P.S.Shetty, R. Steckel, of Consumption Behavior Using Information on and J. Villar.1998. "Report of the IDECG Working Group Aggregate Shocks: Income Seasonality and Rainfall in on Variation in Fetal Growth and Adult Disease." Rural India." AmericanJournal ofAgricultural Economics EuropeanJournal of ClinicalNutrition 52(1):102-03. 80(1):1-14. Grootaert, Christiaan. 1997."The Determinants of Poverty Jalan, Jyotsna, and Martin Ravallion. 1998. "Are There in C6te d'Ivoire in the 1980s." Journal of African Dynamic Gains from a Poor Area Development Economies6(2):169-96. Program?" Journalof Public Economics67(1):65-85. Grosh, Margaret E., and Paul Glewwe. 1998."Data lWatch: Jansen, W. Jos. 1997. "Can the Intertemporal Budget The World Bank's Living Standards Measurement Constraint Explain the Feldstein-Horioka Puzzle?" Study Household Surveys." Journal of Economic EconomicsLetters 56(1):77-83. Perspectives 12(1):187-96. Jha, T.K., P. Olliaro, C.P.N. Thakur, T.P. Kanyok, Gruber, Jonathan. 1997. "The Incidence of Payroll B.L. Singhania, I.J. Singh, N.K.P Singh, S. Akhoury, Taxation: Evidence from Chile." Journal of Labor and S. Jha. 1998. "Randomized Controlled Trial Economics15(3):S72-101. of Aminosidine (Paromomycin) Upsilon Sodium

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Stibogluconate for Treating Visceral Leishmaniasis in Control in Africa." TropicalMedicine and International North Bihar, India." British Medical Journal316(7139): Health 3(4):286-90. 1200-05. Levinson, David M., and A. Kumar. 1997. "Density and Johnson, S., Daniel Kaufmann, and Andrei Shleifer. 1997. the Journey to Work.' Growthand Change28(2):147-72. "The Unofficial Economy in Transition." Brookings Li, H.Y., Lyn Squire, and Heng-fu Zou. 1998. "Explaining Papers on EconomicActivity 2:159-239. International and Intertemporal Variations in Income Johnson, S., Daniel Kaufmann, and Pablo Zoido-Lobaton. Inequality." EconomicJournal 108(446):26-43. 1998. "Regulatory Discretion and the Unofficial Liese, Bernhard, K.A. Mundt, L.D. Dell, L. Nagy, and B. Economy." American EconomicReview 88(2):387-92. Demure. 1997."Medical Insurance Claims Associated Juan, E.J. 1997. "Aviation: The Politics and Economics of with Intemational Business Travel." Occupationaland a Boom." ForeignPolicy 109(winter):141-54. Environmental Medicine 54(7):499-503. Kalulumia, Pene, and Pierre Yourougou. 1997. "Money Lintner, S.F.1997. "Agriculture and Environment in the and Income Causality in Developing Economies: A Baltic Sea Region: An Agenda for Action." Ambio Case Study of Selected Countries in Sub-Saharan 26(7):418-23. Africa." Journal of African Economies6(2):197-230. Looareesuwan, S., P. Wilairatana, W. Molunto, K. Kaminski, Bartlomiej. 1998. "Foreign Trade Policy and Chalermrut, P. Olliaro, and M. Andrial. 1997. "A Institutions: Getting Ready for Accession." Greater Comparative Clinical Trial of Sequential Treatments Europe, Natolin Review 1(1). of Severe Malaria with Artesunate Suppository . 1998. "Poland's Transition from the Perspective Followedby Mefloquine inThailand."AmericanJournal of Performance in EU Markets." Communist Economies of TropicalMedicine and Hygiene 57(3):348-53. and EconomicTransformation 10(2). Lopez, J.H. 1997. "The Power of the ADF Test." Economics Karmokolias, Yannis, Robert Miller, and Sanjay Shah. Letters 57(1):5-10. 1997. "Corporate Dividend Policy in Emerging Lopez-Calix, J.R. 1998. "Are Pic Data on Parallel Exchange Markets." Emerging Markets Quarterly (winter). Rates Misleading?" EconomicsLetters 59(2):223-30. Kaufmann, Daniel. 1997. "Corruption: The Facts." Foreign MacGregor, John, Stephen Peterson, and Claudio Policy 107 (summer). Schuftan. 1998. "Downsizing the Civil Service in Keefer, Philip, and Stephen Knack. 1997. "Why Don't Developing Countries: The Golden Handshake Option Poor Countries Catch Up? A Cross-National Test of an Revisited." Public Administration and Development Institutional Explanation." Economic Inquiry 35(3): 18(1):61-76. 590-602. MacIsaac, Donna, and Martin Rama. 1997."Determinants Khatkhate, Deena R. 1997. "India's Economic Growth: of Hourly Earnings in Ecuador: The Role of Labor A Conundrum." World Development 25(9):1551-59. Market Regulations." Journalof LaborEconomics 15(3): Kim, Y.C., and H.S. Zang. 1997. "Dependency Burden S136-65. and Savings: A New Approach to the Old Query." Malpezzi, Stephen, and Stephen K. Mayo. 1997. "Getting Journalof DevelopingAreas 32(1):29-36. Housing Incentives Right: A Case Study of the Effects Klasen, Stephan. 1997. "Poverty, Inequality, and of Regulation, Taxes,and Subsidies on Housing Supply Deprivation in South Africa: An Analysis of the 1993 in Malaysia." Land Economics 73(3):372-91. Saldru Survey." Social Indicators Research 41(1-3): Mamingi, Nlandu. 1997."Saving-Investment Correlations 51-94. and Capital Mobility: The Experience of Developing Klein, Michael. 1997. "The Risk Premium for Evaluating Countries." Journal of Policy Modeling 19(6):605-26. Public Projects." OxfordReview of EconomicPolicy 13(4): Maskus, Keith E., and Denise Eby Konan. 1997. "Trade 29-42. Liberalization in Egypt." Review of Development Knack, Stephen, and Philip Keefer. 1997. "Does Social Economics 1. Capital Have an Economic Payoff? A Cross-Country McLaughlin, J., and J. McKenna. 1998. "Property and Investigation." Quarterly Journal of Economics 112(4): Development: Building the Essential Infrastructure." 1251-88. Land Use Policy 15(1):1-2. Leipziger, Danny .M.,Claudio Frischtak, Homi J. Kharas, Michalopoulos, Constantine, and David Tarr. 1997. "The and J.F. Normznd. 1997. "Mercosur: Integration and Economics of Customs Unions in the Commonwealth Industrial Policy." World Economy 20(5):585-603. of Independent States." Post-Soviet Geography and Lengeler, Christian, J. Armstrong-Schellenberg, U. Economics38(3):125-43. D'Alessandro, F. Binka, and Jacqueline Cattani. 1998. Milanovic, Branko. 1997. "A Simple Way to Calculate "Relative versus Absolute Risk of Dying Reduction the Gini Coefficient, and Some Implications." Economics after Using Insecticide-Treated Nets for Malaria Letters 56(1):45-49.

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Mody, Ashok, and Kamil Yilmaz. 1997. "Is There Rama, Martin, and Donna MacIsaac. 1997. "Determinants Persistence in the Growth of Manufactured Exports? of Hourly Earnings in Ecuador: The Role of Labor Evidence from Newly Industrializing Countries." Market Regulations." fournal of Labor Economics Journal of Development Economics 53(2):447-70. 15(3):S136-65. Moll, Peter G. 1998. "Primary Schooling, Cognitive Skills, Ravallion, Martin. 1997. "Can High-Inequality Devel- and Wages in SouthAfrica." Economica65(May):263-84. oping Countries Escape Absolute Poverty?" Economics Monga, Ce1estin. 1997. "Eight Problems with African Letters 56(1):51-57. Politics." Journal of Democracy8(3):156-70. Reich, M.R., and Ramesh Govindaraj. 1998. "Dilemmas Moser, Caroline O.N. 1998. "The Asset Vulnerability in Drug Development for Tropical Diseases: Framework: Reassessing Urban Poverty Reduction Experiences with Praziquantel." Health Policy 44(1): Strategies." World Development 26(1):1-19. 1-18. Murphy, Laura, Richard Bilsborrow, and Francisco J. Revenga, Ana. 1997. "Employment and Wage Effects Pichon. 1997. "Poverty and Prosperity among Migrant of Trade Liberalization: The Case of Mexican Manu- Settlers in the Amazon Rainforest Frontier of Ecuador." facturing." Journal of LaborEconomics 15(3):S20-43 Journal of Development Studies 34(2):35-65. Rodriguez, Edgard R. 1998. "International Migration and Olliaro, P., and F.Castelli. 1997."Plasmodium Falciparum: Income Distribution in the Philippines." Economic An Electronmicroscopy Study of Caveolae and Developmentand Cultural Change 46(2):329-50. Trafficking between the Parasite and the Extracellular Rothschild, M., and Joseph E. Stiglitz. 1997."Competition Medium." International Journalfor Parasitology 27(9): and Insurance Twenty Years Later." Geneva Paperson 1007-12. Risk and Insurance Theory 22(2):73-9. Park, Walter G., and Juan C. Ginarte. 1997. "Intellectual Rowe, P.J., and others. 1997. "Long-Term Reversible Property Rights and Economic Growth." Contemporary Contraception: Twelve Years of Experience with Economic Policy 15(3):51-61. the TCu380A and TCu220C." Contraception 56(6): Patrinos, Harry Anthony. 1997. "Differences in Education 341-52. and Earnings across Ethnic Groups in Guatemala." Schiff, Maurice. 1997. "Small Is Beautiful: Preferential QuarterlyReviewofEconomics and Finance37(4):809-21. Trade Agreements and the Impact of Country Size, . 1997. "Overeducation in Greece." International Market Share, and Smuggling." Journal of Economic Review of Education 43(2-3):203-23. Integration 12:359-87. Patrinos, Harry Anthony, and Nicholas Burnett. 1997. SchillhornvanVeen,TjaartW. 1997. "Sense or Nonsense? "Education and the Changing World Economy: The Traditional Methods of Animal Parasitic Disease Imperative of Reform." Prospects27(2):223-30. Control." Veterinary Parasitology71(2-3):177-94. Patrinos, Harry Anthony, and George Psacharopoulos. Sellen, Daniel, and Ellen Goddard. 1997. "Weak 1997. "Family Size, Schooling, and Child Labor in Peru: Separability in Coffee Demand Systems." European An EmpiricalAnalysis."JournalofPopulation Economics Review of Agricultural Economics24(1):133-44. 10(4):387-405. Serageldin, Ismail. 1998. "Managing Water Resources Petit, Christophe. 1998. "How Will Developing Countries Sustainably: Challenges and Solutions for the New Compete for Financing?" International TelecomReview Millennium." Houille Blanche-Revue Internationale de 98. L'Eau 53(2). Pichon, Francisco J. 1997. "Colonist Land-Allocation Serven, Luis. 1997."Irreversibility, Uncertainty, and Private Decisions, Land Use, and Deforestation in the Investment: Analytical Issues and Some Lessons for Ecuadorian Amazon Frontier." EconomicDevelopment Africa." Journalof African Economies6(3):229-68. and Cultural Change45(4):707-44. Shirley, Mary. 1997. "The Economics and Politics of Pritchett, Lant. 1997. "Divergence, Big Time." Journal of Government Ownership." Journal of International Economic Perspectives 11(3):3-17. Development 9(6). Psacharopoulos, George. 1997. "Child Labor versus . 1998. "Privatization Trends." Economic Reform Educational Attainment: Some Evidence from Latin Today 1. America." JournalofPopulation Economics 10(4):377-86. Shirley, Mary, and L. Colin Xu. 1997. "Information, Psacharopoulos, George, C.R. Arieira, and R. Mattson. Incentives, and Commitment: An Empirical Analysis 1997. "Private Education in a Poor Country: The Case of Contracts between Government and State of Urban Bolivia." Economics of Education Review Enterprises."JournalofLaw,Economics,andOrganization 16(4):395-406. (September). Rama, Martin. 1997. "Imperfect Rent Dissipation with Shoukir, Y.,A. Campana, T. Farley, and D. Sakkas. 1997. Unionized Labor." Public Choice93(1-2):55-75. "Early Cleavage of In-Vitro Fertilized Human Embryos

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to the 2-Cell Stage: A Novel Indicator of Embryo Tarr, David G., and Constantine Michalopoulos. 1997. Quality and Viability." Human Reproduction 12(7): "The Economics of Customs Unions in the 1531-36. Commonwealth of Independent States." Post-Soviet Sickles, R.C., and A. Yazbeck. 1998. "On the Dynamics Geographyand Economics38(3):125-43. of Demand for Leisure and the Production of Health." Theisen, G. 1997. "The New ABCs of Comparative and Journalof Business and EconomicStatistics 16(2):187-97. International Education." ComparativeEducation Review Smith, Stephen C., Beom-Cheol Cin, and Milan Vodopivec. 41(4):397-412. 1997. "Privatization Incidence, Ownership Forms, and van den Brink, Rogier, and J.P. Chavas. 1997. "The Firm Performance: Evidence from Slovenia." Journalof Microeconomics of an Indigenous African Institution: ComparativeEconomics 25(2):158-79. The Rotating Savings and Credit Association." Somers, G.L., A.H. Chappelka, P.Rosseau, and J.R. Renfro. EconomicDevelopment and Cultural Change45(4):745-72. 1998. "Empirica l Evidence of Growth Decline Related van der Gaag, Jacques, and T. Barham. 1998. "Health and to Visible Ozone Injury." ForestEcology and Management Health Expenditures in Adjusting and Nonadjusting 104(1-3):129-37. Countries. " SocialScience and Medicine 46(8):995-1009. Squire, Lyn. 1998. "Professor Mirrlees' Contribution to van der Plas, Robert J., and Mark Hankins. 1998. "Solar Economic Policvy."International Tax and Public Finance Electricity in Africa: A Reality." Energy Policy 26(4): 5(1):83-91. 295-305. Steinfeld, Henning, Cornelis de Haan, and Harvey van de Walle, Dominique. 1998. "Assessing the Welfare Blackburn. 1997. "Options to Address Livestock Impacts of Public Spending." World Development26(3): Environment Interactions." World Animal Review 88: 365-79. 15-20. van Lerberghe, W., W. Ammar, R. El-Rashidi, M. Awar, Stiglitz, Joseph E. 1997. "Dumping on Free Trade: The A. Sales, and A. Mechbal. 1997. "Reform Follows U.S. Import Trade Laws." Southern Economic Journal Failure: II. Pressure for Change in the Lebanese Health 64(2):402-24. Sector." Health Policy and Planning 12(4):312-19. -. 1998. "Distinguished Lecture on Economics in . 1997. "Reform Follows Failure: I. Unregulated Government-The Private Uses of Public Interests: Private Care in Lebanon." Health Policy and Planning Incentives and Institutions." Journal of Economic 12(4):296-311. Perspectives12(2):3-22. Vexenat, J.A., P.L.Olliaro, J.A.F.de Castro, R. Cavalcante, Stiglitz, Joseph E., and Lyn Squire. 1998. "International J.H.F. Campos, J.P. Tavares, and M.A. Miles. 1998. Development: Is It Possible?" ForeignPolicy 110(spring): "Clinical Recovery and Lirnited Cure in Canine Visceral 138-51. Leishmaniasis Treated with Aminosidine Syed, M.A., M. Afsin, and M. Celik. 1997. (Paromomycin)."AAmericanJournal of TropicalMedicine "Hydrogeological Study and Discharge Features of and Hygiene 58(4):448-53. the Niksar Karst Springs (Tokat, Turkey)." Arabian Villar, J., G. Piaggio, G. Carroli, and A. Donner. 1997. Journalfor Scienceand Engineering 22(2A):129-44. "Factors Affecting the Comparability of Meta-Analyses Tan, Jee-Peng, Julia Lane, and Paul Coustere. 1997. and Largest Trials Results in Perinatology." Journalof "Putting Inputs to Work in Elementary Schools: What Clinical Epidemiology50(9):997-1002. Can Be Done inthe Philippines?" EconomicDevelopment Wang, J., Dean T. Jamison, Eduard Bos, and My T. Vu. and Cultural Change45(4):857-79. 1997. "Poverty and Mortality among the Elderly: Tanner, M., and C. Vlassoff. 1998. "Treatment-Seeking Measurement of Performance in 33 Countries, Behavior for Malaria: ATypology Based on Endemicity 1960-92." TropicalMedicine and International Health and Gender." SccialScienceandMedicine46(4-5):523-32. 2(10):1001-10. Taramelli, D., N. Basilico, A.M. de Palma, M. Saresella, Watkins, G.C., and Shane S. Streifel. 1998. "World Crude P.Ferrante, L. Mussoni, and P.Olliaro. 1998."The Effect Oil Supply: Evidence from Estimating Supply of Synthetic M:alaria Pigment (Beta-Haematin) on Functions by Country." Journalof Energy Finance and Adhesion Molecule Expression and Interleukin-6 Development 3(1):23-48. Production by Human Endothelial Cells." Transactions Wheeler, David, Raymond Hartman, and Manjula Singh. of the Royal Society of Tropical Medicine and Hygiene 1997. "The Cost of Air Pollution Abatement." Applied 92(1):57-62. Economics (fall). Tarr, David G., Glenn Harrison, and Thomas Rutherford. Winters, L. Alan. 1997. "Regionalism and the Rest of 1997. "Optiones de politica comercial para Chile: una the World: Theory and the Effects of European evaluacion cuantitativa." Cuadernos de Economia Integration." Review of International Economics 5(4): 34(102):101-37. S134-47.

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1997. "What Can European Experience Teach Baker, July L. 1997. Poverty Reduction and Human Developing Countries about Integration?" World Development in the Caribbean:A Cross-Country Study. Economy 20(7):889-912. World Bank Discussion Paper 366. Washington, DC. Winters, L. Alan, M. Rubin, and A.R. Bond. 1998. Barker, James, Jr., Bernard Tenenbaum, and Fiona Woolf. "Antidumping Action on American Imports from 1997. Governance and Regulation of Power Pools and Russia." Post-Soviet Geography and Economics 39(4): System Operators:An International Comparison.World 183-224. Bank Technical Paper 382. Washington, DC. Wodon, Quentin T. 1997. "Food Energy Intake and Cost Bartone, Carl, and Lars Mikkel Johannessen. 1998. of Basic Needs: Measuring Poverty in Bangladesh." Decisionmaker'sGuide to Sanitary Landfills.Washington, Journal of Development Studies 34(2):66-101. DC: World Bank. Wortman,P.M.,J.M. Smyth,J.C. Langenbrunner, and W.H. Barwell, Ian. 1998. Le transport et le village: conclusions Yeaton. 1998. "Consensus among Experts and Research d'une serie d'enquetes-villageset d'etudes de cas realisees Synthesis: A Comparison of Methods." International en Afrique. World Bank Discussion Paper 344F. Journal of TechnologyAssessment in Health Care 14(1): Washington, DC. 109-22. Beattie, Allison, Jane Doherty, Lucy Gilson, Eyitayo Xu, L. Colin. 1998. "Determinants of the Repartitioning Lambo, and Paul Shaw, eds. 1998. Sustainable Health of Property Rights between the Govemment and State Care Financing in Southern Africa. EDI Learning Enterprises." EconomicDevelopment and Cultural Change Resources Series. Washington, DC: World Bank. 46(3):537-60. Benson, Charlotte, and Edward J. Clay. 1998. The Impact Zang, H.S. 1998. "The Stability of the Kuznets Curve: of Drought on Sub-SaharanAfrican Economies:A Prelimi- Some Further Evidence." Applied Economics Letters nary Examination. World Bank Technical Paper 401. 5(3):131-33. Washington, DC. .1997. "Technology Transfer, Income Distribution, Bigio, Anthony G., ed. 1998. Social Funds and Reaching and the Process of Economic Development." Open thePoor: Experiences and FutureDirections. EDI Leaming EconomiesReview 8(3):245-70. Resources Series. Washington, DC: World Bank. Zhang, Tao, and Heng-fu Zou. 1998. "Fiscal Broadman, Harry G., ed. 1998. Case-by-CasePrivatization Decentralization, Public Spending, and Economic in the Russian Federation: Lessons from International Growth in China." Journal of Public Economics 67(2): Experience. World Bank Discussion Paper 385. 221-40. Washington, DC. Zou, Heng-fu. 1997. "Dynamic Analysis in the Viner Brunetti, Aymo, Gregory Kisunko, and Beatrice Weder. Model of Mercantilism." Journalof InternationalMoney 1998. How Businesses See Government: Responsesfrom and Finance 16(4):637-51. Private Sector Surveys in 69 Countries. IFC Discussion Paper 33. Washington, DC: International Finance Corporation. E. World Bank Discussion Papers, Technical Brunetti, Aymo, and Beatrice Weder. 1997. Investment Papers, and Other Bank Series Publications and Institutional Uncertainty: A Comparative Study of Different Uncertainty Measures. IFC Technical Alemneh, Dejene, Elieho K. Shishira, and Fred H. Johnsen. Paper 4. Washington, DC: International Finance 1997. Land Degradationin Tanzania:Perceptionfrom the Corporation. Village.World Bank Technical Paper 370. Washington, Bubnova, Nina C., and Lucan A. Way. 1998. Trends in DC. FinancingRegional Expenditures in TransitionEconomies: Ambler, Mark, and John Marrow. 1998. Priorities for The Case of Ukraine. World Bank Discussion Paper Environmental Expenditures in Industry: EasternEurope 378. Washington, DC. and the FormerSoviet Union. A Report for the Environ- Burki, Shahid Javed, Sri-Ram Aiyer, and Rudolf Hommes. mental Action Programme for Central and Eastern 1998. Annual World Bank Conferenceon Development in Europe. Washington, DC: World Bank. Latin America and the Caribbean 1996: Poverty and Ayres, Robert. 1998. Crime and Violence as Development Inequality (Proceedingsof a Conferenceheld in Bogota, Issues in Latin America and the Caribbean.Latin America Colombia). Latin America and Caribbean Study. and Caribbean Study. Washington, DC: World Bank. Washington, DC: World Bank. Ayres, Wendy S., Kathleen Anderson, and David Burki, Shahid Javed, and Guillermo E. Perry. 1997. The Hanrahan. 1998. Setting Prioritiesfor Environmental Long March: A Reform Agendafor Latin America and the Management:AnApplication to theMiningSectorinBolivia. Caribbean in the Next Decade. Latin America and World Bank Technical Paper 398. Washington, DC. Caribbean Study. Washington, DC: World Bank.

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Byerlee, Derek, and Gary Alex. 1998. Strengthening Dinar, Ariel, Robert Mendelsohn, Robert Evenson, Jyoti National Agricultural Research Systems: Policy Issues Parikh,Apurva Sanghi, Kavi Kumar, James McKinsey, and Good Practice. Environmentally and Socially and Stephen Lonergan. 1998. Measuring the Impact of Sustainable Development Studies and Monographs Climate Change on Indian Agriculture. World Bank Series. Washington, DC. Technical Paper 402. Washington, DC. Calvo, Christina M:almberg. 1998. Options for Managing Dinar, Ariel, and Ashok Subramanian. 1998. Water Pricing and FinancingRural TransportInfrastructure. World Bank Experiences:An International Perspective.World Bank Technical Paper 411. Washington, DC. Technical Paper 386. Washington, DC. Cernea, Michael N4., and Ayse Kudat. 1997. Social Donovan, Graeme, and Frank Casey. 1998. Soil Fertility AssessmentsforBetter Development: Case Studies in Russia Management in Sub-Saharan Africa. World Bank and Central Asia. Environmentally Sustainable Technical Paper 408. Washington, DC. Development Studies and Monographs Series 16. Dumanski, Julian, Samuel Gameda, and Christian Pieri. Washington, DC: World Bank. 1998. Indicators of Land Quality and Sustainable Land Christensen, Garry, and Richard Lacroix. 1997. Management: An Annotated Bibliography. Environ- Competitivenessand Employment:A FrameworkforRural mentally Sustainable Development Series (Rural Development in Ploland.World Bank Discussion Paper Development Subseries). Washington, DC. 383. Washington, DC. Ehrenhaft, Peter D., Brian Vernon Hindley, Constantine Cleaver, Kevin M., and Gotz A. Schreiber. 1998. Inverser Michalopoulos, and L. Alan Winters. 1997. Policieson la spirale:Les interactions entre la population, l'agricul- Importsfrom Economies in Transition:Two Case Studies. ture et l'environment en Afrique subsaharienne. World Studies of Economies in Transformation. Washington, Bank Technical Paper 372. Washington, DC. DC: World Bank. Colletta, Nat J., and Amy Jo Reinhold. 1997. Review of Environment Department. 1997. The Impact of Environ- EarlyChildhood Development Policy and Programsin Sub- mental Assessment: A Review of World Bank Experience. Saharan Africa. World Bank Technical Paper 367. World Bank Technical Paper 363. Washington, DC. Washington, DC. Essama-Nssah, B. 1997. Analyse d'une repartitiondu niveau Commander, Simon, ed. 1998. Enterprise Restructuring devie.WorldBankTechnicalPaper371.Washington,DC. and Unemployment in Models in Transition. EDI Evans, Alison, and WilliamG. BattaileJr. 1998.1997Annual Development Studies. Washington, DC: World Bank. Review of Development Effectiveness. World Bank Costa-Pierce, Barry A. 1997. From Farmers to Fishers: Operations Evaluation Study. Washington, DC. DevelopingReservoir Aquaculturefor PeopleDisplaced by Felker, Greg, Shekhar Chaudhuri, Katalin Gyorgy, and Dams. World Bank Technical Paper 369. Washington, Melvin Goldman. 1997. The PharmaceuticalIndustry in DC. Indiaand Hungary: Policies,Institutions, and Technological Crum, Roy L., and Itzhak Goldberg. 1998. Restructuring Development. World Bank Technical Paper 392. and Managing the Enterprisein Transition.EDI Learning Washington, DC. Resources Series. Washington, DC: World Bank. Foster, Stephen, Adrian Lawrence, and Brian Morris. 1998. Cruz, Wilfrido, Kazuhiko Takemoto, and Jeremy Warford, Groundwaterin UrbanDevelopment: Assessing Manage- eds. 1998. Urban and Industrial Management in ment Needs and Formulating Policy Strategies. World Developing Countries. EDI Learning Resources Series. Bank Technical Paper 390. Washington, DC. Washington, DC: World Bank. Francis, Paul, John T. Milimo, Chosani A. Njobvu, and Csaki, Csaba, ancl Zvi Lerman. 1997. Land Reform in Stephen P.M. Tembo. 1997. Listening to Farmers: Ukraine:The First Five Years.World Bank Discussion Participatory Assessment of Policy Reform in Zambia's Paper 371. Washington, DC. (Also published in Agriculture Sector. World Bank Technical Paper 375. Russian.) Washington, DC. Csaki, Csaba, and John Nash. 1998.The AgrarianEconomies Gallardo, Joselito S., Bikki K. Randhawa, and Orlando J. of Central and Eastern Europeand the Commonwealthof Sacay. 1997. A CommercialBank's MicrofinanceProgram: Independent States: Situation and Perspectives, 1997. The Case of Hatton National Bank in Sri Lanka. World World Bank Discussion Paper 387. Washington, DC. Bank Discussion Paper 369. Washington, DC. Datta-Mitra,Jayali. 1997. FiscalManagement inAdjustment Garcia, Valeriano F. 1997. Black December: Banking Lending. World Bank Operations Evaluation Study. Instability,theMexicanCrisis,andItsEffectonArgentina. Washington, DC. Latin America and Caribbean Study. Washington, DC: Dayton, Julia. 1998. World Bank HIV/AIDS Interventions: World Bank. Ex-anteand Ex-post Evaluation.World Bank Discussion Girishankar, Navin, and Migara de Silva. 1998. Strategic Paper 389. Washington, DC. Managementfor Government Agencies: An Institutional

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Lou, Jiwei. 1997. MacroeconomicReform in China: Laying Oskarsson, Karin, Anders Berglund, Rolf Deling, Ulrika the Foundation for a Socialist Economy. World Bank Snellman, Olle Stenback, and Jack J. Fritz. 1997. A Discussion Paper 374. Washington, DC. Planner's Guidefor Selecting Clean-CoalTechnologiesfor Lovei, Magda. 1998. Phasing Out Lead from Gasoline: Power Plants. World Bank Technical Paper 387. Worldwide Experience and Policy Implications. World Washington, DC. Bank Technical Paper 397. Washington, DC. Perry, Guillermo E., Michael Klein, Timothy Irwin, and Lovei, Magda, and Charles Weiss Jr. 1998. Environmental Mateen Thobani. 1998. Dealingwith PublicRisk in Private Managementand lIstitutions in OECD Countries:Lessons Infrastructure. Latin America and Caribbean Study. from Experience. World Bank Technical Paper 391. Washington, DC: World Bank. Washington, DC. Pohl, Gerhard, Robert E. Anderson, Stijn Claessens, and Martinol, Eric. 1997. Investments to Improve the Energy Simeon Djankov. 1997. Privatization and Restructuring Efficiency of Existing Residential Buildings in Countries in Central and Eastern Europe. World Bank Technical of the Former Soviet Union. Studies of Economies in Paper 368. Washington, DC. Transformation. Washington, DC: World Bank. Prescott, Nicholas. 1997.Poverty, SocialServices, and Safety McPhail, Kathryn, and Aidan Davy. 1998.Integrating Social Nets in Vietnam. World Bank Discussion Paper 376. Concernsinto PrivateSector Decisionmaking. World Bank Washington, DC. Discussion Paper 384. Washington, DC. Prescott, Nicholas, and Menno Pradhan. 1997. A Poverty Michalet, Charles Albert. 1997. StrategiesofMultinationals Profileof Cambodia.World Bank Discussion Paper 373. and Competition for Foreign Direct Investment: The Washington, DC. Opening of Central and Eastern Europe. Foreign Purcell, Dennis L., and JockRAnderson. 1997.Agricultural Investment Advisory Service Occasional Paper 10. Extension and Research:Achievements and Problems in Washington, DC: International Finance Corporation. National Systems. World Bank Operations Evaluation Milazzo, Matteo J. 1998. Subsidies in World Fisheries:A Study. Washington, DC. Reexamination. 'World Bank Technical Paper 406. Radhakrishna, R., Kalanidhi Subbarao, S.Indrakant, and Washington, DC. C. Ravi. 1997. India's Public Distribution System: Mody, Ashoka, ed. 1997. Infrastructure Strategies in East A National and International Perspective. World Bank Asia: The Untold Story. EDI Learning Resources Series. Discussion Paper 380. Washington, DC. Washington, DC: World Bank. Ridwan, Ali, Yusuf Choudhry, and W. Douglas Lister. 1997. Mohan, P.C. 1998.Bibliography ofPublications: Africa Region, SriLanka's Rubber Industry: Succeeding in theGlobal Market. 1990-97. World Bank Technical Paper 393. Washington, WTorldBank Discussion Paper 370. Washington, DC. DC. - . 1997. Sri Lanka's Tea Industry: Succeeding in the Moser, Caroline, and Jeremy Holland. 1997. UrbanPoverty Global Market. World Bank Discussion Paper 368. and Violencein Jamaica.Latin America and Caribbean Washington, DC. Study. Washington, DC: World Bank. Rowat, Malcolm, Michele Lubrano, and Rafael Porrata Murphy, Josette L. 1997. Mainstreaming Gender in World Jr. 1997. Competition Policy and Mercosur.World Bank Bank Lending: An Update. World Bank Operations Technical Paper 385. Washington, DC. Evaluation Study. Washington, DC. Saleth, Maria R., and Ariel Dinar. 1997. Satisfying Urban Narayan, Deepa. 1997. Voicesofthe Poor:Poverty and Social Thirst: Water Supply Augmentation and Pricing Policy Capital in Tanzania. Environmentally Sustainable in Hyderabad City, India. World Bank Technical Paper Development Studies and Monographs Series 20. 395. Washington, DC. Washington, DC: World Bank. Sanjayan, M.A., Susan Shen, and Malcolm Jansen. 1997. Narayan, Deepa, and Katrinka Ebbe. 1997.Design of Social Experiences with Integrated-Conservation Development Funds: Participation, Demand Orientation, and Local Projects in Asia. World Bank Technical Paper 388. OrganizationalCapacity. World Bank Discussion Paper Washington, DC. 375. Washington, DC. Sayeg, Philip. 1998. Successful Conversion to Unleaded Onorato, William T, Peter Fox, and John Strongman. 1998. Gasolinein Thailand.World Bank Technical Paper 410. World Bank GroupAssistancefor CoalSector Development Washington, DC. and Reformin Member Countries.World Bank Technical Schieber, George J., ed. 1997. Innovations in Health Care Paper 405. Washington, DC. Financing:Proceedings ofa World Bank Conference,March Onursal, Bekir, and Surhid P. Gautam. 1997.Vehicular Air 10-11, 1997. World Bank Discussion Paper 365. Pollution: Experiencesfrom Seven Latin American Urban Washington, DC. Centers.World Bank Technical Paper 373. Washington, Serageldin, Ismail, and David Steeds. 1998. Rural Well- DC. (Also published in Spanish.) Being: From Vision to Action (Proceedingsof the Fourth

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Environmental Action Programme for Central and Aturupane, Chonira, Simeon Djankov, and Bernard Eastern Europe. 'Washington, DC. Hoekman. 1997. "Determinants of Intra-Industry Trade . 1998. Higher Education in Tunisia:Challenges and between East and West Europe." Policy Research Opportunities.World Bank Country Study. Washington, Working Paper 1850. World Bank, Development DC. Research Group, Washington, DC. . 1998. Honduras: TowardBetter Health Carefor All. Baffes, John, Ibrahim A. Elbadawi, and Stephen A. World Bank Country Study. Washington, DC. O'Connell. 1997. "Single-Equation Estimation of the . 1998. Lithuania: An Opportunity for Economic Equilibrium Real Exchange Rate." Policy Research Success. World Bank Country Study. Washington, Working Paper 1800. World Bank, Development DC. Research Group, Washington, DC. - 1998. Slovak Republic: A Strategy for Growth and Bakoup, Ferdinand, and David Tarr. 1998. "How European Integration. World Bank Country Study. Integration into the Central African Economic and Washington, DC. Monetary Community Affects Cameroon's Economy: . 1998. West Bank and Gaza: Medium-Term General Equilibrium Estimates." Policy Research Development Strategyfor the Health Sector.World Bank Working Paper 1872. World Bank, Development Country Study. WNashington,DC. Research Group, Washington, DC. Yaron, Jacob, Benjamin McDonald, and Gerda Piprek. Belli, Pedro. 1997. "The Comparative Advantage of 1997. Rural Finance:Issues, Design, and Best Practices. Government: A Review." Policy Research Working Environmentally Sustainable Development Studies Paper 1834. World Bank, Operational Core Services and Monographs Series. Washington, DC: World Bank. Network, Washington, DC. Bond, Eric W. 1997. "Transportation Infrastructure Investments and Regional Trade Liberalization." Policy F. Policy Research Working Papers Research Working Paper 1851. World Bank, Development Research Group, Washington, DC. Ablo, Emmanuel, and Ritva Reinikka. 1998. "Do Budgets Brunetti, Aymo, Gregory Kisunko, and Beatrice Weder. Really Matter? Evidence from Public Spending on 1997. "Institutions in Transition: Reliability of Rules Education and Health in Uganda." Policy Research and Economic Performance in Former Socialist Working Paper 1926. World Bank, Africa Region, Countries." Policy Research Working Paper 1809. Macroeconomics 2, Washington, DC. World Bank, Office of the Senior Vice President, Adam, Christopher S., and Stephen A. O'Connell. 1998. Development Economics, Washington, DC. "Aid, Taxation, and Development: Analytical Burnside, Craig, and David Dollar. 1998. "Aid, the Perspectives on Aid Effectiveness in Sub-Saharan Incentive Regime, and Poverty Reduction." Policy Africa." Policy Research Working Paper 1885. World Research Working Paper 1937. World Bank, Bank, Development Research Group, Washington, DC. Development Research Group, Washington, DC. Agbonyitor, Albert D.K. 1998. "Development Expen- Canagarajah, Sudharshan, and Harold Coulombe. 1997. ditures and the Local Financing Constraint." Policy "Child Labor and Schooling in Ghana." Policy Research Working Paper 1907. World Bank, Eastern Research Working Paper 1844. World Bank, Africa Africa Department, Washington, DC. Region, Human Development Technical Family, Aiyer, Sri-Ram. 1997. "Pension Reform in Latin America: Washington, DC. Quick Fixes or Sustainable Reform?" Policy Research Canagarajah, Sudharshan, and Dipak Mazumdar. 1997. Working Paper 1865. World Bank, Latin America and "Employment, Labor Markets, and Poverty in Ghana: the Caribbean Region, Technical Department, A Study of Changes during Economic Decline and Washington, DC. Recovery." Policy Research Working Paper 1845.World Anderson, James H. 1998. "The Size, Origins, and Bank, Africa Region, Human Development Technical Character of Mongolia's Informal Sector during the Family, Washington, DC. Transition." Policy Research Working Paper 1916. Canning, David. 1998. "A Database of World Infra- World Bank, Development Research Group, and East structure Stocks, 1950-95." Policy Research Working Asia and Pacific Region, Southeast Asia and Mongolia Paper 1929. World Bank, Development Research Country Unit, Washington, DC. Group, and Transportation, Water, and Urban Develop- Andriamananjara, Soamiely, and Maurice Schiff. 1998. ment Department, Washington, DC. "Regional Groupings among Microstates." Policy Celasun,Oya. 1998."The 1994 Currency Crisis inTurkey." Research Working Paper 1922. World Bank, Policy Research Working Paper 1913. World Bank, Development Research Group, Washington, DC. Development Research Group, Washington, DC.

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Chisari, Omar, Antonio Estache, and Carlos Romero. 1997. Performance? Evidence from Mexican Industry." "Winners and Losers from Utility Privatization in Policy Research Working Paper 1877. World Bank, Argentina: Lessons from a General Equilibrium Development Research Group, Washington, DC. Model." Policy Research Working Paper 1824. World Dasgupta, Susmita, Benoit Laplante, and Nlandu Bank, Economic Development Institute, Washington, Mamingi. 1998. "Capital Market Responses to DC. Environmental Performance in Developing Chomitz, Kenneth M., Gunawan Setiadi, Azrul Azwar, Countries." Policy Research Working Paper 1909. Nusye Ismail, and Widiyarti. 1998. "What Do Doctors World Bank, Development Research Group, Want? Developing Incentives for Doctors to Serve in Washington, DC. Indonesia's Rural and Remote Areas." Policy Research Dasgupta, Susmita, Hua Wang, and David Wheeler. 1997. Working Paper 1888. World Bank, Development "Surviving Success: Policy Reform and the Future of Research Group, Washington, DC. Industrial Pollution in China." Policy Research Claessens, Stijn, Asli Demirguc,-Kunt, and Harry Working Paper 1856. World Bank, Development Huizinga. 1998. "How Does Foreign Entry Affect the Research Group, Washington, DC. Domestic Banking Market?" Policy Research Working De Bonis, Valeria. 1997. "Regional Integration and Paper 1918. World Bank, East Asia and Pacific Region Commodity Tax Harmonization." Policy Research and Development Research Group, Washington, DC. Working Paper 1848. World Bank, Development Claessens, Stijn, and Tom Glaessner. 1998. "The Interna- Research Group, Washington, DC. tionalization of Financial Services in Asia." Policy . 1997. "Regional Integration and Factor Income Research Working Paper 1911. World Bank, Poverty Taxation." Policy Research Working Paper 1849.World Reduction and Economic Management Network, Bank, Development Research Group, Washington, DC. Washington, DC. de Melo, Martha, Cevdet Denizer, Alan Gelb, and Stoyan Crampes, Claude, andAntonio Estache. 1997."Regulatory Tenev. 1997. "Circumstance and Choice: The Role of Tradeoffs in Designing Concession Contracts for Initial Conditions and Policies in Transition Infrastructure Networks." Policy Research Working Economies." Policy Research Working Paper 1866. Paper 1854. World Bank, Economic Development World Bank, Development Research Group, Institute, Washington, DC. Washington, DC. Cropper, Maureen L., Nathalie B. Simon, Anna Alberini, Demirgiiu-Kunt, Aslh, and Enrica Detragiache. 1997."The and P.K. Sharma. 1997. "The Health Effects of Air Determinants of Banking Crises: Evidence from Pollution in Delhi, India." Policy Research Working Industrial and Developing Countries." Policy Research Paper 1860. World Bank, Development Research Working Paper 1828. World Bank, Development Group, Washington, DC. Research Group, and International Monetary Fund, Cull, Robert J. 1997. "Financial Sector Adjustment Research Department, Washington, DC. Lending: A Mid-Course Analysis." Policy Research . 1998. "Financial Liberalization and Financial Working Paper 1804. World Bank, Development Fragility." Policy Research Working Paper 1917.World Research Group, Washington, DC. Bank, Development Research Group, and Intemational .1998. "How Deposit Insurance Affects Financial Monetary Fund, Research Department, Washington, DC. Depth (A Cross-Country Analysis)." Policy Research Demirgiu-Kunt, Asli, and Harry Huizinga. 1998. Working Paper 1875. World Bank, Development "Determinants of Commercial Bank Interest Margins Research Group, Washington, DC. and Profitability: Some Intemational Evidence." Policy Dailami, Mansoor, and Michael Klein. 1998. "Govemment Research Working Paper 1900.World Bank, Develop- Support to Private Infrastructure Projects in Emerging ment Research Group, Washington, DC. Markets."PolicyResearch WorkingPaper 1868.World Denizer, Cevdet. 1997. "The Effects of Financial Bank, Economic Development Institute and Private Liberalization and New Bank Entry on Market Participation in Infrastructure Group, Washington, Structure and Competitionin Turkey." PolicyResearch DC. Working Paper 1839. World Bank, Development Dailami, Mansoor, and Danny Leipziger. 1997. Research Group, Washington, DC. "Infrastructure Project Finance and Capital Flows: A . 1997. "Stabilization, Adjustment, and Growth New Perspective." Policy Research Working Paper Prospects in Transition Economies." Policy Research 1861. World Bank, Economic Development Institute, Working Paper 1855. World Bank, Development Washington, DC. Research Group, Washington, DC. Dasgupta, Susmita, Hemamala Hettige, and David Dethier, Jean-Jacques, and ChristophJohn. 1998. "Taxing Wheeler. 1998. "What Improves Environmental Capital Income in Hungary and the European Union."

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Policy Research Working Paper 1903. World Bank, Filmer, Deon, Margaret Grosh, Elizabeth King, and Europe and Central Asia Region, Poverty Reduction Dominique van de Walle. 1998. "Pay and Grade and Economic Management Sector Unit, Washington, Differentials at the World Bank." Policy Research DC. Working Paper 1912. World Bank, Development Devarajan, Shantayanan, and Jeffrey S. Hammer. 1998. Research Group, Washington, DC. "Risk Reduction and Public Spending." Policy Filmer, Deon, Jeffrey Hammer, and Lant Pritchett. 1998. Research Working Paper 1869. World Bank, "Health Policy in Poor Countries: Weak Links in the Development Research Group, Washington, DC. Chain." Policy Research Working Paper 1874. World Dinar, Ariel, and Gabriel Keynan. 1998. "The Cost and Bank, Development Research Group, Washington, DC. Performance of "PaidAgricultural Extension Services: Filmer, Deon, Elizabeth M. King, and Lant Pritchett. 1998. The Case of Aigricultural Technology Transfer in "Gender Disparity in South Asia: Comparisons Nicaragua." Policy Research Working Paper 1931. between and within Countries." Policy Research World Bank,-LatinAmerica and the Caribbean Region, Working Paper 1867. World Bank, Development Sector Leadership Group, and Rural Development Research Group, Washington, DC. Department, Washington, DC. Filmer, Deon, and Lant Pritchett. 1997. "Child Mortality Dollar, David, and JFakobSvensson. 1998."What Explains and Public Spending on Health: How Much Does the Success or Failure of Structural Adjustment Money Matter?" Policy Research Working Paper 1864. Programs?" Policy Research Working Paper 1938. World Bank, Development Research Group, World Bank, Development Research Group, Washington, DC. Washington, DC. Foroutan, Faezeh. 1998. "Does Membership in a Regional Domac, Ilker, and Carlos Elbirt. 1998. "The Main Preferential Trade Arrangement Make a Country More Determinants of:Inflation in Albania." Policy Research or Less Protectionist?" Policy Research Working Paper Working Paper 1930. World Bank, Europe and Central 1898. World Bank, Development Research Group, Asia Region, Albania/Croatia Country Unit, and East Washington, DC. Asia and Pacific Region, Poverty Reduction and Frankel, Jeffrey A., and Sergio L. Schmukler. 1998. Economic Management Sector Unit, Washington, DC. "Country Funds and Asymmetric Information. " Policy Easterly, William. 1997. "The Ghost of Financing Gap: Research Working Paper 1886. World Bank, How the Harrod-Domar Growth Model Still Haunts Development Research Group, Washington, DC. Development Economics." Policy Research Working Freinkman, Lev, and Michael Haney 1997. "What Affects Paper 1807. World Bank, Development Research the Russian Regional Governments' Propensity to Group, Washington, DC. Subsidize?" Policy Research Working Paper 1818. Ellerman, David. 1998. "Voucher Privatization with World Bank, Europe and Central Asia Region, Country Investment Funds: An Institutional Analysis." Policy Department III, Washington, DC. Research Working Paper 1924. World Bank, Office of Frydman, Roman, Cheryl W. Gray, Marek Hessel, and the Senior Vice President, Development Economics, Andrzej Rapaczynski. 1997. "Private Ownership and Washington, DC. Corporate Performance: Some Lessons from Transition Fakin, Barbara, and Alain de Crombrugghe. 1997. "Fiscal Economies." Policy Research Working Paper 1830. Adjustments in Transition Economies-Social World Bank, Development Research Group, Transfers and the Efficiency of Public Spending: A Washington, DC. Comparison with OECD Countries." Policy Research Galindo, Arturo J., and William F.Maloney. 1998. "Second Working Paper 1803. World Bank, Office of the Senior Thoughts on Second Moments: Panel Evidence on Vice President, Development Economics, and Research Asset-Based Models of Currency Crises." Policy Advisory Staff, Washington, DC. Research Working Paper 1939. World Bank, Latin Fernandez, Raquel. 1997. "Returns to Regionalism: An America and the Caribbean Region, Poverty Reduction Evaluation of Nontraditional Gains from Regional and Economic Management Unit, Washington, DC. Trade Agreements." Policy Research Working Paper Gallardo, Joselito. 1997. "Leasing to Support Small 1816. World Bank, International Economics Depart- Businesses and Microenterprises." Policy Research ment, Washington, DC. Working Paper 1857. World Bank, Financial Sector Ferreira, Francisco H.G. 1997. "Economic Transition and Development Department, Washington, DC. the Distributions of Income and Wealth." Policy Gelbach, Jonah B., and Lant H. Pritchett. 1997. "More Research Working Paper 1808. World Bank, East Asia for the Poor Is Less for the Poor: The Politics of and Pacific Region, Office of the Chief Economist, Targeting." PolicyResearch WorkingPaper 1799.World Washington, DC. Bank, Development Research Group, Washington, DC.

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Goldberg, Itzhak, Gregory Jedrzejczak, and Michael Paper 1814. World Bank, China and Mongolia Fuchs. 1997. "The 'IPO-Plus': A New Approach to Department, Washington, DC. Privatization." Policy Research Working Paper 1821. . 1997. "Tackling Health Transition in China." World Bank, Europe and Central Asia Region, Finance Policy Research Working Paper 1813. World Bank, and Private Sector Development Sector Unit, Washing- China and Mongolia Department, Washington, DC. ton, DC. Huizinga, Harry. 1997. "Are There Synergies between Goto, Junichi. 1997. "Regional Economic Integration and World Bank Partial Credit Guarantees and Private Agricultural Trade." Policy Research Working Paper Lending?" Policy Research Working Paper 1802.World 1805. World Bank, International Economics Bank, Development Research Group, Washington, DC. Department, Washington, DC. Humphrey, David B., Robert H. Keppler, and Fernando Grandolini, Gloria, and Luis Cerda. 1998. "The 1997 Montes-Negret. 1997. "Cost Recovery and Pricing of Pension Reform in Mexico." Policy Research Working Payment Services." Policy Research Working Paper Paper 1933. World Bank, Latin America and the 1833. World Bank, Financial Sector Development Caribbean Regional Office, Washington, DC. Department, Washington, DC. Grootaert, Christiaan. 1998. "Child Labor in C6te d'Ivoire: Huther, Jeff, and Anwar Shah. 1998. "Applying a Simple Incidence and Determinants." Policy Research Measure of Good Governance to the Debate on Fiscal Working Paper 1905.World Bank, Social Development Decentralization." Policy Research Working Paper Department, Washington, DC. 1894.World Bank, Operations Evaluation Department, Gupta, Anju, and Maurice Schiff. 1997. "Outsiders and Washington, DC. Regional Trade Agreements among Small Countries: Ingco, Merlinda, and Francis Ng. 1998. "Distortionary The Case of Regional Markets." Policy Research Effects of State Trading in Agriculture: Issues for the Working Paper 1847. World Bank, Development Next Round of Multilateral Trade Negotiations." Policy Research Group, Washington, DC. Research Working Paper 1915. World Bank, Guzanova, Alla K. 1998. "The Housing Market in the Development Research Group, Washington, DC. Russian Federation: Privatization and Its Implications Ingram, Gregory K. 1997. "Patterns of Metropolitan for Market Development." Policy Research Working Development: What Have We Learned?" Policy Paper 1891. World Bank, Europe and Central Asia Research Working Paper 1841. World Bank, Research Region, Poverty Reduction and Economic Manage- Advisory Staff, Washington, DC. ment Sector Unit, Washington, DC. Ingram, Gregory K., and Zhi Liu. 1997. "Motorization and Hassan, Fareed M.A. 1998."Revenue-Productive Income the Provision of Roads in Countries and Cities. " Policy Tax Structures and Tax Reforms in Emerging Market Research Working Paper 1842. World Bank, Research Economies: Evidence from Bulgaria." Policy Research Advisory Staff and Transportation, Water, and Urban Working Paper 1927.World Bank, Europe and Central Development Department, Washington, DC. Asia Region, Poverty Reduction and Economic Jalan, Jyotsna, and Martin Ravallion. 1997. "Are the Poor Management Sector Unit, Washington, DC. Less Well-Insured? Evidence on Vulnerability to Hentschel, Jesko. 1998. "Distinguishing between Types Income Risk in Rural China." Policy Research Working of Data and Methods of Collecting Them." Policy Paper 1863. World Bank, Development Research Research Working Paper 1914. World Bank, Poverty Group, Washington, DC. Reduction and Economic Management Network, . 1997. "Spatial Poverty Traps?" Policy Research Washington, DC. Working Paper 1862. World Bank, Development Hentschel, Jesko, Jean Olson Lanjouw, Peter Lanjouw, and Research Group, Washington, DC. Javier Poggi. 1998. "Combining Census and Survey . 1998. "Determinants of Transient and Chronic Data to Study Spatial Dimensions of Poverty." Policy Poverty: Evidence from Rural China." Policy Research Research Working Paper 1928. World Bank, Working Paper 1936. World Bank, Development Development Research Group and Poverty Reduction Research Group, Washington, DC. and Economic Management Network, Washington, DC. Jayaraman, Raji, and Peter Lanjouw. 1998."The Evolution Hettige, Hemamala, Muthukumara Mani, and David of Poverty and Inequality in Indian Villages." Policy Wheeler. 1998. "Industrial Pollution in Economic Research Working Paper 1870. World Bank, Development (Kuznets Revisited)." Policy Research Development Research Group, Washington, DC. Working Paper 1876. World Bank, Development Juris, Andrej. 1998. "Development of Natural Gas and Research Group, Washington, DC. Pipeline Capacity Markets in the United States." Policy Hossain, Shaikh I. 1997. "Making Education in China Research Working Paper 1897. World Bank, Private Equitable and Efficient." Policy Research Working Sector Development Department, Washington, DC.

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1998. "The Emergence of Markets in the Natural Ma, Jun. 1997. "Intergovernmental Fiscal Transfers in Gas Industry." Policy Research Working Paper 1895. Nine Countries: Lessons for Developing Countries." World Bank, Private Sector Development Department, Policy Research Working Paper 1822. World Bank, Washington, DC. Economic Development Institute, Washington, DC. ---. 1998. "Market Development in the United Maloney, William F. 1998. "Are Labor Markets in Kingdom's NatLral Gas Industry." Policy Research Developing Countries Dualistic?" Policy Research Working Paper 1890. World Bank, Private Sector Working Paper 1941. World Bank, Latin America and Development Department, Washington, DC. the Caribbean Region, Poverty Reduction and Kaminsky, Graciela, Saul Lizondo, and Carmen M. Economic Management Unit, Washington, DC. Reinhart. 1997. "Leading Indicators of Currency . 1998. "The Structure of Labor Markets in Crises." Policy Research Working Paper 1852. World Developing Countries: Time Series Evidence on Bank, Latin America and the Caribbean Region, Office Competing Views." Policy Research Working Paper of the Chief Ecornomist, Washington, DC. 1940. World Bank, Latin America and the Caribbean Kawagoe, Toshihiko. 1998. "Interregional Resource Region, Poverty Reduction and Economic Transfer and Economic Growth in Indonesia." Policy Management Unit, Washington, DC. Research Working Paper 1882. World Bank, Maskus, Keith E. 1997. "Should Core Labor Standards Be Development Research Group, Washington, DC. Imposed through International Trade Policy?" Policy Keller, Wolfgang. 1997. "How Trade Patterns and Research Working Paper 1817. World Bank, Technology Flows Affect Productivity Growth." Policy Development Research Group, Washington, DC. Research Working Paper 1831. World Bank, Michalopoulos, Constantine. 1998. "Developing Development Research Group, Washington, DC. Countries' Participation in the World Trade Kim, Aehyung, Ajay Tandon, Asrat Hailu, and others. 1997. Organization." Policy Research Working Paper 1906. "Health and Labor Productivity: The Economic Impact World Bank, Washington, DC, and World Trade of Onchocercal Skin Disease." Policy Research Working Organization. Paper 1836. World Bank, Africa Region, Human . 1998. "WTO Accession for Countries in Development Department, and University of Addis Transition." Policy Research Working Paper 1934. Ababa, Institute of Pathobiology, Washington, DC. World Bank, Development Research Group, Kim, Aehyung, Ajaiy Tandon, and Ernesto Ruiz-Tiben. Washington, DC. 1997. "Cost-Benefit Analysis of the Global Milanovic, Branko. 1998. "Explaining the Increase in Dracunculiasis Eradication Campaign." Policy Inequality during the Transition." Policy Research Research Working Paper 1835. World Bank, Africa Working Paper 1935. World Bank, Development Region, Human Development Department, Research Group, Washington, DC. Washington, DC. Min, Hong G. 1998. "Determinants of Emerging Market Klein, Michael. 1997. "Managing Guarantee Programs in Bond Spread: Do Economic Fundamentals Matter?" Support of Infrastructure Investment." Policy Research Policy Research Working Paper 1899. World Bank, Working Paper 1812. World Bank, Private Sector Development Research Group, Washington, DC. Development Department, Washington, DC. Moock, Peter R., Harry Anthony Patrinos, and Meera Kraay, Aart, and Jaume Ventura. 1997. "Current Accounts Venkataraman. 1998. "Education and Earnings in a in Debtor and C'reditor Countries." Policy Research Transition Economy (Vietnam)." Policy Research Working Paper 1825. World Bank, Development WorkingPaperl920.WorldBank,EastAsiaandPacific Research Group, Washington, DC. Region, Country Department I, and Human Krishna, Raj. 1997. 'Antidumping in Law and Practice." Development Network, Washington, DC. Policy Research Working Paper 1823. World Bank, Morisset,Jacques. 1997."UnfairTrade?EmpiricalEvidence Legal Department, Washington, DC. in World Commodity Markets over the Past 25 Years." Lanjouw, Peter. 1998. "Ecuador's Rural Nonfarm Sector Policy Research Working Paper 1815. World Bank, as a Route Out of Poverty." Policy Research Working Foreign Investment Advisory Service,Washington, DC. Paper 1904. World Bank, Development Research Mundlak, Yair, Donald F. Larson, and Rita Butzer. 1997. Group, Washington, DC. "The Determinants of Agricultural Production: A Loayza, Norman, and Luisa Palacios. 1997. "Economic Cross-Country Analysis." Policy Research Working Reform and Progress in Latin America and the Paper 1827. World Bank, Development Research Caribbean." Policy Research Working Paper 1829. Group, Washington, DC. World Bank, Latin America and the Caribbean Region, Mundlak, Yair, Donald F. Larson, and Al Crego. 1997. Office of the Chief Economist, Washington, DC. "Agricultural Development: Issues, Evidence, and

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Consequences." Policy Research Working Paper 1811. Queisser, Monika. 1997. "Pension Reform and Private World Bank, Development Research Group, PensionFunds in Peru and Colombia." PolicyResearch Washington, DC. Working Paper 1853. World Bank, Financial Sector Narayan, Deepa, and Lant Pritchett. 1997. "Cents Development Department, Washington, DC. and Sociability: Household Income and Social Rama, Martin. 1997."Efficient Public Sector Downsizing." Capital in Rural Tanzania." Policy Research Working Policy Research Working Paper 1840. World Bank, Paper 1796. World Bank, Social Development Development Research Group, Washington, DC. Department and Development Research Group, . 1998."Wage Misalignment in CFACountries: Are Washington, DC. Labor Market Policies to Blame?" Policy Research Nasser, Thomas-Olivier. 1998. "Congestion Pricing and Working Paper 1873. World Bank, Africa Region and Network Expansion." Policy Research Working Paper Development Research Group, Washington, DC. 1896. World Bank, Private Sector Development Ravallion, Martin. 1998."Reaching PoorAreasinaFederal Department, Washington, DC. System." Policy Research Working Paper 1901.World Navaretti, Giorgio Barba, Isidro Soloaga, and Wendy Bank, Development Research Group, Washington, DC. Takacs. 1998. "When Vintage Technology Makes Sense: Ravallion, Martin, and Shaohua Chen. 1998. "When Matching Imports to Skills." Policy Research Working Economic Reform Is Faster than Statistical Reform: Paper 1923. World Bank, Development Research Measuring and Explaining Inequality in Rural China." Group, Washington, DC. Policy Research Working Paper 1902. World Bank, Nelson, Richard R., and Howard Pack. 1998. "The Asian Development Research Group, Washington, DC. Miracle and Modem Growth Theory." Policy Research Ravallion, Martin, and Quentin Wodon. 1997. "Banking Working Paper 1881. World Bank, Development on the Poor? Branch Placement and Nonfarm Rural Research Group, Washington, DC. Development in Bangladesh." Policy Research Noorkoiv, Rivo, Peter F. Orazem, Allan Puur, and Milan Working Paper 1858. World Bank, Development Vodopivec. 1997. "How Estonia's Economic Transition Research Group, Washington, DC. Affected Employment and Wages (1989-95)." Policy . 1997. "Poor Areas, or Only Poor People?" Policy Research Working Paper 1837. World Bank, Research Working Paper 1798. World Bank, Development Research Group, Washington, DC. Development Research Group, Washington, DC. Ostro, Bart D., Gunnar S. Eskeland, Tarhan Feyzioglu, Ravicz, R. Marisol. 1998. "Searching for Sustainable and Jose Miguel Sanchez. 1998. "Air Pollution and Microfinance:AReviewofFivelndonesianInitiatives." Health Effects: A Study of Respiratory Illness among Policy Research Working Paper 1878. World Bank, Children in Santiago, Chile." Policy Research Working Development Research Group, Washington, DC. Paper 1932. World Bank, Development Research Rebelo, Jorge, and Pedro Benvenuto. 1997. "Lessons from Group, Washington, DC. Sao Paulo's Metropolitan Busway Concessions Pargal, Sheoli, Hemamala Hettige, Manjula Singh, and Program." Policy Research Working Paper 1859.World David Wheeler. 1997."Formal and Informal Regulation Bank, Latin America and the Caribbean Region, of Industrial Pollution: Comparative Evidence from Finance, Private Sector, and Infrastructure Sector Unit, Indonesia and the United States." Policy Research and Brazil Department, Washington, DC. Working Paper 1797. World Bank, Development Schiavo-Campo, Salvatore, Giulio de Tommaso, and Research Group, Washington, DC. Amitabha Mukherjee. 1997. "An International Pargal, Sheoli, Muthukumara Mani, and Mainul Huq. Statistical Survey of Government Employment and 1997. "Inspections and Emissions in India: Puzzling Wages." Policy Research Working Paper 1806. World Survey Evidence about Industrial Pollution." Policy Bank, Office of the Senior Vice President, Development Research Working Paper 1810. World Bank, Economics, and Europe and Central Asia Region, and Development Research Group, Washington, DC. Middle East and North Africa Region Technical Paul, Samuel. 1998. "Making Voice Work: The Report Department, Washington, DC. Card on Bangalore's Public Service." Policy Research Schiff, Maurice, and L. Alan Winters. 1997. "Regional Working Paper 1921. World Bank, Development Integration as Diplomacy." Policy Research Working Research Group, Washington, DC. Paper 1801. World Bank, Development Research Pritchett, Lant H., and Deon Filmer. 1997. "What Group, Washington, DC. Educational Production Functions Really Show: A Shirley, Mary, and Lixin Colin Xu. 1998. "The Empirical Positive Theory of Education Spending." Policy Effects of Performance Contracts: Evidence from Research Working Paper 1795. World Bank, China." Policy Research Working Paper 1919. World Development Research Group, Washington, DC. Bank, Development Research Group, Washington, DC.

161 Bank ResearchOutput

Stephenson, Sherry M. 1997. "Standards and Conformity Wang, Zhen Kun, and L. Alan Winters. 1997. "Africa's Assessment as Nontariff Barriers to Trade." Policy Role in Multilateral Trade Negotiations." Policy Research Working Paper 1826. World Bank, Research Working Paper 1846. World Bank, Economic Development Research Group, Washington, DC. Development Institute and Development Research Svensson, Jakob. 1998. "Foreign Aid and Rent-Seeking." Group, Washington, DC. Policy Research Working Paper 1880. World Bank, Wildasin, David E. 1997. "Externalities and Bailouts: Hard Development Research Group, Washington, DC. and Soft Budget Constraints in Intergovernmental Takeuchi, Fumihicle, and Takehiko Hagino. 1998. FiscalRelations." PolicyResearchWorkingPaper 1843. "Intersectoral Resource Allocation and Its Impact on World Bank, Development Research Group, Economic Development in the Philippines." Policy Washington, DC. Research Working Paper 1883. World Bank, . 1998. "Fiscal Aspects of Evolving Federations: Development Research Group, Washington, DC. Issues for Policy and Research." Policy Research Tsetsekos, George, and Panos Varangis. 1998. "The Working Paper 1884. World Bank, Development Structure of Derivatives Exchanges: Lessons from Research Group, Washington, DC. Developed and Emerging Markets." Policy Research Wozniak, Przemyslaw. 1998."Relative Prices and hiflation Working Paper 1887. World Bank, Development in Poland, 1989-97: The Special Role of Administered Research Group, Washington, DC. Price Increases." Policy Research Working Paper 1879. van de Walle, Dominique, and Dileni Gunewardena. 1998. World Bank, Europe and Central Asia Region, Office "How Dirty Are "Quick and Dirty' Methods of Project of the Director, Washington, DC. Appraisal?" Policy Research Working Paper 1908. Yamada, Junichi. 1998. "Capital Outflow from the World Bank, Development Research Group, Agriculture Sector in Thailand." Policy Research Washington, DC. Working Paper 1910. World Bank, Development Vieira da Cunha, Paulo, and Maria Valeria Junho Penia. Research Group, Washington, DC. 1997. "The Limits and Merits of Participation." Policy Yanagihara, Toru, and Yoshiaki Hisamatsu. 1998. Research Working Paper 1838. World Bank, Office of "Development Strategy Reconsidered: Mexico, the Senior Vice President, Development Economics, 1960-94." Policy Research Working Paper 1889.World Washington, DC. Bank, Development Research Group, Washington, DC. Vittas, Dimitri. 1997. "The Argentine Pension Reform and Yeats, Alexander J. 1998. "Just How Big Is Global Its Relevance for Eastern Europe." Policy Research Production Sharing?" Policy Research WorkingPaper Working Paper 1819. World Bank, Financial Sector 1871. World Bank, Development Research Group, Development Department, Washington, DC. Washington, DC. .1997. "Private Pension Funds in Argentina's New Integrated Pension System." Policy Research Working Paper 1820.World Bank, Financial Sector Development G. Other Bank Working Papers Department, Washington, DC. .1998. "Regulatory Controversies of Private Pension Development ResearchGroup Funds." Policy Research Working Paper 1893. World Bank, DevelopmentResearch Group, Washington, DC. Dasgupta, Susmita, Hua Wang, and David Wheeler. 1997. . 1998. "The Role of Non-Bank Financial "Surviving Success: Policy Reform and Industrial Intermediaries (with Particular Reference to Egypt)." Pollution in China." Poverty, Environment, and Policy Research Working Paper 1892. World Bank, Growth Working Paper 12. Development Research Group, Washington, DC. El Salvador Evaluation Team, Emmanuel Jimenez, Laura von Gersdorff, Hermann. 1997. "Pension Reform in Rawlings, and Diane Steele. 1997. "El Salvador's Bolivia: Innovative Solutions to Common Problems." EDUCO Program: A First Report on Parents' Partici- Policy Research Working Paper 1832. World Bank, pation in School-Based Management." Working Paper Latin America and the Caribbean Region, Finance, 4 on Impact Evaluation of Education Reforms. Private Sector, and Infrastructure Sector Unit, Fuller, Bruce, and Magdalena Rivarola. 1998."Nicaragua's Washington, DC. Experiment to Decentralize Schools: Views of Parents, Waelbroeck, Jean. 1]998."Half a Century of Development Teachers, and Directors." Working Paper 5 on Impact Economics: A Review Based on the Handbook of Evaluation of Education Reforms. Development Economics." Policy Research Working Heil, Mark, and Quentin Wodon. 1997. "Cross-Country Paper 1925. World Bank, Research Advisory Staff, Inequality by Energy Source, 1960-90." Poverty, Washington, DC. Environment, and Growth Working Paper 21.

162 Bank ResearchOutput

. 1997. "Future Inequality in CO2 Emissions and Branson, William H., Isabel Guerrero, and Bernhard G. the Impact ofAbatementProposals." Poverty, Environ- Gunter. 1998. "Patterns of Development: 1970-94." ment, and Growth Working Paper 20. EDI Working Paper. Jimenez, Emmanuel, and Yasuyuki Sawada. 1998. Campos,J. Edgardo, and SanjayPradhan. 1998."Building "Do Community-Managed Schools Work? An Blocks toward a More Effective Public Sector." EDI Evaluation of El Salvador's EDUCO Program." Working Paper. Working Paper 8 on Impact Evaluation of Education Dye, Kenneth M., and Rick Stapenhurst. 1998. "Pillars Reforms. of Integrity: The Importance of Supreme Audit Kim, Jooseop, Harold Alderman, and Peter Orazem. 1998. Institutions in Curbing Corruption." EDI Working "Can Cultural Barriers Be Overcome in Girls' Paper. Schooling? The Community Support Program in Rural Filion, Louise, Martha Bulengo, and Thandiwe Balochistan. " Working Paper 10 on Impact Evaluation Mang'anda. 1998. "Women's Entrepreneurship of Education Programs. Development (WED) Project: Tanzania and Malawi." . 1998. "Can Private School Subsidies Increase EDI Evaluation Study. Schooling for the Poor? The Quetta Urban Fellowship Hahm, Hongjoo, and Demir Yener. 1998."Financial Sector Program." Working Paper 11 on Impact Evaluation Reforms in Mongolia." EDI Working Paper. of Education Reforms. Hoekman, Bernard. 1998. "Competition Policy and King, Elizabeth, Peter Orazem, and Darin Wohlgemuth. Preferential Trade Agreements." EDI Working Paper. 1998. "Central Mandates and Local Incentives: The Kindra, G.S., and Rick Stapenhurst. 1998. "Social Colombian Education Voucher Program." Working Marketing Strategies to Fight Corruption." EDI Paper 6 on Impact Evaluation of Education Reforms. Working Paper. King, Elizabeth, and Berk Ozler. 1998. "What's Langlois, Louis A., Robert P. Beschel Jr., and Rick Decentralization Got to Do with Learning? The Case Stapenhurst. 1998. "Public Expenditure Analysis and of Nicaragua's School Autonomy Reform." Working Management in the Republic of Kariba." EDI Case Paper 9 on Impact Evaluation of Education Reforms. Study. King, Elizabeth, Laura Rawlings, Marybell Gutierrez, Langseth, Petter. 1998."Enseignements tir6s de la reforme Carlos Pardo, and Carlos Torres. 1997. "Colombia's de la fonction publique en Ouganda." EDI Working Targeted Education Voucher Program: Features, Paper. Coverage, and Participation." Working Paper 3 on Larsen, Alex, and Flemming Ytzen. 1997. "Freedonia: A Impact Evaluation of Education Reforms. Case Study in Investigative Journalism." EDI Case Lassibille, Gerard, Jee-Peng Tan, and Suleiman Sumra. Study. 1998. "Expansion of Private Secondary Education: Mackay, Keith. 1998. "The 1997 Conference of the Experience and Prospects in Tanzania." Working Paper Mediterranean Development Forum: An Evaluation 12 on Impact Evaluation of Education Reforms. of a Pilot Initiative." EDI Evaluation Study. Loughran, David, and Lant Pritchett. 1997. "Environ- Neill, Catherine, Kathy Sreedhar, and Karin Kapadia. mental Scarcity, Resource Collection, and the Demand 1998. "Women's Enterprise Management Training for Children in Nepal." Poverty, Environment, and Outreach Program-India: Evaluation Report." EDI Growth Working Paper 19. Evaluation Study. Nicaragua Reform Evaluation Team. 1998. "1995and 1997 Ohlson, Cheryl. 1998. "Effective Strategies for Cross- Questionnaires: Nicaragua School Autonomy Reform." Cultural and Cross-Linguistic Research Interviewing." Working Paper 7 on Impact Evaluation of Education EDI Evaluation Study. Reforms. Petkoski, Djordjija. 1997. "Learning Together with Clients: Private Sector Development Training and Consulting Economic Development Institute in Economies in Transition." EDI Case Study. . 1997. "The Moscow Case: Private Sector Ag6nor, Pierre-Richard, C. John McDermott, and Eswar Development Training and Consulting in Economies Prasad. 1998. "Macroeconomic Fluctuations in in Transition." EDI Case Study. Developing Countries: Some Stylized Facts." EDI . 1997. "Proposal for a Joint Venture between a Working Paper. Multinational Company and a Local TobaccoFactory." Billson, Janet Mancini, Burt Perrin, Norman T. London, EDI Case Study. Pascale La Brecque, Ray Rist, Padma Karunaratne, and Swaroop, Vinaya, and Holley Ulbrich. 1997. "Public Mark Bardini. 1998."Global Knowledge '97 Conference Expenditure Analysis: A Case Study of Lafrasia. " EDI Evaluation." EDI Evaluation Study. Case Study.

163 Bank ResearchOutput

World Bank. 1998. "'Training Program on Social Policy . 1998. "Determinants of Entrepreneurship and in Transition Economies (SPRITE):Status Report." EDI Growth of Entrepreneurial Firms in Cote d'Ivoire." Evaluation Study. RPED Paper 92.

Africa Region TechnicalFamilies, Private Sector Finance Europeand Central Asia Sector Units

Biggs, Tyler, Vijaya Ramachandran, and Manju Kedia Branscheid, Volker. 1998. "Irrigation Development in Shah. 1998. "Does Greater Local Competition Improve Eastern Europe and the Former Soviet Union.." ECSSD Firm Performance in Africa?" RPED Paper 85. Working Paper 3. CERDI, Universite d'Auvergne, Clermont Ferrand. 1997. Csaki, Csaba. 1998."Agricultural Research in Central and "Interim Report on the 1996 C6te d'Ivoire Survey." Eastern Europe and the Former Soviet Union: Issues RPED Paper 84. in Transition." ECSSD Working Paper 2. Fafchamps, Marcel, Jan Willem Gunning, and Remco Csaki, Csaba, William H. Meyers, and Natalija Oostendorp. 1997. "Inventories, Liquidity, and Kazlauskiene. 1998. "Status of Agricultural Reforms Contractual Risk in African Manufacturing." RPED in Lithuania: 1995 to 1997." ECSSD Sector Series. Paper 84. Debatisse, Michel. 1998. "Agricultural Reforms and ISA Group. 1997."Expectations in a Dynamic Investment Protection of Sensitive Ecosystems: A Challenging Model: Survey Evidence from Kenya and Zimbabwe." Agenda for Slovenia." ECSSD Working Paper 1. RPED Paper 93. Sheriff, Khaled, George R.G. Clarke, and Simeon Djankov. 1998. "Capital Adjustment Costs in Sub-Saharan 1998."Using Severance to Facilitate Liquidation: How Africa's Manufacturing Sector." RPED Paper 95. the World Bank Can Help." ECSPF Occasional Paper 1. - . 1998. "Contract Flexibility and Conflict Resolution: Evidence from African Manufacturing." Latin America and the CaribbeanRegion Sector Units RPED Paper 98. 1998. "Exports of African Manufacturers: Macro Edwards, John HY., and Xiaoyan Liang. 1998. "Mexico's Policy and Firm Behavior." RPED Paper 94. Preschools: Coverage, Equity, and Impact." LCSHD --. 1998. "Exports, Firm-Level Efficiency,and Sources Paper Series. of Comparative Advantage in the African Salmi, Jamil. 1998. "Equity and Quality in Private Manufacturing Sector." RPED Paper 97. Education: The Haitian Paradox." LCSHD Paper -. 1998. "Investment in Africa's Manufacturing Series. Sector: A Four-Country Panel Data Analysis." RPED Soares, Sergei. 1998."The Financing of Education in Brazil: Paper 96. With Special Reference to the North, Northeast, and - 1998. "Rates of Return on Physical and Human Center-West Regions." LCSHD Paper Series. Capital in Africa's Manufacturing Sector." RPED Villegas-Reimers, Eleonora. 1998. "The Preparation of Paper 99. Teachers in Latin America: Challenges and Trends." Marchat, Jean-Michel. 1997. "Concurrence et structure LCSHD Paper Series. du marche interieur des produits manufactures en C6te d'Ivoire." iRPEDPaper 82. . 1997. "On Exogenous Shocks Transmission to H. Background Papers to World Development Domestic Prices in the Ivoirian Manufacturing Sector Report 1998199:Knowledgefor Development between 1993-95." RPED Paper 83. (Also issued in French.) Barton, John. "Biotechnology Patenting." Ramachandran, Vijaya, and Manju Kedia Shah. 1997. Behrman, Jere. "Empirical Evidence on Asymmetric "The Effects of Foreign Ownership in Africa: Evidence Information, Markets, and Policies in Developing from Ghana, Kenya, and Zimbabwe." RPED Paper 81. Economies." .1998. "Entrepreneurial Characteristics and Private Belussi, Fiorenza. "Policies for the Development of Sector Growth in Sub-Saharan Africa." RPED Paper 86. Knowledge-Intensive Local Production Systems." Sleuwaegen, Leo, and Micheline Goedhuys. 1997. Braga, Carlos Primo, Carsten Fink, and Claudia Paz "Organizational Ecology and Growth of Firms in Sepulveda. "Intellectual Property Rights and Economic Developing Countries: Evidence from C6te d'Ivoire." Development." RPED Paper 90. Centre for Information Society Development in Africa, .1998. "Barriers to Growth of Firms in Developing CSIRSouth Africa, and the Centre for Tele-Information, Countries: Evidence from Burundi." RPED Paper 91. Technical University of Denmark. "Knowledge in

164 Bank ResearchOutput

Development: Multi-Media, Multi-Purpose Commu- . "Knowledge Clusters and Regional Inequalities." nity Information Centres as Catalysts for Building Mookherjee, Dilip. "Information Systems and Public Innovative Knowledge-Based Societies." Policy in LDCs." Flamm, Kenneth. "Assessing the Rate of Technological Pray, Carl. Untitled. Advance in Information Technology: Quantitative Radosevic, Slavo. "Post-Socialist Transformation of Measurements and Methodological Issues." Countries of Central and Eastern Europe and -. 'Semiconductor Trade Disputes: Defining the Knowledge-Based Economy: The Evidence and Main World Trading System in High Technology Products." Analytical Issues." Johnson, Daniel, and Robert Evenson. "Invention in Less- . "Building Knowledge-Based Economy in Developed Countries." Countries of Central and Eastern Europe: Policy Kumar, Nagesh. "Multinational Enterprises and Implications." Technology Generation: Locational Patterns, Their Rosenzweig, Mark. "Social Learning and Economic Determinants, and Implications." Growth: Empirical Evidence." Kuznetsov, Yevgeny. "Public Policy in the World of Stemnberg,Robert, Elena Grigorenko, and Donald Bundy. Uncertainty and Change: Facilitating Social Learning." "Measuring Human Development: The Role of General Lall, Sanjaya. "Exports of Manufactures by Developing Indices of Cognitive Ability in Assessing the Impact Countries: Emerging Pattems of Trade and Location." of Education and Targeted Interventions on Child -"Putting Knowledge to Work for Development." Development." Maskus, Keith. "Price Effects and Competition Aspects Thomas, Vinod, Nalin Kishor, and Tamara Belt. of Intellectual Property Rights in Developing "Embracing the Power of Knowledge for a Sustainable Countries." Environment." Mitra, Raja. "Hamessing Information and Knowledge for Economic Development."

165

INDEX OF STUDIES BY DEPARTMENT

DEVELOPMENT ECONOMICS SENIOR VICE PRESIDENCY

Office of the Senior Vice President

Does More Intense Competition Lead to Higher Growth? (682-47) 133 Does Schooling Expansion Equalize Income? (681-67C) 14 EfficientNetwork AccessRules for Developing and TransitionEconomies (682-36) 132 Optimal Choice of Industry Structure in the Network Utilities of Transitionand DevelopingEconomies (682-37) 132

Development Data Group

EnvironmentalData Accounting 67 International Comparison Programme Analysis 98

Development Prospects Group

The Implications of Rapid Growth in Large Developing Countries (681-75C) 93

Development Research Group

Office of the Director Structural Adjustment Participatory Review Initiative 86

Finance Banking Crises 106 Benchmarking Financial Systems 114 Capital Markets 114 Deposit Insurance: Issues of Principle, Design, and Implementation (682-90) 110 Financial Liberalization 113 Financial Structure and Economic Development (682-41) 109 Measuring Financial Regulation and Supervision 114

Infrastructure and Environment Causes and Consequences of Tropical Deforestation- 6 Colombia's Pollution Charge System: Implementation, Impact, and Implications (682-69) 57 The Economic Impact of Fatal Adult Illness from AIDS and Other Causes in Sub-Saharan Africa 29 Economic Instruments for Greenhouse Gas Reduction 62 Ecosystem Preservation 65 Environmental and Economic Analysis Incorporating Macroeconomic Issues (682-38) 54

167 Index of Studies by Department

Household Willingness to Pay for Malaria Prevention in Tigray, Ethiopia 25 Motorization and the Pricing of Externalities 76 A New Approach to Valuing Mortality Risk Reductions (682-12) 17 Pollution Control in China: The Role and Impact of Inspection and Complaints (682-44) 54 Regulatory Capacity across Indian States: An Institutional Perspective on the Effectiveness of State Pollution Control Boards (681-86) 53 Small Plants, Pollution, and Poverty (682-66) 56 Spatial Environmental Processes (681-35) 50 The Sustainable Financing of Investments in Municipal Infrastructure: Cost Recovery for Solid Waste Management in the Philippines (682-77) 72

Macroeconomicsand Growth Applied Macroeconomic Models for Developing Countries 84 Crisis, Polarization, and Reform 85 Currency Crises, Financial Intermediation, and Nominal Rigidities (682-27) 81 Economic Policies and the Effectiveness of Foreign Aid (681-70C) 92 A Firm-Level Database for Analyzing Industrial Competitiveness in Thailand (682-15C) 131 Macroeconomic Interdependence in Latin America 85 Microeconomic Evidence on Trade and Growth 99 Real Exchange Rate Misalignment in Latin America 95 Saving in Developing Countries (681-36) 107 Understanding Capital Market Crises in Emerging Economies: The Role of Announcements and News in Spreading Crises and Stopping Contagion (682-26) 94 What Causes Violent Crime? A Cross-Country Study 31

Poverty and Human Resources Changing Ideas about Poverty in Russia (681-42) 119 Child Diet and Academic Achievement in Cebu, Philippines (681-78) 39 Decentralizing Safety Nets: Community Choices and Their Impact on Households (680-98C) 11 Democracy, Redistribution, and Inequality (683-00) 24 Does It Matter How We Estimate Annual Expenditures? An Empirical Comparison of Methods (682-84) 22 The Effects of Urban Land Titling and Tenure Security on Investments, Property Value, and Credit Access in Ecuador (681-60C) 108 El Salvador's School-Based Management Reforms (682-08) 41 Evaluating the Impact of Supplementary Teachers in Nonformal Eclucation Centers (682-18) 42 Evaluation of the Inpact of Investments in Early Child Development (682-34) 20 Explaining Gender Disparity in South Asia: A Cross-Sectional Approach (681-29C) 38 Household Welfare Change during the Transition in Poland (681-21) 119 Impact Evaluation of Education Projects: Decentralization and Privatization Issues (679-18C) 34 The Impact of Child Health and Nutrition on Education Outcomes in Cebu, Philippines (679-57) 35 The Impact of Colombia's Voucher Program: Using Randomization through a Lottery for Program Evaluation (682-56) 42 The Impact of Labor Market Policies and Institutions on Economic Performance (680-96C) 36

168 Index of Studies by Department

The Impact of Market-Oriented Policy Reforms on Households in Rural China (677-16) 116 The Impact of Population Aging on Health Care Systems (682-82) 22 Improving the Policy Relevance of LSMS Surveys 25 Improving Primary Education in Kenya: A Randomized Evaluation of Different Policy Options (681-14) 38 Improving the Quality of Preschool Education in Kenya (682-16) 41 Labor Market Adjustment in Estonia (679-71C) 116 The Measurement and Prediction of Poverty in an Aging World (681-73C) 15 Operating Costs and Investment Returns of Pension Funds (682-50) 20 Pay and Grade Differentials at the World Bank 45 Policies for Poor Areas (681-39) 12 The Political Economy of Pension Reform (682-17) 17 The Political Economy of Social Policy in Transition Countries (682-52) 123 Poverty and the Targeting of Social Assistance in Eastern Europe and the Former Soviet Union (680-33C) 118 Private Transfers and Public Policy 30 Public Sector Retrenchment and Efficient Compensation Schemes 45 Research on the Rural Nonfarm Economy 47 Social and Environmental Consequences of Growth-Oriented Policies 27

Public Economics Aid Allocation in a Federal System: A Case Study of India (681-41) 90 Assessing Welfare Impacts of Public Spending 29 Decentralization and Participatory Planning in Bolivia (681-62C) 128 The Impact of Intergovemmental Grants on the Level and Composition of Local Government Spending (681-58C) 80 Infrastructure and Growth: A Multicountry Panel Study (680-89) 69 Infrastructure Productivity: Direct and Indirect Effects (681-54) 69 The Introduction of Pharmaceutical Product Patents in India (682-88) 135 Joint Development Research Group-Africa Region Work Program on African Development 86 Reform along the Volga (682-42) 122 Safety Nets in an Emerging Market Economy 24 Tools for Fiscal Analysis 83

Regulation and Competition Policy African Politics and African Development (680-86C) 127 Competition and Privatization in Urban Water Supply (682-64C) 71 Database on Infrastructure Privatization (681-66) 69 Institutions, Politics, and Contracts: Private Sector Participation in Urban Water Supply (681-87) 70 Political Credibility and Economic Reform (681-85) 130 Privatization and Corporate Governance in Transition Economies 123 Privatization of Telecommunications in Africa (682-92) 72 Social Capital in Africa 135

Rural Development Agricultural Price Reform Experience 58 Assessing the Sustainability of the Green Revolution in Bangladesh 58 Commodity Marketing Systems 98 Commodity Risk Management and Commodity Exchanges 103

169 Index of Studies by Department

Effectiveness of World Bank Nonlending Services (681-26C) 89 Impact of Policy Reform on Farm Performance 60 Land Markets 66 Land Reform 67 Risks, Lessons Learned, and Secondary Markets for Greenhouse Gas Reduction 59 The Role of Agriculture in Venezuela's Economic Rise and Decline (682-33) 54 Rural Sector Econon-mics:Dynamics of Rural Sector Growth 66 Technology Diffusicn: The Effectiveness of Agricultural Extension 60 World Price Signals, Policy Reforms, and Domestic Commodity Price Behavior (681-49C) 91

Trade Africa and the International Economy 102 Controlling Recidivism 98 Developing Countries and the WTO 2000 Negotiations 106 The Dynamic Impact of Trade Liberalization in Developing Countries (681-40C) 89 Economic Integration: The Americas 101 The Impact of the Revival of the Andean Pact and the ASEAN Group on Their Member Countries' Industrial Growth (682-43) 95 Implementation of the Uruguay Round Agreement on Agriculture: New Issues and -Progress in Post-Round Liberalization (681-69C) 91 International Trade in Carbon Emission Entitlements 58 The Internationalization of Financial Services 105 Monitoring and Implementation of the Uruguay Round 99 Poverty and the International Economy: What Are the Links? (681-83) 16 Regionalism and Development 95 Regulating Technology Transfer in Agriculture: Impact on Technical Change, Productivity, and Incomes (680-61C) 125 Revenue Consequences of Trade Reform (680-93) 87 Trade and Labor Standards 101 Trade Policy in Transition Economies 123 The World Trade Organization and Developing Countries 101

Research Advisory Staff

Comparative Analysis of Growth (681-37C) 80 Motorization and Road Provision 77

ECONOMICDEVELOPMENT INSTITUTE

Office of the Director

When Learning Makes Reform More Productive: An Agenda for Analysis (682-02C) 40

Environment and Natural Resources Division

Common Property Resource Management Issues in World Bank Projects 62

170 Index of Studies by Department

ENVIRONMENTALLYAND SOCIALLY SUSTAINABLE DEVELOPMENT NETWORK

Agricultural Research and Extension Group

Measuring the Efficiency and Productivity of National Agricultural Research Systems: A Quantitative Approach (682-60) 56

Environment Department

Environmental Economics and Indicators Unit Nature Tourism's Contribution to Economic Development and Conservation Finance (682-54) 55

Rural Development Department

Comparative Study of Water Institutions and Their Impact on Water Sector Performance in Selected Countries 75 Decentralization, Fiscal Systems, and Rural Development (679-68C) 78 The Determinants of Agri-Food Market Integration in the Transition Economies, Phase 2 (681-45C) 120 Environmental Change and Adaptive Resource Markets: A Computer-Assisted Market for Water Allocation 65 Land Tenure, Land Markets, and Land Productivity in Rural China (681-76C) 53 Modern Water Control and Management Practices in Irrigation: Impact on Performance (681-50C) 52

Social Development Department

Public Involvement in Industrial Pollution Control in Argentina and Brazil (681-46) 51

FINANCE, PRIVATESECTOR, AND INFRASTRUCTuRENETWORK

Private Sector Development Department

Business Environment Unit Foreign Direct Investment Spillovers in Developing Countries (680-07) 87 Government-Business Consultative Mechanisms and Economic Governance: A Three-Country Comparison (681-83) 129 The Role of Interfirm Linkages in Emerging Industrial Clusters (682-61) 134 Science Parks and Firm-Level Productivity in China (681-43) 127

Private Participation in Infrastructure Group Auctions and Infrastructure (682-58C) 133

Privatization ServicesGroup Postal Financial Services Reform 111

171 Index of Studies by Department

Transportation, Water, and Urban Development Department

Office of the Director Revisiting Development: Urban Perspectives (682-40) 71

Global Urban Unit Pilot Study of City Economic Growth (682-39) 70

HUMAN DEVELOPMENT NETWORK

Education Team

Economic Analysis in Education Projects (682-95) 44 The Impact of Deworming Treatment on Primary School Performance (682-75) 22

Health, Nutrition, and Population Team

Quantifying the Net Economic Loss or Gain from Tobacco Use (681-95) 16

LEGAL SENIOR VICE PRESIDENCY

Operations Front Office

Delay in Disposition: Judicial Performance in Developing Countries (681-92) 130

OPERATIONAL CORE SERVICESNETWORK

Operational Services Team

Economic Liberal:ization and Industrial Restructuring: The Sri Lanka Experience (681-03C) 79

POVERTY REDUCTION AND ECONOMIC MANAGEMENT NETWORK

Economic Policy Division

A Strategic Approach to Asset and Liability Management in Developing Countries (681-23) 88

Gender Division

Gender, Property Rights, and Resource Management in Ghana (681-47) 51 Impact of Rural Roads 77 Long-Term Impacts of Microcredit Programs: A Study of the Grameen Bank and Other Programs in Bangladesh (682-93) 23 Rural Finance in Pakistan 113

172 Index of Studies by Department

Poverty Division

Combining Census and Survey Data to Study Spatial Dimensions of Poverty and Inequality (682-73) 21 Poverty and Income Distribution Dynamics in a High-Growth Economy: The Case of Chile, 1987-94 (681-59C) 13

RESOURCEMOBILIZATION AND COFINANCINGVICE PRESIDENCY

Project Finance and Guarantees Department

Bidding for Private Concessions: The Use of World Bank Guarantees 74 Bond Spreads in Emerging Markets 111 The Financing of the Hub Power Project in Pakistan 73 Private Power Study 74 Private Provision of Water and Sanitation 75

AFRICAREGION

Technical Families

Human Development 4 Africa Nutrition Database Initiative 32

Macroeconomics3 Africa Region Public Expenditure Review 83 Estimating Equilibrium Exchange Rates in Developing Countries 104

Macroeconomics4 Constraints and Opportunities for Agricultural Growth in Sub-Saharan Africa 64

Private Sector Finance Regional Program on Enterprise Development in Africa 136

RegionalInitiatives Group Africa New Product Development Fund 24 Core Welfare Indicators Questionnaire 32

EASTASIA AND PACIFICREGION

Office of the Regional Vice President

A Firm-Level Database for Analyzing the Impact of the Regional Crisis and Longer-Run Issues of Productivity Growth in East Asia (682-65) 134

173 Index of Studies by Department

Sector Units

Environment Estimating the Extent of Corrosion Damage Caused by Acid Rain in China 61

Health, Nutrition, and Population Incentives for Doctor Placements in Rural and Remote Areas (681-56C) 13 Risk Management Options in the Health Sector in East Asia (682-71C) 21

Poverty Reduction and Economic Management Evaluation of Active Labor Market Programs in China (682-78) 43

Private Sector Development The Consequences of Large-Scale Privatization in Mongolia (680-27C) 117

EUROPE AND CENTRALASIA REGION

Sector Units

Human Development Best Practices in Public-Private Health Program Design (682-20) 18 Cross-Country Study of Active Labor Market Programs 44

Poverty Reduction and EconomicManagement External Financing, Macroeconomic Stability, and Government Policy in Eastern European Countries (682-35) 121

Private and Financial Sectors Development Enterprise Restructuring in Bulgaria and Romania (681-96) 121

LATIN AMERICA AkNDTHE CARIBBEANREGION

Office of the Chief Economist

Dealing with Public Risk in Private Infrastructure (681-81C) 129

Mexico Residen,t Mission

Bank Reform, Concentration, and Costs (681-90) 109

Sector Units

Environmentally and Socially Sustainable Development Cost-Effectiveness Analysis of Coral Reef Management and Protection: A Least-Cost Model for the Developing Tropics (680-08) 48 Marine System Valuation: An Application to Coral Reefs in the Developing Tropics (681-05) 49

174 Index of Studies by Department

Market-Based Instruments for Environmental Policymaking in Latin America and the Caribbean: Lessons from 11 Countries 63

Human and Social Development Child Labor and Schooling in Latin America (681-79) 39

Poverty Reduction and EconomicManagement Fiscal Decentralization in Latin America (682-97) 81 Gender and the Rural Economy: Evidence from Mexico (680-95C) 36

SOUTH ASIA REGION

Sector Units

Environment Air Quality Measurement in Asia Using Passive Samplers 57 Integrated Acidification Study in China 57

Poverty Reduction and Economic Management Social and Economic Determinants of Poverty in India's Poorest Regions: Qualitative and Quantitative Assessments (682-21) 19

Social Development Sustainable Banking with the Poor 112

INTERNATIONALFINANCE CORPORATION

Economics Department

Cross-Country Indicators of Institutional Uncertainty (680-51C) 125 The Financial Structure and Governance of Venture Capital Funds in Developing Countries (681-51C) 108 Investment Activity in the Corporate Sector (681-25C) 127 Peru Pilot Project (682-04C) 109 Primary Financial Markets: Macroeconomic Conditions and Market Development (682-98) 110

175 WORLD BANK POLICY AND RESEARCH BULLETIN

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