About the report

THIS YEAR’S World Development Report, the twentyfirst in this annual series, examines the role of
knowledge in advancing economic and social wellbeing.  It begins with the realization that economies are built not merely through the accumulation of physical capital and human skill, but on a foundation of information, learning, and adaptation. Because knowledge matters, understanding how people and societies acquire and use knowledge—and why they sometimes fail to do so—is essential to improving people’s lives, especially the lives of the poorest.

The information revolution makes understanding knowledge and development more urgent than ever before. New communications technologies and plummeting computing costs are shrinking distance and eroding borders and time. The remotest village has the possibility of tapping a global store of knowledge beyond the dreams of anyone living a century ago, and more quickly and cheaply than
anyone imagined possible only a few decades ago. And distance education offers the potential to extend learning opportunities to millions who would otherwise be denied a good education.

But with these opportunities come tremendous risks.  The globalization of trade, finance, and information flows is intensifying competition, raising the danger that the poorest countries and communities will fall behind more rapidly than ever before. In our enthusiasm for the information
superhighway, we must not forget the villages and slums without telephones, electricity, or safe water, or the primary schools without pencils, paper, or books. For the poor, the promise of the new information age—knowledge for all—can seem as remote as a distant star. To bring that promise closer to reality, the implications of the information revolution must be thought through with care
and made part of the development agenda.  As part of its contribution to such a daunting task, this
World Development Report considers two sorts of knowledge: technical knowledge (for example, about farming, health, or accounting) and knowledge about attributes (the quality of a product, the credibility of a borrower, or the diligence of a worker). The Report calls the unequal distribution
of technical know-how knowledge gaps and the uneven knowledge about attributes information problems. It argues that both types of problems are worse in developing than in more technologically advanced countries, and that they especially hurt the poor. This analysis suggests three lessons of particular importance to the welfare of the more than 4 billion people in developing countries:
First, developing countries must institute policies that will enable them to narrow the knowledge gaps that separate them from rich countries. Examples of such policies include making efficient public investments in lifelong education opportunities, maintaining openness to the world, and dismantling barriers to competition in the telecommunications sector.

Second, developing-country governments, bilateral donors, multilateral institutions, nongovernmental organizations, and the private sector must work together to strengthen the institutions needed to address information problems. As societies become more complex, mechanisms for reducing information problems, such as accounting standards, disclosure requirements, and credit rating agencies, and for enforcing contract performance, through effective laws and courts, become  increasingly important.

Third, no matter how effective we are in these endeavors, problems with knowledge will persist. We cannot eliminate knowledge gaps and information failures, but by recognizing that knowledge is at the core of all our development efforts, we will sometimes discover unexpected solutions to  seemingly intractable problems.

Putting knowledge at the center of our development efforts will bear fruit in two areas. The first is in increased social benefits—the more effective provision of public goods, including better air and water quality, greater educational attainment and higher enrollments, improved health and nutrition, and expanded access to essential infrastructure.  These benefits will accrue to the poor as well
as to others in society. The second is in better-functioning markets—for credit, education, housing, and land—that more efficiently coordinate resources and allocate opportunities across society. These improvements will benefit the poor the most, because they bear more than their share of the burden of information failures.

The widening access to knowledge brought about by the knowledge and information revolution is transforming relationships between expert and amateur, government and citizen, aid donor and recipient. Knowledge cannot be static, nor can it move in one direction only. Instead, it must flow constantly back and forth across an ever-changing web, involving all who create and use it.
This is no less true of knowledge at the World Bank, and of this Report. Even as we attempt to share what we have learned, we know that there is much we do not know.  Nonetheless, we hope that this Report will help to increase understanding of the complex relationship between knowledge and development. And that this understanding in turn will help us better apply the power of knowledge
to the great challenge of eradicating poverty and improving people’s lives.