World Bank Research E-Newsletter [October 2008]
*********************************************************************** Bailing out the world’s poorest Deposit insurance is not always a good idea The food prices crisis in Africa and more in the latest Research Digest Preparing for future food crises: A perspective from Justin Lin The promise of index-based insurance Cash transfers to women increase their bargaining power in Ecuador Sudan: Making unity attractive or making offers that can’t be refused? Child labor in rural Tanzania: Different long-term impacts for boys and girls Does community monitoring improve public services? Judicial enforcement of social and economic rights in the developing world
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Bailing out the world's poorest
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While the 2008 financial crisis is global in nature, it is likely to have heterogeneous welfare impacts within the developing world, with some countries and some people more vulnerable than others. It also threatens to have lasting impacts for some of those affected, notably through the nutrition and schooling of children in poor families. These features point to the need for a differentiated social policy response, aiming to provide rapid income support to those in most need, while preserving the key physical and human assets of poor people and their communities. In a new paper, “Bailing out the world’s poorest,” Martin Ravallion, director of the World Bank’s Development Research Group points out some mistakes in past crisis responses and identifies key design features for safety net programs that can help compensate for the likely welfare losses in the short-term while also promoting longer-term recovery.
Paper ***********************************************************************
Deposit insurance is not always a good idea
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Recent financial turmoil has pushed the issue of explicit deposit insurance systems back to the center of debates on regulatory policy. Explicit deposit insurance is widely held to be a crucial element of modern financial safety nets, frequently recommended to countries undergoing reform. In a new book, “Deposit Insurance Around the World: Issues of Design and Implementation”, Demirguc-Kunt, Kane, and Laeven challenge the wisdom of encouraging countries to adopt deposit insurance in the absence of a strong institutional environment to balance the benefits of preventing crises and the costs of controlling bank and customer risk taking. The evidence and analysis confirm that deposit insurance is strong medicine. While it can be a useful part of a country’s overall system of bank regulation and financial markets, research stresses the importance of establishing three preliminary steps before adopting explicit deposit insurance: promptly identifying and eliminating individual bank insolvencies, fostering informative accounting standards, and establishing reliable procedures for contract enforcement.
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Order the book The World Bank and IMF jointly organized a timely research conference to discuss issues related to the ongoing financial crisis. The conference brought together academics, Bank and Fund staff and policymakers.
Conference papers and presentations ***********************************************************************
The food prices crisis in Africa and more in the latest Research Digest
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Rising food prices generate higher poverty in Africa because the hit to households that are net food consumers outweighs benefits to net food producers. Which policy responses most benefit the poor? The latest issue of the World Bank Research Digest summarizes recent research on Ghana, Guinea, Liberia and other countries in Sub-Saharan Africa. The most promising responses by governments are those that help boost agricultural productivity. Mali’s rice initiative, which aims to increase rice production by 50 percent, is one such example. General equilibrium analysis shows that a 15 percent increase in productivity could generate a large increase in rice production in Mali that would ultimately reduce poverty despite the increase in international rice prices. By contrast, the model suggests that import tax cuts would not significantly reduce poverty. Read about these and other findings in
World Bank Research Digest Vol. 3, No. 1 For more on making agriculture a development priority, see the latest issue of the
World Bank Institute’s Development Outreach magazine ***********************************************************************
Preparing for future food crises: A perspective from Justin Lin
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While food grain and oilseed prices have dropped sharply in recent weeks—with slowing economic growth, falling oil prices, and improved supply—millions of poor will feel lasting impacts of the high food prices of 2007-2008. At a recent roundtable at the Center for Global Development, Washington DC, World Bank chief economist Justin Yifu Lin highlighted the need to restore confidence in global grain markets, noting that the recent price fluctuations reflected a collapse in market confidence, not just a temporary imbalance in supply and demand. Lin made the case for brokering an agreement, perhaps under the auspices of the United Nations, whereby individual countries would each hold a certain amount of public grain reserves, and a mechanism for releasing these in times of shock or extraordinary demand when pre-agreed limits are exceeded.
Article and Lin's remarks ***********************************************************************
The promise of index-based insurance
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Index-based insurance is an innovative financial product introduced in recent years in developing countries as diverse as India, Mongolia, Malawi and Thailand. It allows individual smallholder farmers to hedge against agricultural production risk, such as drought or flood. The product pays out in events that are triggered by a publicly observable index, such as rainfall recorded on a local rain gauge. In a new research brief, Xavier Gine notes that this product holds significant promise for rural households, helping protect against weather-related shocks to household consumption. A basic research question is to estimate the determinants of household insurance take-up, and identify the factors which prevent some households from participating. Evidence from India suggests credit constraints and low household income appear to be an impediment to purchasing insurance. Also, various results together suggest that limited familiarity with the provider and the insurance product itself plays a key role in participation decisions. Gine suggests that insurance payouts should be made as promptly as possible after rainfall is measured and verified. While the focus of the research is on the client's perspective, from the lender's perspective a clear picture emerges ---index insurance can be an attractive way to mitigate the risk of default thereby providing an incentive to increase credit availability in rural areas.
Research Brief ***********************************************************************
Cash transfers to women increase their bargaining power in Ecuador
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Cash transfer programs have become increasingly popular as a poverty alleviation tool in developing countries. But how do poor people use these income transfers, and how does this affect the impact of such programs? Past research has suggested that the recipient’s gender can influence how the money is used, because women have different preferences regarding household expenditures than men. A new paper by Schady and Rosero examines the impact on families’ food expenditures of a cash transfer program to poor women in rural Ecuador (the program is known as the Bono de Desarrollo Humano). They confirm that taking into account gender in the design of social programs could enhance their impacts. Schady and Rosero find that households that received the transfers spent more on food than other households at similar income levels who did not receive them. This suggests that the bargaining position of women improved after they received transfers, and that women were then better able to influence the pattern of household expenditures.
World Bank Policy Research Working Paper 4282 ***********************************************************************
South Sudan: Making unity attractive or making offers that can’t be refused?
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In 2011 South Sudan will hold a referendum vote to partition Sudan. This referendum is mandated by the Comprehensive Peace Agreement (CPA), which ended one of Africa’s longest civil wars. An important question is whether the prospect of a future referendum leads conflicting parties to act in ways that “make unity attractive” in the present. A new paper by Elbadawi, Milante, and Pischedda examines the brinksmanship and militarization strategies that both actors are following before the referendum to influence the outcome. The authors show that while brinksmanship is a rational response to a unique event with a finite horizon like the referendum, cooperation could result in peaceful outcomes that would be preferred by all sides. Despite challenges posed by the ongoing crisis in Darfur and regional insecurity owing to conflicts in Chad, the Central African Republic, and Uganda, there remain some credible devices that both actors could commit to and thereby reduce incentives for brinksmanship. These include free and fair elections in 2009, increasing transparency, abiding by agreements on joint military units, and the peaceful resolution of border issues such as the disputed Abyei region.
World Bank Policy Research Working Paper 4684 ***********************************************************************
Child labor in rural Tanzania: Different long-run impacts for boys and girls
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The Health and Development Survey in Tanzania’s Kagera region represents a unique source of longitudinal information on welfare outcomes between 1991 and 2004. Data from this survey was used by Beegle, Dehejia, Gatti and Krutikova to investigate the consequences of child labor several years later, in adulthood. They find that the long-run consequences of child labor are different for boys and girls. An increase in labor for boys of roughly 6 hours per week results in an ultimate reduction in years of schooling of approximately one year. Child labor also makes it less likely that boys will diversify out of agriculture later, and more likely that they will marry at a young age. For girls, the impact on years of schooling is less apparent, but it does lower the age of marriage. Higher involvement of girls in chores which is valued in the marriage market and lower priority placed overall on female education might explain this interesting finding.
World Bank Policy Research Working Paper 4677 ***********************************************************************
Does community monitoring improve public services?
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The push toward community monitoring of public service delivery in development projects is based on the notion that local oversight will raise the social accountability of public service providers and so improve the quality of services. In a new research brief, Stuti Khemani examines diverging results from evaluations of two community monitoring programs in health and education, which suggest that local monitoring does not guarantee better service delivery. One evaluation in Uganda showed success in improving services in public health clinics, while another evaluation in India showed no impact on public schools, although learning outcomes did improve through a private initiative that bypassed the public education system. Factors that could account for these diverging results include differences in ease of monitoring and demanding services across health and education sectors, differences in the level nature of NGO activism across the two programs, and differences in local political economy across the two countries.
Research Brief ***********************************************************************
Judicial enforcement of social and economic rights in the developing world
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A new book “Courting Social Justice: Judicial Enforcement of Social and Economic Rights in the Developing World” is a first-of-its-kind, five-country empirical study of the causes and consequences of social and economic rights litigation. Detailed studies of Brazil, India, Indonesia, Nigeria, and South Africa present systematic and nuanced accounts of court activity on social and economic rights in each country. Edited by Gauri and Brinks, the book develops new methodologies for analyzing the sources of and variation in social and economic rights litigation, explains why actors are now turning to the courts to enforce these rights, measures the aggregate impact of litigation in each country, and assesses the relevance of the empirical findings for legal theory. This book argues that courts can advance social and economic rights under the right conditions precisely because they are never fully independent of political pressures.
Buy the book
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New Policy Research Working Papers
*********************************************************************** These papers, and all older papers, are also available using the Document Search on the Bank's Development Economics Research website and on the Social Sciences Research Network.
4705. Does gender matter for firm performance ? evidence from Eastern Europe and Central Asia by Shwetlena Sabarwal and Katherine Terrell 4706. A road to trust by Julien Labonne and Robert S. Chase 4707. Technology adoption and the investment climate : firm-level evidence for Eastern Europe and Central Asia by Paulo G. Correa, Ana M. Fernandes, and Chris J. Uregian 4708. Job creation and labor reform in Latin America by David S. Kaplan 4709. Refinements to the probabilistic approach to fiscal sustainability analysis by Nathaniel Frank and Eduardo Ley 4710. Trade diversion under selective preferential market access by Ingo Borchert 4711. Mainstreaming climate adaptation into development assistance in Mozambique: Institutional barriers and opportunities by Diana Sietz, Maria Boschutz, Richard JT Klein, and Alexander Lotsch 4712. Infrastructure and economic development in Sub-Saharan Africa by Cesar Calderon and Luis Serven 4713. Household investment under violence - the Colombian case by Rebekka E. Grun 4714. Individual and country-level factors affecting support for foreign aid by Pamela Paxton and Stephen Knack 4715. Hunting for Leopards : long run country income dynamics in Africa by Jorge Saba Arbache and John Page 4716. Development, modernization, and son preference in fertility decisions by Deon Filmer, Jed Friedman, and Norbert Schady 4717. How will climate change shift agro-ecological zones and impact African agriculture ? by Pradeep Kurukulasuriya and Robert Mendelsohn 4718. Black hole or black gold ? the impact of oil and gas prices on Indonesia's public finances by Cut Dian R.D. Agustina, Javier Arze de Granado, Tim Bulman, Wolfgang Fengler, and Mohamad Ikhsan 4719. Trade costs in Africa : barriers and opportunities for reformby Alberto Portugal-Perez and John S. Wilson 4720. General trends in competition policy and investment regulation in mandatory defined contribution markets in Latin Americaby Mariam Dayoub and Esperanza Lasagabaster 4721. Institutions and labor market outcomes in Sub-Saharan Africa by Louise Fox and Ana Maria Oviedo 4722. Promotion with and without learning : effects on student enrollment and dropout behavior by Elizabeth M. King, Peter F. Orazem, and Elizabeth M. Paterno 4723. Multi-product exporters : diversification and micro-level dynamics by Leonardo Iacovone and Beata S. Javorcik 4724. Simulating the impact of geographic targeting on poverty alleviation in Morocco : what are the gains from disaggregation ? by Mohammed Douidich, Abdeljouad Ezzrari, and Peter Lanjouw 4725. Decentralization, economic development, and growth in Turkish provinces by Mehmet Serkan Tosun and Serdar Yilmaz 4726. The sub prime crisis : implications for emerging markets by William B. Gwinner and Anthony Sanders 4727. The relevance of a rules-based maize marketing policy : an experimental case study of Zambia by Klaus Abbink, Thomas S. Jayne, and Lars C. Moller 4728. Determinants of choice of migration destination by Marcel Fafchamps and Forhad Shilpi 4729. The great proletarian cultural revolution, disruptions to education, and returns to schooling in urban China by John Giles, Albert Park, and Meiyan Wang 4730. Foreign direct investment in services and manufacturing productivity growth: evidence for Chile by Ana M. Fernandes and Caroline Paunov 4731. Governance, corruption, and trade in the Asia Pacific region by Kazutomo Abe and John S. Wilson 4732. The impact of remittances on poverty and inequality in Ghana by Richard H. Adams Jr., Alfredo Cuecuecha, and John Page 4733. Is the developing world catching up ? global convergence and national rising dispersion by Maurizio Bussolo, Rafael E. D Hoyos, and Denis Medvedev 4734. The growth of transport cector CO2 emissions and underlying factors in Latin America and the Caribbean by Govinda R. Timilsina and Ashish Shrestha 4735. Multilateralism beyond Doha by Aaditya Mattoo and Arvind Subramanian 4736. Making regional cooperation work for South Asia's poor by Sadiq Ahmed and Ejaz Ghani 4737. Race, immigration, and the U.S. labor market: contrasting the outcomes of foreign born and native blacks by Damien de Walque 4738. Rising food prices in Sub-Saharan Africa : poverty impact and policy responses by Quentin Wodon and Hassan Zaman 4739. Impact of rising rice prices and policy responses in Mali : simulations with a dynamic CGE model by Kofi Nouve and Quentin Wodon 4740. Assessing the potential impact on poverty of rising cereals prices : the case of Ghana by Quentin Wodon, Clarence Tsimpo, and Harold Coulombe 4741. Comparing the impact of food and energy price shocks on consumers : a social accounting matrix analysis for Ghana by Juan Carlos Parra and Quentin Wodon 4742. Rice prices and poverty in Liberia by Clarence Tsimpo and Quentin Wodon 4743. Assessing the geographic impact of higher food prices in Guinea by Harold Coulombe and Quentin Wodon 4744. Assessing the potential impact on poverty of rising cereals prices : the case of Mali by George Joseph and Quentin Wodon 4745. Potential impact of higher food prices on poverty : summary estimates for a dozen west and central African countries by Quentin Wodon, Clarence Tsimpo, Prospere Backiny-Yetna, George Joseph, Franck Adoho, and Harold Coulombe 4746. Are women more credit constrained ? experimental evidence on gender and microenterprise returns by Suresh de Mel, David McKenzie, and Christopher Woodruff 4747. Political alternation as a restraint on investing in influence : evidence from the post-communist transition by Branko Milanovic, Karla Hoff, and Shale Horowitz 4748. The market for retirement products in Sweden by Edward Palmer 4749. The market for retirement products in Australia by Gregory Gordon Brunner and Craig Thorburn 4750. Export surges : the power of a competitive currency by Caroline Freund and Martha Denisse Pierola 4751. Does regionalism affect trade liberalization toward non-members ? by Antoni Estevadeordal, Caroline Freund, and Emanuel Ornelas 4752. In pursuit of balance : randomization in practice in development field experiments by Miriam Bruhn and David McKenzie 4753. Taxation and capital structure : evidence from a transition economy by Leora Klapper and Konstantinos Tzioumis 4754. Market power and the matching of trade credit terms by Daniela Fabbri and Leora Klapper 4755. Intrahousehold inequality and child gender bias in Ethiopia by Feridoon Koohi-Kamali 4756. The 2007 meltdown in structured securitization : searching for lessons, not scapegoats by Gerard Caprio Jr., Asli Demirguc-Kunt, and Edward J. Kane 4757. The effect of male migration for work on employment patterns of females in nepal by Michael Lokshin and Elena Glinskaya 4758. How China's farmers adapt to climate change by Jinxia Wang, Robert Mendelsohn, Ariel Dinar, and Jikun Huang 4759. Cash transfers, behavioral changes, and cognitive development in early childhood : evidence from a randomized experiment by Karen Macours, Norbert Schady, and Renos Vakis 4760. The short and longer term potential welfare impact of global commodity inflation in Tanzania by Sebastien Dessus 4761. Carbon markets, institutions, policies, and research by Donald F. Larson, Philippe Ambrosi, Ariel Dinar, Shaikh Mahfuzur Rahman, and Rebecca Entler 4762. Populist fiscal policy by Stuti Khemani and Waly Wane 4763. Bailing out the world's poorest by Martin Ravallion |
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