Political Economy of PSIA

Poverty and Social Impact Analysis (PSIA) is challenging because of the complex nature of reforms and their consequences. The analysis of distributional impacts depends on many elements—the design of the reform itself, but also on political economy issues of the reform and the capacity of regulatory agencies responsible for implementing the reform program.

Policy design and implementation is a complex, multi-directional, fragmented and unpredictable process. A political economy lens broadens operational considerations beyond technical solutions to include an emphasis on stakeholders, institutions and processes by which policy reform is negotiated and played out in the policy arena. Understanding the relationship between policy-induced changes in incentives and sanctions on the one hand and changes in behavior and interests on the other, allows development practitioners to engage more effectively in “pro poor” policy reforms and operations.

The Social Development department developed a framework for political economy analysis of policy reform in the context of a PSIA, which provides a framework for both diagnostics and action (see below).

For more information on political economy analysis, please see:

• Political Economy of Policy Reform – Issues and Implications for Policy Dialogue and Operations  (48kb PDF)
• Overview information on the political economy of reform 

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