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Political Economy

Political Economy
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The Seeds and Roots of Change

Change is what development is all about. The hard part, as the well-chosen title of a new World Bank book makes clear, is persuading the right kind of change to put down roots and flourish. Read more >>

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The Bank has been conducting political economy analysis for years, but new collaborative efforts are driving more operationally relevant assessments where learning and knowledge sharing are incorporated much more strongly. Governance and political economy factors play a critical role in shaping development effectiveness and development outcomes. The political economy approach can add value to operational teams as a tool to improve project design, promote better risk management, and reduce misdirection and misallocation of funds. It is particularly useful in enhancing the Bank strategies (e.g. Country Assistance Strategies (CAS), sector strategies) and operations, and in finding ways to change the Bank programming if a 'best practice' technical approach has not been accepted, is not implemented and/or produces negative unintended consequences.

While linked, there is a difference between the 'good governance' and political economy agendas. The 'good governance' agenda is more normative, and generally organized around 'gap analyses' coupled with promotion of best practices. The political economy agenda aims to understand more deeply why decision-makers act the way they do (i.e. what their actual incentives are), and what are feasible ways forward.

There are good examples of political economy analysis for countries, sectors, projects as well as for specific themes across all regions of the Bank. There is no single method or approach for political economy analysis as it needs to vary according to the situation. The cases highlighted are considered to be helpful in guiding the Bank staff, country or sector managers in what has been done and what can be learned for new analysis and implementation. For each example, a summary overview seeks to capture the problem(s) addressed by the initiatives, the main findings, the approaches used, and the main impacts on the Bank’s engagement and operational design and implementation. The examples presented here are accompanied by relevant supplementary documentation.

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operationally useful approach

There are a range of approaches towards political economy analysis both within the Bank and externally. This reflects different intellectual origins of the work (e.g. sociology, political science, economics etc.) and varying institutional perspectives, and is also strongly linked with the reality that political economy analyses have to be tailored to the country, sector or project in question.

However, there is commonality regarding some key elements: (1) The importance of understanding how policies and politics interact to produce results (with regards to economic growth and poverty reduction overall, and in specific sectors and localities); (2) A shared concern with operational relevance, identifying solutions and opportunities for reform; (3) An emphasis on actors, institutions, including political systems (such as electoral incentives and their implications), as well as trajectories over time.

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Our Political Economy experts include: Saku Akmeemana (GGODR), Verena Fritz (GGODR), Rachel Ort (GGODR), Maitreyi Das (GSURR).

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