Poverty and Social Impact Analysis

Poverty and social impact analysis (PSIA) implies an analysis of the distributional impact of policy reforms on the well-being or welfare of different stakeholder groups, with particular focus on the poor and vulnerable. PSIA has an important role in the elaboration and implementation of poverty reduction strategies in developing countries. It promotes evidence-based policy choices and fosters debate on policy reform options. PSIA helps to:

• Analyze the link between policy reforms and their poverty and social impacts
• Consider trade-offs among reforms on the basis of their distributional impacts
• Enhance the positive impacts of reforms and minimize their adverse impacts
• Design mitigating measures and risk management systems
• Assess policy reform risks
• Build country ownership and capacity for analysis

PSIA is a systematic analytic approach, not a separate product. It starts with the ex-ante analysis of expected poverty and social impacts of policy reforms, with a view to helping to design the reforms. PSIA then advocates monitoring results during implementation. Finally, where possible, PSIA suggests evaluating ex-post the poverty and social impacts of reforms.

The multi-disciplinary approach of PSIA has broken new ground in cross-network collaboration. The Social Development Department, in collaboration with the Poverty Reduction and Economic Management (PREM) network, has developed a PSIA User's Guide (see box in the upper right corner) that is intended for practitioners undertaking PSIA in developing countries. It introduces the main concepts underlying PSIA, presents key elements of good practice approaches to PSIA, and highlights some of the main constraints and operational principles for PSIA. This User's Guide highlights some of the key tools that practitioners may find useful to analyze poverty and social impacts of policy reforms, but does not aim to be comprehensive in coverage.

Drawing on the lessons learned and experience gained from completed and undergoing PSIAs, the Bank is currently working together with the Department for International Development, UK, and other partner institutions on developing a Sourcebook for PSIA.

For more on this, and on the PSIA experience, please go to the World Bank website dedicated to PSIA by clicking on the 'Poverty & Social Impact Analysis' link in the box in the lower right corner.