Abstract

This paper explores the spillover effects of job losses via input linkages during the Great Recession. Exploiting exogenous variation in tradable employment shocks across U.S. counties, the paper finds that job losses in the tradable sectors cause further job losses in local supporting services. The result is not due to reverse causation, construction job losses, or credit shortages. In addition, the paper finds that logistic supporting services are relatively more affected by local tradable job losses, while professional supporting services, such as information technology and management consulting, are more affected by the job losses in neighboring counties. Document type: Book

Abstract

This study investigates the impact of World Bank development policy lending for public sector governance on the quality of public sector management and institutions. The World Bank’s Country Policy and Institutional Assessments (CPIA) are used to measure the latter, the study considers only policy conditions targeted at improvements in those areas. The analysis uses a comprehensive country-year panel data set of aid receiving-countries and finds a significant and inverse U-shaped effect of public sector conditions on the quality of public sector governance. For most observed values in the data, the impact is positive, but it turns negative beyond a value of 80 conditions. At that point, the predicted CPIA score is about 0.25 point (0.3 standard deviation) higher than with zero conditions. For most observations, the number of cumulative conditions is below 80, so the estimated effect of more conditions is generally positive. The analysis corrects for potential endogeneity and shows that the results are robust to sample restrictions, the use of an alternative governance measure, and the inclusion of an extended set of control variables. Falsification tests are also consistent with a causal interpretation from conditions to quality of public sector governance. The paper shows that conditions related to public financial management and tax reforms are more effective than those related to anti-corruption or civil service and administrative reform, where progress requires changing the behavior of a larger set of “deconcentrated” actors. The paper concludes by describing some innovative ideas in the Bank’s ambitious new public sector management strategy that could improve the effectiveness of its support for public sector governance reform. Document type: Book

Abstract

Despite its rapid growth in recent decades, GDP per capita in India remains at a relatively low level by international standards, and the country continues to be marked by large subnational disparities in levels of well-being. These large disparities naturally lead to interest in India’s spatial landscape of potential for economic development. Against this backdrop, this paper presents the results of an analysis of underlying variations in economic potential across Indian districts, where economic potential is defined as the extent to which a district possesses factors that are important determinants of the ability to experience a high level of productivity. The analysis is based on a simple composite Economic Potential Index, which is constructed from variables for which robust evidence exists of their importance as determinants of local productivity. From the analysis, a picture emerges of a heterogeneous landscape of economic potential characterized by strong geographic clustering of districts. The paper also reveals particularly high levels of underperformance, relative to potential, for districts in Uttar Pradesh. Document type: Book

Abstract

This paper presents an overview of the structure of probabilistic catastrophe risk models, discusses their importance for appraising sovereign disaster risk financing and insurance instruments and strategy, and puts forward a model and a process for improving decision making on the linked disaster risk management strategy and sovereign disaster risk financing and insurance strategy. The paper discusses governments use of probabilistic catastrophe models to inform sovereign disaster risk financing decision making and describes the ex ante and ex post financing instruments available for responding to extreme natural events. It also discusses the challenge of appraising sovereign disaster risk financing and insurance instruments, including a review of the multiple dimensions of disaster risks and the value that probabilistic catastrophe risk models provide. The decision making framework for sovereign disaster risk financing and insurance put forward by the paper includes the use of a decision model (an influence diagram) as a rigorous representation of the relationships between the decisions, uncertain events, and consequences relevant to sovereign disaster risk financing and insurance decision making. The framework also includes a process for generating high-quality customized components for the decision model, and a tool for designing coherent sovereign disaster risk financing and insurance strategies. The paper ends with suggestions for improving catastrophe risk models to facilitate sovereign disaster risk financing and insurance decision making. Document type: Book

Abstract

This paper develops a novel methodology to measure the quantity of jobs and value of wages embodied in exports for a large number of countries and sectors for intermittent years between 1995 and 2011. The resulting Labor Content of Exports database allows the examination of the direct contribution of labor to exports as well as the indirect contribution via other sectors of the economy for skilled and unskilled labor. The analysis of the new data sets documents several new findings. First, the global share of labor value added in exports has been declining globally since 1995, but it has increased in low-income countries. Second, in line with the standard Hecksher-Ohlin trade model, the composition of labor directly contained in exports is skewed toward skilled labor in high-income countries relative to developing countries. However, that is not the case for the indirect labor content of exports. Third, manufacturing exports are a key source of labor demand in other sectors, especially in middle- and low-income countries. And the majority of the indirect demand for labor spurred by exports is in services sectors, whose workers are the largest beneficiaries of exporting activities globally. Fourth, differences in the labor value added in exports share across developing countries appears to be driven more by differences in the composition of exports rather than in sector labor intensities. Finally, average wages typically increase rapidly enough with the process of economic development to more than compensate the loss in jobs per unit of exports. The paper also includes the necessary information to build the Labor Content of Exports database from the original raw data, including stata do-files and matlab files, as well as descriptions of the variables in the data set. Document type: Book

Abstract

This study briefly summarizes the development experiences of special economic zones in China and Africa, the lessons that Africa can learn from China, and the preliminary results of the Chinese investments in special economic zones in Africa. The study makes recommendations on how to unleash the power of special economic zones and industrial zones in Africa through strategically leveraging the Chinese experiences. The success factors of Chinese special economic zones include the strong and long-term commitment of the government, a conducive business environment in the zones, strategic locations, technology upgrading and skills training, and strong linkages with the local economy. However, the Chinese experiences highlight some pitfalls to avoid, such as the “mushroom approach” and high-level overlaps at the later stage, environmental degradation, and the unbalance between industrial development and social dimensions. This calls for a bigger role for the market. Sub-Sahara Africas experience with traditional economic zones has been relatively poor, except in a few countries, such as Mauritius. The key challenges include the poor regulatory and institutional framework, lack of effective strategic planning, weak governance and implementation capacity, and inadequate infrastructure, among others. Since 2006, China has implemented special economic zone projects globally, including in four countries in Sub-Saharan Africa. It is still too early to conduct a full assessment of these projects; however, the evidence shows that some zones have begun to attract investments and make important contributions to the local economy. The main challenges include access to land, regulatory barriers, resettlement and coordination issues, and lack of external infrastructure. Document type: Book

Abstract

The Africa Infrastructure Country Diagnostic (AICD) has gathered and analyzed extensive data on infrastructure in around 40 Sub-Saharan countries, including the Democratic Republic of Congo (DRC). The results have been presented in reports covering different areas of infrastructure ICT, irrigation, power, transport, water and sanitation and different policy areas, including investment needs, fiscal costs, and sector performance. This report presents the key AICD findings for the DRC, allowing the country's infrastructure situation to be benchmarked against that of its African peers. Given that the DRC is a fragile state trying to catch up with other low-income countries (LICs) in the region, both fragile-state and LIC African benchmarks will be used to evaluate the DRC's situation. Detailed comparisons will also be made with immediate regional neighbors in Central Africa. Several methodological issues should be borne in mind. First, because of the cross-country nature of data collection, a time lag is inevitable. The period covered by the AICD runs from 2001 to 2006. Most technical data presented are for 2006 (or the most recent year available), while financial data are typically averaged over the available period to smooth out the effect of short-term fluctuations. Second, in order to make comparisons across countries, indicators had to be standardized to place the analysis on a consistent basis. This means that some of the indicators presented here may be slightly different from those that are routinely reported and discussed at the country level. During the period from 2001 to 2005, per capita economic growth in DRC was on average 2.1 percent higher than during the period from 1991 to 1995. Despite this improvement, growth levels, which oscillated between 4 and 8 percent in the early 2000s, still fell short of the sustained 7 percent per year needed to meet the Millennium Development Goals (MDGs). Improved telecommunications infrastructure has been the main driver of this change, contributing 1.1 percentage points to the country's per capita growth rate. Deficiencies in power infrastructure, on the other hand, held back per capita growth by 0.25 percentage point over this period. Document type: Book

Abstract

Since the industrial revolution, the economic development of Western Europe and North America was characterized by continuous urbanization accompanied by a gradual phasing-in of urban land property rights over time. Today, however, the evidence in many fast urbanizing low-income countries points towards a different trend of “urbanization without formalization”, with potentially adverse effects on long-term economic growth. This paper aims to understand the causes and the consequences of this phenomenon, and whether informal city growth could be a transitory or a persistent feature of developing economies. A dynamic stochastic equilibrium model of a representative city is developed, which explicitly accounts for the joint dynamics of land property rights and urbanization. The calibrated baseline model describes a city that first grows informally, with the growth of individual incomes leading to a phased-in purchase of property rights in subsequent periods. The model demonstrates that land tenure informality does not necessarily vanish in the long term, and the social optimum does not necessarily imply a fully formal city, neither in the transition, nor in the long run. The welfare effects of policies, such as reducing the cost of land tenure formalization, or protecting informal dwellers against evictions are subsequently investigated, throughout the short-term transition and in the long-term stationary state. Document type: Book

Abstract

This paper addresses the question whether and how co-benefits, through disaster resilience building, can be further promoted. Co-benefits are defined as positive externalities that arise deliberately as a result of a joint strategy that pursues several objectives synergistically at the same time, such as disaster risk management and development goals, or disaster risk management and climate change adaptation. Of particular interest is the question of how the economic and broader benefits of disaster risk management can be recognized and realized by those in charge of fiscal policy decisions. The paper considers the interplay between public disaster risk management investment and fiscal policy, and provides an overview of the current debate as well as assessment methods, tools, and policy options. In fiscal budgeting, it has been standard practice to focus on direct liabilities and recurrent spending. Costs of disasters are often dealt with after the fact only, rather than being considered as contingent liabilities. As a consequence, the full costs of disasters have often not been budgeted for, and, with a price signal missing, there is lack of clear incentives for investing in disaster risk management. Overall, the paper identifies four steps and three dividends to be harnessed: (i) understanding fiscal risk; (ii) protecting public finance through risk financing instruments, the first dividend; (iii) managing disaster risk comprehensively, the second dividend; and (iv) pursuing a synergistic, co-benefits strategy of concurrently managing disaster risks and promoting development, the third dividend. Document type: Book

Abstract

The idea of social inclusion has garnered considerable attention, especially in the context of two recent developments: the Sustainable Development Goals and the heightened attention to inequality. This paper reviews the manner and extent to which social inclusion is addressed in the first 17 Systematic Country Diagnostics (SCDs), which are ex ante, country-level assessments conducted by the World Bank Group, ahead of the preparation of its Country Partnership Frameworks. In addition to this primary purpose, the paper fulfils three other purposes. It allows for a broader reflection on the value of the social inclusion construct in macro-level diagnostics; it takes the opportunity to develop and refine a methodology to assess social inclusion and finally, it positions the narrative on social inclusion into the ongoing discourse on poverty, shared prosperity, inequality and the thinking around the implementation of the Sustainable Development Goals. It is therefore, a refined articulation of the idea of social inclusion in the context of global epistemological shif Document type: Book