63858 ResearchDigest World Bank VOLUME 5 ✬ NUMBER 3 ✬ SPRING 2011 The Impact of Migration on Rural Poverty and Inequality in China Migration raises the income of poor have a higher observed average in- IN THIS ISSUE households more than that of rich come than nonmigrant households The Impact of Migration on Rural Poverty households in rural China does not necessarily suggest that and Inequality in China … page 1 households that choose to migrate Easing barriers to migration could help would have had higher income in the reduce both poverty and inequality in rural I n China rural-to-urban migration absence of migration. China and development of the rural In a paper recognized by Agricultural nonfarm sector have transformed Economics as the best in 2010, Zhu FOCUS the structure of rural household and Luo examine the impact of rural- How Would a Global Expansion of Biofuel income since the economic reform to-urban migration on rural poverty Production Affect Developing that began in 1978. In the mid-2000s and inequality using a 2002 survey of Countries? … page 2 almost half of rural income in China rural households in Hubei Province in Many countries have set goals for expanding came from nonfarm activities. There is China. Taking into account unobserv- biofuel use. What are some of the likely a consensus that migration increased able household characteristics, they effects? rural income in sending regions. But consider migration income as a poten- How Resilient Were Emerging Economies to whether the rising share of nonfarm tial substitute for household earnings the Global Crisis? … page 3 income was the leading cause of the rather than as an exogenous transfer. A big shift in how emerging economies sharp increase in rural inequality has With counterfactual simulation, their conduct policy left them better placed to been a subject of debate. results show that migration dispropor- withstand a global shock Some studies argue that rural-to- tionately benefits poor households by urban migration has increased rural providing alternatives for households Small but Effective: India’s Targeted income inequality and poverty. Many with lower marginal labor productivity Unconditional Cash Transfers … page 4 of these rely on two observations: in agriculture. What is the main strength of India’s social The distribution of nonfarm income First, migration income tends to pension programs? Their relatively low is more unequal than the distribution have an equalizing effect on earnings leakage of farm income in rural areas. And the in rural China. The Gini of observed Good Countries or Good Projects? … page 5 average observed income of migrant total income is 0.45 in the presence households is higher than that of non- of migration but 0.56 with migration A new study finds that outcomes of World Bank projects vary far more within countries migrant households. But the fact that income excluded. Migration permits than between them rural households with higher incomes households with low marginal labor are usually those that run a business productivity in rural areas to diversify Fiscal Policy for Growth in Africa in Light of does not mean that such households their production in the urban sector the Crisis … page 6 are more likely than those with lower and thus increase income. Poor and How well has fiscal policy in Africa done in incomes to participate in migration or rich households may both be inclined protecting medium-term growth prospects? benefit disproportionately from it. to participate in nonfarm activities, Because most rural households for different reasons: poor ones have Employability and Skills of Newly Graduated have farm income but not all have a stronger motivation, and rich ones Engineers in India … page 7 nonfarm income, it is normal that the greater capability. Households with Analysis of an employer survey in India distribution of nonfarm income is a larger labor endowment relative to looks at whether new engineering hires have more unequal. But this does not nec- land resources, which in general would the skills they need essarily suggest that poor households have been poorer in the absence of have relatively lower nonfarm income. Moreover, that migrant households (continued on page 8) 2 World Bank ResearchDigest FOCUS How Would a Global Expansion of Biofuel Production Affect Developing Countries? Meeting the many national biofuel The study finds that expanding these technologies are still at an early targets would push up prices for biofuel production over the next de- stage of development and it is impos- food staples, imposing a burden on cade to meet the national targets sible to secure good estimates of their would have significantly varying im- input requirements and costs to incor- the very poor pacts across countries. Major biofuel- porate in the model. exporting countries, such as Brazil, Still, second-generation biofuels G lobal interest in biofuels has Argentina, and Indonesia, would bene- are expected to put less pressure on grown rapidly in the past sev- fit on balance as higher global demand the global food supply because their eral years, driven by concerns boosts their exports of biofuels and feedstocks do not directly compete about energy import costs, oil price feedstocks. Countries with ambitious with food supply. Moreover, because volatility, and climate change. More targets for biofuels but limited do- of higher biofuel yield, they require than 40 countries, both developed and mestic production capacity, however, less land than the first-generation developing, have introduced blending could end up allocating a significant feedstocks. They also can be grown on mandates or targets for biofuel use amount of land now used for domestic lower-quality land. But currently avail- in transportation fuels. Brazil, for ex- food crop production to biofuels while able information about the economics ample, requires that regular gasoline increasing agricultural imports. India’s of second-generation biofuels indicates contain as much as 25 percent etha- agricultural imports, for example, that without potentially costly support nol, and its national fleet, with many would rise by 4 percent while its food policies for these technologies, large- flexible-fuel and dedicated ethanol ve- exports would drop by up to 6 percent. scale commercial production would not hicles, demands even higher ethanol. While the overall national-level be viable for many years to come. But these commitments to expand- impacts on food purchase costs would ing biofuel use have raised serious be small, the increases in prices of concerns. Especially prominent is basic staples could be especially bur- concern about how the rapid expan- densome for the very poor, especially sion of biofuels over the past decade in India and Sub-Saharan Africa. The contributed to the increase in food expansion of biofuels would push up prices—though different studies pro- prices for many food staples: prices for vide a broad range of estimates for corn and other major grains could rise the impact. There is even more limited by as much as 3 percent, and the price understanding of how meeting all the of sugar by 8 percent. national goals for biofuel expansion If all countries meet their stated would affect the world’s economy, the biofuel targets, global biofuel produc- environment, and the availability of tion would go up by more than 60 per- food for the world’s growing popula- cent in the next decade. Yet biofuels tion in the longer run. would still account for a fairly small A recent World Bank study on the share of total fuel use—just above 5 global economic, social, and environ- percent of the total liquid fuel for glob- mental impacts of biofuels addresses al road transportation. So the posited these issues. Using a computable gen- expansion of biofuels over the next eral equilibrium model—a simulation 10 years would have small effects on model of the global economy covering global petroleum markets. But the ex- Miguel Carriquiry, Xiaodong Du, and Govinda 25 countries or regions through 2020— pansion of biofuels would require sig- Timilsina. 2010. “Second-Generation Biofuels: the study analyzes in detail the factors nificant reshuffling of land use. Land Economics and Policies.” Policy Research Working Paper 5406, World Bank, Washington, DC. that would affect the economy, such as expansion to meet stated targets thus the cost of biofuels, changes in land is likely to increase deforestation. Jay Cheng and Govinda Timilsina. 2010. “Ad- vanced Biofuel Technologies: Status and Barriers.” use, and competition between biofuels The study considers only crop- Policy Research Working Paper 5411, World and food production. The results are based biofuels, also referred to as first- Bank, Washington, DC. presented as comparisons with a sce- generation biofuels. It does not in- Govinda Timilsina, John Beghin, Dominique van nario without the biofuel mandates, clude production of second-generation der Mensbrugghe, and Simon Mevel. 2010. “The assuming that economic development, biofuels, derived from biomass that is Impacts of Biofuel Targets on Land-Use Change population growth, and biofuel devel- not used for food (for example, agricul- and Food Supply: A Global CGE Assessment.” opment all continue at their current tural residues and noncrop plants such Policy Research Working Paper 5513, World pace. as switchgrass). The reason is that Bank, Washington, DC. World Bank Research Digest 3 How Resilient Were Emerging their path to becoming richer nations, Economies to the Global Crisis? a recovery of their growth trajectory would make their output converge sooner to its precrisis level. Better positioned to withstand a But emerging economies did in Fourth, there has been a fundamen- global shock, emerging economies fact recover faster and more strongly tal change in the way emerging econo- were more resilient this time around than advanced economies, returning mies have conducted their policies in to high growth rates more quickly. the recent past, with more countercy- They remained under recessionary clical policies pursued before and dur- I n the wake of the 2008–09 global pressures for fewer months than ad- ing the global crisis, a combination of economic crisis, the initial consen- vanced economies. For example, by sounder macroeconomic and financial sus was that the damage would be September 2009 emerging economies policy frameworks, and a shift toward mostly contained within the group of as a group had achieved their precrisis safer domestic and international finan- developed countries. That was not to level of industrial production, while cial stances. The global crisis found be. The crisis had a large impact on advanced economies were still well many emerging economies with more most countries in the world as a result below their precrisis level even by the fiscal space, better domestic balance of vast trade and financial channels end of 2010. This pattern is neverthe- sheets, and the required credibility to that link financial markets, the pro- less heterogeneous, with Eastern conduct expansionary fiscal and mon- duction process, and demand across Europe and Central Asia faring worse etary policies. countries. than other emerging regions, and All these changes on the domestic Yet emerging economies were low-income countries seemingly more and international fronts appear to have more resilient this time around, not so isolated from the global crash, perhaps helped emerging economies avoid the much relative to developed countries because of their lower degree of trade amplification of the external shock on but, more important, relative to their and financial openness their domestic front, which had been own past. In a cross-country incidence The authors conjecture four reasons a frequent outcome in past crises. As study Didier, Hevia, and Schmukler for the differentiated postcrisis behav- a result, most emerging economies document a structural break from the ior of emerging economies. came out of the crisis with strong bal- past in the way emerging economies First, and most obvious, the root ance sheets, which contributed to a responded to this global shock. The of the problem was in the financial speedy recovery. This stands in sharp study classifies as emerging econo- markets of advanced economies, and contrast with the situation in advanced mies those (mostly middle-income) emerging economies had a low ex- economies, where domestic financial developing economies that are eligible posure to these markets relative to crises became a common feature dur- to borrow from the International Bank others. At the same time, the financial ing the global turmoil and where fiscal for Reconstruction and Development. collapse hit highly leveraged consum- stances deteriorated significantly. According to popular perception, ers in some developed countries, while The continuing integration with emerging economies appear to have consumption was poised to continue global trade and global financial mar- performed better than advanced econ- growing at a high rate in emerging kets poses a trade-off for emerging omies during the global crisis. While economies. economies. While integration tends it is true that advanced economies Second, one of the main crisis to be associated with higher growth attained lower rates of GDP growth transmission channels seems to have and other positive spillover effects, it during the crisis, this observation been international trade. As the U.S. also makes countries susceptible to might just be capturing convergence economy came to a standstill by the foreign shocks and contagion effects. effects and not a higher incidence end of 2008, firms stopped their in- But the risk of a synchronized collapse of the crisis. Advanced economies ternational orders, anticipating an should start to diminish as the global generally grow less on average than accumulation of inventories. This economy moves to a more “multipolar emerging economies independent of generated an immediate collapse in world,” with several growth poles as any crisis event. In contrast, collapses production in several emerging econo- engines of world growth. Nevertheless, in GDP growth suggest that, on mies focused on supplying manufac- after several decades of recurrent impact, the crisis was not more severe tures, many of them located in Asia. crises, emerging economies seem to in advanced economies. Emerging As inventories started to decrease and finally be learning to moor the boat economies suffered growth collapses it became more likely that global de- when the gales are unleashed. comparable to, or even larger than, mand would stabilize, firms reignited those in advanced economies, with the production process and overall Tatiana Didier, Constantino Hevia, and Sergio growth in most countries rebound- economic activity in emerging markets Schmukler. 2011. “How Resilient Were Emerging ing during the aftermath of the quickly picked up. Economies to the Global Crisis?” Policy Research crisis according to how much it had Third, to the extent that emerging Working Paper 5637, World Bank, Washington, collapsed. economies grow at a faster pace on DC. 4 World Bank ResearchDigest Small but Effective: India’s Targeted Unconditional Cash Transfers The scaling-up of social pension 40 percent of the population. For the is that leakage is low because levels programs now under way in India, pension schemes there is strong evi- of discretion are low. Potential partici- while warranted, should be closely dence that the funds reach vulnerable pants face a high level of discretion individuals. In Rajasthan nearly three- at the time of joining, but payments monitored quarters of pensioners rely on the then follow more or less automatically. pension as their primary source of sup- Compare this with the PDS, where I ndia’s approach to social security port. The pension schemes, especially potential participants not only face emphasizes the provision of sub- in Karnataka, are successful in select- the same discretionary challenges in sidized food through the Public ing single widows and old people— signing up but also must persuade Distribution System (PDS) and public probably the most vulnerable of these the shopkeeper to sell the subsidized works. Targeted unconditional cash groups—for receipt of the pension. food to them rather than divert it to transfers (or social pensions) are pro- The main strength of the social pen- the open market. This is evidently vided to specific groups—the elderly, sion schemes in comparison with the a difficult task, not often achieved. widows, and the disabled—but are PDS is their relatively low level of leak- Another hypothesis is that those after small by comparison. age. A full analysis of different sources public funds through corrupt means If social pensions are a small and of leakage in the pension schemes are likely to follow the money and tar- relatively unimportant part of India’s in Karnataka suggests that these add get resource-rich programs rather than safety net, why do they deserve study? up to about 17 percent: 9 percent the pension schemes, where both the For four reasons. First, as a recent from “missing” pensioners (pensions payments involved and the number of paper by Dutta, Howes, and Murgai continuing to flow to pensioners who recipients are relatively small. shows, the pensions, though small, are do not exist or have moved or died); Choosing between these two hy- important to their recipients. Second, 4 percent from pensioners receiving potheses is impossible. So the scaling- the Indian government is scaling up only part of the pension or none at all; up of the social pension schemes now the pension schemes. Third, India is 3 percent from fees or bribes; and 1 under way, while warranted, should be home to about a third of the world’s percent from duplicate records in the closely monitored. Nevertheless, it is poor, and its strategy for tackling pov- administrative database leading to a reassuring to know that calls for giving erty is of global interest. Given the possibility that a pensioner is overpaid cash transfers a greater role in Indian resurgent global interest in cash trans- or that someone else is cashing in one social security policy are at least not fers (conditional and unconditional) of the pensions. A partial measure of contradicted by the performance of to the poor, so is its experience with leakage of subsidized food from the India’s existing cash transfers. these instruments. Fourth, there is PDS—estimated as the gap between long-standing dissatisfaction in India food issued to the public distribution with its major safety net schemes— shops and food reported as purchased and, on this basis, recurrent sugges- at these shops—suggests much higher tions that more emphasis should be levels. In Karnataka the ratio of PDS given to cash transfers. But the evi- food consumed to that supplied is 64 dence base on how well India’s cash percent; in Rajasthan, 41 percent. transfer programs perform is weak. Should social pensions therefore be The authors provide a simple evalu- scaled up? The answer depends on the ation of India’s social pension schemes likely impact of increased coverage on for the elderly and widows, both from both targeting and leakage. The shift an absolute perspective and in com- now under way to basing social pen- parison with the PDS. Their assess- sions for the elderly or widows on their ment, based on national household below-poverty-line (BPL) status might survey data and special surveys on worsen targeting given the only mildly social pension utilization in two states progressive distribution of BPL cards. (Karnataka and Rajasthan), reveals But neither expansion nor the shift to that these schemes work reasonably BPL status is likely to make distribu- well. In particular, they appear to out- tion of the social pensions regressive, perform the PDS. and the pensions will continue to re- Though the two pension schemes duce vulnerability. have lower coverage, both schemes, What would happen to leakage if Puja Dutta, Stephen Howes, and Rinku Mur- like the PDS, target the poor and vul- the cash transfer schemes are expand- gai. 2010. “Small but Effective: India’s Targeted nerable. All three schemes deliver ed? That depends on the reason for the Unconditional Cash Transfers.” Economic & about half their benefits to the poorest current low leakage. One hypothesis Political Weekly 45(52). World Bank Research Digest 5 Good Countries or Good Projects? Targeting aid to countries with better countries that perform better on the within-country variation in project policy performance pays off. Yet why CPIA ratings. performance. This suggests that much do project outcomes vary so much Yet 80 percent of the variation in more work is needed to better un- project outcomes in the sample occurs derstand why some projects succeed within countries? across projects within countries and so while others fail at a given level of cannot be explained by country-level country policy performance. W hen is foreign aid effective variables. Although the The authors’ findings in achieving its objectives? likelihood of project have important implica- A vast empirical literature success is correlated The large tions for donor policies has sought to answer this question by with better average variability in aimed at improving aid studying how the cross-country rela- country performance, effectiveness. A basic tionship between aid and GDP growth successful and unsuc- project performance finding is that target- depends on the quality of policy per- cessful projects can be within countries ing aid to countries formance in aid recipient countries. found in countries at all with better policies and The empirical finding that aid works levels of policy perfor- suggests that institutions pays off, better in countries with better policy mance. For this reason, policies to improve because rates of project performance has been taken up by aid it is important to better success are significantly donors, many of which seek to direct understand the factors aid effectiveness higher in countries with aid resources to countries with bet- contributing to the suc- could focus more on good policy. But the ter average policy and institutional cess or failure of a proj- large variability in proj- quality. ect in a given country at project-level factors ect performance within A new paper by Denizer, Kaufmann, a given level of policy countries suggests that and Kraay puts this country-level ap- performance. policies to improve aid effectiveness proach to aid selectivity in context To this end, the authors assemble could focus more on project-level by studying the variation in the ef- a large set of project-level “micro” cor- factors as well. These factors include fectiveness of World Bank–financed relates of project outcomes, drawing those that make projects difficult to development projects. The analysis on the World Bank’s internal databases restructure or cancel outright even af- uses data from more than 6,000 World to extract three categories of such ter early indications of problems arise, Bank projects evaluated between 1983 variables: those that contribute to the size and and 2009. A striking feature of the data complexity of projects, and those that is that the success of development as the size and sector of the project underlie the large observed differences projects—as measured by the World and the amount of resources devoted in project performance across task Bank’s internal processes for evaluat- to its preparation and supervision managers. ing project outcomes—varies much - more within countries than it does be- tors of problematic projects retrieved tween countries. from the World Bank’s institutional Country-level variation accounts processes for monitoring and imple- for roughly 20 percent of the variation menting active projects in project outcomes. Consistent with the large literature on aid effective- World Bank task manager associated ness, the paper finds that country-level with the project “macro” measures of the quality of Empirical evidence indicates that policies and institutions are strongly measures of project size, the extent correlated with project outcomes, of project supervision, and evaluation confirming the importance of country- lags are all significantly correlated with level performance for the effective use project outcomes, as are early-warning of aid resources. Most notably, there indicators that flag problematic proj- is a strong partial correlation between ects during the implementation stage. the World Bank’s Country Policy and Moreover, preliminary evidence sug- Institutional Assessment (CPIA) rat- gests that characteristics of the task ings and project performance. This manager matter as much for project Cevdet Denizer, Daniel Kaufmann, and Aart underscores the importance of the performance as do characteristics Kraay. 2011. “Good Countries or Good Projects? performance-based allocation process of the country. Taken together, how- Macro and Micro Correlates of World Bank Proj- that the World Bank uses to allocate ever, all these project-level variables ect Performance.” Policy Research Working Paper more concessional loans and grants to explain only a small fraction of the 5646, World Bank, Washington, DC. 6 World Bank ResearchDigest Fiscal Policy for Growth in Africa in Light of the Crisis Strengthening institutions for hit. While regional growth prospects capital; inadequate management of managing public investment is key for 2010 strengthened slightly, rising to public investment programs, with to ensuring that fiscal policy can 4.5 percent from the lower levels pro- too little emphasis on results and jected at the peak of the crisis, pros- downstream feedback loops to avoid protect growth prospects pects for the medium term are closely old-style planning pitfalls; ineffective linked to the uncertain pace of global project management, especially in I n low-income countries of Sub- recovery. donor-financed projects; and, in some Saharan Africa, how successful has In analyzing fiscal policy in the re- countries, inefficiency and limited fiscal policy been in protecting gion, the authors focus on changes in transparency of the tendering boards, medium-term growth prospects in expressions of policy intent before and which have adversely affected public light of the global economic crisis? after the crisis as well as preliminary infrastructure investment. Krumm and Kularatne address this observations on budget execution rela- Moreover, insufficient coordination question in a paper presented at a tive to policy intent. The policy intent between government departments, recent conference in Tunis. In line of most countries was not to adjust such as the finance ministry and plan- with fiscal policy for growth, areas fully to the shock and revenue declines ning agencies, creates institutional of spending to protect or in which stemming from changes in the eco- overlap. In some instances the pro- to concentrate increases (if feasible) nomic situation but instead to finance liferation of ministries exacerbates are those likely to increase long-term a higher fiscal deficit, with most of the institutional impotence. Contestability growth. Indeed, the authors find that a additional financing coming from do- in the budget across ministries is also key objective of the fiscal response in mestic borrowing. lacking. African countries has been to protect A smaller set of countries tightened There are domestic supply con- and build on the recent expansion their fiscal stance, less as a response straints as well. Such problems as in their programs of infrastructure to the change in the global economic lack of skilled workers and domestic investment. situation than as a response to preex- construction firms, the inability of When the global crisis hit in 2008, isting macroeconomic tensions and unemployed labor to move from the African countries were building on a risks of debt distress. Another set of commodity-exporting sector to in- base of improved fiscal performance. countries instituted fiscal stimulus frastructure development, and poor The overall fiscal stance changed sig- programs based on higher discretion- transport networks and logistics for nificantly during the 1990s, and 72 per- ary expenditures—ranging from in- moving materials can hamper large cent of the region’s countries had posi- creases in public capital investment public infrastructure expenditures. tive primary fiscal balances by 2008, (such as in Nigeria) to programs aimed All these factors make it difficult up from 28 percent in the early 1990s. at affected populations (such as in for African governments to design and Similarly, fiscal space for pro-growth Kenya and Tanzania). This protection implement effective public investment expenditures has grown since the early of expenditures, including public in- programs in normal times—let alone 2000s. Spending on infrastructure, for vestment programs oriented toward during crises, when continued fiscal example, has been higher than previ- growth, is a notable departure from ad- stimulus is needed to sustain eco- ously thought. With budget and off- justment efforts in low-income African nomic activity. budget spending (including from state countries in previous decades. The authors conclude that the enterprises and extrabudgetary funds) While plans for fiscal policy stances challenges in implementing higher- and external financiers taken into would have largely protected growth quality expansionary fiscal policy in account, it amounts to $45 billion a expenditures, execution of those plans light of the crisis are similar to those year. As much as three-quarters of this was another matter. Only a subset of facing fiscal policy in support of comes from domestic sources—African countries actually spent as much as medium-term growth—notably, the taxpayers and infrastructure users— budgeted, in large part because of need to strengthen public investment including $20 billion in operations and structural factors in public investment management. maintenance spending and $15 billion management. This points to the impor- in capital expenditures. tance of accelerating the institutional But the global economic crisis strengthening of public investment threatened to undermine the gains in management, identifying features that growth and poverty reduction in Sub- increase the ability to maintain growth Kathie Krumm and Chandana Kularatne. “Fiscal Saharan Africa. The region had already over time and to avoid an irreversible Policy for Growth in Africa in Light of the Cri- been hit by the global food and fuel disruption in times of volatility. sis.” Proceedings of the African Economic price increases. A global financial crisis Limited state capacity in African Conference 2010 on Setting the Agenda for followed, affecting the region less di- economies arises from several fac- Africa’s Economic Recovery and Long-Term rectly. Then the global economic crisis tors. These include insufficient human Growth, Tunis. World Bank Research Digest 7 Employability and Skills of Newly Graduated Engineers in India Engineers are in great demand in a design that was efficient in system that provided. Employers across India India. Do new hires have the skills resources (critical for a mobile device) ask for a similar set of soft skills. employers need? A recent survey as well as robust; and integrating and Employers rated graduates rela- testing the driver, which required that tively high on lower-order thinking explores the issue he have a big picture of the entire sys- skills (remembering, understanding) tem and an understanding of how to but low on higher-order thinking skills I n India shortages of skills are use the debugging tools to probe the (analyzing, evaluating, creating). These among the main constraints to system at the appropriate level. higher-order thinking skills are among continued growth of the economy. Despite many an- the most important Studies have shown that the problem ecdotes like this one, Findings suggest that professional skills for is especially acute in industries rely- little research has been engineering schools engineers. Unlike for ing on engineers, where employers done to identify which soft skills, employers’ complain that most newly graduated skills are in high de- in India should seek demands for profession- engineers lack suitable skills. Many mand and which are in to improve the skill al skills differ across attribute that lack to shortcomings short supply. A recent sectors, company sizes, in the education system. Responding paper by Blom and set of graduates and and regions. to a surge in demand for engineers, Saeki addresses this shift the focus toward The authors’ findings India’s higher education system mas- gap in knowledge by suggest that engineer- sively expanded the enrollment of presenting the results higher-order skills ing schools should seek engineering students—and that ex- of an employer survey and creativity to improve the skill set pansion is widely perceived as having aimed at answering of graduates and rec- led to a decline in the average quality three questions: Which ognize the importance of the students enrolled, the teach- skills do employers consider important of soft skills. They also suggest a need ing, and, consequently, the graduating when hiring new engineering gradu- to shift the focus of assessments, the engineers. ates? How satisfied are employers with teaching-learning process, and cur- The story of a recent engineering the skills of engineering graduates? ricula away from lower-order thinking graduate is typical. Gopal graduated And in which important skills are the skills and toward higher-order skills with a bachelor’s degree in computer engineers falling short? and creativity. And they point to a science and engineering with a good Conducted in 2009 across sectors need for institutions to interact more academic track record. After going and regions in India, the survey asked with employers in different sectors and through a competitive hiring process, 157 employers to rate their satisfac- regions to understand their particular he joined a large information tech- tion with new engineering hires with demands for skills. nology services company. A project respect to 25 skills. The results confirm manager responsible for delivering a widespread dissatisfaction with cur- platform software for a mobile device rent engineering graduates: 64 percent assigned Gopal the task of developing of employers hiring fresh engineering a device driver for a simple peripheral graduates are only somewhat satisfied and pointed him to all the relevant in- or worse with the quality of the new formation sources. Given his academic hires. background, Gopal was expected to Similarly, the survey asked the em- be able to complete the task quite ployers to rate the level of importance independently. of those 25 skills. Using factor analysis, But Gopal began to flounder. He Blom and Saeki classify the skills into faced several problems. First, he was three categories: core employabil- overwhelmed by the amount of infor- ity skills, communication skills, and mation at hand and lacked the skill professional skills. While the survey to filter out what he really needed to results show that all three skill sets read for the task. Second, his academic are considered important, the authors projects had not prepared him to han- find that employers perceive soft skills dle a large volume of code, and he did (core employability skills and commu- not have the skill to isolate just the in- nication skills) as the most important. terfaces for the device driver he had to Among all skills, communication in Andreas Blom and Hiroshi Saeki. 2011. “Employ- develop. Third, he lacked the problem- English is among those most demand- ability and Skill Set of Newly Graduated Engi- solving skills he needed to tackle the ed and also shows the smallest gap neers in India.” Policy Research Working Paper design challenges of the task: picking between the skill level demanded and 5640, World Bank, Washington, DC. 8 World Bank ResearchDigest (continued from page 1) migration, are more likely to partici- offers migrant workers alternative job Recent Policy Research pate in migration because their oppor- opportunities; it also helps allevi- Working Papers tunity costs are lower. ate the pressure of land shortage on Second, participation in migra- those who remain in the countryside. 5630 Market Integration in China tion noticeably reduces rural poverty. Because credit and insurance markets Qingqing Chen, Chor-Ching Goh, Bo Sun, and Migration raises the income of poor are highly inefficient in China, many Lixin Colin Xu 5631 Small vs. Young Firms across the World: households more than that of rich poor rural households are unable to Contribution to Employment, Job Creation, households. For the poorest group optimize their investments in physical and Growth Meghana Ayyagari, Aslı Demirgüç-Kunt, and (below the 25th percentile) household and human capital. Appropriate policy Vojislav Maksimovic per capita income increased by more reforms that allow the market to play a 5632 How Can We Learn Whether Firm Policies Are Working in Africa? Challenges (and than 80 percent; for the richest group greater role in allocating land to pro- Solutions?) for Experiments and Structural (above the 75th) it increased by less ductive farmers and that ease barriers Models David McKenzie than 25 percent. The rate, depth, and to migration could help improve living 5643 Education Outcomes, School Governance and severity of poverty are significantly standards and reduce income inequal- Parents’ Demand for Accountability: Evidence from Albania lower in the presence of migration. ity in rural China. Danila Serra, Abigail Barr, and Truman Migration helps absorb surplus rural Packard 5644 Income Shocks and Adolescent Mental labor, and remittances provide rural Health households with an additional source Sarah Baird, Jacobus de Hoop, and Berk Özler of income, improving their living stan- 5645 Export Restrictions and Price Insulation dards and narrowing income gaps. during Commodity Price Booms Will Martin and Kym Anderson Third, land shortage, education, 5647 Politics and Preschool: The Political Economy and proximity to economic centers en- of Investment in Pre-Primary Education courage households to participate in Katrina Kosec 5651 Who Is Vouching for the Input Voucher? migration. Nonmigrant households are Decentralized Targeting and Elite Capture in more productive in local production Tanzania Lei Pan and Luc Christiaensen than migrant households as a result of 5652 Rising Food Prices and Household Welfare: observable and unobservable charac- Evidence from Brazil in 2008 Francisco H. G. Ferreira, Anna Fruttero, teristics, implying a rational selection. Phillippe Leite, and Leonardo Lucchetti Zhu and Luo argue that migration 5655 Governance in the Health Sector: A Strategy for Measuring Determinants and serves as a rational self-selection: Performance more productive farmers stay in the Nong Zhu and Xubei Luo. 2010. “The Impact William D. Savedoff countryside, while workers with higher 5658 Is It What You Inherited or What You Learnt? of Migration on Rural Poverty and Inequality: A Intergenerational Linkage and Interpersonal expected returns in the urban sector Case Study in China.” Agricultural Econom- Inequality in Senegal migrate. Urban employment not only Sylvie Lambert, Martin Ravallion, and ics 41: 191–204. Dominique van de Walle Working Papers can be downloaded at http://econ.worldbank.org To download the World Bank Research E-Newsletter, go to Data & Research at http://www.worldbank.org The World Bank Research Digest is a quarterly publica- The Research Digest is financed by the Bank’s Editorial Committee: Jean-Jacques Dethier (managing tion disseminating findings of World Bank research. Research Committee and managed by DECRS, the editor) and Aslı Demirgüç-Kunt. Research assistance: The views and interpretations in the articles are those research support unit of the Development Economics Nicola Limodio; editor: Alison Strong; production: of the authors and do not necessarily represent the Senior Vice Presidency (DEC). The Research Digest is Roula Yazigi. 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