03. Journals

2,963 items available

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http://hdl.handle.net/10986/2210

These are journal articles published in World Bank journals as well as externally by World Bank authors.

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Locally financed and outside financed regional fiscal multipliers

(Elsevier, 2022-04) Pennings, Steven

The size of regional fiscal multipliers determines the efficacy of fiscal stimulus, the costs of fiscal austerity and whether countercyclical fiscal policy is more effective at the federal or local level. This paper studies fiscal multipliers in regions of a monetary union—US states, Eurozone members, or countries with a hard exchange-rate peg—and how multipliers are affected by the way spending is financed: local deficit financing, local tax financing or outside financing (federal or foreign aid). I present analytical and quantitative government purchase and transfer multipliers using a New Keynesian model consistent with estimated transfer multipliers in Pennings (2021), focusing on the persistence of the fiscal shock. I find that at business-cycle frequencies, financing has little effect on impact multipliers: outside-financed multipliers are only about 0.07–0.16 larger than local deficit-financed multipliers. This suggests efforts to enable local countercyclical fiscal policy may be a partial substitute for greater fiscal centralization or foreign financing.
Trade Liberalization and Investment : Firm-level Evidence from Mexico

(Oxford University Press on behalf of the World Bank, 2012-06-01) Kandilov, Ivan T. ; Leblebicioğlu, Aslı

Plant-level panel data from Mexico's Annual Industrial Survey is employed to evaluate the impact of reductions in tariffs and import license coverage on final goods, as well as intermediates, on firms'investment decisions. Using data from 1984 to 1990, a period during which a large scale trade liberalization occurred, a dynamic investment equation is estimated using the system-GMM estimator developed by Arellano and Bover (1995) and Blundell and Bond (1998). Consistent with theory, the empirical analyses show that a reduction in import protection on final goods leads to lower plant-level investment, whereas reductions in tariffs and import license coverage on intermediate inputs result in higher investment. Also, firms with larger import costs experience a larger increase in investment following a reduction in import protection. On the other hand, higher markup firms lower investment more aggressively following reductions in tariffs and import license coverage on final goods.
An Axiomatic Approach to the Measurement of Corruption : Theory and Applications

(Oxford University Press on behalf of the World Bank, 2012-06-01) Foster, James E. ; Horowitz, Andrew W. ; Méndez, Fabio

No generally accepted framework exists for constructing and evaluating measures of corruption. This article shows how the axiomatic approach of the poverty and inequality literature can be applied to the measurement of corruption. A conceptual framework for organizing corruption data is developed, and three aggregate corruption measures consistent with axiomatic requirements are proposed. The article also provides guidelines for empirical applications of corruption measures and discusses data requirements. A brief empirical example illustrates how each of the measures captures a distinct view of corruption that yields a different ranking. To the authors' knowledge, this article provides the first analysis of corruption measurement using an axiomatic framework.
Managing Public Finance and Procurement in Fragile and Conflicted Settings

(Taylor and Francis, 2012-03-14) Porter, Doug ; Andrews, Matt ; Turkewitz, Joel A. ; Wescott, Clay

Successful transition from conflict and fragility hinges on the quality and legitimacy of public financial management (PFM) systems. This article shows that such systems develop asymmetrically in these settings. Formal aspects of modern systems are adopted, but a layered series of informal arrangements govern resource management. Analysis of data from Public Expenditure and Financial Accountability assessments of 101 countries explores aspects of this asymmetry and different explanations are considered for why elites seem to choose not to invest trust, resources, and capacity in making mainstream PFM systems functional. These explanations focus on the incentives created by three “public” resources: illicit flows, domestic revenues, and strategic or aid flows. Mainstream PFM systems are applied to a small part of these flows. The illustrative case of Cambodia shows how a layered system has emerged to govern such flows, undermining the influence of formal public finance management systems. The article offers suggestions to address these issues.
Funding Self-Employment – The Role of Consumer Credit

(Taylor and Francis, 2012-02-15) Kneiding, Christoph ; Kritikos, Alexander S.

This article investigates whether self-employed households use consumer loans – in particular, instalment loans and overdrafts – to finance business activities. Controlling for financial and nonfinancial household variables, we show that self-employed households particularly use personal overdrafts significantly more often than employee households. When analysing the correlation between consumer loan take-ups and consumption of self-employed in comparison to employee households, we find first evidence that overdrafts are used by self-employed to finance their business as well. This indicates that intermingling constitutes a financing strategy when regular business loans might not be accessible.
Mashup Indices of Development

(Oxford University Press on behalf of the World Bank, 2012-02-01) Ravallion, Martin

Countries are increasingly being ranked by some new “mashup index of development,” defined as a composite index for which existing theory and practice provides little or no guidance for its design. Thus the index has an unusually large number of moving parts, which the producer is essentially free to set. The parsimony of these indices is often appealing—collapsing multiple dimensions into just one, yielding seemingly unambiguous country rankings, and possibly reducing concerns about measurement errors in the component series. But the meaning, interpretation, and robustness of these indices and their implied country rankings are often unclear. If they are to be properly understood and used, more attention needs to be given to their conceptual foundations, the tradeoffs they embody, the contextual factors relevant to country performance, and the sensitivity of the implied rankings to the changing of the data and weights. In short, clearer warning signs are needed for users. But even then, nagging doubts remain about the value-added of mashup indices, and their policy relevance, relative to the “dashboard” alternative of monitoring the components separately. Future progress in devising useful new composite indices of development will require that theory catches up with measurement practice.
Density and Disasters : Economics of Urban Hazard Risk

(Oxford University Press on behalf of the World Bank, 2012-02-01) Lall, Somik V. ; Deichmann, Uwe

Today, 370 million people live in cities in earthquake prone areas and 310 million in cities with a high probability of tropical cyclones. By 2050 these numbers are likely to more than double, leading to a greater concentration of hazard risk in many of the world's cities. The authors discuss what sets hazard risk in urban areas apart, summarize estimates of valuation of hazard risk, and discuss implications for individual mitigation and public policy. The main conclusions are that urban agglomeration economies change the cost–benefit calculation of hazard mitigation; that good hazard management is first and foremost good general urban management; and that the public sector must perform better in promoting market-based risk reduction by generating and disseminating credible information on hazard risk in cities.
Coping with Crises : Policies to Protect Employment and Earnings

(Oxford University Press on behalf of the World Bank, 2012-02-01) Paci, Pierella ; Revenga, Ana ; Rijkers, Bob

The continuing failure of many countries to adequately mitigate the adverse labor market impacts of economic downturns is of concern, since labor market volatility can exacerbate poverty and stunt growth. This article aims to identify potentially effective policies responses to crises by navigating the potential tradeoffs between offsetting adverse short-term impacts of economic downturns on the quantity and quality of jobs, and preserving incentives for economic recovery. The authors propose a taxonomy that categorizes interventions depending on whether they mitigate the negative short-term impact of crises or whether they stimulate recovery. The taxonomy helps policymakers to identify “win–win” policies that avoid potential tradeoffs between these objectives by simultaneously serving both. Common elements of effective interventions are feasibility, flexibility (for example the capacity for scaling up and down), and incentive compatibility—and there is no substitute for being prepared. Having sound safety nets in place before a crisis is superior to haphazardly implementing responses after a crisis hits.
How to Deal with Covert Child Labor and Give Children an Effective Education, in a Poor Developing Country

(World Bank, 2012-01-18) Cigno, Alessandro

Because credit and insurance markets are imperfect and intrafamily transfers and how children use their time outside school hours are private information, the second-best policy makes school enrollment compulsory, forces overt child labor below its efficient level (if positive), and uses a combination of need- and merit-based grants, financed by earmarked taxes, to relax credit constraints, redistribute, and insure. Existing conditional cash transfer schemes can be made to approximate the second-best policy by incorporating these principles in some measure.
When Should We Worry about Inflation?

(Oxford University Press on behalf of the World Bank, 2012-01-18) Espinoza, Raphael ; Leon, Hyginus ; Prasad, Ananthakrishnan

At what level should inflation be a concern? From a growth perspective, high and rising levels of inflation as in 2006–2008 raise concerns that inflation, if uncontained, could undermine growth. On the other hand, higher levels of inflation could create more space for using monetary policy to reduce nominal and real interest rates during financial crises. A nonlinear growth regression for 165 countries over 1960–2007 shows that for developing countries, inflation above 10 percent quickly hurts growth. For advanced economies, there is no specific threshold: in the medium term, higher inflation hurts growth for any initial level of inflation, suggesting that there is a real cost to maintaining higher inflation as a buffer.