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World Bank Economic Review
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The World Bank Economic Review publishes and disseminates innovative theoretical and empirical research that identifies, analyzes, measures, and evaluates the macro and micro-economic forces that promote or impede economic development. It aims to provide the knowledge necessary for designing, implementing, and sustaining effective development policies in low and middle income countries.
The World Bank Economic Review is aimed at readers familiar with economic theory and analysis but not necessarily proficient in advanced mathematical or econometric techniques. Material comes from work conducted by World Bank staff and consultants, as well as outside researchers.
Articles are reviewed by three referees, one from the World Bank and two from outside the institution.
Published three times per year 1996 to Present
Editors: Eric Edmonds, Nina Pavcnik
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Postconflict Monetary Reconstruction
(World Bank, 2008-01-30) Adam, Christopher ; Collier, Paul ; Davies, Victor A.B.During civil wars governments typically resort to inflation to raise revenue. A model of this phenomenon is presented, estimated, and applied to the choices and constraints faced during the postconflict period. The results show that far from there being a fiscal peace dividend, postconflict governments tend to face even more pressing needs after than during war. As a result, in the absence of postconflict aid, inflation increases sharply, frustrating a more general monetary recovery. Aid decisively transforms the path of monetary variables in the postconflict period, enabling the economy to regain peacetime characteristics. Postconflict aid thus achieves a monetary "reconstruction" analogous to its more evident role in infrastructure. -
Publication
What Constrains Africa’s Exports?
(World Bank, 2011-10-18) Freund, Caroline ; Rocha, NadiaAfrica's share of global exports has dropped by 50 percent over the last three decades. To stem this decline, aid for trade to the region has increased rapidly in recent years. Assistance can target improvements in three important components of trade facilitation: transit times, documentation, and ports and customs. Of these, transit delays have the most economically and statistically significant effect on exports. Specifically, a one day reduction in inland travel times leads to a 7 percent increase in exports, after controlling for the standard determinants of trade and potential endogeneity. Put another way, a one day reduction in inland travel times translates into a 2 percentage point decrease in all importing-country tariffs. By contrast, longer delays in the other areas have a far smaller impact on trade. Large transit delays are relatively more harmful because they are associated with high (within-country) variation, making delivery targets difficult to meet. Finally, the results imply that transit times are primarily about institutional features—such as border delays, road quality, fleet class and competition and security—and not geography. -
Publication
Do Migrants Improve Governance at Home? Evidence from a Voting Experiment
(World Bank, 2011-01-30) Batista, Catia ; Vicente, Pedro C.Can international migration promote better institutions at home by raising the demand for political accountability? A behavioral measure of the population's desire for better governance was designed to examine this question. A postcard was distributed to households promising that if enough postcards were mailed back, results from a survey module on perceived corruption would be published in the national media. Data from a tailored household survey were used to examine the determinants of this behavioral measure of demand for political accountability (undertaking the costly action of mailing the postcard) and to isolate the positive effect of international emigration using locality-level variation. The estimated effects are robust to the use of instrumental variables, including past migration and macro shocks in the destination countries. The estimated effects can be attributed mainly to migrants who emigrated to countries with better governance, especially migrants who return home. -
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Disability and Poverty in Vietnam
(World Bank, 2011-05-31) Mont, Daniel ; Cuon, Nguyen VietDisability is significantly correlated with poverty in Vietnam, according to data from the 2006 Vietnam Household Living Standards Survey, especially when the extra costs of living with a disability are taken into account. This disability-poverty link is also associated with lower educational attainment, an important factor in determining poverty and productive economic activity in general, both for household-based businesses and wage employment. Not taking into account these associations and the extra costs of disability will make some poor disabled people invisible in poverty statistics and impede efforts to reduce poverty. -
Publication
What Explains the Price of Remittances? An Examination Across 119 Country Corridors
(World Bank, 2011-01-30) Beck, Thorsten ; Martínez Pería, María SoledadRemittances are a substantial source of external financing for developing countries that influence many aspects of their development. Though research has shown that remittances are both expensive and price sensitive, little is known about what explains their price. Newly gathered data across 119 country pairs or corridors are used to explore the factors associated with the price of remittances. Corridors with larger numbers of migrants and more competition among providers are found to exhibit lower prices for remittances, when average prices across all types of remittance service providers are considered. Corridors with lower barriers to access banking services and broader regulation of remittance service providers also have lower prices. Remittance prices are higher in richer corridors and in corridors with greater bank participation in the remittance market. Few significant differences emerge when results are compared across banks and, separately, across money transfer operators. However, estimations for Western Union, a leading player in the remittances business, suggest that its prices are less sensitive to competition. -
Publication
Thresholds in the Finance-Growth Nexus : A Cross-Country Analysis
(World Bank, 2011-05-31) Yilmazkuday, HakanThresholds of inflation, government size, trade openness, and per capita income for the finance-growth nexus are investigated using five-year averages of standard variables for 84 countries from 1965 to 2004. The results suggest that (i) high inflation crowds out positive effects of financial depth on long-run growth, (ii) small government sizes hurt the finance-growth nexus in low-income countries, while large government sizes hurt high-income countries, (iii) low levels of trade openness are sufficient for finance-growth nexus in high-income countries, but low-income countries need higher levels of trade openness for similar magnitudes of the finance-growth nexus, (iv) catch-up effects through the finance-growth nexus are higher for moderate per capita income levels. -
Publication
The Value of Vocational Education : High School Type and Labor Market Outcomes in Indonesia
(World Bank, 2011-05-31) Newhouse, David ; Suryadarma, DanielThis paper examines the relationship between the type of senior high school attended by Indonesian youth and their subsequent labor market outcomes. This topic is timely in light of a recent policy shift that aims to dramatically expand vocational education. The analysis controls for an unusually rich set of predetermined characteristics, and exploits longitudinal data spanning fourteen years to separately identify cohort and age effects. There are four main findings. First, the estimated wage premium for vocational graduates, relative to general graduates, is greater for women than men. Second, the returns to public vocational school for men have plummeted for the most recent cohort, and male vocational graduates now face a large wage penalty. Third, the generally favorable outcomes of public school graduates can be partly explained by non-random sorting of students with higher test scores and better-educated parents into public schools. Finally, these peer effects appear to be particularly important for students with above-average test scores, as men with high scores earn a surprisingly small premium from graduating from vocational or private general school. These small returns for high-scoring men, as well as the dramatic fall in the earnings premium for all male vocational graduates, raise important concerns about the current expansion of public vocational education and the relevance of the male vocational curriculum in an increasingly service-oriented economy. -
Publication
Corruption and Confidence in Public Institutions : Evidence from a Global Survey
(World Bank, 2011-05-31) Clausen, Bianca ; Kraay, Aart ; Nyiri, ZsoltWell-functioning institutions matter for economic development. In order to operate effectively, public institutions must also inspire confidence in those they serve. We use data from the Gallup World Poll, a unique and very large global household survey, to document a quantitatively large and statistically significant negative correlation between corruption and confidence in public institutions. This suggests an important indirect channel through which corruption can inhibit development: by eroding confidence in public institutions. This correlation is robust to the inclusion of a large set of controls for country and respondent-level characteristics. Moreover we show how it can plausibly be interpreted as reflecting at least in part a causal effect from corruption to confidence. Finally, we provide evidence that individuals with low confidence in institutions exhibit low levels of political participation, show increased tolerance for violent means to achieve political ends, and have a greater desire to “vote with their feet” through emigration. -
Publication
Agricultural Distortions in Sub-Saharan Africa : Trade and Welfare Indicators, 1961 to 2004
(World Bank, 2011-05-31) Croser, Johanna L. ; Anderson, KymFor decades, agricultural price and trade policies in Sub-Saharan Africa hampered farmers' contributions to economic growth and poverty reduction. This paper draws on a modification of so-called trade restrictiveness indexes to provide theoretically precise partial-equilibrium indicators of the trade and welfare effects of agricultural policy distortions to producer and consumer prices in 19 African countries since 1961. Annual time series estimates are provided not only by country but also, for the region, by commodity and by policy instrument. The findings reveal the considerable extent of policy reform over the past two decades, especially through reducing export taxation; but they also reveal that national policies continue to reduce trade and economic welfare much more in Sub-Saharan Africa than in Asia or Latin America. -
Publication
Remittances and the Brain Drain Revisited : The Microdata Show That More Educated Migrants Remit More
(World Bank, 2011-01-30) Bollard, Albert ; McKenzie, David ; Morten, Melanie ; Rapoport, HillelTwo of the most salient trends in migration and development over the last two decades are the large rise in remittances and in the flow of skilled migrants. However, recent literature based on cross-country regressions has claimed that more educated migrants remit less, leading to concerns that further increases in skilled migration will impede remittance growth. Microdata from surveys of immigrants in 11 major destination countries are used to revisit the relationship between education and remitting behavior. The data show a mixed pattern between education and the likelihood of remitting, and a strong positive relationship between education and amount remitted (intensive margin), conditional on remitting at all (extensive margin). Combining these intensive and extensive margins yields an overall positive effect of education on the amount remitted for the pooled sample, with heterogeneous results across destinations. The microdata allow investigation of why the more educated remit more, showing that the higher income earned by migrants, rather than family characteristics, explains much of the higher remittances.