Journal Issue: World Bank Research Observer, Volume 24, Issue 1
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Competition in the Financial Sector
(World Bank, 2009-03-30) Claessens, Stijn
Competition in the financial sector, as in other sectors, matters for allocative, productive, and dynamic efficiency. Theory suggests, however, that unfettered competition is not necessarily best given the special features of financial services. The author discusses these analytical complications before reviewing how to assess competition in the financial sector and its determinants. It is shown that competitiveness varies greatly across countries, in perhaps surprising ways, and that it is not driven by financial system concentration. Rather, systems with greater foreign entry and fewer entry and activity restrictions tend to be more competitive, confirming that contestability—the lack of barriers to entry and exit—determines effective competition. The author then analyzes how competition policy in the financial sector has generally been conducted and how changes in competition in the financial services industries should affect competition policy going forward. In part based on comparison with other industries, the author provides some suggestions on how competition policy in the financial sector could be better approached as well as what institutional arrangements best fit a modern view of competition policy in the sector. The specific competition challenges for developing countries is also highlighted. The author concludes that practices today fall far short of the need for better competition policy in the financial sector.
Evaluation in the Practice of Development
(World Bank, 2009-03-30) Ravallion, Martin
Standard methods of impact evaluation often leave significant gaps between what we know about development effectiveness and what we want to know—gaps that stem from distortions in the market for knowledge. The author discusses how evaluations might better address these knowledge gaps and so be more relevant to the needs of practitioners. It is argued that more attention needs to be given to identifying policy-relevant questions (including the case for intervention), that a broader approach should be taken to the problems of internal validity (including heterogeneity and spillover effects), and that the problems of external validity (including scaling up) merit more attention by researchers.
Rural Poverty
(World Bank, 2009-03-30) Dercon, Stefan
Poverty is still a predominantly rural phenomenon. However, the context of rural poverty has been changing across the world, with high growth in some economies and stagnation in others. Furthermore, increased openness in many economies has affected the specific role of agricultural growth for rural poverty reduction. This paper revisits an ‘old’ question: how does growth and poverty reduction come about if most of the poor live in rural areas and are dependent on agriculture? What is the role of agricultural and rural development in this respect? Focusing on Sub-Saharan Africa, and using economic theory and the available evidence, the author comes to the conclusion that changing contexts has meant that agricultural growth is only crucial as an engine for growth in particular settings, more specifically in landlocked, resource-poor countries, which are often also characterized by relatively low potential for agriculture. However, extensive market failures in key factor markets and likely spatial effects give a remaining crucial role for rural development policies, including focusing on agriculture, to assist the inclusion of the rural poor in growth and development. How to overcome these market failures remains a key issue for further research.
Timing and Duration of Exposure in Evaluations of Social Programs
(World Bank, 2009-03-30) King, Elizabeth M.; Behrman, Jere
Impact evaluations aim to measure the outcomes that can be attributed to a specific policy or intervention. While there have been excellent reviews of the different methods for estimating impact, insufficient attention has been paid to questions related to timing: How long after a program has begun should it be evaluated? For how long should treatment groups be exposed to a program before they benefit from it? Are there time patterns in a program's impact? This paper examines the evaluation issues related to timing, and discusses the sources of variation in the duration of exposure within programs and their implications for impact estimates. It reviews the evidence from careful evaluations of programs (with a focus on developing countries) on the ways that duration affects impacts.
Access to Financial Services
(World Bank, 2009-03-30) Honohan, Patrick; Beck, Thorsten; Demirgüç-Kunt, Asli
In many developing countries less than half the population has access to formal financial services, and in most of Africa less than one in five households has access. Lack of access to finance is often the critical mechanism for generating persistent income inequality, as well as slower economic growth. Hence expanding access remains an important challenge across the world, leaving much for governments to do. However, not all government actions are equally effective and some policies can even be counterproductive. This paper sets out principles for effective government policy on broadening access, drawing on the available evidence and illustrating with examples. The paper concludes with directions for future research.