Journal Issue: World Bank Economic Review, Volume 33, Issue 3

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Costs and Benefits of Land Fragmentation: Evidence from Rwanda
(Published by Oxford University Press on behalf of the World Bank, 2019-10) Ayalew Ali, Daniel ; Deininger, Klaus ; Ronchi, Loraine
Panel data from Rwanda allow us to explore costs and benefits from land fragmentation in a non-mechanized setting using two methodological improvements, namely (i) a terrain-adjusted measure of travel time/cost required to visit all parcels to measure fragmentation; and (ii) instrumental variable (IV) approaches that use measures for inherited/allocated parcels and past displacement as instruments. Results suggest that fragmentation as measured by travel cost negatively affect yield, intensity of labor use, and technical efficiency while reducing yield variability. With some 7 percent increase in yields, the size of the estimated impact of potential consolidation remains modest, suggesting that in an unmechanized setting such as the one studied here, the costs of programs to reduce fragmentation may outweigh the benefits.
Can Grants to Consortia Spur Innovation and Science-Industry Collaboration? Regression-Discontinuity Evidence from Poland
(Published by Oxford University Press on behalf of the World Bank, 2019-10) Bruhn, Miriam ; McKenzie, David
Innovation policy aims to foster collaborations between science and industry in many countries, but there is little evidence for the effectiveness of such efforts in developing countries. We use regression discontinuity to measure the impact of funding from Poland’s In-Tech program on innovation activities carried out by consortia of firms and research entities. A detailed follow-up survey of applicants enables us to measure a wider variety of outcomes than typically used in the literature. We find that the grants increase the probability of a project being completed by almost 60 percentage points, lead to more science-industry collaboration, and increase the probability of domestic patents and publications related to the proposed project. We also find early effects on commercialization of products related to the proposed project.
Importing and Firm Productivity in Ethiopian Manufacturing
(Published by Oxford University Press on behalf of the World Bank, 2019-10) Abreha, Kaleb Girma
This paper investigates the causal relationship between importing and firm productivity. Using a rich dataset from Ethiopian manufacturing over the period 1996–2011, I find that most firms rely on production inputs from the world market. These firms are better performing as shown by significant, economically large import premia. I also find strong evidence of self-selection of more productive firms into importing which is indicative of sizable import market entry costs. To examine the causal effect of importing on firm productivity, I use a model in which the static and dynamic effects of importing are separately estimated. The estimation results provide support to learning-by-importing. However, the productivity gains are small in size compared to similar findings in other studies. I provide some evidence in support of firms’ limited absorptive capacity in explaining the small productivity gains.
Finding the Poor vs. Measuring Their Poverty: Exploring the Drivers of Targeting Effectiveness in Indonesia
(Published by Oxford University Press on behalf of the World Bank, 2019-10) Bah, Adama ; Bazzi, Samuel ; Sumarto, Sudarno ; Tobias, Julia
Centralized targeting registries are increasingly used to allocate social assistance benefits in developing countries. There are two key design issues that matter for targeting accuracy: (i) which households to survey for inclusion in the registry; and (ii) how to rank surveyed households. We attempt to identify their relative importance by evaluating Indonesia's Unified Database for Social Protection Programs (UDB), among the largest targeting registries in the world, used to provide social assistance to over 25 million households. Linking administrative data with an independent household survey, we find that the UDB system is more progressive than previous, program-specific targeting approaches. However, simulating an alternative targeting system based on enumerating all households, we find a one-third reduction in undercoverage of the poor compared to focusing on households registered in the UDB. Overall, there are large gains in targeting performance from improving the initial registration stage relative to the ranking stage.
The Contribution of Increased Equity to the Estimated Social Benefits from a Transfer Program: An Illustration from PROGRESA/Oportunidades
(Published by Oxford University Press on behalf of the World Bank, 2019-10) Alderman, Harold ; Behrman, Jere R. ; Tasneem, Afia
Most impact evaluations of Conditional Cash Transfers (CCTs) and Unconditional Cash Transfers (UCTs) focus on the returns to increased human capital investments that will be reaped largely or exclusively in the future (e.g., when current children have increased productivities as adults). But the objectives of these programs are not only to increase human capital investments with implications for future levels and distributions of income but also to alleviate current poverty and reduce current inequality. The current distributional gains from such programs depend on the degree of inequality aversion in the social welfare function. Simulations show that, for a range of inequality aversion parameters, the welfare gains from current redistribution for the Mexican PROGRESA CCT program can be as large, or possibly much larger, than the estimated present discounted value of future earnings from human capital investments in lower and upper secondary schooling. These, moreover, are underestimates of the gains from redistribution because, in addition to current gains, such gains will be augmented in the future through the distribution of the returns on the human capital investments induced by cash transfer programs. Therefore, to fully evaluate such programs, it is critical to incorporate the distributional gains, not only the impacts on human capital investments.
Distribution-Sensitive Multidimensional Poverty Measures
(Published by Oxford University Press on behalf of the World Bank, 2019-10) Datt, Gaurav
This paper presents axiomatic arguments to make the case for distribution-sensitive multidimensional poverty measures. The commonly used counting measures violate the strong transfer axiom, which requires regressive transfers to be unambiguously poverty increasing, and they are also invariant to changes in the distribution of a given set of deprivations among the poor. The paper appeals to strong transfer as well as an additional cross-dimensional convexity property to offer axiomatic justification for distribution-sensitive multidimensional poverty measures. Given the nonlinear structure of these measures, it is also shown how the problem of an exact dimensional decomposition can be solved using Shapley decomposition methods to assess dimensional contributions to poverty. An empirical illustration for India highlights distinctive features of the distribution-sensitive measures.
Psychic versus Economic Barriers to Vaccine Take-Up: Evidence from a Field Experiment in Nigeria
(Published by Oxford University Press on behalf of the World Bank, 2019-10) Sato, Ryoko ; Takasaki, Yoshito
This paper experimentally evaluates the relative importance of psychic costs of tetanus vaccination compared to monetary costs among women in rural Nigeria. We compare vaccine take-up between two conditions to receive cash incentives: clinic attendance vs. vaccine take-up. Because the only difference between these two conditions is whether a woman was required to receive a vaccine upon arrival at the clinic, the difference in clinic attendance between these two groups captures the psychic costs of vaccination. Contrary to conventional wisdom, we find no evidence for significant psychic costs. Priming about disease severity increases the perceived severity of disease, but not vaccine take-up. Monetary costs strongly affect vaccination decisions.
The Role of Social Ties in Factor Allocation
(Published by Oxford University Press on behalf of the World Bank, 2019-10) Beck, Ulrik ; Bjerge, Benedikte ; Fafchamps, Marcel
We investigate whether social structure helps or hinders factor allocation using unusually rich data from the Gambia. Evidence indicates that land available for cultivation is allocated unequally across households; and that factor transfers are more common between neighbors, co-ethnics, and kinship-related households. Does this lead to the conclusion that land inequality is due to flows of land between households being impeded by social divisions? To answer this question, a novel methodology that approaches exhaustive data on dyadic flows from an aggregate point of view is introduced. Land transfers lead to a more equal distribution of land and to more comparable factor ratios across households in general. But equalizing transfers of land are not more likely within ethnic or kinship groups. In conclusion, ethnic and kinship divisions do not hinder land and labor transfers in a way that contributes to aggregate factor inequality. Labor transfers do not equilibrate factor ratios across households. But it cannot be ruled out that they serve a beneficial role, for example, to deal with unanticipated health shocks.
Impact of Free Trade Agreement Use on Import Prices
(Published by Oxford University Press on behalf of the World Bank, 2019-10) Hayakawa, Kazunobu ; Laksanapanyakul, Nuttawut ; Mukunoki, Hiroshi ; Urata, Shujiro
We examine the impact of free trade agreement (FTA) use on import prices. For this analysis, we employ establishment-level import data with information on tariff schemes, that is, the FTA and most-favored-nation schemes used for importing. Unlike previous studies, we estimate the effects of FTA use on prices by controlling for differences in importing-firm characteristics. There are three main findings. First, the effect of FTA use is overestimated when not controlling for importing firm-related fixed effects. Second, on average, firms’ FTA use reduces tariffs by 12 percentage points and raises import prices by 3.6–6.7 percent. Third, in general, we do not find a price rise resulting from the costs of complying with rules of origin.
Borrowing for Growth: Big Pushes and Debt Sustainability in Low-Income Countries
(Published by Oxford University Press on behalf of the World Bank, 2019-10) Zanna, Luis-Felipe ; Buffie, Edward F. ; Portillo, Rafael ; Berg, Andrew ; Pattillo, Catherine
The paper evaluates big push borrowing-and-investment programs in a new model-based framework of debt sustainability that is explicitly designed for policy analysis. The new framework is grounded in a fully-articulated, dynamic macroeconomic model. It allows for financing schemes that mix concessional, external commercial, and domestic debt, while taking into account the impact of public investment on growth and constraints on the speed and magnitude of fiscal adjustment. Supplementing concessional loans with nonconcessional borrowing in world capital markets is generally a high-risk, high-return strategy. It may greatly enhance the prospects for debt sustainability or lead to spectacular failure; much depends on the fine details governing debt contracts, the dynamics of growth, and the speed of fiscal adjustment.
Redistribution and Group Participation: Experimental Evidence from Africa and the UK
(Published by Oxford University Press on behalf of the World Bank, 2019-10) Fafchamps, Marcel ; Vargas Hill, Ruth
We investigate whether the prospect of redistribution hinders the formation of efficiency-enhancing groups. We conduct an experiment in a Kenyan slum, Ugandan villages, and a UK university town. We test, in an anonymous setting with no feedback, whether subjects join a group that increases their endowment but exposes them to one of three redistributive actions: stealing, giving, or burning. We find that exposure to redistributive options among group members operates as a disincentive to join a group. This finding obtains under all three treatments—including when the pressure to redistribute is intrinsic. However the nature of the redistribution affects the magnitude of the impact. Giving has the least impact on the decision to join a group, while forced redistribution through stealing or burning acts as a much larger deterrent to group membership. These findings are common across all three subject pools, but African subjects are particularly reluctant to join a group in the burning treatment, indicating strong reluctance to expose themselves to destruction by others.
The Effects of Health Insurance within Families: Experimental Evidence from Nicaragua
(Published by Oxford University Press on behalf of the World Bank, 2019-10) Fitzpatrick, Anne ; Thornton, Rebecca
This paper measures the causal effects of parent enrollment into voluntary health insurance on healthcare utilization among insured and uninsured children in Nicaragua. The study utilizes a randomized trial and age-eligibility cutoff in which insurance subsidies were randomly allocated to parents that covered their dependent children under 12; children age 12 and older were not eligible for coverage. Among eligible children, the insurance increased utilization at covered providers by 0.56 visits and increased overall utilization by 1.3 visits. Ineligible children with insured parents experienced 1.7 fewer healthcare visits driven by parent, not sibling, enrollment. The results suggest complementarities across healthcare provider type and provide evidence that households reallocate resources across all members in response to changes in healthcare prices for some.