Journal Issue:World Bank Economic Review, Volume 39, Issue 2
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Volume
39
Number
2
Issue Date
2025-05
Journal Title
Journal ISSN
1564-698X
Journal
World Bank Economic Review
1564-698X
Journal Volume
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Articles
Organizational Hierarchies and Export Destinations
(Published by Oxford University Press on behalf of the World Bank, 2025-05-23) Brambilla, Irene; César, Andrés; Falcone, Guillermo; Guido, Porto
This paper proposes a new link relating export destinations and the organization of the firm: the production of higher-quality varieties exported to rich destinations induces firms to restructure their production processes, becoming organizationally more complex. A theoretical model with these features is presented, and then the mechanisms are explored using a panel of Chilean manufacturing plants. The identification strategy of the paper relies on falling tariffs on Chilean products across destinations caused by the signature of Free Trade Agreements with high-income countries (the European Union, the United States, and South Korea). Results show that Chilean plants induced by these tariff reductions to start exporting to high-income destinations increased the number of hierarchical layers and upgraded the quality of their products. This involved the addition of qualified supervisors who facilitated the provision of higher product quality. These effects took place at new high-income export firms.
Does Aid Induce Foreign Direct Investment: Updated Evidence from a Quasi-Experiment
(Published by Oxford University Press on behalf of the World Bank, 2025-05-24) Tian, Junyan
While the catalytic effect of aid on foreign direct investment (FDI) has long been an implicit consensus among many policymakers and practitioners, assessments of this causal relationship remain limited and are not always reliable. To mitigate this evidence gap, this study applies an instrumental variable approach that leverages the graduation of the International Development Association (IDA) income threshold as a quasi-experiment to identify the causal linkage between foreign aid and FDI. The analysis reveals that a 1 percent drop in the ratio of aid to gross national income leads to a decline in FDI relative to gross domestic product by 0.9 percent in 42 developing countries from 1987 to 2019. In the face of the aid shock induced by IDA graduation, governments in recipient countries restrict their financial policy openness, through which aid could significantly impact subsequent foreign private investment. Results emphasize the necessity of concerted policy interventions to mitigate this negative aid shock.
Deep Trade Agreements and FDI in Partial and General Equilibrium
(Published by Oxford University Press on behalf of the World Bank, 2025-05-25) Larch, Mario; Yoto V, Yotov
This paper quantifies the relationships between deep trade agreements and foreign direct investment (FDI). The analysis relies on a structural framework that simultaneously enables (a) estimating the direct impact of deep trade agreements on FDI, (b) translating the partial deep trade agreement estimates into general equilibrium effects on FDI, and (c) obtaining partial deep trade agreement effects on trade and quantifying the impact of deep trade agreements on FDI through trade. The effects of deep trade agreements on both trade and FDI are sizeable, positive, and statistically significant. A counterfactual analysis suggests that together with direct and indirect channels deep trade agreements have contributed to a large but asymmetric increase in inward versus outward FDI.
Africa's Manufacturing Puzzle: Evidence from Tanzanian and Ethiopian Firms
(Published by Oxford University Press on behalf of the World Bank, 2025-05-26) Diao, Xinshen; Ellis, Mia; McMillan, Margaret; Rodrik, Dani
Recent growth accelerations in Africa are characterized by declining shares of the labor force employed in agriculture, increasing labor productivity in agriculture, and declining labor productivity in modern sectors such as manufacturing. To shed light on this puzzle, this study disaggregates firms in the manufacturing sector by average size, using two newly created firm-level panels covering Tanzania (2008-2016) and Ethiopia (1996-2017). The analysis identifies a dichotomy between larger firms with superior productivity performance that do not expand employment and small firms that absorb employment but do not experience much productivity growth. Large, more productive firms use highly capital-intensive techniques, in line with global technology trends, but significantly greater than what would be expected based on these countries’ income levels or relative factor endowments.
Chiefs, Courts, and Upholding Property Rights
(Published by Oxford University Press on behalf of the World Bank, 2025-05-26) Kpaka, Henry Musa
Land disputes are unavoidable and costly in formal courts in contexts with weak property rights and low state capacity. Many countries permit parallel informal dispute-resolution forums to relax the pressure on strained formal courts. This paper studies the extent to which one such forum, Chiefdom Land Committees (CLCs), in Sierra Leone can resolve land disputes. This paper constructs a data set of ligated cases at local courts nationwide. It implements a difference-in-difference design to estimate the effect of the CLCs on land caseload in the formal courts. Contrary to the policy goals, this paper finds that on average, chiefdoms with CLCs have higher land caseload in the formal courts three years on. By adopting the CLCs, chiefdoms plausibly made land issues more salient, but instead of providing final resolutions, CLCs are conduits for formalizing land disputes.
Subnational Income, Growth, and the COVID-19 Pandemic
(Published by Oxford University Press on behalf of the World Bank, 2025-05-26) Choudhary, M Ali; Dal Barco, Ilaria; Haqqani, Ijlal A; Lenzi, Federico; Limodio, Nicola
Using real-time data and machine-learning methods, we produce monthly aggregates on gross national income (GNI) for 147 Pakistani districts between 2012 and 2021. We use them to understand whether and how the COVID-19 pandemic affected Pakistan's growth and subnational income distribution. Three findings emerge from our analysis. First, districts experienced a sizable decline in income during the pandemic, as their monthly growth rate dropped on average by 0.133 percentage points. Second, a larger income drop occurred in districts with a higher COVID-19 incidence, corresponding to urban areas characterized by a higher population density. Third, COVID-19 caused a decline in income inequality across districts, with more affluent districts experiencing more negative income growth during the pandemic.
Integrating Survey and Geospatial Data for Geographical Targeting of the Poor and Vulnerable
(Washington, DC: World Bank, 2024-05-27) Gualavisi, Melany; Newhouse, David
To address the challenge of identifying the poorest villages in developing countries, this study introduces a cost-effective strategy that leverages a combination of household consumption surveys, geospatial data, and a partial registry. The study simulates a partial registry, containing data from 450 villages across 10 impoverished districts of Malawi, and contains proxy poverty indicators. These indicators are used to impute household per capita consumption estimates, which in turn are used to train a prediction model using publicly available geospatial data. This method is evaluated against an imputed reference of village welfare, derived from the 2016 household survey. The partial registry approach is benchmarked against three alternatives: proxy means test scores, the Meta Relative Wealth Index, and predictions from household surveys with geospatial indicators. Results show the partial registry model’s rank correlation with actual welfare measures at 0.75, outperforming the other methods significantly, which ranged from −0.02 to 0.2. These findings hold under various robustness checks, including the addition of Gaussian noise, indicating that collecting household-level proxy poverty data in low-income areas can significantly improve the performance of machine learning models that integrate survey and satellite imagery data for village-level geographic targeting.
(Joint) Bank Savings, Female Empowerment, and Child Labor in Rural Ethiopia
(Published by Oxford University Press on behalf of the World Bank, 2024-05-26) Galdo, Jose
This study examines whether the random allocation of single and joint savings accounts to cash crop farmers in rural Ethiopia is associated with increased savings and changes in decision-making authority and control over resources that could ultimately affect child labor and schooling resource allocations. Consistent with posited channels of intrahousehold bargaining models, women from households assigned to the joint saving treatment group show significant gains in autonomy and control of savings resources, broader financial empowerment, and increased labor participation. Positive effects on school participation and attendance are reported for girls, although point estimates are measured imprecisely. In a setting where schooling and child labor are not mutually exclusive, children work more when joint deposit accounts are available. In the absence of impacts on household income, this increase in child labor is explained by complementarities between adult farm labor and child labor in the household production function, which is reinforced by lumpy investments in labor-intensive agricultural inputs that likely increased the opportunity costs of children’s time.
Food Transfers, Cash Transfers, Behavior Change Communication and Child Nutrition
(Published by Oxford University Press on behalf of the World Bank, 2024-05-28) Ahmed, Akhter; Hoddinott, John; Roy, Shalini
This paper reports the results of two-year randomized control trials in two poor rural areas of Bangladesh. Treatment arms included monthly cash transfers, monthly food rations of equivalent value to the cash transfers, mixed monthly cash and food transfers, and treatment arms, one with food and one with cash, that combined transfers with nutrition-behavior communication change (BCC). This design enables a comparison of transfer modalities within the same experiment. Intent-to-treat estimators show that cash transfers and nutrition BCC greatly impacted nutritional status, a 0.25 standard deviation increase in height-for-age z-scores and a 7.8 percentage point decrease in stunting prevalence. No other treatment arm affected anthropometric outcomes. Mechanisms underlying these impacts are explored. Improved diets, particularly increased intake of animal source foods in the cash plus BCC arm, are consistent with the improvements observed in this paper.
Why Programs Fail
(Published by Oxford University Press on behalf of the World Bank, 2025-05-28) Schaffner, Julie; Glewwe, Paul; Sharma, Uttam
This study demonstrates rigorously that an at-scale government training program for secondary teachers in Nepal had little or no impact on student learning. It then documents five sets of weaknesses related to training uptake, training-session management, teacher subject knowledge, teacher adoption of new classroom practices, and student knowledge of earlier-grade curriculum content, each of which plausibly explains some, but not all, of the program’s failure. While weaknesses in trainer and teacher motivation may have contributed to the program’s disappointing performance, the study argues that time, resource, and capacity constraints of both trainers and teachers, and a mismatch between policy design and student learning needs, also limited program success. These results highlight the need to broaden common accountability-focused conceptions of how to improve public service quality.