Journal Issue: World Bank Economic Review, Volume 36, Issue 2
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Volume
36
Number
2
Issue Date
2022-05-01
Journal Title
Journal ISSN
1564-698X
Journal
World Bank Economic Review
1564-698X
Journal Volume
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Articles
Urban Agglomeration and Firm Innovation
(Published by Oxford University Press on behalf of the World Bank, 2021-10-05) Chen, Liming; Hasan, Rana; Jiang, Yi
This paper examines the relationship between urban agglomeration and firm innovation using a recently developed dataset that consistently measures city boundaries across Asia together with geo-referenced firm-level data. It finds that the spatial distribution of innovation by firms is highly concentrated within countries. Further, firms in larger cities have substantially higher propensities to introduce product and process innovations and to undertake R&D activities, a result that holds for subgroups of countries and even when the largest cities are excluded from the analysis. Finally, the presence of high-quality universities and highly ranked engineering departments in cities is positively associated with firm innovation, lending support to the idea that the accumulation of human capital locally is a key channel through which urban agglomeration affects innovation.
Land Rezoning and Structural Transformation in Rural India
(Published by Oxford University Press on behalf of the World Bank, 2021-02-28) Blakeslee, David; Chaurey, Ritam; Fishman, Ram; Malik, Samreen
Zoning laws that restrict rural land to agricultural production pose an important institutional barrier to industrial development. We study the effects of the Industrial Areas (IA) program in Karnataka, India, which rezoned agricultural land for industrial use, but without the economic incentives common with other place-based policies. We find that the program caused a large increase in firm creation and employment in villages overlapping the IAs. Moreover, the surrounding areas experienced spillover effects, with workers shifting from agricultural to non-agricultural employment, and entrepreneurs establishing numerous small-scale service sector and agricultural firms.
A Tale of Two Programs
(Published by Oxford University Press on behalf of the World Bank, 2021-09-06) Bahal, Girish
This article revisits impact
evaluation studies on the largest public workfare in the
world, NREGA. In an environment where randomization is not
feasible, I show why an impact evaluation exercise on NREGA
should acknowledge the existence of an older program, SGRY.
Using novel district-level expenditure data on SGRY, this
article shows how ignoring the older program is likely to
underestimate the general equilibrium impact of the
employment policy on various relevant socioeconomic
outcomes. In most cases, ignoring SGRY underestimates
NREGA’s impact by 30–40 percent.
Opposition Media, State Censorship, and Political Accountability
(Published by Oxford University Press on behalf of the World Bank, 2021-09-06) Knight, Brian; Tribin, Ana
This study investigates the effects
of state censorship in the context of the 2007 government
closing of RCTV, a popular opposition television channel in
Venezuela. Some parts of the country had access to a second
opposition channel, Globovision, while other parts
completely lost access to opposition television. The first
finding, based upon ratings data, is that viewership fell on
the progovernment replacement, following the closing of
RCTV, but rose on Globovision in areas with access to the
signal. Based upon this switching, the paper investigates
whether support for Chavez fell in areas that retained
access to opposition television, relative to those that
completely lost access. Using three measures, Latin
barometer survey data, electoral returns, and data on
protest activity, the second finding is that support for
Chavez fell in municipalities that retained access to
opposition television, relative to municipalities that lost
access to opposition television. Taken together, these two
findings suggest that voters switching from censored outlets
to uncensored outlets can limit the effectiveness of state censorship.
How Important Is Temptation Spending? Maybe Less than We Thought
(Published by Oxford University Press on behalf of the World Bank, 2022-01-08) Brune, Lasse; Kerwin, Jason T.; Li, Qingxiao
Temptation plays a key role in
theoretical work on spending and saving in developing
countries. The limited empirical evidence on its importance,
however, suggests that cash transfers do not induce
increases in temptation spending. This paper expands the
evidence base by studying the effect of randomized exposure
to temptation on spending decisions in rural Malawi.
Consistent with the cash transfer literature, a more
tempting environment does not induce significant changes in
temptation spending. However, the magnitudes of both
temptation spending levels and the treatment effects are
somewhat sensitive to the definition of temptation spending
used. This paper examines the potential factors that may be
driving these 0 results, and suggests that future research
may find a limited role for temptation in the economic
decisions of the poor.
Consumption Subaggregates Should Not Be Used to Measure Poverty
(Published by Oxford University Press on behalf of the World Bank, 2021-09-06) Ligon, Ethan; Christiaensen, Luc; Sohnesen, Thomas Pave
Frequent measurement of poverty is
challenging because measurement often relies on complex and
expensive expenditure surveys that try to measure
expenditures on a comprehensive consumption aggregate. This
paper investigates the use of consumption subaggregates
instead. The use of consumption subaggregates is
theoretically justified if and only if all Engel curves are
linear for any realization of prices. This is very
stringent. However, it may be possible to empirically
identify certain goods that happen to have linear Engel
curves given prevailing prices, and when the effect of price
changes is small, such a subaggregate might work in
practice. The paper constructs such linear subaggregates
using data from Rwanda, Tanzania, and Uganda. The findings
show that using subaggregates is ill advised in practice as
well as in theory. This also raises questions about the
consistency of the poverty tracking efforts currently
applied across countries, since obtaining exhaustive
consumption measures remains an unmet challenge.
Poverty from Space
(Published by Oxford University Press on behalf of the World Bank, 2021-07-31) Engstrom, Ryan; Hersh, Jonathan; Newhouse, David
Can features extracted from high
spatial resolution satellite imagery accurately estimate
poverty and economic well-being The present study
investigates this question by extracting both object and
texture features from satellite images of Sri Lanka. These
features are used to estimate poverty rates and average
expected log consumption taken from small-area estimates
derived from census data, for 1,291 administrative units.
Features extracted include the number and density of
buildings, the prevalence of building shadows (proxying
building height), the number of cars, length of roads, type
of agriculture, roof material, and several texture and
spectral features. A linear regression model explains
between 49 and 61 percent of the variation in average
expected log consumption, and between 37 and 62 percent for
poverty rates. Estimates remain accurate throughout the
consumption distribution, and when extrapolating predictions
into adjacent areas, although performance falls when using
fewer households to calculate estimates of poverty and welfare.
The Macroeconomy After Tariffs
(Published by Oxford University Press on behalf of the World Bank, 2021-08-23) Furceri, Davide; Hannan, Swarnali A.; Ostry, Jonathan D.; Rose, Andrew K.
What does the macroeconomy look like
in the aftermath of tariff changes This study estimates
impulse response functions from local projections using a
panel of annual data that spans 151 countries from 1963 to
2014. Tariff increases are associated with persistent,
economically and statistically significant declines in
domestic output and productivity, as well as higher
unemployment and inequality, real exchange rate
appreciation, and insignificant changes to the trade
balance. Output and productivity impacts are magnified when
tariffs rise during expansions and when they are imposed by
more advanced or smaller (as opposed to developing or
larger) economies; effects are asymmetric, being larger when
tariffs go up than when they fall. While firmly establishing
causality is always a challenge, the results are robust to a
large number of perturbations to the baseline methodology,
and they hold using both macroeconomic and industry-level data.
Determinants of Global Value Chain Participation
(Published by Oxford University Press on behalf of the World Bank, 2021-08-30) Kee, Hiau Looi; Fernandes, Ana Margarida; Winkler, Deborah
The past decades have witnessed big
changes in international trade with the rise of global value
chains (GVCs). Some countries, such as China, Poland, and
Vietnam rode the tide, while other countries, many in the
Africa region, faltered. This paper studies the determinants
of countries’ GVC participation, based on a panel database
of more than 100 countries from 1990 to 2015. Results from a
three-pronged empirical approach show that factor
endowments, geography, political stability, liberal trade
policies, foreign direct investment and domestic industrial
capacity are very important in determining GVC
participation. These factors matter more for GVC trade than
traditional trade.
The Pass-Through of International Commodity Price Shocks to Producers’ Welfare
(Published by Oxford University Press on behalf of the World Bank, 2021-09-16) Kebede, Hundanol A.
International commodity price shocks
may have large impacts on producers in developing countries.
In this paper, a unique household panel data from Ethiopia
is utilized to show that a decrease in international coffee
price has strong pass-through to the consumption of
households that rely on coffee production as a main source
of livelihood. It also results in decreases in on-farm labor
supply (particularly male labor supply) and induces
reallocation of labor towards non-coffee fields but has
negligible effect on off-farm labor supply. The decline in
consumption has significant consequences on child
malnutrition: children born in coffee-producing households
during low coffee price periods have lower weight-for-age
and weight-for-height z-scores than their peers born in
non-coffee households.
The Intergenerational Effects of Economic Sanctions
(Published by Oxford University Press on behalf of the World Bank, 2021-10-23) Moeeni, Safoura
While economic sanctions are
successful in achieving political goals, they can hurt the
civilian population. These negative effects could be even
more detrimental and long lasting for future generations.
This study estimates the effects of economic sanctions on
children’s education by exploiting the United Nations
sanctions imposed on Iran in 2006. Using the variation in
the strength of sanctions across industries and
difference-in-differences with synthetic control analyses,
this study finds that the sanctions decreased children’s
total years of schooling by 0.1 years and the probability of
attending college by 4.8 percentage points. Moreover,
households reduced education spending by 58 percent,
particularly on school tuition. These effects are larger for
children who were exposed to the sanctions for longer. The
results imply that sanctions have a larger effect on the
income of children than their parents. Therefore, ignoring
the effects of sanctions on future generations significantly
understates their total economic costs.