Journal Issue: World Bank Research Observer, Volume 22, Issue 2

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Using Global Positioning Systems in Household Surveys for Better Economics and Better Policy
(World Bank, 2007-09-30) Gibson, John ; McKenzie, David
Using Global Positioning Systems in Household Surveys for Better Economics and Better Policy John Gibson David McKenzie Distance and location are the important determinants of many choices that economists study. This article reviews four ways that GPS can lead to better economics and better policy by clarifying policy externalities and spillovers, by improving the understanding of access to services, by improving the collection of household survey data, and by providing data for econometric modeling of the causal impact of policies. 6 This article reviews four ways that GPS can lead to better economics and better policy by clarifying policy externalities and spillovers, by improving the understanding of access to services, by improving the collection of household survey data, and by providing data for econometric modeling of the causal impact of policies. They also find evidence of positive spatial correlation in unobserved shocks to the productivity of fertilizer, highlighting the importance of controlling for geographic effects when examining learning. They find that naive estimates that fail to take externalities into account would underestimate the program treatment effects, leading to the mistaken conclusion that deworming is not cost-effective. Using GPS Can Improve the Collection of Household Survey Data GPS is also being used to improve the quality and cost-effectiveness of household survey data. More accurate and cost-effective surveying enables researchers to carry out better analysis and provide better evidence-based advice to policy-makers. GPS Can Be Used to Provide Data for Econometric Modeling of the Causal Impacts of Policies Most empirical work in development economics aims to identify the effect of a particular variable of interest, X, on a particular outcome, Y. A standard concern is that there are other variables that are correlated with X and that also affect Y. John Gibson and David McKenzie 225 Failure to control for these variables gives biased results. Uncertainty about how to proceed may mean that spatially explicit data are underutilized, undermining the role of data sharing and data preservation in advancing science or that researchers inadvertently disclose information that can identify survey respondents. Human-subject panels (which review the benefits and risks to subjects of research projects) can play an important role in protecting confidentiality, but researchers need to be aware of the costs of the different approaches.
Comment on "Evaluating Recipes for Development Success"
(World Bank, 2007-09-30) Keefer, Philip
Two arguments are important: that the rule of law and the security of property rights are important for growth and that they are the product of political institutions. Professor Dixit argues that identification and other concerns undermine the second argument and inhibit the formulation of policy recommendations. Avinash Dixit reviews many of the recent contributions to the literature that examine the "big" questions in economic development, particularly those concerning the fundamental differences between countries that manage to sustain rapid economic growth and those that do not. Practitioners can nevertheless learn from the generalizations that academic research yields, but they should examine the plausibility of those generalizations, taking into account the many idiosyncrasies The Author 2007. These are based on particular historical and geographic features of countries that researchers theorize should determine the security of property rights but that should not directly affect growth. Just as important, compared with such determinants of political behavior as history and regime type, theses sources of variation in political incentives have at least somewhat more tractable policy implications for what donors and governments should and should not do. Incremental approaches that fail to take the conditions of political decision-making into account in a systematic way are no more likely to succeed than "maximalist" approaches. Less targeted programs, in which targeting is crude but easy to communicate and simple to implement, may offer a greater contribution to development by building political credibility, even at the cost of economic inefficiency. From the first Public Expenditure Tracking Philip Keefer 163 Survey in Uganda, which led to a 90 percent reduction in the diversion of capitation grants to schools, to report cards on public services, pioneered in Bangalore, India, but expanding to China and elsewhere, a variety of tactics are emerging to close the information gap between citizens and politicians. Despite this--despite the fact that such analyses are concerned with big ideas--this line of research shows considerable promise in informing both the content and the design of the reform agenda in countryspecific contexts.
Evaluating Recipes for Development Success
(World Bank, 2007-09-30) Dixit, Avinash
Evaluating Recipes for Development Success Avinash Dixit This article offers a provocative critique of the ability of research on the impact of institutions on growth to offer immediate and practical recommendations for reforming and redesigning institutions in developing countries and transition economies. The article suggests a Bayesian diagnostic procedure to identify the causes of economic failure in an individual country as a first step toward remedying the failure. The main purpose of the most scholarly research, both theoretical and empirical, is to improve our understanding of the phenomena and processes being studied. In the concluding section, I suggest a framework or methodology of research that combines general conceptual and empirical findings from academic research and the experience of practitioners to help narrow or identify the causes of failures in individual countries. Besley and Burgess (2002), using panel data from India, find that an informed and active electorate leads to effective incentives for governments to respond to economic problems and that mass media play an important part. Acemoglu (2003) argues that the lack of third-party enforcement in political contracts makes it harder to make credible commitments, and that this explains the absence of a Coase theorem ensuring efficient outcomes in political bargaining. Finally, the theoretical literature, using a repeated-game framework, shows how a partial improvement of an imperfect formal system, by providing a better outside alternative and thereby lessening the harmful consequences of breaking a relational contract, can worsen the outcomes of the informal system (Baker, Gibbons, and Murphy 1994; Dixit 2004). They find that a country's initial conditions are more important than policy changes in determining its economic performance during the first few years of transition; that is, whether the reforms are rapid or gradual is less important. Pmn Avinash Dixit 151 If we observe a particular effect, say E7, then the Bayesian posterior probability that a particular cause, say C5, is present becomes p P Pm 5 5;7 : i 1 pi Pi;7 If we want to be nearly certain whether a cause, say C5, is present, we need to find an outcome, say E7, which will more typically be a cluster of outcomes or symptoms and might be called a "syndrome," such that It is very unlikely to occur when the underlying cause is any other cause, that is, Pi7 is close to It is very likely to occur when C5 is present, that is, P5,7 is close to one, so the rest of the P5,j's are close to zero, and if some other effect is observed, the posterior probability of C5 becomes close to zero.
Inside Decentralization
(World Bank, 2007-09-30) Umansky, Ilana ; Vegas, Emiliana
Inside Decentralization: How Three Central American School-based Management Reforms Affect Student Learning Through Teacher Incentives Ilana Umansky Emiliana Vegas Despite decentralization reforms of education systems worldwide, there is little empirical evidence about the processes through which decentralization can improve student learning. This article contributes to the understanding of how decentralization reforms can improve learning and shows how education reforms, even when not conceptualized as affecting teacher incentives, can generate important changes for teachers that, in turn, affect student learning. The goal is to broaden the conception of how education reforms affect teachers by influencing teacher incentives and to explore how to design and implement these reforms to maximize their beneficial effects on teaching and learning. This article shows that education reform design should consider the potential impact on teaching quality, even when reforms are not specifically intended to alter the incentives that teachers face. She finds that greater teacher autonomy in implementing projects and designing teaching plans is associated with better student outcomes when school decisionmaking power is close to the level of the teacher. After the war ended, the central government acknowledged the success of these schools in providing education cost-effectively in remote areas and in 1991 decided to expand the program. If a school's choice or assignment into the program is based on expected benefits from participation, such as a school's need or likelihood of success, as is almost certainly the case in the Central American reforms, then the characteristics of those who participate will not be comparable to the characteristics of those who do not. These include evaluation of participating schools before and after the reform; matched comparison, in which a comparison group is chosen to match the observed characteristics of the treatment group; propensity score matching, which involves constructing a comparison group based on its conditional probability of receiving treatment given a set of observable characteristics; and natural experiments, which are naturally occurring experimental conditions due to quirks, isolated changes, or idiosyncrasies in EDUCO Schools Report Significantly More School-level Control Than Comparison Schools in Few Areas Area Ordinary least squares Propensity score matching Determine salary Determine teacher incentives Evaluate teachers Give teacher incentives Hire and fire administration Hire and fire director Hire and fire teachers Spend school money Teachers association activity Teacher supervision 0.05 0.10 20.01 0.03 0.33*** . Conclusions Previous research on educational decentralization has explored the impact of various decentralization reforms on indicators such as student learning and completion.
Domestic Bond Market Development
(World Bank, 2007-09-30) Batten, Jonathan A. ; Szilagyi, Peter G
A two-tiered approach to financial market development aimed at both bank and bond market reform would also be complementary to longer term economic development, provided services could be delivered through efficient financial and legal institutions (Chakraborty and Ray 2006) and there was strong protection for investors and sound fiscal and monetary policy management by government (Burger and Warnock 2006b). Historically, local issuers tend to issue in the major currencies (U.S. dollars, yen, and euro), and then either swap the proceeds into local currency (interest rate parity theory suggests this should deliver funds equivalent in yield to what is available in the domestic market) or, more often, sell the foreign currency proceeds in spot foreign exchange markets, leaving the repayment cash flows unhedged. Chakraborty and Ray (2006) recently established that although stronger bank monitoring helps to resolve information asymmetries and agency concerns, it is the efficiency of financial and legal institutions that influences growth outcomes, whether there is a bank- or a market-based financial system. Among them are the need for enabling regulation, including reform of withholding and other foreign investor taxes (Lejot, Arner, and Liu 2006); continuing reform of corporate governance, which includes better creditor rights, bankruptcy procedures, and contract enforcement (Beck, Levine, and Loayza 2000; Burger and Warnock 2006); and strong financial infrastructure for better information disclosure, the establishment of reliable credit ratings (Kisselev and Packer 2006) and robust benchmark yield curves The securities market is largely self-regulated through organizations such as the Korea Securities Dealers Association, the Korea Exchange, and the Korea Securities Depository, and four local agencies assign credit ratings: Korea Investor Service (a Moody's affiliate), Korea Ratings (a Fitch affiliate), National Information & Credit Evaluation, and Seoul Credit Rating & Information. This process began in 2004 with the introduction of the Korea Interbank Offered Rate (KORIBOR), which should become the benchmark interest rate for short-term financing for banks and may become a reference rate for bond or swap transactions. The first phase of the Foreign Exchange Liberalization Plan (2002 2005) increased won funding limits for nonresidents and raised the ceiling on the amount of residents' foreign borrowings requiring notification. The 2005 merger of the Korea Stock Exchange, the Korean Securities Dealers Automated Quotation stock market, and the Korea Futures Exchange into the Korea Exchange is expected to upgrade the competitiveness of the nation's trading system for a variety of financial products, including stocks, bonds, options, and other derivatives. There appears to be a natural ordering to the tasks involved: first, establish benchmark bonds and indices; second, develop a diverse derivatives market; third, systematically lengthen the bond market's maturity profile; and fourth, build and develop over-the-counter capability and price structures for derivatives and other complex financial instruments. In developed countries, as banks have become increasingly cautious about extending credit, a gradual process of disintermediation has been occurring in historically bank-oriented financial regimes, fed by considerable regulatory efforts directed at market liberalization.