Journal Issue: World Bank Economic Review, Volume 26, Issue 2

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Just Rewards? Local Politics and Public Resource Allocation in South India
(Oxford University Press for the World Bank, 2012-06-01) Besley, Timothy ; Pande, Rohini ; Rao, Vijayendra
What factors determine the nature of political opportunism in local government in South India? To answer this question, we study two types of policy decisions that have been delegated to local politicians—beneficiary selection for transfer programs and the allocation of within-village public goods. Our data on village councils in South India show that, relative to other citizens, elected councillors are more likely to be selected as beneficiaries of a large transfer program. The chief councillor's village also obtains more public goods, relative to other villages. These findings can be interpreted using a simple model of the logic of political incentives in the context that we study.
Conditional Cash Transfers and HIV/AIDS Prevention : Unconditionally Promising?
(Washington, DC: Oxford University on behalf of the World Bank, 2012-06-01) Kohler, Hans-Peter ; Thornton, Rebecca L.
Conditional cash transfers (CCTs) have recently received considerable attention as a potentially innovative and effective approach to the prevention of HIV/AIDS. We evaluate a conditional cash transfer program in rural Malawi which offered financial incentives to men and women to maintain their HIV status for approximately one year. The amounts of the reward ranged from zero to approximately 3–4 months wage. We find no effect of the offered incentives on HIV status or on reported sexual behavior. However, shortly after receiving the reward, men who received the cash transfer were 9 percentage points more likely and women were 6.7 percentage points less likely to engage in risky sex. Our analyses therefore question the “unconditional effectiveness” of CCT program for HIV prevention: CCT Programs that aim to motivate safe sexual behavior in Africa should take into account that money given in the present may have much stronger effects than rewards offered in the future, and any effect of these programs may be fairly sensitive to the specific design of the program, the local and/or cultural context, and the degree of agency an individual has with respect to sexual behaviors.
How Much of Observed Economic Mobility is Measurement Error? IV Methods to Reduce Measurement Error Bias, with an Application to Vietnam
(Oxford University Press on behalf of the World Bank, 2012-06-01) Glewwe, Paul
Research on economic growth and inequality inevitably raises issues concerning economic mobility because the relationship between long-run inequality and short-run inequality is mediated by income mobility; for a given level of short-run inequality, greater mobility implies lower long-run inequality. But empirical measures of both inequality and mobility tend to be biased upward due to measurement error in income and expenditure data collected from household surveys. This paper examines how to reduce or remove this bias using instrumental variable methods, and provides conditions that instrumental variables must satisfy to provide consistent estimates. This approach is applied to panel data from Vietnam. The results imply that at least 15 percent, and perhaps as much as 42 percent, of measured mobility is upward bias due to measurement error. The results also suggest that measurement error accounts for at least 12 percent of measured inequality.
Inequality of Opportunity in Egypt
(Oxford University Press on behalf of the World Bank, 2012-06-01) Hassine, Nadia Belhaj
The article evaluates the contribution of inequality of opportunity to earnings inequality in Egypt and analyzes its evolution across three time periods and different population groups. It provides parametric and nonparametric estimates of a lower bound for the degree of inequality of opportunity for wage and salary workers. On average, the contribution of opportunity-shaping circumstances to earnings inequality declined from 22 percent in 1988 to 15 percent in 2006. Levels of inequality of opportunity were fairly stable while earnings differentials widened markedly, leading to a decline in the share of inequality attributable to opportunities. Father's background and geographic origins had the largest effect on earnings, although the impact of mother's education has risen in recent years. The degree of inequality of opportunity did not differ significantly by gender or rural–urban area, although the incidence was lower for men and for rural areas. The results indicate an increase in inequality of opportunity across age groups, but there is some evidence that opportunity differentials have been declining for the oldest generation.
Can Global De-Carbonization Inhibit Developing Country Industrialization?
(Oxford University Press on behalf of the World Bank, 2012-06-01) Mattoo, Aaditya ; Subramanian, Arvind ; van der Mensbrugghe, Dominique ; He, Jianwu
Most economic analyses of climate change have focused on the aggregate impact on countries of mitigation actions. We depart first in disaggregating the impact by sector, focusing particularly on manufacturing output and exports. Second, we decompose the impact of a modest agreement on emissions reductions—17 percent relative to 2005 levels by 2020 for industrial countries and 17 percent relative to business-as-usual for developing countries—into three components: the change in the price of carbon due to each country's emission cuts per se; the further change in this price due to emissions tradability; and the changes due to any international transfers (private and public). Manufacturing output and exports in low carbon intensity countries such as Brazil are less affected. In contrast, in high carbon intensity countries, such as China and India, even a modest agreement depresses manufacturing output by 3–3.5 percent and manufacturing exports by 5.5–7 percent. The increase in the carbon price induced by emissions tradability hurts manufacturing output most while the real exchange rate effects of transfers hurt exports most.
Trade Liberalization and Investment : Firm-level Evidence from Mexico
(Oxford University Press on behalf of the World Bank, 2012-06-01) Kandilov, Ivan T. ; Leblebicioğlu, Aslı
Plant-level panel data from Mexico's Annual Industrial Survey is employed to evaluate the impact of reductions in tariffs and import license coverage on final goods, as well as intermediates, on firms'investment decisions. Using data from 1984 to 1990, a period during which a large scale trade liberalization occurred, a dynamic investment equation is estimated using the system-GMM estimator developed by Arellano and Bover (1995) and Blundell and Bond (1998). Consistent with theory, the empirical analyses show that a reduction in import protection on final goods leads to lower plant-level investment, whereas reductions in tariffs and import license coverage on intermediate inputs result in higher investment. Also, firms with larger import costs experience a larger increase in investment following a reduction in import protection. On the other hand, higher markup firms lower investment more aggressively following reductions in tariffs and import license coverage on final goods.
An Axiomatic Approach to the Measurement of Corruption : Theory and Applications
(Oxford University Press on behalf of the World Bank, 2012-06-01) Foster, James E. ; Horowitz, Andrew W. ; Méndez, Fabio
No generally accepted framework exists for constructing and evaluating measures of corruption. This article shows how the axiomatic approach of the poverty and inequality literature can be applied to the measurement of corruption. A conceptual framework for organizing corruption data is developed, and three aggregate corruption measures consistent with axiomatic requirements are proposed. The article also provides guidelines for empirical applications of corruption measures and discusses data requirements. A brief empirical example illustrates how each of the measures captures a distinct view of corruption that yields a different ranking. To the authors' knowledge, this article provides the first analysis of corruption measurement using an axiomatic framework.