Kaiser, Kai

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Kaiser, Kai

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Public finance

Last updated January 31, 2023

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Problem-Driven Governance and Political Economy Analysis : Good Practice Framework

(World Bank, Washington, DC, 2009-09) Fritz, Verena ; Kaiser, Kai ; Levy, Brian

Politics and the political economy matter for whether and how reforms happen in developing as well as in developed countries. The World Bank as an institution and its individual country and task teams has been grappling with this issue for many years. The good practice framework described here is an attempt to summarize relevant analytic tools and approaches, to indicate how it can be used (more) systematically, and to make key lessons readily available. It also seeks to set out how such tools can be used in a way that is problem driven, that is, focused on specific issues and challenges rather than on developing broad overviews, in order to generate operationally relevant findings and implications. Integrating governance and political economy (GPE) analysis more systematically into Bank operational work is important to enhance development effectiveness, to better address risks, and to respond to client demands for approaches that are tailored to specific situations. The objective of this framework is to systematize approaches to GPE analysis and to provide orientation for teams that are considering undertaking it. The framework especially draws on the experience with a number of pilot studies undertaken in FY2008 and FY2009, as well as on earlier studies. Analysis focused on a variety of sectors- electricity, transport, and telecommunications, water, and public sector reforms and on thematic challenges, especially the management of natural resource wealth. The framework is therefore tailored to the context of Bank operations and strategy development (such as country assistance strategies) designed to show how GPE analysis can be used to inform and shape them to support more effective development. The framework is divided into six parts: part one discusses the overall rationale of this framework and sets out the key foundations. Part two discusses how PGPE analysis can be used to inform and shape Bank strategies and operations, and offers options for translating the analysis into action more broadly. Part three sets out the various levels of analysis that may be undertaken, from an overall country focus, to a sector or thematic focus, to a GPE analysis that is undertaken to inform specific projects or policy decisions. Part four addresses the issue of evidencing a GPE analysis, a key challenge in producing high-quality work. Part five addresses process issues that arise when undertaking GPE-type analysis. Finally, part six gives conclusion and looking forward.
Electoral Accountability and Local Government Spending in Indonesia

(World Bank, Washington, DC, 2014-02) Skoufias, Emmanuel ; Narayan, Ambar ; Dasgupta, Basab ; Kaiser, Kai

This paper takes advantage of the exogenous phasing of direct elections in districts and applies the double-difference estimator to measure impacts on (i) human development outcomes and (ii) the pattern of public spending and revenue generation at the district level. The analysis reveals that four years after the switch to direct elections, there have been no significant effects on human development outcomes. However, the estimates of the impact of Pilkada on health expenditures at the district level suggest that directly elected district officials may have become more responsive to local needs at least in the area of health. The composition of district expenditures changes considerably during the year and sometimes the year before the elections, shifting toward expenditure categories that allow incumbent district heads running as candidates in the direct elections to "buy" voter support. Electoral reforms did not lead to higher revenue generation from own sources and had no effect on the budget surplus of districts with directly elected heads.
Agglomeration, Transport, and Regional Development in Indonesia

(World Bank, Washington, DC, 2005-01) Deichmann, Uwe ; Kaiser, Kai ; Lall, Somik V. ; Shalizi, Zmarak

How effective are public interventions in addressing significant regional disparities in formal manufacturing concentration in a developing economy? The authors examine the aggregate and sectoral geographic concentration of manufacturing industries for Indonesia, and estimate the impact of factors influencing location choice at the firm level. They distinguish between natural advantage, including infrastructure endowments, wage rates, and natural resource endowments, and production externalities, arising from the co-location of firms in the same or complementary industries. The methodology pays special attention to empirically distinguishing the impact of measured production externalities from unobserved local characteristics. Depending on the sector, the authors find that a mix of both forms of regional advantage explains the geographic distribution of firms. Based on the estimated location choice model, they illustrate the potential impacts of policy interventions on manufacturing distribution by simulating the effectiveness of transport improvements on relocation of firms. Their findings suggest that improvements in transport infrastructure may only have limited effects in attracting industry to secondary industrial centers outside of Java, especially in sectors already established in leading regions. The findings underscore the challenges for addressing the industrial fortunes of lagging regions, either through local decentralized policy interventions or national policies focused on infrastructure development.
Evaluating Fiscal Equalization in Indonesia

(World Bank, Washington, DC, 2006-05) Hofman, Bert ; Kadjatmiko ; Kaiser, Kai ; Suharnoko Sjahrir, Bambang

This paper presents a methodology to evaluate fiscal decentralization focusing on the potential mis-targeting of intergovernmental fiscal equalization transfers. The approach builds on an explicit comparison and the summary measurement of different (horizontal) allocation distributions across states or localities. Whereas formula-based fiscal transfers have the merit of being transparent and promoting revenue predictability in fiscal decentralization, in practice, two challenges emerge: (1) What are the appropriate formula designs given the sub-national data constraints evident in most decentralizing developing countries? and (2) How costly in terms of mis-targeting to the presumed expenditure needs and fiscal capacity are deviations from these types of benchmark formulas (for example, due to historical factors or the need to meet establishment costs such as civil service wages)? The authors illustrate this approach by assessing Indonesia's evolving intergovernmental fiscal system instituted in the 2001 Big Bang decentralization. The discussion comes against Indonesia's recent policy decision to fully fund sub-national civil servant wages as part of the base general allocation grant (DAU) transfers, raising questions about both incentive effects for local governments and potential mis-targeting. The authors identify potential efficiency losses from the DAU's horizontal misallocation from half a dozen alternative scenarios found in the policy dialogue, ranging from 9 to 30 percent-on the order of US$ 3.9 billion-of the overall annual size of this large intergovernmental transfer. The scale of these tradeoffs highlights the importance of intergovernmental transfers in more general debates in public finance for decentralized countries.
Intergovernmental Fiscal Management in Natural Resource-Rich Settings

(World Bank, Washington, DC, 2014) Vinuela, Lorena ; Kaiser, Kai ; Chowdhurie-Aziz, Monali

In resource-dependent countries, natural resources constitute one of the main assets available for financing local governments because the economy is not greatly diversified. The goal of this note is to highlight different critical dimensions of intergovernmental fiscal relations in these settings, present a survey of the range of arrangements used for managing resource rents across multiple levels of government, and synthesize basic principles or considerations in the implementation of revenue-sharing systems across different contexts. The design and implementation of measures to improve intergovernmental management of the oil, gas, and mining sector must consider the core policy objectives, fiscal context, and overall political structure. Paying attention to the constraints and political economy drivers that shape intergovernmental relations is critical to identify the feasible reforms and alternatives to improve performance that are available in a given country.
The “Resource Curse” in MENA? Political Transitions, Resource Wealth, Economic Shocks, and Conflict Risk

( 2011-07-01) Ross, Michael ; Kaiser, Kai ; Mazaheri, Nimah

The recent political upheavals in the Middle East and North Africa region have exposed growing concerns about conflict risk, political stability, and reform prospects across its societies. Given the prevalence of oil and gas resource endowments in the region, which a voluminous literature suggests can be associated with adverse development consequences, this paper examines the interplay between their associated rents and political economy trajectories. The contribution of the paper is threefold: first, to examine the quantitative evidence of violent conflict in the region since 1960; second, to provide a nuanced review of the regional case study literature on the relationship between resource endowments, political stability, and conflict risk; and third, to assess how prospective political transitions have implications for the World Bank Group's work in the region on public sector management and private sector development. The authors find that resources and regimes have intersected to provide stability and limited violent conflict in the region, but that these development patterns have yielded a set of policy choices and development patterns that are proving increasingly brittle and unsustainable. A major institutional challenge for reforms will be to consolidate a requisite degree of inter-temporal credibility and stability in these regimes, while expanding inclusiveness in state-society relations.
Rents to Riches? The Political Economy of Natural Resource-led Development

(World Bank, 2012) Barma, Naazneen H. ; Kaiser, Kai ; Le, Tuan Minh ; Vinuela, Lorena

This volume emphasizes instead the notion of 'good fit,' taking the position that welfare-promoting policies, institutions, and governance must be tailored, at least in part, to a country's specific context. In this vein, the volume presents an analytical framework for assessing a country's political economy and institutional environment as it relates to natural resource management and, on that basis, it offers a substantial set of targeted prescriptions across the natural resource value chain that are technically sound and compatible with the identified underlying incentives. In other words, the objective of this book is to help development practitioners unravel the political economy dynamics surrounding natural resource management in order to complement their technically grounded engagement. To this end, the analytical approach has been two-pronged. First, case studies were conducted on the political economy of the hydrocarbon and mineral value chains in 13 countries in the Africa, East Asia and Pacific, and Latin America and the Caribbean regions. Second, in light of this empirical material, the book highlights the current frontier of applied political economy analysis on resource dependence. This volume synthesizes the empirical and the theoretical with an emphasis on illuminating the implications for operational engagement in resource-dependent settings.
Electoral Accountability, Fiscal Decentralization and Service Delivery in Indonesia

( 2011-03-01) Skoufias, Emmanuel ; Narayan, Ambar ; Dasgupta, Basab ; Kaiser, Kai

This paper takes advantage of the exogenous phasing of direct elections in districts and applies the double difference estimator to: (i) measure impacts on the pattern of public spending and revenue generation at the district level; and (ii) investigate the heterogeneity of the impacts on public spending. The authors confirm that the electoral reforms had positive effects on district expenditures and these effects were mainly due to the increases in expenditures in the districts outside Java and Bali and the changes in expenditures brought about by non-incumbents elected in the districts. Electoral reforms also led to higher revenue generation from own sources and to higher budget surplus. Finally, the analysis finds that in anticipation of the forthcoming direct elections, district governments tend to have higher current expenditures on public works.