Kraay, Aart

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Kraay, Aart

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Kraay, Aart

Fields of Specialization

Macroeconomics, Debt management, Economic growth, Inequality and shared prosperity

Last updated:July 21, 2025

Biography

Aart Kraay is the Chief Economist of the Prosperity Vertical at the World Bank, which covers the Bank's analytical and policy work on macroeconomics and growth, poverty and inequality, trade and private sector development, governance and institutions, and the financial sector. He joined the World Bank in 1995 after earning a Ph.D. in economics from Harvard University (1995), and a B.Sc. in economics from the University of Toronto (1990). His research interests include macroeconomics in developing countries, international capital movements, the links between growth, poverty and inequality, and governance and institutions. His research on these topics has been published in scholarly journals such as the Quarterly Journal of Economics, the Review of Economics and Statistics, the Economic Journal, the Journal of Monetary Economics, the Journal of International Economics, and the Journal of the European Economic Association. He is a member of the editorial board of the World Bank Research Observer and has served on the editorial boards of the Journal of Development Economics and the World Bank Economic Review. He has also held visiting positions at the International Monetary Fund and the Sloan School of Management at MIT and has taught at the School of Advanced International Studies at Johns Hopkins University.

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Now showing1 - 10 of 67

The Worldwide Governance Indicators: Methodology and 2024 Update
(Washington, DC: World Bank, 2024-11-07) Kaufmann, Daniel; Kraay, Aart
This paper provides an overview of the data sources and aggregation methodology for the Worldwide Governance Indicators (WGI). The WGI report six aggregate governance indicators measuring Voice and Accountability, Political Stability and Absence of Violence/Terrorism, Government Effectiveness, Regulatory Quality, Rule of Law, and Control of Corruption in a sample of 214 economies over the period 1996–2023. The aggregate indicators combine information from 35 different existing data sources, capturing subjective perceptions of the quality of various dimensions of governance reported by experts and survey respondents worldwide. The paper briefly discusses how to use reported margins of error when interpreting cross-country and over-time differences in the aggregate indicators. The paper also updates and extends earlier analysis on three key issues relating to the WGI methodology: (a) the effect of correlated perception errors, (b) the robustness of the aggregate indicators to alternative weighting schemes, and (c) the existence on trends in global averages of governance.
A New Distribution Sensitive Index for Measuring Welfare, Poverty, and Inequality
(Washington, DC: World Bank, 2023-06-22) Kraay, Aart; Lakner, Christoph; Özler, Berk; Decerf, Benoit; Jolliffe, Dean; Sterck, Olivier; Yonzan, Nishant
Simple welfare indices such as mean income are ubiquitous but not distribution sensitive. In contrast, existing distribution sensitive welfare indices are rarely used, often because they are difficult to explain and/or lack intuitive units. This paper proposes a simple new distribution sensitive welfare index with intuitive units: the average factor by which individual incomes must be multiplied to attain a given reference level of income. This new index is subgroup decomposable with population weights and satisfies the three main definitions of distribution sensitivity in the literature. Variants on this index can be used as distribution sensitive poverty measures and as inequality measures, with the same simple intuitive units. The properties of the new index are illustrated using the global distribution of income across individuals between 1990 and 2019, as well as with selected country comparisons. Finally, the index can be used to define the “prosperity gap” as a proposed new measure of “shared prosperity,” one of the twin goals of the World Bank.
The World Bank Human Capital Index: A Guide
(Published by Oxford University Press on behalf of the World Bank, 2019-02) Kraay, Aart
This paper provides a guide to the new World Bank Human Capital Index (HCI), situating its methodology in the context of the development accounting literature. The HCI combines indicators of health and education into a measure of the human capital that a child born today can expect to achieve by her 18th birthday, given the risks of poor education and health that prevail in the country where she lives. The HCI is measured in units of productivity relative to a benchmark of complete education and full health, and ranges from 0 to 1. A value of x on the HCI indicates that a child born today can expect to be only x×100 percent as productive as a future worker as she would be if she enjoyed complete education and full health.
Toward Successful Development Policies: Insights from Research in Development Economics
(World Bank, Washington, DC, 2020-01) Artuc, Erhan; Cull, Robert; Dasgupta, Susmita; Fattal, Roberto; Filmer, Deon; Gine, Xavier; Jacoby, Hanan; Jolliffe, Dean; Kee, Hiau Looi; Klapper, Leora; Kraay, Aart; Loayza, Norman; Mckenzie, David; Ozler, Berk; Rao, Vijayendra; Rijkers, Bob; Schmukler, Sergio L.; Toman, Michael; Wagstaff, Adam; Woolcock, Michael
What major insights have emerged from development economics in the past decade, and how do they matter for the World Bank? This challenging question was recently posed by World Bank Group President David Malpass to the staff of the Development Research Group. This paper assembles a set of 13 short, nontechnical briefing notes prepared in response to this request, summarizing a selection of major insights in development economics in the past decade. The notes synthesize evidence from recent research on how policies should be designed, implemented, and evaluated, and provide illustrations of what works and what does not in selected policy areas.
Predicting Food Crises
(World Bank, Washington, DC, 2020-09) Spencer, Phoebe; Kraay, Aart; Wang, Dieter; Andree, Bo, Pieter Johannes
Globally, more than 130 million people are estimated to be in food crisis. These humanitarian disasters are associated with severe impacts on livelihoods that can reverse years of development gains. The existing outlooks of crisis-affected populations rely on expert assessment of evidence and are limited in their temporal frequency and ability to look beyond several months. This paper presents a statistical forecasting approach to predict the outbreak of food crises with sufficient lead time for preventive action. Different use cases are explored related to possible alternative targeting policies and the levels at which finance is typically unlocked. The results indicate that, particularly at longer forecasting horizons, the statistical predictions compare favorably to expert-based outlooks. The paper concludes that statistical models demonstrate good ability to detect future outbreaks of food crises and that using statistical forecasting approaches may help increase lead time for action.
Methodology for a World Bank Human Capital Index
(World Bank, Washington, DC, 2018-09) Kraay, Aart
This paper describes the methodology for a new World Bank Human Capital Index (HCI). The HCI combines indicators of health and education into a measure of the human capital that a child born today can expect to obtain by her 18th birthday, given the risks of poor education and health that prevail in the country where she lives. The HCI is measured in units of productivity relative to a benchmark of complete education and full health, and ranges from 0 to 1. A value of x on the HCI indicates that a child born today can expect to be only x x100 percent as productive as a future worker as she would be if she enjoyed complete education and full health. The methodology of the HCI is anchored in the extensive literature on development accounting.
A Socioeconomic Disaggregation of the World Bank Human Capital Index
(World Bank, Washington, DC, 2019-09) D'Souza, Ritika; Gatti, Roberta; Kraay, Aart
This paper documents inequality in health and education outcomes by constructing an index of human capital disaggregated by quintiles of socioeconomic status (SES) for a sample 51 mostly low- and middle-income countries. The index measures the expected future human capital of children born today, following the methodology of the World Bank Human Capital Index that was launched in October 2018. Within-country disparities in human capital outcomes across SES quintiles are large, accounting for roughly one-third of the total variation. On average, human capital outcomes increase with income at roughly the same rate across socio-economic groups within countries as they do across countries.
Approximating Income Distribution Dynamics Using Aggregate Data
(World Bank, Washington, DC, 2017-06) Kraay, Aart; Van der Weide, Roy
This paper proposes a methodology to approximate individual income distribution dynamics using only time series data on aggregate moments of the income distribution. Under the assumption that individual incomes follow a lognormal autoregressive process, this paper shows that the evolution over time of the mean and standard deviation of log income across individuals provides sufficient information to place upper and lower bounds on the degree of mobility in the income distribution. The paper demonstrates that these bounds are reasonably informative, using the U.S. Panel Study of Income Dynamics where the panel structure of the data allows us to compare measures of mobility directly estimated from the micro data with approximations based only on aggregate data. Bounds on mobility are estimated for a large cross-section of countries, using data on aggregate moments of the income distribution available in the World Wealth and Income Database and the World Bank's PovcalNet database. The estimated bounds on mobility imply that conventional anonymous growth rates of the bottom 40 percent (top 10 percent) that do not account for mobility substantially understate (overstate) the expected growth performance of those initially in the bottom 40 percent (top 10 percent).
Growth Still Is Good for the Poor
(Elsevier, 2015-06-18) Dollar, David; Kleineberg, Tatjana; Kraay, Aart
Average incomes in the poorest two quintiles on average increase at the same rate as overall average incomes. This is because, in a global data set spanning 121 countries over the past four decades, changes in the share of income of the poorest quintiles are uncorrelated with changes in average income. The variation in changes in quintile shares is also small relative to the variation in growth in average incomes, implying that the latter accounts for most of the variation in income growth in the poorest quintiles. In addition, we find little evidence that changes in the bottom quintile shares are correlated with country-level factors that are typically considered as important determinants for growth in average incomes or for changes in inequality. This evidence confirms the central importance of economic growth for improvements in living standards at the low end of the income distribution. It also illustrates the difficulty of identifying specific macroeconomic policies that are significantly associated with the growth rates of those in the poorest quintiles relative to everyone else.
Do Poverty Traps Exist? Assessing the Evidence
(American Economic Association, 2014-07) Kraay, Aart; McKenzie, David
A "poverty trap" can be understood as a set of self-reinforcing mechanisms whereby countries start poor and remain poor: poverty begets poverty, so that current poverty is itself a direct cause of poverty in the future. The idea of a poverty trap has this striking implication for policy: much poverty is needless, in the sense that a different equilibrium is possible and one-time policy efforts to break the poverty trap may have lasting effects. But what does the modern evidence suggest about the extent to which poverty traps exist in practice and the underlying mechanisms that may be involved? The main mechanisms we examine include S-shaped savings functions at the country level; "big-push" theories of development based on coordination failures; hunger-based traps which rely on physical work capacity rising nonlinearly with food intake at low levels; and occupational poverty traps whereby poor individuals who start businesses that are too small will be trapped earning subsistence returns. We conclude that these types of poverty traps are rare and largely limited to remote or otherwise disadvantaged areas. We discuss behavioral poverty traps as a recent area of research, and geographic poverty traps as the most likely form of a trap. The resulting policy prescriptions are quite different from the calls for a big push in aid or an expansion of microfinance. The more-likely poverty traps call for action in less-traditional policy areas such as promoting more migration.