Person:
Kraay, Aart

Development Research Group, The World Bank

Fields of Specialization

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

Departments

Development Research Group, The World Bank

Last updated: January 31, 2023

Biography

Aart Kraay is Director of Research in the Development Research Group at the World Bank. 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 international capital movements, growth and inequality, governance, and the Chinese economy. 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 an associate editor of the Journal of Development Economics, and co-editor of 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.

Full item page

Publication Search Results

Now showing 1 - 10 of 18

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.
Weak Instruments in Growth Regressions: Implications for Recent Cross-Country Evidence on Inequality and Growth
(World Health Organization, 2015-11) Kraay, Aart
This paper revisits four recent cross-country empirical studies on the effects of inequality on growth. All four studies report strongly significant negative effects, using the popular system generalized method of moments estimator that is frequently used in cross-country growth empirics. This paper shows that the internal instruments relied on by this estimator in these inequality-and-growth regressions are weak, and that weak instrument-consistent confidence sets for the effect of inequality on growth include a wide range of positive and negative values. This suggests that strong conclusions about the effect of inequality on growth— in either direction—cannot be drawn from these studies. This paper also systematically explores a wide range of alternative sets of internal instruments, and finds that problems of weak instruments are pervasive across these alternatives. More generally, the paper illustrates the importance of documenting instrument strength, basing inferences on procedures that are robust to weak instruments, and considering alternative instrument sets when using the system generalized method of moments estimator for cross-country growth empirics.
Growth, Inequality, and Social Welfare : Cross-Country Evidence
(World Bank, Washington, DC, 2014-04) Dollar, David; Kleineberg, Tatjana; Kraay, Aart
Social welfare functions that assign weights to individuals based on their income levels can be used to document the relative importance of growth and inequality changes for changes in social welfare. In a large panel of industrial and developing countries over the past 40 years, most of the cross-country and over-time variation in changes in social welfare is due to changes in average incomes. In contrast, the changes in inequality observed during this period are on average much smaller than changes in average incomes, are uncorrelated with changes in average incomes, and have contributed relatively little to changes in social welfare.
Do Poverty Traps Exist?
(World Bank, Washington, DC, 2014-04) Kraay, Aart; McKenzie, David
This paper reviews the empirical evidence on the existence of poverty traps, understood as self-reinforcing mechanisms through which poor individuals or countries remain poor. Poverty traps have captured the interest of many development policy makers, because poverty traps provide a theoretically coherent explanation for persistent poverty. They also suggest that temporary policy interventions may have long-term effects on poverty. However, a review of the reduced-form empirical evidence suggests that truly stagnant incomes of the sort predicted by standard models of poverty traps are in fact quite rare. Moreover, the empirical evidence regarding several canonical mechanisms underlying models of poverty traps is mixed.
Good Countries or Good Projects? Macro and Micro Correlates of World Bank Project Performance
(World Bank, Washington, DC, 2011-05-01) Denizer, Cevdet; Kaufmann, Daniel; Kraay, Aart
The authors use data from more than 6,000 World Bank projects evaluated between 1983 and 2009 to investigate macro and micro correlates of project outcomes. They find that country-level "macro" measures of the quality of policies and institutions are very strongly correlated with project outcomes, confirming the importance of country-level performance for the effective use of aid resources. However, a striking feature of the data is that the success of individual development projects varies much more within countries than it does between countries. The authors assemble a large set of project-level "micro" correlates of project outcomes in an effort to explain some of this within-country variation. They find that measures of project size, the extent of project supervision, and evaluation lags are all significantly correlated with project outcomes, as are early-warning indicators that flag problematic projects during the implementation stage. They also find that measures of World Bank project task manager quality matter significantly for the ultimate outcome of projects. They discuss the implications of these findings for donor policies aimed at aid effectiveness.
How Large Is the Government Spending Multiplier? Evidence from World Bank Lending
(2010-12-01) Kraay, Aart
This paper proposes a novel method of isolating fluctuations in public spending that are likely to be uncorrelated with contemporaneous macroeconomic shocks and can be used to estimate government spending multipliers. The approach relies on two features unique to many low-income countries: (1) borrowing from the World Bank finances a substantial fraction of public spending, and (2) actual spending on World Bank-financed projects is typically spread out over several years following the original approval of the project. These two features imply that fluctuations in spending on World Bank projects in a given year are in large part determined by fluctuations in project approval decisions made in previous years, and so are unlikely to be correlated with shocks to output in the current year. World Bank project-level disbursement data are used to isolate the component of public spending associated with project approvals from previous years, which in turn can be used to estimate government spending multipliers, in a sample of 29 aid-dependent low-income countries. The estimated multipliers are small, reasonably precisely estimated, and rarely significantly different from zero.
Growth Still Is Good for the Poor
(World Bank, Washington, DC, 2013-08) Dollar, David; Kleineberg, Tatjana; Kraay, Aart
Incomes in the poorest two quintiles on average increase at the same rate as overall average incomes. This is because, in a global dataset spanning 118 countries over the past four decades, changes in the share of income of the poorest quintiles are generally small and 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. These findings hold across most regions and time periods and when conditioning on a variety of country-level factors that may matter for growth and inequality changes. This evidence confirms the central importance of economic growth for poverty reduction and illustrates the difficulty of identifying specific macroeconomic policies that are significantly associated with the relative growth rates of those in the poorest quintiles.
Aid, Disbursement Delays, and the Real Exchange Rate
(World Bank, Washington, DC, 2013-05) Jarotschkin, Alexandra; Kraay, Aart
Aid donors and recipients have long been concerned that aid inflows may lead to an appreciation of the real exchange rate and an associated loss of competitiveness. This paper provides new evidence of the dynamic effects of aid on the real exchange rate, using an identification strategy that exploits the long delays between the approval of aid projects and the subsequent disbursements on them. These disbursement delays enable the isolation of a source of variation in aid inflows that is uncorrelated with contemporaneous macroeconomic shocks that may drive both aid and the real exchange rate. Using this predetermined component of aid as an instrument, there is little evidence that aid inflows lead to significant real exchange rate appreciations.
Can Disaggregated Indicators Identify Governance Reform Priorities?
(2010-03-01) Tawara, Norikazu; Kraay, Aart
Many highly-disaggregated cross-country indicators of institutional quality and the business environment have been developed in recent years. The promise of these indicators is that they can be used to identify specific reform priorities that policymakers and aid donors can target in their efforts to improve institutional and regulatory quality outcomes. Doing so however requires evidence on the partial effects of these many very detailed variables on outcomes of interest, for example, investor perceptions of corruption or the quality of the regulatory environment. In this paper we use Bayesian Model Averaging (BMA) to systematically document the partial correlations between disaggregated indicators and several closely-related outcome variables of interest using two leading datasets: the Global Integrity Index and the Doing Business indicators. We find major instability across outcomes and across levels of disaggregation in the set of indicators identified by BMA as important determinants of outcomes. Disaggregated indicators that are important determinants of one outcome are on average not important determinants of other very similar outcomes. And for a given outcome variable, indicators that are important at one level of disaggregation are on average not important at other levels of disaggregation. These findings illustrate the difficulties in using highly-disaggregated indicators to identify reform priorities.
Governance Matters VIII : Aggregate and Individual Governance Indicators 1996–2008
(2009-06-01) Kaufmann, Daniel; Kraay, Aart; Mastruzzi, Massimo
This paper reports on the 2009 update of the Worldwide Governance Indicators (WGI) research project, covering 212 countries and territories and measuring six dimensions of governance between 1996 and 2008: Voice and Accountability, Political Stability and Absence of Violence/Terrorism, Government Effectiveness, Regulatory Quality, Rule of Law, and Control of Corruption. These aggregate indicators are based on hundreds of specific and disaggregated individual variables measuring various dimensions of governance, taken from 35 data sources provided by 33 different organizations. The data reflect the views on governance of public sector, private sector and NGO experts, as well as thousands of citizen and firm survey respondents worldwide. The authors also explicitly report the margins of error accompanying each country estimate. These reflect the inherent difficulties in measuring governance using any kind of data. They find that even after taking margins of error into account, the WGI permit meaningful cross-country comparisons as well as monitoring progress over time. The aggregate indicators, together with the disaggregated underlying indicators, are available at www.govindicators.org.