Development Research Group, The World Bank
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Fields of Specialization
Macroeconomics, Debt management, Economic growth, Inequality and shared prosperity
Development Research Group, The World Bank
Externally Hosted Work
Last updated January 31, 2023
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.
Publication Search Results
Now showing 1 - 10 of 13
Publication(World Bank, 2011-05-31) Clausen, Bianca ; Kraay, Aart ; Nyiri, ZsoltWell-functioning institutions matter for economic development. In order to operate effectively, public institutions must also inspire confidence in those they serve. We use data from the Gallup World Poll, a unique and very large global household survey, to document a quantitatively large and statistically significant negative correlation between corruption and confidence in public institutions. This suggests an important indirect channel through which corruption can inhibit development: by eroding confidence in public institutions. This correlation is robust to the inclusion of a large set of controls for country and respondent-level characteristics. Moreover we show how it can plausibly be interpreted as reflecting at least in part a causal effect from corruption to confidence. Finally, we provide evidence that individuals with low confidence in institutions exhibit low levels of political participation, show increased tolerance for violent means to achieve political ends, and have a greater desire to “vote with their feet” through emigration.
Publication(World Bank, Washington, DC, 2013-08) Dollar, David ; Kleineberg, Tatjana ; Kraay, AartIncomes 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.
Publication(World Bank, Washington, DC, 2014-04) Kraay, Aart ; McKenzie, DavidThis 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.
Publication(World Bank, Washington, DC, 2014-04) Dollar, David ; Kleineberg, Tatjana ; Kraay, AartSocial 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.
Publication(World Bank Group, Washington, DC, 2014-08-01) Geli, Patricia ; Kraay, Aart ; Nobakht, HoveidaA number of recent studies have empirically documented links between characteristics of World Bank projects and their ultimate outcomes as evaluated by the World Bank's Independent Evaluation Group. This paper explores the in-sample and out-of-sample predictive performance of empirical models relating project outcomes to project characteristics observed early in the life of a project. Such models perform better than self-assessments of project performance provided by World Bank staff during the implementation of the project. These findings are applied to the problem of predicting eventual Independent Evaluation Group ratings for currently active projects in the World Bank's portfolio.
Publication(American Economic Association, 2014-07) Kraay, Aart ; McKenzie, DavidA "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.
Publication(Elsevier, 2015-06-18) Dollar, David ; Kleineberg, Tatjana ; Kraay, AartAverage 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.
Weak Instruments in Growth Regressions: Implications for Recent Cross-Country Evidence on Inequality and Growth(World Health Organization, 2015-11) Kraay, AartThis 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.
Publication(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, MichaelWhat 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.
Good Countries or Good Projects?: Comparing Macro and Micro Correlates of World Bank and Asian Development Bank Project Performance(World Bank, Washington, DC, 2015-04) Bulman, David ; Kolkma, Walter ; Kraay, AartThis paper examines the micro and macro correlates of aid project outcomes in a sample of 3,821 World Bank projects and 1,342 Asian Development Bank projects. Project outcomes vary much more within countries than between countries: country-level characteristics explain only 10–25 percent of project outcomes. Among macro variables, country growth and the policy environment are significantly positively correlated with project outcomes. Among micro variables, shorter project duration and the presence of additional financing are significantly correlated with better project outcomes. In addition, the track record of the project manager in delivering successful projects is highly significantly correlated with project outcomes. There are few significant differences between the two institutions in the relationship between these variables and project outcomes.