Policy Research Working Papers

doi:http://dx.doi.org/10.1596/39394

Report Series: Policy Research Working Papers

The Policy Research Working Paper Series disseminates findings of work in progress to encourage the exchange of ideas about development issues. Titles are submitted from units around the World Bank for internal review and inclusion in this series which is managed by the Development Economics Research Support unit. These are pre-print drafts prior to review and publication in formal journals.

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Now showing 1 - 10 of 8563

The Macroeconomic Implications of Climate Change Impacts and Adaptation Options: A Modeling Approach
(Washington, DC: World Bank, 2025-05-29) Abalo, Kodzovi; Boehlert, Brent; Bui, Thanh; Burns, Andrew; Castillo, Diego; Chewpreecha, Unnada; Haider, Alexander; Hallegatte, Stephane; Jooste, Charl; McIsaac, Florent; Ruberl, Heather; Smet, Kim; Strzepek, Ken
Estimating the macroeconomic implications of climate change impacts and adaptation options is a topic of intense research. This paper presents a framework in the World Bank's macrostructural model to assess climate-related damages. This approach has been used in many Country Climate and Development Reports, a World Bank diagnostic that identifies priorities to ensure continued development in spite of climate change and climate policy objectives. The methodology captures a set of impact channels through which climate change affects the economy by (1) connecting a set of biophysical models to the macroeconomic model and (2) exploring a set of development and climate scenarios. The paper summarizes the results for five countries, highlighting the sources and magnitudes of their vulnerability --- with estimated gross domestic product losses in 2050 exceeding 10 percent of gross domestic product in some countries and scenarios, although only a small set of impact channels is included. The paper also presents estimates of the macroeconomic gains from sector-level adaptation interventions, considering their upfront costs and avoided climate impacts and finding significant net gross domestic product gains from adaptation opportunities identified in the Country Climate and Development Reports. Finally, the paper discusses the limits of current modeling approaches, and their complementarity with empirical approaches based on historical data series. The integrated modeling approach proposed in this paper can inform policymakers as they make proactive decisions on climate change adaptation and resilience.
From Patriarchy to Policy: Norms, Votes, and Gender Equal Laws
(Washington, DC: World Bank, 2025-05-29) Bussolo, Maurizio; Rexer, Jonah M.; Hu, Lynn
Legal institutions play an important role in shaping gender equality in economic domains, from inheritance to labor markets. But where do gender equal laws come from? Using cross-country data on social norms and legal equality, this paper investigates the socio-cultural roots of gender inequity in the legal system and its implications for female labor force participation. To identify the impact of social norms, the analysis uses an empirical strategy that exploits pre-modern differences in ancestral patriarchal culture as an instrument for present-day gender norms. The findings show that ancestral patriarchal culture is a strong predictor of contemporary norms, and conservative social norms are associated with more gender inequality in the de jure legal framework, the de facto implementation of laws, and the labor market. The paper presents evidence for a political selection mechanism linking norms to laws: countries with more conservative norms elect political leaders who are more hostile to gender equality, who then pass less progressive legislation. The results highlight the cultural roots and political drivers of legalized gender inequality.
Geopolitics and the World Trading System
(Washington, DC: World Bank, 2024-12-23) Mattoo, Aaditya; Ruta, Michele; Staiger, Robert W.
Until the beginning of this century, the GATT/WTO system worked. Economic research provided a compelling explanation. It showed that if governments maximize the well-being of their own countries broadly defined, GATT/WTO principles would facilitate mutually beneficial cooperation over their trade policy choices. Now heightened geopolitical rivalry seems to have undermined the WTO. A simple transposition of the previous rationalization suggests that geopolitics and trade cooperation are not compatible. The paper shows that this is only true if rivalry eclipses any consideration of own-country well-being. In all other circumstances, there are gains from trade cooperation even with geopolitics. Furthermore, the WTO’s relevance is in question only if it adheres too rigidly to its existing rules and norms. Through measured adaptation to the geopolitical imperative, the WTO can continue to thrive as a forum for multilateral trade cooperation in the age of geopolitics.
Rethinking Fiscal Policies: Tackling Inequality and Poverty in the Middle East and North Africa Region
(Washington, DC: World Bank, 2025-05-27) Fuchs Tarlovsky, Alan; Amjad, Beenish; Loayza Grisi, Mario Julian
This paper examines the redistributive impact of fiscal policy—specifically taxes and transfers—on poverty and inequality in eight countries in the Middle East and North Africa: the Arab Republic of Egypt, Djibouti, the Islamic Republic of Iran, Iraq, Jordan, Morocco, Tunisia, and the West Bank and Gaza. Utilizing the Commitment to Equity framework, the analysis evaluates how fiscal interventions alter income distribution across these diverse national contexts. The results indicate that direct cash transfers and social assistance programs are generally effective in reducing poverty and shielding vulnerable populations, while in-kind benefits—particularly in education and healthcare—significantly contribute to mitigating income inequality. In contrast, generalized subsidies, especially in the energy sector, are fiscally burdensome and largely regressive, offering limited equity gains. Indirect taxes, although important for revenue generation, often exacerbate income disparities. The study underscores the need for comprehensive fiscal reforms, including the expansion of well-targeted transfers, adoption of progressive taxation, and reallocation of inefficient subsidies toward investments in human capital. Successful initiatives, such as Egypt’s Takaful and Karama and Jordan’s Takaful and bread subsidy compensation programs, illustrate scalable models of effective redistribution. Moreover, the Islamic Republic of Iran’s progressive tax policies highlight viable pathways to equitable revenue mobilization. Strengthening investment in education and health is essential for promoting long-term equity, enhancing upward mobility, and supporting inclusive and sustainable development across the region.
Yield Gains from Balancing Fertilizer Use: Evidence from Eastern India
(Washington, DC: World Bank, 2025-05-29) Arteaga, Julian; Deininger, Klaus
As with most agricultural inputs, the optimal use of fertilizer leverages the production complementarities between different types of nutrients. Wide variation in the intensity of nutrient application rates suggests there are potentially large productivity gains to be had from rebalancing fertilizer use across nutrient types even under a fixed expenditure budget. Using detailed information on a large sample of rice fields across three states in eastern India, this paper investigates whether a more balanced use of fertilizer—measured as the ratio of potash to nitrogen applied to a field—can lead to higher yields and revenues. To address the endogeneity of fertilizer application decisions, the analysis exploits the fact that nitrogen-based fertilizers demanded by Indian farmers are mostly produced domestically in a limited number of manufacturing plants, while all potash-based fertilizers must be imported by ship from abroad. Instrumenting for the ratio of potassium-to-nitrogen fertilizer applied on a field with the relative travel distances between farmers’ villages and both the nearest urea production plant and the nearest international port, the paper estimates the impact of more balanced fertilizer use on yields and revenues. The estimates show that at median levels of fertilizer use, and keeping the level of expenditure on fertilizers constant, rebalancing fertilizer application choices such that the potassium-to-nitrogen ratio of fertilizer is doubled would lead to a 4.8 percent increase in yield.
Global Socio-economic Resilience to Natural Disasters
(Washington, DC: World Bank, 2025-05-22) Middelanis, Robin; Jafino, Bramka Arga; Hill, Ruth; Nguyen, Minh Cong; Hallegatte, Stephane
Most disaster risk assessments use damages to physical assets as their central metric, often neglecting distributional impacts and the coping and recovery capacity of affected people. To address this shortcoming, the concepts of well-being losses and socio-economic resilience—the ability to experience asset losses without a decline in well-being—have been proposed. This paper uses microsimulations to produce a global estimate of well-being losses from, and socio-economic resilience to, natural disasters, covering 132 countries. On average, each $1 in disaster-related asset losses results in well-being losses equivalent to a $2 uniform national drop in consumption, with significant variation within and across countries. The poorest income quintile within each country incurs only 9% of national asset losses but accounts for 33% of well-being losses. Compared to high-income countries, low-income countries experience 67% greater well-being losses per dollar of asset losses and require 56% more time to recover. Socio-economic resilience is uncorrelated with exposure or vulnerability to natural hazards. However, a 10 percent increase in GDP per capita is associated with a 0.9 percentage point gain in resilience, but this benefit arises indirectly—such as through higher rate of formal employment, better financial inclusion, and broader social protection coverage—rather than from higher income itself. This paper assess ten policy options and finds that socio-economic and financial interventions (such as insurance and social protection) can effectively complement asset-focused measures (e.g., construction standards) and that interventions targeting low-income populations usually have higher returns in terms of avoided well-being losses per dollar invested.
Tradeoffs over Rate Cycles: Activity, Inflation and the Price Level
(Washington, DC: World Bank, 2025-05-23) Forbes, Kristin; Ha, Jongrim; Kose, M. Ayhan
Central banks often face tradeoffs in how their monetary policy decisions impact economic activity (including employment), inflation and the price level. This paper assesses how these tradeoffs have evolved over time and varied across countries, with a focus on understanding the post-pandemic adjustment. To make these comparisons, we compile a cross-country, historical database of “rate cycles” (i.e., easing and tightening phases for monetary policy) for 24 advanced economies from 1970 through 2024. This allows us to quantify the characteristics of interest rate adjustments and corresponding macroeconomic outcomes and tradeoffs. We also calculate Sacrifice Ratios (output losses per inflation reduction) and document a historically low “sacrifice” during the post-pandemic tightening. This popular measure, however, ignores adjustments in the price level—which increased by more after the pandemic than over the past four decades. A series of regressions and simulations suggest monetary policy (and particularly the timing and aggressiveness of rate hikes) play a meaningful role in explaining these tradeoffs and how adjustments occur during tightening phases. Central bank credibility is the one measure we assess that corresponds to only positive outcomes and no difficult tradeoffs.
Navigating the Competition-Stability Nexus in Financial Services: A Dynamic Extension of the Tinbergen Rule
(Washington, DC: World Bank, 2025-05-28) Calice, Pietro
This paper extends the classic Tinbergen rule within the context of financial regulation, explicitly accounting for the inverted U-shaped relationship between market competition and financial stability. Conventional policy frameworks, premised on independent relationships between policy targets and instruments, inadequately address the complex interactions inherent in the competition-stability nexus. The proposed framework addresses this gap by incorporating four critical dimensions overlooked in traditional applications of the Tinbergen rule: (i) nonlinear interactions among policy objectives, (ii) conflicts arising at extremes of competition, (iii) a hierarchical prioritization of financial stability objectives, and (iv) inherent structural constraints of prudential instruments. The paper introduces a dynamic optimization approach that calibrates policy instruments according to the financial system’s position along the competition-stability curve. Additionally, it provides a comprehensive taxonomy of regulatory instruments, categorizing them based on their primary targets and secondary (cross-) effects, thereby facilitating state-dependent policy formulation. The paper also outlines practical institutional arrangements and coordination mechanisms that are crucial for effective implementation. Overall, the approach may help to equip regulators with strategies for dynamically managing competition and stability, ultimately enhancing the efficiency and robustness of financial systems.
Assessing Workplace Social, Emotional, and Behavioral Skills in Africa: The ESTEEM Framework
(Washington, DC: World Bank, 2025-05-21) Marsh, Vic; Delavallade, Clara; Das, Smita; Rouanet, Léa; Koroknay-Palicz, Tricia; McDaniel, Dawn
Social, emotional, and behavioral skills are critical for success across life domains, yet research is constrained by a lack of internationally validated measures for adult populations. Existing tools often assess isolated skills and are predominantly validated in Western, school- aged samples. To address these limitations, this study developed and validated the Effective Socio-emotional skills To gain Economic EMpowerment framework, comprising 14 distinct social, emotional, and behavioral skills with prior demonstrated relevance to economic outcomes. The framework’s self-report scales were tested among adults in six Sub-Saharan African countries (Côte d’Ivoire, Nigeria, the Republic of Congo, Rwanda, South Africa, and Tanzania), spanning diverse cultural and linguistic contexts (English, French, Hausa, Swahili, and Yoruba). The results confirm the psychometric validity of the scales, supporting their utility in both research and practice. The framework categorizes skills as intrapersonal or interpersonal, awareness or management, and agentic or communal, providing a robust tool to unpack which skills matter for employment and earnings and how this differs by gender. By enabling exploration of social, emotional, and behavioral skills in underrepresented and cross-cultural contexts, use of the Effective Socio-emotional skills To gain Economic EMpowerment self-report scales advances theoretical and practical understanding of social, emotional, and behavioral skills in adult populations.
From Chalkboards to Chatbots: Evaluating the Impact of Generative AI on Learning Outcomes in Nigeria
(Washington, DC: World Bank, 2025-05-20) De Simone, Martin; Tiberti, Federico; Barron Rodriguez, Maria; Manolio, Federico; Mosuro, Wuraola; Dikoru, Eliot Jolomi
This study evaluates the impact of a program leveraging large language models for virtual tutoring in secondary education in Nigeria. Using a randomized controlled trial, the program deployed Microsoft Copilot (powered by GPT-4) to support first-year senior secondary students in English language learning over six weeks. The intervention demonstrated a significant improvement of 0.31 standard deviation on an assessment that included English topics aligned with the Nigerian curriculum, knowledge of artificial intelligence and digital skills. The effect on English, the main outcome of interest, was of 0.23 standard deviations. Cost-effectiveness analysis revealed substantial learning gains, equating to 1.5 to 2 years of ’business-as-usual’ schooling, situating the intervention among some of the most cost-effective programs to improve learning outcomes. An analysis of heterogeneous effects shows that while the program benefits students across the baseline ability distribution, the largest effects are for female students, and those with higher initial academic performance. The findings highlight that artificial intelligence-powered tutoring, when designed and used properly, can have transformative impacts in the education sector in low-resource settings.