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Publication
Droughts and Deficits: The Global Impact of Droughts on Economic Growth
(World Bank, Washington, DC, 2023-05-24)As climate change intensifies, dry rainfall shocks and droughts are a growing concern. At the same time, scientific evidence suggests that the world has surpassed the safe planetary boundary for green water, which is water stored in biomass and soil that is crucial for maintaining climate resilience. Yet, evidence at the global scale of these combined forces on economic growth is poorly understood. This paper attempts to fill this gap by using data on annual subnational gross domestic product for 82 countries from 1990–2014. Using rainfall shocks as plausibly exogenous variations in a spatially specific panel at the grid level, the analysis finds that the global effects of droughts on economic activity are substantial. Moderate to extreme droughts reduce gross domestic product per capita growth between 0.39 and 0.85 percentage point, on average, depending on the level of development and baseline climatic conditions, with low- and middle-income countries in arid areas sustaining the highest relative losses. In high-income countries, moderate droughts have no impact, and only extreme droughts have adverse effects, reducing growth by about 0.3 percentage point, a little less than half the impact felt in the low- and middle-income country sample for the same intensity of drought. Crucially, the impact of a dry shock of a given magnitude also depends on antecedent green water availability. The results show that increases in soil moisture in previous years can neutralize the harmful impacts from a dry shock, with suggestive evidence that local and upstream forest cover are key channels through which these impacts manifest. These findings have important implications for measuring the economic impact of droughts and can inform adaptation investments. -
Publication
Children and the Fiscal Space in Ethiopia
(World Bank, Washington, DC, 2023-05-24)This study investigates the effects of public transfers and taxes on the wellbeing of children in Ethiopia. It applies the Commitment to Equity for Children methodology to examine the burdens of taxation and the benefits from government transfers and spending, and their differential wellbeing impacts on children. The study integrates data from the 2018/19 Ethiopia Socioeconomic Survey, which also collected data on taxes and transfers, with administrative data. Measuring its distribution by child monetary and multidimensional wellbeing, the study finds, on average, a progressive, poverty-reducing and equalizing fiscal system. However, there are important differences in the distribution of some of its elements. Indirect taxes, comprising of value-added and excise taxes, are regressive. Similarly, primary education spending, the largest of in-kind transfers, is only progressive in urban areas. On poverty and inequality, the fiscal system reduced the monetary child poverty headcount by 21 percent and the poverty gap by 33 percent. The effect is stronger for girls and children in rural areas than for boys and children in urban areas, therefore reducing inequalities in poverty rates. However, this is only the case when in-kind transfers for education and health are considered. Without the inclusion of in-kind transfers, the study finds that the fiscal system is not well calibrated to reduce poverty. This highlights the essential role of public services, not only in delivering fundamental child rights, but also in reducing poverty among children. -
Publication
Towards a More Nuanced Approach to Measuring Housing Affordability: Evidence from Pakistan
(World Bank, Washington, DC, 2023-05-24)The inability to afford a decent shelter has a detrimental effect on people’s lives, their well-being and productivity, and the broader economy. Given the pervasiveness of the problem on a global scale, housing affordability is increasingly taking center stage in public discourse. Yet, there is little agreement on the definition of housing affordability and how to measure it. This paper draws on academic literature and lessons from government housing programs to evaluate how accurately conventional measures differentiate affordability levels by income segment, household composition, and tenure. With the objective of more accurately measuring the affordability of housing at the household and aggregate levels, the paper recommends testing (i) a progressive housing Expenditure-to-Income ratio, calibrated by income segment, and (ii) a modified Residual Income Method that uses household expenditure instead of income as well as a simplified budget standard for non-housing expenses. Application of the latter methodology in urban Pakistan highlights a significant underestimation of housing unaffordability using conventional approaches, especially for the lowest income groups. Moreover, the case study indicates that conventional approaches to the measurement of affordability may not adequately reveal the differences in affordability across income segments and household compositions. -
Publication
Philippines Agriculture Public Expenditures Review: With a Special Focus on the Implications of the Mandanas Ruling for the Agri-food System
(Washington, DC, 2023-05-24)The recent positive policy directions embodied in the New Thinking and One DA agenda have not yet fully translated into a shift in public expenditure patterns in the Philippine agriculture sector. One result is that agricultural growth remains low, and poverty in rural areas, where farming remains the main source of income, has stayed high. Underinvestment in public goods in agriculture, vital for inclusive growth, also drives the lack of growth. The continued bias supporting rice production has come at the expense of other agricultural products. The situation could worsen with the ongoing devolution resulting from the Mandanas Ruling of the Supreme Court unless the shift in the agriculture budget from central government to local government units (LGUs) accompanies clear changes in expenditure policies. To take full advantage of the opportunities arising from the new strategic directions and to devolve more responsibilities to LGUs, agricultural public expenditure policies must deal with challenges in three dimensions. First is the challenge of aligning expenditures with the ambition of the New Thinking. The second challenge is improving the currently low effectiveness of public spending, which is one factor behind the relatively low agricultural share in the government’s overall budget. The third challenge is successfully implementing the financial and functional devolution resulting from the Mandanas Ruling. This Philippines Agriculture Sector Public Expenditure Review (AgPER) aims to (a) help the government evaluate the direction of spending policies under the New Thinking strategy and (b) consider the best way forward in devolving agricultural services to LGUs as a result of the Supreme Court’s Mandanas Ruling. -
Publication
Plastic Waste in Road Construction - A Path Worth Paving?: Application of Dry Process in South Asia
(World Bank, Washington, DC, 2023-05-24)As global plastic waste continues to grow, the global community is coalescing to reduce plastic waste. Some stakeholders are also exploring new options to use plastic waste as partial substitute for raw material. The use of plastic waste as a bitumen modifier in road construction, referred to here as ‘plastic roads’, is one option being explored. We reviewed the scientific literature, news articles, and patents; conducted a cost-effectiveness analysis; and interviewed representatives from private companies and independent, scientific researchers to determine the existing knowledge gaps regarding the (1) technology feasibility, including engineering performance; (2) environmental issues; (3) occupational health; (4) economic viability; and (5) industry standards surrounding plastic roads. We found that many companies are starting to implement or pilot this technology worldwide though key gaps in engineering performance, such as cracking resistance, remain. The environmental issues reviewed also have research gaps, including the generation of hazardous air pollutants during production; microplastics and nanoplastics generation during use; and leaching of additives from plastic waste during use. Industry standards for the use of plastic waste in road construction are lacking. In addition, there is prevailing uncertainty in the economic viability of the technology. As a result of these key research gaps, the Ways Forward section presents a roadmap for short- and longterm research priorities.