V , V ~~~~~~' I~~~~~~~~~~~~~ 41~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~1 i _ V I . ., ,___________=______ I . t , f V ;:t,v_. _:Z~ r d:f:E~~~~~~~~ ! r !~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~IK THE WORLD BANK RESEARCH PROGRAM 1992 Abstracts of Current Studies The World Bank Washington, DC Copyright 0 1993 by the ntemational Bank for Reconstction and Development/The World Bank 1818 H Street NW, Washington, DC 20433, U.SA. AUrightsreserved. Fist prinftg January 1993 Manufactured in the United States of Ameica ISSMN 0258-3143 SEN0813-2339-3 World Bank Researh-Objectives and Definition The World Banl s researh prgram has four basic objectivw * To support ai aspects of Bank operations, including the assessmt of development pres in mmber wune * To broaden imdrstadingof the deveopment proces * To improve the Bans capadty to give policy advice to its membes * To assist in developingindigenous rsearh capacity in member cuntries Researciat the Bank encom e analytic work designed to produce results with wide applicabi- itys across cuntries or secos. Bank rsearch, in contrast to academIc march, is directed toward remgnized and emergn poli issues and is focused on yieldg better policy adviwe Althoug motivated bypolicv prablems, Bank reserch addresses longer-term concrns rath than the imme- diateneedsofapartcularBanklendingoperationorofapartculroDuntryorsectorreportActiviies cassed as reserch at the Bank do not, therefore, include the economic and seclor work and policy analysis camed out by Bank staff to support operations in particlr untries. Eanomic and sector work and policy studies take the product of rearch and adapt it to Wsifc proects or country settngs, whereas Bank researh contnibutes to the intctual foundations of fiure lending opera- tions and policyadvice Both activities-research and econouic and sector work-m aitcl to the design of sucsf projecs and efective poicy CONTrENTS troduction 1 Index of Studies by Program Objective C:ategory 3 Abstads Of Current Studies 9 Poverty, Distribution, and Socal Welfare 11 Private Sector Development and Public Sector Management 25 Environment and Natural Resources 59 Human Resources Development 78 Adjustnent, Trade, and Debt 98 Ecnomic Managment 117 Finandal Interiediation 136 Bac Ifastructure and Urban Development 151 IdMex of Studies by Department 159 Appendix Bank Research Output 169 p INRODUCTION This volume presents abstracts of Bank research BaYs research program plays an important role in prrjects that were ongoing or completed dunng fiscal en ng both the quality of the Banles advice and 1992 (july 1991 through June 1992). The abstracs are pdise, and the efficcy of finaning from the Bank gouped by Progam Objective Categories-ues se- and all other sources for ecnomic development The lected as pioity areas for Bank resnd and other prnary objective of Bank research is, terfore, the actviie lead objective categories are the environ- generation of expertknowledge of development, which ment, poverty reduction, and private sector develop- takes many form It involves expeti on ewcmic, meaL The abstracts descrbe each projecVs objectives, tedmical, program, and hiplementation issuesL It is method, and findings; identiy the research tean, and embodied inlending, operations, trainingand technical listassodatedreportsandpublicatonsandtheprojeces assstance, and research and operational reports on completion date. Abstracts identified by a five-digit economic and sectoral policies. Another objective of refieence number are for research projects that have Bank researcl is to be bmadly based and forward- bee reviewed centrally by the Banics Research Com- lookng. Because resch takes time, the early identifi- mittee and receved supportfrom the Research Support cation or antkipabon of issues for research is critical, Budget and these issues can arise inawiderange of sectoraland The Appendc lists the titles of publicatons and economic areas. Two oher related objectives of Bmnk papers produced in conjunction with the research pro- researd&concern the policydialogue with its members gram durng fiscal 1992. Copies of Bank publications Bank research seeksto direcyorindirdlyinfonm this (categoriesA, E, and F) canbe purdcased from the Bank dialogue on both sides, and to erdce indigenous bookstoreorordered fromthe Bank'sPublisher. Copies policy research capabilities in member countries. of working papers and background papers (catorie G-I) can be obtined from the authors or the associated departments. Research funding and a n a TheBaniesrces hprogmminfiscall992wasfunded Comparative advantage and objeciives of fomthreesour Lstdepartmentsindtiatetheirown Bankresearch prjsand spend thew own resources, mainly staff time,onthem (50percentof thetotalresearchprogam). The Bank's research progam has several important Second, a central Bank fnd, the Research Support attibutes that define its comparative advantage. The Budget SB), provides fnding to research projects esearch agenda is shaped by problems that the Bank from throughouttheBankand the International Finance encunters in its operational activiies. The breadth of Corporation (41 percentof therearchprogram. Third, the research program is therefore derived from the funds are provided by outside agecies to support breadth of Bank operations, and the issues it address Bank-managed research (9 percmt of the research pro- are very applied- Bank research benefits from specal gram). access to data and local expertise in dient countries, Research activities funded only fom departmental rmm the long view and direct involvementof theBank, resources are identified and developed as components andfrom theBank'sdedicationtothesolutionofdevel- of departmental work programs designed by depart- opment problems When research results are obtined, ment directs and reviewed at the vice presidental Bankpublicationsprovidethemeansforbroaddissemni- leveL In fiscal 1992, most departmental research was nation, and Bank operations prode an effective imple- located in the Development Emnomics and Sector and mentation medhanism Operations Policyvicepresidences,and in the regional Bank research directy helps Bank cients to pursue Technical Departments. their development objectives more effectively by pro- Departmnts can also prepare research proposals viding evidence about which development strategies and apply for additonal suppot from the central Re- work and why. Basing Bank policy advice on sound searchSupportBudgetProposaLsseekingRSB funding research findings also stegthens its credibility. The arereviewedbytheResearchAdvisoryStaffandevalu- hdndudion ased by internl and extemal peer reviewers. Large nallyfundedreseardialttoughsmewhatconcentrated proposals are considered by the Research Committee, in the Sector and Operations Policy vice presidency, whidischahredbytheBanlesCbdefEcono-dstand Vice takes place in all pars of tle Bank. President, Development Economics, and comprised of The Research Support Budget also supports sever membersdrawnfromtiroughouttheBanklnitsevalu- activities that ame designed to disseminate Bank re- ation of a proposal, the Researh Committee considers search, bring new ideas in development economicsinto the peer reviews, the proposas technical soundness, the Dank, and support resech capacity building in and its cnsistency with institutional priorities. The developing countries The Annual Bank Conferenceon compettive nature of the RSB allocation process helps DevelopmentEconomics,theVisingResearchFellows to ensure the quality and relevance of the projects se- Pogam, the Barns research puuals, and direct sup- lected. port to research networks in Sub-Sahran Africa are the TheReS upportBudgetisasourceofflexdbility most important examples of RSB-fnded activities that and responsivenesintheBankrsresearchprogram,and enhance the Banks capacity in development research, its subject composition changes more rapidly than that increase intemational understanding of the develop- ofdeparimentallyfundedrearchToensurethatRSB- ment process, and expand the capacity of the Bank's funded prcts are well inegrated into sponsoring member countries to conduct research on their most departments, proposed projects must be part of a pressing domestic issues in development policy. department's workprogram and indude departmental staff inputs Research Support Budget funds cannot be used topy for Bank staff lime. Directions of the research program Extera funded research is a relatively small part of the Bank's researchprogmram Mostexterally funded The distribution of overAl Bank reseanch resources actvities also receive support from Bank sourceso across the Program Objective Categories continues to most extemal funding essentially cDfinances research change in response to evolving pnoritiesThe program activitie In severa ases, this cofinancing has also categorywiththeLgestincraseinresearchresources induded funds from the RSB, and the availability of dunng fiscal 1992 was poverty reduction. This growth outide funding is disdosed in research proposals. To was ac odated by a reduction in work on adjust- ensure consistency with the larg work progam and ment and debt, which continued to have the largest departmenla! pnonties, extrally funded research is share of research resources in fiscl 1992, followed by induded in the work progms of research-oriented pnvate and public sector reform and human resources departments, and department directors must approve development research proposals for external Funds and obtain the The abstracts ihat follow reveal the breadth of issues approval of their extemal fimding coordinator. Exter- andconcernsembodiedintheBansresearchprogram. 2 INDEX OF STUDIES BY PROGRAM OBJECTIVE CATEGORY Povert, Distribution, and Social Welfare 11 Poverty, Growth, and Adjustment in Paklstn (67529C) 11 Household Weare Effects of Agricalthra Policy REform in Mlawi (675-91C and 677446) 11 Policy Analysis of Povertr Applicable Methods and Case Studies Phase n (675-96) 12 The Economics of Nonmarket Transfers in Developing Countries (676-24C) 14 Incidence of Public Expendihes U (676-42C) 14 Credit Programs for the Poor Household and Inrahousehold lmpacts and Pgam Sustinability (676-59) 15 Data Analysis for Development Policy (677-03) 15 Macoenonuc Adjustnent and Poverty Rehief The Roles of Soca Policy and Household Behavior (677-14) 16 Income Security for Old Age: Conceptual Badcond and Major lssues (677-45) 16 Adjustment, Income Distribution, and Poverty 17 Study of Deregulation Effects on Low-Income Households 18 Poverty Inpacts of Agricultral Policies 19 SoCial Transfers and Income Distriution 21 Poverty and Price Measurement Update of the Cost of Basic Susenamce 22 Paldstan Inteated Household Survey Project 22 Income Distribution durig the Transiton 23 Private Sector Development and Public Sector Manage nt 25 labor Redundancy in the Transportation Sector (675-21C) 25 Industial Reforms and Productivity in Chinese Enterprise (675-38) 26 Tunis and Rabat Water Demand Study (675-4C 27 Welfare Consequences of Selling Public Entepisesc Case Studies from Clile, Malaysia, Mexdco, and the United Kingdom (675-42C) 28 A Framework for Evaluating Mneral Payment/Taxation Siemes (675-50 29 Agricultural Reform in Eatn Europe and the Former USSR Diemmas and Strategies (675-480 30 Polical Economy and Public Management of State Mining and Oil Companies (676-40C) 31 'Interfirm and Industry-Government Cooperation for Tedmology Development in Europe (676-17C) 32 Intellectual Property Rights Ptecdon and Technology Transfer thrgh Foign DiredInvestment(676-19) 33 Private Sector Manufacturing m Eastem Europe (67634C 33 Notc The numbers in parentheses are refner numbers for projects funded tray from Resear Support Budget A ' suffix denotes a project dosed during fiscal 1992. Projects with no efence numbers are funded by departments. 3 Index O Studie by Program Ojw GCatgory Electric Power Utility Efficecy Study (67650 34 Enterprise Behavior and Competitiveness (676-SOC) 35 The Deternmiats and Consequences.of the Placement of GovermentPrograms in Indonesia (676-74) 36 Evaluations of Social Sector Investments (676-90) 36 Regulations, Istitutions and Economic Efficiency (6764) 37 Enterprise Behavior and Econmic Morms A Comparative Study in Central and Eastem Europe (676-99) 38 Impact of Market-Oriented Policy Reforms on Households in Rural China (677-16) 39 Services as a Major Source of Growth in the Former Soviet Sates (677-43) 40 Public Goods, Pivate Goods, and Sodal Sedor OUtcmes (67747) 40 Explaining Rapid Growth: Chinese Coastal Provinces and Meican Maqulladoms (677-50) 41 Macroecoromic Catastrophes 41 Rural-Urban Growth Linkages 42 Diffusion of information Tedhnology: Opportuniies and ConstrIUnts 42 Elements of Socal Transfomation (pratization) 43 Privatization of the Former USSR 44 Public Enterprise Management and State Holding Companies 44 Private AgricultIual Services 45 ntegration of Food Markets in Russia 46 Advancing Agricultural Productivityr Technical and Behavioal Constraits 46 African PrivateAgrculural Markeieng 47 Brazil Aircaft Industry 47 Factos Influencing the Accuracy of Cost and Schdule Estimates for Power Generation sPrt in Developing Countries 48 Preaoditions for Enterprise Development in Africa 48 The Role of Government in the Develoqmentof Support Systems frSmaI and Medium-Size Enterprises 49 Biotechnology and Agricultural Development 49 Brazil Political, Institutional, and Technology Development 50 Cross-Country Study of Small-scale Entapnse Respxoiveness in Afica 50 The Evolution, Character, and Structur of the Japanese Civl Service and Its Role in Shaping the Interrelationships between Goverment and the Private Sector 51 Land Reform and Farm Restructuring in Russia and Ukrine 52 The Post-Soiast Tansitioni A Systemic View 52 Stratees for Rapid Growth Public Policy and the Asian MArade 53 Technology Assessment of Agricultural Development 54 High Technology: Implications for Developing Countries 55 Privatization of Public Enterprise Management 55 Privatiration in Eastern Europe 56 Cost of Business Regulation Analysis (COBRA) 57 Regional Program on Enterprise Development 57 Private Sector Development Ihitiative (PSDI) 58 Environment and Natural Resources .,59 Improved Accounting of Natural Resources and the Envirmest for More Sustiable Resource Managem t (6754 59 Pollution and the Choice of Economic Policy Instunmnts in Develoi Cinxtries (676-48) 59 Pesticide Exeraities, Comparative Advantage, and Commodity Trade Cotton in Andhra Pradesh, India (676-92C) 60 4 Indx Of Studios by Progrm Of4ctiue CAt"or Economic Growth and Trade Policy In Westen Afrla ImpIWaUos of the Degadation of the Vegetation Cover (676-97) 61 Propety Rights, Rent Dissipatio an,d Environmental Degradation in the BrazIian Amazon (677-24) 61 World Energy Subsidies and Inplication for Greenhouse Gas Emisions and Government Revenues (677-28) 62 Enteprise Ownership and Pollution (677-44) 63 Study of Internabonal Fshresesrch 64 Comparative Studies on Perennals 65 FoDrest and Agticulture Evaluation 65 International Pollution Patteis 65 Solid Waste Management 66 Drzyland Management 66 Economic Evaluation of Energy 67 Environentally Friendly Technology 68 Industrial Pollution: Glbal Indices 68 The Urban Energy Trasition in Developing Cntries 69 lntrnational Trade and the EnvLroment 70 Economywide Policies and the Envirnment 71 Global Envimnment Ibsues 71 Water Resource Polides in Metropolitan Areas 72 Environmental Sanitation 73 Low-Cost Sanitation 73 Sanitation Demand Study 74 Energy Use and Global Atmospheric Pollution 75 Pollution Control and EnvinmentalgementSystem 75 land Allocation 76 Human Resoces Development 78 Women, Public Sevices, and Income Geneation (67514C) 78 Education, Growth, and Iqualty in Brazil (675-61) 78 Economuc Impact of Adult Mortaity (675-71) 79 Impediments to Contraceptive Use in Differnt Enviromnts (675-72) 80 Deftrmiants of Nutntional and Health Outcomes in Indonesia and Implications for Health Policy Reforms (676-27) 81 Age at Mariage, Age at First Birt and Ferlity in Africa (6763C 81 Causes of Mrtality in Developing Contries and Eastem Europe (676.41C) 82 Household Investmnent in Human Capital and Utiiaon and Benefits of Sodal Services (676-44) 83 Inproving School Effectiveness and Effidency in Developing Countries: The Case of Jamaica (67647) 83 Economic and Policy Derminants of Fiity in Sub-Sha Africa (67691) 84 Modeling Future Health Trends and Costs in Chile (676C 85 Prmairy Teacher Training in Nepal Improving Equity for Women (676&98C 86 Growth and Productivity in Developing Countries (67709C) 86 Hun Capital Accumuiation and Ecnomic Growtl An Empmical Study (677-11) 87 labor Markets in Trational Socast Countries (677-20) 87 Cross-NationaL Longitudinal Analysis of the Cumriculum of Seondary Education, 192045(67740) 88 Population Lssues in Asia 89 Researci and Human Resource Issues i Scientfic and Technological Development 89 S hwdx of Studies by Promm Obpf4etu Cal,5. Women's Rights to land and Agricultural Perfonance hi Sub-Saharan Africa 90 Improving the Quality of Primary Education in latin America 91 Moderatng Malnutriti in Ash 92 Higher Education Policy Study 92 Bkun Research Capacity 93 Economics of Education 94 Higher Education-Science and Tedhnology 95 Public Economics of the Health Secbor 95 Employment and labor Market Lssues 95 Secondary Education Policy Study 96 Planning for Equity and Effectiveness in Public Health Institutions 96 Adjustment, Trade, and Debt 98 Poverty and the Sodal Dimensions of Adjustment In COte dIvolr A Policy-Oriented Analysis (675-260 98 Regulations Against Unfair Imports: Effects on Developing Countries (675-52C 99 The lIpact of EC-1992 and Trade Integration in Selected Meditranean Countries (675-640 99 Implications of Agricultural Trade Policy Reform for Developing Countries (676-11C) 100 The Political Economy of Strutur Adjusnnt (676-37) 101 The Cost-of-Prtection Index (676-49) 102 Equipment Prices and Trade Policies for Developing Country Manufactung Industries A Pilot Study of Bazl (6761) 103 Assessng the Meio-United States Free Trade Agreement (676-65) 104 license Prices and Rent-Sharing in the Multi-Fibre Arrangement (676-9) 105 Commodity Exports and ePja hicome in Africa (676-70) 105 The Design of Tarff Refou Theory, Evidence, and Inplications (676-77) 106 Volume on Industril Competition, Productivity, and Trade Regimes (677-10) 107 New Dimensions in Reional Integration (677-12C) 107 Secondary Market Prices (677-15) 108 An Evahlation of the Effectiveness of Preshipment Ispection on Trade, Capital Flight, Customs, and Other Revenue Problems of Developing Countries (677-34) 109 Effectiveness of Economirc Adjustment in Sub-Saharan Africa 109 Inpact of EC Agricultural Policies 110 Strategic Trade Policies 110 CommodityModels 111 Eastern Europe and EC-92 Ill Economic Integration in Sub-Saharan Africa 112 Export Supply Response in Agriculture 112 The Role of Export Catalysts in Low-Incme Developing Countries 112 Commodity Price Formation and Behavior 113 Financing the Former USSR's Transition 114 Investment and Growth 114 Manufactures Trade Modeling 114 Regional Trading Blocs 115 Trade in Services 116 Trade Policy Sudies 116 6 Ind of Studio byPronm Objet Ctegory Economic Management 117 Macroeconomic Policies, Crisis, and Growth in the LongRun (673.990 117 Transport Taxation and Road User Charges in Sub-Saharn Africa (674-37C) 11l Tesdng for Systematic Differences in Jutial and Final Project Evaluations (675-ISC) 119 The Macroeconomic Implications of Parallel Foreigu Excha Markets in Developing Countries (675-30) 120 Macroecmomics of Public Sector Deficits (675-31C) 121 Accounting for Centrally lanned Economies in Transition (676418C) 122 EIvestigating Equipment Investmentand EanomicGrowth (67643C) 123 How Do National Policies Affect Long-Run Growth? (676-66) 124 The International Economic Environment and Productivity Growth in Industrial and Devoping Countries (676-67) 124 Commcdity Prices and the Macroeconomic Policy Mix In Industrial Countries (676-76C) 125 Economic Inpact of Military Expenditures (676-85C) 126 Reestimationof China's National Accounts and Growth Rates (677-17) 127 Revenue Uncetainty in Czechoslovaida (677-18) 127 The Labor Market in Transitional Sodalist Economies: A Macroecononic Perspecdve (677-30) 128 Fconomic Consequences of War-Peace Transitions in Africa: Choices for Public Finance (677-31) 129 Target Zones and Real Exchange Rates in Developing Countries (677-38) 129 Fis. Inentives Reform 129 Global Economic Model-Regional Models 131 Macoeconomic Detmninants of Extemal Remittances 131 Open Economy Tax Reform I 131 Corporate Income Tax Incentives for Investment in Developing Countries 132 Measuring Real ExanWe Rate Misalignment 133 Parallel hMets and Growth in Sub-Saharan Africa 133 The Basics of ConsumerPolides 133 Monetay Policy and the Agricultuwal Terms of Trade 133 Ilkation and Growth Impact of Refm in Post-Sodalist Countries 134 Bank-Global Economic Model 134 DEC Analytical Database 135 International Linkages, Shodcs, and Adjustment 135 Fiancial Intermediation 136 Closed-End Country Funds. Theoretical and Empirical Investigation (676-0C) 136 The linpact of Financidal Rerm (676413C) 136 Japanese FIX in Developing Countries: Trends, Detminants, and Policies (676-570C 137 Investnent Decisions, Capital Market Emperfections, and the Effects of Financial Liberalizatiorn The Ecuadorian and Indonesian Cases (676-720 138 Measurement of Commodity Price Volatility (676-730 138 Corporate Fiance in Developing Econormes (677-04) 139 How Do Inadequate Insrance Markets Affect Commodity Price Stabilization Schemes? (677-06C) 139 7 b o 4S#uds by P_r Objl Caty Cntral Bank Idependec Its Pbolical and nslitutoa Foundations (677-07) 140 Risk-Weighted Capital Adequacy Requirema An Applcation to Developing Country Banks (67741) 141 Management of Drought Ris In Rua Areas (677-51) 141 Successful Rtural Finance InstitutIons 142 Bank Rrctu-Ing The Inratonal Experience 143 Costs of Initemediation 144 Agricultul Credit in the EMENA Re,lozu Characestics, Ise, and Strategy 144 Corporate Eidebtedness in Turkey 145 Rep Diect Investmntand Trade 145 How Integrated 1 the Wozld Capital Market? 46 Banking in Transifional Sodiaist Economdes 146 Commodity Risk Management 147 The Japanme Mai Bank System and Its Relevance for Deveop and Tansming SocialistEconomies 147 Meeting the Fancdal Needs of Ghna's Small- and Medium-Sale Enterpr 148 Risk Managmet in Agriculture 148 Alternative Forms of Extnal inance 149 Contachtal Savings 149 The Role of Banks in Enterprise Restructuring 150 The Role of Payment Systms in Fnandal Sect Reform 150 Basic t4re and Urbam Development 151 Housing Indicakts for Pobymaldng: An Extensive Intemational Survey (676-680 151 Iflrastructe Bottleneck Private Povisions, and Indusrial Productivity. A Study of Indesan and Thai Cities (676-71) 151 The Marginal Productvity of Infastructure in Deveoping Countries (67695) 152 Synergi HeAlth Effects from Water Supply and Sanitation Intrnons (677-25) 152 Willingness to Pay forRural Water Supply 153 Irriation Researdc Preparaton of an International Program for Techoly Research in Irrigon and Drainage 155 Resource Recovery 156 The Debate over Modenuzation of ligation Systems 156 Private Sectr Participation in Water Supply and Sanitation 157 Urban Transport Evaluation 158 ABSTRACTS OF CURRENT STUDIES POVERTY, DISTRIBUTION, AND SOCIAL WELFARE Poverty, Growh, and Adjustnent sumer demand system was estimated to capture own- in Pakdstan and cross-price effects of major commodities. Drawing on recent developments in the theory of taxation and Ref. no. 675-29C building on work completed in the Poverty Analysis Since 1977 Pakistan's economy has been growing at and Policy Division on simlar issues, the research as- a sustained rate of 6 to 7 percent a year. Despite this sessed the impact of various price reforms resulting impressive rate of growth, remtestinates suggest that from alternative tax and subsidy scenarios under con- as much as 35 to 40 percent of the country's population sideration in Paldstan. is below the poverty line, and levels of the population Preliminary findings from two draft papers on pov- livinginpovertyhavefaflenverylittleoverthepastlO erty in Pakistan (based on the exctd shortall of yeas Pakistan's demographic and social indicators caloric intake) show that remain matters of grave cncer: population growth is * The share of the population at risk of undernutri- 3.1 percent a year; life expectancy at birth is only 54 tion for 1984-85 ranged from 17 to 24 percent. years; and infant mortalityisan estimated 100per l,00 * Whether a national or provindal poverty line is live births. According to the 1981 population census, used,thepictureproducedof povertyinPakistanwould only 26 percent of the population were literate (35 be almost entirely one of nral poverty. percent of males and 16 percentof females). The persis- * Location-specific poverty lines suggest that the tence of these levels of poverty in thelight of Pakistan's risk of undernutzition in mosttowns and cities is much socil and demographic indicators is particularly wor- more widespread than generally perceived. rying if the poor have not benefited firom recent eco- It is planned to disseminate the findings through the nomic growth, additional and better targeted measures Living Standards Measurement Study working papers maybe necessary to achieve the Pakistan goverments series. poverty alleviation objectives. Responsiblity: Populationand HumanResourcesDe- Tis project addressed three questions: (1) Has the partment, Poverty Analysis and Policy Division-John incidence of poverty fallen as a result of Pakstan's Newman and Valerie Kozel. With Angus Deaton, recent, sustained economic growth? (2) What specific Princeton University Franque Grimard; Sanjay Jain actions have been undertaken in Pakistan to improve and Aly Ercelawn, University of Karachi. thestatasofthepoor?Whyhavetheybeen,orwhyhave Closing dazte March 1992 they not been, successful? (3) In the light of constraints Reparts- imposed by the new adjustment prgram, how can the Altat Mir Anum, Kaiser Bngi and Aly rclawn. Fortho- design, targeting, and implementation of existing pov- ng 'Povert" In Karacd nidence and Ojacteristicst ertyafleviationprogramsbemademoreeffective? What Deaton,Angu%, and Famque Crimard. Forthomning. Demand new programs mightbe needed to mitigate tha. adverse Analysis for Tax Reform in Paldstanf impacts of adjusbrent on the poor? Ercelawn, Aly. Forthcni4 "Absolute Poverty as Risk of The first two research questions were taken up in Hunger- Nonv, luddence, and intensity for Rural and phase 1, which carried outa retrospective assessment of Urban Pakdstan." how the benefits of Paldistans recent economic growth have been distributed over the populafion, foausing on the poor. Phase I sought to determine why certain Household Welfare Effects of Agricultural groups received a disproportionatedy large share of Policr Reform in Malawi benefits while others received a very small share. This information was used to asses the impact of future Ref. nos. 675-91C and 677-46 growth strategies on poverty levels, and to recmmend This research assesses the effects of the liberalization remedial measures. of the grain market on the income, production, food Phase I required an analytical framework to evalu- security, and nutrition of smallholders in Southern ate the budgetary and distributional consequences of Malawi. The longitudinal data it has callected will help Paldstan's new structural adjustment program. A con- monitor the effects of the policy change, and allow the 11 Poery, Di0tdion, Ad Social Werliwe responses of and the effects an different soioeconmic ricl Cmercialbaon amongSmaflholdems in tpes of households to be diffentiated by the house- Malewl holds' status as net food buyers or sellers, by whether Petes, PY, with C.lager. Forthcoming 'Ie Effects of Crain they axe labor-constrained, and by whether y have Market lberaliation on Income, Food Secuity, and surplus land. It provides mudi more detailed informa- Nutrition of Smalolba in MaIawv" dion on household production and consumption deci- sions than is usualy available, and makes possile the testing of hypotheses about the effectof changing food Policy Analysis of Poverty: Applicable prices.Theanalysiswilltrytosuggestacionsthateould Methods and Case Studies, Phase II be taken to enhance the positive effect and reduce the negativeeffectoahouseholdsoflieralizinggraintrade. Ref. no. 675-96 Aparal studyinthreeareasofMalawiwasconducted Thisprojectwasconcmmed withtheeconomicanalysis by the Center for Socal Research of the University of of policiesthataimdirectly to reduceabsolute povertyin Malawi, and the Bank has studied related issues in developingcountrieLThetwogoalsof phasIwere(1) to Malawi and other countries (the MADIA study). This develop theorecally sound and appicable methodolo- research will be comparable with studies done by the gies for quantifying the effects of policy on poverty alle- International Food Policy Research Institute in Afican viation, and (2) to apply these methods to new data for and other countries, and will help improve the under- Indonesia. The empirical work on Indonesia included a standing of the effects of policy reforms on food secu- detailed analysis of the country's progress in poverty rity, income, and nutrition. alleviation during the 1980s, emphasizing the effects of Data collected in 1986-87 are used as a baseine. A agrculturl policies and nonfarm rural development new data set was collected for 200 households in six Phase I of theprojectsought to enhance our lImowi- viflages by trained interviewers who lived in the vii- edge aboutthe pastperfornance and fuhre potential of lages dunng the fieldwork. Income and expenditure poavertyalleviationschemesinSouthAsia,aregionwith data were coRected every two weeks from September a long idsory of such schemes. Building on the lessons 1990 to August 1991, or once every one to two montS from phase L phase H was particularly concerned with dependigonthedata.Thedataindudeincome,.expen- rural public employment schemes. The empirical work diture, crop production and sales, off-farm employ- in phase I focused primarily on India. ment, food storage, nutrition status (anthropometric The policy analysis of poverty merits an analytical meass), and morbidity. Household calorie intake framework-one capable of consistently descibing the was measured. Grain traders were interiiewed to find effects of policy changes on the living stndards of the out who is trading, how much is traded, and how the poor. The projec's approach used household-level data market is organized. Grain prices were recorded, and guidedbyniiaoeconomictheory,emphasizingtheneed ethnographic data on the households were collected. for realistic specifications of the cDnstraints facing poli- Appropriate quantitative methods are being used to cymakers. analyze the data. Thestudy'sapproachtothemeasurementofpoverty The research findings wil be disseminated thrugh drew on recent theories on the use of dominance condi- researchreportsandseminarsintheBankandinMalawi, tions to establish socia welfare orderings. Thus, the organizedbytheCenterforSodalResearch.Atleastone method was not restricted to a single, well-defined journal article will be written, and a monograph on "poverty line" or "poverty index" Rather, whenever household food secauty will present a comparative possible, the entire distribution of individual welfare analysis of the 1988-89 and 1990-91 data. was studied, and distributions were partially ordered Responsidi Southern Africa Department, Popula- according to a broad clam of social welare indicators, tion and Human ResourCes Operations Division-oy incuding conventional poverty measures. de Beyer, and Agriculture Operations Division-Rich Phase I threw new light on the effects of various ard Anson and Robert Christiansen. With Pauline Pe- policies, including macroeconomic adjustment pro- ters, Thomas Tomici, Peter Walker, and Catiherine la- grams, on thepoor. In the empirical workon Indonesia, ger, H0D and Airl Deolaar. The Center for Social it was found that favorable initial conditions, a timely Research,Malawi,iscontributingstafftime,andUSAID adjustment program, and are in protecting public ex- is providing finandal support penditure programs benefiting the poor allowed Indo- aCsing datc September 1992. nesia to maintain its momentum in poverty alleviation RCA& through the difficult 1980s. And there is furte poten- Peters, PE andC. Hierer with T.F. RandaE 1989. Cash tial forpolicy reforms capable of sustaining the momen- Cropping Food Secrity and Nulhito The Effes of Lum in the 1990s. 12 Paucity, DbStiuflion, and Socia Wlfare A lesson frm phase is thatinformation and related India in the 198kW Jo mdf Dwicm Eawwu 38 incentive constraints an severely restnct the quantita- CAprW7-93. tive possibilities for poverty alleviation ftrough direct Hupt Maank, and Martn Ravaon. 1991. -rhe Sedgal policy intervention. With limited redistribution instru- Stuce of Poverty durn an Adjument Perioct Eviece ments, leakage to the nonpdor from even well- for Indonesia in the 19W Worg evepuu (D9eoi- intentioned poverty alleviation schemes is inevitabl. ber)Y1d53-7 The problems involved in simply reachig the poor in Ravallan,Martin. 1989. -LandcontingentPocies or Rural thernrsectrsof manydevelopingcotniesaredaunt- Poverty Allevlatian. Word Dvdcbpm 17 (August:1223- ing. 33. Themostpromising keyto inpmvintarg etingper- _.199. 'Income Effects on Undernultonf Ecowuk fomwance and, hence, the terms of the tradeoff against DPeori mtd Odlml lagc 38 ApiU 516 other policy objectives, is to build incentives into the .199L -he Chalenging Aithe of Poverty in poverty alleviation scheme that disoDurage partidipa- Bangbdes' PoWReadh WoingPaper5 World tionbythenonpoorandlimitleakageduetocorruption. Bunk, Washington DC (Also in &angldesh Devekopnet Penalty schemes may help, but they too are plagued by Sh 431 3 p mberkS-5t.) informational and administrative problems in this cDn- .1991. -on theCovageofPublicEmpoymentSdhemes text Anattractivequali3roflabor-internsive rural public for PovtyAlevialionf Jow, qItfPlpmvd Enmics worksprogramsfromthispointofviewistheircapacity 34t5-9. to screen the poor and raise their incomes. Phase 1[ . 1991. adngf te Rural Paor thoug Public Employ- compared theperformance of theseprogramswith that meneArgumes, Evidence, and lesinsom South Asa of fesible poliCy altnatives. World ge* Resh Obsaff6 (Iulyt)153-76. Results from phase U suggest that labor-intensive .1992. 'Dow Underutriion Respond tolmesm and rural public works projects have the potential to reach Pric? Dominance Tests hlr lndooeuW Wold BoRk many of the poorest, to protect then from downside EwamRwk6qaruazyrlC09-24 risk, and to develop rual ihatructure. This project .1ph. lbwyo ariA G Cons made whatare believed tobe the firstcredible estimates Mahds Liing Standards Measuement Study Working of the incomes iorgone by participants in rural public Paper; . Wahington, DC World Ban works schemes. The results indicate sizable net income .Fthaming ?overtyAlevladon Through Reeginal gi from participation But realizing these fits Turting; A Cae Study- In A. Bnwaerman, KI lff, and JE. depends crudally on project selection and financing Sllitz, , edt Agm&l Dcpmw p SPA=s and w h77ey and on details of policy design, such as the wage rate ofowl Orgaaaip and coverage. Bmefits to the poor can be rapidly dissi- Ravaflion, Martin, and Gmv DatL 1992. ' Tarting paled by a poorly conceived and executed project Thhwugh a Work Requirment Effident? Some Evidene for ResponsThily: Population and Human Resources De- Rural Indi Paper presensdat Wald Banlk C ne a partment,PovertyAnalysisandPolicyDivison--Mar- PUble Expendiure, and tbePoowr Iiden and Tageting tin Ravallion and Caurav Dlatt With Michad Keen, June Essex Universitr; Stephen CDate,AUniversityof Pensyl- Fot Farhmin "Regional Disparities, Targetina and vania and Alok Bharva, University of Houston. PovertyAlleviaion in India." In Mlkael Lipton andjacques Closing dde March 1992. wander Caag,st, Pmwhs of tw World Bat IWF Rqo?w Fb~~~~~~~~~~~~Pverty PWReseach C.bin Bhara, Alok and Maln Raahn Rthoming. "Does RailWon Martin, Gay DAM and Sbubam ChaudhuJi. Consumption Behave asa Martingale? A Test for Rural Farthcning. "Does MabarashtWs 'Employment Guantee India? ReviEw of noics and Stic Sdhme GuarneEmployment? Effecs of the 1988 Wage hauduhrt Sbubham, and Marti Ravali Forhcmin Incrime" EC D. mniDmuomd aIuCsdz Chage WiTDo Stalk Wdfare Indkztms Idm* If the OzrnimyfPor? Ravailn, Martin, Gauyav Dal and Domiique van de Wallk LivingStndadsMearemetStudy WorngPe. 1991. "Quantifyig Abdukt Poverty in the D eveping World Bui, Washngto, D.C World. Iwcfl d Wet 37 (Dember)345-61. Coate, Sthen, and Martn Ravali Fathcomlng. "Rediproc Raalon, Martin, and Monka HuppL 1991. Measuring ity without Commitment Chwwertion and Perfonm Chanes in Poverty; A Methdolgica Case Study of of lnfbrmaH nsuLuanne A mntte Jownd of D czvpuzt Indoneia durignu Adjustant Period. flydf Bm* Econmics. E .miRe 5 (1):57-U Da4, Gaurav, and Mardit Ravalln. 1992. "Growth and RavaUloa, Martin, and Dminique van de Wale. 1991. The Rediibnlbon Componenb of uChagsin Poverty Me- Impact on Poverty of Food Pcing Refcrt A Welfare srs: A 1 with AppliHatos to Broil and Aralyss for ndonese Imal of Policy AMlba 13:281-99. 13 Povrty, Distrlbution, and Socid Wdlfar The Economics of Nonmarket Transfers inaeasesinpre-pnvatetransferinmeappeartoprompt in Developing Countries largereductionsinppnvate transfers,whichimplies that the targeting effectiveness of public transfers an be Ref. no. 676-24C diminshed because of private transfer responses. This research project sougit to come up with a de- Many private tansfers flDW from the young to the scription of the sizes and pattems of private transfers in old, but the question of how parents secure and enforce avarietyof developingcountrysettings,withparticular such old-age support has been little explored. The re- attention to income distribution. It examined how pri- search investigated empirically the possibility that par- vale transfers affect the incidence and effectiveness of ents seek to set an example of givingbehavior for their public transfers and other government programs. It children by making transfers to their own parents. Ey- tested for the motives of transfer behavior, to compare dence was found that favored this "demonstration ef- the strengts of the altruism and exchange theones. fecd hypothesis And it examined how transfers behave over the life Using a data set collected among the urban poor in cyde-in particular, how they smooth consumption. Cartagena, Colombia, the study investigated the role of The research was conducted through both descrip- private transfers as risk-sharing mechanisms. The re- tive analysis and econometric analysis. sultsindicate thatif household earnings werestabilized, The descriptive analysis cDnsisted of a simple ac- private ransfers would fall about 40 percnt, suggest- counting of the numiber of households receiving or ing a large risk-mitigating role for such brnsfers giving private transfers-for example, hrough the use The papers produced in the study have been pm- of the living Standards Measurement Study ([SfMS) sented at a number of conferenc snrveysfromvanouscountries;thetrackingofintergene- ResponsMliity:Populationand HumanResourcesDe- ational and regional patterns of transfers;an investiga- partment, Poverty Analysis and Policy Division- tion of the effect of private tramsfers on the cross-sec- Ewmanuel jimenez. With Oded Stark, Harvard Univer- tional distribution of income; and the construction of sity and Donald Cox, Boston College. cross-tabulations of private transfer incidence and Cosing dat May 1992. amountswithdemographicandemploymentvariables, Reot&: schooling, and other indicatms of well-being Ccx, Donald, and Emmnuel imeca 1991. "The ReLlaioshp Theprojecrseconometricanalysisconsisted of speci- Betwee Commundty Chaacteriscs and Private Transfes fying and estimating an econometric model of private Evidence forGhana." transfer behavior. In the first step the specification was - 1991. NAStudy of Moivaion for Private Income discssed in two components or stages: transfer dec- Transfes in Cated'Ivoi sion and the amount transferred conditional on its oc- .992. "Moves for Private Income Transfers Over the cunrene. The second step was policy simulation. LifeCyde: An Analydcl Framework and Evidence for The research produced a variety of empirical results Pen" conemring private transfer behavior in a variety of . 1992 "Ptr Trasfers and the Effectiveness of Public countries. Empirical patterns for private transfers in IncDme Redistbution in the Philippines." Peruand Cote d'Ivoire (based on the ISMS surveys) are _. Fthming. Private Transfers and Risk-Shring more dosely aligned with those predicted from the Among te Urban Por in Colombie exchange theory of trnsfers than with those predicted Cox, Donald, and Oded Stark 1992. "Inteeneational based on the altmistic theory of transfers. Further, pri- Transfes and the Demostratin Effect vate transfers in these anuntries appear responsive to Stark, Oded. 1991. "Nonmarketransfers and Altrism. capital market imperfections. Peruvian social security benefits appear to partially diminish private transfers tgeted to the elderly. Incidence of Public Expenditures II Furtier evidence of the connection between policy variables and private transfers was uncovered in the Ref. no. 676-42C ISMSsurveyforGhana,whereitwasfound thatprivate This research sought to eamine what has happened transfer behavior is responsive to the availability of and to the distribution of thebenefits of government expen- distance to health facilities and schools. Simulation ex- ditureovertimeandtobetterunderstandincidenceand periments indimted that building more in*astructure its determinants at one point in time. For Indonesia, the can cause substantial cnges in private transfers. study looked at health and education expenditure be- Evidence from the Family Income and Expenditure tween 1978 and 1987; for Hungary, all social expendi- SurveyinthePhilippinesindicatesthatprivatetransfers ture was exanined for 1987 and 1989. With the incras- are large, widespread, and responsve to household ingconcrnabouttheroleofthepublicsectorinpoverty economic status. Among the very poorest households, alleviation and the scope for pro-poor policy reforms 14 Povety, Dibutki, and Socil Wdfire (such as improved targetig), there is a need to look participation on various household outcomes. The more closely at how the benefits of public spending are projetispartof ieWomen in DevelopmentDivision's distributed. This wiU help in understanding how the research on the causes and consequences of improving system can be reformed to promote equity and protect the productivity of women. the poor and vulnerable while improving the use of Access to affordable credit for productive activities scarce resources. This study was part of a longer-tem can remove the obstacle of low savings for thepoor and research task that the Public Economics Division is help improve their incme and employmenL The ques- conducting on the incidence of public expenditure. tion is how affordable credit can be delivered to the For both Hungary and Indonesia, the analysis was poor. Experience in such countries as Bangladesh sug- based on household-level consumption survey data. geststhatgroup-basedcreditprogramsmaybeeffective Tabulations by expenditure quartles and expenditure vehidles for disbursing credit to the poor. But little is dass intervals, as well as econometric analysis, were known about how group-based credit programs work used to explore the research and policy questions. and whether the programs are sustainable. The results show that smce the late 1970s there have The research will address this issue by examining (1) been dear improvements in education utilization inci- thecoststrucuresof threeaeditprogramsinBangladesh dence in Indonesia and that this cannot be attributed (BRAC, the BRDB, and the Grameen Bank), and (2) the solely to economic growtL In the health sector, the estimated effects of the programs on households and on primary health care movement of the last decade has the members of the households. It will pay particular brought significant dcanges in rural Indonesia in the attention to the distribution of such effects by gender. treatment of ilnesses. To identify thehousehold and intrahousehold effects Preliminary results for the study of Hungary show of credit, a random sample survey of 1,800 households thatthe social safetynetis quiteflexibleto households' will be conducted in three rounds over a year in changing circmstances. The trisformation that has Bangladesh, jointly with the Bangladesh Institute of ocoered in thatcountryduring thetimespannedbythe DevelopmentStudies. Anutritionsuveyofasubsample data has brought up both methodological puzzles and of households wil be conducted, and an education test insights. willbeadministeredtoassessthenumeracyandliteracy The Indonesia case studyhasbeen presented atthree in rural Bangladesh. In addition to the individual- and Economics of Poverty taining courses held by the Pov- household-level data, program- and community-level erty Analysis and Policy Division. The Indonesia data information will be collected from secondary and ad- served as an input to a country operations department ministration sources. These data will be analyzed to study on public expenditure policy for poverty reduc- examine both the effect and the sustainability of the tion. The Indonesia study was presented at the Public creditprograms. Economnics Divisiorns June 1992 conference "Public Ex- The projects output will be disseminated through penditures and the Poor Incidence and Targeting.' working papers and workshops in both Washington, Responsiy: CountryEconomicsDepartment Pub- DC,and Bangladesh. The final output willbe published licEconomicsDivision-DominiquevandeWalle With in a book. C Faji, A. Deolalikar, A. Bhanmik, and Mv Gautamr Responsibfity: Populationaand Human Resources De- COSing data September 1991. partinentWomeninDevelopmentDivision-Shahidur ReVort adandketadSouthAsia,CountryDeparmnmftIPopu- van deWalle, Dominiqu 1992 'Me Disibutin of the lation and Human Resources Operations Division- Beneits rim Soda Seiaces in indonesia, 19-87. Policy Martin Karcher With Zahed Khan, Baqui Khalily,John Reearch Working Paper 87. World Bank Washingon,DC De New, and Mark PitL The Bangladesh Institute of Development Studies is contributibn taff time- Cloig datc January 199 Credit Programs for the Poor Household and Intrahousehold Impacts and Program Sustainabifity Data Analysis for Development Policy Ref. no. 676-59 Ref. o. 677-03 This research seeks to identify the household and This research involves a series of studies, each of intrahousehold effects of credit on income, employ- whichwillshowhowthecorrectuseofhousehold-level ment, education, nutrition, and other household out- data can inform policy. The studies cDver saving, pov- comes It will also examiine the sustainability of three erty and inequality, pnce and tax reform and demand major aedit programs in Bangladesh, the particpation analysis, household compositon and individual wel- of womeninthecreditprograms,and theeffects of their fare, and pnvate and social security. The zesearch wfll 15 Paverty, Dishrition, and Socal Wdfar draw heavfly on the cumulative experience from the indevelopg ountries, particularlydunngmacroeo- Living Standais Measurement Study (LSMS) surveys nonic adjustment, when temporary downtuns in eco- and on other data sets that will be made available-for nomic activity may result If households tundertake exmple, for India and Taiwan (China). The data ob- actvities to protect consumption levels in the short run taned from the LSMS surveys were designed for policy that reduce laibor productvity in the long run-such as analysis,notjustforthenmeasurementof rtainaspects reducingeducationalinveshnentand sending themost of living conditions, and it is for this purpose that the qualified members overseas-these may be activities studies will be conducted. that sodal progams should aim to prevent. Further, if A series of papers will be produced in the study, and private transfer networks tend to weaken as economic the end productwill be a book thatwill pvide arange conditions worsen, public transfer schemes may be of examples showing how the analysis of data can be desiuable. used to provide information and quantitative evidence RespnsWtyPopulationandHumanResourcesDe- for policy design. partment, Poverty Analysis and Policy Division-Paul R&pOnsUdibiyI Population and HumanResourcesDe- Glewwe. With GiLette Hall, Cambridge UniversitY partment, Poverty Analysis and Policy Division- Clasbng date Deember1992. EmmanueljimeneztWithAngusDeaton,PrinetonUni- versit. Cdoing dat cJune 1993. Income Security for Old Age: Conceptual Background and Major Issues Maceconomic Adjustnent and Poverty Re. no. 677-45 Reliefi The Roles of Social Policy and The proportion of the world's population that is old Household Behavior islueandgrowing,thisgroupisoftenpoor,and many countries face huge fiscal burdens because of promises Ref. no. 677-14 they have made to provide income secanty to their Between the years 1985 and 1990, Peru underwenta older citzens Govemment policies regarding old-age heterodox stabilizafion and a dramatic recession after securityhavelargeimplicationsforthelaborand capital 1987.Sodalexpendituresroseduringthefilsttwoyears markets, the growth potential and fiscal stability, and of the program, but after 1987 assistance programs theincomedistributioninasociety.Thesepolicieshave virtually dried up. Previous research, based on house- been debated in industrial countries for many years; hold surveys in 1985-86 and in 1990, revealed that more recently, theyhave becme a matter of concem in averageper capita mnsumption inlima, Peru, felIby50 developing countries as welL This study is designed to percent over this period, help acuntries reevaluate their old policies and formu- This research first explores whether certain house- late new policies in this area. holds in Lima were better proteced from drops in Although most developing countries have long had consumption,andwhetherthesehouseholdsdisplayed some formal public or private pension programs, or any distinct characteristies in 1985-86. Charctristics both, the coverage of these programs has often been explored include access to credit and private ansfer limited to formal labor markets in urban areas. Old-age networks, employment, education, gender, and age. secuntyfortherestof thepopulationhasbeenpprovided The results will show whether, in the face ofa lare and through extended familyarrangements, mutual aid so- widespread downtum in economic conditions and in cieties,akdotherinformalmechanisms.Butasextended theabsence of public assistancenetworks, atleast soen family tes wealm because of urbanzation and mobil- households are able to undertalke activities that protet ity, and as the proportion of the population that is old consumption leves-nd to what degree they are able growsbecause of medical improvements and declining to do so. fertility, these counbies will be forced to reevaluate The resech hn furtherexplores changes in house- theirdegreeofrelianceon informal systems-This isnow hold behavior between the two survey year The re- happening in many African and Asian countries. The search investigates changes in educational investment, challenge facing them is how to shift to formal systems inmigration patterns,and inprivatetransfernetworks. of incomaintenance withoutacceleating thededine Do households reduce the allocation of resources to iniromssystems,andhowtoavoidthemistakesthat education during adverse economic shocks? Which other ountries have made as they design their formal household members mirate overseas? And do private systems. ausfer networks grow or shrink? The findings wM The need to reevaluate policy is even more pressing contr-butetcurrentdebateonapprpnatesodalpolicy for countries that, in the past, introduced formal pro- 16 Powty, Distribution, and Socil Welfare gramsofold-agesecuntywhosecostshavenownsento burden of old-age security be shifted in that direction. a point tat they can no longer afford, as in many latin The study will also cDnsider the advantages and disad- AmencanandEastemEuropeancountnes.Forexample, vantages of pnvate management of that pillar. because of generous early retirement provisions com- The prdcise mix of these four pillars will vary from bined with high rates of evasion, the ratio of workers to country to eountry, depending on their economic cir- retirees in some of these cDuntries is less than 2 to 1. Not cumstances, theirobjectives, and their initial conditions suprisingly, these countries have been unable to pay The study wil evaluate, in some detail, the effect of the prommised benefits and have reduced the real value different mixes of these pillars on benefits, costs, and by failing to index pensions or by cutting the income their distribution, and the difficulties in the transition replacement rate. The challenge they face is how to from one system to another. redesign their fomal systems so that they will be sus- In addition to these basic struchtual recommenda- tainable and have the most favorable effects on eco- tions, thestudy will considerimportant design features nomic growth and equity. of each pillar, particularly of the public redistributive Several alternative models for providing old-age se- pfilarthatisthemainstayof theformal systems in many curity are available and in place in different countries. ounties It will suggest possible reforms of these de- Thesevaryinmanyways,butthemostbasicstructural sign features, to increase the effectiveness and equity differenoes concem the objectives they aim to adhieve and decrease the costs of the old-age security system. (for example, savings and insurance versus redistribu- The results will be disseminated in a flagship report tion), whether they are largey funded in advance or in the summerof 1993, followed by several seminars in financed on a pay-as-you-go basis, and their degree of a variety of countries that are now reevaluating their reliance on public versus private management The old-age security systems. choice among these models has broad implications for Rewonsbty: CountryEwnomicsDepartment, Pub- theoperationsof the laborand capital marlcets, the fiscal licSectorManagementand PrivateSector Development system, and, consequently, for the level, growth, and Division-Estelle James, Public Economics Dvision- distnbution of GNP. Christine Walich, Fiancial Policy and Systems Divi- Thisstudyanalyzestheeffectsof thesemodels,based sion-Dimiti Vittas and Ask Demirgiig-Kunt, Trade on the experience of industrial and developing coun- Policyfvision-DonaldKeesingMacroeconomicAd- tries, as well as simulations of representative countries. justmentand Growth Division-lausSchmidt-HebbeL It will test the hypothesis that a multipillar system is and Socialist Ecnomies Unit-Milan Vodopivec. With preferable to any single method for providing old-age Mukul Asher, National University of Singapore; Eric security. In such a system, one pillar mandates savings Davis, Bank of England; BarTy Bosworth and Gary and annuities, so that people are required to set aside Burtless,Brookingslnstitute,MariaCattell,BrynMawr resources during their working years to take wre of College; Robert Holzmann, L Boltzmann Institute for their needs when they are oldei this pillar also insures AnalysesofEconomicPolicy,AustrWSalvadorValdez- against individual risks, such as uncertain longevity. Prieto, Catholic University, Santiago, Chile; Patrido Another pillar redistributes income to old people who Arrau, Ilades-Georgetown University Program, did not earn enough when they were young to build an Santiago, and Ministry of Finance, Chile; and Padmini adequate cushion of savings; this pillar may also insure Narayan. againstgrouprisks,suchasunexpectedlyhighinflation Casing date June 1993. or unexpectedly low rates of return in the economy. A third pillarprovides fiscal incentivesfornonmandatory savings and annuities, such as tax incentives for job- Adjushnent, Income Distributioni, based pension plans. And a fourth pillar consists of and Povert purely voluntary personal savs and familyarrange- ments. These continue the informal system of old-age Most adjustment programs, whether or not sup- secimty and still play an important role in most coun- pored by the International Monetary Fund and the tries even after formal sysems are put in plan World Bank, emphasized the simultaneous application Most countnes with formal systems today have the of stabilization and structural adjustment measures. redistnrbutivepillar,publidymanagedonalargelypay- This complicates the assessment of the distibutional as-you-gobasis In some countnes thishasbeen supple- consequences of these packagesbecause itisoftendiffi- mented by a tax-advantaged nonmandatory savings- cult to separate the contributions to changes in income annuity pillar. Many countries do not have a separate distribution due to stabilization measures from those mandatory savings-annuity pillar. Prior evidence sug- due to structural refoms. This research looked at the gests that such a pillar be created and that some of the distributional consequences of adjustment programs, 17 Povety, Distributm, and Social WdJare combining country studies and counterfactual simula- mentandtohavebenefited from theliberalizationmea- tion analysis to investigate whether altemative adjust-, suies and real exchange rate devaluaton that accompa- ment padkages that respected the exteral finanang nied adjustment programs. Because of this conflict of constraintwouldhavehad sigicanlydifferenteffects interests, adjustmentprogramsmustbe crefullyman- on income distrbution and poverty than the policy aged. package actually used. The country studies cDvered Thedisdplineimposedbygeneraleqlibriummod- Chile,OCte d'Ivoire,Ecuador,lndonesia,Malaysia,and eling shows the narrow room for maneuvering when Morocco. Each country study induded an analytical the three criteria of efficiency, welfre, and political interpretation of how the economy adjusted and feasbility are taken into account In this setting all oDunterfactual simulations that evaluated howpoverty actionshaveopportunitycostsbeyond those thatwould and income distnbution would have fared under alter- be revealed by a narrowly focused, partial equilibrium, native adjusnt packages. economic cost-benefit calculation. This exposes the po- The study found that two of the countries, Indonesia tentially fatal flaws of narrowly designed adjustment and Malaysia, managed to adjust with the recourse to programs, whether they focus on efficieny or welfar international institutions and without any apparent By the same token, because the margn for maneuver is adverse effect on the poor, despite some cuts in social sosmall,unanticipatedadverseshocks canbedevastat- expenditures in Indonesia. This superior performance ing for an ongoing adjustment progrm. Under those onthedistributionalfrontmwasattributedtoanumberof circumstances foren assistance loans are crucial for factors,indudingrelativelyfavorableinitialconditions, managing the tenuous balance among objectives, and early adjustment, good and credible policies, and con- foreign grants are necessary when the shock is very tinued access to external finance to smooth adjustment large. Not surpisingly, the exploration of alternative adjust- Thediverseresultsof thecountryshldiessuggestthe ment packages through simulation analys7s for these need for careful design of adjustment packages. Tailor- two countries revealed only potentially negligible im- ing adjustment programs to take into account the ecD- provements on the distributiDnal fronL nomic and political environment is essential for equity In Chileand Ecuadorunsustainablemacroeconomic and forthe sustnability of the program. Moreover, the polidesbeforeadjustment(Ch ie)orduingadjustinent case studies show that there is no inherent conflict (Ecuador)contributed toaworseningofthedistnbution between fiscal retrenchment, which implies a smaller of income despite otherwise sound structural adjust- state, and the balancing of the objectves of efficiency, ment policies. The experience of these two countries welfare,andpoiticalfeasibility,whichimpliesanactive underscores tie importance of adopting credible poli- state. des, since reversals benefit some segments of society at Repmo*nsiiiy: CoumtryEDonom icsDepartinent,Trade the expense of others. ln Ecuador capital flight was Policy Division-Jaime de Melo. With Francois distributionally regressive, and in Chile sLubsidies to Bourguignon and Akiko Suwa. holders of dollar-denominated debt led to a significant Completion date December 1991. redistribution of income from the rest of society to the Reorts beneficiaries of the preferential exchange rate for dollar Bourgigno, Francs, Jime de Melo, and Christan Momson. liabilities. 1991. 'Poverty and Income Distribution duxing Adjustment FLnally,forCOted'IvoireandMoroccourbanpoverty Lbsues and Evidence om the OECD Pjec" Policy increased during adjustment while the distribution of Researdc Woring Paper 810. Wortd Bank, Washington, DC income improved as the rural-urban income gap was (Also in Wold Lbvdopmc 19 (11): 1485-1508, 1991. reduced either mostly as a result of measures adopted Bourguignon, Francis, Jaime de Melo, and Christian Mrrison, Morocco) or mostly as a result of exogenous events eds 1991. "Adjustment Palicies and Incme Distributiorc A (C6te d'Ivoire). Simulations showed that, for tiese two Symposm." Wrld Dedopur 19 (11). countiies,alterativeadjustmentpackageswould likely Bourgnon, Francols, Jaime de Melo, and Akiko Suwa. 1991. have yielded superior outcomes, particularly for COte Moddling the Effects of Adjustment Programs on Inkame d'Ivoire, where large imbalances remained Distibuion Worl Dedopmmt 19 O1):1527-44 The comparative studies revealed that distributional conflicts canarise duingadjustnent Themagnitude of these conflicts was highlighted by the simulations. Study of Deregulation Effects Among those conflicts, the most prevalent is that be- on Low-Income Households tween agriculture and labor-intensive sectors in manu- facturing, on the one hand, and the bureaucratic and Jakartas population of more than 8 million was import-substituting sectors, on the other. In general, growingover3percentannuallydurngthe1980s.Only agriculture was found to be sheltered during adjust- about 20 percent of the population had household con- 18 Povety, Distrton, and Social Wedfare nections to municipal water. The rest obtained water reported that in some neighborhoods the amount of from sand pipes, private wells, and street vendors It water resold to nonconnected households and vendors was estimated that about 55 percent of the population, wasas muchas thatsold frompublichydrants,ataprice induding especally low-income households that live slightlylower than thatforwaterfrom thehydrants. The off centrallocaions,relyheavilyonvendorswhocharge study also found that less than half of the households much higher prices for their water supply. The govern- and vendorssurveyed wereawarethatresaleof munici- ment of Indonesia and the World Bank, during the pal water by households was legal. preparation and negotiation of projecs, decided to al- Thestudyconduded thatthederegulationhasstarted low households with municpal water connections to showing direct and indirect benefits to low-income sell water to vendors and neighbors without connec- households and vendors and so should be continued. tionsatpricesnegotiated bybuyersand seller Adirec- Given the complexdty of water supply in low-income tiveto thateffectwasissued by thjaarktMehtpolitan neighborhoods (the pressure available in the piped Water Enterprise (PAM Jaya) in April 1990. water system, the land tenure of residents, the level of This study evaluated the first yearts result of the organizationamong vendors, theway hydrants distrib- deregulation, to see to whatextentderegulation, which ute water, and the size of alleys and pathways between facilitates wider access to water sapply, has improved homes), it is difficult to attrbute any improvement in water deiveryservicesamong low-incomehouseholds water supply to any one factor. But new supplies and that have no municipal connections. In parcular, the other competition-enhancing reforms will help keep study evaluated how deregulation has helped release downward pressure on piees. The study recommends constrained supply, and how it creates potential eco- that community participation in the form of neighbor- nomic gains so that more parties will partidpate in hood meetings and directories should be encouraged to eliminating the monopolistic prices charged by ven- counter th2 widespread lack of knowledge regarding dors. The research also examined the issues on the the legality of sales by households. demand side,incomedistribution-betweenhouseholds Responsibii: EastAsiaand Pacific,CountryDepart- and vendors-and public enterprise management. The mentM,nfstructreOperationsDivisiorl-JunZhang; study wil contribute to periodic workshops evaluating External Affars Department, International Economic theimpactof deregulationmeasmesand strengthening Relations Division-David %eckmarm; and Planning ODmmunityparticipationinneghbhoodenvirornment andBudgetingDepartent,Corpora;teandBudgetPlan- upgrading programs underJabotabek Urban Develop- ning Division-Charlotte Jones-CanrolL With Randall ment Projects Ht and lL Crane, University of Califomia, frvine. The Lembaga ThemaininputsforthestudywereanNGO-assisted Studi Pembangunan and PAM Jaya cDntributed staff field suey and interviews of households (a sample of time. 300 in North Jakarta) and water vendors (about 50). Completion datc April 1992. Based on the surveys, indicators and quantitative esti- Report mates, such as the dynamics in end-user prices, water Crane, RandalL 1992. 'Mle hmpact of Water Supply Deregula- consumption pattos, demand elasticities, and the ef- ton in Jakarta, Indonesia Results from Hsold and fect on vendors, were provided. WaterVendorSurveysin North Jaklarta World Bank, The study found that 73.5 percent of the sample Washington, DC households reported some purdhasing of water from vendors; 27.5 percentalso purchased some water from publichydrants, and 1O percentpurchased from house- Poverty Impacts of Agricultural Policies holds with mnnections. In the survey areas, only 135 percent of the households had munapal connections. Many of the early criticsms of struchtual adjustment The average cost of vending water was 5,040 rupiah programs in the 1980s have become outmoded as expe- (US$2.50)a cubic meter, and the costof municpal water rience has led to the reorientation of pmgrams. In the a small fraction of that (180 to360 rupiaha cubic meter); second half of the decade, the need for specal attntion given this price difference, the consumers of vending topovertyissues induced or overlooked by adjustment water could theoretically payfor the current connection programs was widely acknowledged in Bank dtocu- charges with only one year's savings gained by switch- ments. One component of the curent approach to pov- ing their supply system. The study also found that erty with adjustment is attention to investments in vending water customers, on average, spent the highest human capital in general and in nutrition in particular. proportion of income on water (7.5 percent compared In recent years such investments have regularly been with 3.8 percent for connected households), and cnn- induded in structural adjustmet loans sumed the least water (14.6 liters per person per day, The first phase of this esearch project reviewed the compared with62 forconnected households). The study role of nutrition in recnt structural and setoral adjust- 19 Pooerty, Distbution, and Socil Wdeftre ment lending. A structural adjustment loan (SAL) or The challenge of reacing the poorest also points to agriclWral sector adjustment loan (AGSAL) that fails one of the biggest sortcomings in current programs. A to consider programs dircted at poverty alleviation, or numberof programshavebeen plaguedbyanunderuse to indude exp1icit links to such programs, is now an of edsting data and sigdficant delays in the planned exception. In many cases in which povertyis addressed generation of new information. The potential for im- in an adjustment program, income generation is both a proved program design using integrated household means to an end and an end in itself. Targeted poverty studies and morerapid censuses has beendemonstrated programs are often designed not only to reinforce the in a few cases To date, however, weak links between political consensus for economic restructring, but to readesandpolicymakersinsidetheBankaswellas maintain living standards untila sustainable economic witiin governments, has meant that the potential has base is established. But nutrition reocives far less atten- rarely been achieved. don han income generai The second phase of this research reviewed medha- Even within the subset af poverty programs that nisms that households and communities use to cope explicidtly emphasize nutrition, there is an emphasis an with income shocks. Formal tests of perfect consump- implicitincome tnsfers throughfood prcingand food liensmotingadhievedeidierinrmporallythrough distibution. This has a greater effect on human capital savings or spatially by pooling idiosyncratic income thananapproachthatassumesthattheoverallsupplyof shocks, do not provide convincing evidence that such foodoroveraleconomichealthwillautomaticallyreach pattems are prevalent in vage economines. Although the poor. Nevertheless, this approach, which separats many of the results are oonsistent with some risk shar- food policy from health policy, misses some comparm- ing, they are also consistent with odwer models of on- tively easily obtained synergisms. These synergisms sumptiondelermination.Althoughhouseholdconsmp- occur both in the process of combining irnputs to pro- tion does not tradck household income, it is difficult to duce a nutritional outcome and in program desgn. determine how much of tis consumption-smoothing In addition to the few AGSALs that indude health behaviorrpresents interemporal smootiing, through with food subsidies in rural areas, a number of specific saving and borrowin how much represents inter- programs are already being undertaken that indicate household consumptionsmoothingthroughinsurance, the potental for synergism of health and nutrition with and how much is the spurious result of measurement agrculture. For example, rural credit has been linked error bias. tisnothard to picturewhythiswould be the with nutrition monitoring and education programs. ase Even in a small community, information is asym- Elsewhere, extension and the promotion of new cops metric, and the monitoring of states of nature and of have been linked both to the pivate secbtr production individual efforts makes complete pooling unlikely. of weaning foods and to distrbution through dinics. Similarly, there is often a limited menu of savings in- clearly, there can be no categorical statement about strumentsavailablein a oDmmunity. But the consump- which programs linking nutrition to agriculture or to tion-tracks-incDmealtemativeisnomoreley.Despite employment generation are appropriate in an ACSAL evidenceof liquidityecnstraintsinanumberof conmu- or a SAL, but there are enough successful exampls to nities, most individuals appear to have an ability to indicate that sectoral pigeonholing is an unnecray mitigate income fluctuations. limitation. Yet risk reduction has costs Although there is no ExperienceinBoliviaand Ghanaindicates thepoten- single risk premium that summua the cost of risk tial for tying socia progams to successful adjustment aversion in developing countries, available evidence lending,butitalsoindicatesthattargetingservicedeliv- indicates that them is a relationship between attitudes ery to the poorest regions and the poorest families toward risk and production decisions. That is, despite a within such regions is time-cnsuming. This does not rangeof(expost)consumption-smoothingpossibilities, argue for delays in project initiationbutfor therecognis- householdsappearto forwpotentialeamningsto reduce tion of gestation periods in project planning. Proper risk. The implidt risk premia are not inconsequential; a planning and implementation implies recognizing the diversesetofstudiesinticatesthatfarmersincursizable difference between addressing the needs of the newr costs of risk reduction in trms of reduced farm profits. poor and addressng preeisting strudural poverty. Moreover, the poor appear to be less able to bear Similarly, given the challenge of readhing the poorest, risk-regardlessof whether their nskpreferences differ interimprograms need to considerbroad tageting as a from the general population. Thus, there is a conver- provisional step toward more nanrow targeting. Thatis genceofeffidencyandequityissues.Thattheabsenceof if a narrow but deep safety net will miss many of the insurancepossibilitieslimitshouseholds'abilitytomiti- poor, given initial institutional capacity, a broader, gate income fluctuations does not imply that the most though shallower, safety net minght be considered. effective interventon would be to set up insurance - 20 Poveny, DWrbuion, and Socil Wdfar programs If imperfections are due to factors for which W.ukt, DC. (Also forihmmng in Oa:rd Hammhof scale is importnt, such as the need for reinsurance or Emuaka:ud SIisIiaJ inkmationprocessingsuchintervenmtionsmaybepo.- Man, Hrel 1991 ¶hitrldm'al Ccmldutloenin Bank sible. Converely, if imperfections are due to asymme- Lading for Bmnc Adjstmen Paper prepr for th tries in informtion and moral hazard, outside agncies 1th Af olturalSpaehM Wrld Dank, Jauay 8-1Q offer no particular advanta Aldeman, iaod, and Maito Garda 199t 'Fod Security and A number of studies have suggested programs to Helth Sear43 ExplaIning the lerve of Nutritin in reduce the rislness of income (as opposed to contISmp- PakIta"w Polcy Rarch Woiking Paper 865. World BDa, tion)streams-foremple,troughemploymentguar- Wabgon,DC antee or similar public work schemes Often such pro- Akkr, Harod, and Chlln Paso. 1997. 'Do the Poor grams are evaluated in tms of income sfers and ef lwne? A Syst fthe Leatuwe an Rik Slming assets created, but the stream of benefits may also in- Inutdhiin Developig Countr Presented atan dudeincreased famefficencyduetoindirecteffecson ArItue and Rural Deeoment Department smnar, portfoliosandinputallocation.Moreover,in addition to World Ban, Whlngtc, DC, June 16and at the nierns the fiast-round effect of reduced income risk, such pro- tma EconausAssodato Meette, Mosow, Augst 24L grams may have a seoDndaryeffectbyinaeasingaccess to consumption creditbecause they may reduce terisk of default But little evidence is available to support (or Social Trasfes and Income Distribution refute) this hypothesis. A thrd phase of the research costucted a specific Important cnges are taking place in all aspeds of model of determnants of malnutrition in Paistan to emnomicsinEastemnEuropeancountries.Thesechnges determine the relative contributions of incmaeand caps- will require cmsiderable redefinition of the system of biliies (as indicated-by morbidity and education). A can- sodal expenditme and of govermnent behavior. But tml question when considerg nutrition pogams in socal expenditure has as yet recived little attention general and targetd interventions durng emnomic ad- from policymakers. Thepurpose of this resrch project iusmmentinperticuar,istheexpectedeffectsofinreasing was to provide a bendhmark analysis of the existing household resources relative to aamss to public goods syste and condusions about ther future evolution, ManyinfluentialstudiesofmalutritionDtended toequate and to establish comparative analyses with public ex- hunger with malnutition. More recently, a number of penditume systems in market economies. studies have considered otherfacs-such as infection Theojetaddressedthesequestions: (OHowshould and levelsof maternal education-trespond less rap- Easten European countries seek to rmetructure safety idly to chnge in houseld income nets? (2) What effect is the restructuring or eliminatian .A model of the determinants of malnutrition in chil- of the existing system of social tansfers and subsidies dren in Pakistan that tames into cDnsideratior the fact likly to have? (3) What happens toincomedistribution that the level of health cae use reflects household in the ewnomies undergoing the transition to capital- choices indicates that raising a household's food ac- isn? (4) How can we track the effec of reforms on surnption, for example, has less effect on nutritional welae? (5) Who gets ahead-and who loses? status than does raising a mother's level of education. The study used a uniform methodology to evaluate Similarly, preventng diarheal and other diseases can the distributional impact of socal expenditures (pen- be expected to have a aomparatively large effect on sions, family and welfare allowance, and health and nutritional status. Household income lerels have onlya education spending) in three economies (Czedosdova- small impact on such morbidity, although disease inci- da, Poland, and Yugoslavia) and compared these find- dence is correlated among communities, and thus re- ins with those of other studies on OECD countries flects such community facors as supply and qualit of Eachof the countrystudieshad threeparts (M)analysis services. Thus, food security alone is insufficent to of the size of different soial expenditures and their improve nutritional status modes of fmandng in the last 10 yeas; 2) the differen- Responsibldy: Agdicue and Rmral Development tial impact of social transfes on various categories of Department,AgricultualPoliciesDivision-HaodAl- households (farmers, workersand pensioners); and (3) dermaL - thedistrilbmionalimpactofthetransfers and studies for Completion Me: June 1992. themostrentyearusingdatafromhousehold income Repouts and expenditure surveyr. An overall report integrates Adams, Ridad IHL and Harold Alderman 1992 'Some. of the finding Inanneinequrhln RuratFal } ADewmpwm 1 The study observed that the overall social expendi- Analyss" Pacy Resarh Woing Pap 836 Wl ak tueisdislutedfairlyequallyandthatsocilexpendi- 21 Poy, Dstribution, and Socil Wdfare ture reduces income inequalities. Among the dUifrt signednomnalUSdollarvaluesbasedonworldwhole- categories of social expenditure, farm and child allow- sale market prices or their nearest equivalent on the anceshavesignificantequalingeffect.Thesameequal- assumption that countries always have the option to izing effect has been noted when socal expenditure is acquire goods at such intemational prices if they so applied to health and education, with the single exep- choose when their own prices are higher. To this was tion of university education. Income distibution in added the costof aveageenergyconsumption todefine Eastern Europe is characteized by low inequality of the basic basket of sustenance overall Incomes Both labor income and real prospects, BycompringCCNPpercapitaand"basiccommodity whidL together represent four-fifths of overall income, cost it is possible to detenine which countries were are fairly flat. The transition to a market eownozr . developing in the 1970s and 1980s and which were whidh implies higher business income and unempluy- regressing ment, cn be expected to lead to a widening of income Apart fromissues of broad macroeconomicanalysis, disparities. the numbers highlight possible deficencies in the na- Reonsilb ,: Country Economics Department, So- tional accounts that form the basis of development ialistEonomiesrReformUnitBranrcoMilanoviq;and modeling;. Comparing commodity baskets at domestic Europe and Central Asia, and Middle East and North prices as well as at world wholesale prices also throws Africa Regions. With Aleksandra Posarac, Jan up interesting policy issues Rutkowsli, and Trena Topinska. Raponshj.- International Emonomcs Department, Completion date: June 1992. SDdo-EconomicDataDivision-DavidCikowsldand Rw - Samuel Olayinka. Eurostat, Luxembourg and the FAO Ml3avic, Branko. 1990a " in Polad, Hungry, and are participating in the study. Yugoslavia in ihe Yeans of Crisis, 1975-.5t Policy Researh Compleon datc MIy 1993. Wording Paper 507. World Bank, Washington, DC. (Aso in Repots: YWOr Bank EWWIZCRIvieW52) 3 OConna, Jobn. 'Who Was Develoing In the 1980s? 1CSE _.__ 1991. "Poverty in Polnd, 1978- Pdicy Researd Worldag Pper. World Bantk Washington, DC Woridirg Paper 637. World Bank, Wasig DC Wad, Michal. 198& Pkes and Their Effects on Household ___. 1992. 'Inwme DIstibutIon in Late Socialism: Pla Expe in Developing Countries." Pesented at the Hungary, Czel 4vakia Yugoslavia and Bulgada UNDP Nor4hSouth Roundtabe Development The Human Q::ompare World Bank, Washingto DC. Dimension," AmmanJordan, September 3-5. ._, 1992. "Soda! Costs of Transition to Capitalism: Poland 199(- World Bank, Washingt DC Paistbn Integrated Household Survey ( S) Project Poverty and Price Measurement Update of the Cost of Basic Sustenance ThePovertyAnalysisandPolicyDivision,inmllabo- rationwithPaldstanesFederalBureauofStatistics (BS), This research project is deigned to prode an over- has undertaken a broad-baset household survey de- view of the etent to which average per apita income signed primarily to help assess the impact of policy exceeds the cost of basic sustenance (nduding fuel) initiatives on women, the poor, and other vulneable over a 20-yeartime span for 80 to 100 developing coun- groups in Pakistan The impetus for the poject comes te This "basket is assumed to be a proxy for the from a concem shared by the government of Palistan income level of the poorest in a country. This study and thedonorcommunitythatanumberof issuesraised compiles a "cost of basic sustenance' measured at inter- in recent development plans could not be adequately national prices that, together with World Bank Atras addressed with previously exsting information. These estimates of CNP per capita is used to gauge economic issues indude reducing poverty and expanding basic progress over the yearsm The differencesbetween urban services,literacyand school enrollment1 improving the and rural prices and between formal and inforal mar- well-being and economic status of women; reducing kets are analyzed separately. malnutritionandinfantmortality-andexpandingsmall Each country's food supply and use account for the and household-based enterprises and rural off-farm late 1980s, as compiled by the Food and Agriculture employment By providing the data base neessary for Organzation (FAO), was linked to its cDrresponding - in-depth analyses of these issues, the project will help FAO tine seres on calorie supply per capita, with only poligcyaks to design sectoral polices and programs those food items that make suibstantia contributions to moreeffectively.ItisparticularlytimelygivenPaldstan's calorie supply identified. These items were fien as- need to curtail publcexpenditures in the face ofincreas- 22 Poverty, Distrbution, and Social Welfare ingly tight fiscal constraints A set of policy studies privatation, restructurin& and the eliiination of sub- desiged around basi development issues forms an sidies are exped to change enteprise responses to integral part of the Pakistan Integated Household Sr- price signals, the power relations within entepnses vey (PBS) projecL (orate governance), the distrbution of profits and The PIHS uses an integrated questionnaire format, investment patterns, and wage distribution. These innovative field teuciques developed under the aus- changes at the entepise level have their counterpart at pices of the Livng Standards Measurement Study the household level Expenditureson different factors of (LSMS),extensivetrainingandsupervisionoffield staff, production are-from the perspective of households- and a computer-based data management system de- income flows. signed to improve data quality and reduce the time Soci redistWibution policy will also change With the between the collection of raw data and their use in eergence of unemployment an explidt unemployment policyanalysisTheinitialphaseof hL'project,in which compensation policy appeared in all formerly socialist policy objectives were definred and the survey was pre- comuntries.Thepositionof pensionerswillprobablychnge pared,wascompletedinDeceumberl990.Acomprehen- as acret levels of pension benefits seem unsustaiabl sive one-year survey measurng the social and eco- andastheoveralsystemundergoesanoverhaulwith the nomic attributes of households and communities was irAmductionofindependent(private)pensionfunds. Wel- completed in December 1991, and initial tabulations farepolicymarginal in thepastwlll nowbeused totarg from the survey (the PIHS Sttisbcal AbsTract) were those with particrly low incomes. A second aspect of circulated in April 1992 The abstract pmnvides a com- redistrbution policyistaxation. Socialist ecmnmies have, prehensive pichtre of the social and economic status of until now, relied mostdy on payroil taxes deducted at the households in Pakistan. Studies are now under way in source and tumover (or excise) taxes As the tax system is the areasof poverty reduction,determinantsof fertility overhaued, some actions will be enccuraged (private outcomes, schooling, and the economic role of women home ownrhip stimulated trough t - ninre tax deduc- in the economy. lions in the West is the best-known example) and others The third phase of the PIS project isunder prepara- will be discouraged. tion. It will have three major components: (1) taining The reduction or elimination of subsidies changes for FBS staff, (2) a program of policy studies and re- relative pries and theeffectiveec :;riancposition (stan- search, and (3) three yearsofdatacolection, witha shift dard of living) of almost all households. What the popu- in emphasis from developing a data base designed for lationasa wholelosesinsubsidiesisthe sameaswhatit broad program and policy analysis to expanding the gains through higher incomes, but the pattern of gain data base in order to monitor changes in poverty and and loss is not uniform across social groups. importantdevelopmentindicators.Thepublicationofa As income distnbution becomes more unequal and setofquarterlysodalanddevelopmentindicatorsbased overall income-ia the initial stages of the transition- on the new survey is proposed. declines, poverty wil incease. Many people who had Respo:nslblity:PopulationandHumanResourcesDe- not bee poor might become poor. The composition of partment, Poverty Analysis and Policy Division- the poor will change unemployed urban workers or Emmanuel Jimenez and Valerie Kzel. With Eshya pensioners, rather than margi groups, will aCOunt Mujahid-Mukhtar, Samia Raoof Ali; Akbar Noman; for most of the voor during the transition. The social Salman Zaidi; Kamran Ai; Chazala Mansu Sohail imWplications of the changed composition of the poor AghaShanazKuzi,P1DE;Hln Garia; andJuanMufioz must not be overlooked. and Beatnce Godoy, Sistemas Integrales The Federal Conceptually, the causes of cange in income distri- Bureau of S.atistics, Pakistan, is cDntibuting staff time, bution can be divided into two groups: systemic cause, and the UNDP (slamabad) and the USAID are provid- discussed above, and causes assocated wihi maacm- ing financial supporL nomicstabilizaton(ealdevaluation,inceaseininterest Compleion date June 1993. rates, adjustment to the dissolutiun of the CMEA). The linkietween macroeconomicpoliciesand incomedistri- bution may still be insufficiendy dear, but there are a Income Distribution dunng the Transition numberof studies of this issue for industrial and devel- oping countries There are no such studies for the for- Eastern European countries are engad in a trans- merly socialist cuntries. And the effects of systemic tion from ecnomnies without private ownership (often chng on income distibution are unexplored. centrally planned) to private market economies. This This project seeks to provide answers to a number of process can be seen as involving changes in boti enter- simpleyetbasicquestions withregard to the transition in prse and household sectors In the enterprise sector, five Eastem European counties: 23 PODC*y, Distriuton, id Socad Wdfar * What socal and profeional groups have bea- have any uedistributive function because they are al- erited from the chan? most uniform across income groups; and (6) direct * Who are the losers? taxes are both small and broadly proportional to in- * What happened to overal inmome nequality? Come. * Whatwerethesystemiccausesofcangeinincome In looking at ihe first effects of stabilization in Po- distmbution (for example, how did hiaeased property land,thenhsearfoundthat(l)therealwagesofurban income affect distribution)? sectorworkersdedined more than the incomesof other * How did wage distnbution dhange? sodalgroups;(2)uemploymentinmasedmostamong * What happened to poverty and the cDmpositionof middle-income daises; (3) wage distribution, fairly the poor? egalitian under aommunism, shows some signs of The project uses data published by the countr becDming more unequal; (4) the main beneficiaries statistical offices to assess the effects of the transition on from the transition appear to be those with strong incomedistnbution.Itcombinesdesciptiveandanalyti- private sector orientation and skills that am in high cal approaches (testing a number of hypotheses) And it demand in the arket economy, such as managers, uses the technical approaches derived from the analysis awoimtants, and economists; and (5) the main losers of Gini and mncentration coeffidents am mostindusuiworkersandmid-levelcericalstaff. Preminay findings from the projects analysis of RCspnsit Counrty Economics Department, So- incomedistributionat theendof communistrnleinthe dalist Economies Reform Urit-Branko Milanovic. five Easten European counties are that (1) income With Gabor, Rutkowsla, and GrahauL distribution in socialist aountres was fairly egaariA, C data June 1995. with little diffrence in aveage incomes among sodal RePrts: groups; (2) farmers tended to enjoy incomes at least at M}anovic, Ernwi 1992 income Dltilon ln Late parity with those of urban workers; (3) urban workers SodaDarn Pala4, Hungary, Caedunkrda, Yugoslawi were most affected by the economic decine as their andNulgadCcparedf inecme plummeted in the last 5 to 10 years; (4) a higher _199t 'iodd Csoef Transidn to Capitalism: Poland share in the economy by ihe private secor is associated 199Q' withgreaterincomeinequality;(5)socal trnsfoersdonot 24 PRIVATE SECrOR DEVELOPMENT AND PUBLIC. SECTOR MANAGEMENT Labor Redumdancy in the Transporation The studyalsodiscussdandevaluated thenahreof the Sector adopted polices and redundancy schemes. The results suggest thatlabor redundancy is often a Ref. O. 675-21C severe problem. It is caused by a number of factors, the The growing effort to reduce large public budget most frequent being a dedine in demand, finandal deficits and to increase welfare by improving the effi- constraints,andgovermmenthiringandfiingpractices. ciency of resource allocation is leading many govem- Amongfactorsthatpreventreductionsinemployment ments to concntrate on the problem of sizable and and wages when labor redundancy occurs, the most costly labor redundancy in the public sector. Although important are restrictive work practices, geographical the existence of some redundancy has been genally constraints, and labor legislation and custom. acknowledged, the severity has often been underesti- In several case studies the researchers calculated the mated. Moreover, since the wage bill is usually the costs and benefits of the adopted redundancy schemes largest componentofthepublicsectorbudget, theeffect and found that the payback period is very short They of labor redundancy on the budget, efficiency, and madeastrngase,basedontheconceptualfzamework welfare can be substantial. and the empirical evidence, for funding redundancy This project was motivated by the fact tat there has schemes (severance pay) in the context of World Bank beenlittlesystematicanalysisofthisimportantproblem projects. The evaluation and policy section of the study and of tiesubstantiveand diverse efforts of countriesto detailed a typology of cause of redundancr and of the cope-withit.Theestudyfocusedonthedeterminantsand elements of successful schemes. The issues of monitor- solutions to labor redundancy in selected modes of ing, evaluation, policy adjustment, and sustinability transport (rails, pores, and buses). It focnued on the were also addressed. state-owned transport enterprse, rather than the pub- Fmdings have been disseminated through reports lic sector as a whole, because of both the perceived and through a one-day training course in the Bankl severityof thelaborredundancyproblem and theavail- Rebpoiity:In*astructureandUrbanDevelopment abilityofpredseperformancemeasunsinthissubsector. Department, Urban Development Division-Alice The analysis was based primarily on case studies of Calenson. With Jan Svejnar and Kathenne Terrell, Uni- sixcountries (Brazil,Chile,Ghana,Mauritius,SriLanka, versity of Pittsburgh; Eric Beshers; and Alan larding. and Yugoslavia), which at different points in time accu- aosing date July 1991. mulated significant amounts of redundant labor and Reports. adopted a variety of approaches to solve the problem. Beshers, Eric W. 1991. Restrictive labor Practoes on Railways Ifomation from a number of other contexts was used in Developing Countries"- [NU Dmscduon Paper 7 World to further substantiate findings. ank, Washingt DC The study's conceptual framework derived optimal Hding, Alan S. 1990. lestrldve Labor Practces in Seaport" employment and pay policies for use in desgning Policy Resea Workig Paper 51t World Bank Washg- schemes to reduce redundancy in diferent scenarios. top, DC The issue of identifyig the extent of labor redundancy Svej Ian, and Marko Skreb. 1991. I Lao Redudancy in the was also addressed. The problems associated with the Tfransport Setor The Cas of Yugoulav Railwaym Draft. fequently used "engieeng (ratio) approach were Svejnar, Jan, and Kafferine Teml 1990. Labor Redundancy min discassedand cantrastelwithasodalwelfareapproac, the Trnpot Sector The Cas of Bazil Draf which is based on the comparison of laboes marginal - . 1990. Labor Redundancy in he Transport Sector The product with the actual and the shadow wage Case of Chile? DrafL For each of the six countries, the study examined the .1991. "Reducing labor Redundancy in Sate-Owned principal causes of labor redundancy, the extent of Entmrprie Policy Research Worlng Paper 792. Wld redundancy, factors preventing reductions in employ- Bank, Washngton, DC ment or wages once redundant labor is acamulated, Svjnar, Jan, and Kwadwo Tutu. 1991. -LaborRedundancy in andfactorsleadingtoadedsion toaddresstheprobleL, the Tranport Sector The Casedf Chant DrafL 25 Prkvate Sector Deadopment and Public Sector Mnagemmt Terrel, Katherine. 1991. labor Redundancy in the Transport The remainder of the projectwill be spent on empiri- Sectr. nhe Case of Mauritius." Draft cal analysis of these data sets, focusing on key hypoth- ___ 199L. Labor Redundancy in theTransport Sectwor he eses. Examples of several key hypotheses and issues Case of Snri Lanka Draft relating to the effect of specfic reforms that are being Terrei, Katherine, and Jan Svejnar. 1990. How Industry-Labor empircy investigated, using the firm-level data, are Reladons and Governent Policdes Affect Senegals as follows: Econonic Performanc.' Pbliq Researd Working Paper * The nature of management contract systms (and 271. Wald Bank, Washington, DC there are half a dozen of these) under which an enter- puise operates has a significant effect on the level and growth rates of total factor productivity. Industrial Reforms and Productivity in * The type of ownership under which an enteprise Chinese Enterprise operates (state-owned, mllective, and town-village en- terprises) hasa significanteffecton theleveland growth Ref no. 675-38 rates of total factor productivity. The objective of this research is to identify and ana- * The greater the deree of freedom to lay off and lyze the factors affecting the productivity and the effi- reo-uit workers that is granted to an enterprise under ciencyof Chineseenterprisesand toevaluate the impact vanouslabormarketreforms, thegreaterthetotalfactor of industrial reforms in China. This activity is particu- productivity. larlyvaluablebecauseitwilassess theeffectof ongoing * The relative effidency of capital is related to the reform processes in the industrial sector. The project sourceof investmentfinance (governentbudgets,bank also aims to increase the institutional research capacity loans, or retained earnings). of the collaborating Chinese institutions. * Thedegreeofdomesticmarketcompetitionisposi- The project seeks to answer several research and tivelyrelated tothelevelsandgrowthratesof totalfactor polcy questions: (1) To what etentand in wnat indus- productivity- tres has reform inceased total factor productivity? (2) * The degree of openness to foreign trade-as WNhy do productivity, growth, and effciency differ measured, first, by greater access to fobegn exchange among different types of enterprises, and how can the through higher retention rates, and second, by a lower difference be accounted for? (3) How do different poli- percentage of exports and imports through government ces influence the production and investment behavior foreign trade corporations-is positively related to of enterprises? the levels and the growth rates of total factor productiv- The projectuses enteprise-vel panel data sets forup i43. to 1,210 firms in Chdna forthe period up to 1989, and for * Over time, there will be a convergence of factor 1,500 firms for 1990, to analyze industrial enterprise be- returns among industries as evidence of the incasing havior issues. The data mver all branches of industry, role of factor and product markets. types of ownership, and sizes of firms, and will allow a * The incidence of product innovation is positively detailed comparativeanalysisof changesinproductivity. related to the degree of domestic and foreign competi- The data sets were obtained from three collDaborating tion. institutestheistituteofEmnomicsfortheChireseAcad- TNformal worlcshops will be held throughout the emy of Social Sciences (IE at CASS), the Research Center project to discuss the research findings. for Rural Development of the State Council (RCRD), and Rsponsiity: Cauntry Economics Department, So- the Economic Systms Reform Institute (ESR cialist Economies Reform Unit-lndeiit Singh, Alan The first phase of the projec focused on data collec- Celb, and Geng Xiao; East Asia and Pacific, Country tionandorganization.Thefirstresurveywascarriedout Department Il, Office of the Director-Shahid Yusuf during the fall of 1990 and was designed to update all and Javed Burki, and Country Operations Division- the existing survey data to 1989. But the existing data Peter HarrokL With V. K Chetty, Indian Statistical did not have enough observations on collectives and Institute,bryJeffeerson andA.Lewel,BrandeistUniver- town-village enterprises, and data on some key indus- sityXuWenyi,BrandeisUniversityandWuhanUniver- trial branhes, especally heavy industry, were mmissig. sity; Thomas Rawsld, University of ittsburgWt Richard To crrect these shortcomings, a unified survey was Day, University of Southeem California; Zvi Griliches; designed with the assistance of the collaborating insti- and Zhang Xeujun. The Chinese Academy of Sodal tutes This survey, which was carried out in June 1991, Sdences, theResearchCenterforRuralDevelopment of updated industrial infonnation for 1,000 enterprses up the State Council, and the Economic Systems Reform to 1990, induding 500 new enterprises (in pace of 400 Institute are contributing staff time. enterprises that had reported implausible data). Clsing datc June 1993. 26 Priwte Sector Deldopment and Publc Sedor Managemt ReportL .1991. "Property Rights Anagemnb and Indusrial Ch, l Fag ahrthcoming fIhe Failure of Renmuallzatlon in Productivity in China. World Bank, Coumtry Eanomics Chint Interplays among Local Governments and the Department, Sociaist Economies Reform Uni Washington, Centr." In Arye Hilan and Branko MilanOV, Od. DC Swidist Ecamnits in TrnSliL - . 1991. What is Spedial about Chinas Reforms? World Chen, Xang Gary -L Jeffeon, and InderajtSlnfg L990 revsed Bank, Country Economnics Depatmt, Socilist EMnoes in 1992D. 'Lessons from Chies Economdc ReformL Reform Unil Washgton, DC Brandeis Unlvesity, Waldhum, Maes; World Bank Country Eonomics Departmet, Sodalist Economdes Reform Unit, was'lgton, DC Tunis and Rabat Water Demand Study . E1. 'essons Frm Cina's Econoic Reflim. Joura ofCompEan sukmis 16 201-25. Ref. no. 675-40C Jefferson, Gauy E 1991. "Decompng Soains of Changes in A central problem in investment and pricng choices the Dispersio of Factor Rehun An Evaluation of Cbinese forwater supplyis the estimation of demad. This study Industry Brnmdeis Univesity, Walfitm, Mass. analyzed demand in Tunis and Rabat for cDnnection to Jefferson, Gary H., homas C. Rawsk, andYuzin Zheng. 199f the system for those who were not cormected and de- CGzowth, Effidency and Convergce in China's Sate and mand for level of water use for thDse who were con- Collective Industry. Brandeis University, Walitham, Mass, nected.Theobjectiveswerea)toestimatewillingnessto Pittsburgh University; and Clinese Academy of Soclal connect to the system where supply is not a consutaint Sciences, China. and (2) to estimate residential demand and key elastici- Jefferson, Gary H., and Xu Wenyi. 1990 "he Impact of ties as a function of household characteristics and sup- Reforms on Sodal Entepris In TransitiowSructure, ply characteristics. Conduct, and Performacein Chineselndustry. Brandeis The project studied two different sets of households University, Waltham, Mas; Wuhan University, China in Tunis and Rabat to determine their water use charac- ___ 1991. -Assessing Gais in Efficient Production Among teristics-those already connected and those not con- Chna's lIdustrial Enterps" Brndeis University, necled but for whom connection is possible. The econo- Waltham, Mass. metric bechniques used exanined the feasibility of esti- Rawski, Thomas C. 1991. "How Fast Has Chse Endustry mating single-equation demand functions when can- Crownr University of Pittsburg Penn sumers are faced with block rate tariffs This application Rawski, lhomas C. and Gary L Jefer 1992 A Theoryof is one of the first in the literature for developing coun- iconomic Reform. Brandeis University, Walam, Mass.; tries. University of Pittbrgh Penn. The findings confirmed that connected consumers' Singh, Indeijit 1991. Chia and Central and Easerm Europe: Is knowledge of tariffs is sketchy, and that price and in- There a Professional Schizophrenia an Socalit Reform?w come have a relatively inelastic effect on consumption. World Bank Cotry Ecnomcs Department, Sodalst The initial stock of wealth of a household is the best Econoies Reform Unit, Washinfgton, DC predictor of eventual water use. Those who were not _ . 1991. industrial Restruchting in socials Ecnomies in connected expressed a desire and a willingness to pay Transition: Some Prelzimn Obsc-. tongs" World Bank, foranindividualwateracmectionand topayusecharges County Ewnomics Department, Sc: list Economies despite the availability of free standpipe water-between Reform Uit, Washington, DC 7 and 10 percent of household expenditures The major Xlao, Geng.1990. The Impact of Property Rihts Strctu on impedimetoannectionwasthelupsumrequirement Productivity, Caital Allocation, and Labor hmein orDnnectionfeesasopposedtoasystemwithfeespread Chine State and Colective Enterprisef World Bank, over time. In general, the level of charges for use and Contry Economics Department, Soidaist EconoMies connection were not major deterrnts. Reform Unit, Washington, DC From a policy pc7 Dpective, the study reinforced the *1991. The Econoic Role of Chinese Gental and l view that regularly prug-rammed and prudent tariff Covenm ts Challenges and Opportunities from the State increases are feasible, but that wate utilities need to and Non-State durial Enterprises? World Bank, Comtry spend more time in consumer education, especially re- Econois Department Sodiast Econonies Reform Unit, garding the tariff system and the cost of providing Washington, DC reliable and dean water supply. The study also demon- _ . 1991. iManama Automy, Fringe Benefits and Own- stlated that ontingent valuation surveys of willingness erhip Stuture: A Compative Study of aCnse State and topayombeconductedin urban areasand thattheseare CoUective Enterprses? World Bank, Countrymi Enacs a practical method of gaining valuable information on Deprment B SocaltEem s Refom Unit,Washington, DC consumer response to supply choices. 27 Pri;e Scwtor Deodopment and Public Sector Mainagsmn Rap)ityastruchmnandUrbanDmelopment The gains came from various sources. Depart_mt, Water and Snitation Division-Hry * buLssedbwetment.Wherepublicenterprisesleft A. Garn. With AlexMcPhaiLflSAIDpmvidedfinandal demand unmet, divestiture brought about a dramatic support increase in investment A strilkng example is Chile, Casing date Decber 1991. where the telphone company (C1C)doubled its capac- Rrrtt ityin the four years following divestiture. Md%nAl,m Alex is and Rat WaterDeaadStudyf * Puduivity improvment. A smaller work force, Doctmal tslabusoHopkins Unverstt. improved labor-management relations, better inen- _ FortbcmIng. he OverlookedMarketfrWater tives, and intenal reorganization after divestiture en- C(nmecions in Rabarsanlytown lewnolf Wkler banced productivity in nine cases. The most significant RarrMwr PLaii nd MmugmntL exampkswereMalaysiaisContainerTerminaltMexico's ._ lhe FvePerntRuleW hroved Water SerAv. C& Telmex and Aeromedxco, and Chile's CrC. Houseods Afford MoaeTA Case tdy from Five 1nail * InmaLzedprics.Underpridngofoutputunderpub- CitesinMorocmw lic ownership led to the waste of valuable rources. Divestiture provided governments the opportunity to restructbre prices to better reflect the real value of these Welfare Consequences of Selling Public resoures to the economy. At the same time, effective Enterprse: Case Studies frm Chile, regulation prevented monopolies from exploiting their Malaysia, Mexico, and the United Kingdom marketpower.TheonlyexceptionwasBritishAirways, which was able to ciarge cDnsumers higher fares by Ref. no. 675-42C merging with British Caledonian after divestiture What happens when govemments sell their public * Output diverskadon. Sorne divested firms were enterprises? Are consumers better or worse off as a able to diversify at low cost, capilizing on teir exst- result? Do employe of the affected public enteprise ing strength For example, British Telecom and Chile's suffer? Does the govemnment get its moneys worth? CTCused theirexstinginstitutionalnetworkandknow- What happens to competing enterprises in the private how to provide new value added services; Sports Toto sector?Aboveall,whatistheoveralleconomicinmpactof olMalaysiaintroducednewproductsbThesenewactivi- divestiture? And what can be learned from eperience ties could have been pursued under public ownership, to maximize the gains from divesting? This res but remained unexplored because public enterprise projectprovides asystmaticanswerto these questions manages had no incentive to pursue them or were drawig on the experiences of Chile,Malaysia, Mex, blocked by bureaucratic restramints from doing so. and the United Kingdom. It contributes to the divesti- Who were the winners and losers? ture debate, which has thus far been theoretical, intui- * Workrs did not los-and sometime won. Taldng live, even ideologicaL In addition, it provides policy- into account compensation payments, divestiture inno makers hard evidence on what to expect after deciding caem in the sample made workers of the divesLed firms todivest,andonhowtomakedivestitureadvantageous worse off. Workers-as participants in the equity of to society. divested firms-made substantial gains in the United The researchfollowed thecasestudyapproach,butlt Kingdom's National Freight, Mexico's Telmex, and applied a common methodology to all of the cases. The Chile's electricity distribution entity, ENERSI casesweredrawnfiomtelewnmunications(three mlnns), * Consmers un-but not aways. In the majority of airlines (four firms), electricity (two firms), gambling cases,consumerswereaswelloff orevenbetteroff afber (one firm), container terminal (one firm), and trucdng divestiture-thanks to competition and effective regu - (one firm). In all of the cases, the following questions lation. In five cases, however, consumers as a group were addressed: ended up worse off. Consumers of telecommunication * What happened before and after divestitLre? ssvicesinMMicoanowpayhigherpricesbecausetiffs * What would have happened without divestiture? were previously too low to cover cost and allow for - What is likely to happen in the future? expansion. ENERSIS of Chile is a special case; after * What does it all amount to? divestiture, the company significantly reduced theft of The research conduded that divestiture enhanced electricity,whichhurt ltisgroupof consumersButthe domestic and world welfare in 11 of the 12 firms ant- loss wasmore than offsetby the gain in lower prices to lyzed; the exption wasMexiana Airlines. The magn- other consumes tudes of the gais were substantial; they avenaged 2t. * Forigners did well-but so did natios. Foreigners percent of the companiet predivestiture annual sales, profited from divestiture in all but one of the cases in and in more than half the cLses the annual pins eax- which they were involved Mexicana Airlines is the ceeded 10 percent exception). But tey were not the only wnnners. They 28 Puiw.Sec tor Deeopmett and Publc Sctor Mangem contributed to national economies by bringing much- Rpoib: y Cou ntry ECDnomicsDepartment, Pub- needed fiesh capital tomeetexcessdemand and growth. licSectoranageitand PrivateSectorDLvelopment This is tru, for example, for Mexco's Telmex and Division-Ahmed CalaL Wih Leroy P. Jones, hIgo Chile's CIC Vogelsang,and PankajTandon,BostonUnivetyityRaul Buyers did wdl-but so did governments. Buyers, Saez, Ministry of Economy, Chie; Fadil Azim Abbas, indudingmanysmall shareholdersin theUnitedKing- Prime Ministets Department, Malaysia; and Christo- dom and pension funds in Chile, came out ahead- in pher Doyle and Richard Green, Cambidge University. every case except Mexicana Airlines. But so did Closing datc June1992. governments in the majority of caLses-meaning that Reort after divestiture the Treasury received more in sale Cl, Ahmed. with Raul Saez and Cemenda Tosas 192 The proceeds and the discounted stream of taxes than it Welfare Cosequces of Selring PubUc Ent hri hIa Odle would have received in dividends and taxes had public Background, LGEN ENERSIS, and Companla de ownership continued. Only in three cases did TelefonosdeChOfePaperprstedattheWoddBank governments lose ftwo in Chile) and then onlyby small Coference on the Welfare Consequence of Sling Pubic amounts. Enteises, Washington, DC,June 11-12. What can be leamed from these results? Success, ClaaLuAhmed. Leroy Jones, Pakaj Tandon, and lg defined in terms of the ecxmonoc gains to society as a Vogelsang. 1992. 1Queoulos and Apprachus to Answers whole, was greatest where predivestithue public enter- Paper presented at the World Bank Confence an the prises were relatively inefficient, where the postdives- Wefare Conwsquec of Seding Pubic Enpriss, titure regulatory fiamework was well acnceived and Washington, DC, June fl-It implemented, where lack of public resources was a _ . 1992. -he Welfre Consequen of Seling Public constraint to new investment and service expansion, EnkipepsesSynte of Caes and Policy lmos and where the struchtreofthe sale transactions did not Paper presented at theWolid Bak Conferenceon the involve concessions to sweeten the deaL The study also Welfare Consequces of Seng Public EnEnrises, shows that: Wagion DC, June ll-12 * Effective regulatory nues and isitutin pwvide in- _ Fortmin& Th Wdf*mCawsquwcof Sofig Ptdsk centives to producers to reduce their costs, and a stable EnBTrd Came Studies fis C,MuswMakw md the environment to expand. At the same time, theysafeguard uied KXm;g Washington, DC Wadd Bak againstexploitation of consumes Thisresultwasmost Jone, Lemy, and Fadit Azim AMiss, with Yorgffin Oen. pronounced in Chile, Malay"at and the United King- 1992 'he Welfare Conseqeeas of SeRing Pbic Eabt- dom, in telecommunications and in electricity. pdisf in Malaysi Backgound. ICelang Container Temdnal, * Even thedivestiteofffientpublic nterisecanbe MalaysinAnrinos, and Sports Tom' Paperpresentedat the bene7cialtothe economy. Thisproposition is illustrated by World Bank Conference on the Weae Cngequeass of Chile, where divestiture had little impact on already Sllg Public Enterprises Wasito DC, June 1-12. efficientfirns,buttheeconomystillgained fromdives- Tandon Pankaj, with Mmal Abdala and der Rupa 19921 titure-thanks to the entreprneurial spit of the pri- "The Welfare Conseunce of Seing Public Enprise in vate sector. Mexico: Bakound, TEMIEX, AERCMaXICO, and * Partial diestiture can be more than a cosmetic chane. MEXCANA." Paper presented at the World Bank Cone- In Malaysia, the goverunent retained control (directly mmon the Welfare Consequene of Sellng Public and indirectly through publicenteprises) of Malaysian Entpiss, Washington, DC, June 1-12. Airlines and Kelang Container Terminal Yet the exst- Voesane igo, with Manuel Abdals, Cristopher Doyl, and ence of some private ownership led the government to Ricad Green 1992. -rhe Welfare Cnequens of Sellng exercise its cDntrol function differently, leading to a PubEcEntepiesIn the United Cngdac Dadgond, positive effect on the economy. Bitish Telecom, British Airway and Naional Freight. How general are the results? Thesample covered one Paperpresened at theWorld Bank Confrc on the industrial and three developing counties, and firms of Welfe Consequences of Soling Public Enterprises, diffent izes, in competitiveand monopolishc maket Washington, DC, June 11-12. structures. This diversity of coverage suggests that the benefits from divestiture can be expected in a lage nunber of similar countries and companies. But the A Framework for Evaluating Mineral sample did not indude poor ountries with highly Payment/Taxation Schemes distorted and underdeveloped markets, and formerly centrally planned economies. These limitations pre- Ref. no. 67545C dudesweepinggeneralizationsaboutwhatwiflhappen Many developing cDuntries still depend heavily on in such countries. mineral extraction for public revenue and foreign ex- 29 Prirute Sector Deolopment and Public Setor inageim t change eaing L more than 30 developing countries, Rqeofs. mineral exports account for 25 to 75 percent of total Conrad, Robert F. "Factor Payment Polcy and Mineral exorts. But unlike other export-oriented sectors, min- Contract A Numeric! lhulore World lBaCountry eral sectors tend to be endaves with few interindustry FEnomics Deatzmet Washington DC links. So, it is often necessary to generate funds with Conad, Robert F, Maxdm Enge amd ZwamkSbuiz -The which to finance development. In particular, when min- Roe of Exiaton Charges In Mineral Contracts" Wodd orals form a significant proportion of a developing Bank Counby Ecnmics Department Washington, DC country'sassetbase,itisimportanttohaveaframework Conad, Robet F., ZmarakShald, andjanet Syme. 1990. to evaluate the adequacy of compensation schemes in 'Iues in EvaluatingTax and Payment Airngmts for terms of te opporhmity cost tthe country of extract- Publidy Owned Minerl" Policy Research Worig Paper ing the resource and the costs to the country associated 496 World lbnk Washington, DC. with risk-sharing arrangements. The recent economic _ . "Risk Sharing and Rankbdnof Altmrnatve Mineral and fiscal difficulties faced by many poorly diversified Contract Insrments World Bank, Conty Econodms mineral-rich developingcountriesmaybetracedatleast Departmen Washington, DC in part to deficiencies in the design of current minerad Engers, Maxmd, and ZmaakShalizL "Audion for Mineral payment and tax schemes. Particularly important has Rights A Review of theery." World Bank, Cnmtry been the de-emphasis of production-related charges in EconondcsDeparnent, Washington, DC favor of income-related charges. The different endow- Lund, Didelc 1991. "Mineral Taxation and Reglation in a ments and differentsrisksof each country mustbe taken Sma Mineral Exprting Enomyr Some oafronm into accmuntwhen selecfting instruments and determin- NrwegVan Petroleuxnf Woldd ank Conty Economics ing rates. In some cases, where assets are not and cannot Department, Washington, DC be diversified,royaltiesmaybejustfied and should not Malysher, Terea C mhe Shadow Vaiue of Natural Resource besystematicallyde-emphaizedastheyarenow.Where Extracton in Developing CotmtriesA General Equilibium the assetbase isdiversified and administrative capabili- Analysi Wotld Bank, Cuntry Economc Depatmnent tis aregreater, resource rent taxes maybe more appro- Wadhington, DC priate. Vnmani, Arvind, and Zmarak ShalizL Contracual Arre- Atpresentthereisnopractical framewnrkwithwhich ments in the Mineral Sedr and Their Relatonship to toevaluatehowwell differentpaymentand taxarrange- Govenmnent Revenue and Borrowing Requirements. World ments address the following objectives: (1) developing Bank, Country Economics Department, Washingtn, DC an appropriate time profile of extraction (based on the opportunity costs of extraction and depletion); (2) ac- counting forextenitiesand adjustmentaosts that may Agricultural Reform in Eastem Europe and be important; (3) sharing risks appropriaLely; and (4) the Former USSB: Dilemmas and Strategies setting taxes so as to avoid intersectoral distortions Since one instrument an hardly be expected to ad- Ref. no. 67548C equatelyaddressaltheseobjectivessimultaneously,an The importance and urgmecy of tlis research is un- analytic framework is needed to larify the role of each questionable. TheEastemnEuropeancountriesareenter- mineraltaxorpaymentrelativetoparticulartargetsand big a historical period droug their political and eco- to provide gtidelines for evaluating the appropriate- noric reforms. The path to their objective, a market ness of these cDntract arrangements for an economy. economy, and the speed at which it should be pursued, The purpose of this research was to help develop build- are at best unclear, since these aountries are venturing ing blodks for such a framework for eventual applica- into unknown economic teritory. The combination of tion, currentinstitutionalandnonmarketrigidities,property The project produced discussion papers on the rights dilemmas, high extemal debt, nonconvertible theoretical foundation of the framework and irustative curency, and few or no safety nets poses severe prob- applications, and tentative proposals for contract design. lems. The polices to be implemented will have signifi- Responsiiy: CountryEconomicsDepartment,Pub- cant effects on distribution and efficiency in each of lic Economics Division-Zmarak Shalizi, Arvind those countries and will alter the agricultural ecmnomy Virmani and Heng Pu Zho. With Robert Conrad and in the 21st century. Teresa Malyshev, Duke University; Maxim Engers, This project examined the question of what the path University of Virgia; Janet Syme; and Diderik Lbnd, and speed of reform in the agricultural sector should be. University of Oslo. The Norwegian Trust Fund pr- This involves particularly the extent and timing of (1) vided financial support dhanges in property rights, farm organization, land Closing date December 1991. tenure,andincentives;(2)changesin the marketingand 30 Private Sector Deuldopmet and Pubic Sedor Mamngent pricing of both inputs and outputs; (3) changesin finan- * Government-entrprise authority arrangements da institutions; (4) the introduction of safeLy nets; and * Restrictionson and cntrol overintenationalbor- (5) the daification of the linkage between agculture rowing andtherestoftheeconomythmughemploymentprices, * Restrictions on and control over diversification the balance of trade, and the exchange rate. * The fiscal regime applied to the companies. The project had two stages. The first one developed The study results will assist governments and state a framework of analysis conducive to formalizing the enterprises to determine structural anrangements and issues and dilemmas embodied in the transition from a control policies, since the 'Independent variables" are centralized economy to a market-oriented one. Such a all policies under government controL The fiamework frnmework would allow one to analyze different stat- for understanding the reactions to alternative policies egies that can be pursued in the tansition proces The will facilitate strucural adjustment program design second part consisted of a number of case studies for whenever public sector reform is involved. each of thecountries going through the transition. Since The framework was developed through a case study the status quo and sociopolitical cnstraints vary from approach supported by a broader comparative and mountry to country, the strategies now being followed theoretical analysis of each policy topic Three case alsodiffer. Analysisand cross-comparisonof thesestrat- studies of parastatal oDpperminingcompaniesinChile, egies can provide significant benefits because of the India, and Zambia were selected because of each learning-by-doing factor. Thatis mostimportantin this company's operational significance for the World Bank context, where there is little precedent to fal back on. or its status as a demonstrable success or failure. Each A conference in Budapest in 1990 asunarized the case study assessed the performance record of the min- knowledgetodateabouttheissuesandstrategiesforthe ing or oil company in light of the macremnomic con- agricultural tansitioninEastem and Central Europe It text in which it has functioned. The profile of each helped Bank staff and pocyniaker in designing pro- company was developed in terms of formal structural grams to assist in the transition, and led to a research arrangementsand theperceptionsofresponsibilityand agenda for current work. Findigs are available as a accomuntabity, fiscal regimes, investment and diversifi- series of warking papers, and will be published as a cationpattensandinternationalborrowingpattems- confeece volume, with special attention to identifying changes in perfor- Resansilty: Agriculture and Rural Development mance that could be linked to changes in these arrange- Departme, Agricultural Polices Divisior -Gershon ments and policies. Feder and Richard Burcroff; Country Economics De- The main findings from the initial case studies indi- part.mt;SoalistEconomiesReformUnit-AlanGelb cate that the relationship between the govemment and and Eumope and Central Asia, and Middle East and the state mining company can often be refonned to NorthicamTedhnicalDepartment,PublicSectorMan- improve accountability and efficiency by addressing agement Unit-Geoffrey Lamb. The Hunganan Na- the folowing problems: tional Bank, Karl Marx University, Hungary, and the * Because of the lae economic surplus generated Ford Foundation participated in the researchL by state mining entepises (in contast to stabe manu- Closing date August 1991. facturing enterprises), the key issue in the relationship between the government and the state-owned enter- prise (SOE) in the mining sector is the struggle over the Political Economy and Public Management control of the smuplus. of State Mining and Oil Companies * Even thebest-behaved miningSOEhas the capac- ity and institutional incentive to absorb the surplus in Rf. no. 676-CSC unconstructivewaysif constructivemeansforusing the An appropriate policy and control regime for slate- surplus are notavailable. Perverse SOE behaviors such owned enterprises in the mining and oil sectors is vital aspoorinvestmentandlackofcost-cnsciousnessresult because these companies often account for a huge pro- fiom the lack of constructive mechanisms for the SOE to portion of a country's export revenues and borrowing maintain discretion over part of its profits. capacity. Poor policies and inappropriate govemment- * lack of diversification options, coupled with the enterprise arangements frequently result in poor ac prospect of surrendering profits, exacerbates the weak- countability, ill-chosen investments, inadequate capi- ness of cost-saving motivation. talization, and poorly paced exploitation of the natural * True profitability measures, essential for evaluat- resource endowment This research developed a frame- ing the performanoe of natural resource SOEs, are often work for understanding how state mining and oil cDm- impossible to determine because of inappropriate tax panies respond to four aspects of government control: and subsidy regimes. 31 Privte Senor Dwdpmmt mnd Publie Setor Maageme * Governmet control over state enterprise labor tiesembarkingonmajoradjustmentprograms,advice poilcydoes not incase accountability; on the contrary, and supportfor technological improvement could help whengovenmentsexertthe ctypilressonmining promote improvements in industries in which they companies to retain excess labor but keep wages low, already have some competitive advantage. theyreduetheentrpriss4eoniilityforefficiency. This study looked at technological institutions that The solution is a well-balanced, mutually rinforing provide tedinical servics (not merely money) to indus- structure of moderate opportunities for the SOE to trial firmsin Gertny,ltaly,and the United Kingdom,in benefit from profits earned through cost containment four sectDos shoes textiles, auto parts, and high-tednol- limitsondiverification;moderateoversightcapabllity ogy macinery. These institutions indluded publidy ointdecisions on interationalborrowing and restraint funded tednology insttutions, both regional and na- in the governments political use of the SOE lional (for emmple, applied rsrch institutes, informa- ResponsIbiity: Africa Teicml Department, Indus- lion agences, or instutions that represent collaboration try and Energy Division-John Strongman. With Wl- among industrial firms, with and without government liam Ascher and Yair Ahawon, Duke University and support, such as research associations). They included Janine Aron, Oxford University. nonprofitfoundations,cmmpaniessetupfortedmological Cosing datc September 1991. support activities and trnsfer, and cnsulting centers at Repots educationinstitutions.Sampledinstitufaonsalsoinduded Aham, Yair, mud WMiam Ascher. 12 -Indian Copper Foley multidisciplinary and multisectoral agencies, those that and the Potected Niche of Hindutan Copper Lt" Duke provide a variety of servic induding non-technology- University. related ones, and tose that specalize in a techology or Axon, arine. 1992. 'tovemment Intventions In a Mining functin and apply it to a range of tehnologies. PaIastata The Case of Zambia Consoldated Copper Mnes The foursectorsexmined in the studywereselected Ld Oxford Univerly. bemuse they are frequently important in any newly Ascher, Wiliam. 1992. 'Mle npact of Stringent lts an a industializing country, they are understandable and Nabual Resource ParastatakLThe Case of the Cldean convenient,and theyareof significantrangeand sizein Nationda Copp Corpation (CODELD- Duke Univer- at least two of the hree countries studied. Interviews sfty. were conducted at five firms per sector in each country . 1992. ?Political Ecnomy and Public Maagemt of as well as at industry associations (either regional or State Mining and Oil Companiem Smunmy of Cb&ean, national) and the relevant technological institutions. Indian, and Zamblan Parwatal Case Shudi' Duke The interviews at-tenological institutions were Undvesty. conducted to find outwhat services they perform, how they are organized, whether they have a sizable dien- Wee, whether they have repeat dlients, and the extent to lterfixm and Industry-Govemment whidc they are demand-drivenL These interviews also Cooperation for Technology Development attemptedtodiscovertheinstitutions'viewsonwhythe in Europe firms thatseektheirassistancedoso,and whyothersdo not Firms were interviewed to find out where they Ref. no. 676-17C obtain support for both major and minor technological The Bank is inaeasingly being asked to advise gov- improvements, and what role tdchnology service insti- ernments on industrial tedhnology policy and to sup- tutions play and could play. Industry associations were port projects or programs of industrial technology de- interviewed to obtain their views of the institutions' velopment, particlarly in the newly industializing cntribution as well as more substantial background countries. An important area of investment, and fre- information about the sector, including the changes quentlythefocalpointofrequests, relatestotecdmology taldng place within the industrial struchre, and the serviceandrreseuchanddevelopmentinstitutions.These growth or decline of the industry. institutions are frequently poorly run and provide lim- The research found that ited assistance to their industial clients. By contrast, * Tnstiutions that are demand-driven are the most Europsexsc iencewithtehnologyinstitationsisrich successful in supporting technology improvements in and varied. But there has been little cross-country re- industrial institutions. searchattemp& todrawoutthelessonsofwhatseems * The most successl institutions also receive sig- to work, what does not, and why, in insitutional sup- nificant government or other untied support, largely port for tedhnology development. If properly analyzed, through industia demand for services. the varied experience may yield important lessons for * Educationandtraninginstitutionsareakeylinkin the Bank's lending activities. And for fte many corn- thediainandareparticularlyimportantif theirapproach 32 Pinots Sactor Deveopent and Publc Sector Maagement to trainng and education is applied and practicil-not of such rights. But there has been little or no empirical pure science or dteoretica, but engineering-bamed ad analysis to test whether these hypothes are correc, involving dirct cooperative effts with industry. and,ifsotoestimatehowmuchstwgprowionofthis * Germany'sextensiveintegratedsystemofinstitu- sort affects technology tansfer. The purpose of this donsprovidesenormoussupportbDindustyandmakes study is to shed new light on these topics. a major contnbution to the country's industi succe A four-partempirical study will be carried out. First, * hIstitutions cannot substitute for-but can only interviews will be conducted with executives from a complementgood implicit and explicit technology selected sample of major multinational firms to see policies for industrial technology development whether, accrding t these firms nlltu property These findings suggest that most of the technology rightspotectionhasasignificanteffectonforeigndirect institutions in developing countries, including in most investment SecDnd, the research will try to determine newly industling countries, need tobe cmpletely the key differeces between the systems of protection redesigned: they need to become demand-drven, ori- that are said by particular kdnds of firms to be accept- ented toward applied research and training, and sup- able, and the systems of protection that are said to be portive of a dynamic pnvate sectr that is forced to unacceptable. Third, the research will test whether the compete and therebyto demand tedhnological servies nature of a country's system of inbitectu property Likewise, the knd of education and taining needed in rights has had a measurable effect on the amount of an industrializing developing cDuntry needs to be re- direct investment in that cDuntry by various kinds of thought and, therefore, what sorts of taining and edu- US firmsb Fourth, the research wil by to determine cation the Bank should support, particularly at the whethertheageofthetehnologiestransferredbydirect secondary and post-secondary levelL investment tD countries with poorly regarded proteo Writtenoutputfocasesnontheroleof instutionsinthe iom systems has tended to be higher dun the age of three countres and the lessons for developig countiem tose tnferred to countries with well-regarded pro- Seminars on the results have been given in Mexico, the tection systems. United Kingdom, and Washigton, and furtherpresenta- Reponsiity: Economics Department, Intemational tionsof resultsareexpectedovertheDcmingmonthsdThe Finance Corporatio-Guy Pfeffermann. With Edwin project has led to a variety of hypotheses with major Mansfield. implications for technology policyg dese will be furte Closing date April 199& emnined in a study incorporatig a wider cross-section of industi sectors and cuntries, mostly in Asia. Responsbility Asia Tedhnical Deprtment, Industry, Private Sector Manufactring m Eastern Trade, and Fmance Division-Melvin H CGoldmau and Europe Industry and Energy D rtent, Industry Deveop- ment Division-Carl Dahbnn and Ashok Mbdy. With Ref. no. 676-SAC Jom Konrad Timm, Kid Institute; Chris Roberts, Urd- The ecmnomies of Eastern Europe are undergoing a versityofCardiff,U.K;andAlbertoBondavafli,Univer- tranition from centrally planned to market-based sys- sity of Bologna, Itly. The Science Policy Research Unit temn Private secbor development could play a critcal United Kingdom, particpated in the research. role im tis process, providing for more effident use of Ckosing datc September 1991. rences, greater mpetition, and increased employ- ment opportunities The central research question ad- dressed by this project was whether the new pnvate Intellectual Property Rights Protection and firmsare,inhct playingthisrole. Dotheentrepr-neurs Technology Transfer through Foreign Direct whoarestartingbusinesseshavetherequisitequalifia- Investaent tions and sIdlls to build viable businesses? Is the envi- roinment in which they are operating hospitable for Ref. no. 676-19 private firns? How are private firms linked to state This research projectis concerned with the effects of enises, and whatare theimplicationsof such links? intellechal property nrghts protection on teduology In short, how viable are these new private sectors? transfer through foreign direct investment Accrding The march foiused on a series of three firm-level to many observers, multinational firms are unliely to surveys, one each in Czechoslovakia, Hungary, and transfer their newest or most effective technologies to Poland Usingthenational register,arandomsampleof countries with weak systens of intltua p fimswaschosenfromthepopulationofprivatedomes- rightsprotection. And theyarelessMlikelytoinvestatall tic companiesi manufactring In each country inter- in such countries than in those with strongerpwtection viewtams consistngof localresearchers,western con- 33 Privte Sector Dwdlopmart and Public Sector Management sultants, and the project manager were assembled. Us- Two seminar have been given on the resuts of the ing a firly standard questonnaie, interviewers spent survEy in Poland, and the report on these results wil be about three hours with each entrepreneur asking ques- completed by fail 1992. tionsabouttheoriginofthebusiness, theentrepreneures Responsibt: Industry and Energy Department, In- background, the firms use of labor and capital, the dustryDevelopmentfivision-LeilaWebster.WithPro- impact of the business environment, and the chief ob- fessor.MadrejewsKi,EvaBakonyi,Alena Zemplinerova, stades to hfrther grwth. Daniel Swanson, Wallace Kaufman, Katherine Surveys were completed for Czechoslovakia, Hun- Whitmore, and Judith Brandsma. The Central Office of gary, and Poland between May 1991 and January 1992. Statistics and Warsaw University, Poland; Economy Preminary findingsindicate that the private manufac- Research Institute and Institute for World Economy, tunrig sector in Poland was suffering because of the Hungary; and Federal Statistical Office and Czechoslo- general economic slowdown there, whereas in Czecho- vakia Academy of Sciences., Czechoslovaida, all pro- slovalda and Hungary, the private manufacturing sec- vided staff time. torwas more clearly a source ofgrowth. InPoland,most Closing dat June 1992. sample firms were dependent on, rather than aDmpeti- tive with, the state sector. Manywere unable to compete with imports and were dosing or shifting to trade and Electric Power Utility Efficiency Study services. By contrast,morethanhalfofCzechoslovakian finns were competing with ihe state sector and orny a Ref no. 676-45C fewenltepreneureconsideredinportsathueatF.rmsin The donor agencies supportng the electric power all tuhee oDuntries were exporting, with sample firms in utility efficiency study (EPUES) have financed power Czechoslovalda and Hungary about twice as likely to plants throughout the developing world. These plants export as firms in Poland. have seldom met the expectations of the donors. A 1988 Theoriginsand conditionsfacingnewpnivatemanu- World Ban1k study reviewing some 300 power projecs fachtes in each of thes countries differed. In Czecho- financed by the Bank between 1965 and 1983 showed slovalka and Hungary, about half the firms orginated declining trends in key financial indicators and quality inthe publicsector, withahighpercentageof firms now of service. Traditional approaches to improving the owning their land and buildings. By contrast, Polish stainabtyoftheseinstmets calassistnce, firmsweremostlynewstartups,andmostleased rather improved avallabilityof spare parts,additional taiing, than owned thir land and buildings Other differences and so forth-have not worked well. Clearly, the effi- indluded Polish fis access to short-term but not long- ciency of donor investments in the power sector would tm loansascomparedwithCzechoslovildanflrns,and improve greatly if EPUES sumeds in providing deeper the problems enoDuntered by entrepreneurs in Hungary insights into thse issues and inmaling workable recoi- m dealing with banks General diferences in these amur- mendations on how to remedy poor perfomance. tries induded their hisloric strengtls in manufacturing, The empirical research of tius project focused exdu- thespeed and consistencyof reform implementation, and sively on measuring differences in the performance of specific policies aimed at privatizing and introducing diesel powerplantstlhroughouttheworld.Dieselplants cmpetitionintothe(sti)moslystate-ownedeconomies. were selected because their technology is so uniform These findings are useful to the Bankc's operations that differences in actual plant performance can be complex, which is preparing support programs for the unambiguously compared without having to account private sector in each of these countries and making fortecmologicmldifferencesbetweenindividualplants. decisions about the best means of offering assistance. Thus, they were ideal laboratory mice" for this study. Indications as to which policies are useful to private Missions to 14 countries, extensive information and producers are useful for polircymakers in the countries data on more than 70 power plants,a reviewand analy- involved. Someof the findings aboutthelinksbetween sis of Bank documents, and discussions with staff in the private and the state sectors wilibe of particular use many departments in the Bank and in the bilateral in forecasting the effect of the coming privatization of donor agencies supporting EPUES provided the inputs much of the state sector. to the research project After the surveys in each country, a seminar will be The results of the research show that seven condi- given and a country-specific paper written on the find- tions must be fulfilled simultaneously to an acceptable ings. When all surveys are completed, cross-country degreetoachieveefficientand sustainableperformanca comparisons will be made and findings integrated into These conditions are autonomy and accountability, onedocument. Artideson the research findings will be sldlled human resources, sufficient revenues, availabil- submitted for publiation in journals ity of foreign exchange, adequate tedhnical resources, 34 Private Sector Devedopment and Public Setor Mnagement financial transparency, and donor polides. The proect though the focLs on large SOEs may seem constraining, produced a set of policr guidelines for use in consider- it is in fact valuable for several reasons. Finst, large SOEs ing diesel projects. sHll aount fora large part of Poland's economic acUv- A three-day workshop was held in Sockholm on ity. Second, large SOEs embody many of the more November 13-15,1991, to present the initial findings of complex adjustment problems witnessed in transform- the study. Attending were some 25 r tatives of ing the manufacturing sector, in part because of their multilateral and bilateral agencies, and 25 to 30 utility size and in part because of their bargaining power. executives from developing countries. Third, there are obvious demonstration effects associ- Responsibility: Industry and Energy Department, En- ated with the behavior of large SOEs that wil not only ergy Division-Robert J. Saunders The UNDP and influence the responses of smaller SOEs, but affect the UNDTCD% USAD, United States; ODA, United ling- credibilityof the ETP.Thus, if the governmentis seen as dom, BE, GTZ, and KFW, Cemany, DANIDA, Den- refusing to make arbibtary concessions to large SOEs, mark and FINNIDA, Filand, provided financial sup- this will give smaller finns a dear signal that the new port and staff time for the research. rules of the game are going to be enforced. Fmally, Closing date June 1992. casual empiricism suggests that the variance in behav- Repott ior among large firmsas a whole is low, so that itcan be Ldustryand Eer Deparmnmt Ener D hMo t1991. Gm validly approximated by a nonrandom sample. Report of theElectrlc Pow Uilty Efidenicy Iprovement Some of the main quantitative conclusions are as Study." Industry and E Deptment Worklng Per, follows: Enrgy Series 46. World Bank, Wahingtn, DK * The high nominal interest rate on working capital (reprted bymanagersasbetween 50 and 72peroentfor the month of January 1990 alone) inhibited bon-owing Enterise Behavior and Compelifivene andmotivatedfirmstopayoff zloty-denominatedloans, leading to a squeeze on worldng capitaL The huge Ref. no. 676-8C dedineinrealwages,whidchwerecompressedinpartto State enteprise behavior and reform have emerged accommodate rising financial and input costs, led to a as key issues in all the newly emerging market econo- demand shock, as evidenced bygrowinginventories of mies in Eastern Europe because of the size of the state finished goods. Firms that could more easily pass their manufacnuringsectorasmeasuredbyitssharein GDP, costs through to their customers and maintain their exports, and tax revenues. The diffiartes experienced margins Cow elasticity of demand) were more likely to by Polish state-owned enterprises (SOEs) in adjusting have maintained output Consequently, the initial, un- andrespondingtotheneweconomicenvironmenthave expectedly large dedine in output could be explained led to problems of fiscal imbalance, deteriorating port- by a combination of nominal interest rate shodc and folios of commercial banks, and burgeoning payment standard demand considerations. arrears between firms. * Highl990profitsweretemnorary,stemuingfrom Thisresearchexamined theeconomincandbehavioral inflationary gains on one-shot inventory sales, devalu- reactions of a significant sample of Poland's largest ation gains on enterprises dollar accounts, and implicit state-owned enterpnses to the macroeconomic reforms input subsidies from CMEA trade. introduced as part of the "big bang" in January 1990. It * Banlkswerelaxinenfordngcreditworthiness,lead- tracked the evolution of output, costs, and profits, and ing to an adverse selection problem marked by loans examined wage-setting behavior, enterprise debt dy- going mainly to "bad" firms, which was reinforced by namics, and enforcement of the "micro" hard budget the reluctance of "goa' firms to borrow. constraintbybanks.Anditmadeafirm-levelanaly5isof * SOEs tend to be myopic, with considerable short- the export boom and its causes, and documented the run pressure on wages that works to the detriment of evolving tax burden on enterprises The findings are restructuring investmentsessential forreducingeneiy based on a direct survey of 75 large SOEs drawn from and material intensity and product redesign. the manufctng sector. The survey covered the pe- * Nominal and real wages both displayed remark- riod June 1989 to March 1991-six months prior to and able fleiubl4y Although sgnificant, the reduction in 15 months after the big ban& Both quantitadtve and employmenthas lagged behind reduction in output,in qualitative infomation was collected (argey through partbecause the indexation of wages to inflation,which interviews with managers) duing visits to enterprises is enforced by a punitive tax, has kept real wages low, Theresearchisarecord of themicreconomiceffects and inpartbecause of thenatural reluctance of worker- of, and responses to, the macroeconomic stringency of controlled SOEs to shed labor. So, thede is a dear possi- Poland's Economic Transfomaton Program (El) Al- bility of much higher tansitional unemployment once 35 Prinate Sector Dwvdopngnt and Public Sector Mamagemt privatization and comnmerialization get under way on randon. governments decisions are responsive to at- a large scale. In addition, there are few signs of an tributes of the targeted populations that are not men- emerging factor market for labor. One of the impedi- sured in the dat. Simple nwasured associations be- ments is that large SOEs own worker housing, which tweenprogramsandprogramoutcomesanticipatedor imposes a finandal burden on them,and thatthere is no unanticipated, will therefore not provide correct esti- general housing market, which inhibits labor mobility. mates of program effecth To overcome this problem, a The hard currencyexportboom in 1990 wasmoli- this research project uses the uniquely rich data base of vated more by slack domestic demand han by higher Indonesia and new methods of analysis to reveal both export profitabilty. the pattes of public program placement and the con- The main qualitative change is a definite shift in sequences of the programs, even if they are endog- attitude in favor of profits and marketing in contrast to enously alocated. theearlieroverwhebringemphasisonproduction.Fur- The estimates obtained areused not only to discern ther, manages tend to be the source of change and regularitiesinprogramplacementbuttodeterminethe innovation, with workers playing more of a reactive, consequences of program distribution, and to deter- ratifying role. This reinforces the belief that changing minewhichprogamdistributions,givenwelfareobjec- firm-level incentivesisanimportant step thatshould be tives, are optimal. The optimal distributions are then takeen rapidly. compared with theexistingdistibution in Indonesia In The emphasis on macroemnomic reform and "get- particular,itcanbeassessed whethertheexistingspatial ting the prices right" is necessary, buteventually insuf- distribution of programs tends to equalize the spatial ficent,forinducingfirm-level dcangebecauseaccount- distribution of outcomes or tends to exacebate it-for abilityand responsibility at the firm level have yet to be example, are programs placed in areas that are most darified. At the moment, neither principal nor agent is deficient in outmmes or in well-endowed aras? More- dearly defined. Further, firm-level incentives in terms over,theestimatesprovideinfontiononwhichhouse- of managerial job securityand profit-linked compensa- holds-dassified by education levels, for example- tion are virtuallyabsent Finally, there is need forinvest- benefit least or most from particular programs ment in human capital related to marketing and finan- The study combines a number of Indonesian house- cial sidills The private sector will never have the incen- hold-level,crss-sectonasurveysandoensusdatawith tive to undertake such investments because of the cost comprehensire village-level information on programs and the free-rider problem-why train when you can to create a new data base thatpermits an assessment of lure away a trained person? The resultant lack of re- the effects of a lrge variety of programs on schooling, sponse could (as in Poland) lead to a collapse in enter- morbidity, mortality, fertlitr, agricultral production, prise performance and profits, and thus to dwindling and the use of medical and family planning services. taxesandagrowingdefidtwiththeriskofaresurgence This data base, when appropnately assembled and ininflato. So.itisimportantto speedilyredesign firm- merged,offers auniqueopportunity to studythe deter- level incentives and address the govenance of SOEs, minantsaand cmosequenex sof program placementatthe issues thathave become all themore important in view most disaggegated level using fixed effects methods. of the slow pace of privatization of the manufactring Ruponili4p East Asia and Pacifli Country De- sectDr. partmentM Population and Human ResourcesOpera- Responsibi7ity: Europeand CentralAsia,Country De- tionsDivision-SamuelLiebermanandVicentePaqueo. partment H, Poland Resident Mission-Brian Pinto. With Mark Pitt, Brown University; Mark Rosenzweig, Closing date Septmber 1991. University of Pennsylvania; and G. Sumodinigrat and Report Surgito. The Bureau of &atistics of Indonesia is partici- Pito, ian. 1T9 'Mloecnortcs of Transformaton in pang in the study. Pdand: A Survey of State Enterprise Responses!' Closing date Septenmzr 1992. The Determinants and Consequences Evaluaticns of Social Sector Investments of the Placement of Govemment Pzograms in Indonesia Re. no. 676-90 The World Bank routinely reviews project loans, but Ref. no. 676-74 rarely evaluates the effect of an investment on sodal A fundamental problem in program evaluation is welfare. Given the Bank's central focus on poverty that thelocationof programsand the tiningofprogram alleviationandthesodalproblemsassodatedwithstruo- initiatives-program placement-are not likely tD be hnal adjustmentthereisa reed foran institutionalized 36 Prkit. Secor Deodopxennd Publi Setor Mwuagemt evaluation process to asses a projects effect on the RApowsiMiliyPopulationandHumanResourcesDe- welfare of.itsbenefidaries.Thisresearch will attemptto partmnt, PoverLy Analysis and Policy Division-Ma- develop such a methodology. giaet Grosh and Latin America and the Caribbeam, The project will assist the Bank by sftrngtheni1n its Country Department I1, Human Resources Opations roleasanadvisorybodythroughthedevelopmentofan Division-John Newman With James Hedknan, Uni- instument that will allow the Bank to place a graater versity of Chicago; Charles Manski, Institute for Re- focus on the quality-as opposed to the quantity-of search on Poverty; Burt Barnow, Lewin, ICF; Laura soci sector investments. his type of analysis wil Rawhligs; Marcelo Mercado; and Haydee Carmia. The prove useful to governments that face budgetary con- MinistryofFamilyand OficinaCentauldeEstadisticasy straints and must therefore rank social sector invest- Censs, Venezuela, Fondo Social de Inversion and ments by priority. hstitutoNacional de Estadisticas, Bolivia; Youth Train- Theresearchwifldesign,monitor,andevaluatecom- ing and Employment Partneship Program, Trinidad ponentsof fourongoing Bank projectsdtsobjectivesare and Tobago; and Fondo Soial de Inversion, Honduras, to ascertain the extent to which the projects have in- are contributing staff time. reased the welfare of the beneficiaries over and above Clsig date December 1993. their position in the absmce of the prcect to evaluate RPo the adequacy and cost-effectiveness of the instruments HedoanJmes. ForUecomins lreduiques and Ifnation used totargettheprcjects;and to providemethodologi- Reurns EsftinfmatingDUanifactualsin Evauations cal guidance for choosing among competing social sec- of Sodal Sector Inveslnenruf tor investments. MaL, =Ciale. Forthcnigs 'Using CRahe-Based Samplesin The fourprojectsbeing studied are representative of the Evaluatkos ofSodal-Secr Investmen, different types of "bial sector investment fianced un- der World Bank loans. Two of the projects are Social Investment Funds (in Bolivia and Honduras), one is a Regulations, Institutions, and Economic youth vocational training progam (the Youth Training Effciency and Employment Partnership Program in Trinidad and Tobago), and one is a tageted health and nutrition Ref no. 676-94 intervention (the Venezuelan Social Development Regulatory reforms to promote efficient private see- Project). The projects mpreset important varit in the tor participation have bee introduced in many indus- tpes of social sector investment, outcome mease tial and developing countries, but there is still limited used, and levels of development in the four countries. empirical knowledge about what determines whether Ihe methodology for the evaluations seeks to make sudc refms succeed. This research, which wiR build inferences based on counterfactual questions, such as on the new Institutional economics," will investigate what the welfare of thebeneficiaries would havebeenif how regulaty reforms may promote efficient private 'the pmject had not been implemented or if some aspect sectorparticipationin developing countriesand whatis of it had been changed. To make these comparisons, the necessary to ensmue that the reforms are successfuL evaluation methodology will use randomization when- The reserch will compare the regulatory exper- ever possible to generate control groups consisting of enes of five countries in the telecommunication sector, people who did notbenefit from the project The project a sector whose mix of monopolistic and competitive will also seek to analyze the cost-effectiveness of the activities and pace of technological change present di- targetngusingsimilarcounterfactualmethods Because verse and complex regulatory issues, The cDuntries this type of social sector evaluation involves sophisti- studied, which include Chile, Jamaica, the Philippines, cated econometric approaches, a paper on the technical and the United Kingdom, have a wide variety of regu- approaches to estimating counterfctual results will be latory experiences and institutional capacities commissioned. The country case studies will examine the institu- Household surveys and inteWal and administrative tional arrngements for regulation (for example, the records in the countries being studied will be used as relatinshipsbetweenpolimakes,mrgulatoyauthori- data bases. Data will be ollected as necessary to help in des, and firms, and the mechanisms for conflict resolu- evaluating the projects effects. tion) and the content of rgulatory rules-the areas The project will produce a case study of each of the commonly addressed in standard, operationally on- foursocialsectorprojectsandasynthesisof thefourcase ented approaches. This research wil go beyond the studies. Thepaperswillbepubished togetherasabook standard approach by exmininginstitutional arrange- A workshop will be held in the fail of 1994 to asss the mentsandreWulatrrulesinaricher,morecomplexset findings and lessons from the evaluations. of interrelations. Fust, it will highlight Lie relation be- 37 Prtvate Sector Devdopment and Public Sedtor hMgmmt tween the sustinability of the reguatory regime and there are tensions between the objectives of structual sector performance, and explore the ways in which change (requirg increased investments) and those of institutional arrangements and regulatory rules can stabilizaton equiring tight credit). At the same time, influence sustainablity. And second, unlike the tan- theseountriesarebeing subjected to external economic dard approach, which typically treats institutional ar- shocs-such as the collapse of the C:MEA trading sys- rangements and regulatory rules as exogenous van- tem, which has forced finrs to find non-CMA suppli- ables that policmakers can shape with relatively few ers and to compete in international markets. constraints, this serch will treat sustainability insti- Howindustrialenterprisesrespond-andwhathap- tutional arrangements, and regulatory rules as endog- pens to their productivity and efficiency-is crucial to enous variables whose chracteristics are influenced by the success of thereforms. This research aimsto contib- a country's institutional endowment ute to the understanding of this adjustment and re- To produce lessons with practical application for sponse-an understanding essential for policymakers countries planning regulatory reform, the researh will needing to guide the reform process. test a number of hypotheses on the relations among Examplesofsome keyissuesandhypothesesthatare institutional arrangements, regulatory rules, and the being empirically investigated using firm-level data sustaibilityof reform It will examine the question of indude: whether-and if so, how-institutionad arangements, * How have various industries performed as mea- regulatory rules, and the sequencng of privatization saed by key indicators, induding output, sales, em- andregulatroreformsshould differforcountrieswith ployment, F.. ofitabllity, foreign trade, and financial vi- differentinstitutionalendowmentr.Anditwillexamine ability? how tecnological change and regulation affect each * How have industrial productivity (as measured other, and howtechnological change affects the sustain- by total factor productivity) and efficency (technical ability of reformL and allocative) changed overtime in variousindustries? The resultsof theresearrb will bedisseminatedin the * How will recent reforms affect the levels of and form. of a book-length manuscript on the political trends in industial productivity for various industries economy of regulatory reform in the telecommunica- within and acrosscountries? Will reforms improvepro- ton sector, monographs and artides on the political ductivity and efficiency? economiesofregulatingprivatetelecommunication ser- * Havetightcreditpolikesand theremoval of input vices in the countries studied, a review of the welfare and output subsidies hardened the budget constraints economics and best practice institutional anangements offirmsand has this in tum increased productivityand for telecommunication regulation, and a free-standing efficency? Is the fncial sector allocating resources paper on the policy and operational lessons of the efficently? research for sectoral regulatory refonr in developing * Doprivatelyowned firms have higherppmductiv- countries. ity and efficiency than state-owned firms in the same Responsibiy: Country Ecnomics Department,Pub- sectors? licSectorManagementand Private Sector Development * Will increased domesticcompetition reduce prof- Division-Brian Levy, Alice HilL and Ahmed Calab itability? Will it lead to incased productivity and and Asia Technical Department, Industry, Trade, and efficiency as firms adjust over time? Finance Division-jom Wellenius. With Pablo Spiller . * Are the most dynamic firms-in terms of growth and Hadi Esfahani, University of llinois. in sales and exports-shedding labor (to reduce Closing datc March 1993. overnanning) or hiring labor (in response to growth)? The research will tradc, over a period of four years, the effect of the reforms on industial enterprises in the Enterprise Behavior and Economic Reforms three womties. Industrial performance will be moni- A Comparative Study in Central and Eastem tored continuallyatthefim level. Every sixmonths key Europe mperforance indicators-inluding profitability, em- ployment, value added, and output and sales-will be Ref. no. 676-99 calculated, and a brief paper addressing an important Czechoslovalaa,Hungary,and Poland areundertak- policy issue will be prepared for each of the three ing bold reforms in maldng the transition bt market countries. economies based on a system of private property. The In a second component, analytcal studies will be transition is lilkly to be difficult for several reasons amrried out to shed light or. the impact of ecoromic Factor markets are underdeveloped, ownership rights reforms on enteprise behavior and response. Data on and lega and commercial institutions are lacking, and 800 to 1,500 firms in eadh country, for 1980-90 and 1991- 38 Pru* Sedor Deuopmit ad Public Secdor Managment 94,will be used toestimateparameters for thelevelsand Econoada Dprtment Sociat Eamondes Reorm Unit, rates of change of such performance indicators as out- Wasno, DC put sales,employment,profitability,lndebtedness,and Eutin, Saul, and Line TaUt 1991. "Reform In Y ugosaviw 71w total factor productivity, and the components of tecui- Retreatfrom Sdf-MmnameV London Sdcool of Eamom- cal and allocative efficiency of firms across industries, IC. regions, and countries. These will then be related to key Fa, Qimlao, and Mark E Schaffer. 1991. 'Enterprise Refoms in changes in institutional characteristics (ownership, Cits and PoIBh-Owned Industries.'London Sdool of managementand marketcompetition)and ineconomic Ecoanomc. policies (trade, prices, taxes, subsidies, and exchange Gomiuka, Stnlaw. 1991. -le Cases of Rclon Follwing rates).Theresearchwillfocusonfirm-leveladjustments Sblllaton." London Sdlw of FImwmics. and responses, and try to isolate the effects of privatiza- .1991. "EconomIc Iorns in Poland, 1989D91: AlM, tion. Differences in policy among the counties will Polcis and Outme London School of Enomms help, through the cross-cuntry comparison, in under- . 1991. Pois EconmicRefonr Prn mple, Poies and standing the relation between reform programs and Surpri."LndSdoScol ofEconwomics. firms responses. .1991. fIhe PuzzlA of Fairly Fast Growth and Rapid TheprojectwMllalsoconductcase studiesbased on 12 Collapse uder Socialsm. Iondon School of Ecnomics to 15 firms in each country, foausng on firm-level Jdexmo, Gary H., and Wenyt XL 1992. Assesing Gains In decisionmaking trough detailed longitudinal shtdies Effildent Production Among Chinas indus EteprIe of selectedenterp tounderstand theiradaptation to Picy Retrd Worldng Paper 877. Waod Bank Wang- the newly emerging policy and market environment ton, DCr Finally, it will develop tweories of enterprise behavior Jorgensen, Erika, Alan Gelb, adnderjlt Sngl. 1990. Me duringthetransitiontoamarketeconomyandtestthem Behavior ofPoli Fim After the'sg Bank:e Fndings From usingstyrlizedfactsdeveloped from informationdamwn a Field Trip." Woldd B.k Conmtry Economics Departmet from the monitoring results and the case studies The Sodalst Economes Reform Unit, Washington DC. project is designed to permit some comparisons with Lehmann, HarltH, and Mark L Sdcaffer. 1991 (revIsed In pamllel studies in China. 192). -PoductivIty, Employment and Labor Deuiand In A one-day workshop was held in 1991 for discussion Po lindustry In the 1981k Some Pielimnary Results from of the projects objectives and the work progam by Enterpriselevel Data" Lndon School of Economics. project coordinators and country departments. A sec- ond meeting was organized on September 30, 1991, to establish acomparativediscussiononChineseandEast- Impact of Market-Oriented Policy Reforms emn Eurpean refnrsm on Households in Rural China Resonb: Country Economics Department, So- calistEDonomiesReformUnit-IndejtSinghandAlan Ref. no. 677-16 ;elb; and Europe and Cental Asia, and Middle East In the 198s China dismantled the commune system, and Norti Africa Regions. With Joseph Brada, Arizona in whichland wascommunallyownedandfarmed,and StateUniversiyMarkSsaffeandStanislawGomulka, replaced it with thehousehold responsibility systemin London School of Economics; K Chen, Jan Svejnar, which land is leased to and worked on by individual Pittsburgh University; Saul Estrin; and C. Xiao. Josef households In the eaxly 1Ss agricultural production Zielenuec, Adam Torok, and Marek Gora are the local increased dramatically. No further large inceases are coordinators for the study. The Research Center of anticipated, however, as it appears that the gains firom Central Plannin& Poland; Institute of Industrial Eoo- this new policy have now been reaped. This research nomics, Hungary, CERGE, Czechoslovalda; London projectintends to obtain answers to the fllowing ques- SchoolofEconomics;and UniversidadeCatolim,Portu- tions: Wl)Whatarethemaindeteminantsoftheproduc- gal, are all contibuting staff time tivity of agricultulal households in rural China? (2) Cloing datc Demaber 1993. Would removalof restrictionson factormarkets (credit, Reports: labor, and land) produce further inceases in agnicul- Brad% Jose& and Arthur E. King. 1991. Sependng Meaus wal output? (3) How has the household responsbility for the Tnsfmaetion of Socialist Econornie to Capitali system affected income distribution, and what are the Is hereAJ-Cuve for Eonomic Reforms?AArizona State princpaldetemnantso)fthevaniationinincomesacoss Unvessity and Leigh Univerty- rnral households in China? Efldr, Saul, Mark E. Sciaffer and ndert Singh. 199Q Answering these questions requires detaed house- 'EnterpriseAdjusbnt In Transitio Ecoomis Czedcul)o- hold-level information.Atprest,household-level data v , Hungary, and PdhncL Waod Hak County sets from China are rare. This project will cllect data 39 Primae Sectar Dadopment and Pubic Swtor Mngment from about 1,500 households frm 30 villages in Hebei After providing an intenational comparison, his- and loning provinces. The research wil bebased on toricaldataobtned on servicesinthefonnerUSSRuwill microeconomic models of rural household behavior. be used to.explore differences in the level of services The results e expected to shed light on two broad among the former Soviet states in recent years. This policy questions. Fuis what would be the effect on quantitative analysis wll be complemented by a quali- produclivityoffuriheeralizationofthenraleconomy tative analysis of the evolution of services, especially (that is, ending restrictions on hiring of labor, private busluessand consumerservices,since 1985in theformer provision of credit, and buyig, selling, and renting of Soviet stas and in other socalst economies in transi- land)? And second, what avenues are available for tion, such as China, Czedwslovakia, easter Germany, fuher reducng poverty in rural areas of China? Hungry, and Poland. Resonsiblty: PopulationandHunmanResourcesDe- With a look toward the future, the study will simu- partment, Poverty Analysis and Policy Division-Paul latethepotentialcontnbutonef services to fuurevalue Glewwe.WithLorenBrandt,UniversityofTorontwand added, employment, and household consumption, and Barbara Sands, University of Arizona. China's EC- identifyapolicyagendatofadilitatetherapidexpansion nomicResearch Centre (StatePlanningCommission) is of services. contributing staff time, and the National Academy of ResposibliytyCountryEcononicsDepartment,Mac- Sciences, United Sttes, and the International Develop- roeconomicAdjustmentand GrowthDivision-Martha mentReserch Centre, Canada, areproviding funding. deMeloandWiliam Easely. With Gur Ofer; Gennadi Closing datc April 1994. ZDtee and theCenter for 1rformation and Soviet Tech- nloky. cosing date DEvember1992. Services as a Major Source of Growth in the Fomner Soviet States Public Goods, Private Goods, and Social f. no. 677-43 SectoOutcomes Sevices have played an inceasingly strng role in industrial market economies, reacing two-thirds of Rf4 no. 677-47 GNPinsomecountries. Theyhaveplayedas saerrole Many countes have experienced improvements in in the former Soviet states, which are undeiping a meaures of their health status and-educational attain- geeral contraction in out .d and employment Busi- mentover the past decades. A relevant policy question ness and consumer services are of particular interst, is Howmuch of the improvementhas come as a result since they are an important factor in improving static of emnomicgrowthaloneandhowmuchisattrbutable amd dynamic efficiency, enhandng the quality of life, to policymeasures? And whatare therelative effects of generating jobs, and providing good opportnities for differentformsof intervention? Publichealth and edu- the qpansion of the private sector-through joint ven- cation expenditures sometimes provide truly public tures as weUll as wholly owned domestic companies. goods or are directed at correcting standard market The purposeof thisresearchis to estmate thepot- failures, but sometimes they provide services that are tial contribution of se-vices tD economie growth in the basically private and that mainly crowd out private formerSovietstates,byidentifying thegap between the expenditures expected and actual levels of srice acvities in these This research projectisdesigned to get at the relative counties and by looking at the expeice of other effects of differet policy deterninantsof health status sodalist countries in transition with growth in services and educational attainment for a variety of countries. Drawing on international cross-country, imeseries The workdng hypothesis (based on earler work in Ma- datasets,theresearchwillfirstundertakeacomparafive laysia) is that those policies and services that provide analysis of the importanceof servicesat differentlevels genuinelypublicgoodsand corLectmarketfailureswfill of development Srvices wiLl be measured by value havemoreimpactonoutcomeindicatorsthan those that added, employment, compensation of employees, in- primarilysubstitute for private goods vestment, and household consumption; vanous pmxy The research wll colect panel data-time series of indicators,asweflasCNPpercapita,wilibeusedforthe provinces or regions-for a variety of countries to test levelofdevlopment Seiceswillbebrokendowninto thishypothesis,notepate nsinthetypesof policies that tbree sub-sectors infrastuctme services (transport- appear to make a difference to health in different con- fon,wimmunication,andhousing),publicservices(edu- tesk;, and explore the substitutaility of public and cation,healthandpublicadministratio),andbusness privateexpenditures inhealth ceand inbighereduca- and consumer services (all other services). Particular tion (subjet tD availibility of data on private sectors). emphasis will be given to this last cateoy. Following the workdone on Malaysia and preliminary 40 Priate Sector Dedopment nd Public Sctor AMaagmnt workonthePhilppines,theanalysiswieainhnfnt gerating aclivides, inflows of high-quality interna- mortaity rates (and mortlity rates as available) by (1) tionrl knowledge, and self-sustaing agglomeraton income, (2) proportion of the popuation with safe wa effects have a powerful impact on growth. ter,(3)proportioncoveredbybacim----a-ons(pre- hi contast to most edsting studies, ffis study pro- erably the diphitheria-pertussis-tetanus series), and (4) posestovieweonomywideorregionalgrowthtrough available measures of public axative care efforL The the eyes of individual firms. Its strategy is to seek the last variable may be in physical terms (publidy em- percption of finns on the resources they draw from ployed physicians per capita) or in monetry tems their environment and to discem how they use these based on budget data. In educaio, outce measures resources to implement growth strategie indude enrollment ratios, graduation rates for those [nkeeping idththestudy'semphasisonanalyzingthe who enrol, and continuation rates for those who gradu- Liaoeconomics of growth, the main data source for this ate from prmary, secondary, and hgher levels. The resarch will be a survey of firms (360 in China and 60in explanatory varibles are incme, educational spend- MexcoD),thoughamorecDnventionalinvestigationusing ing at different levels, and allotion of spending be- published regional data will also be conducted. tween teachers and other inputs For both health and Through a firm-level survey in two of the highest- educationandwhen privateexpendituredataareavail- growthregionsinthedevelopingworld (SoutiernChina able, the hypothesis that higher public expenditures andNorthern.Mxico),thestudyexpects to map various "crowd our private spending for services with private knowledge flows and agglomeration effects and iden- benefits can be tested direcdy. tify the leverage points at which these long-run drivers Countnes will be chosen on the basis of time con- of growth cn be influenced. strdints and data availabiity. But further work on Ma- Responi4iti Industry and Energy Department, In- laysia is justified (particulrly hi the education sctor dustryDevelopmentDivision-AshokaModyand Fang- and to look further at public and private substitution). Yi Wang and Country Economics Deparunent, Trade Theremayalsobeadditionalworkon thePhilippineson PolicyDivision-ArvindPanagariya.WithPaulRamer, the substitutability of public and private expenditures. University of California, Berkeley; Andre Shleifer, Appropriate dala are available forIndonesia, which wSl Havan UniversitCuilleermoAbdelMusilvandHelen bethefirstnewcountrytobeincluded.Otercomtries Garcia. The Development Research Center, China, is known to have simlar data (although whehe they contributingstaff time. indudeallrelevantvariablesisyettobedetemined)are Cosing date September 1993. -RD mndiah Mexdco, and rietNamL Argentna, Chile, and Costa Rica have also been suggesbedL Roesibty-CountryEconomicsDeptment,Pub- Macroeconomic Catastrophes licSectorManagementand PrivateSectorDevelopment Division-EsteLle James, and Populabon and Human The objective of this research project was to arrive at Resources Department, Population, Health, and Nutri- realisticanalogies,based on selected crash and recovery lion Division-Jeffrey Hammer, and Education and episodes, for predictng the timeframe of the economic Employment Division-Elizabeth King. With Pia recovery of the counties of EasternEurope Malaney, Harvard University; and Aly Sy, Universitd ThestudylookedbrieflyattheGreatDepressionand deMontreal. the time of recovery, and ten considered in greaber Closkig date Decenber 1992. detailthepost-wardepressionandrewverjindteUnited Kingdom, the "Cermanniracle of the 1950s, the eco- noMic history of the industrial oountries betwee 1950 Explaining Rapid Growtr Chinese Coast and 1970, and theexperiences of a group of developing Provinces and MexdcanMaquiladoras countries. It explored the 'productivity catch-up" hy- pohesisasparticularlyrelevantinexplainingtheobser- Rnf no. 677-50 vations. It produced a simple numerical example that A question of central interest tD the BarWs opea- used for the reoDvery the most fvorable comparator tionalworkandpolicyadviceis Whendoestheprocess case (West Gemany during the 1950s). The results of economic growth become self-sustainng? In other suggest that the costs of the entire cyde are staggering words,whendoesgrowthprovidepositivefeedbackto and positively correlated with the depth of the crash, generatecontinuedgrowth?Asignificntbodyof work and that'recoveryP regardlessof thecriterionbywhich hasemphasizedtheimportanceofprovidingfirmswith itis measured, is atbest a long-term proposition. the rightincentivesand pricesignlsto allowecononi- ResonsWbll Country Economics Department, So- callyefficentdeisions. Rectanalysisalsowremindsus calistEconomiesReformUnit-AlanGlb. With Shirin that investent in physical capital and knowvledge- Fozouni and Martin Schrenk. 41 Priate Sector Development and Public Sector Anagement Completion date: Mardi 1992. Hazel, Peter, and Steve Haggblade. 1989. Trm-Non-Fnm Report Growth Lnkages and the Welfae of the Poor.' Paper Fozouni, Shrin, Alan Gelb, and Martin Sbrnk Fortmin& pesented at the World Bank/FPRI Povaty Resarh Crash and Recvery PecsIn Eat Europe Swne CnfermncArlie HosH, Virg sda, October 25-28. Compaative Lessonse World Bank Country Econosmi .1991. -Rural-Urban Growth Lkaps in Indlae NW Department Sodit Economies Reform Uni Waidngton, mnnt L(Agrculhf Ecnouics 46 (4):5S529. DC Hazel, Peter BA, andC- Raasainy. 1991. Gmm Rewolion Racnsidae The Impct of e ITuk Yrihg Rice Vaiies in Soiut IndiiBatim Johns Hopkins University Pa Rural-Urban Growth Linkages The rual nonfarm economy (NFE) is an important Diffusion of Information Technology. sorce of income and employment in developing coun- Opportunities and Consraints tries-especially for the poor. It often accounts for a third or more of total rural employment and 30 to 50 The increasing information content of economuc ac- percent of rural cash income Moreover, because of tivity worldwide is making the use of information tech- various consumption and production links between nology-wmputerandCmm unicationsedinologyand agriculture and the RNFE, agicultural growth gener- software-increasingly relevant in a broad range of ates sizable incomeand employmentmultipliers within countries and activifim As the unit costs of computers the RNFE that are benefiial for poverty alleviation as andmodemcommunicationstecbnologyhavededined, well as for national economic growti. their use has grown rapidly, leading to vast improve- Despite its importance, the RNFE is not wel under- ments in the abilty of users to store, procss, and stood. Its potential role in helping to resolve employ- retrieve a variety of forms of data, ranging from simple ment and poverty problems is often neglected in the numbers to video images. Information technology is Banlcscountryeconomiicworkandinthedevelopment being applied in a wide diversity of fields-induding plans prepared by national governments. Where poli- sdencew,anuhchninfinanceandmarketin&Jneach cies or programshavebeenimplemented to assistrural field of application, information technology not only nonfarm enterprises, they have often failed to appreci- creates the potential for increasing the efficiency of ate (l)theimportanceof agricultumalgrowth ingeneat- operaton, but often leads to a hange in the way busi- ing a market for increases in RNFE output; (2) the ness is done. iinportanceof serviceandtradeactivitiesvis-a-vissmall- Despite the enormous sums required to develop scale manufacturing; (3) the shifting composition of the information tedmology products and services, many ENFE, and hence of necessary support, over time; and are available at competitive prices in intenational mar- (4)theimportanceofthespatialfeatureofRNFEgrowth. kets, making them accessible to developing countries. This study reviewed and synthesized a wealth of And information technology is sometimes thought to material that has emerged in recent years (induding have particular relevance for developing countries be- case studies, small business surveys, and cnsuses) to ause it is believed to be applicable in small modules. consolidate knowledge about the RNFE, and to mane But despite the apparently favorable features of in- recommendationsaboutappropriatepolidestoenhance formation tednology,its aggregate effect on productiv- its role in the development process. ity performance has been disappointing This researci Reonspibiity: Agriculture and Rural Development project, using case studies of countries and sectors, Department, Agricultural Policies Division-Peter looked at the role of information tecnology in newly Hazell. With Steven Haggblade industrializng and developing economies, addressing Compltion date Mardi 1992. severalquestions.Howwidelyhasinfornationtechnol- Rport&t ogybeen diffused in these countries? Who are the main Hagblade, Steven,J. Hammer, and Peter BAR HazelL 1991. users of infmtion technology, and what do they use -vodefiing Agricltural Crowth Multilere" Amaica it for? And most important, what factors contribute to Iwundaof AgrieuUud Lesnocs 73 (2t:361-74. rapid diffusion and successful application? Haggblade, Seven, and Pter N.B Hazel. 1989. "Agricultural The reserch attempted to determine whether there Techologyand FamnNon-Fam Grwth rnkae were specific sectors, activities, or types of organiza- Agricultuu Eonomia 3345-4 tions that had indeed benefited from the use of technol- Haggblade, Steven, Peer B.R Hazel, and J. Brown. 1989. ogy inf ormation. And to investigate thepayoff of invest- -Far-Non-FFarm linkags in Rural Sub-Saharm Afca ments in information technology, difficult to do in the World Deuepopt 17 (Augmst).17-1202 shortrun,theproject caried outa qualitativeanalysis of 42 Print Sector Oevenp mt and Pubic Sector Mmagenmt the uses to which information technology is being put. Wong Seng Hon. Forthmng EpAoiting Inforan At the core of the research effort, however, was the Tednoogr. A Case Study of Singapore" Wbld Devnopment analysis of the barriers to the use and diffusion of informadon tecnology, to identify the reasons that information technology may not have a significant im- Elements of Social Transfonnation pad on productivity. It was found that effective use of (Privafization) technology information depends on several conditions * The intemational flows of knowledge must occur Eastern European economies are cDnfronting some with the greatest possible fieedom. of the most profound economic and social changes of * The incentives to adopt new technologies and the their history. No comparable changes have affected national infrastructure to support adoption must be in thesecountriessincethelatel940s-whentheyswitched place. to centrally planned economies. The privatization pro- * Theorganizational unit(forexample,thefimora cess in Eastern Europe is without historical precedent. government entity) must have the capacity and struc- The process, over the next decades, represents a chal- ire to absorb the technology. Key factors are manage- lenge to the countries as weli as to economists, since no rial sidlls and entrepreneurship. readyanswersexistonhowtoapproachitThisresearch Responsibty: Industry and Energy Department, In- projectcollected findings on this transition process in a dustry Development Division-Carl Dahlman and single volune. Ashoka Mody; Asia Technical Department, Industry, The research wvered a wide range of topics,indud- Trade, and Finance Division-Robert Schware and ingmicroemnomic aspecs of sysem reform relating to Anton Moussa and Rio de Janeiro Resident Mission- ownership, trade, and other reforms in Eastern Europe, Claudio Frischtakl With Alan Cane, Carl Ducatel, Ian and analysis of legal reform to alter the dharacter of Miles,Cae-OneKIm,YoungKonKim,Chang-BunYoon, state-owned enterprises and captal markets. The re- David McKendrick, Rajan Sun, Jerry Sanders, Boon search addressed in detail modes of divestiture (privat- Wan Tan, Eric Lui Chu Wah, Loh Chee Meng, and Seng ization) in Eastern Europe. The principal research ques- HonWong. tion addressed was whether market institutions can be ompkletion datc June 1992 created by design (human constructivism) rather than Reporfs through a slow evolution dharacterized by accumula- Cine, Alan. Forthcoaing. T and CompetitiveAdvantge: tion of knowledge and the survival of more efficient tesn from the Developed Countrlesf WoddDewlmmnt forms of organization. Ducatel, arL and Ian Miles Forthwng. "Intanainalation Theprojectanalyzed fourstrategiesofprivatizaionr ofIT Seavces and Public Policy Implicationsf Wod * Internal privatization-when shares are sold Dme at. (given) to workers in enterprises Fribctalk, Cudloi Forthcoming "BankingAutomation and * Extenal privatizadon-when shares are sold to Productivity Change: The Brazilim Experience. W1l the highest bidder ?doPamt. * Distribution of shares to citizens im, Cae-One, Young lCon Kim, and Chang-Bun Yooxi * Privatization by holding companies-when state Forthcoming, "Korean Teleomnimcations Development firms are taken overbyholding companies before being Achievemnets and Cautionary lssonsr- Wol De1opnt. sold to individuals. Mdcendnick, Davi4 Forthcoming. -Use and lmpact of Each of these approaches is associated with di ferent iformation Technology in Idonesian Commerdal conditions. Privatization is likely to generate conflict Banking." World Deud1pmnl between social groups, so its final form will be deter- Mody, Ashoka, and Cad DeThia Forthcomng& 'Performance mined by a poIitical process. and Potenal of Information Techdology An Intemnatnal Experience in several Eastern European countries Pempective. WR DwedopmL indicatesthat cuntrieswilladoptdifferentapproaches Mody, Ashoka, Rajan Sun, andJerrySander Forthcoming. that reflect each country's and govermment's condi- "Keeping Pace with Change: Orguniational and Tedmo- tions,thepoliticaland socialstrengthof variousgroups, logical Impeaive" WordDclpmen the degree of decentralization, and the relative success Moussea, Anton, and Robert Schwae Forthcoming; "Ifrmati or failure of socialist experiments. in Afric Lesons from World Bank Eperience." World In the sequencing of reforms, privatization needs to DweopnmnL follow macroeconomic stabilization as quiddy as pos- Tan, Boon Wan, Eric Ltdi Cu Wah, and Loh Chee Meng. sble.Asignificantrole shouldbereserved for employee Fothcog. -Me Use of Inmtion Tedcnology by the ownership so as to weaken political obstades to privat- Port of Singapore Authoity? Worl Devdopmen ization. Fonner CMEA members should seek full inte- 43 Priae Sector Deveopment and Public Sector Mageant gration into the world economy raer than try to Compiien daft- June 1992. strengthen preferental argements among them- Reprt selves. One clear cDnclusion is that there is a rned for SIAOV,SrgeL 1991. Pdvalzalin in the Soviet Union: mhe more innovative approaches to privatizaion. BegnnIng of a Transitio.? Policy Resardc Worling Paper RapoMisifiIy Country Ecmomics Departnent, So- 805. World Bank Washintn, DC dalstEDnonuesReformUnit-BrankoMilanovic,Alan Forthming. minal Vehidd for Plivalizalon an Gelb, Marlin Schrenk, Milan Vodopivec, and Inderjit Russia? Singh; Finandial Operations Department, Division 1f- Fernando Saldana,- and EastAsia and Pacific, Country Department I, Country Operations Division-Erika Public Entexprise Management and State Jorgensen; Europe and Central Asia, and Middle East Holding Comp aes and NorthAfricaRegionalOffices; and SouthernAfica Department With Arye HIluman. A recogition of the relatively poor economic effi- Complion date June 1992. ciency of public enterprises has led many countries to Repot s: try to improve their management Many countries see Dbanj,iFark, and Branko Milanovic 1991. ?Mrvattion In the valueof increasing the exposure of such enterprises East and Central Europe Objeclives, Cons(taits, and to market forces, but consider it politically difficult bD Modds of DivesirSe Pohicy Eseardi WoigPapr 770 proceed to immediabe privatization. Even in transi- World Bank, Washnton, DC tional economiespursungthegoal of privatiation,itis Hlllman, Aye, and Branko Milnovc 1992. "Transiton from often difficult to achieve this quickly because of the Soiaim in Fashn Eope Domestic Resrucring and largenumberofpublicenterprisesandthedifficultiesof Foreig Trade? World Bank, Wasingtn, DC mass privatizaidon. As an interim solution, many coun- Milanovi Brarko. 1991. Privatiztion in Post Communi ties have set up institutions or corporations that are Sot" Commui EBmmzk Trwsnum 3W. givenownership rights and entrusted with thernanage- Suldanha, Fenando. 1990. "A Proposal for a Fast and Effldent meat of pubric enterprises on behalf of their uldtmate Privatization of the State Factor. The Pr;wtiion Rcukw owner, the state. These "second-best' solutions are of- (fan). ten adopted, and may be essential in a multiphase process of transition. A key objective of this study was to assess the experienoe of countries with the state Frivatization of the Former USSR holding company to see whether this solution has per- nutted enterprises to behave competitively and effi- This research surveyed privatization activities and a denaly while still under public ownership. range of financial institutions active in the privatization The study also examined the extent to which state under way in Russia with a view toward adding to the hokling companies have been able to adcieve other key understanding of this largely spontaneous procs. government objectives, such as the insulation of public The research reviewed the different types of privat- enterpnses from govenment support through binding ization under way in the former USSR. The last all- budgetconstraints,therehabilitationorrestructoringof Unionregimewasthefirsttounplementprivatzations, public enterprses, and progress toward eventual pri- wlich took different courses. Some cume "from above" vatiation. Finally, the study attempted to relate the (from the ministries), and others came "fiom below" relative success or failure of holding companies to key (fromtheenterprisesthemselves).Thestudyconduded internal and external variables. These indlude certain that privatizations were effectively resticted to the characteristics of holding oDmpanies, such as their pat- elite, because monetary and price reforms had effec- tern of share distribution or their vertical strucure and lively wiped out household savings. The privatiuation the lega code under which they operate. External van- initiative hasbeen shifting from the center to the repub- ables indude the links between the holding companies lics. and the financial system, and the effect of emnomic Extending this work, a small survey of the activities policies (especially concering trade and prices) on of some of the many financial institutions that have holding companies' performce. Based on this, the developed in Russia was undertaken, with a particular study proposed a framework for better utilization of focus on their actual and potential roles in financing holding companies, where their adoption is necssay, privatizations. to adieve the objectves of greater decentralization and Respiity: Country EConomics Deparment, So- improved efficiency. cialistEconomiesReform Unit-Alan Cel. WithSergei Theresearch wasbased on a detailed examination of Shatalov. theexperienceof threecountriesthatbaveexperimented 44 Privae Sector Deelopment and Public Sector Managemt with state holding companies on a large sale. Of these, ribution, and livestodc health and production services two are developing countries, Algeria and Egypt, and Itexanined whetheror not these functions have publc one an industrial comuntry, Italy. A variety of data was good properties and whether their delivery entails ex- used,includingfinancialstatementsof theholdingcom- temalities,informationproblems,oreconomiesof sole. panies,informationonthepublicenterprises'linkswith This analysis was used to develop a framework for the banking sstem, and data on govemment transfers establishing the appropriate government and private to or receipts from the public enterprise sector. The sector roles in the delivery and financing of these ser- study also surveyed the experience of holding compa- vices. nies in other countries. And it examined some new The study identified and analyzed worldwide pat- trnsitional institutions in Eastern Europe to see what ternsinthenrxofpublicand private sectorinvolvement useful parallels can be drawn between these and more in agricultnral service supply, based on interviews and traditional holding company structures correspondence withresearch,extesiion,livestock,and The study found that the likelihood of the state seedspecialistswithintheConsultativeGrouponlnter- holding company adhieving gmater efficiency and de- national Agrcultural Resech (COLAR) system, the centralization depends first on the commitment of the academicconmunuity,internationaldevelopmentorga- state and the economic policy environment But them nizations,andindustryrepresentatives,aswellasinfor- are also a number of key characberistics oncening the mation provided in published sources. Drawing on internal structure of a holding company that influence published materials,projectdocuments,and interviews, its ability to achieve its objectives, cuntry case studies were developed examinng the Responsbliy: Middle East and North Afica, Coun- complementary or conflicting roles of the public and tryDepartmentLIndustryandEnergy OperationsDivi- privatesectors in the deliveryof particularagricultural sion-Anjali Kumar and Sven Kjellstrom, and Country services, the evolution of institutional arrangements Department I, Industry and Energy Operations Divi- within such service sectors, and the nature of private sion-Emile Sawaya. The Development Unit at the sector sevice delivery systemsL SICERD, London School of Economics, partidpated in The research found thatwhile the public and private an advisory and extenal review capadty. sectors have come to play complementary roles in the Conmpletin dte: J une 1992. delivery of many agicultural services (with the private secor undertking most commeri activities) in in- dusbial market economies and in many of the more Private Agricultural Services conmerdallyadvanced developingcountries,ina large number of developing countnes, public sector institu- Agricultural support services-such as agricultural tions continue to dominate formal systems of agricul- research and extension, seed production and distnrbu- tural servce delivery. In these countries, a combination tion,andlivestodckservices-areanessential elementof of -restictive licensing monopoly marketing arrange- agricultural development because they can greatly in- ments, subsidized public services, weak legal protec- fluence the sectozs productivity, sustainability, and tion, small market size, and inadequate finandal and flexibility.Inthepast,aprincipal componentof govern- technicalresourceshaveinhibitedprivatesectorpartic- mentstmategiesforensarnggrowthinagriculturalout- pation, even in areas proven profitable in other coun- put has been public provision of agricultual support tries. There is thus sope for a considerably grater role servicesRecently,however,ascnuntrieshavestruggled for the private sector in the delivery of agriculural to adhieve higher levels of economic efficency-and services i many developng counties. spuredbygrowingfiscaldefitandpervasiveorgani- But the privafization of agricultural services cmnnot zational inefficiencies-governments have had to re- and should not be undertaken as one broad strategy. consider their stategies. This development has also Someagriculturalservices,becauseoftdeirpublicgood highlighted issues regarding the potential role of the nature, economies of scale, orother features assocated private sector irn the delivery of these services This with their delivery, may require some form of govern- research was initiated in response to the need to ment intervention. This need not entil direct govern- understand the appropriate roles of the public and ment delivery or control; the research found that for private sectors m the delivery of agncultural support many services, the regulation, subsidization, and taxa- services. tion of private sector activities have frequently proven The research applied principles of welfare and insti- to be more efficient forms of intervention. tutional eonomics to analyze the economic natue of Responsibity: Agriculture and Rural Development the many individual functions that constitute agrcul- Department, Agricultural Policies Division-Gershon tural research and extension, seed production and dis- Feder, and Agricultural Technology and Natural Re- 45 Private Sector Dodopmet and Public Sector Anagement sources Division-Cornelis de Haan and jitendra Advancing Agricultural Prnductivity: Srivastava. With Steven Jaffee, Dina Umali and Lisa Technical and Behavioral Constraints Schwartz. Comptn date: September 992. This work is part of the continuing analysis of the Rports: global agricultural sector and its capacity to meet the Jaffee, Stven, andJienda Srivastavl992 Sued Sysem needs of growing populations. This research has fo- Deelpet: Appopial Raes .ffrdwi and Public cused on the generationaid transfer of newagricaltural Swctorm World Bank Discussion Paper 167. Washington, DC technologies,especially thoseemergingfromtheformal Shwarrb,, Lisa "Balandig Private and Public Sector Extenslnw research systemx Theary and Case Shtdies. DrafL The research has involved dose interactions with UmaU, Dint Forthcomin& Pubic and Prime Sctor Rles in institutes supported by the Consultative Group on In- Agridlurat Recl 7heory and Experie World Bank terntatioralAgicultwalResearColleaguesfrom these Discussion Paper. Waingo, DC institutes, from the Bank, and from other concerned Umali, Dma, Cershon Feder, and Conelis de Han 1992 The institutions, sudh as universities, met at a Bank confer- Barane betwn Pubic and Priuat SctAmitiesn Ar ence at Airlie House, Virginia, in October 1991. The DelDwy of Lhisar Serv World Bank Disusslon Paper papers from tins conference are being collected in a 163. Wadngton, DC book. Reonsi ity: Agriculture and Rural Development Deparbnent, Agricultural Policies Division-Jock Integration of Food Markets in Russia Anderson and Peter Hazel, and Agrialtural Technol- ogy and Natural Resources Division-Anthony After the libemrlization of prices in Russia in January Pritchard and Gabrielle Persley. 1992, most food prices were formally free to respond to Completion date -December 1992. changes insupplyand demand. The dispersion ofprices Reprts: among different areas is much greater than that to be Anderson, Jock KL 1991. 'Agiicultnal Reerch in a Variable expected in an environment in which markets are inte- and Unpredictable World? In P.G PaErey,J. Roboom, and grated and quantities flow among markets in response Jodc R Anderson, eds. Agricirld ERani Po i: Inerns- topricedifferentials.Theobserved patternof retail food tii Qu=ntekhiwpcsprus. Cambridga Cmbrd pnces raises many questons about the functioning of Universty Press. food markets. Thisstudyseeks tounderstand the factors .1991. cifficules in Afian Agricultra Systems affecting the dispersion of retil food prices in Russia Hypotheses? Ag*udl l Systems 38 (4)3S74109 since the price liberalization. It addresses the following . 1991. -What is the Nature of the Wold Food Problemr issues: Outo san Agricuhre20 (4)213-17. * The extent of price differences not attrbutable to .1 992. "Masuring the Efficacy of Intematonal Agdicl- transportation costs or other unavoidable marketing urW Rwesc In CIMMYT 1991 Anna Repor-bhrmbq costs due Peduchiby of Ma md Wi*a i Dedvpig ConbtiAn * The causes of these differences AssessmeofIpLMexico6D. * The extent and causes of short-ten (week-to- Antony, C, and Jock K AndersoL 991. Modelling Teduno- week) fluctuations in price differences ogy Replacement Overrme for the Ex-Ante Analysis of * Howquicldyshort-termdeviationsareeliminated, Agricuhtua Resarch Prects Agrhadul Systm 37 and why cities differ in the speed of adjustment C2):113M92 * The extent to which both the typical price pattern Crmson, P,, andjock R Anderon 1992. "Global Foode and the short-term deviations from it are attributable to Rources and Prwpects for the Major GCeals" Bakgoud remediable imperfections in the marketing systeaL Paper 19 for World Deueopmnt R t 1992 World Bank, The shtdy isbased on weeldyprice data for 70 foods Washington, DC in approximately 130 cities tiroughout the Russian Haze, Peter B, and Jock K Anderson. 199L 'Commentary- Federation since January 1992. Agricultural Tehnology and the Poor? IFPRIRepmt Responsility: Agriculture and Rural Development 13(4ft.1,4. Department, Agricultura Policies Division-Karen Pandy, S, and Jck R Andesn. 199. Systems Modlg and Brooks. With Bruce Gardner, University of MaWyland. Technoogy Evaluation: An Inda Application?Indian The Center for Economic Analysis and Forecasting in lownalofAgridaural Ewaamics 46 (1)A7-56. Moscow is collaborating in the implementation of the Pardey, P.C., J. Rw&ooo, and Jodc R AndLson. 1991. study. "R#ond Perspectves onNaiona Agiculturl Researt Complion date October 1992. In P.C. Pardey J. Roseboom, and Jock K Anderuon,eds. 46 Priate Sector Devdopnent and Publc Secor Mnagemt Agriufral Rudearhq nknsmm Qumitali producer-to-consumer chahi for individual commodi- Pespcta >Cmbddg Cambridge University Press ties. Itidentifiestherangeofpublicgoodsandextemali- .1991. Topka Perspectives an Natonal Agrcultural ties associated with food pressing and marketing that Reseac." In P.C. Pardey, J. Roseboon ad jock PR mayreq regovemmentintervention,assesses the tech- Andeon, eds., Agriul Rmrcm Poke1q:Iamnad nical and economic characeristics of individual com- Qumlitiu Pawcie. Cambridge Cambridge University modifies and marketing functions, and identifies the Press. range of feasible institutional structures within the pri- Petit, Miche, and Jock R. Anders 1992. "AgrIcultuhl vate sector for xoordinating food production, process- Deveopment in the Third World: Recent Past and Futue ing, and marketing activities. Direcis En CMMY lkrnamtirm Agvfcuhui Reseacl The empirical component of the research has two The Net 25 Yare, On Ox Ocasion of CMMrs 25k parts. The first part, completed in fiscal 1992, was a Amduewy Z96S92. Mesdco 6 DS. review and synthesis of major "success stories" in food lhampapillal DJ, and Joc IL Anderson. 1991. "Soil Cons- pocessingandmarketingindevelopingeountriMost lain Developing Countmie A Review of Causs and of the casesexamined were forAsianand Latin American Remedies. QwrteoyJoxumwl ofInn ediwa Agdrhwe 30 oimtlriesandcovered relativelyhigh-valuehorticulural, ,210-23. fish,meat,andcoilseedproductsTheanalyrsisoDvezd the roles of the pblic and private sectors mn c-mmodity systemdevelopment,pattemsofcompetitionandverticaI African Private Agrcultural Marketing coordination within these commodity systems, and the market and macroeconomic cets in which these suc- Over the past two decades, many countries of Sub- ssful commodity systems developed. SaharanAfricahaveexperiencedastagnationordedine The second part of the empirical research will be in their traditional agricultural exports and agro-indus- undertaken in fisml 1993. This work will focus on pri- tries. Within the region, there have been relatively few vatesectoractivityinSub-SaharanAfricaintheprocess- cases of successful agricultural export diversification, ing and marketing of higher-value food commodities foodprocessingindustnesremainunderdeveloped,and and nontraditional food exports, including livestock much of thepotential forinhtaregional tradeinfreshand and fish products, fresh and processed fruits and veg- processed food products has not been realizecd While etables, vegetable oils, sugar, and spices. Based on a there have been adverse trends in the international litfeature review, a survey of acadenics and practitio- marketcDnditionsforAfnca'sleadingexportcommodi- ners, and fieldwork in several countnes, the resarch ties, there has been a growing consensus that Africa's will combine a regionwide analysis of presentpatterns poor agricultural export and agro-industrial perfor- of private sector involvement in food processing and manceismorecloselylnked to variousformsof govem- trade with detailed casestudies of individual food com- ment failure at the macroeconomic and sectoral levels. modity systems or industries. Thisanalysis has led manyresearchers and practitio- Resposity: Agriculture and Rural Development ners to recommend policy adjustments as well as the Department, Agricultural Policies Division-Gershon restucturing of agricultural marketing systems to al- ecler; and Africa Technical Department, Agriculture low the private sector to play a greater (or dominant) Division-Kevin Cleaver and Craeme Donovan. With role in agricultural processing and marketing activities.. Steven Jaffee. Butthe understanding of the actual potential of private Completion datc December 1992. sector marketing in Africa and the actual forms that R1pot. private enterprises and private markets take in the Jaffee, Steven. 1992. The Orgamizatimn, CoKdinatiork, and context of African agro-industry and trade is very lim- Performance of Food Marketing Systems A Cnceptu ited. This research was undertaken to assess the extet Framewr and formns of private sector activity in these areas, to Jaffee, Steve with P. Gordon. 1992. Intendonally Compet- examine both successful and unsuccsful cases of pri- tive Fwod Commodity Systems A Revew of Major Develqp- vatesectorfoodprocsingand marketing,and todeter- ing ContrySuccess' Stors mine the policy, financial, or other barriers to frither development in this area. Aconceptualframeworkfortheresearchwasdevel- Brazil Aircraft Industr oped which combines a comnodity system approach with elements from welfare and institutional econom- Theobjective of thisresearchistopresentananalysis ics The framework positions focal food processing and of the international commuter aircraft industry. The marketing functions and institutions witiin the wider - focusisonthedifficultiesfacedbyindustrializgcoun- 47 Prv*te Sector Dwdopmmnt and Public Satdr Management tryfiltstenterandcosolidateeirpoinnahigbly global megaprojects msting billions of U.S. dollars acmpetitivemarketinacomplxproductarea.Thecaseof Even modesdy sized schemes-by global standards- Embmaer, the mostpxwmientof the fewairaftmamac- can be huge relative to the economies of small develop- turns in the indstiizig wormd, is mnustative in this ing countries. regard. Embrer started opeations in 1969. A relatively Reliable estimates of project costs and schedules at young firmbyindustry standardrlnit experienced acwler- the time of projectapproval are important for justifying ated growth for two decades before peteing out after a project on economic grounds and for planning the 1989. A combination of recessionary forces in he cor- means for its financing. Faced with the huge economic muter airline industry and the militar aircraft market, and finandal costs of expanding powersupply, govern- itensiyin competition fhm bet financed firms, and ments of developing countries are under pressure to an oveambitious development program led to substan- ensurethatpowerpromjectsareselectedwithdueconsid- tial lossesin 1990 and 1991. 1i early 1992 thegovernment eration forthe economicand commercial risks thatarise decided to privatize Ember because of the company's from the uncertainty in these estimates. high level of indebtedness and the government's mwill- This research aims to help national planning and ingness to come to its rescue with a padcage that would finance Winistries, power utlities, and financing agen- efectivey restruchure is balance sheet destoimprovetheselectionofpowergenerationprojects ThisstudyfocusesonEmbraer'slast10orsoyearsin in developing countries. It povides useful indications the broader context of a rapidly changing commuter about the factors that have influenced the reliabity of aircraft industry. For Embraer, this period has been estimatesofcostsandsdiedules-forinstance,whether characterized by significant teclmological achieve- suchpro)ectcharactristicsascomplexity(size,technol- ments-the codevelopmentof the AMX fighter jet and ogy)andconstructionarrangements(siteversusfactory of the CBA 123 pusher prop-and commercial suc- assembly) acaunt for differences in estimating riLabil- cesses. This has also been a period of growing financal ity, or the reiability of price contingendes for estimat- difficulties, in part as a reslt of a number of bold and, ing project finandngneeds. Factors thatare found to be in retrospect, wrong decisions concerning product de- significant can be used to incorporate risk consider- velopment strategy and financing. ations in the planning of power systems to meet power Responslily: Industry and Energy Department, In- needs at least economic cost dustry Development Division-Caudio Frischtak and The research examines the bias and uncertainty in B. Chaudhuri. cost and schedule estimates for power generation Compleion date: Decenber 192. projects. These projects are suitable for this type of Reporwt analysisbecausetheyarebasedondassifiabletehnolo- Frisdak, Clandi 1992. Learing Tedmical Press, and giesforan attbutableacmmonoutput Theimplemen- Competilivenesin the Conmuter Airrft Indusry An tation cDnditions are also amenable to this analysis Analysis of Emraerf- Indst and Energy Dpartment because power generation projects are planned, de- Working Paper, hdustry Seris 58. Wold Bank, Washing- signed, and promred according to a set of well-estab- ton, DC libed, idenfifiable practices. The influence of such fac- tors is assessed by comparing the estimated cost and schedule at the time of project approval with the actual Factors Influencing the Accuracy of Cost castand scheduleforeadhprojectinagroupofaboutl30 and Schedule Estimates for Power power generation projects that were approved for fi- Generation Projects in Developing Countries nancing by theWorld Bankbetween the mid-1960s and the mid-198Os. The costsand sdhedulesofpowergeneralion projects Resonsuuity Industryand Energy Department, En- affectnational economic developmentand the financial ergy Development Division-John Besant-Jones and viability of project investors. Developing countres are Jamshid Heidarian. planning massive developmentprograms to meet their Competion dte: December 1992. power needs. It is estimated that they plan to install 384 gigawatts (GW) of new generating capacity during the 1990s at a cost of about US$450 billion in 1989 prices. Preconditions for Enterprise Development Power generation projects are capital-intensive and re- in Africa quire lengthy construction periods. They account for a substantial proportion-averaging about 10 percent- The World Bank's Long-Term Perspecive Study for of a developing country's total physical investment Sub-Sahaan Africa (Szb-Saha Afr;i From Cis to Some hydroeletic schemes and thermal power cDm- Sustaib Gwth,Washington, DC: World Bank, 1989) plxes in the largest developing counties rank among identified atheneed to understand African political and 48 Pime Secto Deulopmient and Pubic Swtor Magmet sociocultual structures.. [and) institutions asavehide has concentrated on ascertning from SMEs active in orhindrance of development" In the process of huuan three subsecors what their sources of financial, techni- resource development as it perins to the fostering of cal, and marketing support have been. A second round entrepreneurship in Africa, there is a need for a better will analyze the impact of govemnmenton the evolution understandingofhowcultureactstopromoteorhinder. of these private (or public) support sytems. The re- This project will look at how cultural filters affect sd- searchisbeingundertakenin japanjndonesia, and the ence and technology and istitutional questions in- Republic of Korea, and may be extended to Thailand voIved in entrepreurship. Its objectives are to im- and Taiwan (China). prove the understanding of the sociocultural strengths The projectuwiliproduceamonograph foreach caun- and inhibitors that affect enterprise in Sub-Saharan try,aswellasacomparativevolume.Thesewillprovide Afriic, and tD translate that understanding into practi- an empirical foundation for the development, by gov- caladvicefordonorsandnationalauthorities.Theproject enmuents and the Bank, of aicro-level polices toward helps cary the interest in the linksbetween cultureand SMBs, and thus help move policymaking beyond a development to the field of enterris in SubSaharar prior, ideologically driven debates and measures. Africa in ways aimed to yield pragmatic advice to the Responsbty: Counttry Eonomics Department, Pub- Bank and its partners in Africa. licSectorManagementandPrivateSectorDevelopment The project will tap existing knowledge of leading DivisionBrian Levy, and Trade Policy Division- African (and other) acadermics and entrepreneurs DonaldKeesingxandlndustryandEneyDepartment, through reflective analyses centered on aconceptpaper Industry Development Division-Carl Dahlman and spelling out key issues; an interactive workshop; and a WilLiamnSteel. With AlbertBerry,GeoffreyNugent,and conference of national and donor practifioners The Shuiro Urata. conference will feature reflections of experiences by Compidn date: March 199& African professionals and enrpreeurs. Te project will complement the survey and case work of the Re- gional Program on Enterpnse Development- Biotedmology and Agricultural RponsaliIi: Africa Technical Department, indus- Development tryand EnergyDivision-RobertJ. Berg TheAga KChan Foundation is providing financial support As biotechnology is developed thatcan be applied to Cmpletion dte: Januay 1993. improveagriculturalproductionitisimportanttoiden- tifytehnologythatcanbeused in developingcountries and to ensure that they reap some of its potential ben- The Role of Government in the Development efits. This research addresses policy questions on envi- of Support Systems for Small and rnmenal risk, intellectua property rights, and Bank Medium-Size En rises policy toward support for pivate industry and Joint ventures of high risk The study solicited papers cover- The Bank and other donors have a long history of ing the technicaL ethical, and lega aspects of biotech- lending to developing countnes in support of financing nology. for small and medium-size enteprises (SMEs) and in Although biotechnology has promise, it is far from support of institutions that provide such enterplises proven.Mostresearchanddevelopmentisconductedin with technical and marketing assistance. The record of the industrial countries. Special efforts and innovative this lending is mixed at best, and there is continuing funding arrangements will be needed to ensure that controversy about the desiwability of interventions tar- developng countnes can share the benefitL.Anewway getedtosupportSMEs.Yetlittleisknownaboutwhether must be found for supportng research and develop- governmentinterventions were in factnecessaryforithe ment in high-risk situations More efforts are needed to development of succesful private (or public) financial, develop joint public and private ventures. technical, and marketing support systems in countries The papers commissioned for the prject were pre- inwhichsmallandmedium-sizeenterpnseshaveplayed sented at seminars held in Canberr The Hague, a dynamic role in industrial development The goal of Melbourne,and Washington, DC,in 1988-89.Aseriesof this research is to begin to fill this crucial gap in knowl- country studies commissioned in connection with the edge study are being compiled into a data base on agricul- The research taks the form of comparative case tural biotechology in selected counties. studies of the mleofgovemmentindevelopingsupport Responsbdyp Agriculture and Rural Development system for SMEs in countries characterized by sus- Deptmt, Agricultua Technol and Natural Re- tained expansion and participation of large numbers of sources Division-Cabrielle Persley, Conelis de Haan, S%Es in export markets. The first round of fieldwork and Anthony Pritchard; and Latin America and the 49 Priate Setor Deudopment and Public Swtor Managemen Caribbean Technicml Departnt, Agriculture Divi- tobean importantbarrierto entryin creating concentra- sion-MatthewMcAahon. With Peter Dart, University tion, was found to have only weak direct effects on of Queensland. The Australian Centre for international profitability. The straight-line relationship is weak, and Agricultural Research, the University of Queensland, heavy advertising in the industry (10 percent of sales) and the Commonwealth Scientific and Industrial Re- adds only about one-tenth more profitability. search Organization, Australia, are contributing staff The study's analysis of the relationship of foreign time, and the UNDP is providing financial support. ownership to profitability showed that Brazilian firms Compldion date. June 1993. are more profitable than foreign firms and that foreign- Repofts led industries are less profitable han domestically led Agdculture and Rural Development Department World Baun industries. It is conceivable that the interfirm differ- Ausalan Centre for Inlernationai Agicultural Research; ences are attributable to the infexior efficiency of multi- Austrlian Intemational Development Assistance Bureau; national firms; it is also conceivable that inteindustry and Intenational Sevice for National Agricultual Research. differencesareduetomorecompetitivebehavioramong I99. AgricdhulaalHi Rkfdmogy: The Ne 'Green Rewlutio4" multinationals than among Brazilian finns. World Bank Technical Paper 133. Waslngton, DC Responsibity: Industry and Energy Department, In- Persley, C.J., ed. 1990. "Agrctural Biotedcnology: Opportimi- dustryDevelopmentDivision-ClaudioFrischtak,Carl ties for Internatlonal Development" CkB IntenutionaL Dahlman, and B. Chaudhuri. Wallngford, U.K. Compleion ate: June 1993. .___ 1990. Beyond Menders Gmrden: Biotednology in the Report: Sevce of World Agriculture." CAB Intenational, Newfarmer, Richard S, and lawrence Maish. 1992. 'hndustial Waflngford, U.K Strdure, Market Power, and Profitabllity.- Industry and Parsley, C.J., LV. Cddings, and a Juma. 1992. Blosafety The MEergy Department Workdng Paper, Industry Series 63 Safe ApplcaUon of Biobechnology in Agricdture and the World Bank, Waington, DC Environment Internaional Service for National Agricdl- turnl Research, The Hague, The Netherlands. Cross-Country Study of Small-Scale Enterprise Responsiveness in Africa Brazik Political, Institutional, and Tedhnology Development The reforms embodied in structural adjustment ef- forts have created the framework for an increased role This research examines two questions, using firm- for the private sector in African industrialization. Be- level data from Brazil in the mid-1970s: How does causeof the lowlevelofforeign investmentand reduced market structure affect profitability? And what is the direct government involvement, the local private sector role of multinational finns? mustprovidetheimpetusforgrowthin themedium tenn The studyfound thatmeasuresof market concentra- and a foundation for sustained industrialization. Evi- tion have an important effect on profit rates, after other dencesuggeststhattheexpansionofthesmal-scalemanu- factors are controlled for, such as the size and capital facuring sector preceded the spread of large plants in intensity of the firm. Firms (both foreign and domestic) industrializir8counties,displacingmiaenterrr isesand in highly coneentrated markets (for example, above 80 cottage industries and preparing the ground for larger- percent) earn about one-fourth more thanfirms in com- scaleproductionbyservingasalocusforthedevelopment petitively structured markets (less than 20 percent). ofmoreefficentproductioandmanagementtechniquer. Market share has an even more powerful association InAfrica,however,thesmall-scalesectosexpansionhas with profitability. Firms with market shares approach- lagged behind that of oher regions. ingamonopolyearnnearlyoneandahalftimesasmuch Studies based on a survey designed by the Industry as firmswith marketsharesof less than 10 percent Some DevelopmentDivisionwerecanducted infivecountries of the effect of relative market share may be attributed that undertook structural adjustment reforms (Ghana, to the greaterefficiencyof the leadingfirms, but there is Malawi, Mali, Senegal, and Tanzania) to identify con- no way to distinguish these effects from the market straints on small-scale enterprise growth. This study power of dominant firms. The presence of a positive synthesizes data from the five country surveys in a effect of industrial concentration when market share is systematic manner across countries. The objectives are also in the model provides evidence of market power. to compare the prospects for small enterprise in coun- The measures intended to capture the effects of bar- tries with varying degrees of reform and differing in- riers to entry had apparently little consistent effect on dustrialstructures;toidentifytrendsandpattemsacross prDfitability. Product differentiation, which was found countries; and to enhance the understanding of the 50 Private Secor Dedonpment and Publ c Sector M 8angmet support of small-scale enterprises as dynamic agents in CoGmpktion date: June 1993. development Report The study asks five basic questions: (I) How can Fristltak, Caudli. 199Q "Adjustmt and Consained small-soleenterprisescontributeeffecivelytodynanic Resporas Malawi on the Threshold of Sustained Growt private sector development in African countries? (2) In World Bat Wasington, DC what ways does liberalization help and hinder these Kesuous,J. 1991. 'LeStekw Jadusel nu Malt Rdponsu a enterprises? (3) What are the main constraints that pri- rAjustemet fliude tronomque Conseil, Quebec. Draf vate manufacturers face? (4) What are the key determi- Parker, Ron, and Wlmn Stee. 19927 "Sinal Enprises under nants of firms' succss? (5) And what can poicymakers Adjustment in Sea World Bak WasWigon, DC. and donors do to facilitate private sector growth? The SUt, Wimiam, and Leia Webster. 1991. "Small Entpise answers to these questions areimportant for the design underAdjustment in Gbana. Wcrld Bank, Washington, DC of strategies for private sector development in parhicu- lar te extent to which macroecmonic policyliberalm- tion needs to be complemented by measures at the The Evolution, Character, and Structure institutional and sectoral levels in flnance technical of the Japanese Civil Service and Its Role assistance, and regulatory reformL in Shaping the Interrelationships The research is based on data from interviews with between Government and the Private Sector firms on theowners' characteristics; start-up and evolu- tion of the business; structure of supply and demand; Thelargebodyof non-Japaneseliterature thatexam- sources and intensity of competilionr major constraints ines how Japan tansformed itself from a technologi- on operations and new investment; changes in produc- clly backward agrarian society into today's economic tion,employment, sales, and otherbuinessbarometers superpower pays little attention to the role of Japan's since structural adjustmenrt use of and demand for dvil service. The exceptions are a few works that fo- finance; and future outlook and plans. Firms aaoss a cused on the economic ministnes' roles in formulating fiul range of sizes were interviewed, from microen- and administering economic policy following World teprisestDlargefins.Withineachcounrytheresponses War IL But tese works do notaddress some important and consuaints of fimLs of dffnt sizes will be cor-- issues, induding these: (I) How can Japan maintain pared; thesedifferenceswil,in turn, be contasd acrss such a relatively sma11 dvil service given its pervasive countnes. In addition, firms of the same size wil be roleinfiemarketplace?(2)HowmightJapan'srelance compared across countries. This analysis should help to on the private sector for econonic development be idendify priority areas for policy kttervention. adapted to the needs of developing countries? (3) How Prelminary findings suggest thatbefore the reforms does the civil service make the most effective use of its the small-scale manufacturing sector was operating resources,includinglhumanresources? (4)Whatincen- below its potential in the sample countries as a result of tives motivate civil servants to set long-term goals? (5) thedifficultbusinessenvironment thatitfaced. Liberal- How does the civil service resolve confficting interests, ization lifted some obstades, thereby generating gains and how does it remain accountable? (6) How does the in productive investment and output in this sector, but cvil service remain relevantand flexible? (7) How were it also increased competition, especally from imports. theeffectsofdistortionstomarketsignalsintroducedby Small-scale enterpises appeared particlarly respon- political intervention mnimimzed? (8) Howdoes the civil sive to liberalization when compared with large indus- service permit economic agents to concentrate on their tres, many of which suffered from inefficient produc- business activities by maintaimng order? tionpracticesandexcesscapacity,andnicroenteprises, The objective of this project is to exanmne some which tended tobe constrained by lower levels of sklls aspects of the role played by Japan's administrative and resources and by easy entry, which resulted in structure in helping the country achieve its high eco- intense cmpetition. Successful small-scale enterprises nomic performance, focusing on the relationship be- wereespeciaylilkely to havemadeadjustmentsin their tween Japan's dvil service and the private sector. The internaloperationsin thehiberalznggenvironment These projectwillattempttodeducegenerallessonsthatcould movesinduded takingadvantageoftheinreased avail- beof valuetodevelopingcountriesandothereconomies abilityofimportedinputs,findingmarketniches,branch- attempting to adopt a free-enterprise system. ing cutinto new products, andpurdiasingequipment The project will alminate in a collection of papers Responsinliy: Industry and Energy Department, In- aimed atpolicakers from developing and ransform- dustry Development Division-Ron Parker, William ingeconomies. Thesepaperswill focusonthreespefic Steel,ClaudioFrischt LeilaWebster,andMarkDutz areas: institutional aspects (for eample, legal instru- With Randall Riopelle, Georgetown University. ments and analyses of histoical issues pertaining to the 51 Private Sector Devdopmen and Public Sector MAnagemmt civil service); case studies on the behavior of the civil * Activityin land markets, both rentaland saleand service(forexampletthe coordinationoffinandalpolicy prices for bnd and the effect of labor policy on industrial rationalia- * Change in demand for hiputs and arrangements tion); and finally, condusions that examine the rel- for supply, indutding purchased inputs, labor, credit, evance to formerly centrally planned economies and transport, and services newly industriazing economies of the lessons learned * Marketing of agicultural output from the study of Japan's civil service. * Changes in farm earnings and earnings by people Reqsmnsly:EcorrcoucDevelopmentInstitute,Stud- employed in agriculture iesandTrainingDesignDivision-Hyung-KiKim.With * Initial financial indicators of alternative forms of Michio Muramatsu, University of Kyoto; T. J. Pempel, enterprise, earnings per unit of land and labor, and University of Colorado; and Ko Yamamura, Univer- outstanding debt per unit of land and labor sity of Washington, Seatde. The Society for Japanese * New amngements for social services fonmerly Studies is contributing staff time. provided by state and collective farm; Compleion date: June 1993. Rsponsity: Agrinculture and Rural Development Department, Agricultural Policies Division-Karen Brooks; and Europe and Central Asia, Country Depart- Land Reform and Farm Restructuring mentl Agricultre, Industryand Fmance Division- in Russia and Ukraine Csaba Csak;i TheAgrrian Institute, Russia, is contrib- uting staff time. This study focuses on the reform of agricultural Completion datc June 1993. producer enterprises, and particularly on land reform and farm restructuring. Enterprise reform is part of a process of sectoral adjustment trough which activities The Post-Socialist Transition. A Systemic profitable under new relative prices and incentives will View displace presently unprofitable ones Which activities should be expanded, which shunld be contracted, and The post-socalist transition is a multidimensional how are these decisions made by the agents managing process involving econornic, political, and systemic as- the enterprises? Understanding how rapidly state and peca Tnis pmject focuses on three aspects of that pro- colective farms are restructuring and how they and cess: new private farmers are responding to new prices and c The design of reform programs-particularly, the marketing procedures is key to understanding the intensityandrsequendngof thedifferentcomponentsof progress of adjustmentand the opportunities for assist- a program.lntensityrefers to thechoicebetween shock ing and hastening the process. treatment and gradualism; and sequencing refers to the The sectoral adjustment is uinitiated by the stabiliua- interactions between the macroeconomic and liberal- tion program (for example, price liberalization, higher ization elements of the progrms. interest rates, and mom lberal trade policy and realign- * The reform of the state and the reemergence of mentof theexchangerate),and ultimatelyimplemented owners and market. Tlhis refers to the changing role of through enterprise reform. The success or failure of the thestate-fromthedorunantproducerundersoialism stabilization program will not be determined solelyby to the stabilizeandregulatorofamarketeconomy. The developments in the agricultural sectorbut agriculture potential role of industrial policyand other policy mea- has implications for the trade and fiscal balances, and sures (such as resructurg) oriented to nurture an sectoral policy will affect the general stabilization pro- emerging private sector is analyzed. gramL The stabilization program and agricultural ad- * The intactions between economic and political justmentareinterdependent;neither is lky tosucced reformineconomiesthataresimnultaneouslycDnstrucling without substantial progress in the other. Enterprise both marketeconomiesand multipartydemocracies. reform is thus essential for both. The analysis is based on cross-country comparisons Among the important issues addressed in this study (centered on these three aspects) of pattens of post- are these: socialist reform in Eastem Europe, Russia, and other * The pace of land reform and farm restructuring, post-socialist countries in Asia, Africa, and Latin and major factors affecting that pace AmericaL * The forms of land tenure and farm enterprise that A cnferec cosponsored by the World Bank, the are emerging Spanish Agency for International Cooperation, * The effects of the first two issues on land use and UNCTAD, and ECLA was held in El Escorial, Spain, on farm specalization July 6-8, 1992, to analyze these topics. A conference 52 Priit Sector Dwopment and Public Setor Mangement volume witi ihe proceedings of that confer willbe ment and growth path of individual HPAEs in the ab- published. senceofpollcyinterventionsandto contrastthatwiththe Resp:onslliyCountryEconoicsDepartmtntMac- actual patten of investment and growth. Attribution roeconozicAdjustmentand Crowth Division-Andrds consists of establishing whete greater levels of invest- Solimano. ment (either globaly or in individual industries), earlier Compltion datc June 1993. introduction of products or technologies (or longer per- sistence of dedining sectors), and more rapid growth of total factor productivity were associated with policy Stategies for Rapid Growtlc Public rolicy interventions. The secnd approach asks what charac- and the Asian Miracle teristicsof marketsand privateagents mighthave made government (collective) action desirable. Empirical evi- The pursuit of rapid economic growth and struural denceon the nature and magnitude of interventions will change is the central objective of economicpolicyin most need to be related to at leas three areas in which eco- developig countnes. Beginnig with Japan, and most noniuc theory suggests that markets may not achieve recently, Indonesia, Malaysia, and Thailand, a number of desirable outcomest (I) the level of savings, (2) the shar- East Asian economies have enjoyed specacular growth ing ofriskand (3) theuseofand investments in informa- and productivity performance. These are ecnaonies in tion. Both approaches are complementay and should which govermhent has played an active role, and their provide insightsinto the social benefits (and costs) of the success has renewed interest in the role of the state in growth strategies pursued. managingand promotingeconomicgrowth. Research on the problem of replicability will evaluate A common view of public policy in the high-per- the initial conditions for policy implementation in the formingEastAsian economies (HPAEs) is thatgovern- HPAEs, induding economic management, civil admin- ments attemptd tb -Assist the market" by following istration, and social organzation. The nature of collabo- strategies that emphasized three major goals: (1) in- mtion between business and goverment will also be creasmg the level of private savings and investment,W) analyzed,and theroleof thecivil serviceofbureaucratic ensuring rapid growth in productivity through policies incentives, and of rules and monitring of programs will to promote tednological learning, and (3) promoting beexplored.Thefocusof theworkonreplicabilitywilbe the growth of manufactured exports. An altnative on drawing lesns for other developing counties on view questions the need for and benefits of selective means for emulating the high attainment of objectives, interventions to achieve these goals, and their flexibility, and relatively low levels of rent seeldng that replicability charactrized policy implementation in the HPAEs. This research project will look at public policy and TheresearchwillcoverHongKong,Tndonesia,Japan, economicgrowthinHPAEs.Ithasfourmainobjectives Malaysia, the Republic of Korea, Singapore, Taiwan - Toprovideanoverviewoftheprocessofgowthin (China), and Thailand. One country case study will be the HPAEsbyanalyzing thepattenofoutputgrowth, undertaken for ticn of the BPAEs, except Japan, for stucntural change, and productivity growth in each which several essays on aspects of public policy in the emnomy rapid growth period are planned. In addition, compara- * To describe thestrategicapproachesto promoting tivestudies will beundertaken independentof the coun- rapid growth taken by govemments in the HPAEs, the try studies. Each comparative study will address the rationale for undertaking them, and the sequencing, main research objectives across countries in four main objectives, and outcomes of individual policy measures policy areas: * To evaluate the extent to which the rate and pat- * Trde and industrial polcies-analysis of trade in- tern of growth is attributable to public policy centives and institutions, the regulatoryand administra- * To assess the extent to which sucessful interven- live framework, competition policies, and policies for tions in the East Asian economies may be replicable in technological mastery and innovation other developing countries. * Finanlu*ets and poliies-analysis of the insti- The research addresses two main questions: (I) To tutional structure, evolution, and performance of finan- what extent can the rapid growth of real inacmes in the cial markets and an assessment of financial sector inter- HPAEs be attributed tD activist public policy? (2) And ventions whatelementsof sucessfulpolicyimplementationcan * Hum=n ctal and labor ma*dt-analysis of the be replicated outside the HPAEs?Both questions pose - structure of the labor market and the nature of human important difficulties for the conduct of the researc capital investments; evaluation of the extent to which Two approachestothe "attributionproblem"willbe public and private investments in skills formation were explored. The first attempts to characterize the invest- complementaryr assessment of public policies to pro- 53 Priate Secor Devdopment and Public Seaor Managemt mote investments In human capital by firms and em- efforlstoldentifysourcesoftednologyhavebeeniad- ployees equateand available tecnology has notbeen used to its * Institon studws and innovions-analysls of best advantage. The Agriculture and Rual Develop- the nature of institutional sctums, induding the civil ment Department is therefore undertaking a general service, the traznparency of procedures, and interrela- assessment of available technologies to identify major tionships between the public and private sectors, focus- tehnical and socioeconomic constraints to their adop- ing on how policies were implemented effectively. tion and mechanismsfor theirtransferintoBank lending The country case studies will cover each of the above operations. topics,butwill also provide the historical and macroeco- In its initial phase, this study is focusing on two areas nomic context for the country and explore interrelation- in which the ladck of tecnologyhas been feltmost (1) the ships among the policy areas. The comparative studies arid and semi-mid regions of the cool subtropics, where will address the attribution and replicability problems technology generation has been hindered by the poor systematically, and provide a comparative empirical resourcebaseandrelativelylatestartoftelnternational perspective. Agriculhural Research Centers (IARCs) of the Consulta- The research is doselyrelated to and wi drawinputs live Group on Intemational Agricultural Research- and from fourotherBank researchprojectThesearestudies (2) the livestock sector in Sub-Sahaan Africa, where of theJapanmemainbanksystemandcivilservicebeing introductions of technology and overall project perfor- undertaken by the Economic Development Institute, mance have been particularly disappointin. and two companion studies, "Effectiveness of Credit The research in the and and semi-arid cool subtrpics Polices in East Asia" and "Taxation and Economic isbasedonadetailedinventoryof thetedhnologiesused Crowtl Lessons from the Asian Mirade." to be under- in Bank-funded p. as in Northern China, North Af- taken by the Country Economics Department rica and the Middle East, and Southem latin America. Thecbnterpieceof the researchoutputwillbeallagship Farm data were colected on the Loess Plateau in China repDort, similar in style to te World Deome Rport, and in severaareas ofMorocco to establish the effect of entided "Strategies for Rapid Growth Public Policy and the adoption of a number of the most frequetly used the Asian Miade"; this is scheduled to be completed in ecnologies. This information is being analyzed. June 1993. Volumes comprsig the muntry case stdies A consortium of six institates (World Bank, Intera- and the stxdies of Japan are also aantemplated. tional Livestock Center forAfrica, lnutnadonal Labora- Responsilt Country Economics Department, Of- toryforResearchonAnimalDiseases,CanadianAgency fice of the Director-John Page, Nancy Birdsall, for International Development, Consultative Group on Changyong Rhee, Marilou Uy, and Chang-Shi Kim, International Agricultural Research, and Rockefeller and Public Sector Management and Private Sector De- Foundation)wasformedtoassesslivestocktedhnologies velopment Division-Ed Campos and Brian Levyr East in SubSaharan Africa, and top African and international Asia and Pacific, Country Department L, Office of the consultants were recruited to prepare state-of-theart re- Director-Danny Leipziger, Country Departnent I, portsontheselivestoctehnologies.Thereportshighlighb Country Operations Division-David Dollar, Country sgnifiant advanee in the development of animal health Department IIL Country Operations Division- tedlogies,whicbcanbeexpectdtofadlitatemeatand Amarendra Bhattadha, and Office of the Regional milk production in areas previously unsuitable for live- VicePresident-VinodThomnas;EconomicDevelopment stock. It also stressed the need for inceased researdi on Institute, Finance, Industry, and Energy Division- animal feed production, as feed production has been the Sahathavan Meyanathan; and International Economics main botdenedc in the development of the aucal white DepartmentlnternationalTradeDivision-C.rSuanTan. meat (pig and poultry) sector. The findings of the study The Ministry of Finance of Japan is providing funding. havebeen animportantinputinto the design of the future Completn date: June 1993. livestock research strategy for the IARCs in Afrca. Reponsiity; Agriculture and Rural Development Department, Agicultral Technology and Natual Re- Technology Assessment of Agricultual sources Division-Cornelis de Haan, Hamdy Eisa, and Development Jitendra Srivastava, Office of the Director-Jacques Brossier, and Agricultural Polices Division-Shem The introduction of improved agricultural technol- Migot-AdhollaWithWinrockInternationaLStaff imeis ogy will be an important factor in determining whether beingcontnbutedbyteNorthwestemUniversity,Jangli, the world's future population will be adequately nour- China; Institut National de la Recherche Agronomique ished and doied- For some ime Bank staff have been and DirectiondeProductionVegetale,MoroccosTechni- concerned that in Bank-funded agricultural projects, cal Advisory Committee, Italy; International Livestock 54 Priae Sector Deaedopment and Public Swcor Ma geugnt CenterforAfrica, Ethiopi International Liboratoryfor Assembiy Keeb g Pew with Tednological Gag ResearchonAnimalDiseases,Kenya; CandianAgency ndustyand ergn Departmt WorkingPwper1 Industry for International Development; Consultative Group on Series sa Wocld Dan, Wahingto, DC ltlemational Agricultural Research; and Rockefeller Mody, AhakA, RJean SuuiJerry Sndes and David VanZo Foumdation. 1992. "Internanal Competlon hn the Foote Industy. Compleion daie June I993. Keepng Pace with TedWIogil Chage." Industry and Repr Eneg Dqeatxmt Worldkg Ppr, Industry Serel 51. WlnrodclIntematioriaL 1M. "An Assessment of Animal World Bank, Wasglon,g DC Agriclture in Sub-Sahman Africa." Privatization of Public Enterprise HighTechmology Implications Management for Developing Countries Goverments around the world are privatzing ihir I day'sfactory isbeing tansformed ata pace thatis state-omedenterprises. IePublicSectorManagement trdy remarkable, and probably unprecedented. Some and Private Sector Development Division recetly ex- industies have already exeienced profound duange anined the lessons of experence in pivatization. An no manufacurer wil remain unaffected for long. The important lesson of that study is that ownship itself abffitytokeeppacewiththeongoinganehasbemme matters for improving enterprise efficiency. Outright an important ingredient of success. sales are preferable to nonownersbipmethodsofprivat- Manufacturing processes worldwide are being izationbecausetheytransferpropertyrightstoadearset reconfigured by organiaional innovations pioneered of owners with the incentive to improve perfornance. bytheJapaneseandbymicroeledronic-basedtechnolo- But sales may not be feasible in cuntries vwth weak gies. This research pmject developed a cost model that capital makets, an unfavorable policy framework, and simulated factories with several varations in the pro- weakregulatorycapadty-andinenterprisesinwhichit duction practices and technologies used. The results is difficult to attract pnvate investors In these cases, show that in a period of zapid technical change signifi- significant gains can be had by bdnging in aggressive cantdifferencesinproductivitycanemegeamongeom- private managers while leaving ownersip in the state peting firms-even in mature sectos These differenes sector. are amplified if leaming across innovations is cumula- Management contracts, leases, and concession ar- tive. For firms in developing countries, the findings rangementshvebeenwidelyusedthroughoutthewrd suggest that efforts to effect organizational changes to privatize management in a variety of sctos, indud- should be supplemented by dose intemational relation- ing industry,services, publicutilities, tourism, and agri- ships and apprpriate irstucture; a passive trust in cultut Yet there are few systematic analyses of experi- the product cycle could be unhelpful. ence wilh these anngements. The fewavailable studies, MRponsiVlil Industry and Energy Department, In- largdy descriptive in nature and focused on manage- dustry Development Division-Ashoka Mody- mentcontracts,showhatmanagementmntractorsrarely Completion datc September 1993. assume risk and have little incentive to improve effi- Repot ciency. Leases and concsions overcome some of tiese Mody, Ashoka. lerry Sander Rajan Sur, Chandu Rao, and problems. Under a lease the private party assms com- Fenando Contreas. 1991. "IntmuationdaCompeitlion In the mercial risk and thus has greatr incentive to enhance Sicyde Idustry: Keeping Pace wih Tehog*ical Change" efficiency, and under a concession the holder is respon- Indusy and Energy Deprent Working ae,4 Idustr simble for investments. Nevertheless, because the scmpe Series 50. World arnk, W ashingt DC for government intervention over the long run can be Mody, Ashok, Jerry Smdes, Rajan Sutl and Erc hompsom. large, private manament arrangemrets might tend to 1991. International Trends in Sti Mii-Mir Keeping Pace workbestwhen theyarean interim step toward-ater with TedcnologIkal he Industry and Energy Depat- than a substitute for-full prvaization. mert Woring Pap, Indutry Sers 52. World Bank, This study will attempt tDfil in the eistinganalytical Washingon, DC gap. Its goals are to examine the lessons of expeeriece Mody, Ashobka, Rajan SurL and Jerry Sande 1991. "KeepIg with the privatization of mnagement so as to provide Pace with Change Otrizat and TechnogIcal operational guidance for Bark staff and bonower gov- hnperaivee Irld Dewopmu2a2). ernuents. The research will briefly exmie the nature Mody,Asboka, RamnnSur, Jerry Sanders, and Mohan Talkoda. and structure of such anrangements. It will focus on 1991. international Competition in l'unted Cirit Board analyzing the impact of differtmanagement aange- 55 Priate Sector Deveopment and Public Seator Magem ments on enterprse performance, the determinantb of even a delayed-transition to a market economy. Abol- sucoess, and the extet to which the pefmnance gins isbing central planing alone metely results in decen- from private management are sustainable. trlized industry without the incentives provided by The research will use the case study approach. De- pinate property rights, and dcaratstically entails tailed information will be collected at the firm level mretmarkets th heavy stainterference and ex through interviews with government offidals, manag- post redistnrbution designed to equalize outcomes. ers, and workers. To reduce the problem of generl- The project includes analyses of the exeience of izability of findings from one setting to another, the economies in which central planning was eliminated, sample will be carefully selected to ensure wide mier- butproperty rights were notassigned and ex post redis- age, induding cass from both middle- and low-inmcome tribution remined pervasve. These indude Yugosla- countriesand from competitiveand noncompetitivesec- via, post-1968 Hungary, and Poland in the 1980s. These tors. The goal wl be to selectfirms thathave been under analyses are supplemented by an accunt of economic private management but public ownership for a suffi- transformation in China, which also moved away from ciently long time so that performanoe under private planed socialism in the 1980s; here, too, socialism per- vesuspublicmanagementcanbecontrstedandjudged. sisted without central planing. The research examines Respo ity: Country Economics Department, Pub- several key issues: the effectiveness of government poli- lic Sector Management and Private Sector Development cies in regulating economic activity in reformed (but not Division-Sunita Kikeri. yet fully privatized) socalst economies; the manner in CDmpletion datc June 1994. whichprivatiuationmaybeacCMplished;andemployee ownership as a means of defusing inital political oppo- sition to private ownership. Privatizatlon in Eastern Europe The end of socim in Easten Europe was also waccmpanied by an end to the socialist system of con- The transtion in Eastern European countries from ductingintermationaltrade.Thesecondpartoftheproject socalismtoamarketeconomyencompassesavarietyof is concernd with intemational trade issues. Sodalist eamomic, political and sodal dimensions. Transforzm- international trade had been regulated through the don in some of these dimensions, once under way, is nmehanisms of the Council forMutual Economic Assis- easier to achieve than in others. Political change-a lance (CMEA). The CMEA system was the logical ad- prerequisite for economic change-once seemed diffi- jnct for the international transactions of a centrally cult,ifnotimpossible Yet once c ncespemitd planed economy. The system was based on govern- political change, the political transformation in Eastem ment-governmentnegotiations regarding thecontent European countries was relatively swift of trade and prices This was highly regulated, plamw 1- Economic trandormation is more complex.Amodemn in-advace international trade that assured foreign sales functioning market economy is not only difficalt to and at the same time protcted enterpnses byeliminat- achieve. It is also often unclear what is meant by market ing the possibility of unplanned, disruptive competitive economy. For some, the idea of a market economy hn- imports. The extreme protectionism of the system per- plies job protection and a broad social welfare system. petuatedatechnologygap thatisrefleced in thedistinc- For others, the concept of the market ecnomy implies a tionbetween 'har and "soft" goods. Theproductionof competitiveenvironmentandunbrledffreeenterprise. soft goods was sustained by the highly conservative Fora third group, it implies that the state would aid the CMEAsystm,wherethequalitystandardsofyesterday's market by identifying enterprises with the greatest po- deliveriessettheprecedentforthoseof today,withlittle tential for success and steerng the targeted enterpris or no spedfication for quality improvement attached to toward the most profitable activities. An economy that the physical units in which traded quantities were de- has for decades been planned or that has experienced fined. decentralized redistribulive socalism camnot instanta- With the demise of the CMEA, issLues arose concern- neously be transformed by deaee, or by good wishes ing the adaptation of Eastem European countnee inter- and decarations of intentions, into a Western market national trade and payments medhnisms. Proposals economy. Thisproject,and thebookthatresultedfromit, discussed by the study for post-CMEA trade and pay- address the complexities that are encountered in eco- mments aangements are directed at three isues: (1) nomic transformation from socialism to a market identifying interim arrangements to facilitate interna- economy. tional trade in the post-CMEA regme; (2) confrontig The research first address issues of domestic re- theneedforhardcurrencypaymentforimportsatatime structuring. A central theme is that eiminating central that a substantial trms of trade loss has bee incurred planning does not necassarily imply an immediate-or becauseoftheswitch frmCMEAtointemationalprices; 56 Piw Sector Development and Publfc Sector Management and (3) spedfying the nature of interim interational reformlhave emerged from thesestudiesAfirst lesson is payments aangements, gven that full convertibiity thatnotonlydobindingconstraintsontheprivatesector will not have been achieved. begulatory or otherwse) vary sharply across countres, The conclusion from the study'sanalysis of domestic the constraints that tun out to be binding often are not restructringissues is thateliminating central planning the ones that superficially seem to have the greatest isonlyaninitialinompletestep Forthetansfomation effect A second lesson is that the gap betwee fornal tobeeffected swiftlyandwithminimal meandering, the rules and regulatory practice can be substantial-both key institution of a maket economy-pervasive private because public offidals may exmrse discretion in the property-must be established. Onlry ten can markets way theyimplementrulesand because firmssometimes be operative and government policy addressing macro- can adapt to superficially forbidding formal require- eonomic instability be effective Without privatization, ments at quite a low cost (through institutional adapta- economicagents wi fil to replicate thebehavior of real tions or modest side payments). market participants, and macroeconomic policies may These lessons point to the crucial importanceofgoing have limited or even pervere effects. beyond an exdusive focus on formal rules and the "offi- Thestudy'sanalysisof tradeissuescontraststhecase cial view of public officials What is needed is careful, for an Eastem European Payments Union (EEPU) with cotmtry-specificanalysiso identifywhichregulatory(and the circumstances of the (West) European Payments othdrw)cnstramntsarebindinginapartcularsettingmandto Union of the early 1950s. There are the similarities of measre the costs these constaints impose on private "dolr shortage" and gams from multilateralism. Al- fms and on the economy. Consequently, onrw goal of the thogh the argument against an EEPU is that it miight COBRA program is to develop a tool kit for operational become a "cocoon" for the old system, the fial dedsion staff conprising two componLents ()a diagnostic instru- ought to be made takdng into acunt the nature of the met, to leam which among the myriad of fonnal rdles in alternative-that is, whehr the alternative is default pracice most burden the private sector, and (2) impact bilatealism or a multilateral trading system. An EEPU assessments, to measure as predsely as possible the em- domiates the first but not necessarily the second. nomic costs imposed by the regladons identified by the Retmsponsibdiy: Country EoDnomics Department, So- diagnostcinstrumentasmostburdensome. dialistEconomiesReformUnit-4rankoMlanovic,Alan Another goal of the research is to extend the analysis Geib, Inderjit Singh, and Milan Vodopivec, and Trade of the effect of regulation to incorporate two additional Policy Division-David Tan; Europe and SovietUnion, considerations. Although surveys of firms provide rich Country Deprtnmt 1, Country Operations Division- informationon the costs imposed on them byregulation, Zeljko Bogetic; Europe and Central Asia, Middle East it would be desirable to complement the surveys with and North Africa Techical Department, Office of the other types of empirical analyses that do not depend on Dirctor-Manuel Hinds; EastAsia and Pacific, Country information(orperceptions)providedbyentrepreneurs, Department 1, Country Operations Division-Erika and that incorporate the economic oDsts of regulation Jorgensen, Europe and Central Asia, Country Depart- that extend beyond the diectburden placed on firms. It ment III, Office of the Director-Constantine would also be desirable for analyses to be directly com- Michalopoulos; and Fnancial Operations Department parable-bothacrosscountnesandwithothersourcesof Division IT, North America, Asia, Pacific-Fernando welfare loss in a given oDuntry-and thereby to provide Saklanha. WfthArx,ye Hlman, Bar-Dan University. a basis for judging whether the regulatory burden in a Completion 4itcc June 1995. given country is large in some absolute sense Reprt Ruponslil:tj Country Economiics Deprtment, Pub- Himar, Arye L, and Branko hlanovk edt Forthconn licSectorManagementand Private Secbtr Development Transsidtnp f m Soxilim in Basin Eumpc Deslknblw- Division-Brian Levy and Andrew Stone With Ralph hK3 and Foam Tr&k Waingto, DC World Bank Bradburl, Williams College. Completion dat: December 1995. Cost of Business Regulation Analysis (COBRAJ tRegional Program on Enterprise Development Over the past two years, staff in the Public Sector Management and Private Sector Development Division In addressing the problems of private enterprise de- have worked on Bank operations in seven countries to velopment in Africa, local govenmments and intema- complete a seres of studies on the effect of regulatory tional agencies operate with only limited information. andotherconstraints. Two centrallessonsforregulatory Policymakig without facts is pervasive. Formulating 57 Prikt. Sector Deudopmatt and Public Sector Managemant effective assistance efforts at the secor and enterprise proadc will provide more reliable bases for policy and levelsrequir(1)betterinformationaboutthemuiaoeco- operational work nomic facts of the African enabling (disabling) environ- Reponiity: Africa Technical Department, Indus- mentwithinwhichenterprisesoperate; (2)moredetailed tryaand EnergyDivision-TylerBiggs.The DutchGov- information on the determinants and dcacteristics of ernmen$theSwissGovenunent,NORAD,SIDACIDA, behavior of the miacro units and the dynamic processes FMNIDA, the Belgian Government, and DANIDA are through which they interact and (3) much more knowl- providing fmancial support edge about the investment processes that underpn the Completion date- December 1995. fomationandgrowthofnewfirms.Theprindpal focasof theRegionalProgranmon EnterpriseDevelopnment(RPED) willbeanempiricalinvestigation,basedonfieldsurveysof Private Sector Development Initiative firms in seleced African countries, of how government (PSDI) regulations, ftaaction institutions and business support services in finance, technology, and infrastucture influ- As more Sub-Saharan African countes undertake ence enteprise investment decsions (formation of new majorprivatization programs, and as adjustment pro- firms, epanion upgding of te hnology, and exit). grams begin to provide strong incentives to pnrvate The principal objectives of this research are (1) to activities in the productive sectors, demand for equity develop a more precise understanding of how different and term-debt finance forprivate investment will ex- elements of Africa's business environment influence pand signifiantly. Support from the Bank and donor privateenterpr.dsebehaviorandperformance;(2)totrans- operations for this shift in economic activity to the late the research results into recommendations for more private sector will require changes in the ways we do effective policies and assistance programs for private business.ThePSDIwillsupporttheBanlesresponsein enterprise development; () to strengthen the analytical theseareasthrough 'mands-on"'supportforthedesign capacity of African institutions (government, research, and implementation of new styles of operations, and and private sector); and (4) to create the capability for their dissemination in the Africa Region. donor agences and African institutions in the private Thisprojectaims(1)toprovidesupporttotheAfrica enterprise development field to monitor trends and de- Region's Country Departments and its Technical De- velopmentsinindustrialactivity(throughperiodicfirm- partment in designing and developing prototypes for level field surveys) for their polides and programs. new operational products for Africa; (2) to identify The research will be carried out over three years, and good practices forpolicy and operational workin tese will center on the collection of panel data and on case areas and disseminate then; (3) to focus initially on studies. The project will produce a regular series of new project finance instrumens, capital flows to the interim reports, case studies, ross-auntry studies, and private sector, competition and regulatory policies, policy reportsk and labor market issues; and (4) to provide a frame- TheRPEDwillstengthentheunderpinningsforBank work for implementing private sector assements in and donor operational work in support of enterprise theAfricaRegion,indudingstrengtheningoperationaI development in Sub-Saharan African countries through collaboration wirh the Intemational Fiance Corpora- in-depth analyses of the effect of govemment policies tion. (such as regulatory and labor market policies) and sup- Responswity: Africa Tehnical Department, Indus- ply-side cnstraitsonAfricanfirmsr performance. Given try and Energy Division-Paul A. Ballard. the dearth of industrial data in Af*ica, the survey ap- Complin date 1995. 58 ENVIRONMENT AND NATURAL RESOURCES Improved Accounting of Natura Resources aosing data June 1992. and the Environment for More Sustainable R4ports Resource Management Bartmu Peter, Enst Lutz, and Slefan SchwelnfesL 1992 fIntegraed Environmental and Economic Accounting A Ref. no. 675-43C Case Study for Papua New Guinea." Environment Depart- The general objectiveof this research was to improve ment Workig Paper 54. World Bank, Washintn, DC accounting of natural resources and theenvironmentto Harrison, Anne. 1992. ¶Natural Asseb and National Inenie enable both to be managed in a more efficient and Environment Department Divisional Workdng Paper 1992- sustinable way. Standard national income accounting 34L World Bank Washington, DC doesnottakeintoaccountsome of the effectsofproduc- Hartwick, JM, and A.Y. Hageman. 1991. "Economc Depreda- tion and consumption activities on the environment, ion of Mineral Stocks and the Contribution of E Serafy." Nor does it distinguish between true value added and Environmnt Department Divisional Working Paper 1991- asset sales of (nonrenewable) mineral resourmes. The 27. World Bank Washington, DC. main question that this research addressed was whether Lutz, Enst, ed. Forthcoming. 'Toward Improved AcoDunting methods for improved accounting of natumal resources for the EnvuennenL World Bank Symposim PaperSeries. and the environment could be developed, and inte- Washington,DC grated environmental and ecDnomic accounts estab- Lutz, Enst and Mohan Munasingbe 1991. "Accounting for the lished, that can be applied under different country Environment Fince and Devopment (MarclOl9-21. circumstances. Peskdn, Henry, wvith Erinst Luto 1990. "A Survey of Resource Case studies for Mexico and Papua New Guinea and Envirnmental Acounting in Indusrdal Countriems" carried out jointly by the World Bank and the United Environment Department Worddng Paper37. World Bank, Nations Statistical Office showed that it is feasible to Washington, DC develop integrated environmental and economic ac- van Tangeren, Jan, Stefan Schweinfest, Ernst Lutr, Maria counts. The studies also identified limitations in such Gomez Luna, and Fancisco CuMilen Martn. 1991. lute- accounts. That there are limitations should not be sur- grated Environmental and EconomicAccoimting A Csme prising. It took many years to develop the current Study for Mexdm. Envirment Department Warldng nationalincomeaccountingsystem,whichreliesmainly Paper 51. World Bank Washington, DC on market infornation; for natwal resources and the environment such information is often ladking, physi- cal information is sketchy, and monetary valuation can Pollution and the Choice of Economic Policy be difficult Additional casestudywork is needed; this Instruments in Developing Counfries may help in moving toward agreed acmunting conven- tions in some controversial conceptual areas. Ref. no. 676-48 Environmental concens need to be integrated into This project aims to address the following questions macoeconomic, sector, and project work, and into for developing cDuntries: What is the least-cst policy incomeandwealthacmunts.Sobetteraccountingshould intervention to reach a given ambient level or a given be seen as one activity in a multi-pronged effort The effluent standard? And what are the distributional im- costs may be quite moderate-in smaller countries, plications of such interventions across income groups? even one full-time personassigned to the task can make In doing so, the project will compare standard regula- a difference. The payoff of better accounting is better toryinterventions,butalso,moreimportant,price-based "numbers" for a national economy, and it can be ex- (or tax-based) policy dhanges to reduce pollution in the pected directly or indirectly to support enviromnen- most efficient way. In the evaluation the project will tally oriented work and decisiomxaking in macroeco- systematicallyconsidertheconstraintsdevelopingcoun- nomic, sector, and project work. tries face in implementing policy, such as the cost of ResponsThiy Environment Department, Environ- monitoringemissionlevels,enforcement,tightbudgets, mentalPolicyandResearch Division-ErnstLutz.With and uncrtainty about costs and benefits. Under these collaboration of the United Nations Statistical Office. constraints, such direct interventions as damage-based 59 Environment and Nahral Resources dargesorregulations,taditionalyconsideredtDbe"fzst- .1 C. Cubng Pollution in Developing GDUntriesf bes minsayntayiinbfactbe iy;ifso,howdo th Fkmua md Deaopmm (Mard). compare with "second-best indirect instumnents? An Jack, WIliam. 1"92 'Power Sharing and PollutiControt important hypothesis is that indirect instruments, such as Coordinating PoUcies Among Levels of GovenumenLt Policy taxes and subsidies n marketed inputs and outputs, Gn Rearh Worldng Paper 887. World Bank, Washt DC play a role in cost-effective pollution control. Kcopp, RaymondJ. 1992. EconomIc Incentives and Point Souce The project consists of several case studies razil, E ons: Choce of Modeling Platform." Poliy Research Chile, nddonesia, Mexico, and Poland). The work focuses Worklng Paper 920. World Bank, Washington. DC on pollution problems caused by sectors at the locil level, and is supplemented by country analyses. The case stud- ies comprise abadcgrourd description of poiutionprob- Pesticide Exwtnalities, Comparative lems in specfic metropoliUtan areas and analysis of the Advantage, and Commodity Trade: underlying causes of pollution and the role of public Cotton in Andhra Pradesh, India policy. Sector-specfic simulation models are developed to address suchquestionsas Whattaretheeconomiccosts Ref. no. 676-92C of using alternative instruments to reach a given tar This research sought to measure the economic costs level of emissions? How do txes compare with direct ofpesticideresistance in the cotton-growingareas of the emissions-related interventions? And who benefits and Guntur district of Andhra Pradesh in India. It focused who loses from the interventions? The paranmeers are on externalties that arise in the use of pesticides against derived from micneconometric analyses of specific sea- the cotton bol'worm (helithis armigenr). Because the tor to examine the degree of flerdbility in input substitu- boUworm is raigratory, a fiirmer who controls the pest lion on the supply side. Demand-side analyses will be on his own fiald creates a positive externality for other used tostudy thepossibilitiesof substitution in cDnsump- farmers,butbcamuse pesticde use leads to the develop- lion(forexample,interfuelsubstitution)andtheincidence ment of pesticide-resistant stlains, he also creates a of alternative polcr interventions, negative externality. These external effects impinge on The case studies also indude partial and general equi- a wide range of food crops (coarse grains, pulses, veg- librium analyses of the role of fiscal policy in asessing etables, and spices) as well as cotton. As a result of pollutionoutcomes,andcDnceptualworkontheincentive extensive-but so far not well understood-migration, effects of alternative policy instruments, pesticide-resistant boliworms are attadking food crops Findings have been presented at the World Bank and hundreds of kilometers from the cotton tracts. Resourms for the Future in WaShington, DC, in Cam- Using a theoreticl model, the research found that a bridge,Massachusetts,andinlndonesia,Malaysia,Mtdco, first-best solution for attaining Pareto optimality is to and New Orleans. The final results will be disseminated levy two taxes-one based on the pest population on trough one or two books synthesizing the findings, as each famer's field and the other based on his pesticide well as through cDnfernces. input Because itis impossible to monitor the pest popu- ReponsylCountryE pnonocsDepartEment,Public lation on individual fields a (feasible) second-best solu- Economics Division-Shantayanan Devaraian, and tionisto levyataxonferdlizer input (which is thoughtto GunnarEskeland Population and Human Resourms De- be well cDrrelated with the pest population) and a tax on partment, Poverty Analysis and Policy Division- pesticides. Implementing Integrated Pest Mnagement Emmanunlimenez4andEnvimtDepartznent,Envi- PM) tniques, which directly control the pest popula- ronmental Policy and Research Division-Robin Bates. tion,alongwithataxonpesticideuse,offersafeasiblefirst- With Dim Backdnezos, Robert Bacon, Neil Bruce, Guo best approach to achieving Pareto optimality- Chia-Hsiang, Anil Deolalikar, Gregory Ellis, Robert Next, using field data, the study attempted to quan- Hamrin inar Hope, Michadl Hoy, William Jack, Yahya tify the losses in cotton and in other crops due to the Jamal Raymond Kopp, Alan Krpnidc, erey Lewis, developmnent of pesticide-resistant pests. In one simu- Lily Liu, Bart Ostro, Mark Roberts, Emmanuel Skou&fa latedscenario,itwas found thatif these externality costs Joffred Swaite, Adrin Ten Kate, James Tybout and are imputed to cotton, which is perceved as the source Christopher Weaver. of the problem, they could raise the full economic costs Clsing dite Decmber 1993. of cotton cultivation by 50 to 60 percent. R1port& Based on the field data, the study cDndluded that 1PM E*k un Cnm, and Emmanuei rmum 1991.CoosIng ( with its emphasis on reducing pesticide use) offers the Among Policy Inslrents for Polluton Cactrot A mostfeasilbe(andenvironmentallybenigw)%aytoachieve Review." PRE Working Paper 624. World Bank, Washingto4 Pareto optimality, espeialy over the long term. Making DC lo forthcoming in the World BankR smck OlaerJ IPMoperation (proviing effcientsCDutingservices,for 60 Ewbnmat and Natural Resoues example) may require initial lr-oe govemment in- LSS survey data in Cbte d'Ivoire for 1985-8B to obtain tervention to ensue that it is suasly adoptecA information on inputs, area cultivated, real wages, rural If 1PM is not adopted, the most likely values of the household production, and so on, and using remote exteral costs suggest that long-staple mtton would sensingdataonbiomassdensity,areaunderfallow,and nevertheless be an efficient export from India. But ad- area under dosed forest. The remote sensing data were dressing the externality problem with IPM practices matched with the LSS data at the village level for each would increase the economic return from long-staple year. cotton exports because these practices have the potmn- Theprincipal empirical findingsfrom theflrstphase tial substantially to reduce not only the extemal costs of the research are the folowing but also the private costs of cotton cultivation. * Natual biomass is an importantfactorof agrical- The findings of the research have been presented at tual production,withanoutputelasticityofabout 125. seveal seminars the Trade Policy Division Brown Bag * Communities do exert some control on the use of Seminar Seies (August 1991); the ICAR/IORPMI SDA common pmperty resources, induding biomass, but Joint Project Development Group Meeting on Managing these cDntrols are insufficient Only about one-third of Insectide Resistance with Focus on Heliothis Resistance the social value of biomass is intemalized in their land Management, Hyderabad, India (October 1991); and the allocation decisions. Cotton Pestidde Seminar, World Bank (Marc 1992). * Theseinsuffidentcontrolsleadtoovercultivation, Rapomsily:CountryEconomicsDepartnent,Trade which causes long-nm income losses for agriculhtal Policy Division-Carry Pursell and Environment De- communities of about one-fournt of village income. partm-ent, Environmental Policy and Research Divi- * Agriculturaloutputpriceelasticitiesareestimated sion-John English. With Nalin Kishor. The USDA- at about 0.4 in the short run; in the long rmr, they are FERRO and the IORPM provided financial support. negative because of the negative effect of biomass re- Cksing dac April 1992. duction on agricultural outut. Rports: Rnponslity:Coun tryEaconoicsDepartmentTrade Kisho, Nalin M. 1992. "Pestidde Eteraliti Comparative Policy Division-Maurice Schiff Environment Depart- Advantage, and Commodity Tade: Cotbon in Andha ment, Environmental Policy and Research Divison- Pradesh, India Pohiy Rearch Woring Paper 92. Weld Emst Lutz; and Asia Technical Department, Infrastruc- Bank, Washington, DC ture Division-Wayne Luscombe. With Ramon Lopez, Forthcoming 'Impact of Pesticide Exlanwlies an University of Maryland; Claudia Sepulveda; and Earth Prducton and Trade in Agicultural Commodities The Satellite Corporation. Case of Conon Cultivation in Coasktl Andha Pradesih In Cosing date Decmber 1992. John Kerr and Wiliam Bentley, eds, Naa mReo Reports: Ecomomicsfrmndia. EARTHSAT. 1991. Ivory Coast Chanrge Deecdon: Quantitative Assesment for Basic Lad-Cover Categes for the Years 1985,1986, and 198&. Economic Grow&h and Trade Policy Lopez Ramon. Roume Degradation and Agricultrl in Westem Africa: Implications Productivity In Poor Tropical Ares: The Effectiveness of of the Degradation of the Vegetation Cover Community Contrls to Common Propety Resource. Lopez,P Rmon, and Mario Nlithek. 1991. " Emnomic Ref. no. 676-97 Growth m Poor Tropial AreefJoumalofDerwpmmni This research tried to establish empirically ihe im- Enics36c189-211. porance of resource degradation for agcultural pro- Lope2, Ramon, and Claudia Sepulveda 1990. "Analysis of the ductivity in Western frica. The findings could have lime Cnsistency of the LSS Farm Data for Cte d'Ivcire important implications for policy evaluation. Q9S-S7): Some Prelminary Resuls on the Estimation of a The research addressed the following questions: (1) Production Function." What is the role of vegetation cover in agricultural growth? (2) To what extent is there an externality? (3) Whatpolicyinsumentswould improve the sodalvalue Properly Rights, Rent Dissipation, of natura vegetation cover? (4) What effects has trade and Environmental Degradation policyhadinWesternAfricaonagriculturalproductiv- in the Brazilian Amazon ity, cnsidering its impact on the evolution of the veg- etation cover? Rqf. no. 677-24 A theoretcal model was used to guide the empirical There has been much concern that the rapid settle- work. The empincal analysis was perfbrmed using the mentof theAmazon region will lead to the destruction 61 Envbrwmnt and Natra Resources of the rain forest and the degradation of the land. Some World Energy Subsidies and Inplications of the attention to this issue has centered on the role that for Greenhouse Gas Emissions land tenure plays in decisions on resource use. Land and Govenmment Revenues tenureonBrazilrsfrontierisgenerallyconsideredwealk The abundance of land keeps economic rents low and Ref. no. 677-28 makes investments in land ownership and protec- Economists have long argued that subsidizing en- tion generally unprofitable. As the frontier moves on, ergy distorts consumption and production decisions economicrentsgraduallyincrease,butinstitutionalbar- and that it can have adverse consequences for govern- iers often prevent the emergence of land tenure ser- ment revenues and the protection of local and global vices (titling, and property rights enforcement). Both environments. Yetsuchsubsidiesarequite pervasivein situationslead toa tendencybyecononiicactors to mine emergingmarket economies and developing nations. If the resourc in the first situation because land's abun- energy resources were to be priced according to their dance makes new land cheaper than fertilizers and true opportunity costs, these nations could improve pesticides, and in the second because, without the abil- teir economic and fiscal perfonnance while furthering ity to exclude others, there is no incentive for land- local and global environmental objectives. holders to invest in the future productivity of the re- This study will review energy pricing practices by source. typeof fuel and energyandbysectorinmajoremerging Thisresearchprojectwillexaminetherelationsamong market emnomies and developing nations. It will esti- land values, property rights, and natural resource deg- mate levels of subsidy for coal, natural gas, and peto- radation in the Brazilian Amazon. The central policy- leum products and determine the implications of the relevant question of the research effort is the extent to subsidies for greenhouse gas emiissions (in particular, which improving land tenure systems might improve carboneEnissions),govemmentrevenues.andconsumer environmental outcomes. The answer to this quesion, welfare taking into account location, the cDsts of establishing A formal, sectorally disaggregated model will be title, and other factors, is essential for designing the specified to estimatethe effectof removing subsidieson appropriate mix of land tenure and other policies to energy consumption and carbon emissions. The model reduce deforestation. Many of the costs of defining allows for differences in own-price elasticities and property rights are inherent in the process, but others interfuel substitution elasticities across sectors and fu- maybe due to policy and political conditions, and thus els. The data used are 1990-91 consumption and end- amenable to policy reform. If the costs of secning user prices of fossil fuels and electricity by sector the property rights are high relative to thevalue of theland, data are collected from a variety of sources, including it can be expected that open-access conditions will per- World Bank sources, OECD energy statistics, and inter- sist and thus that rents will continue to be dissipated national energyannualspublished bytheEnergyInfor- through wasteful land use practices. mation Administration. The research will address three issues relating to Prelmin aryestimates indicate that annual fossil fuel property rights in the Amazon region. First, it will subsidiestotalmorethanUS$230billionandareequiva- develop measures of tenure security, based on land- lent in revenue terms to a negative global carbon tax of holders' expectations about future control over land. $40 per ton of carbon. This represents about 25 percent Second, it will document the resource costs associated of the total value of fossil fuel consumption at world with semuing property rights on the frontier, and ana- prices. China, Poland, and the formerUSSR accountfor lyzehowthecostsvaryinamountandcompositionwith a disproportionate share of these subsidies, although the increase in economic rents as the distance from the substantialsubsidiesexistinArgentina,Brazil,Czecho- frontier inceases. And third, the research will investi- slovakia, Egypt, India, Indonesia, Mexico, Saudi Ama- gate empirically differences in tenure security and their bia,andVenezuela.Mostoil-exportingcountriesheavily effects on choices concerning land use. This investiga- subsidize domestic consumption of petroleum. Oil-im- tion will involve comparisons of land use investment portingdevelopingcountries,howeverusuallytaxgaso- and techniqueson the frontierwith thosein moresettled line but subsidize kerosene, diesel, and heavy oiL Most areas, where property rights are more dearly estab- developing countries price elecicity (hydro- or fossil lished. fuel-based) well below its long-run marginal cost of Responsibiity: LatinAmericaand theCaribbeanTech- production. Subsidies for petroleum products account nical Department, Environment Division-Robert for55 percentof total world subsidies, those for coal for Scneider. With Gary Libecap, University of Arizona; 23 percent, and those for natural gas for 21 percent and Lee Alston, University of lllinois. Amongpetroleumproducts,fueloilsreceivethelargest Cosing date December 1993. subsidies in dollar value. 62 Envirnment and Nature Resources Theremovaloffossilfuelsubsidiesworldwidecould Enterprise Ownership and Pollution reduceannualglobalcarbonemissionsbyasmuchas io percent (assuming a weighted average own-price elas- Ref. no. 677-4 ticityof-0.2foraggregatedemand)and increaseaggre- The rapid pace of privatization in many economies gateconsumersurplusby$34billionannuallythrough has raised an important question for environmental improvements in resource allocation arising from policy: Do state-owned enterprises (SOEs) pollute more undistorted narket signals. It could also improve the or less than facilities owned by domestic private enter- local and global environments. prises or multinationals? This study investigates that Ending fossil fuel subsidies would pay rich divi- question by surveying the envirommental performance dends for the republics of the former USSR. They could of comparable plantsin all three ownership classes. The see their emissions reduced by nearly one-third and analysis will consider the effects of ownership on three their government coffers inflated by $170 billion, and basicdetrminantsofenvironmentaldamage pollution theycould experienceagainin welfareof$29billionand intensity (or pollution per unit of output), scale of pro- derivesignificantenvironmentalbenefits.Yetevenwith duction, and location. this change, the energy intensity in the former USSR Even when final products are identical, plants can would still be greater than thatin the United Statesand have widely varying pollution intensities because of two to three times greater than that in most Western differences in production technology, waste treatment, European countries. Reductions in carbon emissions and efficiency in materials use. Because environmental from efficient energy pricing are expected to be more damage depends on total exposure, scale is clearly moderate in other counties, in the range of 10 to 20 important In many cases, location is also important percent because the potential for damage varies with local ab- The removal of fossil fuel subsidies would entail sorptivecapacity,populationdensity,andvulnerability short-runadjustmentaDsts forenergy-intensive sectors of the ecosystem. and households. The severity of such adjustment costs The research will seek to determine both the direc- will depend on thelevel of subsidies removed, the share tions and the approximate magnitudes of partial rela- of energy in production and consumption expendi- tions linling ownership and determinants of pollution. hires, and the possibilites for substitution between The magnitudes are probably critical because it is un- types of energy or fuel and between energy and other likely that all partial relations linldng ownership status inputs or goods. and pollution will go in thesame direction. For example, Externalassistance,ifavailable,couldeasesuchpains. SOEs would be unequivocally more polluting only if For OECD countries, such assistance offers a potential (forpairsoffirmsmatchedbyproductineacheconomy) alternative to global arbon emissions reductions at a they typically had dirtier technology, lower efficiency, lower cost than taxing carbon domestically. For ex- lesswaste treatment, largerscale, and locationsdoser to ample, to achieve an equivalent reduction in tons of densely settled areas. carbonemissionsin theOECDcountries,a carbon taxof The research will define a fr-amework for analyzing $60per tonof carbonwouldbeneeded inthesecountries the relation between ownership and pollution in facili- atan annual cost (in forgone output and adjustment) of ties that are matched by product. The framework will $155 billion. distinguish separate relations linking ownership to five Adjusting energy prices to reflect their true opportu- proximate determinants of pollution: process technol- nity costs is the firststep in an environmentallyrespon- ogyr mode of waste treatment efficiency in materials sible and fiscally prudent development strategy. The use;scaleofoutput;andlocation(relativeisolationfrom emerging market economies and developing nations densely settled areas). that adopt such policies sooner rather than later will Itisinterestingtoobtainairectmeasuresofair,water, reap rich economic gains. and solid waste emissions wherever possible. But this ResponsibiUi4- Country EconomicsDepartment,Pub- study relies principally on the proximate determinants lic Economics Division-Anwar Shah. With Gordon approach for two reasons. First, it is based on a rapid Hughes, Warwick University; Bjom Larsen; and Isidro survey of industial facilities in economies in which Soloaga monitoring of emissions has been weak or nonexistent Cl1sing date February 1993. Second, the proximate detenminants provide a better Report framework for policy analysis. The basic research hy- Lvn, Bjon, and Anwar Shah. 1992 -World Energy Subsidies pothesis is that interactions between ownership and and lobal Carbon Emisior Bacgound Paper 25 to other important variables will have very different con- W,l aemqpnen Repo 199X World Bank Washigton, sequences forprocess tecnology, waste treatment, effi- DC (Also fothcming in arrgyJumalj.) ciency, smle, and location. 63 Enironment and Naul Resoures Data for the analysis wMI be coUeced trough a sources Division-Eduardo Loayza. Funding was pro- plant-level survey in Bangladesh, India, Indonesia, and vided by the United Nations DevelopmentProgramme, Thailand. The survey will mver two environmentally DanishlnternationalDevelopmentAgency;Australian importantsectors, pulp and chemicals matchingplants InternationalDevelopmentAssistanceBureau;Intern- by product as dosely as possible tional Centre for Ocean Development, Canada; Minis- Responsibliy Environment Department, Environ- tryofForelgnAffairsofNorw-ay;DeutscheGesellscaft mental Assessments and Programs Division-David fiirTedinischeZusammenarbeit;lcelandiclnternatonal Wheeler. With Mainul Huq. Development Agency; Minislry for Foreign Affairs, Closing datc October 1992. DirectorateGeneralforDevelopmentCooperation,Italy; Swedish International Development Authority; Over- seas Development Administration, U.K; and U.S. Study of International Fisheries Research Agency for Intenational Development. Staff time was contributed by the Commission of the European Com- This research project, which involved collaboration murities; FoodandAgricultureOrganization;Mnistere among a number of international donor agencies and de la Coopdration, Fonds d'Aide et de Coop*ation, governments, stemmed from a concem in the interna- France; and Ministry of DevelopmentCooperation, the tional donor community that fishery development Netherlands. projcts have met with too little success. Because insuf- Completion date: October 1991. fident research had been identified as one possible Reports: cause c the perceived lack of success of such projects, Johton, Rkihard S 1992. Fihries Demspan, Fisherie the project set several goals to assess the role of research AMinqnntd, Fx Eenilics. World Bank Discussion Paper in fishery development 165. Washingto DC * To determne whether lack of basic information Lya, Eduardo, with Ludan M. Sprague. 1992. A Sategyfr was a cause of failure Fheies Dewvpment. World Bank Disusion Paper 135. * To identify high-priority research needs Washington, DC * To assess the capacity of developing countries to Sheprd, MP. 1991. Firs Pad Needs of Small Isad undertake the research Counbis Hallfx, Nova Smta: iternatimal Centre for * To recommend ways to inprove the impact of OonDevdopmenL intermational aid in fisheries researcIL World Bsa United Nations Development Programe, The study reviewed the major changes in fisheries Commisio of the European Commnxmitis, and Food and over the last 40 to 50 years, looling particularly at Agiculhre Organization of the United Nations. 1991. developments in fishing techniques, management, and Fizries and AqEMdtmc Resnrs Cajubiities and Needs ik marketdemand.Itfoundthatinadequateresourceman- Afw Studi of Kana,Muari, *Mrambkue, ZiAbwe. agement-partiazlarlyin offshore fisheries, butalso for Auritani,Mon,Ar,afd SegaL World Bank Tehnical inshorefisheriesand,increasingly,inaquacultul-has Paper 149. Washington, DC led in many areas to seriously low, unbalanced, and .1991. Fiseris ad AJqJumZ RcasCh Capblitis and unsustainablefishstocks.Theenvironmenthasalsohad Nds in AsiStudis of India, Thaand, Mays Indanxesi, tOe detrimental effects on fishing societies, especially the Phippis, and heASEAWREion. World BankTehdical rural poor, and on national economies. Paper 147. Washington, DC Based on the results of its review of the state of . 1991. F 0is s and Aqalre weserh Capbitis and fisheries and the state of research capabilities in devel- Neds in fatinAmeieL Siuies of Umguay,Arentima, ODile, oping countries, the study outlined a strategy for re- &Eadar, ad PesL World Bank Technical Paper 14. search, identifying the pincipal areas of aoncem and Wasington, DC the opportunities to address them, and a plan foraction __. 199l. Insemaimd Ccperud in Firs Resrch. World for the intenational donor community. The plan for Bank Tecnicdl Paper 150 Wasingtn, DC actionemphasizeswidedisseminationofthefindingsof _.1991. Snuff PelagFish UFM ftf aizL Reard* Neds. World this research projectamongresearchers and planners in Bank Techndta Paper I %k, Washington, DC. developing countries, coordination of donor support to . 1991. SmnD-sui Fis: Resn:h Neds. Word Bank ensure that all the areas of research identified as priori- Tedmical Paper 152. Wnhington, DC ties by the study are covered, and exchange of informa- .1991. Tropial Aqcr DecVlopment Rcses/s 1NMds tion among fisheries research programs. World BankTechnical Paper 151. Wasidngton, DC Re eosblhy Agriculture and Rural Development _ 1992. A Shy of ema4tion Firdse FRed. Policy and Department, Agricultural Technology and Natural Re- Rsearch Serie 19. Washingon, DO World Bank 64 Environment and Natural Resources Comparnative Studies on Perennials Interational Pollution Pattems Perennial commodities-such as tea, coffee, cocoa, There is little evidence on how toxic releases by rubber, and palm oil-arenotonlymajorexportitems in manufacturing are distributed across countries or how a number of middle- and low-income countri They thepatternsof theirdistnbutionarechangingovertime. also provide significant employment in these countries. A number of studies have asked whether environmen- The world market for these commodities hasbeen very tal controbls imposed in the industrial economies are dynamic diverting investments in pollution-intensive activities This project compared production and marketing offshore. In broad terms these studies reach a negative systems of perennials in major producing countries, condusiorn direct investment does not appear to be using quantitative analysis. The study collected infor- stimulated by such regulations, in partbecause the cost mation and data on production, processing, and mar- of emission controls isgeneraflya tiny fraction of oper- keting costs, and analyzed them. ating costs. Yet direct investment reflects only a part of The research is especially relevant to Sub-Saharan what maybe happening to world production patterns; African countries, for which these commodities are technology transfers may occur with no simultaneous important and world market shares are declining. direct investment, and production may readily shift Respomhiiy: International Economics Department, toward a different global distribution without either International TradeDivision-Takamasa Akiyamaand direct investment or technology transfer. Panos Varangis. Onepurpose of this research was therefore to present Competion date: January 1992. some evidence on the world distribution of manufactur- Report: ing production acmrding to pollution intensity, using a Alkyama, Takari. 1992. "I There a case for a opuma new data source compiled by the World Bank Industrial Export Tax on Perennial Crapsr Polcy Reearcb Working Pollution Projections System. Another purpose of the Paper 854. World Bank wasington, DC- study was to consider some of the environmental issues surrounding free trade, which is often said to lead to greater and more rapid environmental degradation for Forest and Agriculture Evaluafion the developing countries, and to offer some empincal evidenceatleastwithrespectto the man ingsector. The World Bank's environmental assessment pro- Data forintensities of toxic release per dollar'sworth cess is revealing a dearth of practical tecniques for of output in the United States were compiled for each valuingenvironmentalirnpactsand incDrporatingthemn three-digitand a selection of four-digitindustriesunder into project and policydesign. This project, focusing on the Iternatiornl Standard Industrial Classfication sys- the forestry sector, is one of several case studies con- tem. Two main sources of data were used fr these inten- ducted in different sectors to develop better analytical sitymeasures.Asampleof 15,000 plants wasirhawn from tools for Bank staff. the US. Environmental Protection Agency's Toxic Re- The purpose of this research project was (1) to iden- lease Inventory, which reports air, water, underground, tify environmental impacts in the Madagascar forestry and solid waste releases for 320 toxic substances. These sectow; (2) to value in economic terms as many of these data were matdced with observations on the same plants impacts as possible; and (3) to prepare new options for from the second main source of data, the US. Census of sustainableforestmanagementthatmorefullyincorpo- Manufacturing to calcthate emissions per unit of output rate environmental considerations. Threemetiodsofcalculatingintensitymeasures were The research, carried out by a joint team comprising developed using the US. Environmental Protection World Bank, US., and Madagascar researchers, relied Agency's risk index assigned to toxic substances ac- on in-depth field studies and surveys, followed by crding to their threat to humans. To create annual analysisofthefindingsinMadagascarand Washington, toxicityeskimatesforeachlcountry'smanufactuingpro- DC duction, the total number of pounds of emissions per Responslbity: Environment Depatment, Environ- dolls worth of outputir1 the United States was multi- mental Policy and Research Division-Mohan plied bythemanufacturingsector'sshareinoutputfor Munasinghe and Narendra Sharma. With R Kramer the relevant country. The data for output covered the and S.Hansen.TheSchoolof ForestryDukeUniversity, period 1960-88. Statistical analysis was used to explore and Madagascar's Forest Department contributed staff the proximate determinants of -ariations in industrial time. toxic intensity. Patterns were studied with respe-t to Compleion date March 1992 inecme per capita and through time, and the role of 65 Environment and Natural Resourmcs trade policy was studied using UNCTAD data and the Solid Waste Management David Dollar openness index Itisoftenasserted thatenvironmentaldamageatfirst Municipalities in developing countries have gener- rises with the level of development, then dedlines at ally simply dumped solid waste indiscrininately in higher incomes. This study found mixed evidenaL In a open areas. This project, part of the Water and Sanita- cross-sectionof countriesaninverseU-shapewasfound tion Division's resource recovery program, is develop- in industrialemissions relative to total GDP. But even in inga manual on theenvironmentally safe development the cross-section, the ultimate relative improvement is and operation of a sanitary landfill. attributable largely to a dedine in manufacturing out- The research to develop the manual consisted of a putrelativeto GDP, as services became more important review of literature on the subject The marual has also among the higher-income economies. Overall, the data been extensively reviewed by practitioners Yn the field. do indicate a long-term upward trend in industrial The findings show that developing a landfill isenvi- euissions,bothrelativeto GDPandrelativetomanufac- rormentally more sound than simply dumping. Fman- turing output,for most countries. Moreover, these posi- cal resources need to be made available for developing tive, long-term trends are dearly higher among the and operating landfills, or high environmental costs lower-income countries. will be incurred in the future. More resources need to be The investigation of trade effects is divided into two committed to the safe disposal of solid waste (in land- parts: thefirstconsideredsome cross-sectional evidence fills), rather than to the purchase of collection trucks. with respect to specific measures of import protection, The manual or report will be distributed through the and the second examined openness to trade more Water and Sanitation Division's regional water and broadly. The data indicate that the toxic intensity of sanitation research centes manufacturing cutput in these developing countries Responsiility: Asia Technical Department, Environ- rises with both a higher tariff on chemicals and greater mentDivision-JadcJ. Pritzand Suhashini Krimnaratnea nontariff barriers to imports of chemimls. With Luis F. Diaz, Clarence G Golueke, and Lisa D. Whether developing countries that have been more Reese, CAL Recovery Systems. outward-oriented in their trade strategy suffer higher Completion date. September 1992. loal industrial emissionswas also cnsidered. Countries thathavepursued more open tradeare estimated to have suffered less om growthinthe toxicityof theirindustrial Dryland Management mixb This is not to say thatprotectionistmeasures cannot bedesignedtoavertlocaltoxic-intensiveproduction. But The problem of land resource management under it may well be appropriate to be skeptica of countries pressureof inceasingppulation,especiallyindryland caling for proection on environmental grunds; devel- areas such as the Sahel, has become a major subject of oping countries that have been proteconist may have concern. Earlier studies of theeffectof specific interven- encouraged local envirnmental damage. tions on land resource management have had limnited Responsibility: Industry and Energy Department, [a- valuebecauseof theshorttimespanoverwhichdataare dustryDevelopmentDivision-?{emazalaHettige and usually available, the anecdotal nature of information EnvirornentDepartrent,EnvironmentalAssessments on earlier periods, and the limited understanding of and Programs Division-David Wheeler. With Robert how socioeconomic variables (such as population) in- EBL Lucas, Boston University. TheCenter for Economic fluence land resource management Studies and the US. Bureau of the Cmesus contnbuted Two studies have been undertaken in this project. staff time. The first has reviewed changes in land management Compleion date. April 1992. practices and productivity in a semi-arid district in Reports: Kenya, the Machakos District, over a 50-year period. Hetlige, Hemamala, Robert E.B. Lucas, and David Wheeler. The study examined how this area, in which land deg- Forthoming. -Ibe Toxic Intensity of Industrial Productona radation was a concern before World WarlT, has subse- Clobal Patterns, Trends, andTrade Policy? Americaz quently managed tosupportafivefoldincreaseinpopu- Ecionac Assaton Pappas and ProfingS latiokn. This review has been carried out by the Overseas Lucas, Robert ER, David Wheeler, and Hemamala Hetlfge. Development Institute (London), with the assistance of 1991. "Economic Devopment Environmental Regulation the University of Nairobi The study team undertook and the Internaflional MgEramton of Toxdc Industrial PoUutionc field surveys and archival review to ascertain dhanges in 1960-1968? Paper pxesented at the World Bai Symposim the condition of land resources in the districtand in the on Intemational Trade and the Envirment, Washingto,n farming systems being used, and the technological, DC social,and economiechangesthataccompanied them.A 66 Environment and Natural Raw urces seriesofbackgroundpaperswempreparedonenvfrn- is based largely on data collected for the Ethiopian mental change, population, growth of agricultural pro- Highlands Redamation Study. Materials on the rela- ductio-, farming systems, soil conservation, manage- tionships between population, environment, and agri- ment of trees, tedhnological dhange, and institutional cultirehavebeenreviewed toformulatepossiblesingle- change. A workshop was held in the district in Septem- relation or simultaneous equation links for empirical ber 1991 to review these findings with local people, and testing. Statistics on the relevant variables are being final reports are being prepared. collected and reviewed, to estabLish what observable The study showed that while the district's popula- variables (or proxy variables) can be aonsidered endog- tion had increased more than fivefold, agricultural out- enous to the rural household and which variables exog- putpercapitahadmorethandoubledin realtenns This enous. And empirical tests of the proposed relation- had been achieved through a combination of bringing ships will be conducted. new land into production (generally scrubland used These studies are providing significant insight into occasionaullyforgrazing)and increasing theintensityof the extent to which local populations can adapt their production.Atthesametimetherewas noevidencethat methods of land resource management in a sustainable the quality of the land resource had dedined; in fact it way, and the economic and social conditions that have had been enhanced by major efforts carried out by facilitated such changes. The studies will thus help in farmers, especially in terrace construction, geneally the design of policies and programs aimed at support- without official support Significant changes had oc- ing sustainable resource management curred in farming systems, including new products, ResponsIbility: Environment Department, Environ- inputs, and technologies. The prinnpal conclusions of mental Policy and Research Division-John English. this study were as follows: With Stein Hansen; Sverre Grepperud; and MayTiffen * Market outlets were important in providing as and Michael Mortimore, Overseas Development Insti- widearangeaspossibleofeanomicallyand Lechnically tute,UX. The University of Naimbi and Kenya's Min- viable land use options, permitting land users to devise istry of Recamation and Development of Arid and land use systems that were sustainable and tD modify Semi-Arid Areas and Wastelands are contnrbuting staff them underchangingeconoiandsocialcircumstances time, and the ODA, the RockefellerFoundation, and the * Some of the tecnologies adopted were aimed Norwegiangovermment (Sahelian StudiesProgram) are prmarily at resource conservation (such as terracing); providing funding. others contributed to that objective only incidentally. Complet ion date: December 1992 * Theadoptionofthesetechnologieswasanintegral Reprs part of the entire process of agricultural innovation, and ichuki FlN. 1991. "Conservation Profiler ODI Working Paper efforts to press solely for the adoption of technologies 56. for soil conservation were generally unsuccessful. Mortimore-, MicdaeL 1992. 'Tree Management! OD1 Workdng * Landresourcemanagementinnovationscamefium Paper 63. manysources-someasadirectresultof publicinitiative Morimore, MichaeL, ed. 1991. "Environmental Poffie ODI (such as the development of short-dLuration n-aizes for Workdng Piper 53. local conditions) and some despite-rather than because Mortmore Michael, and Kate Wellard. 1992. "Profile of of-publc actions (such as improeent in tillage). The Tecnological Cange." ODI Working Paper 57. introduction of innovations was fostered by stong links Rostoxn, R.S, and Michael Mortimor 1991. 'land Use Profilef between the local society and the economy at large. ODl Working Paper 5B. * These links were enhanced by an open society Tiffen, Mary. 1991. -Population Profle f ODI Working Paper 54. with a broad development-oriented leadership struc- .1992. 'Faing and ncome Systems ODI Werking ture, and by increased commercialization of agriculture Paper 59. and the development of related commercial activities. Tiffen, Mary, ed 1991. "Production Profie. ODI Worldng Thus,land resourcemanagementcannotbedivorced Paper 55- from the entire development process, and increased .1992. lns9itUdtiDnal Profile. ODI Working Paper 6Z population oragricaltural production,orboth,inalow- income area are not inevitably accompanied by land resource degradation. Economic Evaluation of Energy The second study is undertaldng a cross-sectional analysis, using data from Ethiopia, to explore the rela- Thisprojectintheenegysectorisoneofseveralcase tionships between land degradation and agricultural studies in differ.ent sectors to develop better analytical and socioecDnomic factors, such as soil type, climate, tools for Bank staff for valuing environmental impacts topography,populationdensity,andincome.Thestudy and incorporating them into project and policy design. 67 Envinnment and Natunl Resource Ajointteam of Ba;nkandSri Lankanresearherswill composition, and the process technologiesemployed in attempt (1) to identify environmental impacts in the Sri production. Although most developing countries have Lankan power sector, C2) to value as many of these little or no industrial pollution data, many have rela- impactsaspossiblein economicterms;and (3)tomodify tivelydetailed industrysurveyinformation. ThelPPSis existing power planning metods to indude environ- designed to convert this information into the best pos- mentalimpacts(bothquantifiableandnonquantifiable). sible profile of the assocated output of pollutants. The research wfll be conducted through in-depth A first prototype of the IPPS has been completed. field studies and surveys, fllowed by analysis in Sd This prototype has been developed from a data base Lanka and Washington, DC Fmindings will be dissem- containngeompleteenvironmentalandeconomicdata nated through Bank publications, joural articles, and for approximately 15,000 factories in all regions of the conferences. United States. The first set of IPPS indices draws on the Responsiblity: Environment Departnent, Environ- US Environmental Protection Agency's Toxic Release mental Policy and Research Division-Mohan InventoryC(I",whichrecordsair,waber,underground, Munasinghe. With P. Meier KKY.W. Perera; and S. and solid waste releases of 320 toxic substances by each Hansen.TheSrilankanMinistriesofPowerandEnergy reportng plant These data were matched at the plant and Environment are contributing staff time. level with U5 Bureau of the Census output data from Completion date: December 1992. the 1987 Cenus of Manufactures. The aggregate toxic releases per unit of output were then calculated for different categories of industry under the International Environmentally Friendly Technology Standard Industrial Classification (ISIC). Three main approaches are considered in aggregat- The objective of thisresearch is to deternine whether ing the320 toxdcsubstaz.cesrecorded in theTRLThe first it is possible to measure the efforts that different coun- is the total pounds of all 320 toxic releases-whether tries have made to develop or adopt environmentally atmospheric, effluent or solid-per dollar's worth of friendly technology. To do so, the study is looldng at output. Because some emiissions are dearly of greater information on patents awarded and on imports for conceranotrs,alternativeriskindicesweredevel- Gernany, Japan, the United States, and 16 to 17 devel- oped! using the US Enviromnental Protecion Agency's aping countriesto determine towhatextent these coun- Human Health and Ecotoxicity Database (HIED), whih triesareinventingorimportingtecwnologiesthatleadto contains seveal measures of toicological and carcno- better environmental conditions. This would indude genicpoteny for each substance. The secnd measureof tecnologies that incorporate pollution control equip- toDdc intensity uses the HHED ordinal indices ranging ment or that increase effidency. from! (mild) to 4 (vy serious) in a linear weighted sum Responsibly: Industry and Energy Department, In- of toimc releses per dollars worth of output The implicit dustry Development Division-Ashoka Mody. WithJ. assumption is that the HRED risk scle is inerently Lanjouw, Yale University. linear. Because this may notbe a reasonable assumpion, Competion date December 1992 a tfirdmeasurewascostructedthatassumesthatHfED risk factors are expential rather n liear. To create annual toxic intensity estimates for each Industrial Pollution: Global Indices country, toxic intensity measures were applied to ISIC sector shares from the United Nations annual sectral This project is developing an Industrial Pollution outputseriesforeachreportingountryduringl960 Projections System (IPPS), a modeling system that can Becauseinterationaldataontheprocessmixand abate- use industry or trade data to estimate comprehensive mentchoiceswithinsectorshavenotyetbeencollected, profiles of industrial pollution for counties, regions, constantUS-based outputindiceshavebeen adopted. urban areas, or proposed new projects. Rapid environ- Although the United States has the largest and most mental progress in the near future will depend on diverse economy, it is dlear that many country-specific reliablepollution estimates Mostdevelopingcountries factors willaffectthe acuracy with which the prototype have little reliable informadon about their own pollu- IPPS can project industrial pollution in other econo- tion. Tnerefore, there is a huge potential demand foran mizes. Wherever national pollution data are available, IPPS among environmental and indusWial planners in theywillalsobeused toadjustbaselineIPPSparameters developing countries. that are appropriate for developing economies with The IFFS is being developed to exploit the fact that differentcharacteristics. thescaleand intensityofindustrialpollutionareheavily Themostimportantconclusion tobedramwnfromthe affected by the scale of industrial activity, its sectoral inidtal analysis is the need for carefil definiton of the 68 Environment and Natunrl Rmorsou term pollution in identifying the industrial sectors that ties as the environmental problems associated with shouldbegivenpriorityinaddresgindustrialupa- harvesting trees around urban centers. tion. In particular, relatively low correlation is found The purpose of this researh is systatically to between rankings of sectors by risk-weighted toxic re- analyze the dynamics of interfuel substitution and the lease intensities, carcinogenic release intensities, and tramsition from traditional to modern fuels in urban bioaccumulative metal compound release intensities. areas of developing countries. It also will explore the The World Bank's World Development Ret 1992 feasbilitoyofsubstituting kerosene,liquefiedpetroleum drewheavilyon IPPSestimatesforanalyzingand illus- gas (LP), or electricity for wood-based fuels. To ac- trating the industral pollution problem in developing complish this task, the study will examine the causes of countries. interfuel substitution and theeffectofinterfuel substitu- Responsibility: Industry and Energy Department, In- tion on equityaand the qualityof life in urban areas. The dustyDevelopmentDivision-HemamalaHettige;and main hypothesis of the study is that urban income, the EnvironmentDepartment,EnvironmentalAssessments type and location of an urban area, the wood fuel and ProgramsDivision-DavidWheelerandPaulMar- resources around a city, and the tpe of government tin. The Center for Economic Studies and the US. Bu- policy will all affect the use of fuels by urban clisses in reau of the Census ame contnbuting staff time. differentways. Compleion date December 1992 This study moves in a new direction to deal with RPmt many of the inherent weaknesses in past research on Birdsal, Nancy, and David Wheeler. 1991. "Trade Plicy and interfuel substitution. The research utilizes existing sur- Industrial Paluton In Latin Amerca: Where are the veystoanalyzepatternsofenergyusebyurbanareaand Polution Havensr Paper preseted at the Wodd Bank cassofincome.Forabout45urbanlocations,adatabase Symposium on Interational Trade and the Envkrmment, will be assembled with significant variation in the main Washington, DC. variables in the study-government policies, market Hettige, Hemamala, Robert R Lucas, and David Wheeler. conditions, urban location and type, and fuel use by Forthoomin& "The Toxdc Inteisity of Industrial Productor urban households. In addition, data on resource condi- Global Patterns, Tends, and Trade Policy." Ame tions will be gathered for each country. As a result, the Ecnmic AssoiaMm Papes and Pvcftl study will be able statistically to analyze the causes of Lucas, Robert EB., David Wheder, and Hemamala Hettige urbaninerfuel substitution,includingtheeffectof such 1991. "Economic Devlopment Evronmental Reguation factors as government policy or resource conditions on and the Intemational Mgalion of Toxic Industral Polut urban fuel use. 1960-1998B Paperpresented at the World Bank Symposium Theresultsof the research will shed somelighton the on Intermational Trade and the Environment, Wahingtn, effectiveness of eisting policies, the conditions under DC which transitions can be expected to occur, and the Martin, Pad, David Wheder, Hemamala Eige, and Ralph socoeconomiceffect and consequences ofinterfuel sub- Stengren 1991. Ihe Endustrial Polution Projcion Sytem: stitution. The research addresses such issues as what Ccept, Iidtal Deveoment and Critica AssmmenL policies are appropriate based on the socioeconomic World Bank, Washington, DC conditions of the urban environment, the equity impli- cationsofsuchpolicies,theimplicationsof theavailabil- ity of local resources for energy use, and the foreign The Uxban Energy Transition in Developing exchange implications of importing or producing com- Countries merial formsof energyforhouseholduse.Asexpected, thepreliminaqfindingsindicatethatgcvernmentpolicy, With growth rates atbetween 3 and 7percenta year, alongwithincome,hasasignificanteffectonresidential the population of the urban areas of developing cour- fuel use in developing auntnes A somewhat surpris- tries has reached starting numbers. More than 125 ing finding is that many of the poorest households in billionurbandwellerslivein360citieswithpopulations urban areas of developing countries use electricity, but over 500,000. The high growth rates stem from high rarely use LPG. The use of wood fuel is fairly extensive birth rates and extensive migration from rural areas to in all but the largest cities. These findings are prelimi- cities, and they are acmmpanied by increased demand nary, however, and more analysis is needed before firm for energy, food, water, and other resources. The mi- condlusions can be drawn. grants from rural areasbring withthem their traditional The work completed so far shows that government patterns of energy use, which are based mainly on the policyplaysaveryimportantroleininfluencinghouse- use of wood for fuel. In urban areas demand for wood holds to choose one fuel over another. It also shows that products is highly concentrated, creating such difficul- policies to promote LPG for households with incomes 69 Environm t and Natural Resources that are less than about US$25 per capita per month are F4aad, eds, hktn m n Imm Em Policy, Dclop. likely to have disappointing results. Appently, elec- m.m,md Ewsiw. Boulder: Wesndew Press.) tricity can be promoted at much lower levels of income because of the high value that ura households place on lihting, although this will require substantial capi- International Trade and the Environment tal expenditure by the electricity industry. In develop- ing counties, wood fuels do not disappear completely Of major cDncern for this study has been the increas- as incomes risebecause many high-income househlwds ing pressures for environmental regulation and the still use these fuels, reflecting their utHity for urban perceived danger of using trade policy to achieve envi- households. But wood-based fuels do seem to disap- ronmental goals or using environmental arguments to pearfrom urban householdsinlargemetropolitanareas bolster requests for industry protection. Research cul- with populations Df more than I million, where wood minatinginaWorldBankconferenceinNovember19g9 apparently is difficult to obtain. The urban poor are and publication of the conference papers has been on- pmbably affected most by urban fuel polices because cemed with the international aspects of enviromnental they spend a signdficantproportion of their incomes on policy and the relation between environmental con- energy. cems, wheher global or country-spedific, and the use of It is important to understand the transition from trade policy instnrments. wood fuels in individual urban areas and individual Theconclusions drawn from the researchincludethe countries in the contex of the socioeconomic forces that following: dnivetheuansition.Policiesandprojedstbatruncounter * Trade measures, because they are indirea. inter- to prevailing socioeconomic forces are bound to en- ventions, rarely offer the best means of addressing counterproblems. Forexample,encouragnggtreeplant- environmental extenalities. ingfortheproductionoffuelwoodineonomiesthatare * Governments in OECD countries have shown an rapidly making the tnsition to commercial fuels mnay overwhelming preference for direct regulatiDn over be good environmental policy, but it does notiing to marketbasedpolides,althoughregulationisfrequently help alleviate energy problems in urban areas. Like- more costly in tenns of efficiency. wise,encouragingpoorhouseholdstorelyonexpensive * Legitimatedifferencesexist among cuntrieswith modem fuels early in the transition, when fuelwood is regard toenvirhnmentalobjectivesandstandards.These verycheap,maydonothingbutstrain thebudgetsof the reflect different absorptive capacities and different so- urban poor and of national govemments cial preferences There should be no presumption that Responsibity: Industry and Energy Department and harmonization of environmental standards is a desir- EnergyStrategyManagementAssistanceProject-Dou- able policy objective. glasBarnes. With Liu Qian, University of Penrsylvania * Where environmental problems cannot be ad- JefreyDowd,USIDepartnentofEmnge rygie rufrfra, equately addressed in a domestic setting, international Indiana University4 William Hyde, U.S. Department of cooperation offers better prospects for sound environ- Agriculture; and Mark Pitt, Brown University. Indiana mental outcomes than punitive unilateral actions. University is contributing staff time. - Pollution abatement and control expenditures do Compltin date: January 1993. notseem to have had a significant effecton competitive- Reports ness in most industries, since these expenditures repre- Bames, Douglas. 1992. Understanding uiwood Prices in sent a modest share of total costs. This suggests that DevdopingNations." Industry and Ener Department national differences in environmental regulations have Workdng Paper, Energy Series 56 World Bank, Washing, notbeen an important explanatory factor in the chang- DC ing international patten of the Ioation of "dirty" in- Barnes, Douglas, Kevin Fitzgerald, and Cordon McGranahan. dustries. 1991. "lntertulSubststution and Changes in the Way * Fast-growing economies with liberal trade poll- Houwhods Use Energy: Estnmated Changes iCoGking and cies have expeienced less pollution-intensive growth Ligfing Behavior in Urban Javaf Pac wiacd Asa n mand q than dosed economies Enawjy I (New Sede*fI-49. (Alo Industry and Energy Responsibility: Intemational Economics Department, DepartmentWaoingPaper,EnergySees29. WorldBarn, Intemational Trade Division-Patnck Low and Raed Washington, DC) Safadi. Barnes, Douglas, and liu Qian. 1992. 'Urban Interfuel SubstHt- Completion date. June 1993. tion, Energy Use and Equity in Develping Countri. Rort. hidustry and Energy Departm Working Paper, EneFg Low, Palrlck, ed. 1992. Iunbatioai Trade and the Enuiwnmat. Serks 53. (Also forthcomning in James Dorlan and Fereidun World Bank Discussion Paper 159. Washington, DC 70 Envirnment and Natural Resoures Economywide Policies and the Environment and Stein Hansen The Minstry of Foreign Affairs of Norway and the Swedish International Development The Banlesseffortsin environmnental economicsin the Agency are providing finandal support past have focused on environmental screening and as- Competion datc December 1993. sessmentpromduresthataremandatoryforallprojects. For example, a ffil environmental assessmnt is re- quired forprojects thatarelkely to have significantand Global Ervironment Issues diverse environmental impacts These would indude large-sole ingation and draiage projects and most Global warming woud have serious environmental thermal power and hydropower developmentprojects. implications for all countries. National policy options For projects that may have only limited environmental with regard to global warning range from the 'no implications, the environmental analysis is appropri- regrets" options to changes in development strategy ately reduced in scale. that have high domestic opportunity costs for develop- This project focuses on a complementary area in ing countries. Intemational responses include the Glo- which sigdficantprogressisurgentlydesired-thebet- bal Environment Facility of the World Bank and other terunderstandingofthelinkagesbetweenecDnomywide proposals for intemational resource transfe Because policies and environmental degradation.The results of of the potentiaRy high costs and benefits involved, the study will be invaluable in Bank operations for use every effort must be made to ensure that responses to in redesigning and fine-tuninga wide range of develop- global warming are effective, efficient, and equitable. mentpolicyprescriptions,indudinginadjustmentlend- In this project scientific factors and economic impli- ing, and in sharpening environment-related dialogue cations are being reviewed to detemine the keyopera- with borrowes tional policy issues forthe Bankand fornational policy Theobjectiveof theprectis toidentifyand evaluate formulation. Literature is being rerched to establish the environmental implications of economywide poli- a normalized data base of the costs-including the local cies. The study falls within the overall applied policy environmentaleffects-ofusminga:ermativeenergysup- research program of the Environment Departmentthat plies that emit lower levels of greenhouse gases. The focuses onincorporatingenvironmentalconsiderations consequences for the developing countries of reducing into Bank operations. greenhouse gas emissions will be calculated according An initial task of the project is to develop a fiame- toalterntiveproposedinternatioralformulastoreveal work that relates adjustment-related economywide re- equity effects Finally, the adequacy of existng data formstobasicpattemsofresourceuseandenvironmen- bases of greenhouse gas emissions and sinks will be tal impacts. In the nextstage eight to 10 case studies will reviewed for policy purposes. beundertakenintheBankregions.Thechoiceofstudies The results of the research will contribute to the will be based on three considerations: (1) the relevance articulation of developing country interests in any on- of country issues to the set of environmental problems going negototiatos for protocols to the Climate Conser- identified asprioritiesin theBank'sannual reporton the vation agreement signed at the United Nations Confer- environment(7he WorldBankandtheEnvonment,Fiscal ence on Envinment and Development (UNCED) in 1992, Washington, DC, 1992); (2) the importance of Rio in June 1992, and to the development of priorities economywide policies in causing or alleviating these and appropriate criteria for global warming projects problems; and (3) the need to assess a variety of adjust- funded by the Global EnAronment Facility. ment-related policies and analytical approaches. A workshop on global warmng summarizg the The case studies are expected to identify practical intermediate outputs was held on May 6,1992. In the approaches for a range of countries, analyzing policy remainder of the project the focus will be on country options that address different environmental issues. incremental costs and costsharing, sector strategies for Conclusions will be drawn on the importance of envi- energy and transport, and issues relating to the mitiga- ronmental considerations relative to the conventional tion of and adaptation to climate change. developmentorgrowth Dntnbutionsof policyreforms. Responsl : Environment Department, Environ- Depending on whether the envirnmental links of poli- mental Policy and Research Division-Mohan cies are positive or negative, the potential for comple- Munasinghe and Kenneth King With Amulf Gnrbler, mentaryordefsiveenvironmental measures can then and Nebojsa Nakicenovic, IIASA. be assessed. ompetion date December 1993. Repnlty: Environment Department, Environ- Rpots mental Policy and Research Division-Mohan EbertCmaI, and Abyd KarmaL 199L 'UncrtaintiesIn Munasinghe and Wilfrido Cruz. With Jeremy Warford Esimatig reenhouse Gas Emision" Environment 71 Environment and Nturl Resources Department Worlking Paper 52. World Bank, Wa&Angton, evaluate policy measures that will encourage water DC conservation and innovative operating procedures for King, Kenneth, and Mohan Munasinghe 1992. `CoCEffectlve reservoirs Means to Limit the Emissions of Greenh Gases in These findings draw attention to the seious water Developing Countries." Environment Depatment Divisional quantity and quality problems likely to arise in urban Woring Paper 30. World Bank, Washington, DC areas in the next decade. These should be taken into _ . 1992. "Qobal Warming: Key Issues for the Bank." account in planning investments in the irrigation and Enviwrnment Departmet Divisional Working Paper 36 water supply sectors. Adequate emphasis should be World Bank, Washington, DC given to demand management (both consrvation and Smith, ICR., and othe 1992. India for a Greenhouse Gas realloation) as "supply options" before new invest- Contol Regime that lncorporates Both Effidency and Equty ments are made. For borrowing counties, in-depth Coalse Envinent Departent DivisionalWoldng Paper analysis of selected case studies would indicate the 77. World Bank Washnton, DC effidency of various policy measures and the institu- tional structures (in public and private sectors) thathelp in their implementation. Water Resource Policies in Metropolitan Theprojectwillproducefourseriesofoutputs Series Areas i willcomprisethedetailed casestudies,tobe produced asworkingpapers.Series 2 will consist of focused issue Better management of water resources can lead to papers on ecnomic subjects (the economics of demand significant improvement in the environmental condi- management the opportunity cost of water and its tions and the economic performance of cities. This re implications),envionmentalsubjects(pnioritiesindeal- searci project aims at evaluating various policy instru- ing with domestic and industrial pollution), institu- ments (incentives, tws, subsidies, tariffs, regulation, tional subjects (the implications of utility privatization legislation) for encouraging economically efficient and for the management of water resources, the potential equitable use of water resourcs The research will role of water markets in developing countries), and provide a methodology for estimating the economic tehnical subjects (domestic and industrial water cor- value of water in altemative uses, the opportunity cost servation tedhnologies). These wil be published in the of water in different seasons and locations, and the cost Policy Research Working Paper senes and m scientific of conserved water for various water-sa-ving tehnolo- and policy journals Series 3 will comprise two flagship gies in industral and household sectors. This project is papers, "Water Resource Management in Cities, k Em- part of a broader effort in the Bank's Policy Research piricalFmdingsand Policylmplications, and I 'lMeth- complex to develop water resource management poll- odological Fmdings," targeted to Bankjournals Series4 des for the Bank will comprise chapters in two policy papers. The conceptual approach underlying the research is RaponsbftgLifrastructureandUrbanDevelopment IntegratedWaterResourcesPlanningandManagement Department, Water and Sanitation Division-Ramesh (lWRPM).Puttingthisapproachinto operationrequires Bhatia,John Briscoe,and Rita Cestti With PeterRogers, defining the riverbasin(s) in which a city is located and HarvardUniversity;MalinFalkenmark,Swedish Natu- the economically optimal instruments. Fieldwork is ral Science Research Council . Anandalingam, Uni- caried out to estimate the economic value of water in versity of Pennsylvania; and D. B. Gupta, National alternative uses through willingness-to-pay studies. Institute of Public Finance and Policy, India. The Irriga- Survey data are also used to quantify the cost of aDn- tion Department, Biha, India, and thectorate Gen- served water to evaluate the economics of each water- eral of Water Resources Development, Indonesia, are savng measure. Theeconomicallyefficientafocation of contributing staff time, and SIDA, Sweden, is providing water (calculated through a systemwide optimzation funding. exercise) is component with the curret and future Compltion date. December 1993. allocation based on tradition, legislation, water rights, Repo1ts or administrative allocation. The advantages of chang- Bhada, Raesh Rit CAse, and James Winpenny. Farthomng ing institutional structures to achieve a more efficient Polidsjbr Wate Cosnim and Rafoctio: Good Prwtfcs allocation of water are quantified. Cans ixlmpu Efficicy and Equy. Word Dak The principal findings are that conflicts in water use Tehlo Paper. Washington, DC are likely to arise in many developing countries, par- ENtail, Ramesh, and Mali Falkena 1992. "Water Resource ticularly around the 45 metopolitan areas in which the Pdiies and the Urban Poor Inovative Apprace and population is likely to be 4 million or more. It is neces- Polcy Imperatives Badkgomd paper for the woing sary to identify the time profile of these conflicts and to grup on Water and Sustainable Urban Development 72 Envirnment and Ndaural Rsources InLternaional Conefence on Wakr and the Envirment Preiminary results show athe strategic sanitation Development Isa for the 21st Can". T(Porthconingas planning process holds good promise for rational in- an hnerastcn and Urbma Develomet Department vestment choices for ctwide provision of sanitation Dsusion Paper.) services in developingcountries. But the existing incen- Bhatin, Ramesl, Peter Roges, John Bdsme, and Basaw Sinha tive struchtres are generally not conducve to such an Forthcomb "WaterConseration and Poluton Cnb IIn approach. So, it is. necessary to make certain policy Industries: How to Use Water Tariff, Pollution Taxp and danges (fnancial, technological, and legal) to facilitate Fiscal Inetivese the introduction of such a demand orientation in urban sanitation planning. Itisplanned todisseminatetheresults of thestudyin Environmentbl Sanitation a series of publications. The first would be a book entided Strategi Sanitaion Planing A Demand-Based Inmostdevelopingeountries,availableresourcesfor Appch to Urban Sanitation in Developing Countries, urban sanitation services are inadequate for providing addressed to policymakers, sector professionals, and all urban residents with a high level of service. Hence, exteral support agencies. The second, addressed to hard choices need to be made if adequate levels of sector professionals, would provide gidelines for the service are to be extended to all, rather than high levels application of the strategic sanitation planning process. of service to a few. The old vision of urban sanitation Inaddition,specialsemiarsandworkshopsareplanned planning relied on one proven technology, conven- to introduce the new methodology to Bank staff and to tional sewerage. This technology was applied to the sector professionals in developing countnes. Largest area possible until the financial resources were Rep:sblitnyhfastrecn andUrbmnDevelopment exhausted. Department, Water and Sanitation Division-Albert The limitations of the old vision prompted studies Wright, Harvey A. Gam, Alexander E Bakalian, and thatled to the developmentof tecnologiesat the other Vijayjagannathan. With Dale Whittington and Donald extreme of the cost spectrum-low-cost, on-site sanita- T. lauria, Univesty of North Carolina. The UNDP is tion systems, mainly improved pit latrines. This devel- providing financial support opment produced two challenges: how to expand the Compltion datc January 1994. menu of supply options to indude intermediate-cost sewerage technologies,and how to incorporate demand considerations in the planning procs. Low-Cost Sanitation Meanwhile, there had been two breakthroughs first, recognition of the avaflabilityof intermediate-costsew- InmostdevelopingcDuntries,sanitationoptionscon- erage systems,and,second, thedemonstation thata set sist of conventional sewerage and on-site systems. The of existing methfods for asessing demand for environ- first option is an expensive system unaffordable to the mental quality in industrial ountries can be used in majority of urban populations. The second, though assessingdemandforsanitationservicesinthedevelop- much lower in oDst, cn be inappropriate (for such ingcountries. The research question is Howcan weuse reasons as a high water table, lack of space in high- thesebreaktiroughstoimproveinvestmentchoicesfor density areas, and high water cDnsumption), or unac- citywide provision of sustainable urban sanitation ser- ceptable for sociocultunal reasons. Because of econo- vices in the context of constained resources? nies of scale and lumpiness of invesinent, pnvate Acombinationofdeskandpilotstudiesisbeingused sector involvement in the supply of the first option is to develop a new vision of urban sanitation planning oftenlow. InDntrast privatesectorinvolvementtends Known as strategic sanitation planning, the new vision t be high in the supply of on-site systems, which are, as involvesmappinga fullersetof supplyoptions,assess- a rule, associated with low economies of scale. The ing demand (the type of services consu .-ers want and absence of intermediate options is believed to be one of are willing to pay for, matdcing supply .nd demand in the constraints to the expansion of services to middle- an affordable, sustainable setof choices, and detemin- and low-income communities. ingappropriatefinancingandinstitationalrequrements The objective of this research is to identify options for implementing such a visiorL This new vision has that fall between those two options in cost and level of been incorporated into two UNDP-funded "stategic service. The study is aimed at identifying the types of sanitation plannir projects, one in Ghana and the intermediateoptionsthatareavailableanddetermiiing other in Burldna Faso. In a complementary study, a howsuchintermediateoptionsdifferfromtheavailable simulation model is being developed for matching sup- options in design, cost, operational peformance, and ply and demand. institutional requirements for supply. The availability 73 Environmet and Natura Resources of such intermediatetedhnological options would fill an conferece of the Water PoUution Control Federation in important gap in the demand-oriented (citywide) plan- Torntao, October. ning process being developed in the Water and Sanita- Da n, Aleander, Albert Wright, Ridhird Ots, and Jose de tion Division. AzevedoNetit 1992. SimpilIied Sewerage: Deign Cuide- Thefirstphaseof theprojectconsistsofa prelimnary lines" UNDP/Warld Dank Water Decde Progrm Report survey to identify and evaluate available intermediate options. The second phase comprises more intensive studyof selectedaspectsof themostpronmisingoptions. Sanitation Demand Study It focuses on two innovative technologies, "simplified sewerage" and thecondminileseweragesystems, which The failure of the supply-side approach to cope with have been identified by preliminary reviews of the the deficiencies in urban sanitation services in develop- literature as the most promising intermediate options ing countries has led to consideration of demand orien- for furtherstudy.Itwill studythecostsof these options tation in the planning of such services. One of the andtheirtedhnicalperformance.Thecoststudieswillbe prerequisites for this altenative approach is a reliable done through the development of quantity functions, method for estimating demand for sanitation. The pur- using data from bills of quantities of old and new pose of this study is to find out whether the contingent projects. The results will be translated into cost func- valuation method for estimating willingness to pay tions, using local unit costs. The study of technical couldalsobeusedtoestimatethedemandforimproved performance will include design details, capital costs, sanitation services. The study will investigate the deter- operation and maintenance needs and costs, and insti- minants of the wfllingness to pay for sanitation and tutional requirements for planning, implementation, determine how routine willingness-to-pay studies and operation and maintenance. Comparisons will be should best be conducted with respect to sampling madebetween these intermediatetechnologiesand con- procedures, analytical procedures, and questionnaire ventlonal sewerage and on-site systems. structure. The results of the research would provide a Site visits to the utilities have been conducted to basis for policy decisions on such issues as technology discussthetechnicalandinstitutionalaspectsofthenew choice, coverage, subsidies, and tariffs. This research is options, the "simplified sewerage" and thecondominiale part of a larger research taskcto develop a methodology sewerage systems, developed in Brazil. Both systems for demand orientation in the planning and delivery of have been successfully implemented in many parts of urban sanitation services. the country. Because of its physical layout, the The contingent valuation method, as modified for aondwmniale system requires a high degree of interac- the willingness-to-pay studies for water supply, has lion with the beneficiares from the onset of the project been further modified for sanitation studies. Using this This in turn improves its prospects for acceptance and as the starting point, a numnber of country studies are better maintenance. being conducted on a rolling basis to test the applicabil- Thefindingsof thefirstphasehavebeen presented at ityof themetiod and investigatetheresearchquestions the annual conference of the Water Pollution Control Thefindingsandexperiencefromcompletedstudiesare Federation in Toronto (October 1991). The results fhm progressively built into the design of subsequent stud- the two studies to be undertaken in the second phase ies. Studies have so far been conducted in Africa and will also be presented at conferences and published in Asia. It is planned that the next study will take place in professionalournals.Thedatafrom the firstand second Brazil. phases (on both the condominiale and the simplified Theresultsshowthatthecontingentvaluationmethod sewers) will be disseninnated through a Water and Sani- can be applied in designing urban sanitation services in tation Division publication. developing countries. It yields data that can be used as Raponslity:lnfitrauctureandUrbanDevelopment a basis for choosing investments, arranging financing, Department, Water and Sanitation Division-Albert and setting priorities in the supply of services. Some of Wright, and Water and Urban Development Techmol- the country study findings have been consistent with ogy and Assessment Unit (UNDP)-Alexander E. expeclations;othershavernotbeenbuthavebeen found Bakalian. With Jose de Azevedo Netto; and Richard to be valid. Otis, Ayres Associates. The findings indicate that the contingent valuation Competion datc January 1994 metod can be used in prepanng urban sanitation Repoit projectsbytheBank,bydevelopingcountrypolicymak- Baklim, Aleander, Richard Ots, Albert Wright, and Jose de ers, and by the development community more gener- AzevedoNetto. 1991. SInplified Sewea A Review of the ally. Its use can improve project design as well as the Brazilian Exqeerice Paper presented at the amual sustainability and reliability of services. 74 Envirnmenet and Natural Resormes The results of the country studies are ben pub- inareasof high population density. Priorities are setby lished separately as NUWS Discussion Papers. The talngintoaccountthepotentialeconomicconsequences, Water and Sanitation Division also plns to pool the the costs of the proposed investments, and the relative results frm this study with those from the studies on health risks associated with each control strategy and water supply to produce a manual on designin& Con- the community response to it ducting, and analyzing willingness-to-pay surveys for The computerized approach thathasbeen adopted is water supply and sanitation. therapid assessmentproceduredevelopedbytheWorld Reponsibilit: Infrastructure and Urban Development Health Organization (WHO) and published as 'Man- Department, Water and Sanitation Division-Albert agement and Control of the Environment" The result- Wright With Dale Whittington and Donald T. Lauria, ing environmental management system permits the University of North Carolina; and Anjum Altaf, Univer- computation of emissions in all environmental media sity of Karachi. TheUNDP isprovidingfinancial support bygeographic zone. The basic computational unitis the Completion date Januazy 1994. productive activity in a given area, disaggregated by Repore four-digit International Standard Industrial Classifica- Whittington, Dae, Donald T. Latna Albertd MWright, tion (ISC) codes and the emission factors associated ICyeonpe Choe, Jeffrey A. Hughes, and V. Swarna. with each industrial production process. Pollution con- "Househod Demand for Improved Sanitation ServioeE A centrations in air, waber, and soil are calculated using Case Study of Kumasi Chant" simple dispersion models and straightforward calcula- tions of hazardous waste disposaL Maps, reports, graphs, and ranking and mapping Energy Use and Global Atmospheric procedures allow the user to quiddy desaibe and test Pollution the seriousness of the pollution in a populated area, check the pollution data against socioeconomic infor- Energy consumption is expected to expand signifi- mation available in the study area, and simulate the cantly in developing countries over the next two de- effects of changed assumptions and of abatement poli- cades. Based on the natural resource base of these coun- cies on the pollution situation. tries, coal canbe expected to accountfora largeshare of The methodology is designed to supportaparticipa- the expanded energy consumption-especially in large tory process by allowing quantitative data to be com- developing countries, such as China and India. binedwithqualitativeandjudgmentalinputsAweight- This projecwilluse theEntemalonalTradeDivision's ingsystem allows information to beaggregated and the models of energy demand in developing cunmtries to results tbe communicated to abroad and varied audi- deriveexpected rangesofenergyconsumptionand pollu- ence. The methodology encourages community partid- tion emissions in the major developing cuntries. It will pationindevisinginputsand readcingconsensus on the alsoexaminetheeffectofsuggested meas orescntrol- strictlytecnicalissues,andincDnsensusbuildingamong iing pollution emisions on consumption levels These politicians, administrators, and representatives of local estimates would make a valuable contribution to discs- communities and business on priorities after evaluation sionrs about domestic and international energy policies of the tradeoffs among the costs associated with cottrol It is also proposed to study ihe effects of the various measures, the changes in health risks from exposure to suggested emission control measures on the interna- standard and toxic pollutants, and, eventually, the di- tional market for energy. rect benefits, if possilble. Responsiity.: International Economics Department, The software that supports the approach is built Intemational Trade Division-Mudassar Imran and around a proprietary decision support system, and Takamasa Alkyama. With Alan Manne, Stanford Uni- integratestheautomatedairand waterdispersionmod- venity; Robert Kauffman, Boston University; Dermont els. In later phases of development, the health risk and Cately and Kevin Chang, New YorkUniversity; and R. the costing models will be added. A broad set of default K Pachauri, TATA Energy Research. technical information that is required to carry out the Completion date June 1994. assessment to develop adequate policy strategies, and otherawdliary information, such as conversion factors, is induded in the models data bases. Pollution Cntrol and Environmental The model is constructed around the data inventory Management System system, the platform from which the different compo- nents are operate& The steps in the system are as This research project is developing a generalized desaibed below: methodologytoestablishprioritiesforpollutioncontrol * In the data inventory, the four-digit ISIC code 75 Environmnt and Natunl Resoures industiesintheareaof thestudyarelisted,anddataon Theliteraturehasgivenlittleattentiontotheimplica- the associated production and tlhe consumption of raw tionsofurban davelopmentforthedeterminationof the materials are collected. process of allocating land betweenrural and urban uses * Emnissions,effluents,andwastearecalculatedbased (between agricultural and nonagricultural uses) in de- on standard emission factors, and total waste produe- veloping countries The studies that have been done tion is calculated in each medium. focus mostly on industrial countries, particularly the * Sunple dispersion models are used to calculate United States. And the literature has not yet provided a pollutant concentrations. comprehensive assessmentof the roleof governmentin * Exposure is assessed, and risks are evaluated. influencing the allocation of land between the two sec- * Consensus is reached based on the tradeoffs be- tom It would be desirable to know, from the point of tween the costs of controls and the relative health haz- view of efficient alocation of resources, whether gov- ards. emient shoud intervene in the allocation of land be- Responsy: Environment Department, Environ- tween rura and urban uses or whether the allocation mental Policy and Research Division-Iona Sebastian. should be determined entirely by market orces. A With TEBODIN Consultng Engineers, Capital Systems number of questions are associated with this concern. Group, Inc., and RIVM (Netherlands). Funding is being Aremarketforceshlikelytogenerateanefficientallocaton provided by the Dutch governmenes Environmental of land between rural and nonrural uses? In the presence TmstFundandbyWHO/PAHO.WHO/PAHOisalso of other distortions in the economy, can direct govem- contributing staff time. ntintenrentonbenKare-inaeasing?7fso,whatkinds Completion date June 1994. of polides are ely to be the most effective? And why have many of the polices applied by governments of developing countries to reduce the rate of conversion of Land Allocation rural lands into urban lands been ineffective? Government poLicies that create wedges between There are indications that recent trends in urbaniza- market prices arnd social (or shadow) prices are pre- tion in developing cDuntries will ODntinue in years to dominant in developing countries. The urban bias im- come. Population growth in a number of developing plicit in these policies, often manifested in taxation counties appears to be slowing, but urban population (implicitorexplidt) of theagriculturalsector, facilitates gowthisstiinUcaeasingEthepast70years,thedevlop- the expansion of the nonagricultural sector. In many ing word's urLn populaon inceased fifteenfok, from developing countries, agriculture is a large share of the aboutlOOmillionin 1920 to dose to 1.5 bilion in 1990.The economy, and taxing agriculture relative to the growth rate of the urban population in te developing nonagricultural sector is seen as a temporary media- regions bas ranged,on aveage, from 3.42 percent to 5.22 nism for tansfering resources (nairdy labor and capi- percent a year over the last four decades. tal) to the nonagricultural sector and for generatng rev- Urban growth manifests itself not only in a shift in enue for the government If significnt quantities of land population-thesubjectofmanystudiesonrural-urban are also trnferred to the nonagricultural sector whie migration-butin spatialshifts. Theseshifts,an integal such poLcies are in place, when the time comes for edlimi- part of development, involve adjustment costs, such as natingthesepolices,thequantityofagriculturalland may thedislocationof rural amilieslivinginthefringeareas be smaller an optimally desred. But urbanization is, to of large cities (mainly those leftbehind bythemigration a large extent, ineversible because the costs of conveng process), the dismantling of rural infrastructure built landfromurbantoruralusesareextremelyhigh.Whether, over rral lands, the onversion of high-quality agricul- in thie presene of policies that distort agricultumal incen- tural lands to urban uses, and the environmental im- tives, diect intervention in the land market is wefare- pacts of the added pressure on the remaining agricl- improvin is an empirical question. tural and forestry lands. Although these costs can be This research project will onsider these issues in two high, they cannot, by themselves, jusify interventions Asianewnoies-BgladerhandIndonei-which to change the natural pattern of spatial shifts. Nonetle there is sgnificant cDnversion of land from nrual to urban less, they have caught the attention of polcyiakers in use and whicha aracterzed by high population den- many countries, both industrial and developing and sity. The anaysis will be developed with the aid of a have provided the underpinnings for an array of le[gi- cmputable generda equilibum modeL This is appropri- lation to halt or reduce the rate of conversion of land ate fortheproblemathand in which asignificautnumber from rural to urban uses. These legal resticions have of intersectoral links are involved and in which substitu- been largely ineffective in developing countries. tion in production and consumption, the structure of 76 Envbunmt and Nhtural Xesourcs factor arkets, and toa resourc endowmens play Repwmseir Agriculture and Rural Development significmiroles in detmixding land allocatosL Furthe- Depalt,ent Agricultural Policies Division-Antonio more,govemmetpolices aktcutaacssaligenumber Salazar P. Drmdao; and Infrastructure and Urban De- ofdifferentsectorsandacdvidesarelIkdytoWduamIhe pelopm rtmentUrbanDevelopmentDivlsion- process of land slocation. The effects of dthe polic Alain Berud. ianbe uewiullyaralyzed withoutproperlyamcunt Com Aft Deember 1994. for the interactions between de rwal and urban sectors. 77 HUMAN RESOURCES DEVELOPMENT Women, Public Services, and Income hiring women in the public sector to provide a few role Generation models to "prime the pump." Responsibiliy: Population and Human Resources De- Ref. no. 675-14C partment,WomeninDevelopmentDivision-Shahidur This was the Banks first RSB-funded research fo- Khandker. With Paul Collier, David Bevan, and Jan cused on women in development. It asked what deter- Cunning, Oxford Enstitute of Economics. The Oxford mineswomen'saccesstopublicservicesand whatinflu- Institute of Economics and Statistics, Unit for the Study ences women's productivity, as compared with men, in of African Economies, contributed staff time. threeAfricancountries-C6ted'Ivoire,Kenya,andTan- aCsig date July1991. zania. It then analyzed the consequences for develop- ment of gender bias and suggested remedies. More specifically, it asked whether and why parents send Education, Growth, and Inequality in Brazil girls to school less than they send boys; whether and how health and access to information and credit influ- Ref. no. 67561C ence productivity-andwhatpolicies canbeidentified to Brazil's implicitstrategy of human capital accumula- improvewomen'sproductivityandaccessto schooling, lion, characterized by low levels of public investment at health care, and other social services. The research was the primary and secondary levels of the school system part of the Women in Development Division'sbroader andbylowenrolmentsandschoolquality,isnottypical efforttodetermineworldwidehowtoimprovewomen's of middle *income developing countries. Has this strat- productivity and how that will promote economic per- egy limited the country's economic growth? Has it formancm, poverty reduction, and other development exacerbatedincomeinequality?Theprimaryttaskof this objectives, research project was to assess the costs and benefits of The project prepared seven studies, based on the theBrazilianpattemofinvestmentineducationinorder results of econometric research using Living Standards todrawlessons fromtheBrazilian experienceforpolicy- Measurement Study survey data for Cote d'Ivoire and makers in Brazil and other low- and middle-income similar data sets for Kenya and Tanzania. countries facing choices about the level and nature of The results have shown that, compared with boys, investments in education. girs are less likely to be sent to school at all,more likely A second task of the research project was to analyze to drop out, and less likely to have time for homework. the role of the private sector in the deliveryof education Girls are more likely hr go to school if their parents are in Brazil, especially in secondary and undergraduate educated, if they have female role models, and if they education, where the private sector is most developed. can earn a decent income. But women lack acess to Resultsfromthisrescarchprovideanempiricalbasisfor credit and have difficulty brealdng into the wage labor proposingchangesinpolicytoward theprivatesectorin market, so many are stuck in low-productivity agricul- Brazil that could improve the efficiency and effective- tare. Thisresultsinamassivemisallocation of laborand ness of public policy and investments in education. loss of productivity. Yet, when women earn cash in- The research program consisted of 20 research pa- come, they are more liely to spend it on children's personeducation,economicgrowth,andinoDmedistri- welfare, health, and schooling than men are. Men are bution in Brazil. Several of the Brazilian scholars and more likely to spend income on adult consumer goods. outside experts participating in the research based their Th-is research helped define the Bank's women in analyses on rich lodes ok data, such as the annual na- develo -pment strategy. The report on the projecrs re- tional household surveys conducted since 1976 and the search results notes that "it may help the reader to see monthly household employment surveys conducted the wood for the trees to point out that the powerful since 1982. Some of the studies are comparative, draw- interactions largely come down to a case for greater ingon cross-nationalsourcesof dataormicrodatafrom priority for public female education." The report also other countries. A few of the studies highlight differ- recommends credit programs and affinnative acton in ences among regions or states within Brazil At a work- 78 Human Resources Delpment shop in Rio de Janeiro in March 1991 the researchers Baptista de Oliveira, International Labor Organization; presented their results and discussed them with Brazil- Albert Fishiow, University of Califrnia at Berkeley; ian policymakers and academics; since then, the re- EiicAHanushek,UniversityofRochesterEstellejames, searchershave-revised theirpapersto incorporate com- State University of New York at Stony Brook; Dean T. ments and exploit commonalities across papers. The Jamiison,Universityof CaliforniaatLosAngeles; David papers are being finalized and collected into a single Lam, University of Michigan; Lawrence Lau, Stanford volume. An overview essay analyzes the links among University;,RicardoChavesdeRezendeMartins,Brazil- the papers and highlights the implications of the re- ian Ministry of Education; Samuel Morley, Vanderbilt search for education policy in Brazil and other develop- University; Young Bum Park, Korean Labor Institute; ing coum tnes. Jose Pastore, University of Sao Paulo; Jean-Jaques Paul, Findings of the papers include the following. Earlier Institut de Recherche sur L'Economie de L'Education, investments in education in Brazil contrbuted mark- Dijon, France; David Plank, University of Pittsburgh; edly to the country's rapid growth in the 1960s and Donald Robbins; David Ross and Richard Sabot, Wil- 1970s, particularly as a threshold of three to four years liams College; John Strauss, Rand Corporation; and of averageeducationoflaborforcememberswaspassed Duncan Thomas, Yale University. The UNDP and the (suggesting positive externalities to higher average lev- Brazilian Ministry of Economy, Finance, and Planning els). But compared with Korea, where educational op- contributed staff time, and the Mellon Foundation pro- porhtuities grew faster, Brazil's relatively lower invest- vided funding. ments have implied greater inequality of income, par- Clsing data June 1992. ticularly because of high private "scarcity" returns to the relatively few beneficiaries of post-primary educa- tion. Brazil continues to be a highly mobile society; Economic Impact of Adult Mortality compared with the 1970s, t.ere was somewhat less upward mobility and somewhat more downward mo- Ref. no. 675-71 bilityin the 1980s, and educational characteristics seem The AIDS epidemic presents an additional burden of to have carried more weight in the 1980s than in the mortality to an African population already afflicted 1970s (whenmorerapid rates of economicgrowthpro- with high mortality rates. According to World Health ducedmorewidespread upward mobility). Private and Organization estimates,annual adultdeathsfromAIDS social returns to the quality of education continue to be in Sub-Saharan Africa will grow from about 350,0ao in considerable, suggesting that more expansion of low- 1992 to more than 700,000 by the year 2000. Because quality schooling may not be the optimal approach to these cases derive entirely from existing infection, they new public investments. The quality of rural schools in will occur regardless of the effectiveness of recently the noriheast of Brazil could be substantially improved initiated programs to prevent the spread of the disease. at extraordinarily low cosl increases in the number of This project seeks to answer two broad research ques- books arid improvements in teacher skills would virtu- tions: (1) What are the ecDnomic costs and impacts of aly payfor themselvesby reducing wasteful and costly AIDS illness and death among adults on households repetition. Differences in returns to education are con- and communities? (2) How can the government target siderable across timeand regions; thesedifferences will patient and survivor assistance programs to maximize be explored further. Finally, there is evidence that regu- thebenefit to survivors fora given government budget? latoryand pricing restrictionson private schoolinghave This project complements other research by the Banks reduced the overall efficiency of the education system. Population and Human Resources Department in the Respndity: Country Economics Department, Of- field ofadulthealth,imcludingthediseaseprioritystudy fice of the Director-NancyBirdsall; LatinAmerica and and the ad tilt health study. The project will also comple- the Caribbean, Country Department 1, Envirounent ment the regional studies program of the Btks Africa and Agriculture Divisian-Robert Kaplan, and Popula- Technical Department, which indudes several studies tion and Human Resources Operations Division-Bar- on proritizing expenditures for AIDS trwitment and bern Bruns; and Latin America and the Cabean Tech- prevention. nicalDepartment,PublicSectorManagementDivision-- The research project is conducting a socioeconomic Donald Winkder. With Ricardo Paes de Barros, Yale survey of households in an area of high AIDS preva- University, and Enstituto de Planejamento Economico e lence. A sample of both 'healthy' and severely affected Socia, Rio de Janeiro, Jere R. Behrunn, University of households is being followed longitudinally over 12 Pennsylvania; Carlos Alib'at Pnmo Braga, University months, at six-month inervals. Becauce it makes pos- of S.0 Paulo;tIbflo do Mell-o eSouza, Federal Univer- sible the use of techniques to comtrol for certain unot- sity of Riodejaneiro; Claudio deMoura Castro and Joao served variables and it captures the time path of house- 79 Human Resowres Delopment hold respnses, the longitudinal design will yield more target groups. This research is important for exploring complete estimates of the costs and impact of fatal the points at which health and family plannig pro- ilnessthancouldbeglemnedfromasingleaoss-section gramsmightbeexpanded toinasase omtraceptiveuse. Furiermore, by comparing severely affected to rela- Theeffectofprogamsondifferentsocioeconomicgroups tively untouched areas, the project will document the and the extent to which economic factors constmin the stress imposed by the epidemic on local coping media- use of conttion are explored to detemine the nisms and the consequently higher burden on the af- relation between poverty and access to health and fam- fected households and individuals. ily planing programs. Theresultsof theresearchwillbedisseminatedjoindy The basic model used in the research is a four-equa- by the local and intermational researchers through a tion strudural modeL The basic equations cover the workshop in Bukoba, Tanzania, in September 1992, a number of births and deaths that a woman has had policy conference in Dar es Salaam, Tanzania, in 1993, (poisson equations), herintentionswith regard to fertil- international meetings, such as the Global Conference ity, and her choice of ecntraceptive methods (nultino- on AIDS, and a book addressed to practitioners and mial logits). Thebirth and death equations are reduced- policymakers. It is also planned to submit papers for form and are used to pnxdict the number of living publication intheWorld BankPolicyResearchWorldng children forawoman,whichisa determinantof fertility Paper series, the ving Standards Measurement Study intentions. These intentions are then predicted in the Working Paper series, and academic joumals equation forcontraceptive choice. In addition, reduced- Reqsns4 Population and HumanResources De- form multinomial logits are estimated for the choice of partment,Population,Health, and Nutrition Division- contraceptive method. Mead Over; and Africa Tecnical Department, Popula- The research has found that the deterninants of tion, Health, and Nutrition Division-Martha fertilityand contraceptive usevaryby country. Female Ainsworth. With Phare Mujinja, Godlike Koda, Inno- educationisveryimportantasadeterminantinColom- cent Semali, and George Lwlhua, University of Dar es bia, less important in Zimbabwe, and unimportant in Salaam ThomasWayman,and Juan MuiozandBeatiz Tuniia. Acce to services also has differential effects. Godoy, Sistemas Integrales, Chile DANDA is provid- The number of contraceptive methods available and ing financial support- familyplanningmessageshaveimportanteffectsintwo Cosing date June 1993. ofthethreecountries Community-baseddistributors of family planning have important effects in two coun- tri Fixed facilities have less uniform effecta The level Impediments to Contraceptive Use of constmer assets of a family tends to be associated in Different Environments with use of contraception in such a way as to sluggest that income is still a constraint on contraceptive use in Ref. no. 675-72 theseoountneseventhoughtherallhave"good"family This researdc focuse primarily on access to services planning progrms. The research did not find that ac- andthemotivationtorestrictfertiityasdetminantsof cess to services had differential effects on wntraceptive contraceptive use and ferdlity. The research also seeks use among socioeconomic groups, whether they were to determine whether access bas different effects on definedbyeducation,urbanorruralresidencetorhouse- different target groups. These sses are addressed in hold assets. This finding is still preliminary, however. three counties at different stages of fertility trasi- The findings for Zimbabwe have contnbuted to a tion-Colombia, Tunisia, and Zambabwe. proposal to expand the number of community-based The research looks at how prior accs to health distributors in rural areas. It may also have some effect facilitiesandcuretaccesstofamilyplanningaffectthe on plans by other donors to consider higher fees for motivation to restrict fertility; this work builds on a servies. In Tumisia, the results mdicate the contiued model of ferility determinatic r originated by Richard importance that reducing mortality has for increasing Easterlin. The research then examines the effects of the motivation to restrict fertility. motivation and family plannig services on contracep- RsponsIblty: Population and Human Resources tive use. The study has several unique elements. First, it Department, Office of the Director-Susan Codcrane. uses lagged information on women's access to health WithDavidGuilkey,UniversityofNorthCarolina;Dov services at the beginning of their reproductive life and Chernichovsky, Ben Gurion University; Mark Mont- the effect of this on their fertility and mortality experi- gDmery, New York University; Alex Zinanga, Zimba- ence. Second, it includes the motivation to space and bwe National Family Planing Council; Marvelous limit fertility in fertilty motivation. And tird, it uses Mhoyi, University of Zimnabwe; Dr. Trias-Farga and simulationstodetemine theeffectof accesion different Gabriel Ojeda,PROFAMIUA,Colombia; Patricia Prieto 80 Human Resoures Deudiopttent and RafaelRofman,UniversityofCalifomia;Mohamed -addressingproblemsofevaluatingpublicexpenditurs Baraket and Habib Fourati, Office of Family and Popu- in Indonesia. lation, Tunisi Mamoud Seldani, University of Tunis; The research is to be carried out over two years, Abdo Yazbeclc, Texas A & MUniversity; and Christino throughempiricalestimationsandfieldworkinlndone- AiToyo, Rice University, Philippines. The Zimbabwe sia Relatively good household and community data for National Family Planning Council and Zimbabwe Cen- Indonesia for addressing the questions raised in this tral Statistical Office are contributing staff Uime. research are already available. A combination of the Claosing datc September 1992. available data on households, communities, and indi- Reports: vidualsisused to formulate and estimate reduced-form Cocban Susan, and Laura GIbney. 1991. "Does BeterAccess relations for utilization of health services, choice of to Contraceptives Inaese Their Use? Key Policyand health providers, and health outcomes. Methodolocd Ie" Polcy Research Woerking Paper 728. Several products will emerge from this research World Bank, Washington, DC. projecL The first will be Policy Research Working Pa- Colme, Susan H, and David K Cuikey. 1991. "Ferility pers. Other products will indude Bank seminars to Intentions and Access to Sevices as Contraints on discassongoingresearchandpreliminaryfindings,and Contraceptive Use in Colombia" In Demgmphic ad Hlkth perhaps seminars at other international organizations. Sunnys Waord Confiwen: Pvauings, 1991. A final product will be the methodology of merging _ 1992. "How Access to Contraeption Affects Fertity and household data from largesample surveys and commu- Cotaceptve Use InTunisla. Policy Rearch Worklng nity-level information from Economic and Population Paper 841. World Bank Washingoan, DC Census undertakings to evaluate the impact of health Roafan, RafaeL 1992. 'FHow Reduced Demand for Children mad andcmmunityinfrastrucureontheutilizationofhealth Access to Family Planning Accelerated the Fertilty Decline servicesandon healthoutcomes. Thismethodologywill in Colombia" Polcy Resrch. Worldng Paper 924 World be used in designing effective health programs and Bik, Wasbint DC. - .. interventions in other countries. Responsbily: Population and Human Resources De- parnent, Population, Health,and NutritionIDivision- Determinants of Nutritional and Health JeffreyHammer, and PovertyAnalysisand Policy Divi- Outcomes in Indonesia and Implications sion-4frtinRavalliom;andEastAsiaand PacificCoun- for Health Policy Reforms try Department 1, Population and Human Resources ;ct. ;.'.-:. Operations Division-Vicente Paqueo. With Anil Ref. no. 676-27 Deolalikar,University of Washington; Center for Child The health status of a population is an important Survival, University of Indosesia; and Demographic indictor of overail well-being and.a key factor in eco- Institute, Uriversity of Indonesia nonc productivity. This project will provide a greater Claosing dixtc October 1992. understanding of theinterrelationsaamong health infra- structure, the price and quality,of health services, the utilizationof health servicesbypatients,and individual Age at Marriage, Age at First Birth, and, household health outcomes, and of their effect on and Fertility in Africa the formulation of policy. The objectives of theresearch are to clarify (I) why the use of primary health services Ref. no. 676-38C issolowinlndonesia;(2)wt'.atpolicyoptions,induding Fertility is beginning to decline in some parts of price, quality, and other ii xerventions, can balance the Africa (that is, in Nigeria, Senega, and Sudan) where goals of effectively raising utilization rates, promoting - there has been no evidence of an increase in contracep- equity, and improving the use of scarce resources; and tiveuse.Why,thenisfertilitydedininginsomeof these (3) how these policy interventions, both within.and countries?(IcontrastminBotswana,KenyaandZimba- beyond the health care system, will influence the health bwe, where fertility has also been declining, greater use status and health outcomes of individuals. This project of contraception is important) There are some india- iscloselyrelated to threeotherresearchactivitieswithin tions that women-for the fist tme- beginning to the Policy Research complex- the study of the public delay marriage and birth of their first child. Africa has economics of health in developing countries; the Pov- typically been characterized by early entry into mar- erty Analysis and Policy Division's preparation of an riage and parenthood. If this is beginning to change, empirical study of similar policy issues in other coun- whatdemographicimplications wil ithave forAfrica? tries, using Uving Standards Measurement Study sur- In popuations with little contraceptive use-such as vey data; and the Public Economics Division's project those in Sub-Saharan Africa-and in which fertility 81 Human Resources Development occurs largely within marriage, an increase of three or education of women is one of the principal forces inftu- four years in the average age at first union can result in encing age of entry into mariage, the prospects for a 15 to 25 percent dedline in the total fertility rate With continuing increases in age at marriage appear promis- the recent completion of several Demographic and in& especially in populations in which women have Health Surveys (DHS) in many African countries, it is traditionally married at relatively young ages. Thus, now possible to examine some of these trend& delayed marriage will probably play a role in reducing This project, using data from the World Fertility African family size. Survey (1970s) and the DHS (mid to late 1980s), exam- Responsixluty:PopulationandHumanResourcesDe- ined trends in age at marriage, age at first birth, and partmentPopulation,Health,andNutritionDivision- schooling for girls The data cover 126 regions in 20 SusanCochrane.WithCharlesWesthoff,PrincetonUni- African countries that had surveys. The statistical pro- versity. ceduretheresearchfollowediscausalpathanalysis.The Clsing datc August 1991. goal was to describe the large structure of factors affect- ing fertlity, ranging from social background character- istics to rural-urbanresidence and education of women, Causes of Mortality in Developing Countries as theyoperate through ageat marriage and age at first and Eastern Europe birth and ultimately influence fertility through the in- tervening variable of reproductive intentions and con- Ref. no. 67641C traceptive practice. The Population and Human Resources Department Age at marriage has been increasing steadily and recently completed an extensive research project that steeply in North Africa for several decades, but so has culminated in a study entitled "The Health of Adults in contraceptiveprevalencIntheSudan,however,where the Developing Countries." This project sought to ex- contraceptiveprevalenceremainedataverylowlevelin tend cetain features of the analysis in that volume to 1990 (8.7 percent), the total fertility rate dedined from either countries in the developing world, and especially six to five children, mainlyas the result of a steep rise of to those of Eastern Europea five to six years in the age atmaniage and at first birth. The purpose of the exercise was to document the InSub-SaharanAfricatheresultshavebeenmore mixed. cause-of-death structure in selected countries those of In Liberiaand Mali there is no evidenceof any changein the previous study, sixadditional LatinAmerican coun- age at marriage. The same is true for Cameroon, C8te tries, and six from Eastern Europe. The task required a d'Ivoire, and Lesotho, but the data for these countries significant data collection effort, and an important out- are out of date. In Kenya, Mauritania, Nigeria, Senegal, put of the project is a collection of data sets providing Togo, Uganda, Zimbabwe, and, possibly, Ghana, how- consistent time-series estimates for specific causes of ever, there is some evidence, weakorstrong, that theage death in those countiesin which rawdata are available. at marriage and age at first birth are rising. For Kenya Linldng these data to measures of income makes it and Zmbabwe, where contraceptive prevalence levels possible to answer more definitely the following ques- are significant, the role of recent changes in age at tion: 'Is economic development good for you?" The marriageand firstbirth in thedecdine of fertility is more earlier work on adult health answered "yes," but its difficult to esimate, but they have undoubtedly made results with regard to specific causes of death, such as some contribution. In Nigeria and Senegal these in- cardiovascular disease, remain controversiaL creases have been chiefly responsible for the recent de- It is anticipated (on the basis of the observations of a dines in fertility. The model highlights the importance of recent Bank mission to Poland) that the pattens and women'seducationandrevealshowageatmarkgeand trends of mortality in Eastern Europe will be quite age at first birth directy and indirectly influence the different from those found elsewhere, and that these fertlityratethrc ghtheinterveningvariableofreproduc- differences are attributable to identifiable risk factors tive intentions and contraceptive prevalence. thatareamenableto change ffirough intervention. There The imnplications of the findings of this inquiry for is specific interest attached to those diseases associated population policy are straightforward. First, the age at with smoking and diet, which can lead to immediate which the first birth occurs is relevant for the level of support for public information campaigns and other total fertility, especaly in populations with liUttle con- public polides in the countries. traceptive practice and high fertility, such as in Sub- Analysis of the cause of death was conlucted using Saharan Africa. To the extent thatfertility occurs within time-seriesos-secion statisticaltechniques to exam- mariage,theageatunionwilllargdydeterminetheage ine the effect of sodoeconomic indicators on disease- atfirstbirth.Theageatmarriageand theageatfirstbirth specificmortalityrates.TheoDnlationofdifferentcauses have increased in some African countries. Because the of death with total mortality was also examined. 82 Huma Resources Delopment The research is expeCled to result in Policy Research University;MarkPittBrownUniversitrEricHanushek, Worldng Papers, journal artides, and seminr inside University of Rodhesterx Anil Deolalikar, University of and outside the Bank. WashingtonJereBehrman,Universit yof Pennsylvania ResponsUiit:PopulationandHuman ResourcesDe- John Quigley, University of CaLfornia, Berkeley; and partnent,Population,Health,andNutritionDivision- John Strauss, Rand Corporation. Jeffrey Hammer and Mead Over. With C. Murray. Csing datce January 1994 Closing dafte December 1991. Repors: Bduiman Jere. 1992. Cid Headth and Sdoohng Achlevemenb Assoition or Cu=Hty?r Household Investment in Human Capital Behmran,Jere, and Anil Deolaliwar. Forthcoming. "Child and Utilization and Benefits of Social Growth and Socal Services In [udlal Services Bhargavnk At Forthcoming 'Die Determinants of Heights of FllipinoChildren." Ref. no. 676-44 Lavy, Victor. 1991. 'Supply Constraints and Human Capital This research studies the interaction between the Inhestmeat Sdolngin RurGhanal Preted at a demand for and the supply of social services, the impli- World Bank swinar, Washington, DC January 2B. cations for the use of social services, and the effects of Lavy, Victar, andJ.MU Germain. 1992. The Choice of Medical social services on outcomes of human capital invest- Care hn Ghana and the Wilingness to Pay for Improved ments (such as childrerCs health and nutritional status, Quality? adult morbidity, and children's schooling attinment Lavy, Victor, John Stm, and Duncan Tbomas. 1991. 'Public and leaming achievements). In general, it seeks to an- Health Polcy and Health Outcomes in CAte drivoir swer such questions as: How imnportant are the vanous _. 1992. Quality of Social Services and Child Surival and dimensions of access to and quality of public and pri- Adult Health in Ghana." vate socal services in determining thedemand for them Pitt, Mark, and Victor Lavy. 1992. "Intra-housebold Resource and their use, particularly in the final outcomes of Allocation to Health in Ghana? human capital investnents? Specifically, it seeks to QuiWgey, John. 1991. Modelling the Demand for Health Care in study the nature of the effects of social serviceavailabil- Ghana and Simulations for Policy. Presented ata World ityandqualityon dildhealth;todeterminethedemand Banrk semin, Washington, DC, May 15. forhealth care and the effectKof the quality of services in Sdcultz Paul 1992. "Consequences of Health on Labor Ghana; to detenmine the effect of the quality of school- Productivity in Ghana and Chte dlvore" ingon student achievements in Indonesia, the effects of Stem, Steven. 1992. 'The Effect of Quality of Health Care on healtd services and the health status of adults on labor Adult Hefflth and Labor Force Partipation inJamaica? forceparticipationandeaningsinC6ted'Ivoire,Ghana, Thomas, Duna 1992 -Health Care and ChId Health in and Jamaica, and the effect of health and education Zimbabwe. services on the nutritional and health status of children in the Philippines; and to explore the effect of chlld health on school attendance and educational achieve- Improving School Effectiveness ment and Efficiency in Developing Countries: The research is a acoss-countzy, cross-time study. The Case of Jamaica Analyses focus on the integration of the supply of sodal services into the study of utilization and outcomes. It Ref. no. 676-87 uses a matching of each household survey with surveys Basic education is hndamental to economic and of providers of social services. Its approach relies on the social development and for individuals it is a principal estimation of reduced-form relations, bypassing the means for raising their socioeconomic statbis. Yet in identification of the tecnology involved, on both the many developing countries basic education is not orga- demand and the supply side. It also uses a compaxison nized topromoteefficientproduction of cognitiveskills. of the main sodal sectors-ealth and education-with Knowledge of which educational investments are most the experience of several countries with different eco- effective in imparting these skills would assist both nomic and policy contexts, using very similar data sets govermmentsand theWorld Bankinallocatingresources explicitly designed for the project, and conditioned on aimed at improving educational outcomes in develop- county-specific circumstances. ing countries. ResponsZsibiyfPopulationandHumanResourcesDe- The ultimate objective of this prject is to demon- partnent, Poverty Analysis and Policy Division-Via- stratehowtocanyouteducationresearch thatwill lead tor Lavy. With Paul Schultz and Duncan Thomas, Yale to immediate and specificpolicy recommendations that 83 Human Resourc Deopment can be acted on by Minstry of Education officials in JamaicaHananJawby,UniversityofRochesterAbigail developingcountnes,takmngjamaica as thedemonstra- Harris, Fordham Universty; Lynn Ilon, SUNY, Buffalo; tion country. It has two immediate objectves that work and Chinghua Zhao, American University, China. The toward this end. Thefirstis boestieatedeterminants StatisticalInstituteofjamaicaandthePlanninglnstitute (bothhousehold and school factors) of reading compre- of Jamaica are contributing staff time. hension and mathematics computation skills atboth the Cosing datc June 1993. primary and the secondary levels in Jamaica. The sec- ond is to combine these estmates with data on costs of schooling inputs to calculate the relative cost-effective- Economic and Policy Determinants nessofvariousinputmixes. Thiswiilbedoneusingdata of Fertilit in Sub-Saharan Africa already colected in the Jamaica Survey of Living Con- ditions (SLC). R. no. 676-91 The research will be based on the 1990 expanded Sub-SaharanAfricahasthehighestpopulationgrowth education module of the SLC, which includes detailed rate and the highest fertility rate among the developing household data matched with extensive data on the regions. And while countries in everyotherdeveloping schools attended by each child in the households sur- regionhavebeguntoexperiencedeclinesinfertility,this veyed.Thedataonschoolsincludetheirphysical,peda- trend has only recently shown up in Sub-Saharan Af- gogical, managerial, and ranizational chaacteristics, rica, and in only three counties, Botswana, Kenya, and as well asinformationbearingonpoliqrissues of cntral Zimbabwe. Results from the Demographic and Health concen to the Jamaican Ministry of Education. In addi- Surveys indicate an increase in these countriesintheuse tion, thedataindudestandard measuresof readingand of modem contraceptives and a possible decline in mathemaicssklls(CaliforniaAchievementTest). Ana- fertility. But what accounts for these trends and how lyticalteniqueswillbeemployedto control forsample sustained they will prove to be remain uncertain. Fur- selectivity, grade repetition will be analyzed in detail, ther, fertility rates in these countries are still relatively separate analyses wfll beperformed by gender, and the high. use of scores on gade-sixnational assessment testswll In considering a strategy for reducing fertility and permit studies of leaning gain in secondary schooL population growth rates in SubSaharn Africa, know- An innovative component of this research project is ing why fertlity remains high and contraceptive use the extent of Jamaican involvement. The survey instru- low isimportant. Surveys of women of childbearingage ments were reviewed by government officials and aca- in Sub-Saharan Africa over the past two decades have demics at the University of the West Tidies; Jamaican shown that there is a growing unmet need for CDntra- experts evaluated proposals submitted under a small ceptives among certain groups of women who want to grants competition; and four research studies will be space and limitbirths but that, despite this trend, mort carried out by Jamaicans under the small grants pro- couples still want very large families. gram. The Jamaican involvement is intended to ensure Among the factors thought to be most important in that the policy prescriptions derived from this project accountingforthedesireforlargefamiliesarehigh child feed into the education planning process in Jamaica. mortality rates and women's low levels of education. The following four analyses will constitute the main That would suggest that a two-pronged approach for research output of the project (1) analysis of the deter- reducing fertility is needed: first, multisectoral policies minats of educational achievement; (2) assessment of that will lower the demand for children (by reducig the cost-effectiveness of alternative educational invest- dhild mortality, raising the level of education for fe- ments; (3) investigation of gender differences in learn- males, and increasing the attractiveness to parents of ing; and (4) a study of test bias relating to the use of an investinginchildren),and second, improvementsinthe American test in a Caribbean ODuntry. Further studies performance of familyplanning programs in attracting will come out of the small grants competiton. The results and retaining clients. The purpose of this research is to will be diseminated thmugh technical and policy-oa- providetheneessaryempinicalfoundationforeffective ented working papers and two conferences, one in Ja- muldsectoral population policies. maica and one in Washington at the World Bank. The project wil address two questions. First, what is Responsity: Population and HumanResources De- the effectof ecDnomicand socal policies on fertlity and partment, Education and Employment Division- contraceptive use in Sub-Sahara Africa? And second, Marlaine Lockheed, and Poverty Analysis and Policy how can African family planning programs be made Division-Pau Glewwe; and Latin America Technical more effective in attracting and retaining dients? To- Department, Human Resources Division-Margaret ward answering these questions, the project will con- Crosh. With Derek Cordon, University of West Indies, duct comparative microeconomic analyses of the eco- 84 Hwman Resowres Deveopmet nomic and policy determinants of fertlity and contra- and Andrew Nyamebe,; Population and Human Re- ceptive use in 13 African countries, using recently mDl- sources Departent,PopulationHealthandNutrition lected household data. Ihe research will focus an fow Divson-SusanCodne;WestemAfricaDeparent, issues: the effect of women's education on fertilitrand Population and Human Resources Operations Divi- contraceptive use; the relation between child invest- sion-HazelDentozuGhanaResidentMision-Patience ments and the number of childrenr; the deterninants of. Stephens; and Nigeria Resident Mission-Esther chld mortality and the effect of hild mortality on Boohene With Kofi Benefo, Brown University; Aka fertility; and the effect of the avaibility, price, and KCouame, University of Montreal; Mark Montgomery, quality of family planning and other social services on SUNY, Stony Brook, Itayi Muvandi, Zimbabwe Family fertility and contraceptive use. PlanningCouncilt Raylynn OliverStranford University; Tentative conclusions of the research are as follows, and Duncan Thomas and T. Paul Schultz, Yale Univer- * Thlere are verylargedifferences in theproportion sity. The Institut National de Statistique, Cote dIvoire, of women with schooling and in the distribution of is contributing staff time. female schooling aauoss the African countries studied. Caosing datc June 1993. * MultivariateanalysisofAfricanDemographicand Re ts: Health Survey (DHS) data shows that women's shool- Ainswor, Marb, md Andrew Nyamet. 'Impact of ing is assocated with lower cumulative fertility in all Womens Human Capital an Ferily d Conbaplive Use countries, in both urban and rural areas and in the in Sub-Saranfrica: A Study of 10 Sub-Saham African youngest and middle-ged cohorts of womerL CoimWesf * The size of the relation between women's school- Befo, Ka4 and T. Paul Scihult. 'Frtity and Child Mortality ingand fertilityvariesconsiderablyacrossthecountries in Cte dlvoire and Ghan. studied, but the reasons for these differences remain obscure For example, there is no apparent relationship between per capita income and the relation between Modeling Future Health Trends and Costs female schooling and fertility. in Chile * Women'ssecondaryschoolingisuiiversallyasso- dated with lower fertility. The relationship is quite Ref. no. 676-96C strong, even in countries with less vigorus family Chileisundergoingamajordemographicandepide- planning programs. In most countries there is no rela- miological transition. The incidence of infectious and tion between women's primary schooling and fertility. pamitcdiseaseshasdedinedsharplyand,asthepopu- But in a few countries female primary schooling does lation has aged, the relative importance of noncommu- have a strong negative relation with ferfility. These nicablecdurnicconditionshasinceased.TomeetChile's ases call for additional scrutiny for potential policy emergingand future health needs and priorities, and to implications- improve the equity, effidency, and effectiveness of its D Husbands'schoolingisalsoassocatedwithlower health system, improved data on the country's future cumulative fertility. But the association is weaker than health trends and costs are needed. Also needed are for women's sdhooling. evaluations of how alternative health-related interven- * Women'sschoolin&includingprimaryschoolin, lionswouldaffect themortality,disability, and morbid- raises the probability of the use of contraception in all ity associated with chrodic degenerative diseases and countries studied. k seems to have the greatesteffecton injuries contraceptive use in countries without an active family This project centered on the development of a model planning progauL to predict Chile's future health cue experience and * AnalysisofLivingStandardsMeasurementStudy needs. The model was designed to produce three main survey data for Cobte d¶[voire and Ghana shows that results: an "order of magnitude" forecst of causes of women'sschooling is stronglyrelated to fertilitylevels. death for the next 40 to 50 years; the ability to generate But therelationsbetween incomerwealth and fertility alternativescenariosofhealthsectororbehavioralinter- in the two countries are opposite: income or wealth is ventions and a measr of how these interventions associated with higher fertility in CBte d'Ivoire but could be xectd t affectChiles futurehealth experi- lower fertlity in Ghana. ence; and predictions of health care costs over time, * In Cbte d'Ivoire and Ghana, child mortality is using mortality experience as an index of morbidity associated withigherfertility: areductionof five child expense deaths would be assocated with one less birth. Unlike the eari, more narrowly focused studies of Responsilty: Africa Technical Department, Popula- health conditions in Chile, this model incorporates na- in,Health,andNutntionDivision-MarthaAisworth tional data and allows comparisons between sodoem- 85 Human Resocs Devdopment nomic groups and between urban and rural areas. The The reslts of ihe study indicate seven policy inter- data base it will areate should help in Idendfying cost- ventions that are Ikely to improve gender equity in the effective policies and programs for reducing the mci- teaching force and in training programs in Nepal: denceof chronicdiseasesand injuriesinChile. Itshould * Tnprovefaimessinteadierrecruitment,selection, be useful to policymakers atall levels of governmentin and posting practices Chike, as well as to policyakers and researchers of * Implement hiring quotas for women in the teach- other countries, particularly those countries undergo- ing force ing similar demographic and epidemiological tansi- * Introduceasocialmarketingcampaignthatmodi- tions. The results of this project will also contribute to vates women to satk teaching positions and profes- thepreparation of aWorld Bank-supported adulthealth sional training and encourages husbands and parents to study in Chile. prvide substantive support to these women Responsibilny: Latin America and the Caribbean, * Provide economic incentives in the form of hous- CountryDepatmetIV,HumanResourcesDivision- ing allowances for female teachers posted away from Patrido V. Marquez and Evangeline Javier. With IL their homes Dennis Tolley, Brigham Young University; and Maria L * Implement an accessible information dissemina- Rivara,Mlnistryof Health,Chile.TheMinistryof Health tion system to advertse teaching and training opportu- of Chile contributed staff time. nities Clasing dAta March 1992. * Expand theuseofradioasanalterative in-service taining strat * Provide secare travel, lodging and child care ser- Primary Teacher Training in Nepalt vices for women in training. ImproDVig Equity for Women Rsponsit: South Asia, Country Department I, PopuIation and Human Resources Operations Divi- Ref no. 676-98C sion-Thomas Scmidt. With Molly Maguire Teas. This study looked at how equity for women in the Cosing datc June 1992. teaching force and in traininp, programs could be im- proved in Nepal and in counties with conditions simi- lar to those in NepaL Improving equity for women in Growth and Productivity Lm Developing teachingand teachertrainingprogramsin the countryis Counties important for at least two reasons. First, Nepal has among thelowestschool enrollmentand retention rates Re. no. 677-09C for females in the world, and research has shown that This project consisted of seven closelyrelated studies Nepali parents prefer sending girls to schools that have on the determinants of productivity and growth in female teachers. Yet in 1990 only 12.8 percent of Nepali developing countries. The studies contribut I to the teacherswerewomen,and64percentoffemaleteachers Banies World Development Report for 1990 and 1991. This were untrained. Second, there is an unqualified female project completed each of the studies, refining and labor pool in Nepal that is untapped; leaving valuable testing their findings human resources wasted. One of the chief accomplishments of the research The study had several objectives. It attempted to effortwas to construct adata base for about70 develop- identify key factors related to Nepali women's partici- ingcountries for the period 1960-87. Thisdataset,which pation in the primary school teaching force and in two indudes annual data on human and physical capital in-service teacher training programs, the Radio Educa- stock, served as the basis iw the studies. tion Teaclur Training (RETh program and the Primary The main purpose of the .esearch was to examine the Education Project (PEP). It sought to design intren- relations between educaton, economic openess, and tionsto inaeasetherecuitmentandretentionofwomen omnomicgrowth,focusinginparticularontheinteraction in the primary teaching force and in the REIT program between policies thatencourage openss and those that and the PEP. And it aimed to provide information to encourage educationL Other factors relatingtoproductiv- otherprograms and oDuntriesinwhich gender equity is ity and growth were also investigated. For example, ore sought in education and other sectors. studyeminpedthemlonshipbetweeemnoaicgrowth The study used ethnographic and quantitative data and economic, politicl, and civil libertes. collection instruments to gather information on the Some of the studies looked at the relation between supply of female teachers in teaching and the REIT human capita! investennt and growth and productiv- progradmandthePEPandtDrevealthecomplexdynam- ity. One study used the data series on education and ics of the lives of women respondents. physical capital to conduct empirical tests of endog- 86 Human Resources Devdopment enous growth models. Another combined that data range of national economic policies that direcy or series with data on land and the labor force to estimate indirectly influence the economic incentives to investin productionfunctionsandsuchparametersasretumsto human capital versus physical infrastructure capital. schooling and the marginal productivi tyof capitaL The And, In the light of tese inferences, the research will results of this study were compared with those of other reexamine a number of issues that pertain to these studies of production functions and with results ob- tradeoffs. For example, given that the choic between tained for industrial economies A third study com- taxdng income or taxing financial wealth affects private pared the effect on wlfWare of economic growth with incentives to invest in human versus physical capital, thatofgovernmentspendingonhealthandeducationin what is the lkely time profile of the tradeoffs involved? developing countries. And given thatthemosteffective means of favoring one Finally, a study that established that industrial and form of accumulation over another vary according to developing cDuntries experienced similar decines in the precise role of human capital in the growth pro- productivity during 1973-87 sought to determine the cess-depending,forexample,onwhetherhumancapi- reasons for those declines. tal acts as a source of unbounded accumulation in itself Responshit3 Investment Department, Special Op or simply as a primary factor in the research sector-is erations and Researdc Division-Suijit Bhalla With itbetter to emphasize primary education or speciized Indermit Gil and Lawrence Lau. post-secondary education? Clsing date: June 1992. The study will use data sets available in the World Repors: Bank Economic and Socal Database (BESD) for the hal. Suilt. 1992. ree Sodelies, Open Markets, and national accounts data on physical capital investment Economic:Welfare" Wodr Bsank, Washingto, DC DrafL and GDPin the empirical approach. It will first prepare bhalw SurMit and Indemit CGiL 1991. 'Sodal Expenditre the data for analysis, then develop furiter the theoreti- Policies and Welfare Adcevements In Developing Cour, cal and empirical frameworks and estimate the various tise World Ban, Wasigoan, DC DrafL models, focusing on the role of humnan capital as a Bhafll, SurjZ and lawrence LanL 1992. 'Openne and determinant of long-run economic growth. Econoic Crwlt Cros-Cumtry Evidence. World Bark Responsbiity Population and Human Resources De- Washington, DC Draft parument, Poverty Analysis and Policy Division-Vic- Gill Indermit, and Surjt Ea. 1992. "Extenalties In New tor Lavy. With Bogan Jovanovic, New York University; Growth Theoq lhe Importance of Fenuale Human CapitaL' Shaul Lach, Hebrew University; Danny Quab, London World Bnk, Washngton, DC Draft School of Economics; and Peter Pedroni, Columbia University. Cosing date January 1993. Human Capital Accumulation and Economic Report Grow&l An Empiical Study Jov.novvi, Bgan, Shatd a1 and Vktor Lavy 1992. "Grwth and Human Catars Rleas an Invesment In Cost Ref. no. 677-11 Reduction'. This research has four primary objectives - To develop an empirically viable framework in which to aaalyze the role of human capital investment Labor Markets in Transitional Socialist in the process of economic growth Countries * To explore the use and role of diffeet aggregate measures of human capital-from the narrower con- Ref. no. 677-20 cept of schooling to a broader measure that indudes This project will provide hard evidence concerning investment in health and nutrition-in the process of the patterns of job mobility associated with the transi- economic growth tion of a socialist economy to a market economy. And it * To compare this role to that of other potential will formulate labor market policies and programs to growthfactors,withparticularemphasisonthetradeoffs facilitatethetiansitionboth byenoDuragingtheefficient between physical and human capital investments reallocation of labor and by spreadig the costs equita- * To evaluate the role of countries skill endow- bly among different segments of the population. ments in the process of producing and adopting new The resech will bry to answer the following ques- technologies, and in contribtng to the endogenous tions Which labor group is most at risk of becoming growth of total factor productivity. unemployed? What is the lengih of post-displacement On the basis of these relationships, the reah will unemployment? Which group of the labor force is make inferences about the consequences of a broad reemployed first, and which one finds difficulties in 87 Human Rswrts Deudopmat seauring new jobs? How do the salaries of reemployed studyorforthelaborforce. Currenttheonzingaboutthe individuals compare with their previous eamings and emergmce of a "world society" leads to an expectation with the earnings of otherworkersundersimilarcondi- of inanwsing standardization of the formal content of tions and dharacteristics? Are there certain groups of mass and elite education. It remains to be seen whether workers whose eanings losses are especially large? elite education is also subject to world cultural norms Theanalysiswillbebased onan estimation of hazard thatresult in increasingly homogeneous formal content models, for analyzing the deteminants of labor market across national education systems. transitions, and an estimation of earnings functions, for The research analyze the Idnd s of formal knowledge analyzing the determinants of displaced workers' to which national poicymakers expect general second- reemployment earnings. my students tube exposed. The data wem compiled by The study will use data on the Republic of Slovenia, a group of Stanford University researches about five which possesses an extremely rich administrative data years ago. This group collected and coded official re- set on the personal characteristics and work history of ports of the kdnds of courses and the amount of time virtually aU labor force participants. spent on different subjects in primary and secondary Becauseof thebreakupofYugoslaviaand theaccom- education for many countries and for a long period of panyingpoliticaluncertainty,theprojectwasposed time (1920-85). for about six months. By the end of June 1992, the Curriculumninmostcountries isgeneralyamatterof extensivedatapreparationwasdosetocompletion,and national policy, and these data cDnsist of official na- the analytical work will soon begin. tional curricular timetables listing the proportions of Besidesa comprehensive final report,theproject will school periods to be devoted to such topics as math, produce three interim reports: on transitions out of science, social studies, languages, physical education, unemployment, on the performance of recnt entrants moral or religious instruction, the arts, and, sometimes, into self-employment, and on the post-displaament vot,'naltraining.Thesedataspecfyeithertheamount experiencrs of individuals who lose their jobs. of time to be spent on each subject or the proportion of A oferenceonlabormarketpolidesforpolicymak- time devoted to each subjecL The data set emphasizes ers in socialist countries in transition wiU be held in tracks that lead to higher education, even though in Eastern Europe, and seminars on the research findings many oounties only a small percentage of individuals will be held in the Bank and elsewhere. completingthecourseworkinthattradckwill actuallybe Responsibility: Country Economics Department, So- seected for higher education. cialistFconomiesReformUnit-M;lanVodopivec,Alan Thisworkwillffillanimportantneedforunderstand- Gelb, and BrankoMlanovic,WithKatharineAbrabam, iug the evolution of the contentof secondaryeducation. Universityof Maryland.TheStatisticalOfficeof Slovenia, In preparation for the Education and Employmcat Pension and Invalidity Fund of Slovenia, and Employ- Division's secondary education policy paper and to ment Office of Slovenia are contributing staff time. help Bank staff in evaluating and designing secondary Cbosing datc June 1993. school projects, it is important to understand cross- national and historical trends in subject matter empha- sis. The approach of this study-sweeping in compari- Cross-National, Longitudinal Analysis of the sons across time and space-can add a much-needed Curriculum of Secondary Education, 1920-85 context for substantive discussion in the field. Responsibi.y: Population and Human Resources De- Ref. no. 677-40 partment, Education and Employment Division- Theexplosionof compulsory,uimversal,nasseduca- Donald B. Holsmger. With John Meyer, Stanford Uni- tion throughout the world has led to much research versity David Kamens,TUniversity of Southem llinois; attention to the organization, financing, and gover- Aaron Benavot, Hebrew University; and Yun-Kyung nance of secondary education systems. But litde atten- Cha. tion has been given to the content of these education Closing date November 1992 systems, to how much variation exsts across societies, Reorts: and to what the sources of the variation are. This re- Mqe, Jobn VW. avid Kaeos, and Aaon BDqavot 1992. "fle search is an effort to correct this considerable gap in Wemnal of New Kuowledge: Nineteenth Centur understanding. Oulghu andd Twenteth Cntury Diusion f Educatouf The main issue the research addresses is whether a Jmua of Cu n WISuis (Febnay). world consensus is emerging acrss nation-states con- Meyer, John W, David Kamens, and Aaron Benavot, edt 1992. cning the knowledge that secondary students should Sdad XKzuifrr fhc ms WrdM Cud NAknuJ formally study as part of their prepsartion for furither Cunkuda, 19201986. Londo: Famer Press 88 HAman Resources Deveopment _._ 1992. alVant Faimn Cages of Otiulesa vith Distnct than is commonly thought Thus, if oontrolling future cuiaf Injohn W. Meyer, David Knaenr, and Aaron population size is an objective, policies must persist Benavot, eds, Sdaoiw KnwldforJMasw WardCultur overlongperiods(measuredindecades notyears).This ad Notinl Currinu, 1920-198& London: Falmer Press suggests the need fhr broad and sustainable interven- tions to address constraints in the demand for and supply of family planning services, and in the demand Population Issues in Asia for smal families. Third, the bariers to lower fertility differ across Between 1950 and 1990 population growth rates in countries and over time within countres. In some set- Asian countries were among the highest in the world. tings, inadequate family planning sevices and other The prospects are for continued growth. In the next 40 supply-side bottlenecks maybe the chief limiting factor, years, the total population of the 18 countries consid- while in others, it may be the weak demand for small ered in this study is expected to increase by 60 percent families n desiging overall strategies to lower fertility rea_hing4.4billionin2030,comparedwith2.7billionin in a given context, careful assesment of country-spe- 1990. Population growth thus remains an important cific conditions is therefore essential to determine the concen to policymakers appropriate balance of emphasis between enhancing This study wasan attempt to contribute to debates on the supply of family planning services and strengthen- appropriate policies to slow population growth. It was ing the demand for small families. addressed to policymakers with a broad rather than Fourth, the effectiveness of family plaxning pro- specialized interest in the subject, and focused on such grams, as they are currendy organized in Asian coun- questions as the power of policies to alter future popu- tries, can be improved, though not necessarily through lation growth, the cDnditionsunder which their effect is the same measures everywhere. Additional resources liklhy to be maximized, the efficiency with which they may be waranted in some countries, but more often bring family planirng services to target populations, better allocations of available resources are needed. In andtheimplicationsofshort-runchangesintiesizeand most settings, public services and subsidies could be the age composition of Asian populations, more sharply tageted to reach disadvantaged groups. The study used country data for comparative analy- Fifth, substantial changes are expectd in the age and sis of three princpal aspects of population issues: (1) geographiccompositionofthepopulationinmostAsian Asian countries' curent demographic cDntext, includ- countries in the coming decades, with important impli- ing recent histories of dhanges in the underlying deter- cations for sectral policies and investments regarding minants of fertility; (2) the design of current family environmentalmanagement,education,healtb,employ- planningprograms,including programfinanceand the ment,andurbmndevelopmentMonitgsuchchanges, targeting of public services and subsidies; and (3) the especially where fertility and mortality conditions are prospects for population growth and change in compo- changing rapidly, and incorporating the information in sition.n addition, casestudieswereprepared forChina, development planning are essental to ensure efficient India,andEndonesia.Thedataforthestudyweredrawn and adequate responses to Asian countries' changing from a wide variety of sources, mostly published, and demographic context were recompid to ensure comparability across coun- Responsiblity: South Asia Regional Office, Office of tries the Regional Vice President-Jee-Peng Tan. With War- Five key findings emerge from the study. Fist, in ren Sanderson, SUNY; Paul Gertler, Rand Corporation, most Asian countries, a substantial proportion of the Judy Banister, US Bureau of the Census; Amy Tsui, population increases in the next 40 years-about 65 University of North Carolina; and Andy Mason, Uni- percent an average-will be due to the rlaively high versity of Hawaii. proportion of young people in their populations. Poli- GCmpLetion dalt June 1992. cies to lower current fertlihty an influence futhre popu- lationincrease,buttheireffectwilloftenbemuchsmaller than that of the age structure. This does not mean that Research and Human Resource Issues policies are futile, ordy that a substantial proportion of in Scientific and Technological Development future population growth is unavoidable even in the best of circumstanes This study sought to identify the major research and Second, policies to reduce future population growth human resource constraints in the developmet of sci- are most effective when they support a sustained de- ence and technology in selected countries of the Europe, dine toward a lowlevel of fertility that continues to be Middle East, and North Africa (BIENA) region and maintained; the speed of decline exert les influence recommenel measures for their alleviation. 89 Human Resources Deveopment ManyEMENAcountniesareseekLngBankassistance opment But their existence indicates that they should to improve their higher education and technological be considered as areas for policy reform in operations developnmentpolidesandprograms.lisstudyhelpsto addressing scentific and technological development illuminate successful interventions and policies for sci- Responsibiy: Europe and Central Asia, and Middle entific and technological research at a time that knowl- East and North Africa Technical Department, Popula- edge and understandingin this crucial area areweakfor tion and Human Resources Division-Uoyd D. Briggs both the Bank and its borrowers This study carefully andMauriceBoissiere WithCharlesWeiss,GlobalTech- links with and provides important additions to the nology Management, Inc.; Vlastimnir Matejic, Irstitut Bank's ongoing country sector work in higher educa- MihajloPupin Beograd; Mira Lenardic, Instituteof Eco- tion. The study will provide considerable background nomicsofZagreb;andSandor Nagy.TheTurkishScien- information for other, similar studies that are being tificandTechnicalResearchlnstitute,Council of Higher initiated in other countries and regions Education, Turkey; National Technological Develop- The descriptive study began with a review of newly ment Office, Hungary; and the Federal Secetariat for gathered information and analysis within the Bank Development, Yugoslavia, contnbuted staff time. relative to the policy environment that affects the de- Cmpletion date: June 1992. mand for improved science and technology. Using this as essential background, the study team gathered addi- tionalinformationintheparticipatingcountriesthrough Women's Rights to Land and Agricultural interviews with ministry and agency officials respon- Performance in Sub-Saharan Africa sible for formulating and implementing higher educa- lion and science and technology policy. Data analysis In most Sub-Saharan African countries in which ag- focused pnmarily on the levels, sources, and distribu- riculture is the main source of livelihood, access to land lion of research funding and expenditus, the distribu- remains a princpal determinant of poverty and sodal tion of research manpower, and the trainingof scientific well-being. Women's rights of access to and use of land and technological personneL maldng comparisons with are conditioned by the positions of their households other countries. within the broader sodoeconomic organization of their Themostcommonsignificantconstraintstoscientific communities-and by the distribution of authority and tedhnologicaldevelopmentin thepaticipatingcoun- within the household. As a resut of historical prooesses tries were found to be as follows: leading toagricultural cmmercalizationand intensifi- * Thehrameworkforformulatingandenforcingover- cation, women are a primary work force on famis. all scientific and tedhnological policy is generally weak, Estimates by the International Labour nzation and there are inconsistencies in establishing research suggestthattehareof agricalturallaborcontributedby policies and priorities. womenin Sub-SaharanAfrica isamong thehighest inthe * linkages between the researchers and research world (42.7percet).Thissuggeststhatneglectof the role institutions and the usersof research in the govenmuent of women in agriclturl production may undermine the or the productive sector ae weak or nonexistent realizationofdevelopmentgoals.Butalthoughthe critical * The procedures for funding research do not re- role of women in development is now widely adknowl- ward technical merit, and the financal support and edged,tereremainsaDnsiderableanalyticconfusioncon- incentives for establishing a strong research program cening the interplay between women's status in society are insufflcient and productive efficiency. Solutions that seek to target * Thereisinadequateprovisionforappropriatetrain- rural woren as individuals rather than as members of ingof researchersand otherhigh-leveltechnicalspecial- rurlmulti-enteprisehouseholdsmaynotbeparticularly ists. effidentininasingfarmproductivityorimplementable * There is insufficient attention to the marketing of by borrower governments. research services to clients who need them, and mad- Rual women do not cDnstitute a single homog- equate attention to dissemination and transfer of the eneous category for whom a particular poLicy interven- results of successful research. tion would be uniformly appropriate. At least four * Participation in international systems of scientific broad categories of women in nual Africa may be cammunication, indludingaccess to international scien- identified: those from landless or near-landless house- tific data bases, is minimal, if not nonexistent, and the holds, those from small cultivators! households, those statiscal data base fordecisionsregarding science and from large-farm orpredomantly commercial famng technoloy policy is inadequata households,andthosefromfemale-headedhouseholds. Some of these constraints are not new to Bank staff The most disadvantaged of these households, which involved in higher education and technological devel- require urgent attention, are the Temale-headed and 90 Human Resources Development landless or near-landless households. The two often and 1980, decreased significantly between 1980 and overlap. 1985, and then began to recover some of the losses. In Thisstudyaims toassess theextentto whichaccessto somecountnieshighlyvocallobbyigandinterestgroups land bywomenisderived,Iimited,insecare,ortenuous, have succeeded in protecting the higher levels of educa- and how this leads to low agricultural productivity of tion from the economic recession-to the detiment of female-managedfarmsinSub-SaharanAfriaLThestudy basic education. But there are now major efforts in the relies,asafrststep,onareviewof theexistingliterature LAC region, many supported by World Bank loans, to to critically analyze and distinguish between aspects of improve the quality of primary education. Loans total- productive efficiency and those relating to social wel- ing more than US$1 billion are under way or being fare.Itwillbeargued thatpolicyinterventionsaddress- prepared in Belize, Bolivia, Northeast Brazil, Chile, ing the two problems must, of necessity, be separate if Colombia, Costa Rica, the Dominican Republic, Ecua- they are to achieve their intended impact. dor, El Salvador, Haiti, Honduras, Mexico, the state of aose coordination will be maintained at all stages Sao Paulo, and Venezue!a. The Bank carries a major withthoseworkingonpolicyformulationintheWomen leadership role in the region; its support to primary in Development Division and operational staff con- education has increased from an average of $20 million cerned with improving productivity and social well- a year in 1985-90 to an expected $500 million a year in being among rurl women in Africa. 1991-95. Resq s7ity: Agriculture and Rural Development These efforts represent significant changes in atti- Department, Agricultural Policies Division-Shem tudes and expenditures, but there is much we do not Migot-Adholla; and Population and Human Resources know and understand about how best to achieve the Department, Women in Development Division. goals of increased learning and school retention. The Compleion dat December 1992. gaps in our knowledge can be roughly categorized in terms of (1) inadequate kmowledge of and information on inputs, outputs, and the relations between them in Improving the Quality of Primary Education primary education; and (2) inadequate understanding in Latin America of how to design effective interventions and to deliver services in such areas as textbooks, in-service training, Current gross prmary school enrolment ratios of school health and nutition, and improved manage- more than 90 percent in nearly all Latin American and ment. Canbbean (LAC) countries and more than 100 percant Thisstudyseeks to contribute to theimprovementof in many aountries show that most nations in the region Latin Americas primaryeducation byundertakngfive have achieved the quantitative goal of having nearly tasks. Frst, it will analyze a set of comparative educa- enough physical places in primary education to serve tion indicators onLAC countries. SecDnd, it will review theschool-agepopulation. Butprimaryeducationin the the literature on student learning and the causes of LAC region continues to be beset by grade repetition repetition and drop-outin theLAC region. Third,it will and inadequate learning, especaly in the first grade, undertake case studies on the use of information for and the region continues to lag behind-especially in decisionmaking. Fourth, it will conduct case studies of terms of repetition rates-not only industrial countries effective school practices. And fifth, it wiul undertake but many low-income aountries in Africa and Asia. operational reviews of key project design issues. Ihe First-gade repetition is reported to be more than 50 study will conclude by preparing a final report percent for Brazil and more than 30 percent for Bolivia, The study will help convince countries to "stay the Ecuador, and Peru, and repetition continues to be high course in assisting primary edacation, but to target even in the upper primary grades. In addition, recent their investments to those elements of the system that work undertaken in Chile and Costa Rica has shown have been shown to have the greatest returns. The that most children completing primary education have reportwill provide, for the first time, a critical review of mastered less than half the content of the national cur- proectdesigissuesnBanc-financededucationprojects riculum. The achievement of children in rur and m and will therefore help to redirect some of the Banlcs urbanslumschoolsismostdeficient,espedallyinhigher- lending strategies as well as those of other lending order thinking skills. The only children doing consis- agencies. While some comparative indicators are avail- tently well, as defined by the national curriculum in able on education in the LAC region, for the first time thesecountries,arethoseinfee-chargigpnvateschools they will be reviewed ctically and systematically. Txe generally serving the nuddle and upper casses. reportwill hel?a countries to begin gathering systematic Public expenditure on education per inhabitant in dataon such areasas textbooksand time-on-task, which the LAC region increased in real terms between 1970 have been identiFLed as key factors affecting achieve- 91 Human Resoures Delopmet ment The report will help Bank staff to ident key should be identified and promoted, and nutrition in the sectoral issues, induding country outliers, and thus context of the BanWs mandate to reduce poverty and improve the focus of project content and conditionality. alleviate its significat manifestatons. The case studies on the use of educational Information Thestudywillcomise situationanalyses;casestud- and on effective schools wil help lead to more cast- les of nutrition institutions and successful lage- and effective education programs and project and help to small-scale nutrition interventions; and a synthesis of define project components. the lessons of the experience for national strategies ' ReponsTlit:LatinAmericaand the Carbbean,Tech- rapidly improve nutrition. nical Department, Human Resources Division- Re sWbiy: Asia Technical Department, Popula- Laurence Wolff, Eduardo Velez, Jorge Valemzuela, and lion and Human Resourcs Division-James Greene. PhillipFletcher,andCountryDepartmentLPopulation Complto ate June 1993. and Human Resources Operations Division-Robin Hor; Population and Human Resources Department, Education and Employment Division-Himelda Higher Education Policy Study Martinez; and Economuc Development Institute, Hu- man Resources Division--Calos Rojas. With Emesto Manycuntrieshaveinvestedconsiderableresourcs Sdhiefelbein,UNESCO-OREALC,ChileRobertMeyers, in buiding and developing their systems of higher The Consultative Group on Early Childhood Care and education, often with the assistance of donor agmcies Development; Mariano Herrera, Centro de andtheWorldBanl.Butinmanyinstancestheseinvest- Investigaciones Culturales y Educativas, Venezuela; mentshavenotbeen effective in establishing the capac- and Sergio Costa Ribeiro, Fundaqio Carlos Chags, ityt train thehigh-level manpowerand to produce the Bradl. new scientific and tedhnological knowledge necessary Completion d2tef March 1993. to sustain economic growth and development Govern- ments are therefore trying to reform their higher educa- ton systems to improve performiance. Tis policy study Moderating Malnutrition in Asia aims to identifyoptions in improvinghighereducation. It focuses on (1) the roles of the govenment and the Although Asia has managed to avoid overt famin, pnvate sector; (2) strategies for the effectve mobiliha- chronic serious and moderate malnutrition remains a tion, allocation, and utilization of resources; (3) the role significant problem in the region. The malnutrition of higher education in scientific and technological de- contributes to highinfantmortalityratesand adversely velopment (4) the cost-effectiveness of investment in affects the physical, mental, and emotional develn- differentinputs; and (5) options for diversifyinghigher ment of more than a third of surviving preschool chil- education structures and alternative delivery modes- dren. Foravarietyofreasons,policyrnakersinAsiaand The policy study is being developed through a pro- program managers in theBank are often unaware of the cosofsimultaneousresd,review,and consultation. extent of the malnutntion problem or their options for Research papers and country studies have been com- dealing with it Moreover, program managers are often missioned to assemble the empirical evidence that will unaware of the lessons for design and implementation underpin the policy recommendations. Reviews of the from the growing body of successful nutrition pro- literature on specific subjects linked to the role and grams. performance of higher edtuation systems (economic This study will accelerate leaning about the chice, contribution of higher education, financing issues, gov- design,and implementaonof integrated nutition pro- ernance, equity) and areviewof Bank lendingfor higher grams. It will summarize the nature and importane of education arebeing conducted. A worldwide consulta- the nutrition problem in Asia, typologies of malnutri- tive meeting was held in July 1991 in Kuala Lumpur, tion and their proximate causes, and the range of strte- Malaysia, tz identify the concerns of higher education gicoptionsfordealingwithmalnutrition.Itwilldismcss policmakers and specialists in member states. And a ways of matching the design and content of nutrition number of regional consultative meetings have been programs with their cultural, political, administrative, held in Africa and Asia to promote a collaborative technical, and economic contexts. And it will doument process of analysis and information- sharing between successful exFerience inthedesignand implementation leadersinbighereducationindevelopingcountriesand of nutritionprogramsandwithtinstitutionsfornutrition representatives of donor agences. policymaldng and policy analysis. The study will also Responibty PopulationandHumanResouresID- advance dialogue in two important areas of Bank con- parmit, Education and Employment Division-4anil cern:nutritionasatechnicalfieldinwhichbestpmctices Salmi, Thomas Eisemon, Viswanathan Selvaratnam, 92 Human Reures Delpmet Ompom Regel, and Robin de Pietro-jurand. With tests, designing survey research, and processing and Moussa Kourounma and Adrian Zidenn an.zngdata-aH forpurposesofpolicyanalysis. The Compkpion datc February 1994. projecthasreviewedWorldBanklendingforeducabon Reots resear,tesfing, and managementand reviewed inter- Albredht Douglas, andAdrian Zadna 1991. Defvs Cbse national donor experience in developing education t- PRcmyfor HIhek Etdwion: Studet [mn Prcgnms in searchcapacity. It asexamined experiencesinbuilding D ro Con World Bank Disc Paper 13V education research capacity in three developing corm- Washington, DC tries and explored institutional and social aonditions _.1991. Fuding Mea msforHig jrEurFinncFing under which applied sciencs flourish in developing for SaWity, Effcincy wd Rpumms. World Bank countries, drawing suggestions from these experiences Discussion Paper 15Z Washngton, DC.. on how donors can help strengthen education policy Ebisemon Thomus. 1991. anguage ksues In Scienticrlaining research capadty. The project has provided Bank staff and Research in Developing Goune PHRE Back- with a nonterlhnil, general overview of the purposes grod Paper 92/47. World Bank Washington, DC of educational assessments and the advantages and ___ 1991. Pkvate Jdntlutives and Tradition of State Control disadvantages of different types of standardized tools in Higher Education in Sub-Sinn Afrl PHREE for measuring student learing, and with a review of kgro d Paper 92/48 World Bank, Wasingtn, DC basic concepts related to measuring learning, educa- Sai, Jamn11 1991. he HiBher Eduction Crilis In Develping tional inputs, and processes. It has devloped a test- *Coumtriet PHREE Bakground Paper 91/37. World Bank, coting program to assist in the development of Bank- Washingto, DC supported testg components and provided technical _- 1991. ?ezspecvives on the Rnandng of Higberd support for Bank projects in all regions. And it has don?- PHREE Badcgound Pap 91/45 World BRnk sponsored a training workshop on measurement and Washingto, DC - as -assment for Bank staff and produced papers for Sdvartnam, Viwanathan, and OmpomRegeL 1991. "HIghe several international conferences Educatio in the Republic of Yemen: The University of The project will continue these efforts thuough sev- Sana'af Pohcy Resarch Wokidng Paper 676 World Bank, eral actions. It will expand provision of tedhnical assis- Washingtm, DC tance to indlude other counties, such as Venezuela. It will provide more tainingonmeasurementand assess- ment for Bank staff. And it wil produce resources (an Building Research Capadty educational assessamt sourcebook, an arotated bib- liography, and a book an improving resrch, evalua- As counties shift the emphasis of their education tion, and assessment apadty in developing countries) policy from school expansion to educational effective- that will assist Bank staff in tackling problems associ- ness, the infonnation needs of pohiymakers changa ated with im; roving the capacity of countries to con- Moreinformationisrequired abouttrendsin the learn- ducteducationresearch,evaluation,and assessmentsto ing achievement of students and about how the effec- inform policymakers on the conditions of leaming in tiveness of inputs differs among schools. This informa- their countries. lion is laddng in most developing countries; where Rwponsiity:yPopulation and Human ResourcesDe- available, it is frequently out of date. One agreement partment, Education and Employment Division- reached atthejomtien Conference on Education forAlI Mrlaine Lockheed and Donald Holsinger. With Linda was the need to assess learing achievementand to use Lach,LynnlonAbigailHarr,is,AlastairRodd,Otheilo assessments for improving education management. Congar, Levi Nyagura, Abby Riddell, Kenneth King, Educational assessment for education management Rosemary Bellaw, and Dean Nielsen. and policymaking is receiving increasing attention in CGikdtin date June 1994L Bank lending operations. The first project supporting Repors:. systems for assessing learning adhievements for moni- BeIew, Rosemary, and Led Nyuma 1991. ding Educa- thring purposes was approved in fiscal 1988, and in the ffonal Reserch Capalty in Zimbabwe - World Bank past four years such projects have increased absolutely Populaion d Human Resor_ Depmatment, Education and in proportion to the total number of education and Employmet Divisien, Wasdington, DC Draft projects. But tD ensure the quality and success of Bank- Gogr, Otheio. 1992. Tiannlng and Man_geneat in Bank- supported research and assessment components, sig- financed Education Prjects, 1981-83 and 1989-91 World nificant human and capital investments are required. Bank, Population and Human Resources Deparnt, This project thus seeks to develop strategies tD Educalion and EmploymetDivision, WashingoDC strengthen local capacity for developig assessment DMat 93 Humon Resourmcs Devopmaet Harrs, Abgail M. 1991. Effectve Assent of Educationl assessing the cost-effectiveness and equity implications Progress A Review of Strategtes for Measuring Lamning of policy and of specfic interventions In addition, the Acdhievement PHREEBa ound Paper 91/34 World programwillgroundtheissuesof provisionandfinance Dank, Wasingon, DC and of die role of the state in the contributions of Holsinger, Donald. 1991. "Building ReeavCapacaty in education to economic growth and productivity and to Brazil World Bank, Populaon and Huan Resources social development. Department, Education and Employment Diision, The rsearch begins with a survey of the liteure in Washington, DC. Draft the economics of education; this review is meant to lon, Lynn 1992. "A Framework for C;osing Tests In Third identify the analytical priorities for a research agenda. World Settings.- World Bani;, Population amd Huim One of its preliminary findings is that studies of the Rources Department Educaion and Employment economics of education grew in number during this Diisionv Wahgton, DC. Drat decade, contrary to expectations, and emphasized new lXng, Kenneth. 1991. Eilding Capacitle. aA the Developing directions. Two other studies review the gaps in our Workl A Review of Experience in the Hid of Education." knowledge about the contru. =tions of education to de- World Bam, Popuation and Human Resurs Department, velopment, particularly the measurement of extemali- Education and Employment Dision, Washington, DC. ties, the socal benefits of education not captured by DrafL individual gains. Measuning the benefits of education Lundc, llnda, and Marluine L2ckheed. 1992. "World Dank has always been a difficult and controverial task, Lendng for Educational Testing, Geeral Operational especially whec. differentiating between basic and Review. World Bank, Population and Hunmait Resources higher education orbetween general and tehnical edu- Department, Education and Employment Division, cation. Washington, DCr Draft Another set of studies will examine the partnerships LokheeI d Marlaine E. 1991. 'Mutidimensicnal Evaluatom: between the public and private sectors in providing Meaures for Both Right and Left Sides of the Equationf education, and ther effect on access, quality, and eq- PHREE Background Paper 91/46 Word Bank, Washigton, uity. In most developing countries, the central goverm- DC' ment carries the burden of financing a large part of the --- 1992. "World Bank Support kr Capadty Buildia The education sector. But tighteningbudgetconstraintsand Challenge of Educational Asessment' PHREE Backgomd expanding education deman. ? haveincreased the need Paper 92f54C World Bank, Washngon, DCr toconsideralternativesourcesof fundingand modes of Locked, Marbaine F., and Alastair C. Rodd. 1991. "World delivery. In some cases, the public and pnivate sectors Bank Lending for Education Research, 198249.' Policy are so interrelated that policies designed for public Research Worldng Paper 583. World Bark, Washington, DC schools also have a corresponding (and sometimes per- Nielsen, Dean. 1991. "Building Remarch Capacity in Thailand." verse) effect on private schools. Related to assessing the World Bank, Popabator and Hiuman Resources Department, appropxiate role of the state in education investments is Educaton and Employment Division, Washington, DC. measmuing the effect of the labor market on how much DrfL and what type of schooling individuals want to invest ___ 1992. "Building Educational Rearch Capacity. A in. But studies of the determinants of education invest- Syxntes of Experienes in Three Develping Counti ments in developing countries have rarely modeled or World Bank, Populabon and Human Resourc Departent, estimated this effect Education and Employment Division, Washington, DC A principal activity of this three-year research pro- Draft. gram will be an international symposium on selected topics in the econoircs of education thatwillbe held in the late spring of 1993. The symposium, which is being Economics of Education cofunded with several donor agencies, will brng to- getlher economists who have contributed to the under- The Bank has produced policy papers on primar -tnding of the economics of education. education and vocational-techical education, and is ReponsiufyitPopulation andHumanResourcesDe- undertaking suimlar work on secondary and higher partment,]EducationandEmploymentDivision-Ei- education. Thisnewresearchprogam aimstoexamine beth AL King and Rajendra Swamy; and Country E=- key overarhing economic issues in the education sec- nonics Department, Public Sector Management and tor These issues indude the appropriate allocation of Private SectDor Development Division-Estelle James. resources among differentlevels of educaion, the rela- With Kathryn Anderson, Jere Be*ran, IL Anne Hill, tive roles of the state and the private sector in the YanWan& and MIartinWeale. provision and financing of education, and methods for Completion date June 1994. 94 Hsman Rouwes Dvdopment Higher Education-Science and Technology publicand aprivate pespective govaenment repon- sibilities in health in developing countuies; pricing in In recent years, a significant development has oc- public fachlities and issues of extemal efficiency. crred in the factors that determine competitive advan- The supporting research is divided in two parts: (1) tage. Scientific and tedmological knowledge has be- developing the empirical base for comparative analy- come the most important factor in many areas of pro- ses, and (2) synthesizing and analyzing this infonna- duction. The potentially immense effect on develop- tion. mrnet of sdentific and technological training, research, The empirical base of the work has two parts. The and applications is beginning to be recgnized in most first is a pair of comparative reviews of experiences in developing countries, but they often find it difficult to both the developing and the industrial world. The sec- identify effective strategies. ond comprises case studies of different countries' fi- This research is designed to produce important in- nancing policies. puts for policy studies, in both higher education and The principal output of the project will be a set of secondaryeducationLItsresultsarebeingtransferred to guidelines to aid in the analysis of policy options for Bankc operational staff through an informal Science financing health care systems. Intermediate outputs Group network that has been established in the Bank, will be available continuously on topics relating to and through course activtyr. operational use. Contributions of this £2cearch that are particularly Reponsziby: Population and Human Resources De- relevant for the higher education policy work indude a partme.t,tPopulation,Health,and Nutrition Division- general operational review of scientific and technologi- Jeffrey S. Hanmer, Howard Barnum, and Mead Over ia projects in the Bank and completed or ongoing With J. Cercone and Joseph Kutzin. studiesonhowto imp.ove researchquality atdevelop- Compltion date June 1994- ing country universities, on higher education indica- tors, on cooperation between universities and industy, on scientific and tedhnological education and research Employment and Labor Market Issues in the newly industrializing economies of Southeast Asia, and on scientific and technologial indicators in Eventsoverthepastdecadehaveproduced a climate developing countries. The research has contnbuted to of economic change and adjustment in industrial and the secondary education study through a comprehen- developing countries. The performance of labor mar- sivestudyof schoolscienceindevelopingcountriesand ketsin facilitating the movementof labor from newly an operational review of Bank lending for school sci- noncompetitive to newly competitive sectors and in ence. Cross-cutting contbutions to higherand second- encouraging the accumulation of skl for emerging ary education work will come from ongoing studies on industriesandtechnologies-isincreasinglyrecgnized environmental education in Central and Eastem Eu- as important in managing the social cost of economic rope and on trining for science teachers. Formal train- adjustment Rigid labor markets can produce slower ing for Bank staff was provided in a one-week flagship economicgrowth,priceinstability,andunemployment seiminar in Knoxville in April 1992 The influence of the past decade's events, particularly Responsbdiuly:Populaon and Human Resources De- the globalization of trade and the movement toward partment, Education and Employment Division-Erk market economies, will continue to put pressure on W. Thulstrup. With Kin Bing Wu. labor markets in the 1990s. Complent date June 1994. This study is concerned with how to improve the competitive operation of labor markets and increase the efficiency of private and public spending on education Public Economics of tihe Health Sector andtraining.Itaddressestwoprncipalquestions:What govermmentpolicyinterventions should be given prior- Thereisvirtuallyuniversal concenamongtheBank¶s ity m labor market reforms? And what labor markcet borrowers about the financing of health care services. strategies can be used to manage the social cost of Although there has been much recent interest and de- economic and labor reforms? The three-year study is bate, there is little consensus on the typeof analysis that nowin its second year. During thefirstyear, a reviewof is appmpriate for supporting policy recommendations the Bank's treatment of labor market issues in its eco- in this ara This study centers on the analysis of market nomic and sector work was begun, and a senes of failure in health and the use of this analysis to guide background and state-of-the art papers was cmmis- policy development It will try to answer questions sioned on.issues related to these questions. Additonal related to how health care markets work, from both a papers were comnmissioned during the second year. 95 Human ResoUres Dedopment Thebadcgroundandslate-of-the-artstudieswlflpro- Yetsecondaryeducationhasbeenaneglectedpartof vide a foundation for identfying best practices to the developing world's education system. Seconxary improve theperformanceof labormarkets, particularly education faces severe problems affecting efforts to as they affect women and poverty. They will also be furither expand eoverage and improve quality. These used to develop a longer-term research agenda on the problems indude the following principal questions addressed by the study. The initial * Multiple and undear goals-the perennial ques- review of Bank economic and sector work covered the lion concerns the right mix of the twin roles of prepara- period from 1985 to 1990. It shows that the level of tion for the labor force and preparation for higher edu- atekntion givento labr-marketissuesinBankeconomic cation. and sector work increased in the study period,but that * Unmet social demand-few governments can af- the attention given to these issues in the country policy ford to respond fully to rising popular demand for dialogue was weak It recmmended improving the secondary education from public sources. qualityofeconomicand sector workon labormarkets to * Poorarticationwithdemandsofdevelopment- strengthen the policy dialogue. in a fast-changing world, secondary curricula remain The results of the research wil be disseminated much tLhe same as before World War IL, and little is through Bank seminars to discuss ongoing labor re- known about which investments will improve perfor- search in the Bank, other national and international mancein areas critiml for national development organizations, and the academic community, and * Lowquality-resources in the education budgets through a series of training semdnars for Bank staff on are inadequate for improving the quality of secondary how labor markets work and on strategies for improv- schooling and the equity of its distribution. ing their perfonmancea Results wfll also be published in This project will undertake research and other stud- worldng papers; the final report will be published in ies prepartory to the writing of a secondary education two books. policy paper. The project will benefit from consultation RespmUsy: Population and HumanResources De- and coDlaboration with Bank regional staff, otherdevel- partrnent,Educationand EmploymentDivision-Arvil opmentassistance agencies, member govments,and Van Adams, Elizabeth King, Zafiris Tzannatos, Mukti a wide range of scholars and professionals from both Upadhyay,andAmitDar,andWomeninDevelopment industri and developing countries. Division-Cuilherme Sedlacek; Europe and Central Respnsily PopulationandHumanResourcesDe- Asia, and Middle East and and North Africa Tedhnical partment. Education and Employment Division- Department, Population and Human, Resources Divi- DonaldRHolsinger,HlimeldaMiartnezErikThulstrup, sion-David Fretwell; and Asia Tehnical Department, and Zafiris Tzannatos. With Richard BennetL Population and Human Resrces Division-Bemard Completon date: June 1995. Salome. With A. Noss, Luis Riveros, Ricardo Paredes, Augustolglesias,PierreRunner,RobertGoldfarb,Daniel Hamermesh, Harry Katz, Duane Leigh, Ramon Lopez, Planning for Equity and Effectiveness Stephen Mangum, OliviaMitdll, and Gail Stevenson. in Public Health Institutions CoMplet ion dat December 1994. Reports: Many developing countries have insufficient health Adams, AnAv Van, and othem. 1992 Thz World ass Tramziwt resourcesto providebasic health services. And with few of Empbo7mt and Labr Mare Issu World Bank Tedmical exceptions, their meager resources are deployed inef- Paper 177 Washington, DCr fectively. Resources are concentrated in urban areas, Hamermeih, Dniel S. 1992. "Unemploymt Ihuran for leaving a large share of the population uncovered, and Developing Countnes. Poliq Researi Working Paper 897. the services provided are often based on technologies World Bank, Wanbingh, DC thatareexpensiveand ineffectivelimprovingthealloca- tion of resources in the health sectorwili lead to gains in health for the poorest groups, cntnbuting tD poverty Secondary Education Policy Study alleviation and the development of human resources in developing countries. Secondary schooling has grown steadily in most This research aims at integrating, refining, and de- parts of the developing world in the post-World War IF siging methodologies that can assist governments and era. Enrollmentrates dlimbed during the 1980s, despite other health institutions in developing health service budgetary constraints. Overall secondary enrollment programs that are more effective and equitable. The ratesinLatinAmerica(52percent)andAsia (49percent) results of this research will assistin (1) setting priorities am now equal to enrollments m the middle-income among competng health programs; (2) allocatng re- countries of Eastem Europe and North Africa. sources according to health needs to reduce inequali- 96 Human Resouvres Development ties; and (3) developing strategies to build the capacity and that the method an be used in the rational alloca- for health planni. tdon of health ore Researchers and dedsionmakers from Indonesia, R Population and Humian Resurces De- Mexico, and Niga will adapt and apply epidemio- parbint, Population, Health, and Nutriton Division- logicalandeoononiicmethodstoassesthehealthneeds Jose-Luis Bobadulia and MWy E. Young. With Sswanto of different population groups and set health L.je pri- Wilopo, Mnistry of Population and Environmt, Judo- orides in their own countries. Theresearch will focus in nesir A. 0. Euinosho, Mlnistry of Health, Nigeria and one province of each countr and willbe developed as HenryMosleyandRicwardMorrow,JohnsHoplknsUrn- a pilot study to test the feasibility of the approach and versity. the appropriateness of the proposed methods. Complktfon date December 1995. The research will evaluate the extent to which theuse Repork ofcost-effectivenessanalysiscanimprovethealloation Thmips, MI Forlhmml& flhe Cscot-Effectivenes of Inteven- of resources and consequently increase the number of don Facutos Wluendng Their Rdng. In D.T. Jamson years of healthy life gained through the health system. and aw. MoSey, withJ L Nobadi and AR. Meahma, If the results show signilfcant positive canges, the eds, MDize CavnPrxirks zn Drekpig Cunobi New project will demonstrate that the inherent problems of Yorkc Oxford Univeri Pese. thismethod and thepaucityof data can besurmounted 97 ADJUSTMENT, TRADE, AND DEBT Poverty and the Social Dimensions Michel Noel, and Economics and Fmance Division- of Adjustment in Cote d'Ivoire: Lionel Demery and Western Africa Department, Resi- A Policy-Oriented Analysis dent Mission in Chana-Ravi Kanbur. With Graham Pyatt and Andrew McKay, University of Warwick, and Ref. no. 675-26C BakaxyDaho,OfficeNationaldeJaStatistique, Abidjan, While adjustment pmgrams of the 1980s focused on C6te d'Ivoire. achieving balance in internal and external accounts, Closg dat- Febnzary 1992. adjustment programs of the 1990s must integrate a Repots. concen for poverty and other sodal objectives. But Daho, Bakary. I99 "LEnquate Permanente aupras des before this can be done, a detailed analysis of how the M6nages de CGte dlvoiref World Bank, Africa Techical poor are affected by the processes of adjustment is Department, Poverty and Socal Policy Division, Washing- requied. The objective of this research project was to ton, DC provide just such an analysis, using Cbte dIvoire as a Demery, LioneL 1992. EstmatIn of Household Incomes and case study. Expendtu from the C6te d'Ivoire Living Standards Coted'lvoireunderwentadassicpattemof stabiliza- Surveys." World Bank, Afria Technical Dpartment, tion folowed by adjustment in the 19BOs. Each of its Povery and Social Policy Division, Washington, DC three World Bank adjustment loans put progressively Demry, lionel, and Christian GroowterL 1992. "Household greater emphasis on struchnual adjustment issues and Size in Cte d'1voire Corret for Sampling Eros in the poverty consequences Living Standards Surveys." World Bank, Africa Techmica The project's central task was to trace the income, Depat,me Poverty and Sodal Policy Division Washing- expenditure, and basic needs fulfillment of the poor in tn, DC COte d'lvoire during the second half of the 1980s. CBte Crooerb^t Chrisliana. 1992. he Evdution of Poverty and Basic d'ivoirehasanchdatabasefomwhichlirkksanddetailed Needs Fulfillment during Economc Recession and Struc- dsaregations can be drawn. The Living Standards turd Change-The Case of C6e dIlvoire, 1985488." World MeasurementStdypsurveypmvideshousehold-leveldata Banlc. Africa Tednidal Department, Poverty and Sodal on inome, expenditure, employment, health, housing, Policy Dvision, Wahington, DC agriculture, education, and so forth for 1985-88. . 1992. "How Usefd ae Integrated Survey Data to The project analysis used the full run of data for the Support Policy Analysis? The Lessons of the C0te d'Ivoire fouryears to identify persistentpatterns of poverty. The Living Standards Swvey. World Banrk, Africa Technical data also contain three two-year panels (1985-86, 1986- Department Poverty and Social Policy Division, Washing- 87, and 1987-8), since half the sample households are toxn, DC. thesamefor oonsecutiveyears. Thisallows theexamina- Grootaert, Christiaan, and Ravi Kanbur- 1990. Policy4-riened lion of variations in the income, expenditure, and basic Analysis of Pert and th Sad Dmnson of Stntatu needs fulfillments of the same households over three Adjustmnt-A Mdehodog d Pposed Appication to OCe d' periods. Thesedata can be used in addressing the ques- Ihire, 989588. Social Dimensions of Adjustment Working lion of whether, and in which groups, poverty persists. Paper 1. Washington, DC World Bank Initial results indicate that poverty incidence did not _ . 1992. /Esmating a Regional Price Index for CBte change much in 1985-86, after five years of sustained d'lvoire Using ICP Data An Exercise in EconicStatistia" adjustment effort. After the adjustment program was World Bank, Africa Technical Department, Poverty and abandoned in 198748, poverty rose sharply. Urban Social Policy Division,washingto DC povertyroseata muchfaster rate than ndralpoverty. But 1992. 'lM Persistnce ofPovert in COte d'lvoire An the deterioration in basic needs indicators was more Analysis of Panel Data" World Bank, Aica Tedhical severe in rural areas. There is strong evidence that very Department, Poverty and Social Policy Division, Washig- poor households suffered more than other households. ton, DC Responibiy Afica Technical Department, Poverty Johnson, Marin, AndrewMcKay, and Jeffrey Round. 1990. and Soci Policy Division-Chisdaan Grootaert and In md Eendftur in a System of Ho hwld Acounts- 98 Adjustment, Trde, and Det Ccapta ad BEsthmfh. Social Dimesions of Adjustment KorealnstituteforlnternationalEconomicPolicCarlos Working Paper 10. Wasgon, DC World Bank Alberto Pnmo Braga, Fundacao htstituto de Pesqusas Oh, Cl-Talk, andMeera Vekatarman. 1992.'ected User Ecoomias,Brazil;PatickConway,UmverityofNorth Files r the Mte divoire lving Standards Surve%1985 Carolina; Mark Dutz, Princeton University Guumar 88 Methodology and Documentatilon Word Bank Afic Fors, Stockholm School of Economics; Jose Mendez, Te mnical Department, Poverty and Sodal Policy Division, Arizona State University; Andrej Olechowski, National Washington, DC Bank of Poland; Gary Banks; - ddger Schuknedtt; and Angelika Eymann. The University of Norti Carolina partidpated in the research. Regulations Against Unfair Imports Closing datc September 1991. Effects on Developing Countries Reportx Banks, Gary. 1990. Australia'siAnidumping ETepiewef Ref. no. 675-52C Pifcy Reseach Working Paper 551. Wold Bank, Washing- Antidumping procedures provide bad guidance for tor, DC public policy. The resulting interventions in cDmmer- Brags, Carlos Alberto Prima, and Simao Davi Silber. 1991. cal anrargementsare contray to the national economiic "BrazilIm Froze Conceated OrangeJuo The Foly of interests of both the exportng and the importng con- Unfair Trade Cases. Poicy Resach Woridng Paper 687 try. Antidumping is ordinary protection with a good World Bank, Washington, DC public relations program. Conway, Patrick, and Sumana Dhmr. 1991. "The Economic This researh showed that today's fashionable ratio- Effects of Widespread Applicadon of Antidmnprig Duties to nabzationforprotectionisnothingmoretanarational- Import Pricing." Poicy Research Worlkng Paper 782 World ization. It asked two questions: Bank, Wahington, DC * Do antidumping actions make economic sense Duty, Mark. 199.L Enforcement of Canadin'Unfai' Trade from the perspective of either the perpetrator or the Laws: The Case for Competition Polices as an Anftdote for victim country? Proteon. Policy Research Working Paper 776. World * Should developing countries implement anik, Washington DC antidumping regulations? Eymann, Angdika, and Ludger SdhuknedhL 191. "Antidump- The answer to both is no. ing Enforcnent in the European Commuilty.' Policy At a methodological leveL an important objective of Reerch Working Paper 743. World Bank, Washington, DC the study was to 'de-expertise antidumping-to give Fingr,J. Michael 1991. "The Meaning of lUnfale in US Inport a generally educated reader an everyday feel for what Policy. Policy Research Working Paper 745. World Bank, antidumping does SD that the reader is provoked to ask Washington, DC the question: "Good grief! How did we come to this?" _- Forthcoming. 'If at Fist You Dont Suceecd How The project sbessed a low-tech research design tD pro- Antidumping Works and Who Get HurLi duce a high-impact output It examnined a number of _ . -bhe Origins and Evolution of Antidumping ReguLa- representative applications of antidumping and ex- tions. plained thatantidumpingdid notmakeeconomicsense. Finger, J. Micdael, and Tracy Murray. 1990. "Polidng Unfair A comparison of fact with rhetoric snows that the two Imporbt The US. Example." Policy Research Working Paper are sadly out of alignment 401. World Bank, Wasbngton, DC (Also in Journdl o WaWd Antidumping, as practiced today, is a witches' brew Trmfa 24 (4fl9-53.) of the worst of policymaldng power politics, bad eco- Po, Cunnar. 1991. "Stainless Steel in Swede: Antidumping nomics, and shameful public administration. Attacks Good Intemaonal Citizenship." Poicy Reech "Antidumping law" is an oxymororL Expansion of the Working Paper 744. World Bank, Washington, DC power of te state to act against imports in the name of Mendez, Jos6 A. 1991. -The Development of the Colombian Cut antidumpinghasbeenbuiltonthemeanestof violations Flower Industry.' Polcy Research Working Paper 660. against the principles of the rule of law. World Bank, Washington, DC Developingcountriesshouldbeadvisedrnottoimple- ment antidumping procedures. The research has pro- duced guidelines for altemative ways to deal with the The Impact of EC-1r92 and Trade Integration problems that antidumping has been used to handle. in Selected Mediterranean Countries The project has produced a book that could be the basis for extensive lechtring and advising. Ref. no. 675-4 Responsibity:ComtryEonmcsDepartznent,Trade As the European Community (EC)planstobecomea Policy Division-J. Michael Fnger With Taeho Bark, fully integrated common market at the end of 1992, 99 Adjustent, rude, and Deb oncermismountingamongnianycuntriesoftheworld, magnify distrtion rather than offset import protec- especaly among Medianean counties in signifi- tion. canttradingrelationshipswiththeEC.Thereisfearithat Thestudyfound thatTurkey'sproposedharmoniza- trading opporhnities will be reduced because of the tion of ariffs with the cmmon external tariff of the EC preferred access that Cr ce, Portugal, and Spain will yields only small welfare gains, which can be losses if receive in the EC and the lower transportation costs for theECsratherthanTurkey'sinterpretationofharmoni- EC firms in EC markets relative to external firms And zationisaccepted,butineithereventthewelfarechanges there is uncertainty about the effect of EC product are small. The reason is that harmonization results in standards. But there is also optimism for a nmber of tariff reductions in the presence of export subsidies reasons: the accession of Greece, Portugal, and Spain almost as laieas the average tariff rate and introduces will mean greater access to the markets of these coun- a pm-export bias into the regime. But harmonization tries;harmonizationmaymeanrationalizationandpro- wiU yield benefits if it is accompanied by a policy of duction according to comparative advantage, with export subsidy reducion. greater opportunities in products in which developing Respaonsity:CountryEconomicsDepartznent,Trade countries have a comparative advantage; and EC-92 Policy Division-David Tart. With Glen Harrison, Uni- will likely lead to an inrease in the growth of the EC- versity of South Camlina; Thomas Rutherford, Univer- and in its demand for imports. sity of Colorado; and Stephen Felder, University of At the same time, and possibly as a result of EC-92, Berne. The State Planing Organization of Turkey and efforts are under wayin some Mediterranean countries the Ministryof Foreign Tradeof Morocco provided data to integrate more fully with the EC Turkey has an for the researcdL association agreement with theEC and plans to harmo- Cosing dat June 1992. nize its tariff with the common external tariff of the EC Repot: and eliminate trade restraints against EC products. HarTrson Ga W., Thomas F. Rutherford, and David G. Tarr. Morocco has proposed a free trade agreement with the 1992. 'Pecemeal Trade Reform in Parally balized BC, and the EC may propose a similar agreementt with Economies An Evaluation for Turkey." Policy Rearch Algeria and Tunisia if one is developed with Morocco. Woridng Paper 951. Wodd Bankl Washington, DCr Thisstudydeveloped smalLopeneconomy,comput- ablegeneralequilibuiummodels and data sets for Alge- ria, Morocco, and Turkey for analyzing the trade policy Implications of Agricultural Trade Policy changes contemplated by these countries in the context Reform for Developing Counties of trade intration with the EC The study also devel- oped a mutiregion computable grneral equilibrium ef. no. 676-1C model and data set to assess the ampact of EC-92 on Concern about the effect of changes in domestic and Algeria,Morocco,Tunisia,a-r4Turkey.Thisassessment international agricultural policy prompted the World indudedaquantitativeassessmentofchangesbyindus- Bank and the OECD Development Centre to engage in try, indluding the effect of inceasing retwuns to scale. a joint research effort with the following objectives: (1) The principal results of the research so far relate to to assess the implications of agricultural policy reform Turkey. It was found that departures from a uniform for the developing counties, and (2) to provide guid- structure of tariffs do not follow theoreficaly optimal ance as to the inddence of the reforms, with particular (Ramsey) rules. The unifornity of extral incentives reference to the implications for poor households. (tariffs and export subsidies) in Turkey would achieve Theresearchcolaborationfollowed twobroad tracks. an extremelyhigh proportion of thebenefitsoffull trade The first examined the global effects, focusing on the liberalization. That is because Turkey has undertaken interactions among trading regions to assess the aggm- substantial trade libealization (removing quantitative gateimpactof thealternativeliberalizationscenarioson restrictions and lowering tariffs) that has on average world prices and on welfare. The analysis was moti- removed the anti-exort bias; the principal distortion vated in part by the shortcamings in existing studies of remaining derives from the dispersion of the tariff and the ipacts of trade liberalization. For the most part the export subsidy structure, espedialy the latter. studies have failed to focus on developing countries, to It was found that le-of-thumb piecemeal trade take an economywide and forward-looling perspec- policies can counterproductive after a country has tive, or to provide perspectives on alternative reform gone as far as Turkey has in the lberalization of trade options and their sequencing. In addressing these con- For Turkey, a reduction in tariffs would be counter- cems, it was decided to exterd and develop an existing productive unless it is coordinated with a reduction world trademodel,knownastheRUNS(Rural-Urban/ in export subsidies; and increases in export subsidies North-South) model The models current verimon con- 100 Adjustment, Trade, and Debt talns 22 tradmg regions (six industrial regions, Eastem The Politcal Economy of Strucktral Europe, the former Soviet Union, and 14 developing Adjusbuent regions), 15 agricultural commodities, and five nonagicultural commodities. The model provided the Ref. no. 676-37 basisforanalyzingtheimplicationsofpartialliberaliza- The World Bank has increasingly recognized the tion of global trade and of trade reform for regional importanceof political supportfor the successful adop- groups (such as the OECD countries or developing tion and implementation of struchural adjustment pro- countries),andforexaminingawiderangeofglobaland grams But little is known about why political commit- regional trade poliy and agricalhual reform issues. menttoadjustmenthasbeensrongerin some countries Forthesecond trackof theresearchtheOECDDevel- than in other. This project is trying to advance the opmentCentreandtheWoldBanmkhavecommissioned understanding of the political economy of structural aseriesofcomntryeconomywidemodels.Theseprovide adjustment, focusing on the effect of program design thebasisfordisaggregated analysisof thedistributional and institutional arangements. consequences of trade and struchural reform and, for a The project is sponsoring studies of eight countries number of large countries (Brazil, China, India, and thatarenewlydemocraticorundergoingpolitical liber- Meico), for the development of components that form alizatiorChile,Mexico,Mgeia,Poland,Senegal,Spain, regionsintheRUNSmodel.Becauseofitsglobalnaure, Thaiand,and Turkey. Each country study examines the the RUNS model is not the appropriate tool for analyz- interaction of politics and policy reform in two policy ing the effects of price shodcks at the oDuntry level. The areas: stabilization and fiscal reform, and trade and country studies are intended to complement the first exchange rate reformL part of the research by looking dosely at the domestic The project also includes cross-country statistical effects on production, trade, and relative prices as well studies or. the effect of different political regimes on as the distibutional implications associated with these inflation and stabilizationin middle-income countries shocks. The country models also provide the basis for Thecasestudiesaddressed thepoliticalissuesinboth assessing variousdomestic reformissues,includingthe the initiation and sustaining phases of the adjustment effect of macroeconomic policies on agricultum programs. The research looked at how political leaders, Twobooks,published jointlybytheWorld Bankand particularlyin the sustaining stage, handled the task of the OECD,areexpected to comeoutof this activity. One, building a coalition of winners from the program. Six which will focus on the RUNS model, will analyze the condusions from the case studies stand out implications of agricultural trade reforms for the blocks I. Political libralization, especially the introduction of developing countries. The other wil contain the of democracy, complicates the political managementof country studies. economic reform, but it also provides the government Responsbiy: Agriculture and Rural Development with advantages, such as the popularity of democracy Department, Agricultural Policies Division-Antonio itself and increased legitimacy and credibility for its Salazar P. Brandao; Middle East and North Africa, actions. Country Departnent I, Agriculture Opeations Divi- 2.Althoughpoliticalbusiness cydesdonotmanifest sion-Odin Knudse; and International Economics De- themselves in ways that are dearly visible in macroeco- partment, Intemational Trade Division-Will Martin nonmic data, new governments of all sorts-and espe- and Ronald C Duncan, and International Economic daily democradc ones-seem to enjoy a honeymoon Analysisand ProspectsDivision-Paul Armington. With during which it is advantageous to launch economic Antonio Campos, Universidade Federal de Vicosa, Bra- reform, because people are more likely to be willing zi; Sherman Robinson, Elisabeth Sadoulet, and Raul then to wait a while to see positive economic results. Hinojosa-Ojeda, University of California at Berkeley; Conversely, just before an election or when a govern- Pan Yotopoulos and Marcel Fafchamps, Stanford Uni- meat faces the ftreat of being overthrown, an adjust- versity; Thomas Hertel, Purdue University; David ment program is unlikely to succeed, because people Roland-Holst, Mills College; J. Alston, University of will be short of patience and the government will be California, Davis; M. Tsigas; and J. Waelbroeck The short of credhbility on the persistence of the new policy OECD Development Centre contributed staff time. regime- C&ig dafteApril-1992. 3. In a democratic context, govemments with dose Repwt ties to the labor movement are more likely than busi- Mar, Wil, and Juian AL AlieL 1992. 'An ExactApproac ness-oriented govemments to be able to sustain an for Evaluatng fte Benefits from TedmCdlogical Chng adjustment program, if they have decided to initiate it, PoUcy Remnd Woring Paper 1024 World Ban Waing- bemusetheyarebetterable tobargain with labor,mak- ton, DC ingcrediblepromisesof futureornoneconomicbenefits 101 Adjutmet, Trade,and Debt as compensation for the up-front concessions from la- Webb and Bilin Neyapti; and Latin America and the bor that are tpically necessary for adjustnent Canrbbean, Country Departnent m, Country Oper- 4. A reform program is more likely to succeed if a dons Division 2. With Slephan Hggard, University of politically insulated agency spearheads the reform ef- Caifornia, San Diego; Alberto Alesina, Harvard Uni- forts. Usually this group has close personal lieswith the versity, Genaro Arriagada, Corporacion riempo 2000: political leader of the reform. To sustain the reform, ProgramaAsesoriaLegislativa;CarlosBazdresch,ClDE; however, this personal link has to be de-emphasized Nancy Bermeo and Jeffey Herbst, Princeton Univer- eventually, and the reforming agency has to have its sity; Richard Doner, Emory University; Jose Garcia own mstitutional identity and popular support Duran, Barcelona Uuiversity, Barbara Geddes, UCLA; 5. The pac of implementation that works best from Blanca Heredia, TrAP Simon Johnson, Duke Univer- a political viewpoint varies according to the type of sity Samba Ka, Johns Hopkins University; Robert economic problem requiring reform. For acute macr- XaufmanRutgersUniversity;MarzenaKowalskaA,nek economic imbalances, a shock program works best po- 'Laothamatas, Thamsat University; Adebayo Olukoshi, litically,becauseoftheinitiallystrongpublicperception Nigerian Institute of International Affairs; Ziya Onis, of a need for reform; this percepton then dissipates Bogazici University; Dani Rodrik, Columbia Utniver- quicldy, tough perhaps temporarily, as soon as even sity;andNicholasvandeWaLleMichiganStateUniver- partof theprogram isputinplaceTradelibealizadon, sity. The Intemational Center for Economic Growth is on the other hand, is rarely a response to an acute providing financal support problem, and it seems to work best politically, all else Closing date June 1993. being equal, if it is introduced more gradually, so that R1opot people can see the benefits of liberalization and start to Akna, Albertt 1992. Polia Modes of Maremconmic move into the grup of those winning from it Plic and Fiscld Reformn. Polcy Resch Working Paper 6. Presenting reforms in a package is often crucial to 970 World Bar, Washington, DC their political acceptability. People who lose or do not Donr, Richud, and Ankc Laothmats Forthcoming. "Mhe perceve their potentia gain from one measure will Poliical Ecmamy of Stucturl Adjustment in hailand." nonedieless accept it if it is part of a package that Pdicy Resh Working per. Worldmank, Wahington, indudes other measures from which they dearly ben- DC efit. For instance, trade liberalization, whose beneficia- Hagad Slepan, and Robert Kaufman; 1991. lDemoaacy, ries are rarely identified in advance, can be madepoliti- Political Transiion, and Iflation in Midde-Inoame calyacceptableifitispadcagedwithanurgentlyneeded Comuhesf stabilization. Packaging considerations often need tobe _. 990. The Politcal Economy of nflation and Stabiliza- balanced against ountervailing considerations of the tisin Middle-ncome Countries." Policy Research Working optimal pace. Paper444. World Barnk, Washington, DCr The aoss-country analysis of politia regims and Hagprd, Stphan, and Stv Webb, eds. Forthconing. Voting inflation outcomes has two major findings thus far. Frst, for pL*n EcnomickMjuswt in New Deuaacies. among middle-income CDuntries, democratic regimes do Washington, DQ World Bank. not have systematically higher inflation than authoritar- . Fthoming. 'What Do We Know about the Political ian regimes. And second, in countries in Latin America Economy of Struchtal Adjustmentr World Bo*k Reerch thathaveswitchedbetweenauoritarimnanddemocratic obsevuer. regimes,thereissystematicallyhigherinflaiondumingthe Oak, Zlya, and Stven Webb. 1992. "Political Economy of Policy democatiephasesand in theyeamsaround the transitions, Reform in Turkeyin t wi19a" Polcy Reserch Working compared with the authoritarian phases. Paper 1059. World Bank, Wagton DC The findings of the research have been presented ata Rodrik DmnL Forthcoming. 'e Rush to Free Trade in the number of workshops and conferences. These indudea Deveopig WorklhWhySo Late?Why Now?WillItLast?' seminar sponsored by the MIacroeconomic Adjustment Policy Research Working Pper. World Bank, Washington, and GrwthDivision of the CountryEcononicsDepart- DC ment (August 1991); Latin American meetings of the Econometrics Society (August 1991); a conferenceof the American Economic Association (January 1992); and The Cost-of-Protection Index the World Bank Conference on Voting for Reform: Po- litical Economy of Structural Adjustment in New De- Re. no. 676-49 mocrades (May 1992). In evaluating trade policy, analysts typically face Responsili CountryEoonomics Department,MAc- problems in making comparisons over time or between roecononuc Adjustment and Growth Division-Steve countries.Whenacountryliibehzestraderestrictions, 102 Adjustment, Trade, and Debt how can the progress or regression be consistently Both measureshave been used to track trade liberaliza- measured? And how can progress be compared be- tion in developing countries over time and in compari- tween countries, an issue that arises in trade negotia- son with each other and with industrial counhies. tions? The different methods that have been used for The current methodology reveals the shortcomings such measures have limitations Tlhis research project ofthese conventional techniques and provides an alter- centersonaproposed cost-of-protection Indexthatcom- nativefor usein policymakingboth for theBankand for bines the standard cost-of-protection analysis with in- national authorities. dex number theory. The findings of the research havebeen disseminated The results of the research should be useful for the throughcollaborationwiththeBank'sregionalofficesin Bank'soperationsandpo]icymaldng.Themethodsused their applied work and through seminars at the Bank offeratheoreticallybasedindexnumberfbrtradepolicy and at academic institutions In addition, a theoretical that requires in its simple form no more information and methodologiald summary of the issue will be pre- than the Bank already collects. The research is part of a pared. This will show in detail the method of the index larger effort in the Bank to quantify the detrimental numberconstruction,and will serveasaquidcreference effects of protection, for economists involved in trade refomL The cost-of-protection index number concepteonsis- Responsibliy: International Economics Deparment, tently ranks tariff and quota distortions on a basis that IntemationalTradeDivision-Will Martin, Raed Safadi, allows comparison among countries and overtime. For and l71rich Reincke; and Lain America and the Carib- tariffs, the index is based an measuring the uniform bean,CountryDepartmentltCountryOperationsDivi- tariff, equivalentin welfhre to thepresentdifferentiated sion 1-Swedervan Wijnbergen. WithJames Anderson, tariff system. For quotas, the index expesses the uni- Boston College; and Peter Neary, University College, form volume reduction from fiee trade quantities, Dublin equivalentin welfare tothepresentdifferentiated quota Cling dtec October 1992 structure. For tariffsaand quotas togeher, the index isan Reports: appropriate average of the two. Anderson, James E 19929 "TarifM Indheoryx The research project has dreeparts Fast, the theory Anderso, James Land Geoffrey Bannister. 1992. Mm Trade has been applied to assess the level of protection in the Rezclivaes inder AnApplcalion toModcam Agic- clothing and textilesetor that major developig coun- tuea" Policy Resea Warking Paper 874 Word Bank, try exporters faced in the main industhal markets dur- Washingto, DC ingtheI980sundertheMulti-ibrm Arrangenent(MFA). SeoDnd, the theory has been applied to evaluate the recnttradereformsof12developingcountriesstudied Equipment Prices and Trade Policies for by the Bank This part of the study will serve as a test Developing Country Manufacturing case forevaluating reform of a trade system as a whole, Industries: A Pilot Study of Brazil and will provideabasis forjudging theadequacyof tile cost-of-protection indexand othermeasures. And third, Re. no. 676-61 the project has applied the theory, using primary data, This project focuses on the hypothesis that the "law inanin-depthcasestudyofMexicowithanemphasison of simars" or "domesticavailability" styleof lisig agricultur The empirical applications are intended to equipmentimportsbydevelopingeountiies(l)exdudes help develop the theory further as a practical tool. some potential foreign madcinery suppliers or other- A pilot study of Hong Kong-U-.S MFA trade was wise reduces competition among foreign suppliers, (2) undertaken. This studydemonstrated theoperalionality raisesforeigncuirencyprices, and (3) leads to the choice of the methods and, more important, their empirical of overspeciled or otherwise inapoprnate unported significance. in more than half of the annual observa- equipment; The project also considers the hypothesis dons, the index showed a rise in protecidon when the that the credit risks faced bvsuppliers of equipment to trade-weighted average triff-equivalent of the quotas highly indebted countries also worsen the teams on shoived a fall. which machinery and equipment is imported. I these Forlackof a well-based measure,analysts haveused hypothesesare correct and the terms of tradeforequip- a variety of indices that have well-known problems. ment ar worsened, anoher dimension is added to the One common measure is the trade-weighted average of well-known economic costs of importsubstitutionpoli- tariffs and of tariff-equivalents of quotas, where these des that lead to higher-cost local production. To assess can be measured. Rently, Bank analysts have been howwellthesehypothesescanbetestedempirically,the using a second index fomsed on tariff dispersion-the research has been narrowed down to a pilot study of trade-weighted coefficient of the variation of tarif. exports of garment and textile machinery from Ger- 103 Adjustment, Trade,and Debt manyand Switzerlnd toBrazil. Brazil waschosenwith '.ng increased direct foreign investment likely. The FrA theexpectation thatitsrecenttradeliberalization would could thus have broad implications for Mexico's allow useful comparisons of the before-and-after sitwa- economy, and it rais a number of policy issuer. tions with regard to import licmsing, and because its Tbisresearhprojectexani-nesthelikelyeffecsof the external indebtedness has greatly incrased the credit FrAonMexdco,focusingonthreequestionswithaview risks perceived by foreign equipment suppliers and toward policy. First, what will trade liberalization in dthir banks. agriculture mean for the eecnomy as a whole? Second, The empirical work consists of small informal and how wil opening up the sevices sector affect both the questionnaire surveys of textile madcinery-expoting sector itself and the sectors that use its outputs? Third, firms and other firms and organizations in Germany to what extent can we expect major changes in firms' and Switzerland and similar surveys of textile macbin- decisions on location and in trade patterns after a free ery-importing firms and other relevant fims and orga- trade agreement in industry? And if we cn expect nizationsinBrazil.Thisworkisbeingsupplementedby substantialforeigndirectinvestment,whatarethelikely analysis of World Bank subproject data in Washington implicationsforMedaudsaggregateproductivity growth andbyindependentstatisticalanalysis(notfinancedby and hence for long-term growth prospects? this project) of unit value data taken from official trade The research hasatwo-track structure. Furst, it looks in statistics compiled by Dean Spinanger, a aonsultant at detail at sx sectors maize, sugar, service,s textiles and the IEel Istitute. A preliminary theoretial conceptual apparel, motor vehiles and parts, and maquiadons (bor- framework for analyzing the effects of the 'law of der industries that operate under a special tariff regime) similarse import licensing has been developed by Bar- The research examines the potential effects for each sector bara Spencer and wilL be developed furither to take of itsindusioninthefreetradeageement-suchasthose account of the empirical findings, on enploymentand trade. Secnd, the project is conduct- Contacts made with textile machinery-manufactur- inganecrnomywideanalysisoftheefkctsoftheFrA.The ing firms in Germany and Switzerland have broadly analysis focses on intersectonal linkages and spDilovers, confirmed the hypotheses. In particular,itisclearthata using the results of the sectoral studies, and on polcy number of textile madhinery finns that are regular sup- dcanges (regulation of foreign investment, for example) pliers to odter markets either do notbid or have limited that affect the economy as a whole thir activity in Brazil. These findings will beprobed in The results of the research could help in formulating moredetailfollowing the srvey to beundertakenat the policy, both on which sectors the parties should bring importing end in Brazil in early fiscal 1993. iniotheagreementandonthedesignofpolicypacdages, The study will be discussed at seminars at the Bank if any are required, to ease Mexico's adjustment to the at the Kiel Istitute, and in Brazil. conditions resuting from the agreement The findings Rsponsibiy:CountryEconomicsDeptment,Trade should also be of general policy interest, for several PolicyDivision-CarryPurselLWithNalinKishowGeeta reasons: this is the first free trade agreement among Setht Dean Spinanger,Klel Tnstitute and Barbara Spen- developing and industrial countries; the agreement is cer, University of British Columbia. expectedtocovernewareas(se-vicesanddirectforeign Closing date December 1992. investment); and other Latin Ameican countries may soonestabshsimilaragreementswiththeUnited States. Responsiiy: Europe and Central Asia, CountryDe- Assessing the Mexico-United States Free partment II, Office of the Director-Sweder van Trade Agreement Wijnbergen; Middle East and North Africa, Country Department IL, Country Operations Division-Alberto Ref. no. 676-65 Musalemn Country Economics Department, Financial Thefreetradeagretnent (PTA)thatCanada,Mexico, Policyand SystemsDivision-AsliDemirgiiv-Kuntand and the United States have agreed to negotiate is ex- Dinitri Vittas; and International Economics Depart- pected to go beyond reducing or removing trade barri- mentlntemationalTradeDivision-PatrickLow.With ers for agricultual and manufactured products, to lib- Sandi go Levy,SECCOflMexico;andAnthonyVenables, eralizing such areas as direct foreign investment and University of Southampton, U.K The Mexican Minis- key services-transport, communications, urance, ties of Agriculture and Finance and SECOFR, Mexico, and banking. For Meico, the agreement can be ex- are contn'buting staff time pected effectively to cement the major structural re- Cosing datc August 1992. forms that it has undertaken over the last few years by Repot: increasing the difficulty of policy reverSaLs. This wil Levy, Santago, and Swede van Wjnberg 1992 'Thansiton send a strong signal to potental for investors, mak- Prblem tn EWm micROdfOm Agiulture hr the Mexdco- 104 Adjustment, 7fdc, a Nd Debt US. Free Trae AgreemenL" Poliy ReEsrd Worldng Paper The U.S. market, the lrgst importer of apparel prod- 967. World ak, Washington, DC ucts, will remain thefocus butGermanyand theUnited Kingdom have also been indluded where possible. A- pare] imports from nonrestiic countriesand product License Prices and RentSharing categories have also been studied to see whether price in the Multi-Fibre Arrangement differences exist that cannot be explained by quality differences. ew. no. 676-69 The research on license prin paths will seek the T'hisresearch on thepossibilityofrent-sharingin the appropriate model specification to representaccurately Multi-Fibre Anrangement (MFA) and on license price the dynamic option value property of the market The pathsinauctionmarketswill provideanswersusefulfor empirical simulations require a consistent data set on policymaking and for Bank operations directly in the monthly license prices. This stingentdata requirement contextof theMFAandmorebroadlyina1 tradepolicy limits the analysis to a small number of counties in questionsthatinvolvequotas. A definiteanswer tothe which quotas are somewhat openly traded. Data on question of whether there is rent-shafing in the MFA Hong Kong and extremely detailed data for Indonesia, will remove an importantelementof uncertaintyfor the on a transaction basis, are available. parties to the MFA in agreeing to the parameters of its The actual cost of the MFA quotas to r- orting phaseout and in evaluating their gains from it. Stong developingcountriescouldbeconsiderablyhigli er'lan evidence of rent-sharing would call for a reassessment conventional estimates thatassume thatexporters seize of most welfare evaluations in the presence of quotas, all the scrcity rentb For U.S, appare icmports from withl obvious implications for the BanK's operational Hong Kong, the preliminary findings point to a 50-50 work The research results will also provide insights sharing of the rents between the exporters and the into the functioning of quota administrations in the importers developing cDunties covered by the study. And the Rent-sharingsubstantiallyaffectstheesmatedmag- policy advice for reforms may have to be modified nitudeofwelfrelossesthatoftgdevelopingooun- accordingly. tries sufferbecause of MFA quotas-and because of any The purpose in seeking the appropriate model sped- voluntay export resbaint in other sectors. Not only do fication for license price paths is to understand the these couniies have reduced export volumes, but, con- relationship between spot or monthly prices and vari- trary to the prevailing wisdom, they do not receive al ous aggregations o fitese data into yearly figures. The the scarcity rents the quotas generate. emerging methodology would improve the accuracy of The findings of the resarch project will be dissemi- empirical and practical work in which spot data reflect- nated through seminars at the World Bank and the ing option values are used to derive average prices. In National Bureau of Economic Research and through the Bank operations, it is increasngly common to advise Policy Research Working Paper series and artidles in using auctions to arrive at indicative prices that can professionaljournals. serve as benchmarks in moving from quantitative con- RePosity. International Eanomics Department, trols to price mechanisms. International Trade Divisiour-Will MArin With Kala Theproject'smethodologyinvolvesatestof whether Krishna and Ling Hui Tan, Harvard University. the license price inclusive of import price, adjusted for ClIohg da December 1992. tariffs and transport costsis equal to thedomesticproe RePOHt: in the importing country. Any devation bewe the Fzzin,Rek, Kale Kdrh and LIgIHI Tan. 1991. 'Rent two pricesisindicative of productmarketpoweronthe ShaingIn the MWut-fibreAangment Theoyand buyes& side, which may or may not be combined with Evidence frm U-S Apparel Impat rm Hong Kone imperfections in the license marke The resrch starts Policy Resear Working Paper 597. Woid Bank, Washig. with homogeneous goods, modifies the test to take into ton, DC account cDmpositional differences, and finally consid- ers differentiated goods. Data will be tested against the competitive model, Commodity Exports and Real Income but alternative proxies for market power will be incor- in Africa porated to determine the sources of the deviations from the model-whether fram imperfections in the product Ref. ns 676-70 markets or in the liense markets. Economies covered There has long been a concer that a simultaneous include Hong KCon& Bangladesh, India, Indonesia, expansionofcommodityexportsbyseveraldeveloping Mexico,theRepublicof Korea,Sri lanka, and Thailand. countries could cause a dedine in export prices large 205 Adjustment, Trade, and Debt enough to reduce the exportrevenues and real incomes fStIWcWU Adjusutmnut: I.spku for Dawlpig Coutry of exportingcountries. Earlywlitlngsargued thatworld Agritur Cambridge University flu. demand for primary products was Inelastic and that therefore any productivity gains in exports were likely tobepassed on to importingcDuntries through a change The Design of Tariff Reform: Theory, in the terms of trade that favored them. Later analyses Evidence, and Implications countered this argument. But the more effident use of production resources envisioned by structural adjust- Re. no. 676-77 ment programs has renewed the concern. There is par- During the 196is the World Bank, in the context of its ticular concern about conmodities said to exhibit low adjustment lending program, promoted trade policy price elasticity of demand, such as coffee and cocoa- reform that centered on reduced reliance on quantita- exports critical for some African countries tive restrictions, and lower and more uniform tariff This research seeks to ascertain whether the concern rates. Many of the trade policy reform packages imple- is justified. The study focuses on cocoa because (1) it mented with the support of Bank adjustment loans accountsforalargeshareoftheexportsof manyAfrican induded changes in the dispersion and the level of countries; (2) African countries have a large share of the tariffs, inaeases in the lowest taniffs to ensure revenue world market in this commodity; and (3) it is exported neutrality, and the introduction or strengthening of only by developing countries. export duty drawbacks. Theproject will analyze the current situation in Afi- These reforms are presumed to improve efficiency. can and non-African cocoa-exporting counties, focus- Buttheyaregenerallyundertakenunderlessthanideal ing on how cocoa exports affect the rest of the economy conditions, and since the policy changes in a package of and how theyaffecttaxrevenues,tradebalance,and real reforms interact, there is no guarantee that each will incomes. Econometric studies of the cocoa sector will succeed. And more important, often only some of the examine the likely effects of deviationsfrom the current reforms in a package are actually implemented; thus, state on the countries' export earnings, tax revenues, the benefits attained may be limited. and real income. Because cocoa is extremely important This research project aims to improve the under- both as a source of export eamings and as a contributor standing of the post-reform conditions by comparing toGDP,thegeneralequilibriumimnplicationsareimpor- the main featwes of the tariff regimes before and after tant. More to the point, for a major export, the welfare reform in 35 countries and evaluating the effidency and income effects of export taxes cannot be evaluated effectsoftherefouis.Itwillalsoproposefutherchanges correctly without taking into account import restric- for representative countries. tions as welL For this reason, for countries in which In comparingprnrefonm coitions, the esearch will cocoa is very important in the economy, small general address two issues. equilibr!um models wil be constructed. Forothercoun- * It will look at the relation between statutory tariff tries, modeling will be partial equilibrium. Cocoa secor levels and actual revenue generation. Legal tariff rates equations will be estimated econometrically and some can behigh at the same time thatthe ratio of importduty other sectors of the economy will be calibrated. Ulti- revenue to the potential yield of the tariff code can be mately,countrymodelswillbelinkedthroughtheworld low. The divergence between legal and effective rtes cocoa market when all countnes compete against one can open up possibilities for combinations of lower another. tariff rates and lower exemptions that lead to higher Respolbuty:CountryEconomicsDepartment,Trade revenues. PolicyDivision-Arvind PanagariyaandMauriceSdhiff * It will determine the sources of tariff dispersion. With RobertChambersandRamonLopez,Universityof Tariff rates differnot only across different producs but Maryland; Irdrani Gupta, Claudia Sepulveda; laurian often also across similar products. In this case, disper- Rutayisire,NationalBankofCommerce;and AlanWin- sioncanbereduced significantlywithoutmajorchanges ters, University of BirminghanL in the general tariff structr Closing dte April 1993. In the comparison of post-reform conditions, the re- Reports search will address three issues. Panagariya, Arvind, and Maurice Schiff. 1992. Commodity * It will examine the different methods of tariff Expors and Real Inmamesin Afrct A PrminaAnaly- reformn (general or discretionary, for example) and their sha In Ajay Cihbber and Sanley Fischr, ed., Anlysis of effectiveness in acoomplishing the goals of the reformE Ewnamic Refm in * It willmeasurethedispersion of tariff rates,ung _ 1992. 1 Tavers Quotas:TheCaseof ComaExpartsf various methods to assess how well goals were met In L Goldin and LA Winter, eds, Inkmsimad Dhnasiaas * It will detemine whether average tariff levels 1,06 Adjiusment, Trade,and Debt decreased and whether average tariff collection in- tively few and market power is thus most likely to be creased. present. DTawing on patterns of actual tariff reforms, the Hifgherlevelsofproductiveefficiencyalsoappearto projectwil determine which pattens are most effective be associated with exposure to foreign competition. inenhancingwelfare.Theanalysiswilhindludesensitiv- Sectors undergoing trade liberalization tend to show ity analysis to determine the relative importance of redvucionsinthecraoss-plantdispersioninproductivity departur from perfectcompetition fordesignof tariff levelsand increasesinaverageproductivityratmsMore- reform and will take into account the sensitivity of the over, in one very open country (Chile), newly creatd results to budgetary constraints. The simulations are plants have productivity levels above those of dying expected to help in developing rough guidelines on the plants, so entry and exit improve productivity. relative desirability of different approaches to tanff Finally. ontrary to popular belief, efficiency gains reforms. do not appear to come mainly from the exploitation of Re;sibiy:CountxyEconomicsDepartent,Trade intenal scale economies. In most sectors, plant-level Policy Division-lant PritchetL With Geeta SethL rehtuns to scale appear to be modest. Furthermore, if Cdsing datc August 1992. anything, trade liberalization is associated with plant size reductions, probably because foreign competition shifts demand curves inward. And there is no evidence Volume on Industrial Competition, thus far that trade regimes have any effect on the size APoduc divity,andTrade Remes _ distibution throughentryandedft,onceflucuationsin aggregate demand are controlled for. Ref. no. 677-10 Forpolicymakers, themostfundamentalimplication According to received wisdom, protectionist trade is that trade hlberalization can lead to significant intra- regimes hurt mnanufactuing productivity and foster industry improvements in perfomance, both in factor noncompetitive market strcturs But the empirical productivity and in pricing behavior. But the exploita- importance of tltese consequences is not well docu- tion of scale economies is unlikely to be a major source mented,and tetrasmissionecanisnslinkingpolicy of productivitygain inmost cases,and thepromotionof and performance are not well understood. bignessisnotadvisableunlessthereisdearengineering The research contained in the olume that came out evidence to the contrary. Fnally, entry and exit can of thisstudyattempts to provide an empricl bais hfor perform a significant ceansng role by weeding out generalization on both of these issues. low-productivity plants so on efficiency grounds poli- Unlike earlier efforts to link trade and performane, cies that impede turnover (for example, severance pay this project is based on large panels of plants from six laws) are undesirable. developing countries: Chile, Colombia, Cote d'lvoire, ReposiryCountryEcwnomicfepartmentTrade Mexic, Morocco, and Turkey. This has enabled re- Policy Division-Jaime de Melo and Faezeh Foroutan, searchers to distinguish dimensions of microeconomic and Public Economics Division-Lili liu. With James adjustment thatare hidden in sectoral-level analysis. In Tyboutand Daniel Westbrook, Georgetown University, particular, new methods for studying scale economies, Mark Roberts, Pennsylvania State University, J. Ml plant-level productivitytrajectores,andindustrialevo- Grether,UniverstyofGenevaandDavid Roland-Host, lution (entry, exit, and growth) are exploited. Mills College. This research augments country studies completed Closig date: January 199& undertheresearchproject'lndustrialCompetition,Pro- Reprt ductive Efficiency, and Their Relation to Trade Re- Wlnters, Aan, aed. Frhran&lndusrisl Compelitim, gimes- with new overviews that bring their results Fv&du y,ad TuRege:The REm together, and with tinee new studies that pursue in detail topics of special interest Several basic findingshaveemerged. First, entryand New Dimensions in Regional Intgration exitpatternsinChile,Colombia,andMoroccochalge the popularnotion thatentryand exitbariers are espe- Ref. no. 677-12C cialy high in developing countries (for example, be- There has been a revival of interest in the regmal cause of capital market imperfections). Nonetheless, approach to trade liberalization. This move away from there is evidence that foreign wmpetition puts down- multilaeaism reflects in part the difficulties that have ward pressure on domestic tadable sector prics This besieged the currentround of multilateral negotiations pressure appears to be most significant in sectors in in theUnuguayRound under theauspicesof theGAIT. which production is concentrated in the hands of rela- Theregionalapproachisinhberentlydisaiminatoryas it 107 Adjustmet, Tmde,and [d t involves preferential trade liberalization that is not oc- customs unions, the highest admissible common exter- tended on aimostfavored nation AMEN) basitlheissue nal tariff should bedetemined by the lowest tariff rates is whether the new regioalism is a step toward a more among members. liberal trading system or a stumbling bloc if, as some * Bilateralism, not multilateralism, led to a liberal observers have argued, the world is moving into a few trade regime during the second half of the 19th century. trading blocs (for example, ihe triad around Japan, the A series of bilateral treaties with an MEN dause, led by EurpeanCommunity,andtheUnitedStates)tatmay the Anglo-Frnch Treaty of 1860, gave rise to a liberal havefreetradeamongmembersbuthighproctionvis- tadirg system a-vis outsiders. For developing countries espedaly, and for small A conference, organzed jointly with the Centre for countiesin general, an open trading system is vital for Policy and Economic Research (CEPR), was held in their survivaL Given that regionaism is liklcy to stay, April 1992 to discuss the implications for the multilat- what must beavoided is that small countries paya high eral system, and for individualdeveloping countries, of cost-in the formof exclusionaryarrangementsagainst thisrecentrevivalinregionalhsutPaperswerewnommis- their national interests-for their safe-haven anange- sioned to examine (1) the systemic implications with a ments with larger couties view toward making reemmendations on how to en Responskbiliy: CountryEeDnouiicsDepartment,Trade sure that the formation of regional arrangements leads Policy Division-Jaime de Melo, Arvind Panaganya, J. toan open world trading system; and (2) theeerience Mihael Finger, and Faezeh Foroutan; Julio Nogues, of past regional arrangements in order to draw lessons andLatinAmericaand theCaribbeanTechnicalDepart- for future ones. ment, Trade, Fmance, and Private Sector Devebpment The main conclusions from the conference indude Division-Rosainda Quintanilla. the foliowing Casing datc June 1992. * The current wave of regionalism is here to stay. RqeorS That is because, in contrst with the past, the United de MejJanime and Auvind Panagariya. Fohcoamdng. Tk States is actively promoting regionalism. R 5maliswh nr Pdcy. Wahngon, DO World Bak * There is a st possibility that the world will divide into three trading blocs (the Americas, Asia, Europe). This would help solve the free-nder problem Secondary Market Prices that afflicts multilatral negotations, and could lead to a fortress mentalityin which regulatory barriers woid Rf. 677-15 be used to deny marlcet access to nonmember In dtat Theseurndarymarketfordevelopingcountries'com- event, the small (and geerally poor) cuntes left out merxcal bank debt is the prncpal vehicle for transfer- of the blocs would be hurt most. ring ownership of the debt among banks and other * Countrieswitstillhighlyproteedtraderegimes investor The market hns increased drastically in effi- (such as India) wil benefit most from unilateral trade ciency in recent yearm. 'rices are increasingly used as liberalization. indicators of the relative creditworthiness of countries * Developing counries with lr trade regmes and as a benchmarkin formulating debt reduction and (such asMedco) stand tobenefitmost fromintegration restrucring padkages negotiatedby developing coun- with large industrial countries. This would bring cred- tries. But there is little reserch explamnmg secondary ibility to their hard-fought liberaization policiue and marketcdebt prices. enoDurage them toadoptinstitutionscommonrtoindus- Thisreseaxrch will contribute to the understanding of trial countries (for example, stable maoeconomicpoli- secondary market debt pncem It is collecting data on cies and liberal labor markets). secondary market prices from traders in secondary * Today, most muntries have a fairly libeal trade markets. Thedata cllected will be as comprehensive as regime. The problem they face is one of fuhre mnarket possible hi tems of the number of countries, the fre- accs should existing and emerging trading blos be- quency of exported prices, the history of pricc avail- come 'fortresses.f Regional integration is a vehicle for able, and the number of instruments on which data are guaranteeing fuhtre market access. avaiable. The projectwill then strip the raw prices, and - Toconstraintradingblocsfrombecominginward- test the liquidity and efficiency of the market by con- looking, GAIT rules on voluntary export raints ducting standard efficiency tests and examining the (VERs),antidumpin,andcountrvaintdutiesshould relative importance of creditor-specific factors in ex- bestrengthened.And ihenrlesforestablishingreginal plaining pries. arrangements should be modified. Among the modifi- The project is expted to result in a data base of catiousproposed in the research were thatmenbershp pnces and a desiption of the terms of the cormspond- in regional arrangements should be open, and that, for ing instrumts, a data base of stripped prices (raw 108 Adj_csnt, Trade, and Debt prices deaned of the value of enIanIments and other RePort indentures)? and two papers, the first analyzing the Ye= Alend. 1m. D9an Pensbtpnt Jnseca Offset efficency of the post-Brady bond market and Mating NeempivePrding of Develpg Counies' lmpasrb? prices to aeditworthiness indicator Theaudiencewill The Evidene from M.adaa Policy Reu Warking be Bank econmsts, outside researchers, developing Paper 611 World Bank, Washigton DC countrypolicmaks,andfinancialmarketparticipants Responsii4 Intermational Economics Department, DebtandlnternationalFnanceDvsion-StijnClaessens Effectiveness of Economic Adjustment and SudarshanCooptu WithRobertCamby,NewYork in Sub-Saharan Africa University. Closing datec December 1992. This research examined the ecanomic problems of Sub-Saharan Africa over the past two decades and reviewed the debate on their causes, focusing on the An Evaluation of the Effectivereness effectiveness of Bank-supporLed adjustment programs of Preshipment Inspection on Trade; Capital in Sub-Saharn Africa. The reserch used a miethodol- Flight, Customs, and Other Revenue ogy that permits the endogenzation of decisions to Problems of Developing Countries partidpateinWorldBankadjustmentlendingprograms and thetestingof thevalidityof themaintained assump- Ref. no. 677- lios reg3ding progam participation. Merchadise imports into developing countries are The results of the rsearch show that adjustment often seen to be overpnced, to suffer defects in quality programs in Sub-Saharan Africa have had no statisti- and quantity, and to lead to practices of over- and caly sWificant effect on growth in the secmnd half of under-invoicing with adverse consequencas for cus- thel980scompared wththeflrsthalf.Butteyhavehad toms revenue collection and exchange controls, a significant and deleterious effect on investment be- Preshipment inspectin has been perceived asawayto tween the two periods. The results also show that ad- reduce these adverse effects. The use of such services Justtent lending programs have contibuted signif- hasbeen reCmmended by the Bank whee imnpors are cantly to the imrovement of export performnce m being brought in under struchual adjustment fmdin&g Sub-Saharan Africa, at least relative to that of Thisresearch will attemntto defin the appropriate role nonadjustngAfrican countries. Thesefindirngssuggest for preshipment inspection or for its use with other that the perceived increases in export competitveness services, and in the efficiency of investment that are supposed to The research wil be conducted at two levels First, be generated by the reform programs have not been studieswilibecarriedoutindeveloping Duntriesinthe sufficient to counterbalance the ensuing dedine in in- African, Asian, and latin American and Caribbean vestmnt-andrthustorestoreecnomicgrowthinSub- regions. The countrycasestudieswfillexanineindetail Saharan Africa. An important qualfication of the re- howpreshipmentinspectionhasperformed indiffernt sults, however-one that is a point of departure for functions.Second, troughanalysisof dataprovidedby fuhu research-is that the study's methodology for inspection firms and analysis of trade statistics, the dassifying countres into adjusting and nonadjustng researchwllattempttoisolatetheimpactofpeshipment cntries does not explicitly allow for the degree of inspection in the counties in whdch it is practiced. implementation. Therefore, strictly speaking, the find- A pilot statistical study of Madagascar, where ings of the studyare an assessment of the effectiveness preshipmentinspectionhasbeeninplacesincel983,has of a proxy (adjustent lending) for the adjustment been conducted tO determdne the effectof preshipment p inspection on average prices paid for manufctured ResponsiCy:ountryEconomicsDepartmentMac- imports Preliminary findings indicate that there is no roemonoicGrowthandAdjustmntDivision-brahm significant effect No conclusions can be drawn, how- Elbadawi; and Aftica Technical Department, Econom- ever, until more comhre studies have been un- ics and Finance Division-Gilbert Uwujaren. With dertken. Dhaneshwar Ghum, State University of New York. Reponsiby: Innational ECDnomics Dqeprmt, Completion dat October 1991. International Trade Division-Patrick Low and Repots Aleocander Yeats; and Occidental and Central Africa Elbada lbrblah 199 Worl Bank Adjustment Lnding and Department, Country Oprations Division-Luc De Emomia Perfomance in Sunb-bmn Afric A Compai- Wulf The Overseas Development Association is pro- son of EaryAdulern, Late Adjuert, and Nonadtn viding financial support Pdl ear& Woring Paper 1001. World Bank, Washing Clstg dat May 1993. ta, DC 109 Adjusbtmt, Trwde,and Debt EIlbadawi lbrahdm A, Dhmaeshwar Ghur, and CGlbert lArson, Donald F., Simon Glance, Brent Brrl, Merllnda lngeo, Uwuar. I99. -World Bnk Adjustment Lending and andJonalan Colema. 1991. "Abcllsld Green Rates The Ecnmic Perfom_ance in Sub-Sharan Afria in the 19809: A Effeds on GCeraIsSugar, and Oilheeds in West Germany. Comparison with Other LownoueCxnmrlesf Policy PolT Regear& Worldng Ppr 60. Word Bank, Washing- Research Warldng Paper 100D. Worid Bank, Wasing ton, DC DC Strategic Trae Policies lmpact of EC Agricultural Policies Therehasbeenanincreasedinterestinstrabegictrade The establishmentat the end of 1992 of the European polidesin thepastdecade, particularlyin the industrial Commuiity's single market (EC-92) wil abolish trade couniies. And it is claimed that strategic trade policy bamersbetweenmembercountries. Thiswillmean,for has been an important component of Japans trade example, the elimination of the border txes and subsi- policy. But there are also instances of strategic trade dies within agriculture, called monetary compensation polices in developing countries. amounts (MCAs). Intemal pressures to reduce ECagri- This research project studied the effect of strategic cultural budget expenditures have also weakned the trade policies, with a particular emphasis on Japan. It role of the price intervention systemL An example is the also examined Indonesia's ban on log exports, because 1988 adoption of a Common Agricultural Policy (CAP) it is a case in which a developing country holds a large reform package to limit market price supports, alled share of a world market. stabilizers. The question tuis project addressed was the The study found that exports to Japan have been a lily effect of EC-92 on EC agriculture and, in turn, on primary destination for Japanese foreign direct invest- agrinclturalproductionandexporLsindevelopingconm- ment in selected sectors in developing countries. This tries, was true in earlier years for Japanese foreign diect The research addressed the question of how the investment in primary sectors, and itis becoming true removal of the country- and commodity-specific ex- for foreign direct investment in selectedmanufactues change rates (green rabes) would affectagriculturein the It can be argued thatJapan has longappeared to have a former West Germany. The effects of price changes on "freeride"onthemultlateraltradingsystem,whichbas production are estimated to be small, suggestng that opened markets for its exports while Japan has been a elimination of green rates would lead primarily to afall difficult market for exporters to penetrate. Although in farm income and a devaluation of fixed assets, exac- Japanese foreigndirectinvestment doesprovideoppor- ebating the difficult tas of reform. tunities for developing auntries to establish export UsingthelntemationalTradeDivision'sglobalecono- markets in Japan, it would be in Japan's interest to metric model for grains, the study showed that the support the multilateral trade system. removal af the stabilizers and MCAs would have lim- Analysis of Indonesia's log exportban shows that it ited effect on world grain prices and trade. This is is not dear whether it has produced a net benefit yet, because of the indlastic supply response and the offset- while it may have incrased the felling of trees. Log ting effects of exchangerate policies. Largepricereduc- exportbansmaynothavebeenthebestinsumments for tionswillbenecessarytobringproductionintolinewith promotingeconomicallyefficient,local timber-process- demand. Elinination of MCAs woud result in a slight ing industries, nor for controlling tree felling. decine in world wheat and coarse gran prices. The Relponsility International Emnomics Department, elimination of the CAP and a return bD pre-CAP yield Inteational T ade DivisionKenji TakLeuchi. growth paths would lead to a significant dedine in EC Competion datc December 1991. productionandnetgrainexports-resulinginsebstan- Reprts: tiolly higher world prices for wheat and coarse grauL Takeudd, Cenjl 1990L 'lhe Impact of Japan's ForEgn Diet Reponsbir -iterational Economics Departmt, hmestment on Its Inpors frn Deveping Econanmies. International Trade Division-Donald Mitchell, PaperpresentattheSecundCovetionoftheEst-Asan Merlinda fngco, and Donald Larson. conodc odao , Bandung August-272 Complein date: October 1991. - 1990. "Japuns ETenencemen Unidng FReign Direct Repots: Investaent and Imports of Mineal" Keso Pdiq 16 (4). Ingco, Merhnda D.. and Donald 0. MitidL 1992 'ow EC .1991. "DoesJapanese Foare Dirc Ivesunent Pomote 1992 and Reforms of the Common Agiltura Policy Japas I rs of Manufactures fom Developing Caim- Would Affect Deveoping COmbleV Grain Thda tres?- As EmicloJwd (5)1. Woking Paper 848. World Bank, Washington, DC .1991. "Managed Tiade vs Free Trade in Japns Trade 110 Adjustment, Trade, and Debt Poicy. Paper presnd ata symposium at TokalUniver- Easten Europe and EC-92 alty, Tokyo, June 20-f2 ___ 1991. 'Review of Cots and Benfits of Indoneis Log The establishment of the single market in the Euro- ExportBRan! World Bank, Wasington, DC DrafL pean Community at the end of 1992 (EC-92), the eo- nomuc and political reforms in Eastern Europe, and the closer economic ties between the EC and Easten Euro- Commodity Models pean countries-already implemented wrin prospect- pose insting questions about the effect of these This is an ongoing research project cantered on the hanges on these and other countries. costuction and improvement of global commodity Thisstudyexarninedthepotentialeffectsontradeof modelsused intheInternationalTradeDivision'swork possible economic relationstips between the EC and The models are used in developing the outlook for Hungary.FullmembershipforHungaryintheECcould primary commodity markets, for undertakdng price lead to an expansion of its exports to the EC by some 48 policyanalysisforindividualdevelopingcountries,and percent Membership in the EFIA would lead to a 15 for studying the effects of trade interentions. percent expansion in Hungary's exports to the EC The research has developed econometric models of Obtaining the same preferential tariff treatment as the global markets, with areasonabledisaggregaton to the Mediterranean countries would lead to a 10 percent country and regional leveL increase. iugary's inclusion in the genealized system ResponsibiylutemantionalEconomicsDepartment, of preferences is projected to expand its exports by 6 International Trade Division-Takamasa Akiyama, percent Improved access for Hungary to the EC would Mauioce E. Thigpen, Panos Varangis, and Mudassar lead to orly minor losses to Portugal and Spain inran. The study also investigated the effect of the Multi- Compktion dale June 1992. FibreAnrangement (MFA) onthetradeof EasternEuro- Repofls pean countries. It found that the UFA has restrained AldyamnA, Takamnsa 1992. 1 There a Case for an Optimal their trade as much as ithasrestrained the trade of other Export Tax on Peremni-a Crps." Plicy Researdc Woridng suppliers In the United States, the WA quotas were Paper385L World Bank, Washington. DC rarely an effective constraint; the high non-MFN tariffs Aldyama, TakamasA, and Panos Varangis. L99L. "Pice were considerably more important than the WIRA quo- Slabiization for Raw Jute in Bangldes Poliy Reearch tas. EC and US treatment of Eastern European coun- Working PaperS. World Bank Washingn, DC. tries has changed considerably since their economic onvL BrenL 1991. mHowa Change in Brazs Sugar Poldes reforms, and it can be expected to become even more Would Affect the World Sugar MareL" Polcy Rear& favorable. Eastern Europe'sexports of teailesand doth- Woridag Paper 642. Word Bank, Washngto DC ing have been more capital-intensive and less special- Bodl, Brnt, and Maw-Ceg Yanp 199L "FC Banarma izad than other major suppliers. Because of the market 1992PolicyResearWorkingPaper523. WorldBank, reforms in Eastem Europe, exports of labor-intensive Wasbington, DC textles and dothing-where their conparative advan- Colenan,Jonathan R, and MauiceE Ihie 1991. An tage appears to be in the near future-should incmse, Ewnm i AMdelr of the Wwtd Cobf andd AOE-Cldc Fh vs espedally if theNFA is abolished or its grip on Eastem arkets Wodd Bank Staff Commodity Worlkng Paper 24. Europe's exports to the EC is relaxed. Washington, DO World Bn Finally, the study sought to provide a long-term . 1991. Impat of Cotton Maxket Deve1openftin China perspective on developments in international trade in and the Soviet Uxnon on the Uxited States CDttonMae manuctures due to the changes in members of the Paper presented at the Beitwide Cotton Conference, San former Councl forMutual EconomicAssistance.Using Antio,Texs,January. "gravily model" analysis and Michael/s "index of in- Larson, Donald F., !cn tanoe, Brent Borrel, Merlinda Ingeo, come levels of exports and imports," the study found andJonathan Coleman. 1991. "Aboishing Green Rates The that Eastem European ecnonmes will have a consider- Effeds on Creals, SugarF, andOleedsin West ermanynr ably smaller proportion of manufacture trade with Poliy Research Working Paper 5;7. Wadd Bank, Wasbing- each otherand particlarlywiththeformerUSSRWest- ton, DC ern Europe will becme their prncipal trading partner, igpen, Marice E, andjonatha Colemat 1991. "Oil Madret but tuade with North America and Japan will increase Distbuxanco Short-Term Implicato for Waod Tetile sarply from its small base. T-rade with developn Coasmption with Emphasis on Cotonf Paper preseted at countries, both imports and exports, will also incease the Beiwide Catmon Cme , San Antmio, Texa sharply. In the short temi, these developments will . likely adverely affect many deveoping countries that 111 A#ustmt, rTMd,wt Dekt rely on manufactures eort-thro mmpetition in cition of cosly public goods projects on a very small major industial markets. scale. Regioa integration should be looked upon as a Reponsiit.r Imnational Econonmcs Dqrtment, means to achieve international competitiveness. International Trade Division-Refik Erzan and Raed ThesefindingsimplythattheBankshould recDgnize Safadi theconsnaintsimposedbyregionalintegrationschemes Compleion datc June 1992. inSub-SaharanAficabutshould try to usetheregional Reft friiamework for promoting economic eforms. Erzan, Reflk, amd Chdsber Hdlme 1992 -MhefRestrldve- The project waspart of a wider workprogramin the nes of thenlMI-FlbeArangement on Easte uopean Trade Policy Division that cinated in a conference Tra" PolcyRedWokigPaperstilLW laddBad on the issues and experences in regional integration WamhbIgt, DC worldwide, New Dissemination of Regional ntegra- rz, Refik, Cbrstophe olm, and RaedSafidL 199Z tion, sponsored by the World Bankand the CEPR (April "Imaplicaticas of the Change In the Former CMEA Am an 1992). Intionmal Trade in Manufacte World Bak, sonsbt&y:ComtryEcwonmicsDepartmen*Trade Washnton, DC Policy Division-Faezeh Foroutan and Claudio Toas,AIfAl h 99L "BC-Estern Eimp: A Cae Study of Montenegro;andOfficeof the VicePresident Develop- Hungary.2 Iw of Cam= Mutt Shadi 29 O)291-31L ment Economics-Lant Pritchett Toias, Aird and S&a l.ard. 1991. Whte Hungzy and the Complelion date June 1992. Ezropean C=Atnesr Poli Rmesrch Workng Paper 4WordBank,Whintn DC Export Supply Response in Agriculture Economic Integration in Sub-Sahman Africa This study of agricultural pricng and tax policies produced two major cmdusions. First, based on new Tn Sub-Saharan Africa. regional integration, in the and fairly comprehensive measures of taxation and form of trade, exdanmge rate, and cooperation agree distortions (such as deviation of domestic prices from mentsamonganumberofwuntries,iswidelyaccepted border levels) in agricultural pricing in B0 developing asaneffectiveapproachtoemnomiegrowthand pros- counties from-1966 through 1987, it appears that, on pentrt. Bywideningthemarkets,regional integrationis average,taxationof agailturethroughdirectprice polh- believed to allow the small cunties in the region to des dedined in the mid-1980s as a result of adjusbment industralizeandbreakawayfromexcessivereianceon refoms (Distortions, however, remained quite high in raw matals and primary commodity eports, This general, and taxation rates vaaned significantly aaoss research project attempted to determine whether these cotniesandops.)Seond,basedonateoreticalmode epecions were realstic, whyregrol integraon in of induced inovation and some empirical evidence m theregion hasachieved so litle, and how iheempbasis this same .rple, the price kles (not just the rate of intefuteshould cbangetoniakeregionalintegration incrase,asstandarimodelswouldsuggest)seemtohave an effective tool for sustainable growth. an effect on the long-erm growth rate of yields. The reSeardc is important bemuse regional integra- PonslltCountryEwnomicDepartmmt Trade tion is widespread in Sub-Saharan Africa and because Policy Division-John Nash; and Office of the Regional most economic reforms endorsed by the Bank have to Vice President, East Asia and Padfic Region-Vmod contend with constraints imposed by various regional ThomasWithCeorgeTolleyandJamesSnyder,Univer- integration schemes in form in the subcontinent sity of Chicago. The research used trade and country-specific data Compktion date :June 1992. obtainable from international statistical sources. The methodology waspartly quantitative and econometric and parly descrptive. The Role of Export Catalysts in Low-Ilcome The pricpal findWs were the folflowinw Develping Countries * Regional integration intpWeted as a trade agree- mentandusei asanimport-stbstit tionollbeiton The most profound emnoomic development lessons a wider scale-has failed and is bound to fail in the of the past four decades derive from the superb perfor- future. manceof outward-oriented developmentstrategiesBut * RPgionalintegationshouldbeinterpreted mostly the deeper lessonson the intricacies of initiatingindus- asa cooperation agreement and as a means to integrate trial development in an outward direction in low-in- government activities and reguations to prevent repli- come developing countries have yet to be explored and 112 A4jusbnn, TTUd4 ad Debt articuatedFor Sub-Saaran Africandevelopingeoun- Thisresearchcentersonanirnvestigationof thestatis- tries, the dedine in their real per capita GDPduring the dcal proptes of the time series of prices. Italso inves- 1980s by more than 2 percent a year is evidence of the igates the relations bwen macroenomic variables poorperformancof thirstrategies.Themostclalleng- (suc as interest rates, exhange rates, inflation rates, ing task in the 1990s is to find practical means for and industrial production) and the formation and be- initiatinganoutward-orienteddevelopmentsategyin havior of primary cnmiodity prices. And it exanmines these countries, the relation betwee stodcholding behavior and com- In the research and operational support work of the modity price movements. Industry Development Division during the 19s and Theresearchhasfound thatthereisahighlynonlinear thelasthalfofthe1970s,twomajorbuildigblodswere relaion between stocks of a commodity and its pzri identified thatare critical foriinitiatingindustialdevel- movements. When stocks dedine to low levels, the opment in low-income developing counties in an out- ability to dampen price movements is sharply reduced. ward dicion. export polcy regimes and export cata- Most commodity prices do not appear to ollow a ran- lysts. Recently, the research has focsed on the role of dom walk, as long beeved. Stock-out periods areper- collaboration between small- and medium-scale firms odsof Hneardependencein the series Of themacroeco- fromindustrialandnewlyindustrializingoDuntriesand nonuc variables, the real interest rate exerts the stron- firms in developing countries, particularly in Sub-Sa- gestinfluenceon commodity prices. haran Africa It is generally not possible to forecast commodity This researc is explorng these issues. It is based on prices acuamtely. The prelmnary results of tis study fim-level investigation using quantitative, quitaive, sggest thatgreater emphasis should be put on the use and historical (dynamic) data and information about of flnandalmarketinstrumentsformanagingcDmmod- human resource development, private sector develop- ity pnce risk. For this reason also, Bank project evalua- nent, and export development The data are drawn lion should pay more attention to analyzing the ris- from a number of Sub-Saharan African countries and nessof projects inolving primarycommoditiesr Where from Hong Kong and Italy. possble, price-hedging stategies should be incopo- Resasbity Industry and Energy Department, In- rated. Industi cuntry policies thataffect real interest dustky Development Division-Yung Whee Rhee and rates will have an importantinfluence on prmary corn- Katharina Katterbacb and the Eastern Africa Depart- modity prices mentWithT.BelotCAndin,andA.BowringWomen's Resnbly International Economics Department, World Bankin& The US. Agency for ntemnational De- Intermational Trade Division-Takamasa Akiyama, velopment is providing financial support Panus Varigis, and Boum-Jong Choe. With Pravin Competion date- December 1992. Trivedi Rem Cmpltn date June 1993. Toaey. Geog. Vinod Thomas John Nash, and James Snyder. RAla FRthcmin What We Know About Agriculural Pcei Aldyama, Takamasp. and Pyavin KX Trivedi 199L Stabiling Pdides, Politcs, and Supplyf n volume in hmor of D. Gale Impoted Food Prices for Small Devlroping Countres Any Johnson. Univers of Chicgo Press. Role for Fuht?" Paper presented at the 21st hItenational Cfrence of Aguiltural Ewncmists, Tolyo, Augst 22- 29. Commodity Pzice Formation and Behavior Choe, Down-Jo& 19L aCommodity Pice Forecasts and Futues Pikes." Policy Resrch Woking Paper 436. Word Developing cotries are heavily dependent on ex- Dak, Washirgton, DC ports and imports of primary commodities. They are __. 199t -The Metals Pike Dw. of 1987-89: The Role of thus very susceptible atboth the micro and macro levels SuWly Disnuplios and Stod Cangesf Poliqc Research to sharp changes in Cmmodity prices. Better under- Woridng Paper 542. Wodd Dank Wasingto, DC. standingof commoditypricbethavior will lead tobeter . 199 Rational Expectations and Caminodity Pnice pzice policies, indluding better policies for managing F ovt. Poicy Resewrch Wkng Paper435 Wold Bank price risks. Better understanding will also improve the Washington, DC JnternationalTradeDivision'sabilitytoforecastprines- .1992 "e frecautionay Demand for Commodity to the extent that this is possible Improving the under- Sbodas standingofcommoditypnrcebehaviorrequnesanswes Pabaas, TheodosLos B, and PanosN. Varangls1991. ls The to such questions as: What factors are the main influ- Ex( Co-movemet of Piary Canmodity Pulces? A ences on commodity price movements? How do they Coitneraton Test Paicy Resarch Working Paper 75& influence them? Are these influences random? WaS Dank Washigon DC 113 Adjmbnmt, Trade,and Debt Qbin, Yfng 1990 "Do Sted Pdals Move Togehw? A The empirical part of this project induded empircal Conaegrtioa Test' Polcy Rerdh Waking Paper 45I analysis for East Asia, Latin America, and some African Wod BanB,c Waidngton, DC. countries.Themainfindingof thisanalysisisthatihecyde Trivedt Pravin IC 1991. -lme Seies Behavior of Some of iimlial contraction foUowed by (in several cases) a long Conmodity Pzices. investment pause in the aftemath of adjustment is con- Trived, Prvin Land Pans VaanjsIi 1991. "Ens Co- finned for economies that sted their adjustment pro- moument of Commodity Pric A Stadsdcal muuir gramsfomverydeterioratedmac_oeconomicconditions. Varangi, Pans. 1990. "How Inteegted are Tropikalimber With regd to the determinants of investment, the Marketr Policy Reseach Working Pape 465. World Bmak, econometric analysis shows the fiDowing Washingtm, DC. a There is a positive and significant relationship between the level of public investment and the level of private investment This suggests dominant comple- Fimancing the Foaner USSR's Transition mentay relationships between the two types of invest- ment. Thetransitionof the fornerUSSRwiil requirea geat * The Gagged) growth rate of GDP has a significant deal of newfinancing In addilion, the former USSR will positive effect on private investmenL need to resolve internalyand exernally howitwfll deal * The foreign debt overhang and variables measur- witholddebtaswellasthe daimsitholdsondeveloping ing the degree of macrOeconomic instabilityuch as countries. These are new issues from both a conceptual thevarianceof therealexchangerate and of theinflation and a practical point of view. This research has three rate-have a negative and significant effect on private objectives: to analyze different ways of dealing with the investment olddebi;toanalyzethedaimsthe formerUSSRholdson * Thelevel of thereal exchangeratehasan insignifi- developingcountriesandthepossibleoptionsfordeal- cant negative effect on the level of private investment ingwith them; and todevelopa conceptual and analyti- In addition, the analysis notes an asymmetry in the (ml model to projecbalance of payments requirements effects of macoeconomic versus liberlization policies for each of the republics of the former USSR oninvestmentand gwth. On theonehand,policiesof The transition the formerUSSR facespresentsanew macroeconomic restraint, when sharp and protracted, challenge in modeling adjustment and external financ- adversely affect the level of investment in the short ing. The research will therefore have to first develop a tesm. On the other hand, liberalization policies tend to methodology. The data used in the research will be affect the composition and productivity of investment trade data (inter- and extrarepublic), debt stocks, and more, and they do so slowly over time This asymmetry evidence from cross-country comparisons. should be considered in the design of growth-oriented Responslbiylit International Economics Department, adjustmentprograms. DebtandlnternationaFianceDivision-SijnClaessens A conferenceto presentthe fmdings to date was held and David Naudea With Mchael Dooley, University of at the Bank in March 1991. California, Santa Cruz RepsitirCountry EnonoicsDepartment,Mac- Completion datc June 1993. roeconomicAdjustmentandGrowthDivision-Andrds Solimano and Luis Sven With Robert Pindyck, Mas- sachusetts Instifftte of Technology. Ilnvestment and Growth Comtpltion dact June 1993. This project seeks to contnbute to the understanding of how adjustment polides affect capital formaion and Manufachues Trade Modeling growth. Investment is a main determinant of growth, andmanypolicesaffecttherateof GDPgrowthhrough Trade in manufactures is thefastestgrowing compo- their impact on investment nent of trade for developing cmuntries. This project Two womisome trends concernng investment are which seeks to construct a global model framework tD observed inthepracticeof adjustmentirst,publicand make analysis of manufactures trade possible, will lead private investment tends to fll at the beginning of an to abetter understanding of these trade flows and their adjustment program involving comprehensive macro- ,.otentiaLI t will contribute to the manufactur trade economic restraint. In several cases the drop in invest- forecasts made in the Banks operations wmplex for ment rates was found to be quite shap. And second, individual developing countries. there is a considerable lag in the response of private The work has combined econometric analysis and investment to liberalition policies. simulation modelng. An econometric model of the Z14 Adjustment, Trade, and Debt determinants of manufactes pors has been devel- Regional Trading Blocs oped and used to provide evidence on the manitude of the keybebhavioral paramtrm the elasntit of response Interest in regional tradingarrangements-behteen of aggreate manufactures expm to hanges in rdlative mdusialcountries,betweendevelopingcounbies,and prices These pametes were then Inioporated into a between industrial and developing countries-has simulation model of world manufacture trade grown considembly in recentyears The reasonsfor the The manufachtues trade simulation model has been heightened interestmaybedifferentineachcaseandam used to invesigate the "fallacy of omposition" augu- notalways dear. This research has concentrated on iden- ment that individual countries may be made better off tifying the gains and losses, prticularly for developing byan expansion of their manufacthr exps,but that countnres, from participation m such arngements, the the developing countries as a whole would be made effcts on third countries, and the effects on the multilat- worse off if they all expanded their exports simulta- erd process of tade reform It has conducted detaiLd neously. Considerable importance was placed onspeci- studies of the implications for Mexico of its participation fying the precise causeof the expansionof manufacturs in the proposed North American Free Trade Agreement exports For the mostimportant cas, where the xpan- Furtw work in this project will concentrate on the ben- sion is due to improvements in productivity or the efits and costs of a regional trading arrangement for the accmulation of specific factors in the manufacturing EastAsian or South and East Asian countries sector, the result obtained was exactly the opposite of The research examined the potential gins to Latin thatimplied by the fallacy of composition argument. A Amerian countries from a free trade agreement (ETA) simultaneous expansion of manufactures exports in all with the United States. It found that the FrA would, on developing ounties actuayineased thegains e- thebasisofexistingtradebarriers,raiseLatinAmerican rienced by ech developing country region. The de- exports by only 8 to 9 percent, with Brazil and Mexico dinesinexportprcesresultingfromexpansionofmanu- gaining the most The inaeases in exports realized by fachures exports benefited the developing countries, others would be relatvely smaller because they pres- which are net importers of manufacures and which ently face lower barriers. freqaentlyhaverelativelystrongradeli hnkagesinmwanu- The researc looked at how Multi-Fibre Arange- fachires. ment WMFA) quotas currently on US imnports from In the coming year, further work will be undertaken Mexico will be replaced by rules of origin designed to in this project to develop the simulation model to pro- maintain the essential features of the existing regime. It videa higher degree of commodity and regional disag- found that Mexico's compliance witha "multiple trans- gregation, and to incorporate improved measures of formation" ruleof origin should notbeonerousbecause protection. A high priority is the development of a of the high level of dependence on US. inputs. model database thatwill allow themodel tobeadapted Fmally, the research looked at the effects of a US.- to policy proposals involving diffent regional group- Mexico bilateral iaization of sweetener trade. It ings and changes in protection measures. found that piecemeal bilateral changes could inpose Resoby: Interational Economics Department; huge costs on third-country sugar exportes Elimina- International Trade Division-William Martn and ton of protecion of sugar producers in Mexio and the Vasilis Panoutsopoulos. United States could incmase the world price by an GCmpldion dstc June 1993. estimated 15 percent Roients: Resposity: International Economics Department, Martin, WiaUL 1992. -Me Fallacy of CmpaOdiol and Intertational Trade Division-Alexander Yeats, Carlos Develoing Coumtry Exorts of Manufactur Word Bwl Braga, and Patrick Low. Washington, DC Compldion datc. June 1993. _ 1192 "A Nmeial Mode of World Trade in Manuf- Repots thues" World Baik, Wadingt DC Bmistar, G, P. Low, and C Holmes. 1992. "Noth Amerian Marti,Wilm andS. GurnmL 1991. Growth,Structural Free Trade in Textiles and Apparel: A Case ofConstained Trasfoion, and Trade in Manufactures" World Bank, Lbxalizat"onf Weld Bank, Washingtorn, DC Washingkn DC Borrell, Brent, and Jonaha ColenIaML 1991. -Gains hom Marffn, Wiali, and Vasfis Panoutiopoulos. 1991. "The Trade in Sugar and the US,-Mexiwo Free Trade Agremenn Changing Composi and Diection of Trade and the Woidd Baik Washdngto, DC Participation -o Devping Counies. Prsted to ODI Erzn, Refik, and Alexander Yea&. 1992. "Free Trade Agree- Confierce an conomic: Prospects for Developing CGim- mts with the Udbted Stams Whats In It for Latin tries Patters of Industria Prouctio and Devlping AmerIca Poliy Rfeseh Wodrcg Paper 827. Ward Bank, Country Trade, London, Ocober. Washgton, DC 115 Adjustmnut, Tite, nd Db Trade in Services Trade Policy Studies Services have rapidly becme an important compo- This ongoing projet in the Intmational Trade neat of the export trade of many developing countries Division focuses on issues reklvant to the perfor- as reflected in workes' remittances from tempory mance of the inational trading system and trade mignt Labor or from tourim But the services sectors issues of geneal relevance for World Bank members ofmostdeveldopguntriesaretighdtyprotctdagahist In the ating year the research will look at several uiport competition and are therefre very high aost issues.Fwst,itwillecaminethe use of "ules of origin." This would seem to work against the develpment of These appear to be the cutting edge of protectionism in efficent services sectors and, in tum, hurt the develop- the move away from the use of tariffs. Second, it mentof low-cstprimaryand manufac gindusi will deveop taiff-equvalent measures of these and This research wil address issues of importnce to a other nontariff forms of protection. And third, it better understanding of behavior in the smices sector. will Investigate the ikelihood of the extension of These issues indude (1) improved global estimates of compettion poliq disciplines into the intemational worke remittances and causes for underreorting of arena. remittances; (2) the on4go globabation of industry Rpniltyr Iwnational Economics Department anditsimplicationsfordevelopingcountiesintermsof Intermational Trade Division-Ronald Duncan, foreign investment, technology btnsfer, competitive- Alexander Yeats, and Patrick Low. ness, and the upgradig of labor skills; (3) benefit-cost Cbqpltin atc June 1993. analysis of trade leralization in the services sectors of Repw.t developing oDuntries; and (4) the inceasing labor mi- Huge Hals KI VL Mlm IWadef EG-2 sz Developing gration within Asia and the pressures underlying it. Conshtbde ADIUSGnUgVMewf Plcy Reserch Respoabity: International Economics Department, Weuldg PapeS. World Bk, Wahin, DC International Trade Division-Carlos Braga, C Suan Qiai,lng, and Pans Varglt. i9± -Doe Exchange Rate Tan, and Kenji Takeucdi Voaity Hids Export Grwth? Additiml Evidence." Compltion dAft June 1993. Policy Research Wedng aper 911. World Bank, WashiA Report ta, DC Mmse, 5.5, and MSS Tdtelbaum.L 1992 In Wmafind Mg-.tim- ad Ineniha Trwi Word Blk D on Paper 160. Washington,DC 116 ECONOMIC MANAGEMENT Macroeconomic Policies, Crisis and Growth Theprojsapproach tissuesandwayof amving in the Long Rim at judgments and condusions was thoroughly piag- mafic or edlectic. The emphasis was as mudh on differ- P1. no. 673 -9C ences among countries-on diversity-as on similari- Until the 1970s, research on developing countries ties or regularities. was conerned mainly with longer-run structural fah- The country case studies conducted in the project tors. The new interest in macroeconomic policy par- show that economic shodcs can have diverse aigins- ticularly its relation to growth, arose essentially as a and induce diverse responses-end that the dcoice of result of the sevee shocs-4eading to the debt cisis- policyinstumentstodealwiththecrsisdependsonthe thathitsomanycountriesintheearlyl980s.Thededine country'spast experice, its ideological positions and in the growth ratesof manydeveloping munties in the the policymakers evaluation of the nature of the shock 1980s was dearly connected with the macroeconomic Policy lessons that have been drawn from the coun- cises and-some- have argued-with the adjustment tries eriences are as follows: policies that subsequently were followed. There is now 1. There should be firm overall budgetary account- a large liteature an this subject, focuing in paricular ability, includingaccess to the tentral and international on the implcations of accumulated debt and on the capital markets. effect of the "ordiodoxr economic policy presciptions 2 Attempts should be made through monetary and t'hat have inceasingly been followed. But much of the fiscal policy to stabilize output around its long-nn eraturehasdealtwithasmaflnumberofLI;inAmeri- trend, but counties need to be wary of changes in this can countries, especially Argentina, Brazil, and Chile. trend. To that extent ithasbeen quit unbalanced. This project 3. Jerky movements in the real exchange rate should looked at a much wider range of countnes-18 coun- be avoided. tries in four continents. 4. It is important that countries resist euphoria when The project's objective was to review the macrec- export pnrces rise excptionally, new resourwe are dis- nornic expermns of these 18 developing countries covered, or new borrowing opportunites open up. over 15 to 20 years. The research was concermed with 5. Policymakers should be aware of the unpleasant thre periods: the period from the first ol shock to the aritimetic of both external and domestic government second (1974-79), the period of crisis (roughly 1980-83), debt, and of the need tD relate borrowing to rettun on and the subsequent period of adjustnent and, in many investment to borrowing rates, and to the prospective cases, growth recovery (1983-90). In particular, the e- h in exports and in government revenues. search looked atpolicyreactions to external shocks and 6. Countries should be sensitive tD the maturity of to stabilization and adjustment policies. But the re- debt, both exte and inal. searchalsotried totakealonger-termview,tolookatthe 7.Countiesshotddavoidusingimportcontrolsexcept period as a whole, and tD acsider the implications for in extreme situtio, and then remove them as soon as growth of shocks and policy reactions. It sought to macecnic crcustances permit If pused cred- compare experienCes and reactions and to understand Wy, this stance will enhance the effectiveness of import why they have differed among the countres, controls on the rare ocsions that they are used. The research asked why some countries suffered & More generally, it is important to avoid building bigger shocks than others, and why theyreacted diffe- rigidities into the strucmture of the ewnomy, which per- ently to similar shocks; tD what extent the shocks were sistent import cDntrols do. external or internal in origin; what the roles of fiscal, 9.Itisimportanttomaintainffloibility inpoicy,and monetay, exdhange rate, and trade policies have beer; in partcalar tD correct mistakes quiddy. how the iflation epiences differed and why, and The findings of the study have been disseminated what condusions can be drawn about the effects of through periodicworishopsand cnferences.L Thefal macreconomic policies on growth and what lessons country studies wil be disseminated as separate coun- can be discened for future policies. try volumes, and through a synthesis volume. 117 The countries seected for studyand the authors (in 991. 7Maoen Policy and CGwt Some Lemm parentheses) are as foUows; Argentia (Juan Carlos de of Expern In Pvoemdhto de1 Wbrltd Bn Amnd Paiblo), Brazil (Donald Coes witi Marcelo Bianconi), Cm*vrean Devdopuad Eemwnas, 1990. Supplenment to Cameroon (Michae Connoely), Chile (Reman Coe), Wol ak Eon aauk jw. Colombia (Jorge Gar-Garda and Sisira Jayasuiya), -. Fashcoin& "Aborpton, the Budget and Debt The Costa Rica (Claudio Gonzalez-Vega), COte d'Ivoire Wondeand of PbcAiblldesP In H. Habeng and N.V. Lon& (FranoDis Bourguignon and Jean-Claide Berthelemy), edL, Currt Issue in Ihlr nt Trade ay: Papes ui India (Vijay Joshi and Ian Utile), Indonesia (Wing Thye IlnorffMumy KaqtAim Arbor Undversty of Mlidgan Woo, Bruce Glassburner, and Anwar Nasution), Kienya Press. and Nigeria David Bevan, Paul Collier, and Jan Gun- de Pabl, Juan Carlos. 1991. Agntina. Vontobet Bnk rnig), Mexico (Francisco Gil-Diaz), MorocoD (Emil ardae-Cad, Jorge with Lia Gurerman. 1988 Medidon del Claass), Palkstan (Nadeem U. Haque and Mohsin delicdtdel.ctorpublioo comblanoy suflnandadon: 1950- Khan), Sri Lanka remiachnda Arthukoaa and Sidra 1986 Eufis Sbre POlMm Ecamdmra (DBnu de l Jayasuriya), Tadand (Peter Warr), and Turkey (James Republc., Depatmefto de Invesllgadones Eonomic., Riedel and Ziya Onis). Bogota, ColmbIa) 14 Deouember ResponsFLb.IatinAmenicaandtheCazibbeanTech- GQDlazD FncIsco, and RHul Ramos Temn. 1988 "Lsson nical Department, Trade, Fmance, and Private Sector fromMexicofltMldieBrunoandWorldInstitutefor Development Divison-Sarath Rajapatrana With Ian Deelopmet Economics Resch, eds, Iatrin 5bfi- Utle,NuffiedCollege,rdUniversitMaxCorden, Liner EimFerwa ofsrd, Arenta, BazE, Baolb md JohnsHopldnsUniversit;andRiharddCooper,Harvard MAic Cmbdlge, M MIT Press. Umversity. SIDA provided finandal support Conzalez-Vea, Caudio. 1989. Debt Stablzaton, and Cln date June 1992. lberalUatlo In Costa Ric Politica Economy Respnses to Reporis* a Fia Cis In Philip Brock, Midhae Cannofly, and Athukoa, Preachandra, and Swath Rajapatra 1991. The Caudlo Gonzalez-Vega, eds, Latin AmeAn Debt and Dnmestic Finandal Market and the Trade Liberalization Adjshl nL; E*redE Shack and M 1xcn,ic PadiiesNew Outom The Evidence o Sri aa Poicy Reseavh York Pranr. Worldng Per 590 Waord Bank, Wahlngtcm, DCr - 1989. 'Foreign Assinc and Domestc Hnandal BiaxamL, Marel 1989. "Br:t Government Interventioan and Markb in Dewv ing Countries." L Myers Memoral Maket" Tufts University and University of WasingkN Lecur I&ac., NY: Comel Unrsiy Pria - 1989. BraLt SomIeMaoeoSOmI Froblem Tufts -. Fortoin&g "Establzadon y Gestlon Ewnouda en Universitand Unhvrsity of Wasidton PequnaEwnamias: Comentulo In Eduardo Lizao, ed, .1989. "Brat Sbilizadon Pan and Foreign Shocke Ajuske, Cadmimnto y CDiercielnklrnnd a Peques TufIs Unversty and University of Wafhangk EConmO Abketas. Cooper, RIchard 1991. Debt aud Stization iu Doping Gonzalez-Vega Claudio, and Edna Camadho-Mej4 edL1990. Conts. Cambridge, Mass.: MIT Pre Poti Emuamims m Ca Rica. 2vols. San jose. Academda _ 1992. Curny D qwcMmn v Devdping Countrie Euys de Centoamerlca in Intenational Fhmce 86. PrIneton, N.J.: Prieon Gonzalez-Vega Gaudlo, with VIL Cespedes and R. runenez. University. 1990. Costa Rica Fmae ala Cruisi Polti ms y Resutdos. San Cooper, Richard, S Hard, S. Colns, C IGm, and N. Rob. Jae Academl de GentroanericL Forthcomin k licnemomlcManagement in Korea. 1972- JoshtVijay. 1990. "Exchnge Rate Regimes in Developing 88 ountrIes!"In Mamce Swtt and DeepaokLl, eds., Pubic Coarden, Maw 1987. fThe Releance fr Devdoping Counties of Pdiy and Ecaw Dd =L Oxfordi Caendm Press Recent Dvelopnemb in Maomei cirdc Theory. World Khan, Mobsin. 1990. "Macroeomonic Policy and the Balance of BWa Resuda Obserwr2 (01714l& (Also hCG. Calvo and Payments in Pakstan: 1972-86? Worldng Paper 90/78. oths, ed, 1989, Debt, Stabliratou and Declona Essays Internatina Mneutay Fund, Washington, DC in Ma&au of CmfosDiczAlAndro. Oxfoud: Bladcwel Lit% LD. 1989. Indian Maoemnic Policies"In Pubishe Calvo and others, eds., Debt, Stbuatmn and Dedhpnnt: . 1989. MacrdpAdjustmentIn Deveoping Essays ina MAeo r f Owrs Dia-Alejwdro Oxford: Bla&well CorW l Ban Reknuch Cdffw4 (P)51-6 (AlsoIn Publishe I. Scott andDeepak la1, eds, 1991 PublicPocy d . 1989. -Les Politiques Macrecnomiques lndiermes? Emmk Delpamn. Oufmor: Clarendam Prs) Reve Tis Ande 30 (October-Dec.nber)797-821. . 1991. "Exchange Rate Pqoin Devoping Countriem itfte LLD, and Vijay joshl 1987. Indian Maoecooic ln!alunedeMelo andAndre Sapr, Trde Thoyad Emk Pdoicis" Emnnir a P id Wefty 22 buar)y371-78. R4be Nrt*, South,and FAst: Essays int HU of Bla BSao Ltttle, LiiD, and J.A. Mirlees. 1990. Prject Appraisal and Oxfrc Basil RadcL Planning Twenty Years On In Prcengsof the World honk 118 Economic Mazagenat AwadCoafevwat DDnde omlap Z Ew ics, 2990. Supple- remain in the definition, assessment, and valuation of met to WnI Bat Eaoomic Rcei-w. congestion cost. Peiminary results from the study in Woo, Wingibyte and AnwwrNa dtLo 189. "ndonesIa Zimbabwe, where oDngetion costs are not an issue, Eamomle Polies and The Reulaton to Extal Debt suggest that diesel fuel used by heavy vehidles Issubsi- ManhgemenL In Jeffrey D. Sadhs and Susa M. Cins, dized, and light vehides-particularly crs, pickups, ed&, Der7veg ContyDt Dtad Emic Peflnc& and vans-bearmore th theirshaein roadusecosts, Chlicag Unieity of hicago Press, with important consequences for rural transport ser- vices Themainfndingsof theresearcisuggestthatgreater Transport Taxation and Road User Charges attention needs to be paid to cost recovery from road in Sub-Saharan Africa users in Sub-Saharan Africa to ensure efficient use of resources and mobilization of revenue while mnimiz- Ref. no. 674 -37C ing the adverse distributional and price effects of road Transporttaxesaretraditionalandimportantsources user taxes. More important, it was found that fairly of public revenue in most countries of Sub-Saharan robust analysis of road user charges can be carried out Africa, with road trnport yielding the greatest rev- even in data-poor countries to obtain practical policy enue. Practicalyall African countries face severe short- recommendations. ages of public resources and have a road infiastrcture uchp iity.IfratructurmandUrbanDevelopment thatisseverelydeterioratedorinaprecariouscondition Department, Transport Division-Asif Faiz and Wil- andneedingsubstantialandregularexpenditure.Roads liam Paterson, and Office of the Director-Esra have deteriorated because of varying combinations of Bennathan Westem Africa Departet, Ifrastructure neglect and unexpededly heavy or inappropriate use, Operations Division-Thampil Pankaj and Anil yet the costs are generally not transmitted, trough Bhandari; and Southern Afica Departmet, Infiastruc- pricing, to those who use the roads. Transport taxation ture Operations Division-Imogene Bums and Preben is thus an important policy issue for both efficient re- Iensen. With Reuben Gronau, The Maurice Falk Insti- source use and resource mobilzationL bute for Economic Research, Israel Abbey Sam, Ghana The main objectve of this research was to provide a fighwayAuthorit;andRodM thUMnitlsyofTrans- shortcut method for establishing road user dharges and port, Directorate of State Roads, Zimbabwe transport taxes in data-poor countries. Itbuilt on earlier Clbsing daft December 1991. reserch supported by the World Bank in engineering Repofrt economics and the economics of transport taxation. It Gronau, Reube. 1991. -Are ChantsRoads PayingThelrWay? sought to improve the design of tansport taxation and Asdng Road Use GCst d User Chage in Ghana" road user charges in Sub-Sahwan AfricaL Policy Reseac Workng Paper 77. Wcld Bank, Washig- The research was conducted through case studies. te DC. Theexploratorystageof theresearch,which used Ghana _. 1991. 'fnsport Taxion and Road Use Chags in as a test case, was devoted to ascertaining the adequacy SubSharan Akicaw A Coe Study-Zmbabwe. World of available information and tax instruments for devel- Banik, farastuctue and Urban Development Departmt, oping simple and administrativelypracticable schemes Wagton, DC. Draft for assessig road user charges. The follow-up stage Newbery, David M. Cordon Hughes Wlliam Patson, and induded two detailed case studies: the first to complete Esra Benmathan. 1985. Road Tnosport Taxatiam in Dudopmxg the research in Ghana, and the secmd to replicate the Cieo World Bank DIscusion Paper 26 Wadingon, work in Zimbabwe. De World Bank The exploratory phase of the research showed that even drastic shortcuts in assessing an appropriate level of road user charges lead to fairly robust results. The Testing for Systematic Differences in Initial case study in Ghana conduded that fuel taxes are the and Final Project Evaluatdons closest proxy for road user dharges and adequately cover the msts imposed by most users, as long as the Ref. no. 675-1&C local fuel prices are adjusted to reflect world energy There has been an inceasing interest in the gap pnces. The annual license fees constitute only a small between the rate of rettun expected by initial evalua- fractionofroaduserchrgesin Ghana,,and heavytrudks tions of Bank projects and the rate found by subequent pay only one-fourth to one-half of their share of user evaluations after completion of the projects. This study costs The study alse showed that congestion is an looked at the 594 agriculuaul projects completed by the important determinant of road user costs and of near- end of 1988 to investigate whee there are systematic effident road user dcarges, although major problems factors that explain the differences in the rate of retunL 119 EconoiManAgement Theaverageeconomic ateof return calculated fortese The Macroeconomic Implications of Parllel prosects before approval was 21.5 perant, and the Foreign Exchange Markets in Developing reestimated economic rate of return after completion Countries averaged 11.8 percent. The study explored severa ap- proaes Rf. no. 675 30 A complicatng factor arlses becase the rate of re. This project examines macroeconomic aspects of the turn at tompletion is censred. A dgnlfcatnumber of use of prallel foreign exchange markets in developing failed projects are asded a rateof return of-S percent countries. In particular, It focuses on the reasons that in the final appraisal For (asymptotically) unbiased lead to the adopdon or emergence of exchange rate estimation and testinga modified Tobit produre de- systes with a parallel foreign exchange market (for veloped fora tivo-equation SUR model, where thece- example, dual exhange rates), and the conditions re- soring occurs in only one of the equations, is ret. red. quired for successful unification. Theesting liature At intal evaluation all funded projects are expected alreadyprovidesstrongevidenceof aninverserelation- to be successful and are assigned an appraisal rate of ship between the ratio (prenium) of the parallel to the return (tRO). At project completion the Bank reevalu- offcialexcbagateandeconomicgrowthThisproject ates the I .oject and assigns a measure of sucess or examines the deteminants of the premium, and the failure and, when possible, recomputes the rate of se- impact it has on the fiscal defict, on the balance of turn (RRI. This research addressed three related ques- payments, and on inflation. A centaml question is to tions understand when adoption of dual exchange rates is * Are the two sets of project performance measures appropriate. consistent? The analysis is based on case studies on Argendtna, * Does the initial 1RRO contnbute to the explanadon Ghana, Mexico, Sudan, Tanzania, Turkey, Venezuela, of the RRI? and Zambia, and cross-country analysis involving a * Do initial predictions of rates of return matter in broader sample. the assipgment of success or failure at completion? The research findings show that in the short run the The study tested the hypotheses it formulated in the parallelexhange rate (andhencethepremium)isdeter- context of seemingly unrelated Tobit regrssions on mined prmarily by monetary and fisa poliry and equations for the RRO and RRL expectations about devaluation of the offiidal exchange It was hypothesized thatif the two sets of evaluators rate. large prenia are thus generaly the result of un- (for the RRO and RRI) were consistent, the coeffidents sound macroeconomic policies. The available evidence of the explanatoryvariablesin thetwo equations woud also indictes that in most developing cmuntries large be the same. The consistency hypothesis was refuted. premia increase the size of the budget defiit, mainly The RR11 was found to be a significant predictor of beause the public sector is a net seller of foreign ex- the RRI butnotasignificant predictorof projectsucoss dhange. The research also found that, because of leak- This seemingly anomalous result may arise beause of ages, the use of parallel foreign exchange markets has thernoiseinthedata.ItispossiblethatineasingthesLze only nitedeffectivenessincontrollingcapitalflows.In of the project sample could establish a significant rela- addition, the evidence indicates that the adoption of a ton. dual system on a temporary basis can be useful to Different measures were used in an attmpt to iden- smooth the impact of maxi-devaluation on domestic tify and measure mntry characteristics that create a inflation. climate for project success. These indluded price distor- The projects csse studies have been completed, and tion and openness measurs, inflation, importance of anoverviewpaperisbeingprepared.Earlierversionsof the private sector, and changes in exdhange rate valua- the papers were presented at conferences sponsored by tions. There were distrbg differens betwen the the project at Oxford University (April 1992) and at the PRO and the REI equations in the signs of the effi- World Pank (aume 1992). In addition, papers were pre- aents for several of these variables, partiuay for sented at intemational conaferces and at seminars at inflation. umiversities and policy ornizations. Respouity: Iternational Economics Departent, RespwbifijyCountryEconomicsDeparfnent,Mac- IternationalTradeDivision-4onadDuncamand0p- roeconomicAdjustmentandrowthDivision-MigueI erations Evaluaton Departmnt, Agricture and Hu- A. Kigul and Ibrdhim Elbadawi; Europe and Central man Development Division-Paul Duane. With T. Asia CountrDeparment3,CountryOperations Divi- Dudley Wallace, Duke Urnversity; and J. Low Silver, sionM-DamelKaufmaunandYawAnsu(WorldBank Untversity of Alabama. Nairobiaoffice). WithSteveOConnell,SwarthmoreCol- Cosing datc August 1991. leg; Saul Lizondo, Inernational Monetary Fumd, jarie 120 Eco,ni Maagement Aron, Oxford University; Rihard Hamm_n, IESA, surgesofmoneyeationarenotdosylinkedtoinfla- Venezuela; Steve Kamin, Federal Reserve; Gradel don accelation. Kadnsky, Univeity of California, San Dego; Nancy Countries ina fiscal crsis, such asArgena, Ghana, Marion, Dartmouth Coilege; and Stie Ozler, UCLA. and Meico,commonlyresorttofiscal repression when CIoing date Decmbe 1992. extrnal financing disappear But the collapse of pri- vate cedit, investment, and growth in those coutries folowing financal rpession hardly makes it the rec- Macmeconomics of Public Sectr Defidts ommended way to deal with crises Privateconsmpionandinvestmentaresignifiatly Ref. no. 675-31C affected by the public budget structure, the overall This study looked at the macroecnomic ense- defidt, and its financig. Private mnsumption is re- quences of public defidtsbysuna4ilngf the resub of duced by inoome taxes-by an amount betwee what 10 case studies of developing countries (Argentina, the Keynesian and the permanent income hypotheses Chile, Colombia, C8Oe d'Ivoe Ghan, Mexico, Mo- would predict Public saving (or the public surplus) rowa, Pakistan, Thaiand, and Zimbabwe) and by ex- tends to raise ConsUmption somewhat-particularly in amining broader evidence. 'mutriesinwhichtepubUcsectorlaspreredaccess Crosssectioncorrelationsofflslbalanceswithmac- to resources of the financial system. Real interest and roeconomic variables are sup y streng. Stable infltion rates-and hence how the public deficit is and lowfisal defidtsare associated with -ow grwth financed-do not affect private acnSumption in any performace Fisml balances are postively related to systematic way. investmentand tourrentaccountbalances. High fisal A wide rae of responses of private investment to defcits show an association wit highly negative real the public capital stock (or to publk investment) is interest rates (financial repression), money creation, observed in the sample oannriea A n'ative influence andhhighbladckmarketexihangeratepremia.Theaggre- is present in countries with a large public enterpse gateof the 10 ca sudiesshowsan assodation beween sector that competeswith privatefirs and in countries fiscaladjustmentinthe?980s,curentaountimprove- in which the public sector has rweferentid access to ment, and real deprecatioDn domestic financial resources. C -i ll, public deficits The case stdis show thatboth foreign and domestic tend to crowd outppnvateinvestmentin the ltter cout- macoeonocshodsplayasenmdaryoleinthecydH- tries. When the public sector has to compete with the calvariatioandstructural disof non lpublic pnvate sector for resourcs in a liberalized finandal sector deficits. Acive fisca plics unde te direct cn- market, crowding out oco inditectly, through higher trol of policyakers are both the main cuprit of fisl interest rates. Private and public investment aisesandaneffectiveinstrnentforbringngaboutfs complementaity tends to dominate substitutability adjustment The latterisacueved byreducngoverblown wherethestateowned sectorissmallandpublicinvest- govemnmnt bureaucrades cutfing ineffcient ansfers ment is concentrated on publc and social infrastruc- and subdies, reorming tax systems to mse broad- tum based taxation,and reformigorprivatzingpubicenter- The fiscal deficitexplainsa greatdeal of variationin pises and ommwdity marketing boards, the trade deficit and the real exchange rate in the case hiflationdoesnotshowanysimplecorelaionwith studies. The share of government spending on fiscal deficits across countries. The cross-ection rela- nonadables is also an important deteminant of the tionshipbetween inflation andmoneycreation shows a outcome; the case studies show an even split between "Laffer an ve patt, with maximum seignorage at countres in which the government spends more on inflation between 68 and 160 pent By cmnrst, the nontrdables than theprivatesetorand those in which studiesusingindividual countries'-eriesdatafid the reverse happen The lundamentals approach to revenue-maximizing inflation rates at seem t rise therealexchangerateisvindicattd,which should serve with actual average inflation-the "optimum" rate is as nc antidote to the notion that nominal devaluation estimated to be oidy 4 percent in Thaland, but 966 alone cn restore macnreconomic balances. percent in Argentina. The assumption of a money de- Growth is central to the maeconomics of public mandwithwonstantsemin-elitywithrespecttoinfla- deficits. Paklstn and Thailand were able to sustain tionoverestimates the"opmum"inflationrateinhigh- large deficits because of high growth, while economic inflation countries and un in low-ina- collapseworedthemaoenomic sof deficits lion ones. Seiporage is umimportant as a steady-ate in Argntina, Cbte dIvoire, and Mexio phenomenon, but it can be very impotant asa tempo- Repomtyy:CountryEconomicsDepartment,Mac- rary source of revenue in tmes of cisi Even large roeconomic Adjusftent and Growth Division-Wil- 121 Ewormic Mmgamut 1m Easterly and Klaus Scumidt-Hebbel; Dhaka Resi- RoddrieZ, CarIaS Alfedo. 1989. "The Exteal Effects of Public dent Mlssion-Hafez Chanemt and Middle East and Secr Deidw Policy Reearch Woking Paper 299. Woid Norti Ahica, County Deportment L Cnuntry Open- Bank, WaDsngton, DC tionsDivisin umeenllamWitCalosRodguez, .1991. lheM. Meomomia af the Public Sector Defidt CEIA,Argntna;jorgeM,msbaDLADES,Georgetown The Case of Argmntlna." Plicy Reearch Woridng P;aper 63 Univedty,andMnisyofEconomics,ChiuChrisltphe World Ba, Washington, DCr Chaniley, Boston University; Deborah Wetzel, Oxford University; Jose Albero, El Colegio de Mexdco and CEPAL, Mexico; Riccardo Faini, Universita' di Bresda Accounting for Centrally Planned Economies and CEPR, Italy; Peter Monil and Nadeem U. Haque, in Transition IntemationalMonetaryFund-VirabongsaRamangkura and Bhanupongse Nidhiprabba, TDRI, Thailand; and Ref. no. 676-1ISC FlipeMioande,LADES,GeorgwnUnversity,Chil- Goveuments in many of the counties once loosely Cosing diSc June 192. referred to as centrally planned economies are shifting Repwrts from direct to indirect means of influencing economic Alberro-Se. me1 aj. 1991. DheMameemomks of the Public activities. During this transition, indicators generated Sector Defidit In Memdco duing the 19B6." byanunhanged infomation symmayprovide mis- Camley, Clrstoe, and HafezGhaem. 991. rscd Picy leading pictures of eoDnomic performance That can with Fixed NominaIl Exage Ratem Cote dlvoie" PolDy have adverse effects on decisions about the phasing and Rwesach Woidng Pape 658. World Bark, Wahingfton, DC sequencing of policy reforms But this statistical prob- Easterly, Wlam. 1991. -a Macroema del DIt dd lem lhas received relatively litte attention and is poorly Secor Piib l o ICmdeG olombie wsabmNlfus understood. This projec was intended to be a step Eamdu CQ4 Decmber). toward remedying this situation. 1991. -The Ma of the Pubic Secbor Defidt The projectaddressed te follDwingquestions. What The Case of Colombia Paocy Reseach Worldng Per 626. are the system-related, special dcrateristics of cen- World Bank Washngon, DC. trally planned economies traditional statisteis on eco- Eastely, Willim, and Xlaus Scdmdt-HebbeL 1991. flhe nonicperformance? How do the dacberisticsof these Macroemnonis of PublicSector Deficit A Synthesls." data change during the transition? What would the Policy Resech Workng Paper m. Wrld Ba, Washin- statistical biases assocated with the transition be, espe- toa,%DC daily in comparisons over tame? What adjusutents _- P FPrboming. 5lsml Deficits and Maeconomic should be made to the traditional data to impiuve Performance in Developing Counties. Wir lmk Ptsrdz comparability aaoss time and counties? What recom- Obsenze. mendations could be made to national statiscal agen- FainL Riea rdo. 1991. "[he Macroecononics cf the Public Sector ves for changing their methods of collecting and com- Deficit The Case of Morocc Poy Resmaxh Woring piling data? Paper 631. World Bank, Washdngton, DC Through case studies and comparative data analy- Ha, Nadeen U., and Peter ManeL 1991. h MaRMeco- ses, the project investigated three themes the determi- nomics of PublicSector Deflcit lhe Caseof Pakistan." nation of basic costs and prices, national accounting for Policy Resrc Workng Paper 673. Wodd Bak Washing- private sector production, and the measurement of ton, DC growth and inflation, all during economic transition. Islam, Romeen, and Deborah L Wetzel 1991. "eMacraeco- The objective was to determine, among ote things, nomlis of Public rDeficits:he Caseof Ghana.: Policy how basic costs and prces are typically detemined Rsearch Workg Paper 672 World Bank, Was ingto DC durig emnomic tranition and how they are mani- MarshL Jorge, and awus Sdmddt-Hebbel. 1991. MAcoeOo- fested in theagga pice indices; how erraic record- noxics of PaVb- Sector Deficit The Casedof Gil:. Poliqc ing of private production activities systmatically dis- Reearch Working Pape 696 WodBand k W ashgton, DC torts time senes on gross domestic product how the Momnd6, Felipe, and Klaus Schidt-Hebbe. 1991. "Macroea- accuracy of etig indices for economic growth and nom.cs of Pbic Sector Defit The Case of Zlimbabwe" inflation would change during transition; and how na- Policy Research Working Paper 688. World Bank, Wasg tional practiars could be improved. ton, DC Case studies were carried out on selected countnes, PRmanglonVrabonpsandihanpongse Ndilprabha. on their rules and guidelines for defining csts and 1991. "TheM'n of dbe PublicSector Deficit The settingpricesforaboutadozenitems(forexample,acal, CaseofThallandfPolicyResardtWordngPaperl6t steel, bread, railway freight) and national accounting World Bak Washington, DC. practices for reCDoding private sector activities. These 122 Eacomnc Mgement studies provided bendcmark information for develop- nization.Initsplacehascomeagrowingbeliefthatother ing an analytical famework and for conducting de- factor--sudc as formal education, the pace of work, tailed data analyses. Statistical data collected from na- economies of scale, and the development of organza- tionaland intemational agendes were analyzed toiden- tionshave been more important. Growth acmounting tfEy systeiic pattems of statistical indicators over time studies in the tradition of Solow have been perhaps the and across counties. They were also used for simula- mostpowerful force pushingin this direction. Thegen- tdon exercises on aggregate volume and prce indics eral drift of this line of argument is that a high rate of The findingswillstrengthen theinformationbase for investment is neither sufficient nor necessary for eco- the economies in tansition and help country policy- nomicgrowth,morecriticalinlong-rnmecnomicgrowth makers as well as the Bank and odter development thantagblephysicalcapitalgoodsareeducation,skills, assistance agendes make better decisions about the and organizations. transition process. Findings from the first stage of the research showed Freliniiray reports on private sector actvities were a very stong association between rates of machinery presented atameetingattheUniversity of Trento,Ialy, investment and long-run rates of productivity growth inOctober 1991. Duringthe seond half of 1992, selected over 1960-85 inasampleof61 industrial and developing papersbyconsultantswiilbepublished asproject work- economies. Each one percentage point inaease in ma- ingpapersforresearchers,andafinalr,eportdirectedto chinery investment as a share of GDP cames with it a policymakesand the general public will be published. one-quarter percentage point increase in the rate of Responsibility: Intemational Economics Department, economic growth-thus, such an increase in machinery Soco-EconomicDataDivision--Jong-CooParkandSul- investment if sustained over1960-85,isassodated with tan Abmad. With j. Arvay, A. Bergson, L Bratanova, B. a boost in output per worker in 1985 of 7 percent Dallago,ZDabek,ltErnst,A.Feltenstein,D.G ivekov, This association in the cross-secton of post-World K Ishihara, J. Kendrick, E. Kiss, P. Maer, S. Mateescu, War H economies is much stronger than that between DaMiljlkovic,cOblath,N.Pham,LRibnikar,LZelenco, investment in general and growth, or between growth L Zienkowski, and Richard Rose Policy Analysis. and other factors, If this association is interpreted as Closing dztc June 1992. reflectngthemargnalsocialpmducivityofadditional Report machinery investment, it would suggest that rates of Polish Reeach Ce- r for Statistcal and EAmomlc Analysis return on machinery investment are enormous-more 1992. Inkky Fiycnyeh Romziw Prad ewpo han 30 percent a year-and are far greater than the Rnuio. Warw. privateprofitstypicallyearned byinvestors in macbin- Findings from the second stage of the esearch show Investigating Equipment Investment thatthe strongassocation betweenmadhineryandeco- and Economic Growth nomic growth holds in a number of additional samples with data derived from independent sources. The same Re. no. 676-43C strong association between growth and machinery in- This research project invesigated whether differ- vestmentispresentinasmallsampleofsevenindustrial encesamongecor.omiesinlong-runproductivitygrowth nations for which data since 1870 exist It also holds in are the result of differences in investment in the rela- the post-World War HI period for 27 additional econo- tively narrow category of machiny and equipment It mies forwhichdata werenotavailableforearlierstages also assessed the relations between the various corre- of the project It holds in additional subperiods of the lateshuman capital, investment, susceptbility Lo rent post-World WarHeranotconsidered in earlier stages of seeling, and so forth-Of producfivity growth in the this project, in the pre- and post-World War I peliod% post-World War I period. and in a sample of economies for which data of higher Economic historians have always seen the industrial quality exist revolutions of the past two centuries as asuccssion of These confirmations using new independent data technological innovations that raise productivity and greatly strengthen cofidence in the robustness of the livng standards when their fruits are embodied in associationbetweengrowthandmachineryinvestment capital goods In their narratives, factors supporting a Moreover, there is substantial evidence that the dose highrateofinvestmentinmadhineryaregivenapromi- associationbetween machineryinvestmentand growth nent role in the picture drawn most famously by isiiotastatisticalartifactcausedbytheomiissionofsome Alexander Gerschenkron. key factor from the list of potential causes of growth By contrast, growth economists have shifted away considered. It is important to note that the dose and fiom theidentification of economicgrowth with mecha- robustassociation isbetween growthand investnentin 123 Ecomic Mangement machinery,notgrowtarandinvestmentingeneraLThere Closing datc April 1992. are no strong signs that investment devoted to categ- Report nes other than madhinery investment has produced de Long, JamesBradfod,adLawrenw Summer 1991. sodal gains in terms of added productivitynmuch larger 'Equlpamt hwaetm and Ecnnomic Growth." Quzery than the private profits received by investors. ,wEd of Ea mcus 1t06 May).445:45 This research pecalso turned up evideesuggest- ing tat the association between growth and mnachidey investment is indeed a causal oneand thatitisappropti- How Do Nafional Policies Affect Long-Run ate to intwet the dose asciation of growth and ma- Growth? chinery investment as arising becuse a high rate of ma- chinery investment boosts productivity significnly. Ref. no. 676-66 Themostpowerfulsuchpieceof evidenceisderived Developing countries' average percapita growth in from a simple supply-and-demand argument If ma- the 1980s was essentialy zero. Many developing coun- dhinery investment were the effectof fast growth rather tieshavebeenundergoingadjuslmentforseveralyears, than the cause, then the growth-machinery corelation butthe reaDveryof growth has been slow in comung. Do woudd arise because fast growth inmeased the demand national exnocpolices explainwhysomepoorcoun- fornachmineryinvestent,andhighdemandwould raise ties have stagnated and others have advanced? To the relative pnce of mahnery. Buthighratesof macdn- what extent do national policies-as opposed to exter- eryinvestmentandrapidgrowthareassodatednotwith nal influences-explain the stagnation of the 1980s? high but with low machnery prices. The fast-grwg Which polcies are most critical fora country seeking to countiesappeartobethcseinwhichpolidesof opmness attain decent long-run growth? and macmoenomic stability have made the supply of This research project proposes an analytical frame- ncbmerycheapandplentifandnotountmiesinwhidch workbasedon theidea thatall factorsof production can fast growth hasboosted machinery demnand be increased through investment in physical and hu- The existence of such a dose association between man cpital.Ecnomicgrowth willberelated to policies madcinery and growth and such a strong case for its thataffectinvestmentinsuch capitaltand topolides that interpretation as a causal association strngly support affect the efficiency of use of physical arkd human capi- the "new thinldng" in the theory of economtic growth taL Studies will conduct cross-cuntmy and pDoled tests which stresses the connection between productivity of the theoretical predictions of this framework, focus- growth and investment broadly defined, and which ing on five policy areas (1) fiscal policy; () monetary sees large gaps between the private profitability and the policy; (3) trade intervention; (4) financial policies; and social utility of investment The findings of this project (5) openness to foin capitaL provide strong support for a conception of the process A conference to discuss the projecl research find- of growth and development that places the greatest ings, targed to govermment policymakers and staff of emphasis on madhinery investment as a key means by international organizations, local research institutions, which developing economies acquire and learn to use and universities, is tentatively planned for February modem industrial technologies-much of which is 1993inWashington,DC. embodied in machinery-and thus insrease economic PmnsbihCoxmtryEconoricsDepartmntMac- productivity. roeconomlc Adjustment and Growth EXvision-Wil- Should these findings prove robust in further work, liam Easterly. and hould the interpretation of the growth-machinery Closing dte December 1992. nexus advanced above prove correct, then they have strong implications for development policy. If achiev- ing a hi rate of mabhinery investment is essential in The Intenational Economic Environment order for a developing economy to gain accss to ad- atd Productivity Growth in Industrial vanced industrial chnologies and acqire the skits ant Developing Countries and ortional experience neessary to effectively adapt and use productivity-boosting techniques, then Ref. no. t76-7 infastructumal and other development projecs should Therehasbeenno analysis of the relative importance be chosen for thirpotential effectiveness atsupporting of the intnational and domestic policy enviromnents investment in machinery and equipment. in explaining economic growth in developing and in- Responsibity: Office of the Vice President and Chief dustrial countries. This research project is aimed at Economist-Lawrence Summers. With J. Brdford de fillig this important lacuna. It will answer two ques- Long, Harvard University. tions:Whatarethesourcesoflong-termeconolmicgrowth 124 Economic Mangement inindustrial and developing countries? And is the inter- help increase th understnding among primary com- national economic environment or the domestic policy modity producers about the effects of OECD couttries' environment more importantin influencng long-term maaoecononic policies an their terms of trade, growth? Ithasbeenargued thatexpansionarymacroeonomic The research is part of a larger effortby the Bank to policies lead to an increase in the prices of primary increase the undestanding of why countries' growth axmmodities.AsincomesinindustrialoDuntnesnse,so rates differ so markedly over the long ternm does the import demand for primary commodities, Considerableeffortwillbedevoted intheearchto lading to inses in their prices, other things being collecting and improving time-series data on human equaL This mardh argued that following this line of and physical capital stock fora wide range of industrial reasoning may lead to erroneous results. It argued that anc; developing aDuntries. The project will estimate it is not sufficient to say that policies are expansionar aggeate production functions for industrial and de- itisneosarytoDspecifythenmxofpolicies thatgenerate veloping cDuntries and disagegate the sources of out- expansion. For this reason, the research addressed the put growth into contributions from producion inputs effectof thefiscaland monetarypolicymix oncommod- and total factor productivity. It will then use cross- ity prices section, time-series, pooled regrssion equations to de- The researhalso addressed two other issues. Flrst,it termine the effects of the international economic envi- looked at the dynamics of the behavior of commodity ronmentanddomesticpolideson thelong-erm growth prices following changes in the fiscal and monetary of output and on partia and total factor productivity. policy mix in OEW countries. Because the prices of ThedatacDllectedintheprojectwillbedisseminated manufactrs are sluggish and the prices of primary in diskette form. Analytical papers wil be disacssed at coamodities are fl le, thereare inesting comnmod- a conference and, if considered appropriate, published itypricedynacs following changes in the poliynmx asa book. Second, the research investigated the idea of using Resonul International Economucs Department, comoncdty prces as guides to maoemnomic policies Office of the Director-ikam Nehru, Intemational in industrial economies. Proposals have surfaced that Economic Analysis and Prospects Division-Ashok advocatetheuseofcommoditypricesasleadingindca- Dhareshwar, and Debt and Intenational Finance Divi- tors of inflation and therefore recommend conditioning sion-Eduardo Fenandez-Arias. With Jere Behrman. macreconomic polides on developments in conmod- Closing date December 1992. ity markets. The resarch was based on an equlibrium model incDrporating simultaneous determination of the prices Commodity Prices and the Macroeconomic of commodities relative to the prices of manufactures Policy Mix in Industrial Countries and to real international inIterest rates. The theoretical model was used to investigate two issues. First, the Re. no. 676-76C resrch investigated the equilibrium detemination of In real terms, the prices of nonfuel primary com- the relative price ofcommodities and manufactunesina moditiesas a group are probably at theirlowestlevel in world of instantaneous nominal wage and priceadzust- recorded history. This is the r-nlt of the sharp dedines ment. The purpose of this inivestigation was to establish in the prices in the 1980s, pr.- icularly in 1986. Farm howrelativecommoditypricesareaffectedbyshocs- policies in both industrial a., ideveloping counmies particularly fiscml shocks Second, the resrch investi- appear to have contributed to this decline, as have gated the dynamic adjustment of the relative price of variouswmmodity-peaificfactors,suchasthecolapse commoditiestowardthdseequibnaanaworlinwhich of international commodity agreements. Butto explain the nominal price of manufacures adjusts sluggishly the sharp dedine relative to export prices for manufac- and thenominal priceof commoditiesadjustsinstanta- tures seems to require other, more general, explaia- neously.Aflert1-'teoreticallinks wereestablished,the tions. Oneof themmostlikelyischangesinthemacroecD- model was used tu nrive reduced-fozm equationrs for nomic policies of industrial counties. econometic estimation. Prior to the estimation, the Becausetheexportsof somanydevelopingcountries - time-series properies of the data were analyzed using depend on primary commodities,itis crucial to analyze unitrootand cointegiation tests. Fmally, using the time- the reasonfor the recent sharp dedlineinreal commod- series infotmation,a reduced-form equation was speci- ity prces and, in particular, to understand the linkage fied and esimated. between commodity pnces and indusial countries' The research found that, in a model of instantaneous macroeconmc policies. The general objective of this adjustnent, expansionary fiscal polices in the OECD study was to analyze these linkages. Its findings should countries lead to an increase in the real rate of interest 125 Ecnomic Maagement and a decrease in relative commodity prices to equli- Varnas Pance. 1992 "On the Internons Beten te brate world labor, product, and asset markets. Variances of Moneysupply Ailturhal Prie and Contractionary fiscal polides have the opposite effects. Indusa Prices World Bank, Wasington, DC. Monetarypolicyhasno effectin this context If theprice ofmanufacthresadjustsslowly,thenamonetaqexpan- sion in the OECD countries leads to an overshootng of Economic Impact of Mlfitary Expenditures commodity prices-that is, the terms of trade between primazycommoditiesandnanufactuesimproveinthe Rf. no. 676-8C short nu In the long run monetary expansion has no Inrecentyearstherehasbeengrowingconcernabout realeffectAfiscaloepansionintheOECDcuntieshas the possibly harmful effects of unfettered military ex- a real effect even in the long mrm The relative price of penditures in developing countries. It is alleged that commodities again overshoots in the shortrun-that is, these expenditures underminegrowth, worsmen balance terms of trade worsen-and slowly rises to adjust to its of payments deficits, and crowd out crtical economic new equilibrium. The overal effect is a decline in rela- and social sector programs, This study addressed three tive commoditypricesand an increase in thereal rateof aspects of militay spending in developing countries. interest. First,whatarethelevelsandtrendsinmilitaryspending Econometric estimates based on annual data since asa percentageof national product? Second,whatis the the 1950s cannot reect the hypothesis that higher fiscal effect of militay spending in peacetime on growth, defidts are assodated with a lower relative price of govemmentsodalandinfatructurespending,andon oammoidities. The estimates suggest hat a rise in the other key economic variables? And third, what are the fiscal deficitsof the G-5 muntriesbyoneperntagepoint principal factorsinfluencingthelevel of militaryspend- of CDP causesthe relativeprice of commodities to fail by ing? about2percentArireinthedeficitoftheUnitedStatesby The study found that the share of military spending oneperetagpointof itsGNPreducestherelativeprce in GNP ldES) was generally falling during the 1980s, of prmary commodities by about 3 pemrnt induding in the high-spending areas of theMiddle East WithregardtousingmovementsincDmmoditypices and North Afica. And in areas with the most severe as a guide to macoeconomic polices in OECD coun- economic problems-Latin America and Sub-Saharan tries, the research found the following. With monetary Africa-military spending was comparatively low. policy rules that allow partal accommodation of infla- The study invesgated the effect of military spend- tion in industril goods' prices by prmary commodity ingoneconomicgrowthusingregrssionsofthegrowth prices, the speed of adjustment of inflation and output rate of real GNP on MES and other important detmeii- folowig macroeconomic shocks is slower than with- nants of growth. This investigation was based on a outaccommodation.Thus,bothinflationaryshocksand sample of 71 countries over the period 1969489. shocks to output and to the relative price of commodi- Thestudyhypothesizedanonlinear(quadratic)rela- ties persist longer. Rulesbased on fu l accommodation, tion between military expenditure and growtL Accord- tostabiizetherelativepricesof commoditiesandmanu- ing to this hypothesis, at low levels of MES there wSibe factures, lead to price indeterminacy. Adjustment to apositiveeffectongrowthbecauseofineased secunrity both nominal and real shodcs is faster with rules that and pressure for policy efficiency due to the extenal aim to stabilize the nominal price of commodities. threat, and at higher levels of MES the crowding out of Responsiity: International Economics Departmen4t, moreproductiveinvestmentswill lead tolowergrowth. International Trade Division-Ronald Duncan and For the full sample of 71 countries the study fouand PanosVarangis.With GeorgeAlogoskoufis,University supportforthisnonlinearrelationbetweenMESandthe of London, Birkbeck College growth rate. But this result was driven by the 24 oun- Closing date Sptember 1991. tries in the sample from Asia, the Middle East, North Reports: Africa, and Southern Europe. Consequently, there is nD Alagooufh Gerga 1992. "Commodity Pric and Maacoeco- evidenceofanegativerelationbetweenMESandgrowth moinic Polcies in the hndu ad EoDDomiesP World Bank, until MES is quite high, though it is undear whether Washngto, DC this can be generalized beyond Eurasia and North Af- .1992. "iaion md Conmodliy-BasedlBatnailonal rica Manetay Reimee World Bait Wasiington. DC The study also found that higher levels of MES are Alokufl Gwerge, and Pans Vaangls. 1992. "OECD Fical not associated with lower government spending on Pdides and the Relative Price of Prmay Commod1"esf health, education,and infrastructue asa share of CNP. Poicy Resertd Workdg Paper 955. World Bank, Washing- Thereissomeevidencethatincreased militaryspending tan, DC. in developing countris is asociated with inceased 26 Economk Management efficiency in reponse to external threat, and that MES makes a preliminar estimate of the indirect effect on has a very weak negative effect on investment, a weak the value of GNP of adjusting all labor costs to accom- positive effect on education, and a weak negative effect modate price increases in basic items, such as housing. on the balance of trade. Early results, which still need considerable refining& Finally, the study found that the principal determi- suggest that official data underestimate the value of nants of militazy speding as a percentage of GNP are China's GNP in loml curency in 1987. the average level of military spending by neighboring Respnslity.EastAsiaandPadfic,CountryDepart- countries as a proxy for the potential threat (the most ment 11, Office of the Director-Shahid Yusue and Of- important deteminant), per capita product, and the fice of the Vice President, Development Economics- existence of international wars Ramesh Chander. With Albert Keidel, Rock Creek Re- The study concluded that, contrary torecent concern search. that military spending is growing and excessive, mili- Comnption datec August 1992. tyspendingisgnerlly [allin& rationally motivated, and without serious negative economic effect unfil it reaches high levels. Revenue Uncertainty in Czechoslovakia Respasi CityCtrmyEconnomicsDepartment,Pub- lic Economics Division-Sanjay Pradhan. With Daniel Re. no. 677-18 Landau, Univesity of Connecticut As Eastem European economies undertake reforms Closing date March 1992 on all frontsin their transition to market-based systems, their revenues are becoinmg uncertain. The uncertain- ties have several sources. Reestimation of China's National Accounts Fust, the emnomic transformation wil lead to radi- and Growth Rates cal changes in the underlying tax bases, with corre- spondinginstabilityin revenues Forexample, thevalue ef. no. 677-17 added of services will rise as the distnbution system is Because of the dose links between economic struc- decentralized. The scale of enterpi wil shrink as trn and the statistical system, China's reforms are servicesgrowand as thelarge soialzed enterprises are exertng a significant influence on the actual size and broken up and privatized. The number of individual ianue of its GNP. Many transactions previously taxpayers,induding self-employed entrepreneurs, wil unrcrdedorunderrecordedarenowindudedinGNP likely increase. The shifts to servims, smaller enter- esbmates at values much doser to their scarcity values. prisesm and individual taxepayers will make it generally These indusions and revaluations have led to changes harder to collect taxes Moreover, an importat source in the estimate of Chinas overall level of emnomic of revenue-profitremittancesfromstateenterprLis- activity.Thisresearchintroducesthebasicinput-output will be replaced by dired taxes. The revenue that the methodologies used to account for these changes in a direct taxes will yield is uncertahv profits might fall systematicway. because of difficulties in transition, and the share of Revisions to the value of China's GNP suggested by profits going to interest payments-generally not this methodological study reflect acommmodation by taxed-will increase. the statistical system both to newformsofmanagement Send, with reform, new taxes are imposed on a and to their matching price reforms Management re- shifting eoamnoy, requring a tax administration on- foxmaffectsmeasurementsofGNPmostdirectlythrough ented toward collecting revenues from thousands of the inceased difficulty of accounting for all output private individuals and firms. Revenues might fall produced. As the cDverage of sample surveys lags be- sharplybecauseof theuncertaincollectionratesthatare hind decentralized ownhip and forms of manage- likely before a new system becomes fully operative. ment, graswoots data collection overlooks an increas- And privadzation is often aompamned by tax avoid- ingly significant share of outpuL This problem is best amce, as agents switch to transactions that are less tax- refed to as one of scope of the statistical system, and able. itismostseriousinrurdlareas,whereeconomicsponta- Third, the tansition brings with it such problems as neity has been most pronounced. the slower-than-expected rate of privatization. Slow Issues of pnce and valuation are subtler and more privatization in turn implies that a large segment of complexftanthoseofsope,andthisstudyexplaresthe supply is unable to respond efficiently to liberalized quantitative significance of price reforms that alter the prices. Thus, the expanded tax bases promnised by a profitability of major sectws in ways more conistent more productive market economy can be attained only with the relative scale of their capital stoks. It also in the long run. 227 Economic Mgagment Fourth, the dismantling of CMEA trade in Eastem The transition inevitably implies rising unemploy- Europe has led to the disa rce of traditonal ex- ment and significant changes in wage- and employ- portmarkets,whilethepricesof suchinputsasfueland mat-setting procedures. To imprve the understand- raw material imports have soared, resulting in wide- ingof thesechanges,theproject willaddress the follow- spread output dedlines. ing questions: What are the consequences for employ- ForecDnomiesintransitionattemptingtoprojectand ment of recent stabilization programs? What are the plan budgets, it is critical to understand how each of characteristics of the unemployed, and what policies, thesefactorsaffectsrevenue.Addingtothedifficultyof given the nature of the unemployment that has been planning budgets are the changing behavioral relation- geeated, can be adopled to reduce the level and per- ships during the transition. There is arange of possibili- sistence of unemployment? What are the main featues ties for such parameters as the savings rate of wage-and employment-setting in the socialized sec- This research project will exam-ine the implications tor and in the emerging private sector? What are the for public revenue of different causes of uncartainty in consequences for aggreate wages and employment of Czechoslovalda. Firm estimates are impossible in an differing wage and employment behavior in these two economy undergoing such a fundamental transforma- sectors of the economy? With regard to wagesetting, do tionL So, to produce plausible lustrations of the rev- incomespolicieseffectivelyrestraininflation-andwith enueperformance,theprojectwilldevelopananalytical what associated efficiency msts? and accounting frmework that mnsiders the signifi- The research has two dosely related components. cant factors of changes-sucih as shifting tax bases, The first, largely empirical, wil involve detailed coun- uncertain parameters, and nascent tax administration try studies. These will provide an explicit macoeco- with potentil collection problems. The analysis will nomic framework in which labor narket variables wfll brnng the impLed unrtainty in revenue in greater be cetraL Monthly or quarterly time senes-or both- ficus,muchlikethefinancialappraisalofarisyproject covering prices, wages, employment, and unemploy- For each factor that generates revenue uncertainties, a ment will be generated. In addition to aregate data, ful range of possible values and some measure of the country studies will rely, where feasible, on data likldihood can be specified. This will result in a risk from establishments and surveys, particularly for assessment of what would happen to revenue for each changes in employment and for factors determining set of conditions identified. Each revenue analysis will transitions in employment encompass many 'what-if' scenaios, including the The second cDmponent will be comparative and most likely outCome, some measmue of risk dispersion analyticaL The analytical work wil center on wage around the expectation, and the relative likelihood for bargaining, employment-setting, unemployment dy- any rarge of outcomes. For ase in which the best namics,and the design Of incomes policies. estimate of revenue is very uncertain, the policy re- The rapid development of unemployment and the sponses to achieve stabiliation or othfr maCrOeconomiC fall in real wages in the transitional economies make it goalsmightbequitedifferentfromthepdicyesponsesin critical for policymakers to understand the nature and those cases in which revenue estmats are more certain dynamics of these novel phenomena The resrch will Responsibtiy: CountryEconomicsDepartment,Pub- providepolicymakerswitha clearanalysis of thenature lic Economics Division-Delfin Go, Christine Walich, of theunemployment,theextentof wage flexibility, and and Heng-Fu ZDU. With Pelda Sinko. the implications of wage behavior in both private and Closing datc October 1992. soia sectrs for overaU employment. It will pro- vide a mpE>rehensive overview of experience with a variety of incomes policies. And it will draw out the The Labor Market in Transitional Socialist costs and benefits of such policies and their efficencies Economies: A Macoeconomic Perspective at particlar stges of refomL A workshop for the researchers was held in Czecho- Ref. no 677-30 slovalia at Caste Dobris in July 1992. A conference on This research pojectwiil provide empiical and ana- the results of the country papers' will be scheduled in lytical treatment of the effects of key policy changes on the summer of 1993. the labor market in a number of transitional sodalist Reysobty: Economic Development Institute, Na- economies. The research will allow a more precise un- tional Economic Management Division-Simon Com- derstanding of the natue of the unemployment being mander and Country Economics Department, Macr- generated, of the relation between wage and employ- economic Adjustment and Growth Dvision-Fabizio ment behavior, and of the consequences of incomes Concelli With Olivier Blandhard, Massad nsetslIsti- regulation under a range of country experiencea tute of Tednology; Iidhard Jackman, London School of 128 Economi AMnngemet Economics; Jan Svejn, University of Pittsburgh and Target Zones and Real Exdhange Rates CERGE,-V.TzanovandLBeleva,lbstituteofElcnomics, in Developing Countries Bulgaria; R Yemtsov, Moscow State University, M Erbenova, CERGE; J. Koflo and B. Vilagi, nstitute of Ref. no. 677-3J Economics, Hungary; and K. Rybinski and K. Thereisreasontobelieve thatatargetzoneregimeis Hagemayer, Warsaw University. anappealingexchange ratesystemfbrdevelopingcoun- CDsing date April 1994. tries facing large swings in their trms of trade or in capital flows. The regime could enable the countries to presr the advantages of having a nominal anchor- Economic Consequences of War-Peace the cental paritwhile allowing the exchange rate to Transitions in Africa Choices for Public move within the band. Finance This projectwili fzstpresentstylized facts on the use of tagetzones in industial countries and in Chile-the RW. no. 677-31 onlydevelopingcountrythathlasused anexchangerate A number of African economies have been severly band for an extended period. It will briefly desaibe the disrupted by civil war in the last three decades The end main featuesoftheregimein each countryand then,for of conflict brings both challenges and opportunites for each country, present facts on the size of the bands, the economnicmanagenent Publicinfrastrucureanddeliv- fiequency and size of realignments, movements of the ery systems are often heavily damaged and require exchange rate within the band, rules of central bank rebuilding to permit a resurgence of private activity. intervention, and so on. The end of conflictallows a redirection ofpublicspend- The project will also develop an analytical frme- ingfrom militaryand security purposes to this rebuild- work for the design of exchange rate bands in develop- ing. But the redirection may not be easy to achieve, for ing countries The model will focus on the factors that several reasons. The transition to peace is accompanied determine the optimal width of the band, and the size by macroeconomic effects on the balance of paymentsh, and timing of realignments of the central parity. The labor supply, and exports that complicate economic project will test the empirical relevance of the predic- management Institutions and their roles are often in tions of the model with available data from industial flut And the transition may require substantial re- countriesand Chile. Itwil cDndude with an evaluation sources-for example, for military demobilization and of theapplicabilityof targetzonesfordevelopingcoun- for resettlig refugees. tries. This research project wilU examine the economic im- Resonsifty:CountryEconomicsDepartment,Mc- plications of the transition to peace, focusing on public roeconomicAdjustmentand GrowthDivision-Mlguel finance management It will use a largely inductive A. KigueL With Gil Bufinan, Alex Cukiernan, and approach, seeing an appreciation of the common prob- Leonardo Leiderman, Tel Aviv University. lens,constraints,and opportunities thatwar-tornAfri- Closing dae February 1993. can states face at the end of conflict, and trying to analyze the choices that need to be made by govern- ments and the implications of those choices. The re- Fiscal Incentives Reform searchwillfocusonsuchareasasthepublicexpenditure choices to facilitate market integration and the short- Tax policy instruments are widely used by develop- term supply response; social safety net issues; redefin- ing countries to foster industrial and technological de- ing the role of the state; and policy reforms for the velopment objectives Although such tax policies are recoveryof the private sector. The project will cDmbine actively pursued, there is little research guidance as to fieldworkinAngola,Ethiopia,andUgarkdawithawider their effectiveness in meeting policy goals desk review of completed transitions to peace in other This research project empirically examined, in se- countries in Africa and elsewhere. lectedcountries,theeffectivenessofincentiveprograms Raspo iy:CountryEconomicsDepartment,Pub- currently in place to attract foreign investment and lic Economics Division-Shankar Adharya and Sanjay stimulate domestic investment The empirical work fo- Pradhan and the Africa Regional Office. With Paul cusedonanarrowsetofquestions (1) Whathavebeen Collier, David Bevan, and Jan Gunning, Center for the the aggegate investment stimulation (direct and in- Study of African Economies (CSAE), Oxford Univer- duced) effects of tax policy measmues per dollar of sity, and Jean-Paul Azam, University of Clermont forgone revenues? (2)DD tae matter for foreign dire Fermnd and CSAE. investmentin developing countries? Do they influence Closing date August 1993. foreignbusmesslocationdecisions? Whataretheimpli- 129 Economic Management cations of the home (industrial) contry tax regime for developing countries as poor tax administration; own- the host (developing) country tax syst? (3) Howdo ership and control by foreign investors with access to taxes interact vwth other developing country institu- foreign tax credits against home tax liability; credit tional features, and what are the implications for the rationing; and exchange controls. effectiveness of tax incentives? Is corporate tax largely * Tax holidays, as cuarently institated in seveal anineffective(nonmnuginal)instrumentbecauseofother developing countries, are poorinstrumnts for promot- policy instruments? ingnew investmentbydomestic investorsaswell as by The project sought to develop and apply new meth- investors from capital-exporting counties that allow ods that woild represent important depts from foreign tax credits agist domestic liabilities. the approaches of industrial countries by paying dose * Corporatetaxratereductionsoftenresultingreater attention to the tax and nontax policy elements and the revenue losses than increases in investment In fact existing institutions (marketumperfections) in develop- such rate reductions could generate expectations about ing counties, future tax hikes and may well discourage investments. Various production structure empirical approaches Thus,formostdevelopingcountries,adesiablefirst (dynamic rational expectations models, dynamic factor stepinaneffectivemvestmentpromotion strategywould demand models with endogenous capacity utilization, be to develop a climate of business confidence by insti- and other disequilibium models of producer and in- tating sustinable economic policies and liminating vestor behavior) were used for Mexico, Paldstan, and tax and nontax disincentives to invest Avoiding fre- Turkey. In addition, computable general equflibrium quenttaxchangeswoud beanelementof this strategy. analyses were used forMeicoand Pakistantoexamine Oncebusiness confidence is restored and the credibility inteLsectoral resource allocation effects. Studies carried of the regime is no longer in question, consideration out for this project have examined, both conceptually could begiven to wel-targeted taxpolicyinterventions. andempirically,theefectivenessofalternativetaxpolicy In designing tiese measures, are must be taken to regimes to promote prvate capital formation in devel- examine theiradmiistrative fesibilitytheir effects on oping countrie Despite the sharply differing method- margnal incentives to invest in various assets and sec- ologies adopted and cuntry eonomic situations stud- tors, and their effects on tax loss firms, cash flows, ied, the empirical findings of the studies present quite foreign firms, and government revenues. coherent themes regarding such policies. These themes The project has produced 21 papers for publication. are as follows: These aDver seven countries (Brazil, Malaysia, Meico, * A stable and credible tax regime with tax rates Pakistan, the Philippines, Thailand, and Turkey) and roughy comparable to those of capital-exportng coun- review such sbcts as tax policyand investment, inter- triesisaprerequisiteforeffectiveinvestnentincentives. national tax competition, asymmetric information, and In fact, a stable low corporate tax rate regime offers financing choices. Analyses used complement econo- greater promise for investnent promotion than a re- metric analysis with computable generl equilibrium gime that has high taxes and high incentives, but that is analyses. Papers from the project are slated for publica- uxe.abk. tioninBankand non-Bankljoumalsand in two volumes. * Tax incentives matter for domestic and foreign Several papers from the projectwill also bepresented at investment but elimination of tax and nontax disincen- anOECDconferenceonTaxlcentiLvesand FoignDirect tives matters even more. For example, in Mexico and InvestmenttobeheldinSingaporeinlatel992-Thepapers Palkstan infrastucture deficiences and regulatory re- produced in the project have been widely used by the gimes-and in Malaysia, the tarff regime-were seen Banks operations complex in its tax reform work as serious barriers to capital formation. Responsiblfy: Country Economics Department, Pub- * Sometaxpreferences,suchasinvestmenttaxcred- lic Economics Division-Anwar Shah. With Alan its for research and development and machinery and Auerbach,UniversityofPennsylvaniaijeffreyBernstein, equipment that embody advanced technology, have Carleton University; Robin Boadway, Queen's Univer- stong theoretical and empirical support. sity; Andrew Feltenstein, University of Kansas; John * Tax incentivesthatarenotproperlytageted,and Halvorsen, University of Washington; Joel Slemrod, that do not recognize tax administration capabilities, University of Micigan; and John Whalley, University more often than not result in less than a dollar in of Western Ontario. investment stimulation for every dollar lost in govern- Completion datc June 1992. mentt revenues. ReOwos * The investment stimulation effects of tax incen- Shah, Anww,d Fead. coing s Fll Icadtsfr nwrsbnm h tives are severely Dnstrauned by suchdcaraceristics of DDCopbig Chies. Wahingt, DC World Ban 130 Ewnom& A 8Mngme Farhecunlng. Tax its and Ixsbwd hin Paysio an Macroeconomic Determinants of External R&D Capd. Waingn, DC: Wrid Bank Remittances This research reviewed the theoretical and empirical Global Economic Model-Regional Models literathreonthedeterminantsofremittancesbyexpatri- ate workers, with the objective of producing a synthe- The Global EconomicModel (GEM) is the main tool sized empirical frameworkforanalyzingthesedetermi- of the International Economic Analysis and Prospects nants. The framework was applied to six major labor- Divmsion (IECAP) for folrecastng macoeconomic mdi- exportng counties of North Afica and Europe: Alge- cators for OECD countries. It is builtand maintained at ria, Morocco, Portugal, Tunisia, Turkey, and Yugosla- the NIESR and London Business School in London. via. Projections are made by IECAP for the Planning As- Theresultsof themsearch suggestthatpolicymakers sumptions Committee and Global Economic Prospecs should correct nacroeconomic imbalances before con- paper The GEM is also used to analyze such scearios siderimgspedalincentivesdhemestoatbactrenittances. as the effects of oil price fluctuations. The conecfion of such imbalances should lead to an The GEM conssts of globally linked models for the increase in the flow of remittances toward its long-run 0-7 countries and for eight regions cDvering the rest of potentiaL The aging of the migrantpopulation leads te the world. The curent reduced-form submodels for a natural decline in remittances that is urdikely to be developingregionsareratherunsatisfactory.Newmod- offset by specal incentive schemes. els are being specified and estmated for these regions RespomaMty CountryEconomisDepartmentMac- based on Bank data. Structural models for Afiica, Latin roeconomicAdjustmentandGrowthDivision-lbrahim America,andnewlyindustnializingandothercountries Elbadawi; and Europe and Central Asia, and Middle in Asia are being implemented in the GEM in accord East and North Africa Technical Department, Trade, with the research agenda shared by the London Busi- Finance, and Private Sector Development Division- ness School, the NIESR, JECAP, and the University of Roberto Rocha. With Larry Kotikoff, Boston Univer- GIasosw. sity. The GEM is a vesatile tool for IECAPs forecasting Compledion dater June 1992 and analysis of scenaios for OECD countries. Prelimi- nary simulations conducted at the London Business School indicate great improvements in the moders ap- Open Economy Tax Reform I plicability when the new developing country modules are used. With a view toward assisting the Bank's country The need in the Barns lending operations for an economic work in tax policy, this research employed early warning system and a flexible scenario analysis general equilibrium tax models to address the issue of tool for global events is well established. The GEM is revenue in developing countries undertakdng tax re- used to respond tospedal reqestsfrom countryopera- form and trade liberalization. lions divisions to analyze scenarios. In one application, the study examined the competi- Responsili ternational Econonics Department, tion for public revenue among policies designed to International Economic Analysis and Prospects Divi- promotestabilialion,structual adjustment,andgrowth sion-Christian F. Petersen and T. G. Srinivasan. The inthePhilippines.Apackageofsuchpolicieswasfound University of Glasgow, London Business School, and to require an increase in domestic tax revenue of as NISR are participating in the researdL much as 38 percent. But such factors as liberalization, Compktion date June 1992 tax reform, and productivity improvements could re- Repost duce the amount required by half. Moreover, much of Ale, C, T.C Sruivasan, andD Vin t991. -Fmpfrical the additional resources could be obtained through Macroecoamnic Interactions between North and Soutic The increased efforts in tax collection (rather than inaeases Cases of the Asian NIBs and Latin Amnerica Paper in tax rates). preeted at a Brookings, OECD, CEPR, and KDI conference, The project also extended and outlined formally in a SeouL May. methodologically oriented paper the framework used Vmes, David, and T.G Srinivasu. 1991. "SImulation, dan by Pradeep Mitra and Delfin Go in a World Bank study Econmetric Model of Asian NE on India's trade and public finance. The framework was .1991. Simulataons ofan EcnometricModel of Other used to look at both the macroeconomic and sectoral aiar effects of tariff reform, in two stages. First, an aggre- 131 EconomicMangent gatedgeneraleqbriummodelwasusedtodetermne so,* it important to know how cDst-effective these the amountof fiscaladjustmentand devaluationnes- invesentincentivesare-thatis,how theextrainvest- sarytooffsetpoiblerevenuelossduetotariffreform meat they generate compares with the revenue loss or in order to naintain maaoeconomic balances Next, a the deficits to which they give rise. These questions are compatible disaggregated fiamework was used to trace the central theme of this research. theeffctoftariffreformontheouiputandvalueaddedof To acoomplish its aim, tis research developed a various subsecr and to identify ndusties that would simultaneous econometric model that captures the in- require rsucdming as a result of the tariff refomL teactin of corporate income tax policy with the tax Although the objectives of higher growth, greater revenue, taxbase, and private investment in a develop- efficency, and macrnomic balance may not be in- ing country. The model comprses two blodks: revenue compatible in the long run, the immediate revenue and investment In the revenue block, the study em- implications require attention in the short run. More- ploys Ehdaie's method ("An Econometric Method for over,becausetaxreformeffortsindevelopingcountries Estmating the Tax Elasticity and the Impact on Rev- often require substituting domestic taxes for a highy enuesoffDiscretionaryTaxMieasures(AppliedtoMalawi differentiated and complex system of trade taxes (as and Mauritius)," Poliy Research Working Paper 334, wel as quantitative restriction of imports), there is a World Bank, Washington, DC, 1990) to estimate the need in providing tax advice to look not only at the effectof corporateincometaxpolicyonrevenuesand to economywide consequences of tariff reform,but at the generate time-series data on the realized corporate in- sectoral effects. cometaxrate,definedastheaverage effectivecorporate Responsibt:CountryEconomics Department,Pub- income tax rate net of the changes caused by factors lic Economics Division-Delfin Go; and South Asia, other than corporate income tax instruments. The real- Country Department I, Office of the Drector-Pradeep ized corporate income taxrate reflects all changes inthe Mitra. corporateincome tax structure induding the statutory Completion date June 1992. tax rate, exemptions, tax holidays, tax allowances, tax Repot creditsandrebates,and effidiencyof the taxadministra- Go, Dlin. 1991. 'A Review of theVATExpeuin the tion. In theinvestmentblock,thestudymodifiesKhan's Philippines WarddBank Washington DC. investment function-a neodasdcal model of invest- _ . 1992. "Revene Requrenents cESazato, Stfuctur ment that takes into account the relevant stuctual Refom and Growic ietIatons UsingData rom the features and data problems of developing countries- Phippinee Woid ak, Washington, DC. by explicitly incorporaing the realized corporate in- Mitra, Pradeep, and Wefin GQ, 1992. "rrade berizalaom, come tax rate into the corpoaate income tax policy. Fiscl Adjustment and FTdange Rate PolIy A Methd- ThemodelwasthenappLiedto timne-seriesdata (1973- dogical ustration Using Indian Data? World Bark 90) for Pakistan, where corporate income tax instru- Washingtn, DC meris have been used extensively to stimulate prvate investment during the 1980s. The econometric estima- tionof themodelindicatesthatthecorporateincometax Corporate Itcome Tax Incentives does not play a significant role in stimulating private for Investment in Developing Countries investment in Pakistan but that public investment in infrastructures does To determine how cost-effective Corporate income tax instruments are often used in these investment incentives are, the model was simu- developing countries as a part of industrial strategy, to lated for two policy scenarios first, no change in tle stimulate investment or to influence its sectoral or re- wrporate inmCme tax strucure dunng 1980-90, and, gional allocation, orboth. The most widely used instru- second, investment in infrastructure of the additional mernts are tax holidays, inital depreciation or invest- revenue that would have been generated wnthout cor- ment allowances, tax credits, and tax rebates These porate income tax incentives over the same period. The measuresimmediatelyleadtoanexogenousdecreasein simuation results show that, on average, a I rupee taxrevenue-Asincentivesforinvestment,theymayaso inease in private investment due to corporate income result in a built-in inease in the taxrevenuebybroad- tax incentives costs the government 5 rupees in lost ening the tax base. The net effect of these measure on corprateincometaxrevenue,andthat5rupeesinextra tax revenue, and thus on the fiscal deficit, greatly de. publicinvestmentininftructureleadstol.8rupeesin pends on their effect on investment. For this reason itis extra private investment of greatinterest to policymakers to know whether these Thus, crporate income tax incentives erode tax rev- measures ultimatelylead to the erosion of tax revenues enues, undermining the government's fiscl deficit re- and, thus, to thedeteriorationof thefiscal deficitAndif duction effort while filing to play a significant role in 132 Ecownoic Magmut0 stimulatng private investment As an incntive for The Basics of Consumer Policies private investment, public invesmenttin iasucture costs the government less than tax incentives. This nsarch is part of a series of studies on regu.- Rapesposi4CConntryEmonomncsDeparment,Pub tory reform being cnducted in the Industry Develop- lic Economics Division-JaberEihdale. ment DivisioIL Its purpose is to provide a survey of Compktioon date December 1992. consumer policy that will be useful to World Bank staff and to policakers in industializing CDuntries. The study wilL synthesize recnt developments in the ecD- Measuring Real Exchange Rate nomics literature and review the case for selctive gov- Misaligunment emientintervention. Itwill conducta systematicover- view of existing public and private initiatives in both Thepurposeof thisresearch is to derivea theoretical industrial and developing economires, suring the model of the real exchange rate that lends itself to main public and private institutions that deal with econometricestimation. Themodelwilbeestimatedfor consumer policy and the prindpa. aras of legislation Chile, India, and Ghana, and then used to derive in- and enforcement, and highlighting differences in ap- dexesof theequilibrium real exchange rate. Tis alows proachandemphasisacrossountisAnditwillassess an empirical assessment of the real exchange rate appropriate policy, regulatory, and institutional initia- overvaluation relative to its equilibrium. The implica- tives for indust developing conmtries. tions of real exchange rate overvaluation for economic Respomsiity: Industry and Energy Department, In- performanc will be indicated and employed to explain dustry Development Divsion-Mark Dutz. historical development in the iree counties Complikon date March 1993. The methodology used in the research is an econo- metric regression on the detrminants of the equilib- num real exchange rate, based on a traded-nontWaded Monetary Policy and the AgriculturAl Terms goods model that will be estimated for each CDuntry. of Trade The theory of cointegration and error correction will be employed in the eoDnometric estimation. This research will look at the relation between mDn- Rwponsibity:CountryEconomicsDepartmentMac- etaypolicyand theagicalturaltermsof tradein Brazil, memnomicAdjustmentandGowthDivision-lxahim a country in which agriculture accounts for about I0 Elbadawi. percent of GDP and monetary policy has been quite Compltion date December 1992. unstable. The research will address the following ques- tions * How do moetar shocks affect the prices of agri- Parallel Markets and Growth in Sub-Sahara clturalcommoditiesrelativetothoseofnonagricultural Africa mmmoditis? * Howdoshodcstoagriculturaland nonagricultural This research is examining the effect of paralle mar- pnces affect the money supply pre-if at all? kets on the medium- to long-nerm deerminants of * Howdodifferentpolicyregimesaffectthenature growth.Sizableparalmarketswithlargeandvariable of these relationships in Brzi's economy? spreads-such as those in Sub-Saharan Aftica-an It has been argued repeatedly that macreonomic causecredibilityproblemsthataredifficulttoreversein variables have a significant effect on agriculture and, the short term This can lead to negative effects on conversely, that varibles specific to the agricultunl private sector investment and savings dedsions and on sector influence macroecnomic variables. This propo- long-term growth. sition is almost trivial in countriesin which agricultua The research is based on amss-country regressions comprises a large share of GDP. Butin middle-ncome on the determinants of growth in Sub-Sahar Afica, ctries, where agriculturWs share of GDPis typically usng the empircal models of the 'DJewgrowtf item- less than 20 percent the empirical signifiance of these ture,inwhichanindexofdistortiongivenbytheparalel interactions is not dear. Empirical research to support premium (or real exchange rate overvaluation) is in- or refute this proposition is needed. Knowledge of the cluded as a potential determt. relation between sector prices and monetary policy is Raspons -y:CountryEconomicsDeprment,Mac- useful not only for macroenomic policy, but for sec- roecnomicAdjustentandGrowthDivision-Trahim toral policy. For example, in an economy in which ElbadawL - monetary pohicy responds to relative price shocks, re- Closing date December 1992. moval of policy-induced taxes on agriculturemay lead 133 Economic Managment to undesirable bursts of Inflation that, in twn, might Short-term Outlook and Globwa Economi Prospa:ts pa- jeopardize the adjustment program that is under way. perm The system consists of 144 single-countzy struc- The research wlll develop vector autoregressive turlnmodels that forecast the key macroeconomic indi- models of te money and price vadables, paying par- cators of eadt country. The countries are linked consis- ticular attention to possible effects of changes in the tentlythroughtradeandfinandalmarkets.Theforecast policy regime on the stability of the estmated param- is based on the assumptions of the Planning Assump- eters. The stationary properties of the vector tions Committee and on the unified survey. The basic autoregressive systems will be detemined, and tests acounting fiamework is consistent with that of the willbeperfrmedtoevaluatewhethertherearestation- RMSM-X, but limited to a thee-sctor split-public, ary equilibrium relationsips among the series, even if private, and foreign sector. they are individuaily nonstationary. The DEC Analytical Database (DAD) supports this Responsibility: Agriculure and Rual Development work,andMAXSLMisthecomputersoftwarethatmakes Department, Agricultural Policles Division-Antonio the project feasible. Prototype models are specified for Salazar P. Brandao. With David Orden, VPL individualdevelopingcountriesLCountriesaremapped CoIpMCLdion date: May 1993. into model types. On the real sideof the currentaccount, behavioral equationsare estimated based on theexperi- ence with the regional prototype models being devel- Inflation and Growth Impact of Reform oped for the GEM-Regional Models research project in PFst-Socialist Countries 'rune-sies cross-section techniques are used to esti- mate parameters for each group of countries. The trade This projectanalyzes the impact of macroeconomic linksarespecifiedon thebasisof theUNbilateral trade policies on inflation and growth in reforming sodalist matrices that are expanded to 144 x 144 countries, re- economies. The research focus on the following ques- fined withfFDOT dataand made consistent trough tions theRAS method. Financalvaiables are linked direcdy. * What has been the effect of price reform and sub- The research has shown thatit is possible to assemile sequent stabilization efforts in Easter Europe on the data formoeconomicaunts foressentially all coun- rate of inflation? Why was the initial effect of eliminat- tries. These dat and the model can be managed on ingmostprice controlson theprice level so large? Why pex-ondaomputersatzeromargmalcostusmgMAXSlN has there been, in some countries-such as Bugaria, Using pooled data for esimating model parametes has Poland, and Romania-so much inertia in inflation in shown promising results Globally linked model the aftermathof price reform and in conditionsof aggre- simulationresultssuggestthatthemodelwfllbeapowerful gate excess supply and slack in the economy? Did it tool for foresting and for analyzing scenaios. make a differencein the velocity of disinflation and the Bank-GEM provides the BanKs operations complex degreeof outputresponsewhethermoney4basedstabi- with an analytical tool tD assess the consequences of lization(BulgariaandRomania)orexchange-rate-based globaleventsforalmostanycountryin theworld. Itcan stabilzatiDn (Poland) was pursued? beusedasadescriptivedeviceand asa prescriptivetool * What is the shape of the (full) output cyde in forfindingoptimal policyresponses toexternalshocks. reforming socialist countries? How long will it take for The results of model specifications and estimations theeconoiniesofEasternEuropetostartgrowingagain? aredisseminatedtjcughlntemationalEconomicAnaly- The research is concentrating its analysis on Eastem sis and Prospects Division working papers, and fore- Europe, and is reviewing the international experience casts and scenario analyses are published in the Globl with stabilization and growth to illuminate patterns of Economic Prospwsb papers. macroeconomic adjustment in formerly socialist coun- Responslity In% 'rxnational Economics Deprtment, ties International Econcmic Analysis and Prospects Divi- Responsibdiiy:CottryEwnomicsDepartnent,Mac- sion-ChistianE.Ptrsen,IarstenPedersen,andT.C. roecono-icAdjustmentandGrowthDivision-Andrds Srinivasan. Solimano. Conpktion date June 1994. Compleion dte December 1993. RepiSt Petersen, Christian E, and othem 1991. 9Bank-GEN A World Bank Global Economic Model" Paper presented at a ProjeD Bmnk-Global Economic Model LINC oonference,Moscow, Septenber. 1991. 'The Srudcure of a World Bank Ecnondc Model The Banks Global Economic Model (Bank-GEM is Paper prsneted at a Brooking, OECD, CEPR, ad KDI the underlying foreasting and scnario tool for the cfr, esoul May. 134 Eonoemic Mmgemt DEC Analyffical Database sion-ElliotJ. Riordan, Sodo-Eonomic Data Division, Systems Division, and Debt and lInernational Finance The DEC Analytical Database (DAD) being devel- Division. oped in this projct will filU the need for a niurnal but Cmpdon dat- June 1994 consistent set of macoeconomic data that covers all countnes and hence permits analysis and modeling at the global level of aggregation, and for any region International Linkages, Shocks, desired by the user. DAD organizes data on national and AdLjustment acoDunts,trade,balanceofpayments, debt,govemment finance, money, and pnces into a coherent three-sector Over the period 1973-89, countries faced anumberof framework-private, public, and rest-of-world-for externalshocks.Theeyhavetriedtoadjusttotheseshocks about 140 countries.-This is a cornerstone of the global in dfferent ways and with different records of success. modeling effort of the Intemational EcDonomicAnalysis Identifying the cauntries that were highly successful in and Prospects Division (ECAP). adjusting to shocks and the polides they used would BeforestartingDAD,IECAPspentayeardeveloping yield helpful lessonsforfutureeconomicnagement and vettingasuitableglobalaccountingframeworkand This work is the initial trust of a planned larger testng it with bendhmark data for 1985 for rrtain research task on international linkages, transmission regions. In DAD, this frmework is filled with indi- mechanisms, the nature of shods to be expected, and vidual-country seies of maximum length, using stan- modesofcopingwithshockswhilemaintaininggrowth. dard Bank nomendlature and the most authoritative The basic methodology is that used by Balassa and standardized data avaiable through the Bank's cantral McCarthy CAd#usmnt Poliis in Decelapig Counbs, files (BESD). The work has also induded meticulously 1975-83: An Updafr World Bank Staff Worldng Paper filing gaps in the data through additional sources and 675, Washington, DC, 1984), in which a shocks-and- staff estimates, and developing efficient means for up- adjustment decomposition is derived from the cunent datingdata,changingbaseyears,andmanipulating the account identity, in the first phase The extent and data for analysis and pujections. compositionofshocksandadjustmentsarethen related, DAD has so far been used in a varietyof descriptive in the second phase, to various policy measures to studies (for example, trends in global savins and in- identify the measues used by countries success in vestment) and for the estimation of models of many adjusig to shodcks countries and regions. It has demonstrated a capability The study is still in progress, but the following tenta- for efficiently handling a global data base comprising tive hypothesis gives a flavor of the Idnd of results that more than 100,000 series on a personal computer. Thus, can be expected: It appears that countries that are more expensive and cumbersome computers are no longe open are likely to be subject to shocks of laer magni- reqired to process and manage global model systems. tude, but are also likely to adjust more quiidy and This createsopportunitiesforanalystsin all countries to effectively. monitor their counties as linked components of the The findings are expected to identify modes of eco- world system, using their own hardware and readily nomic management more condudve to growth in an transferable data and softwaxe. environment in which there will be continued shocks DAD wil be diseminated electronically after addi- Reoniity: Intrational Economics Departmet, tional validation and testing. Interational Economic Analysis and Prospects Divi- Responsibily: IEnternaional Economics Deprtment, sion-F. Desmond McCarthy and Ashok Dhareshwar. Itemational Ewcnomic Analysis and Prospects Divi- ConxpqkIkm date June 1994. 135 FINANCIAL INTERMEDIATION Closed-End Country Funds: Theoretical The Impact of Financial Reform and Empirical hivestigation Rnf. n.676-13C Rtef. no. 676-07C lnterestinrefomn firnancialmarketsindeveloping ThisresearchwaspartofalargertaskintheDLebtand countries remains high, reflecng the realization that Intemational Finance Division focusing on the pros- evensmallgainsfrommobilizngandeffcientlyallocat- pects for new types of exnal finance for developing ing financial resources wll outweigh any concivable counties. Theresearchexaminedinternational diversi- augmentation of net international transfers Increas- fication thrugh countryfnmds the effectof this on local ingly,authoritiesrecognizetheinefficienciesassociated stock markets; the management of a country fund; and with heavy government intervention in the financial the initial public offering of a county fund. Portfolio sector,-particularwithinterestatecontrolsanbeavily investmenttis an expanding activity, and it has ciarac- subsidized credit; in some cases they are responding to teristicsthatarepotentialyfavorablerelativetothoeeof the difficulties inherent in maintaining controls. other financial instuments The objective of this studywas to enhance theBanVs The research addressed such questions as Should abihtytoofferinformedadviceonfinancdalreforn.LThe developingcountries start country funds? Shold insti- study examined financial reform analytically and em- tutional investors in the West hold oountry funds in piricalry, fousing on seveal key issue. thebehaviorof their portfolios? How should country fundsbe initiated banksandotherfinancialinstitutionsaround thetime of and managed? reform; the relation between financial and real sector The research had both a theoretical and an empical reforms; the process of reform and the sequencing of part The theoretical model is one of partial segmenta- various elements, induding in particular the timing of tion, highlighting two majoreffects an accss effectand the openung of the capital account; and the effect of a noise effect It delvers a pricing technique as well as financial reforms on the efficiency with which capital is welfareresults.Themajortheoreticalresultsweretested alloated. empirially,usingweeldypricesandnetassetvaluesfor This project complements the research project on the all the country funds trading on the New York Stock rea sector effects of financia liberalization (RPO 676- Exdcange 72), and more general work of the Fmancial Policy and The research has foumd that the additional diver- Systeus Division. sification allowed by country funds expands the Several core papers provided the analytical fiame- efficient frontiers of risk and return. County funds of works for the case studies, which examined a set of developing countries play an important role in this relevantissues forthereformprocess.Insomeasesthe expansion.Theresearchfindinigsalsosugstthatinsti- colection of financial sector data was augmented by a tutionalinvestorsshouldinmasetheirholdingsofco- survey of commercial banks. tryfundsCountry*mdsindevelingcumtriesshould The research led to seveal key findings First, the be promoted as an alternative means of attracting perrmanneofthefinancialsectorisinexticablylinked foreign investmnent and lowenng the domestic price of to that of the real sector, in particular hirough the risk evolution of borrower net worth. Reform programs Responsbii International Economics Deartmnt, rmustbe designed and modified to take accunt of these Debtand International Finance Division-IhacDiwan. lnks. Semnd, iniual conditions in finance-the portfo- With Lemma Senbet and Vihang rnmza lio of banks, their mformation capital, their human Cksing datc October 1991. capital, and their internal incentive sys -will play R1oi a key role in detemining the success of recorm effort Diwan, Mhac, Vhmg Ernm, and leo=a SenbeL 1992. and implicitly offer a blueprint for the design of reform Cotnmty Funds: Empical Resul Da progr Third, these two points create a bias in favor .1992 rthe Pridng of CoutUy Fumds amd Their Role in of moving promptly on vanous aspects of institution Capil Moblkzato fr Emeraing Eccoieaf Draf buildingfinanceandmdoregradually (butstillsteadily) 136 Finanl Intermediation on interest rate deregation and removal of portfolio Nam, Sang-Wo "oas Fhdinanil Reform ince the Early restrictions. Fourth, a variety of sequences of finandal 1980s reformshavebeen tried. In particular, several countries Valdes-Prieto, Salvador. "Intemadonal Finandal Uberalization opened their capitalaccouits prior bo or simultaneously in CUe, MUMar with domestic financial reforms. But the sustahnbiity YUot& 7Z 1 AZnani AwangAdek HeusEn, kmail AloWL LUn of unconventional sequences may result from specal e Sing, and Sukhdave SngL "FnanciA Reform In factors, including in hIdonesia the absence of govern- Malaysia! ment debt and in Malaysia and New Zeland a high degree of central bank independenoe Theproject'sfindingswerepresentedataBanskcDn- Japanese FDI in Developing Countries ferenceheldApril2-3,1992,inWashingtonandanEEDI/ Trends, Detenninants, and Policies CEPAL conference in Chdle The papers prepared in the project are being submitted to Bank and outside jor- Ref. no. 676-57C nals, and assembled in a volume on financial refomL Many developing countries need to attract flows of Several of the papers wi be presented at an American foreign direct investment (FDI) to achieve sustainable EconomicsAssociationsessioninjanuazyl993,andone growth, espedally in the current environment of gen- willbepresented at theWestern EconomicsAssociation emlc-editshortagejapanlasbecometheleadingsource conference. of FDm and there are possibilities foreven larger invest- Responsbity: County Economics Department, F- ments of Japanese capital in developing countries. A nandal Policy and Systems Division-Gerand Caprio, significant impediment to an in-dept analysis of Japa- Jr.; Latin America and the Caribbean, Country Depart- nese FDI has been the lack of comprehensive and re- ment IV, Office of the Director-fames Hanson; and fined data. Industry and Energy Department, Industry Develop- This research explored several issues: ment Division-Tak Atiyas. With Mark Cmtler, New * What is the emerging trend? York University; Andrew Rose, University of Califor- * What causes shift in priorities for Japanese FDI? mia, Berkeley; Sang-Woo Nain, Korea Development In- * What policy choices do host developing countries stitute; John Chant, Simon Fraser University; Mari wishing to facilitate FDI inflows have? Pangesta, Center for Strategic and Interational Stud- The project was part of larger efforts in the Debtand ies,Jakarta,HamnErsel,CentulBankofTurkey;Dimtri Intemational Fnance Division and the Policy Research Margaritis,Universityof Waitako and Reserve Bankof complex to investigte alterative forms of resource New Zeland; Zainal Aznam Yusof, Awang Adek mobilization for development, particularly foreign di- Hussin, Ismail Alowi, Lim Che Sing, and Sukhdave rectinvestmenL Sigh, Bank Negan Malaysia; and Salvador Valdes The research was onducted in several steps. First, Prieto, Univeruita Catolica, Chile. dataonJapaneseFDIweregatheredfirmofficialsources Closing date April 1992 and survey results and thert refined. Second, the data R1otr were analyzed, broken down by sector and county. Atliyas, Ink Finadal Reform and invesnt Behavior in And third,policymeasureswerediscussed.Mostof the Korea Evidence from Panel Data! work was carried out by three Japanese researchers Capfio, Cwardj r "Bankldg on Fmianal Reform? A Case of (stationed in Japan) under the research direction of the Sensitive Dependence on Initial Cadlions. Debt and International Fnance Division and the Japan ___ 1992. Pdicy Uncedalnty, formatin Asymmetis, and Center for International Finance. Finandal Jnternedlatiouf Poli Resewnc Working Paper Thestudyfound thatEDIflows fomjapanese corpo- 853 Wedd Bai, Washingtn, DC rationshaveincreaseddramaticallysincethemid-1980s, Capio, Carrd, Jr, IzakAtlyas,andjamA. Hams ?Pllcy but the bulk has gone to industrial aountries. Japanese Issues in ReformigRngRanoe lAso and Strae FDI in developing countries has been concentrated in ChRiS lolm, and Mari Pana. -An A_esmat of Finncial the Asia region. Preliminary findings suggest that the Reform in Indonesia: 1963-90." deteinantsofjapanese FDI vary considerably aaoss Edl, Han, and EIak Atlyas -The hnpactd FRnal Refms industrial sectors. The ExpeienceofTurk. The findings of this study will be useful for Bank Catder, Mark, and Andrew Rose, Finane, Gww, and Public opeations in facilitating policy dialogue with member Policy. counties and in implement policy and sector re- Hanso, James. Ai,COpn Capit Acwunt A Brief Survey of foins conducive to inaeased nondebt capital flows. the Isues and the Resls Policyrnakers in developing countries-particularly Margai, DimitrL PRnadal Policy Reform in New Zeald." highly indebted countries-experiencing cDntinuous 137 Finandd intnne2diin stagnation in FDI inflows could utlize the researh firms to large fins that are both more efficient and resltstodevelopappwpiatemeasurestoinducegreater more profitable after liberalization. But in Indonesia it flows of FDI fom Japanese firms. wasthesmallfimsthatbeamelesscnstrainedintheir The data obtained on Japanese FDI will be made investmentdecisionsfollowingreforms. Onereasonfor available for future Bank studies. The Japan Center for the difference appears to be that large firms in Ecuador International Finance will disseminate major findings continued tobenefitfromsignificantlevelsof protection through publications and seminars tareted atJapanese followingfinancialreformsandattracted creditbecause policymakersandJapan'sbusinessand academic com-. of their still cmsiderable profitability. munities. A Bank-wide seminar presenting the results The findingsprovideabasisforrecnmmendationsto of the resarch is planned for late September 1992. reduce interference with credit allocation and interest Responslbilini: Iternational Economics Department, rates But because both countnes continued small di- Debt and International Fmance Division-Kwang Jun. rected credit programs, it does not show that all such With IH Horaguchi, Hosei University; and H. Kwak, interventions should be ended. MMRL The Japan Center for Intemational Fmance con- The project's findings were disseminated at a Bank tributed staff lime and provided financial support. confeenceheldApril2-3,1992,inWashingtonandatan Closing date June 1992. EDIICEPAL conference in Chile. A summary of the findings, along with the findings of a study of firms in Korea (Induded in IPO 676-13), is being indluded in a Investment Decisions, Capital Market volumeronfinancialreform (FianilRqfornTheoyand Imperfections, and the Effects of Fmancial E. The summary paper wil also be presented Uiberalizatioie The Ecuadorian atanAmericanEoconomicsAssociationsessioninJanu- and Indonesian Cases ary 1993. Responsibtit Country Emnomics Department, Fi- Ref. no. 676-72C nandal Policy and Systems Division-Gerard Caprio, M.ostfinandalrefonmeffortsstartwiththebeliefthat Jr.; and Industry and Energ Department, Industry a raore market-oriented finandal system will be able to Development DivisionIzAtiyasd WithJohn Haris, allocate credit more efficiently. Although much has Fabio Schatareli, Andrew Weiss, Miranda Siregar, been written on the role of the financial system in and Fidel Jarmio, Boston University; and MLGCertler. promoting growth, there has been little empirical evi- Closing datc: June 1992. dence available t asses the real effect of fancial Repot liberalization. Until veryrecently, one had to relyeither Aflyas, izak Geard Cprio, lr., Jobn Harr, Fabio Scldaar on country case studies or on mostly aggregate econo- andAndrew Weiss. 'Credit Where I b Due? Evidace on metric evidence, the Efficiecy Effects of Kmada Refornif The objective of this project was to examine two rich Hani, Jobn, Fabio Sdhanaei and Miranda Shear. YFmn- data sets covering a large number of manufactring dat and Investment Beavior of ffie Indmesian Manufiahw- firms in Ecuador and Indonesia, with the aim of assess- e- ad the Effect of Lberuizatlorn Evidence From Panel mg the effects of reform on capita] accumulation. The Data, 19814W project first d,eveloped a model generating testable im- Jaa,dFo, Fie Fabl Sddnel ad Andrew Weiss Credit plicalionsconcniing theeffectof financial variableson A110catlo. Investment, and the Effects of Finanil investment when capital markets are imperfect This Liberalizalon Evidnce ranaom aPanl of Ecuadorian Firus framework was then used to evaluate the effect of Sdlbrelt Fablo, Andiew Weits, and FidelJaudlo. reforms on firms' access to aedit and on their invest- "Financal CTestrlts and Investment Dedsions The ment choices. The research looked at how theallocation FrnEwrk for Analyss." of credit has chaged, whether it has flowed to more efficent firms, and whether we firms have gained at the expense of small firms. Measurement of Commodity Price Volatility The resuts for a panel of several hundred Ecuador- ian and Indonesian firms in the manufacturing sector Ref no. 676-73C provide evidence that, other things being equal, since Commodity prices are of vital importance for much liberalization there has been an increase in the fow of of the Bank's project and program work. To date, most credit accruing to technically more efficient fims Thlis research has centered on predictng ihe expected mean resultis robusttodifferent specificationsof the produc- of future prices. But because the vdaEity of prices is tion function and to different estimation methods. In large, ex post prediction errors are common. This re- Ecuador there was a shift of resources from smaller search project sought to obtain, using available market 138 Fbiancial ntanrtiifon information, a better prediction of the uncertainty of Thisprojectwll tettherobutn_of the resultsof fe fuumes prices. This should help theBankindeveloping erlrsearchbyexpndig thesample Of cDrporations; better sensitivity analyses for projects and programs itwillexfteid theworkon therelationsbetweencorporate The reserch is part of the effort by the Intenudional a ics and it will attempt to aeplain the differ- Trade Division of the International Economics Depart- encesobservedinthefimandalstructuresamongdevelop- menttoprovideprobabilisficpriceforecaststotheBank's ing counties and between developing and industria operations complex. counties. It will address such questions as How are a Options and futures prices were used to extract the corporation's capital structure and financing patten af- market expectations of not only the expected future fectedbysuch charactistics asitsage,size, and varibl- commodity price, but the expected distribulion of fu- ityinearnings,whefieritisamultinationalandwheher turepricesAndadvancedeonometrictechniqueswere it produces capital goods rather tian, say, consumer used to generatepricedistributions overmatunityhoi- goods? How much do corporate capital stmctue and zons that go beyond the maturity of the options. financng patterns affect growth? And is there a caver- The results of the research will likely indicate that gence of capital structure and financing pattens among there is a need for risk management-at the project as the very lagest corporations in developing countries well as the progam level-and that it should be inte- because of the acess that they have-despite national grated into both the Bank's and the cuntrie? work capital controls-to the international capital market? Reponsbity: Interational Economics Department, The research will rely on three research methods Debt and Intemational Finance Division-Constantijn econometric analysis of accounting and stock market Claessens. With K Kroner. data for developing country corporations; interviews Closing date June 1992. with corporate managers and others; and case histories of a small subset of developing country corporations. The expansion of the data base is now complete, and Corporate Finance in Developing Economies fieldworkinMalaysia wasundertaken inJuly1992. The econometric analysis is scheduled for fal 1992, and the Ref.a 677-0 write-up of these results, and of the Malaysian case The limited amount of research on corporate finan- study, is scheduled for spring 1993. ciai structures in developing countries has left some ReponsbrlityIntermtionalFmanceCorporation,Eco- basic, policy-relevant questions unanswered. One rea- nomicsDepartment--MchaelAtkinandBahrainSalimi, son forthe dearth of studies on the suecthas been the and Central Asia, Middle East and North Afica, Divi- lack of suitable data. But with the recent emergence of sion 1-Javed Hamid. WlthAjitSingh,Queen'sCollege, stock markets in developing countries, more informa- Cambridge, U.K tion on company accounts has become available. These Closing dait May 1993. accmunts allowed researchers of the International Fi- nance Corporation to study, in a systematic fashion, corporate finance in nine developing countries (dia, How Do Inadequate Insurance Markets Jordan, Malays Mexico, Pakstan, the Republic of Affect Commodity Price Stabilization Korea, Thaland, Turkey, and Zimbabwe). Schemes? The study found that, despite the wide variation in the strctures of corporate finance in these countries, Ref. no. 677-06C the structures nevertheless differ in important ways In recent years, governments in many developing from tose in industial countdes. Corporations in de- countries have lilbralized their trade policies in the velopingcountriessexterimalfinance(long-termdebt pursuit of improved economic performance But this or equity) far more than intenal finance the median exposes the economy to intemational price varability corporation among Korea's top 50 financed nearly 90 and increases pressures fordomestic price stabilization percentof its growth from external finance. In contrast, programs, such as buffer funds for exports or variable corporations in industial countries use mainly internal tariff schemes for imports. It is important to ask why sources to finance their growth. A second striidng con- economic agents in a country cannot insure privately trast was found in the use of equity finance. For large, against international prce risks, or why they camnot listedcorporationsinKorea,equityfinanceaccommtsfor smooth their incomes or expenditues by borrowing up to40 percentof their growth,and for those in Turkey, and lending in internatonal markets. Dixit and Stiglitz more than 60 peent In the leading OECD economies have emphasized the need to isolatereasons for theladc net new stock issues acCount for only 2 to 3 percent of of private insurance if the welfareeffectsofgovernment corpoate growth. policies designed to remedy the lack of insurance op- 139 Financidal ntrmedition portunitiesaretobeprperlyunderstoodForexample, industrial and developing counties and used them to many governments of developing countries resrictfor- understand cross-countryvariationsintheaveragelevel eign capital flows. Thispreventsagets from diversify- and the variabilityof the rate of inflation, and to testfor ingeconomywiderisksbyholdingforeignsecuritiesor other possible effects. The research colected, besides restricts their access to international futures markets in legal criteria for independence (such as tenure of the whichrisks can beboughtand sold. Domesticinsurance central bank governor, appointment procedure, formal markets may be nonexstent or inadequate because of statement of objectives, and limitations on borrowing govenmnentintevention,becauseof alackof adequate by the government), data on the actual turnover of skidlls, or because property rights are not adequately centralbank govenorsfor65countriessince 1950 orthe defined and thus cannotbe traded. time that the bank was established. This indicator of This research had two objectives: to isolate reasons independence often diverges from the degree of inde- for inadequate insrance markets in developing cDun- pendence implied by the central bank's charter. Further tries,and toanalyzethewelfreeffectsofpricestabiliza- country-specific information was obtained hirough tion under different explanations for inadequate insur- questionnaires sent to informed individuals in the cen- ancemarkets.Byfkcuingonthereasonswhyinsurance tral bands of various countries. markets are incomplete, the research should help im- Itwas found thatindicators of central bank indepen- prove policymaldng dence contribute significantly to explaining inflation In earlier work, Coleman and Jones extended the Thelegalindicatorsof independenceare less important widely used Newbery and Stiglitz approach to measur- in the developing counties than in the industrial coun- ing the welfare changes from commodity price stabili- tries, and the rate of turover of the head of the bank zation to a general equilibrium setting. Coleman and contributessignificantlytoexplaininga country'sinfla- Jones'sanalysis confirms thatdomesticweLfareislower tion performance, espeially in developing countries. under trade policies, such as variable tariffs, that at- The research has tested for the long-term effects of tempt to stabilize domestic prices, as ey serve orly to central bank independence on important real variables, shiftthepriceuncertaintyfromproducersandconsum- such as the rate and variability of growth, real interest ersto the govenmentbudgetwhile incringthe social rates, and private investment. The real effects of central costsof thedistortionary tariTheyalsoshowthatthe bankindependenceareweakerthan the effectson mfla- N'ewbery and Stiglitzformula, basedon price stabiliza- tion, and they often do not show up at all in aggregate tlon through international storage, should not be used data. Low central bank independence reduces the to justify the adoption of domestic pice controls, such chances for a country to have high growth, after other as a variable levy. factors affecting growth are controlled for, but there are Re5ponsiity: Intemational Economics Depatment, muny countries with relatively high central bank inde- Internatonal Trade Division-Ronald Duncan and pendencethatneverthelessdo not enjoy stronggrowthL Jonathan Coleman. With Chris Jones, Austalian Na- Thebroaderpoiticalcontextmattersforcentralbank tional University, Canberra. independence Instabuityinfundamentalpoliticalinsti- Casing date June 1992 tutionsincreasesthe turnover of thecentral bank gover- Repot: nor in some countries, and in counkties in which this Col.nan,Juatan, and Chais Jones. 1992. eeWefre Effecs happens, the inflationary effect of the political instabil- of Stabiizing the Price of Traded Commodles in Sman ity is greater. And where central bardc tumover is occur- Open Emnomie."- World Bank, Waingt, DC ring in apparent response to polical instability, it has greater inflationary effects than where central bank tumover occurs without apparent relation to political Central Bank Independence: Its Political events. and Institutional Foundations The findings of the research have been presented in several fornms a National Bureau of Economic Re- Ref. no. 677-07 searchPoliticalEconomyworkshop (ovemberl991);a TheWorldBankisincrasinayadvisiggoverments Country Economics Department, Miaoeconomic Ad- on the reform of institutions, induding central banks. jutment and Growth Division seminar (November Therefore, it seems imptant to understand the facDrs 1991t) a Feder Reserve Banking seminar (My 1992); that can ernmce the independence of cetral banks and and a Carnegie-Rochester conference (November 1992). their comniitmentto nmiainiirng macroecnomicstabil- Resposirty:Country Economics Dertment,Mac- ity. Thisreserch aims to deepen thatimdezstandin roeconomicAdjustmentand Growth Division-Steven The researdh has developed broadly based and de- Webb. With Alex Cukierman, University of Tel Aviv. tailed indices of central bank independence for both Cosing date June 1993. 140 Finndal Iffmeniafion Report determined based on its riskiness, with riskier banks Cukldan, Al Sleven B. Webb, and BUn Nyat 1m being subject to a more stringent capital requirement Measuring te Indepdence of Centl Bks and Is But in most developing countries, it is difficult to Effect en Polcy Oulcoam.s Wl BPdt EraomkReukw 6 obtain accurate information, if any, on the quality of 0):353-9B banks' loan portfolios. Accounting standards are inad- equate, diseosure is poor, and markets do not function well. Moreover, banils are not able to hold a fully diver- Risk-Weighted Capital Adequacy sified portfolio because of exhange restrictions and Requirements: An Application lack of infortion and tehnical extis to Developing Cout Banks This research project seeks to develop ways to get around these problems and improve the risk-assess- Ref. no. 677-4 ment and capital-meansemetfuctions of regulators In July 1988 the Basle Committee on Banidng Regu- indevelopingcountries. Themainquestion theresearch lations and Supervision Practicesreached an agreement seeks to answer is how to design and apply an effective on a framework for measuring capital adequacy and capital adequacy requirementin developing countries, setting minimum standards for international banks. where the quality of information severely undermines This agreement established a system of risk-based stan- measurement and monitoring, and estrictions on di- dardsofcapitaladequacyforthedepositinstitutionsof vrfication exacerbate the nsks. Specifically, the re- the major industrial countries. The two goals of the search wil address the question of how capital ad- agreementare (1) to increase the stabilityof the inteima- equacy guidelines can help improve risk management tional banking systm, and (2) to harmonize gover- of the financial sector in developing countnes, to pie- ment supervision and regulation of internationally ac- vent a recurrence of the large financial imbalances and tive banks. The Basle Agreement undoubtedly repre- high-riskacdvitiesthatledtodebtandbankcrsesinthe sents a major step toward regulatory convergence in 1980s. industrial countries. The findings of the resarch will be presented in a The trend toward hanoniztionand unificaton has comprehensive and analytical policy paper that will spiDled over to the developing countries, as bankig identify workablesolutionstoproblems that arise when supervisors of more and more developing countries developing acuntry institutions are asked to comply have started adopting the Basle risk-weighted capital with Basle capital adequacy guidelines. Tis analysis adequacy guidelines, often at the World Bank's behest willmakeitpossabletostruchurecapitaladequacyguide- Egypt, Mexico, Tunisia, and Turkey are just a few ex- lines with capital-definition, nisk-assessment, and en- amples of countries that have adopted the guidelines. forcement rules designed for application in developing Because the guidelines were developed with industrial countries. country institutions in mind, it is important to analyze RtesponsbUy: Country Economics Department, Fi- whether these guidelines, without any adjustments, nancal Policy and Systems Division-Asli Demirgiiq- wouldalsobeappropnatefordevelopingcountrybanks. Kunt With Edward Kane, Ohio State Univedty, For developing countries to achieve the two goalsof Closing date September 1992. the Basle agreement, institutional risks and capital must be defined and measured appropriately by the regula- tors of individual countries. In a firm's financal struc- Management of Dxought Risks in Rural tum, capital plays the role of an incDme shock absorber Areas for those who hold stakes in the cash flows of the fizn. Capitalandloanlossprovisionsrepresenttheaggregate Ref. no. 677-Sl of accounts that, for a given stakeholder, absorb in- Manypooragdiculturalregionsareperiodicallysub- creasesanddecreasesinafirm'scurrentandantidpated ject to severe droughts, which can have devastating futureearnings.'heamountofcapitalappropriatefora effects on household incomes and consumption. To bankcanbedefinedonlyrelativetoagivensetoffisks- protect their consumption against drought riks, rumal itis the amount that would minimze the loss epsure households engage in a variety of risk management of a deposit inurer (be it a fund or the goverunent strategies. Some of these are primarily intended to re- itself). In urn,iskmustbe defined as the netexposue duce inoDme losses in drought year-for example, of an institution's capital to loss from all sources. For income diversification. Oher strategies are essentially banks, the most common risks are credit risk, interest coping devices designed to protect cDnsumption once rate risk, foreign exchange rate rsk and management inmcome losses have occuned-for example, borrowing risk. Ideally, each bank's capital adequacy should be from local stores and money lendes An important 141 Financil Intenediation limdtittio of many traditional rsk management strate- as devices to neutralize or mitigate distorted "urban- gesisthecovariabilityofdroughtdamage-mosthouse- biase maaoeconomicpolicies thatadverselyaffected holds suffe losse simulaneously within aregion.Asa the rual sectur. Butmany of these prograns fell shortof result, the ability to pool risks witEn a region is greatly achieving their objectives, as they reached only a small reduced, making traditional risk management strate- part of the rural population. Because of the risk in- gies less effective and more costly. volved, the high transactions cost, and mounting loan Fonral credit and insurance institutions have the loses, these RFIs have severely drained state resources ability to pool risks across large and diversified portfo- without progressing significantly toward sustainabil- los and, in principle, offer an efficient way of overcom- ity. But there are a few publicly sponsowred rural credit ing regional cvarianceproblemsand reducing the cost institutions that seem to have fared well. of risk management But these institutions are rarely This research highlighted and suggested criteria for well developed in drought-prone regions of the devel- assessing rural finance schemes The study focused on oping world and their absence amounts to a market the reasonsehind theexceptionalsuccessof fourAsian falure Although supply-side problems that limit the RFIs and analyzed the diversified policies, modes of spread of formal credit and insurance institutions have operation,incentives,and financialresultsof theseiinsti- recmved considerable attention, little research has been tutions to ensure an adequate and balanced approach in done on thelatentdemand fortheseinstumments in rual different socioeconomic envirounents. Because of the areas, large number of rual finance and agricultural credit The primary purpose of the study is to determine, program that have fallen shortof expecttions, policy- within selected study regions, the latent demand for makers, researchers in rural development and finance, improved credit and insurance for better managing and designers of rural finance schemes should be in- drought risks. Specifically, the study will seek to deter- formed about the emergenceand modes of operation of mine how much improved (formal sector) insurance these successful RFs and the unique features that ex- and credit different types of rral households would be plain their performance. wilUing to buy at full cost The study will model house- This research was part of broader analytical efforts hDId deasionmaklng using exiting household survey on rural finance issues by the Agriculture and Ru1l data from study regions in Burlina Faso and South DevelopmentDepartment Theeffortsaim todefinethe India. Both data sets indude data for the same house- proper role of governments in ural financial markets holds for a year of severe droughtand fora subsequent and thedesirable design featuresofinterventions inthis normalyear.informationisalsoavailableonhousehold sector.Thisresearchprojecthighlightedtheelementsof participation in government relief programs. successful programs that may be replicable in rural The study will contribute to the Bank's work on finance programs elsewhere. strnngthening rural credit markets and provide infor- The studydefined two prime critexia for Rsuccs mation an the effectiveness of existing government (1) self-sustainability, and (2) the level of outreach relief programs. This information will be useful for achieved with the targeted population.AnRIFlachieves inproving the design and trgeting of drought assis- financial self-sustainability when the return on equity, tance programs. It may also lead to follow-up work on rnet of any subsidy received, equals or exceeds the op- the design of simple drought insurance sdhemes. portnity cost of funds. Many RFIs have long been Responsibili: Agnculture and Rural Development sustained by implicit or explicit subsidies to ensure Department, Agricultural Policies Division-Peter continuedcoperationsToelihminatesubsidydependence, Hazell and Harold Alderman. With Madhur Gautam; an RFI needs to have positive on-lending interest rates RichardJust,UniversityofMarylandandTomReardon, that cover costs; adequate deposit interest rates; a high ?t&higan State University. rate of loan collection (apopular criterion forjudging an Closing datr December 1993. RFYssuccess);andreasonablylowadministrativecosts. Outreach can bemeasured by (1) the value and number of loans extended, (2) the value and number of savings Successful Rural Finance Institutions accounts, (3) the types of financial services offered by the R1F, (4) the number of brandies and village posts or Rural credit has been a significant component of units, ( the percentage of the total rural population Bank lending operations since its inception. Providing served, (6) the real annual growth of R1F assets over affordable credit to the rural sectr was considered reaentyeas,and(7)women'sparticipation.Thegrowth wanranted on both growth and equity considerations. rate of an RFrs assets might, under given conditions, States and donors have promoted and continuously also serve asa crudeproxy for new clients' access to the supported supply-led rual finance institutions aRFls) financial servi. 142 Financial Intermuliwin There were differences among the programs, butall allocation, lead to severe disinternediation and capital fourRFlsusedpositiveon-lendinginterestrates,aswell flight, and retard efforts at macroeconomic stabiize as financial and other incentives to borrowers, savers, tion. and staff, efficientdelivery mechanisms, and increased The objective of thisstudywas to enhance theBanles reliance on savings mobilization rather han on the use and its client countries' understanding of the range of of extemal funds. tedmiques available in bank restructuring and to offer Anyattempttoreplicatethemodeofoperationofone informed advice on "best practices' for combating fi- of the RFIs should be carried out with geat caution. A nandal disress The study surveyed the causes of finan- solution that was found adequate for tackling the com- cialdistress,examined therelationbetweenbanklosses plex issue of providing financial senrices to the rural and real sector losses, and reviewed the different tech- poor in one socioeconomic environment-where there niques that different governments have used to deal is a specific set of social values-is not necessarily the with bank distess. right approach in a different socioeconomic environ- This project cmplements the rsearch work of the ment. State or donor financial support in the form of Financial PolicyandSystemsDivisioninstrenghiering making financial resources available (not necessarily at financial institutions in developing countries. a subsidized interest rate) can constitute an important The key findings of the research are, fir.t, that bank contribution to a newly established RFI during the restructuringisinextricablylinkedtoreformsofthereal initial stage of negative cash flow. There is no way to sector, since the banking system is also a transmission define the appropriate time period and the pace at mechanism forral sector losses. Bank losses have been which support should be phased out in a given caset fundamentally wealth effects of sharp changes in rela- Savingsmobilizationshouldbeemphasized. Caretaken tive pricas on the banks net worth during the 1980s. So in institution building is often the main difference be- restructuing techniques should take into account both tweenanRFIthatcould eventuallybecomeself-sustain- stock and flow losses of the banking system. ing after a few years of support during its startup Second, because of the implicit or explicit deposit peaiod,and anRFIthatwould need perpetual subsidies insurance fortheliabilitiesof banks banklossesin excess and bailouts, of bank cpital are de facto quasi-fiscal deficits. Accord- ResTnsIlty: Agriculure and Rural Development ingly,theabilityofgvermenlstodeulwithbankdistress Department, Agricultural Policies Division-Jacob woud depend significantlyon their tax and debt capad- Yaron. With MJL Goldberg, L. Mitchell, and AL Munsli. lies. Countries that have high debt capacities relative to Compption date January 1992. bank losses (particularly the industri and middle-in- Rp7orts: come countries) have had relatively few problems in YarcnJacb. 1992. Assessing Dnwlonzn Finane Insitutims:A financing-and hencedealing with-banklosses. Highly Pnblkc lnstAnatl World Bank Dicussion Paper 174. indebted wuntrieswithlmacr economicimealances Washingkmn, DC (particulary fransitional socialist economies) could not .1992. '¶ural Fnance nDeveloping Countie" Plicy finance iese losses and left dtem unaddressed in the Research waing Pp 8;75. World Banik Washgton, DC banldngsystem,thuswoseingadsten tert CDUn- _ 1992. Sucssfid Rural FoamrInstluous World Barnt hies that tried toiWflateawaythelosses (sudh asArgentina Discussion Paper 150. Washington, DC and Yugoslavia) did notsucceed, and lossesrapidlyreap- peared in their banking systems. Third, successful banrk restructuring calls for move- Bank Restructuring: The International ment on four fonts: establishing a stable macroeco- Experience nomic environment, simultaneously restructbring the ral sector, particularly enerprises, and correcting the In the 1980s bank cises and restructuring reached fiscal account; building institutons through tanspar- historicallyunprecedented levels in bothindustrial and ent acmunting, and improving the legal framework so developingcountries.Severebankproblemswerefound that it favors competition and financial discipline; and in almost all 22 countnes that received financial sector getting the incentive and punishment structure right adjustment loans from the World Bank in the 1980s. The last involves not only removing the incentives for Both governments and the Bank have realized ftatbankk moral hazard behavior inherent in high-coverage de- restuctunng-defined as the padkage of macro and positinsurancesystemsthatrewardprivatesectorprofit micro measures undertaken to restore banling systems at high sodal msts, but also punishing inefficient finan- to solvency and operatingefficiency-maybe one of the dal institutions through enfotrced exit mostimportantconditionsforrestoringmaaoeconoEmc Fourth1therearenouniqueoruniversalsolutionsfor stability. Distressed banking systems distort resource all cases of financial distress. Country conditions vary 143 Financia Inite7raeitiot significantly,and carewilhavetobetakenindesigning directed credit progams, and a high level of inflation appropriate restructuring progams for individual High operatigcosts,largeloanlosses,andlargeprofits banks.Thestudydrewonthevariedlessonsof different from uncompetitive behavior also translate into wide countty expeiences, bakc spreads. Three core papers produced in the study review the An issue that confronts policmakers of developing causes of financial distress, the techniques used in bank countries is how to measure improvements in bank restruduringandsupvisoryremediesindealingwith efficiency. Measuring bank efficiency is difficult be- problem banks. The project also conducted eight coun- cause there is no satisfactory definition of bank output try case studie thatreview the unique features of bank This project in a paper on commercial bank efficiency, restruduring in each country. used bank accountng ratios for bankcs in industnal The projects findings were disseminated at a Bank counties to develop a setofratios thatcould be used for cmnfermceforseniorbanksuperviorsheldAugust3-7, analyzing bank performance in developing counties. 1992. An overll report will be published as a "best The methodology has been used in studies of bank practice book, entitled Bank Restrucurig: The lniea- * competition and efficiency in Mexco (fora study on the timoal Exzpaice. financalimplicationsof theNorthAmericanFreeTrade Reulbl4y: Country Economics Department, Fl- Agreement), Hungary, and EgypL The paper draws nandal Policy and Systems Divsion-Andrew Sheng. attenton to the substantial struchtal and accounting With SusanHartBo Wang;jbeRutrowskaFemando differencs among countries, among individual banks, Montes-Negret Silvia Sagart Luis Giorgio, CEMLA, and over time. It argues for using grat caution and Meiaco City; and Archibald Tarmor, Bank of Ghana. exendsive knowledge of local banking conditions in Completion datcjune 1992. intrpreting bank ratios. Repot Responsibityy: Country Economics Department, h- Montes-Negret, Fando. Forthwming -An Oveview of nandal Policy and Systems Divisioafi Harb, Diana Colombias Bankg Gris, 1982-i Policy Rarch McNaughton, and Dimiti Vittas. Working Paper. World Banrk Washiton, DC. Compelion datc June 1992. Sheng, Andzew. 1989. "Dank RestchutngIn Malaj* 1985- Report 8. Pdiy Resach Worldng Paper SC World Bank Vitt, DimtrL 1991. -Meuring Commecal Ban Efflder Wahington, DCr Use and Misuse of Bank Operatng Radlos Policy Resarw 1991. -The Art af lank Restructuring. EDI Working Worldng Paper 806. World Bank, Washingto, Dr- Paper. World Bank, Washnton, DC. Silverberg, Saney C 1990. 'The SaviW and Lan Problen in the United Slt Policy Research Wordng Paper351. Agcultual Cedit in the EMENA Region: World Bank Wasbington, DC acteistics, Issues, and SkLate The recnt iuance of World Bank policies guiding Costs of Intermediation finandal sector operations and the resuting dedine in lendirng for agricultual credit in the Europe, Middle An inportant plank of baning and financial reforM East, and North Africa region bring to light the need to programs in developing countries is the improvement examine dosely Bank exprience in agricultmual cedit inbankefficencythatmayresultfromexposngdomes- This need is highlighted by the less than satisfactory tic institutions and mariets to greater competition. A performance of agricultural credit projects in many basic benefit of enhanced efficiency is a reduction in countries of the region. spreadsbetweenlendinganddepositrates.Thisisley Because of the limited information on rural credit, to stimulate both greater loan demand for industial the first objective of this study was to review the perfor- investment (and thus contribute to higher economic mance of the rural credit systems of the countries in the growth) and greater mobilization of financial savigs region. Thesecondobjedivewastoexamineexperience through the banking system. with Bank credit proects and their contnbution to the Banks in developing countries operate with rela- improvementof these credit systems. The last objective tively wide spreads. These are caused by govenment was to develop a strategonnruainanoefor theregion policiesandregulationsandbyoperatingineffidendes. within which country-specific strategies would be de- Forexample,a wedgebetweenloan anddepositrates- veloped. at least for the nonprivileged cutmers of banks-is The study was based on a review of all available created by the imposition of onerous reserve requirm- infoation on rural credit in countries of the region, mentsandotherformsofbanktaxation,theoperationof particularly Middle Easten and NordL African coun- 144 Fiancil Intenneduthon tries. Nme countries were induded in the study, of Corpoate Indebtedness in Turkey which six had undertaken World Bank prects. The experience in two countries of Central Europe was also This rsearc projec addressed two issues. First, it indluded in the study. Three country case studies wer analyzed thedetermiantsof corporate indebtedness in camried out to study in detail the experience in imple- Turkey with a view toward identifying market imper- menting Bank credit projects and the effect of such fections that affect Turkish companies' access to exter- projects. nal finance. Second, the projet attempted to determnme Thestudycondluded thatBanklendingin therengion whether borrowing from a privately run development should shift from its basis in the traditional thinking on finance corporation-te Turldsh Industrial Develop- agricltural credit to embrace the broader conoept of ment Bank (TSCB)-had any influence on the determ- rural finance. The study recommended strengthening nants of corporate indebtedness. In particular, it at- rural financial intermediation-rather than depending tempted tosee whether thefact thatthe TSKB had better onexternalfunds-asameansof financialdevelopment project appraisal and monitoring capabilities reduced notonlyof agriculturebutof theentirenralsector.This the degree to whidc firms( borrowing suffered from conclusion was premised on the observation that suffi- problems of mperfect information and cDntract en- cient capital can be mobilized from within the rural forcemeut. sector. The project relied on the literature on the detrmi- Commercial bank&-the pnncipal rual deposit {al- nanis of corporate cpital stmctue and utlized both ers-are reluctant to lend to agriculture and normally simple regression and more complex latent variable move deposits out of the sector. To reverse the flow of analyses. To address the second issue, two disointed capital, governments have established spealized agri- sets of firm-level data were used, the first from the cultural credit institutions. These institutions are the Capital Markets Board and the second from the TSB most important source of formal credit, but most have The research has led to two prindpal findings. Frst, not performed well. World Bank projects that have finns seem to have easier accss to trade audit than to reliedontheseaeditinstitutionsasfinancialintermedi- short-term bank loas. This finding is consistent with aries have made only a limited contribution to improv- the widespread view that trade crdit is an important ing financial performance and attaining audit policy source of financing in developing countries. Second, refiorm there is some evidence that being a client of the TSKB The basic strategy proposed by the study is tD de- facilitatesflrms'effortstoraiseshort-termbankloans;in velop specalized agricultural acdit institutions mto partiaclar,TCBfhmsseemtobelessaffectedbyagency effective rural financial institutions. Bank support is problems that arise because of imperfect information proposed for attaining management and financial au- and costlycontractenforcement Thus, it seems that the tonomy, mobilizing rural deposits, and diversfyg screening and monitoring functions carried out by the lending to meet the credit demnds of the entre rural 1G facilitates firms efforts to raise financing from sector. This proposed strategy is being used in the otlherlenders design of new rural finance projects and in dialogues Respsity: Industry and Energy Department, In- with rural financial institutions in countries of the re- dustryDevelipmentDivision-TzakAtiyas.WithHaluk gion. UnaL University of Maryland. The findings of theresearch havebeenpresented ata Complion kde October 1992. seminar on Rural Fuiance at Ohio State University, Columbus,Ohio (Novenber 1991),and ata seminaron EmergingStrategiesin RuralFnanceintheMiddleEast Foreign Direct Investment and Trade and North Africa Region sponsored by the Africa Rural Fmance Group (June 1992). Thisresearchprojectseekstoidentifythemain deter- Rnptonsluy: Europe and Central Asia, Middle East minants of foreign direct investment in developing and North Africa Region Technical Deparbmt, Agri- countries he results should help counties that are culture Division-Orlando Sacay. With MelisaAgabin analyzing their polices with a view toward attacting and Price Cittinger. greaterinflows of foreign investmentby shedding light Completion date September 1992. on what factors are more effective in encouraging for- RwPat,: eign investment Samy, Orlando. 1992. 'Avaflability of Cedit for Livesto& The study is conducting an analysis of cross-sec- Production in Easter Europ Presnted at the Cnerce tional time-series data on investment originating in the en lvestock Production in Easen Eurmpe, Budpt, United States (for 1977-89) and in Japan (1960s through Hunmar April. 1989). Itisplanned to ectend this analysistoinvestment 145 Financal IntaerAtion in Canada, tLe Republic of Korea, and the United King- cpital to equalize in different countries, although it domL The purpose of the analysis, which covers invest- woid bea difficult testto conductbecauseofcomplexi- ment in 40 to 50 developing countries, is to determine ties in tax systems. Feldstein and Horioka proposed a whether tax incentives or more fundamental factors, different method for such an assessment based on the such as human capital and inhastructure, are more size of the correlation coefficient between national sav- effective in attracting private investment. ingsanddomesticinvestmentrates.Theirtestsproduce The research has ound that tax incentives seem to counterintuitive results that also contradict those ob- have a weak and ambiguous effect in attracting foreign tained f mmdirecttests of nominal interestparitycondi- direct investment, and that good infrastructure and a tions. So, the issue of the actual extent of international stable political and emcnomic situation (the creditwor- capital markets integration, or the degree of interna- thiness ofacountry, forexample) havea veryimportant tional capital mobility, remains unsettled. effect Theobjective of this study is to evaluate the explana- Some of the research being conducted will be linked tions put forward for the seemingly conflicting results with efforts in the East Asia and Pacific and the South of these tests and to shed some light on the correct Asia Regional Offices. A seminar was conducted in the interpretation of the savings-investment correlation International Fmance Corporation in March 1991 for coefficient and its relevance to capital mobi!ity. It will Bank and IEC staff to discass the findings of the re- thenintroduceapractical benchmarkagainstwhitithe search. actual extentof cross-bdercapitalmarketsintegration Responsiity: Industry and Energy Department, In- could be assessed. dustry Development Division-Ashoka Mody. With J. Reponsity: International Economics Department, .anjouw, Yale University, and Krishn Srinivasan, In- International Economic Analysis and Prospects Divi- diana University at Bloomington. sion-Jalaleddin Jalali. Compklton datc December 1992. Compleion date March 1993. Wheeer, David and Asboka Mody. 1992. 9lnteatlonal investment Locaton Dedsions The Cas of US. Firn Banlng in TransitionlW Socialist Economies JloUd1ofJIZrmaLMd Eanomics 33 (AugstYi7-76. The objective of this research project is to pursue the proposition-not an arignal one-that a narrowly de- How Integrated Is the World Capital Market? finedandamplyregulatedbankingsystemisbestsuited totheconditionsinEuropeantansitionalsocialistecono- The extent of integration of an economy's capital mies. Itbrings to the debate the perspective of the bank marketwith thosein the restof theworld isan important supervisor, to whom the responsibility for ensuring the parameter for analysts and policymaker It sigfi- safety and soundness of the banking system will falL cantly affects, among other things, the effectiveness of This study stresses that bank supervision cannot be govemments' fiscal and monetary policies, the ici- relied on as the principal means for achieving financial dence of cetain taxes, and the effect of changes in soundness. Bank supervision cannot avert problems private savings and govenment deficits on capital ac- that will arise because of inappropriate policy. cumulation. The results of perfect integration of the The study has led to several findings. First, govern- intenational capital markets indude the followinrg ments need to promote the achievementof certain fun- * Government deficits will not crowd out private damental objectives of bank regulatory policy, and the investment. financial soundness of the banking system is important * Savingspromotion policies will notbeeffectivein to the achievementof thoseobjectives. Second, propos- reducing the current accunt deficit. als intended to assist the transition of the nonfinancial * An increase in national savings will not raise do- sector may have adverse long-run consequences for mestic investment and labor productivity. banlk financial soundness. And third, bank supervi- * Monetaryand tax policies cannotalterthe real net sorscnnotreasonablybeexpectedtomitigatethethreats rate of return on domestic investment to fnandal soundness inherent in functional and own- * Taxes on capital income will induce a capital out- eship policies that envision universal-type banking flow,shiftingthetaxburden todomesticlaborandland. Supervisors attempting to ensure financial soundness The extent of cross-border capital markets integra- in transitional socialist economies face obstades. tion can be directly assessed by examining nominal Pesponsli4c Country Economics Department, Fr- interest rate panty conditions. Another direct method nancial Policy and Systems Division-David Scott could be devised based on the tendency of the return to Completion dte: June 1993. 146 Filnca IWtawmaIimn Commodity Risk M gment Deb Paodl Pi Re Woing Pper 739. World Ban, Watdngtoc, DC High eosure to volatlity i primary commodity Lamoq, Donald P, andJonathan R. Codels. 1991. "The PFea prices contine to bedevil manydeveloping counties. ofOpdlon-Hegngon th Cb of DoucPrieStbdaza- The Interational Economic Departmffens tedutico tin Scheea Polcy Resmrci Workng Pae 653. Wod assistancpipgrami on managing commodity primis Bank Waudngtou DC is helping them to manage the risk using financial market instruments This research will support the Departments tedmial assisae effor m this area The Japanese Main Bank System and Its Fast it wil futher investigate ctistbnces under Rdlevan for Developing and Transfnmg which itmaybe useful to employdomnesticstabilzatim Socialist Economies sdenes in conimction with financial hedging instm- ment. And second, it wi evauate the possilty of There are three main models for banking. The first is substtuting eectrni ading of fcwaid contracts for theAnglo-AmerianmodeLinwhichutiesmarkets the abet futu'snmarkets for some cmmnodites. are well developed and play an important role. The Research over the pastyear has concentrated on the secnd is relatonship bankdng, which involves dose role that financial risk manaement insuments can ties betwm bomrowers and the banks. The thrd is the play in hedging commodity prim risks. An important banking system of planned economies, in wich the role a--! an immediate appliation in managing prim banuin roleistheallocationof resourcesacmrding nsksoverbothshort-andlong-tEmperiodscanbeseen to national plans. indevelopingcantries' participathon in trdein petr- The Japanese main bank system (MBS) is a unxpue lumandpetroumproducts-whetherasortersor fth modeL t combiesanntimaterelationsip with importers. Odtr resumrdh pointed to the benefits that the cient with a system in rwich the main bank acts as te use of the new financial instruents-commodity a syndicator of loans to its dients with offierbanks and swapsandommoditybonds-couldhaveinana inancial institutions. This permits banks to help their the rids assocated with developing coutries' foreign dients make decisions duning periods of financial dis- debtptfols tress,and alsopemitsredprocalrelationsamongbanks RIs&l International Economics DU rnent, intheappraisal, monitoringand supervisionof assisted InternationadeDlvision-RonaldCDunwn,Panos enterpris Varangs, and rug Qian, and Debt and Inrnainal This research projects purpose is twofold. First it Fnaoe Diiion-Stija Claessens. The Fedeal Office will carryouta theical and empirical analysisof the for Econoc Affais, Switzerland, is providg finan- MBS and the funcions it peformed durng Japan's ciasupport acelerated industrialztion. Second, it wil assess the Cemplel iondac June 1993. relevance of theJMBSas an institutional mehnism for Rq: prmoting rapid indusializtion in the developing Alyun Ty_ maka and Panos Vnglu 1991 ?klw economies and the transfornmng socialist economies, Sbbaizatian fr RawJute in BDaglade Poli Resad partilarly in the private sectr. WorigPaper lWodd B;tWaldgtcmiDC. The reseirdc will compare the Japanese model with Clae ,St, andIm CoolaL 1991. Hfn theG manuriversalbandngsystem,ntheKornbank- Caumodty PriPdNkIsiaFaptNewCuz. Polcy ing system, a latin Americn bank, and the Indian Hearh Wkng Paper 749. Wor Bank, Waidhb banking system. It will be based on the work of an DC intnational team of scholars, who will prepare 18 Caa,Sjtn,andYtQhl 1991. -Risk Managmnat papers in four categories. Papers in the first cabegory Smiaharan AMa." Pdoiy Reearch Wading PaV S9W wiexaminekeyfeaturesof the JBSand itsevolution Wodd Bak Wauhtgtcn DC those in the.second wfll discuss how the main bank Caesen,St4n,and Pas V_ans. 1991. Hedg CrudeOl systemworks; wseinethdn will sistofcanmra- inporb in Duv_opig CZmmW uFWy Researc Woring tive country studies of relationship banidng and those Paper 755 Wod Bank Waskinf DC inthefourthwiICompistudiesoftherelevanmofthe Cde 4mata L, and Dold P. 1s. 1991. 'iff- JMBS toother comties, lso learned fm theanaly- Bal Commodi PMie SbiIzatio ShSm i VeneaY - sis of the JMBS, and implications for developmg and daf Pok7 Kesah Waddng PapPd 611. Wod Bant f econoumies Waihiogl DC. RepsmW DEwnomicDeveopmet1nstitn,Stud- Ctm=, la aldYh1g QL. 1991. ManagIn iesandTrainingDesignDiviIon-Hyng-KIGimLWith IsddaRsin PapaNewvCuwAn Optmal Enl HughParidc,CohibiaUn sity.s.eCleerofjap; 147 Financidl Interacdion nese Business and Economy of Columbia University, scheme) Borrowirng frommoneylenders irarebecause and the Economy of Japan Program at Stanford Univer- their rates are high Thus, most sds finance their opea- sity are contributing staff time. tlions and growth from inernal fumds. Although many Completion dite. June 1993. would have difficdty using and repaying credit, some SMEs with stng demand and the potential o grow could benefit from greater ams to credit at rates dose to Meeting the Finmcial Needs of Ghana's those prevailing in the form] financal sector. Small- and Medium-Scale Enterprises Preliminary research findings suggest that efforts to expand financeavalable boSMEswill have littlesuccess The purpose of this study is to investigate the capac- if they relyonly on cDmmercial banks' traditional meth- ity of the financial system in Ghana to meet the needs of ods. Even if competition spurs some banks to fious on small- and medium-scale enterprises (SMEs). Based on SMEs as a market niche, this will require significant a survey of the nature of demand for finance by SM improvements in their supervision capability and in- and an investigation of the cDnstraints on both formal centives for branch staff to develop good SME portfo- and informal financial institutions, the research will lios. Another approadh would be to increase the link- draw conclusionsonways thatGhana's financal devel- ages between formal and informal financial agents, to opment could be hastened to facilitate the growth ofan take advantage of informal financial agentsf ability to efficient, dynamic private sector. obtain infomation an and assess the ceditworthiness Ghanahaslaliazeditsfinancipoliciesandrestruc- of small clients. tureditsbankingsystemaspartofitsEc onoi icRecovery A subsample of the institutions and firms surveyed Program. Inprnciple, the removal of interestrate ceilimgs in 1991 will be resurveyed late in 1992 to assess changes and direct allocation of credit should establish more suit- in conditions. Particular attention will be paid to indica- able conditions for SME lending. In pracice, tight man- tions of financial deepening and inaeased access to elary policies, high interest rates on govemment paper, finance in response to looser monetary policies. and conservativebancingpracticeshave resulted in little Repolity: Industry and Energy Depatment, In- increase in the acess of pivate SMEs to bank finance dustry Development Division-William P. Steel and WhleSMEsdcitelackofaccesstofinanceasanimpor- Mala Hettige. With Emest Aryeetey and A. Baah- tant constraint on their operation and growth, banks Nuakoh,UniversityofGhana,andTamaraJ.Duggleby. suggest that there are too few applications from credit- TheNationalBoardforSmali-scalelndustries,Ghanais worthy SMEs to use up the available resources. This providing financil support may result in part from the banks' insistence on prop- Compltion &ute- June 1993. erty as collateral, because of the difficulty they face in Repqrts assessing creditwortiiness through other methods. Duggleby, Tamaraj. 1 'Best Pracies In Innovaive Snail The first component of the study consists of inter- Enteprise Inance nultulons." World anc, Whigton views of a range of financial institutions to assess their DC Draft relative abilities to provide financial services to SMEs. Duggleby,TamarJ, Emnest Aryeetey and Wiliam F. Stee. The interviews fouson the institutions' access toinfor- 'Formal andInformal Fiancefor Small Entepris in mation about small-scale entrepreneurs, their transamc- Chant Dac ind Paper for the Study an Meeting the tions cDsts, and the risks they face. For banks, the tans- Finandal Needs of Qana's SMEs Wolld Bank, Wasing- actions costs of lending t SMEs are high beause it is tm, DC. Draft difficult and time-consuming to obtain the information Helige, MalL 1992. "Toward Fiandal Deepening in Sub- needed to appraise MBE loan proposals. Furthermore, Saharan Afc An Analyical Ramework. World Bank, the perceived risks arehigh because of economic uncer- Wasidngto, DC Draft tainty,thehighturnoverrateamongSMEs, and thelack of nsk-sharingaangements. Banks' depositstructures are predominantly short-term, and they remain or- Risk Management in Agriculture ented toward short-term commercial finance. The second component is a survey of more than 100 Price and output risks inagrimlture can have inpor- firmsof differentsizes.SMEsinGhanamakelittleuseof tantnegativeeffectsoncashcropping,tedimologyadop- informal financial mechanisms, either as savers or as tion, investments i land improvements and consrva- borrowers. This is in part because the informal savings tion, and the welfare of the poor. Concern with these schemes Csusu) involve relatively small sums compared effects has been an imprtant factor driving the agricul- with the amounts requied by SiMEs, especially to ex- tural policy interventions of many countries and under- pand (as distinct from the smaller wordng capital needs lying their reluctance to more fully embrace market of pettytraders,whoacivelyengagen infma savings liberalizaton polices. This research is analyzing the 148 Fiacial Imtgrmadion various policdesand institational arangements rough to governments havetaken on incased importance asa which govemments and private agents can dlzcty or result of the debt crsis and the collapse in commerdal indely ameliorate the negative implications of price bank audit to developing counrier. The purpose of is and output volatility in agriculture. Of particular int- researdiprojectistolermmmoreaboutthedeterminamtsof estare insuranee schemes, futures markets, and price Iheseatermativeypesoffinandalflowsinordertounder- policies. The research will also seek to develop practical stand how these flows an be incuased and put to teir methods of incorporating risk management consider- bestuselhemearchwllstudythefinandngbehaviorof ationsintothedesignandappraisal ofBankprojecetand subddiaries of mutinatlonals in developing counries; struchtal adjustment loans develop a ownwp-ual framework on muntry risk aspects The research is being conduced thrugh a liteatue of alternative finance; and study the prospects for in- review, analysis of secondary data, and case studies. The ceased equity portfolio flows to developing counties findings will be disseminated though policy guideline This resech is excted to lead to further rearch papers, seminars, and participation in operationl mis- on countr risk and financial intermediation cspects of sions. foreign direct investment and issues related to equity Reonsoibiiy: Agnculture and Rural Development investment Department, Agricultural Policies Division-Peter The results of the research, which are to be disseti- Hazpll, Jock Anderson, and Apparao Katdneni With nated though a series of policy papers on the attributes Michael Cudger. of aIterativefonnsoffinancialflows,shouldhelpBank Compktion date June 1993. ecnomists in their policy work with borowing coun- -7wft tries. A confermce to disseminate the findings of the Anderso, Jodc R 1989. "Reccosiderations on Risk Deduction research is planned for spring 1993. in Public ProetiAhasa Aussdienlr -of .rkflhvWl Responsllily: nterational Economics Deparnent, EcnmiFc 33 (2):13640L Debt and InternaPtonal Finance Division-Stijn _ 1990 "houghts on RJSIkAcOUUIgInD Publc Prct Claessens, Kwang W. Jun, and Ronald Johannes. Appraisal? Ln Qsntmg taLg-Rum Agrdlwl RiPask m Compleion dait December 1993. Ewhtding Farmer Repees JobRi Food and Resource Economik Deatment Univedsir o tRorida Gainesville. 2992 lManaging Poducten lUt" in ouloak T2 Contractual Savings Nadbig Canber.- ABAR Hazell, Petr BR19!1 'A Anaysis of te Ptdnal Benefits of Contractual savings instiutions (such as pension Using te New York Ftr Markcet for Manging the Price fnds and life insuance companies) can make a signifi- Ris of Coffee Farmers in Costa Rica" cant contribution to the development of long-term debt - . Fothccmdngs "he Appropriate Role of Agricultural and equity markets. This project reviews their progress Inrac in Developing Conmtrles-flwaaesflxralii in both industrial and developing countries, assesses DewlpnezL tuir effect on the economy, and evaluates policies for Hazl Peter B.K, hL Jaramillo, adAn Williams. 199. 'The their promotion. One of its prindpal objectives is to Relaionship between World Psice lIstability and tme Pm exaine theecDnonicandcregulatoryissuesinvolvedin Farmers Recive in Deval%ingCountris.J- lolof promoting contractual savings. Agkrc.dtml Eamics way). In the first part of the projet, papers that deal with KeL Peter B& and R. Stewart 191. 'Evaluating the Cost policy issues will be prepared, and in the second part and Beneits of Costa Rias Food Secaty System." papers wiU be drftEd on experiences in both industrial Wan, G1., andJo& R. Andewmn. 199( "Estimating Risk Effeds and developing countries. These papers will be col- in Qdnese Foogram Production." Journal f4gria l lected for publication im a book. Ecamoias41 (1)8553- This project complements the Country Economics Wan, GC., WE GffiLhs, andjocdk R. Anderson. 199!. "Usn Departments work on old-age security. Pandl Data o Esmate Risk Effects in SeninglyUnrelated ResponsIbility: Country Emnomics Deparment, Fi- Production Functions Enpfcl Ewnan 17(1):5V.9 nancal Policy and Sysems Division-imtri Vittas (Reprinted In B Rai and BRM Baltasg eds, Pand DN With Michael Skully; Augusto Iglesias, Habitat APP; Andysis Hedelberp Phyics-Verlag) Kenne&WrightMichaelBart and MartdnGrace,Ceor- giaStateUniversity and Thomas Rabe, European Com- mission and Treuandanstalt. Altrative Forms of Extenal Fiace Compeion dte June 1994. Rep.fl Forms of development finance that are altentives Grace, Mrtin, and Mdil Bardh 199Z The Reguato and to official and commercial balance of payments lending hnddara OCgizatin oF the US Non-Life Isurne 149 Finacfal Infimaii aion lnduaty. World Bank County Economies De nt Rspanlblffty: Country Ecnomics Department, Fi- Tnhadal Plcy amd Systems Division, Washinglo, DC nancial Policy and Systems Division-Diana Vitkas DItrL 1990. conomI canrA ReguOt" Immue of McNaughton. Cotractul Saig nldn Wd Bnk, Country Compkdton datc June 1995. Ecnomics Depatment Famcia Policy ad Systms Divisib, Washton. DC 1992. 'CobnfltdSavings andEmerging Securities The Role of Payment Systems in Financial Markets. Pooly Research Waorg Paper 858 Wold Bank, Sector Reform Washington, DC .199 "he Slmple(r) Albra of Penim Plan" Wrld Payment systems are the foundations of the financial Ban, Country E&momcs Departm, Finandal PoUcy and sector. They are the grid or te mechanisms by which System Diviin, Waingtn, DC transactions are deared through finandal intermediar- ViUs Di , and Augusta 1glesas 1992. heRationaek and ies, paid, and setied. In recent years, attempts to intro- Perfonnane of Pesmal Pension Plans in Clil" Policy duce indirect and market-based instrunents in mon- Reearch Wrking Paper 8W. World Bank, Washingt DC etary poliqy in rany developing countries, particularly VMt Dini and Mial Skully. 1991. "Ovew of in transitional socialist economies, have faced the Cotactual Savingsstituoa" Polircy Research Working problems of highly defective or inefficient payment Paper 60. World Bank, Wasngto, DC sysms Wight, Kenneth M. 1992 sThe LUfe nne Industry in the This study will examine issues relating to payment United Saim An Analysis of Economic and Regatory systems in developing cDunties-the implications for Issues.' Policy Rsardi Warldng Pap 857. Wcrld Bark, monetarymanagement,banksupervision,bankacmunt- Washingtonp,DC ing, institution building, and access to the payment system. Of particular significance are te dcanges in telecommunications and computing technology in pay- The Role of Banks in Enterprise ment systems. Traditionally, payment systems were Restructuring centralized, stictly controlled by the state, and often state-owned, because of the high costs of installation of Traditionally, Bank programs in industial or enter- the "grid" and the social costs arisig from disruptions prise restructuring have been carred out entirely sepa- to the system. Tedhnology, however, is decenthalizing rate from programs in bank restructuring. But bank the system, since the private sector (particularly losses fundatally reflect enterprise losses. An im- nonbanks in the industrial nations) can easily build portant issue in economies in tansition or under stru- dchap and efficient parts of the payment system on its tural adjustment is the role of banks in enterprise re- own. Problems of accessibility (deterent to competi- scturing.Towhatextentsholdbanksbeinvolvedin tion), connectibility, and efficiency then arise. therestrucuringofteirworporateborrowers,and what This study will examine the lessons of design, estab- is the ewrience of differet countries in this regard? If lishmenL and implementation of payment systems in a banks should be imvolved in enterprse restructurin& number of countries, particularly transitional socialist induding the privatizaion of state-owned enterprises, economies, to draw policy lessons and best practice what are the implications for the struchre of the bac- stadards for policymakers and for Bank staff inter- ing system, the human resource dimension of banks, ested in developing efficient and sound payment sys- and te ownership and control of the enterprise sector? tems in financial sector reform programs. This study will examine the experience of banks in A first conference on Payment Systems in Develop- enterpnse restructuring in a number of countries, in- ing Counties is expected to be held in Beijing in fiscal cluding several Easten European econonies in transi- 1993 to hunch studies in such key issues as desig, tion and someindustial economies. It will identify best standards of operation, accessibility, connectibility, practice and the modalities of enterprise ructuring monetary and supervisory implications, and the role of The research will be carried outin collaboration wit the private sector. Several research studies that arise enterprise restruchring work being conducted by the from this conferencrwill then be initiated fora number Industry Development Division of the Industry and of developing countries. Energy Department. RF :sbLiy Country Economics Department, Fi- An EDI Senior Policy Seminar will be organized in nancial Policy and Systems Division-Andrew Sheng. fiscal 1993 to dismss the iSSueS and present findings With David Humphrey, Peter Allsop, Hermann-Josef from selected case studies. These studies will also be Perse, and Robert Lisfield. published in a book. Completion dat December 1995. iso BASIC INFRASTRUCTURE AND URBAN DEVELOPMENT Housing Indicators for Policymalng: RePsp iyffrnfsh tUcteandUrbanDevelopment An Extensive InternaionSurvey Department, Urban Development Division-Stephen Kr Mayo, Wiiliam Stephens, and Michael Hello; and Ref. no. 676-S6C Latin America and the Caribbean Tedmical Depart- Although the housing sector is an important eco- ment, Ifrastructme and Energy Division-Thakoor nomic sector in most countries, there is no fmework Persaud, and Public Sectr Management Division- for measuing its performnae or intenationally con- Waleed MaUlk Wit Shlomo Angel, Paul Strasnunn, parable data that would permit housing policy to be Mdicigan State University; and Marja Hoek-Suit, Uni- adequatelyinformed.TheHousing IndicatorsPrognam, versity of Pennsylvania. The United Nations Centre for of which this project is part, is designed to fill an impor- Human Settlements (Kenya),theUSAD, and the UNDP tant conceptual and empirical gap-by developing a provided financial supporl framework to measur the performance of the housing Cosing datc June 1992. sector as a whole, collecting data on key aspects of the sector's performance in some 50 countries, analyzing reasons for differences among countries in the sectDor's frastructure Bottlenecs Private performance,anddevelopingtoolsforintegratinghous- Provisions, and Industrial Productivty: ingindicators mto theformuldtionand implementation A Study of Indonesia and Thai Cities of housing policy. The Housing Indicators Program is a joint undertakng of the United Nations Centre for Hu- Ref. no. 676-71 man Settlements and the World Bank It is also sup- This resech investiates the cDntribution of invest- ported by several other bilateral and multiateral agen- men; i infrastructure to industrial productivity and cies. economic growth. It will also study private sector par- In this component of the program, a survey was ticipation in the supply of infrastructure seices. cnducted in about 50 countries on all five condnents. Understanding the relation between deficientpublic Each survey sought to obtain values for 25 key indica- infrastructure services (as inputs in the production pro- tors of housing sector performance, 10 alternate indica- csew of manufacturing firms) and the productivity of tors, and 20 indicators designed to quantify the regula- industryisi- io.tantforpoliyandlendingoperations toryandinstitutionalframeworkwithinwhichthehous- beause infrastructure affects economic growth and ing sector operates. After a series of regional meetings development with country-based consultants to discss the data and The research has three omponents. First, the effects preliminary findings, the data are to be analyzed using ofdefidenciesininfxastrucwureonthecostsandproduc- a variety ofeconometricmodels. These models focus on tivity of manufacting firms wil be studied. Second, testinghypothesesabouttherelationbetweemeasures the effects of inrastuctra deficiencies on industrial of housing sector p rmce and vanables character- growth in regional cities wil be compared with those in izing the economic, demographic, and policy frame- the most important, or primate, city of Indonesia and work in different countries. Thailand. And third, a contestability analysis will be A monograph wfll be produced that sunmariz the conducted for private sectorparticipation in such public findings of the project including information on both infrastmcture services as power, water, telecDmnuni- the comparative performance of the housing sector and cations, transport, and waste dsposal. the factors responsible for differences in the perfor- Using industial oensus dataand establishment sr- mance.lininwyfindigsweredseminatedthrough vey data tobe collected, ecnometric models for firms' a series of regional workshops held from November costfunctions will be esimated and simulation models 1991 throughFebruary 1992,and workshopswithin the willbeconstructed tostudyeffidencygainstomanufac- Bank in the spring and summer of 1992. In addition, huing industries from altemative market struchures country-speficworkshopswilibeconducted through- with varyig degrees of public and private sector par- out 1992 tidpation in the supply of infiastucture services 151 Basicnrstructureand Urban Dv*pnrent Repo llcbrastutctbrandUanDevelopment nomc rates of return on World Bank infrastruchtre Department, Urban Development Divislon-Kyu Sik projects and on possibilities of interpreting them as Lee. With Kavita Setid and Mr. Nadirowi. The Indone- information on the productivity of inhastrucre rela- sianCentralBureauofStatistiLcand thelbailmndDevel- tive to other us of capital. opment Research Institute are contributing staff time, Finally,a sestudyinacountrydisplayingsubstan- and USAID, aata, is providing funding. tial regional differences will test ways of establishing Closing date June1994. the margnal productivity of different tpes of infa- stuctur from analysis of aggregates (at the sectoral or regional level) and from microecononicdata as well as The Marginal Productivity of Infrastractre the consisnbetween the two kdnds of information. in Developing Countries Rnpnibi. urastructureandUrbanDevelopment Departme,nOffice of the Director-ArturoIsrael. With Ref. no. 676-95 Gordon A. Hughes; David Canning, ColumbiaUniver- During the past decade, the question of what effect sityCharlesHulen,UniversityofMarylandandNBESt publiccapital expditureoninfrastructuremighthave and Esna Bemathan. on economic growth came to the fore both in economic Closing datc January 1993. research and in the policy debates of industrial coun- Reort ties. The question is no less relevant forthe developing Cainig, David, Marine Fay, and Roberto PerdtL 1992. countries. Many among dtem made deep cuts in public hufraucture and Growth.w Wolid Banfratuclme capital e diture during the 1980s, and there is evi- and Urban Develpment Department Washington, DC. dencesuggesingthatinadequadesininfasructureare HvEn,, amde. . -2. Pnblkc Iftructure Capital and the holding back the supply esponse to structural adjust- Aggrepat Projection Funcdown Specificatkn bLue in meat. By the same token, the question isrelevantfor the Estimatng de Mar Poductivity of ilnftnchare and World Bank in its capacity as a major lender for infra- Developing Comtdsmfi World Banl, Inrastruchue and structue projects-for its investment decisions, its sea- Urban Development Deparimeat Washin, DC tororcountuylending stratgies, and the adviceitgives in public sector expenditure reviews. The question can be put in two sihtly different Synergistic Health Effects from Water ways. The first concens the effect of differences in Supply and Sanitation Inteventions infrastructure stocks on the rate of growth of output per worker. The semnd focuses on the resource allocation Ref. no. 677-25 aspect-on the marginal productivity of infrastructuue Manyattemptsbavebeenmadetoquantifytheeffect relative to otherussof capitaL Bebind the second lurks onhealthofimprovingwatersupplyand sanitation. But thequestion aboutthe nature of the infrastructure sup- few studies have considered factors that may modify ply decision. Because of the public good characteristics the relation between environmental sanitation and of much infrstruchre and of political economy, that diarrheal disease. decision must be expected to differ from the corre- This research project will investigate whether envi- sponding decision on private investments. ronmental interventions have a synergistic effect in The objective of this study is to test alterative ap- reducing diarrheal disease- The research wiRl be based proachesto eachquestion. Buttheresearchisalso meant on data from the Ceou Longitdinal Health and Nutri- toexplorethepossibilitiesofcombiingmacroeconomic tion Survey, a community-based survey of more than wit miconic evidence on the productivity of 3,000childreninCebu,Philippines,thatcollectedinfor- infrastructure investments. And the researh seeks to mation on families socioeconomic and demographic develop procedures for intrpreting infmnation avail- dharacteristics, sources of drinlkng water, saritation ableatthelocallevelasindicatorsof therelativeproduc- facilities, household hygienic conditions, feeding pat- tivity of infrastructue tems and food preparation practices, and diarrheal One line of research in the study cDnsists of the morbidityfrombirthtotwoyearsof age.Thestudywill analysis of mulicDuntry data, pooling cross-section address these questions; with time-series data and introducng infrastructure * Do simultaneous improvements to water supply Stocks in physical terms, an approach not found in and sanitation lead to a greatereffecton health than the eawlier studies. Such econometric work raises unique sum of the effects of each intervention alone? specfication issues, and these arebeing investigated in * Does briastfeeding alter the effect of improved the search forsuperior, feasible solutions Asecond line watersupplyand samnitationonhealth? Do children who of research focuses on the analysis of mestnated eco- are not breastfed realize greater health benefits? 152 Basic Infrbauctwm ad Urban Devdopment The presence of such synergit effects woud have. (such as cost-recovery mehnisms, tariffs, and subsi- important implications for planning water supply and dies). sanitation programs, and for identifying chldren at Case studies of willingness to pay for water were highriskdLfimprovingbothwatersupplyand sanitation undertaken in six countries Brazil ndia,Nigeria, Pald- is found to have a synergistic effe a pacag of mul- stan, Tanzania, and Zimbabwe. In mostof these country tdple environmental interventions should be encour- studies, household surveys were conducted at six sites. aged. A strong interaction betwem breastfeeding and In each country, the sites selected indude vilages in envimnmenltal sanitation may indicate that children which improved water supplies are in operation and who are not breastfed are at particularly high risk of vilages in which improved water supplies are to be diarrhea caused by environmental contamination and installed. For villages with improved water supplies, thus should be a high-priority target group for water infereces were based on observed behavior. For vil- supply and sanitation interventions lageswithoutimDrovedwatersupplies,contingentvalu- Reponrlbli -nastructureandUrbanDevelopment ation surveys were carried out in which households Department, Water and Sanitation Division-John were asked a seres of structured questions designed to Briscoe. With James Vanderslice and David Guilkey, determinehowmuchtheywerewillingtopayforaccess University of North Carolina. to inproved water supplies. The researchers examied Closbi date December 1992. the effect of family socioeconomic characteristics and the dhacteristics of different water sources induding typeof service,monetarycostreliability,and perceived Willingness to Pay for Rural Water Supply quality) on how many households choose to use tie new water service, and the maimum theyare willing to pay About$1.5 billion is spent annuallyon theconstruc- for the service. The research was designed to assess the tionofruralwatersystemsin develong c ntries, but reliability of the contingent valuation method in the con- the efficiency of tese invesents is generaly low. textofhouseholdwaterdemandindevelopingcountiies Often, water systems are neither used correctly nor Theasestudiesledtomanynewinsightsintohouse- properly maintaned. It is estimated that at least 25 hold water demand behavior and about the determi- percent of rumal water systems in developing countries nants of households' willingness to pay for improved are not woring,and in some countries constction of supplies. The results support the use of a standard new facilities is not even keeping pace with the rate of microeconomic, utility-maximizing framework for un- failure The numberof people using Improved systems derstanding household water demand and choices of is much smaller than the number ostensbly served. In sources. The vanables suggested by demand theory C8te divoire and Kenya, for instnce, surveys have weregenerallysignificantdetinantsofhouseholds' shownthatonlyone-third of thepopulationreported to willingness to pay for improved water supplies in all have access to improved facilities actully used these countries. For example, connection charges and tariffs facilities. were important detrmiinants of households' decsions A major impediment to improved perfomance is on whete to connect to a piped distribution system. inadequate information on the response of consumas Households with higher incomnes and higher education to new service options. Itis cmmonly assumed that so levels were more likly to connect to piped water sys- longasthefinancialrequirementsofanimprovedwater tems, and such households said th;At they were wiing systemdonotexceed5per ntofincme,ruralcmum- to pay more for improved supplies than households erswill choosetoabandontheireodstingwatersupplyin with lower inmmes and lower education levels favor of the new water system In many instances, Oder factors were also important, particularly the however, such rules of thumb have led to poor coices availabilityof alternativewatersupplies.Theamountof of service levels and inapropate investuments, money or time a household spends on water often This research project had two prindpal objectives. emerged as a key detminat of its willingness to pay First,itsoughttotinvestigatethedeteminantsofhouse- for improved supplies. This research found little sup- holds' willingness to pay for improved waler supplies portfor the assumption thata household will pay3 to 5 in a variety of socioeconomic and cultural settings in percent of its income for improved waler supplies. differentdevelopingcountries.And second,itsoughtto When water is scarce and alterative supplies are ex- develop valid yet rlatively rapid and invexeve pro- pensive,householdsareoftenwillingtopaymuchmore ceduresforassessinghouseholds'deniandforimproved than this;when water iseasilyavailable, households are water services so that communities, governments, and often willng to pay much less. donor agences can make better choices on techircal Theresultsofthisresearchsuggestthatthereliability issues (such as level of service) and financial issues of a water supply system is of cental concern to a 153 Basoic lftntruure and Urban Deveoment household. When a system is unreliable, people often Tests were also conducted in selected csestudies on make othfer arrngements to obtain water, and thus are possible sources of bias in the williness-to-pay bids, unwlllingtopaymuchforaconnection toan unreliable induding starting-point bias and strategic bias. These system In Keala, for instance, those who have house biases were evident in some case studies. Even where connections wil pay almost twice as much for a reliable these bias were considerable, however, they did not system than they now pay for a system that operates negate the usefulness of the information collected or only a few hours a day. substantively modifythepolicyimpliationsof thefind- A common concem with increasing water tariffs is ings, Additional tests were caied out to see whether that the poor will be unable to afford the improved the order of the willingness-to-pay questions affected service.In both Brazfl and ndia the effects of theavail- the responses (itdid not), and to see whether the time ability of fiee water from public taps on the demand for respondents were given to cDnsider the willingness-to- yard laps were assessed. In both countries, there was payquestionsaffected theiranswers(sometimesitdid). little subsitutabiity between taps and private connec- Generaly, the series of analyses of the willingness- tions. In other words, if both private connections and to-pay bids that were carded out indicated that the public taps are offerd, te price of water from a private infmation obtined from the contingent valuation connection can typicailybe raised withoutlargenumbers survey was of a quality comparable to or even higher of users switching from a private connection to a public than that reported in the literature for industrial coun- tap. Thus, where the demand for pnvate comnnections is tries. high and most of the community desire a piped comnnec- Resposbpity:frastructureandUrbanDevelopment tion, water can be provided free at pulibc taps without Department; Water and Sanitation Division-John jeopardizing the financal viability of the water utility. Briscoe. With Paulo Furtado de Castro, Institute of Thisfinding-of thelackof substitutabilitybetween Soial and Economic Planning, Brazil; Orjan Olsen, ard taps and public taps-was not universaL In Nige- Brazlian Institute of Public Opinion and Statistics, Sao ria a large part of the population could not afford a Paulo,;WiltonBussab,University ofSaoPaulo;Bhanwar private connection. In this case, free public taps may Sigh and RadhikaRamasubban, Centre for Socal and involve substantial revenue losses forthe water utility, Technological Change, Bombay; Ramesh Bbalia, Insti- and kiosks may be necessary to mobilize sufficient tute for Economic Growth, Delhi University; Apia finandal resources to provide reliable service. Okorafor and Augustine Okore, University of Nigeria Fnally,in both India and Pakistan the relative effects Anjum Altaf, University of Krachi Mark Mujw i, of connection costs and tariffs could be assessed. In University of Dar es Salaam; Dale Whitfington and V. Indiapaymentsforaconnectionwereamajorbarrierfor Kerry Smuth, University of North Carolina; Charles many interested in yard taps, the "connection cost Griffin, University of Oregon; and Peter Robinson, problem was not a simple cost problem, however, buta Zimnconsult, Haar The study was undertak in col- reflection of the high cost of credit fiLcing vUlagers in laboration with the Institute of Resource Assessment, India.Itwasestimatedthattheeffectivecostofaconnec- Uxiversity of Dar es Salaam; the Department of Eco- tion could be reduced 50 bt 70 percent if the water nomics, University of Nigeria, Nsukka the Applied authority offered credit for connections at standard Econonics Research Centre, University of Karamcht interest rates and repayment periods. ZimconsutEcononiicandPlanningConsutants,Hrare; This research was the first attempt rigorously to the Institute for Economuc and Social Plnning of the apply contingent valuation tecniques in developing SecretariatforPlanningBrazil;andtheCentreforSocal countries; its findings are thus of widespread interest to and Technological Change, Bombay. development plaers for valuing public goods. The Compleion dac October 1991. results of thecse studies indicate thatcontingent valu- Reots ation surveys canbe conducted in developing countries Alta4 bGr Ansjum and Haroa JamaL Fortlomng. Wuing- and that policy-relevant information can be obtained ns to Pay for Waterin Rua Aresa Report on Reerh in about householdse preferences far improved services the Punjab, Pakt DiscUasion Paper. World Bank, In all studies, special attentiou was paid to testing the Wangton, DC reliability of households' responses tD contingent valu- af, tMrAnjum HarjmL,Long Liu,V. KerrySmith, ation questions. Multivariate analyses of the determi- and Dale WhtlngL Pinces and Connei Dedsions for rants of the willingness-topaybids were crried outin PblcWaSerSystmin DevdopkigCommie: A Case all the case studies. The predictive power and statistical Study of the Punjab, PaMstan? sgnificance of these models varied, but the results A , MirAnm Dale Whittington, V. KerrySditb, and consistently supported hypotheses denved firom a util- Haron JamaL 'Peuspeclves on Rual Water Pdicy in the ity-madmizing framework. Punjb, Pakistan 154 Basi Infrastctue and Urban Deveopmet Bohn, Robert A., Tmothy Esenburg and Wlll F. Pa "Willing- Whittlngton Dale, Apia Okorafor, Augustine Okore, and ness to Pay for Potable Wate Services In the Philippies Ale=nerMcPhai L1990. "CstRecoveryStrategyfor Rural lrsoe% John, Paulo F. de Cer, Charle Crfln, J. Ninth, and Water Delivery in Nigeria." Pdi Research Working Paper Oijan OsenL 199Q Towards Equitble and Sustainable 369. Wold Bank, Washigton, DC Rural Water Supplier A Contingut Vaation Study In .1990. "Strategyfor Cost Remvery In the Rurll Water Brazil World Bank Eommikceviw 4 :)115-34 Sedwc A Cs Stdy of Nmukka Diict Anambra Sbta Bussab, Wlton. 1988. Dlsposkaoapagrperagua nasa Nigeria.- WaMt Raes0 Rsech 26 (9).1899-1913. nrais. Univexdty of Sao Paulo W kgtn Dale, V. Keny Smith, Apia Okafor, Augustine MacRae, Dunan, and Dale WhittingL 1988 'Assessing Okore in Long Uu, Luz Keta RuIk and Abxander McPhalL Preferences in Cast-Benefit Analysis Refletins on Ruml Forthcoming "Giving Respondents lime to Think In Water Supply In HaIt" JorlS of PciWy Anaysis ad Contingent Valuadon Studies. ournl of Envinmed Armgi ed 7 (2464S. Emwnicsw&dMwAgcmxt. Mu, Xinning Dale Whlittln, and John Brisoot 199Q The World Bank Water Demand Team.A Multi-Country Study "ModelingVillage Water Demmad Behavior A Discrete of Wilingness to Pay for Water Findings and Impcations Choice Approach." late Reowces Ramuda (AprlTh for Policy." Nart, J. -Ecnoumc Valuation of Household Benefits from Vige WaterService iprovemenb In the Philippines." Ramasubban, Radka, and BhanwarSlngl 1959. 'The Irrigation Research: Preparation of an Effienc of Impoved Supp Systm in Meetng Rul International Program for Technology Water Demand for Domesic Needs Evidence from Research in Irigation and Drainage Noren Kierala" Centre for Socal and Techologkcal CLange, Bombay. This project identified global needs for researdc in Robinson, P.1988 WWingness to Pay forRural Water The irrigation and drainage through a consultative process. Zmbabwe Cae Study." Zimoonslt, HM These needs fall within three broad themes: modeniiz- Simgh, Bhanwar, Radhika Ramasubban, Ramh Bhatiao, lm ing inigation and drainage systems; ensuring sustain- Briscoe, Charies Grffin, and C Mim. "Rural Water Supply hi able use of land and water, and improving technologies Kera4, Indila How to Eere frm a tow-levl Equilibrium for maintenanca Theprojectalso led to arecommenda- Trap." tion to set up an intnational program for tecmology Whlttington, Dale. Forthcoming. 'A Note Possble Adverse research in irrigation and drainage. It was suggested Effeds of Increasing Block War Twf In Developing that such a program could assist developing countries Countries." &wiwr DCo&pNw wa Cull WCasl. in establishing a program of research in line with na- Whittington, Dale, John Brse, XMnming Mu, and Wiliam tional goals and user needs. A program of this nature Baron. D9D "Estimating the Wilngness to Pay for Water was considered a high priority given that only 0.5 per- Seric in Devoping unties A Case Sudy of the cent of investnent in the sector goes to research. Cotiagency Vhatkm Method in Southern Haiti." Enmx A proposal was developed that analyzed the re- DCeeopmt mad Cntmi Oaanse38 (2f311. search priorities in the context of needs for improving Whi lngon, flak Doad T. Lai, and Ximing Mu. 1989. the productivity of irrigated agrculture and ensuzing 'Paing for Urban Service: A Study of Water Vending and its sustainability. The proposal identified constrints to Willigness toPayfor Waterin tsha, Nige INU improving the perfomiance of irrigation and drainage Report 40. World Bank, Washingo, DC systems in terms of inadequades in design, regulation . Forthcoming. "A Studyof Water Vending and Wiin sysems, and tedhnologies used for oDntrol of waterlog- n to Pay for Water in Ordtha, NIgerie iWM Develop ging and salinity. meat. The proposal has been presented at several interna- Wibttingo, Dale, Donald T. Lauria, Daiel Ckun, and Xlmlg tional forums and in the Bank's irrigation and drainage Mu 1989. 'Water VendingActties in Deveping seminars A three-year program to promote research CotlesA CaSteuyfUkdo wA,Kenyaftrnatiaua has been set up in the Bank with assistance from the Jowna of Wan Rr-es Dnpropnt 0Seber)1868. UJNDP and bilateral donors. Wlitngo Dale, Xlning Mu, and Robet Roche 1989. "The Responsby: Agriculture and Rural Development Value of rime Spent on Gdlecting Water. Some Estmates Department, Agricultural Technology and Natural Re- fer Ukunda, Kenya INU Repot 46 Wold k Washing- sources Division-Ashok Subramanian, Shawki tn, DC Barghouti, Walter Ochs, and Herve Plusquelec, and _ . 1990. "Calculating the Value of Time Spent Cecting Office of the Director-Guy Le Moigne Funding was Water Some EsDats for U hknd Kenya" Wr Dalop- provided by thelntemational Commission onlrigation rnt18 isl(Q)2N- and Drainage, the UNDP, the European CDmmunity, 255 Basc Infnmsnctu and Urban Deveopment theFordFoundafion,and thegovemmentsof Australia usually consistent with two emerging themes, espe- Canada,France,Germay,aly,theNetherlands,Spain, daily in "water-short" areas avoid mixng low-quality the United KIngdom, and the United States. Staff time with high-quality water, and rank uses of water by was contnbuted by the African Development Bank; priority according to minimal water quality require- Asian Development Bank Food and Agriculture Orga- ments (that is, use the best-quality water where it is nization; World Health Organization; CEMAGREF, essentialanduselow-qualitywaterwherefeasible).The France; HR Wallingford,UC.;IML Sri Lanka; ILRI, the activitiesunder this projectcan help make sure thatlow- Nethwlands;lMTA,Medco;IRYDA,Spain;JllD,Jaran quality water is not reused at the expense of people's WAPDA/IWASRL Palkstan; and WRC, Egypt health and that reuse of water is integrated into routine Completion date- December 1991. project planning for adequate economic and finandal evaluation. An early draft of the technical review report on Resource Recovy aquaculture was presented at an international semninar in Calcutta in 1988, which was attended by about one This work was part of a larger research task (started hundred scientists, officials, and opemtors of waste-fed atthebeinningof thewaterdecade)onresourcereDv- aquaculture systems. The technical and progress re- erythatseekstodevelopandpromoteeenvironrmentally ports on the wastewater aquaculture research in lima safe systems for reusing waste matrials. It was in- are available for dissemination, and proposals on final tended to supporttwoobjectves of greatimportance for reports and technical seaunars are being prepared with the sanitation of urban areas (1) reducing waste treat- CEPIS The report on reuse guidelines will be dissemi- ment costs, and (2) generating revenue by selling a nated to Bank staff and country decisionmakers for use useful by-product The two components of the project in project activities. addressed the followingquestions; Fst, whatis known Rpniuty Ifastrucure andUrbanDevelopment about waste-fed fish production? What is the practice Department, Water and Sanitation Division-Curt around the world? What is needed to improve present Camemark. With Peter Edwards, John Kalbemtten, systes? And second, how should recently adopted and Max Aguero. The Asian Institute of Technology, wastewater qualityguidelinesbe integrated i the plan- Thailand, and the Pan-American Health Organization ning of reuse prcts? provided financial support. Theprojectconductedareviewofliteratureonaquac- Completion dale 1991. ulture and performed related fieldwork at the Asian Institute of Technology (Al In Lima research was caried out in collaboration with CEPIS on plot-scale The Debate over Modemization stbilization ponds in San Juan, which treat part of of Ixrigafion Systems Lims wastewater. This research included monitornng thequalityof thewak!randfish,thepathogens in fish, The design of irrigation systems is citical to.heir the marketability of fish products, and the effect of operation and maintenance. Progress in the industrial different management systems on the treatment effi- countrieshasled tomodern irrigation designs,buttheir ciency of the ponds. relevance to irrigation in developing countrieshas been Although waste-fed aquaculture has a long history, questioned. And failures reported in the application of that eperience has not yet led to guidelines for the modern designs have given nse to arguments agaist environmentally safe reuse of human wasts in aquac- their application. uliture. Research and evaluation needs have been iden- This research examined the relationship of modem tified, and the Lima experimentaddressed a number of design to tue operation and performance of irrigation them. In fisal 1991 the Lima experiment developed a systems, and the masons for the reported failures. socioeconomic survey on the willingness of cnsumers The research reviewed a large number of perfor- to buy waste-fed fish, and the resuts of a cholera- mancestudies,andidenifiedandstudied casesof lrge- identification study are now being analyzed. sale success in the tansfer of modern technology. Guidelines for the safe reuse of wastewaterin irriga- Mnyrecent projects were found tobe conventional and fionhavebeendeveloped,and effortsarebeing madeto notmodern attempts to incorporate new hardware and integrate these guidelines into operational activities. In fragments of new operations bad been inconectly ap- routine Bank projects additional steps need to be taken plied and led to failure. tointegratetheseguidelinesintowater-related project Modernization dependson theproperapplication of The sequential use of water is an important compo- the sophisticated hardware available, which in tum nent of sound water resource management This is depends on staff with adequate education, awareness, 156 Basic Infiustmct ure a Urban D aopmen and initiative. Modem design permits the maidmum wate supply operations and the regulatory inplica- useof advanced conceptsof hydraulicangieegand tionsof theseforms.Animportantobjectiveof thiswork themeaningfulapplicationofagronomicscience,iriga- is to Identify what essential regulatory fumaions are tion engineerng ad economics to irigation schemes. appropriate for the public sector, what institutional The perceived failuresof modern designs haveresulted arrangexnentsare conducive to effectiveregulation,and becauseof improperselecionof structures,poordesign how capacty to regulate effectively cn be developed. of the irrigation components, and lack of an adequate Experiencewith differentinstitutionalanrangements operation and maintenance plan,rather thanbecause of and regulatoryframeworksforwatersupplysenricesin the failure of the design itself. bothindustralanddevelopingcountriesisbeingexam- Theresearchshowsthatsuccesftlmodemizationis ined. These anrangements, which range froa enirly possible if trained operators are available, communica- public to fully private, arebeingcompared with respect tions systems are in place, water delivery is reliable, to quality and costof service, complexity of regulatory operating rules are clearly defined, the irrigation infra- approach, stabilityand susisinability of improvements struchme for water control is inplaceand the hydraulic inperfornance,adaptabilitytovariousdevelopingcoun- design is fleble enough to allow water tobe delivered try contexts, and contribution to long-tar capacity in response to agricultural and social needs. Much de- building in both the public and the private sector. pads on the competence of the operators of a scheme Several forms of contractual arrangements with pri- Responsibl Agnculture and Rural Development vate finns seem promising These range from servce Department, Agicultural Tednology and Natual Re- contracts and management contracts to more compe- sources Division-Herve Plusqueliec and Ashok hensiveleasecDntractsandconcessions.Differeutforms Subramanian andSouthAsia,CountryDepartmentIL, are suited to different country situations. In several Agriculture Operations Division-Shaw3i Barghouti cases in which such contractual arrangements have WithCharlesBurt,CaiforniaPblytcnicStateUniver- been used in developing countres, the tehical effi- Sity. ciency and the quality of service have improved sub- CDmpldion dae: July 1992. stantiafly and the costs appear to be equal to or lower Report. an the cost of less reliable services in other countries. Q,t anies, and H erve PlusqueUec. 1992 "The Debate over For a number of reasons, these contractual forms of Modrizatuof i rrgatam Sy . privatesectorparticipation mayactuallyfacilitateeffec- tive regulation. UnhikeperfomancexcDntractswithpublicenterpnses, Private Sector Partcipation which have enjoyed limited success, contracts with in Water Supply and Sanitation private firms seem to have a better recard in maintain- ing the amis-length relationship (autonomy) and incn- Urbanwatersupplyserviesindevelopingcountries fives for performance (accountability). This has been are plagued by a number of weaknse The quality due at leastin part to the limited duration of the on- and reliability of service are often low. In many places, tcts and the credible threat thatthe mntracts could be access to service is inadequate. With few exeptions, teminated or might not be renewed. Commitment to water supply utilities are typified by high costs caused adequate cost recovery has been enhanced since it is a bylow capacityutilization, high levels of unaccuted- prerequisite for private involvemente for-water,and atendencytobeovestafed.Theinflated One of the principal advantages of contractual forms costs, along with low cost recovery from consumers, of privatesectorparticipationisthattheysimplifyreg- reslt in poor financial peformance and a chronic and lation and provide opportunities to develop regulatory unsustainable reliance on subsidies. The resulting lack capacity and credibility. A heavy regulatory bureau- of operating funds constrains the purchase of spare cracy is not required. An adequate regulatory frame- parts and fuel, acmpromising operational efficiency workindudesaclearslatementofthenghtsandrespon- and thequalityof serviceand leadingto furtherdeterio- sibilities of the parties involved, and a set of enforce- ration of cost recovery. The undeyinyg cause of these ment mechanisms. A small but competent oversight failures appears to be an inappropriate regulatory and departnent or authority is sufficient to administer and institutional framework. enforce an initial contract If the regulatory framework Broader research on institutional performance is ex- isnotinplace,itcanbeincorponatedintoamanagement aminingtheeffectofvariousinstitutionalaranements contract, lease contract or concession fora single urban on perfornce and the costsand benefits ofalternative area. As experience is gained, sinilar anangements arrangements This research is examining experience may be adopted in other cities and a comprehensive with different forms of private sector participation in framework for the sector can evolve. Capacity can be 157 Basic Infrastructd and Urban Devedopment reinorced by short-term thniadl assistance for - _. Vda 1rvabe Pandpadon In Water Supplyf Infrastruc- odic in-depth contract reviews or the renegotiation of twe Notes WS-I. World ak, Washington, DC fees. . 1990. Trivate Parwicipation in Water Supply in Cite Success in attracting private fims and the effective- dJvolre. nratuctur Notes WS-2. World Bank, Washing- ness of these arrangements In achieving effidency and tr DC. equity goals depend on careful preparation of the regu- - Private Sector Involvement In Water Supply." NMal latory framework and draft contracts. Bank-supported (Urban Affairs Quarely, Indian hIstitute of Publc tedbmicalassistancefortheprepationphasehasplayed AdminIstraton) 22 (4):55-59. andwillcontinuetoplayanimportantrole,evenifBank finance for sector assets is not requird. In many cases, success also depends on the availability of donor fi- Urban Transport Evaluation nance for rehabilitation and investment that will con- tribute to the financial viability of the operating con- Thisresearchprojectwasbegunonthepremisetbat- tract A major ciallenge for the Bank is to adapt its becauseof theodeternalitiesofurbanprojects,suchasthe procurement guidelines so that it can continue to fi- environment-it was necessary to examine the Bank's nanee investments in the context of such contacs. metiods of evaluating urban transport projects to en- Finally, guarantees to protect investors againstpolitical sure that all relevant aspects are take into account risks would help to attract more private invesent. A The research looked first at the valuatiLon of time possible role for the Bank in this remains tD be devel- savings for travelers. Itthen investigated thepossibility oped. ofapplyingmatrixevaluation tecniquaetourban tans- The resech findings have been presented at send- portprojects A possible third component would exam- narsorganizedbytheCountryEconomicsDepartment's me the valuation of operating costs. PublicSectorManagementand PrivateSectorDevelop- IMspwwlbfitItnfrastructureandUrbanDevelopment ment Division on Private Sector Delivery of Socal Ser- Department, Transport Division-Ricard Scurfield. vices (April 1990 and April 1991) and Privatization and With Peter Mfacke, University of Leeds; Ross Silcock Public Enterpise Reform Way1992). Partnership; and Richard Darbera, L:Oel, Institut ResponsuiicnhfrastructrandUrbanDevelopment d'Urbanisme de Paris. Department, Water and Sanitation Division-hrvey Compltion date June 1994. A. Gain, Thelma Triche, and Jean-Louis Oliver. The 1epofs UNDP is providing financial support alster, Sten and John Bate 1992 "f1he Valuation of rilme Compltion datc January 1994. Savings for Urban Traspot Projects In Deveping Repovt. Coumniee Wodd Ban, Washington, DC Draft Tridie, Thelia A. 1990Q ?dvate Parwtipation in the Delivery of Madd, Peter. 1992. "The Banks Economcd Evaluation Meods Culnea's Water Supply Sevik" PoiUcy Research Woridng Applied to the Trnsport Seduor Wodd Bank, Wasiington, Paper 4177. World Bankl Washington, DC DC Draft 158 INDEX OF STUDIES BY DEPARTMENT Agricult e and Rural Development Departent Agriculural Policies Diision Advancing Agriculhral Prducivity: Tehnical and Behavioral Constraints 46 African Pivate Agricultural Marketng 47 Agricultural Reform in Eastern Europe and the Former USSR. Dilemmas and Strategies (675480 30 Implications of Agricultural Trade Policy Reform for Developing Countries (676-11C) 100 Integration of Food Markets in Russia 46 land Allocation 76 land Reform and Farm Restructuing in Russia and Ukraine 52 Management of Drought Risks in Rural Areas (677-51) 141 Monetary Policy and the Agricultural Terms of Trade 133 Poverty Impacts of Agricultural Polices 19 Private Agricultural Services 45 Risk Management in Agricultue 148 Rural-Urban Growth linkag 42 Successfd Rural Finance Institutions 142 Women's Rights to land and Agrincultual Perfomiance in Sub-Saharan Africa 90 Agriculura Tedmology and Natual Resources Diisn Biotechnology and Agricultural Development 49 The Debate over Modernization of Irrigation Systems 156 Irrigation Researc: Preparation of an Intenational Program for Technology Research in Irrigation and Drainage 155 Study of International Fisheries Research 64 Tecnology Assessment of Agricltural Development 54 Country Economics Department Opf of the Director Education, Growth, and hiequality in Brazil (675-61Q 78 Strategies for Rapid Growth: Public Policy and the Asian Mirade 53 Finnl Policy and System Dison Bank Restrucig The International Experience 143 Banldng in Transitional Socialist Economies 146 Contractual Savings 149 Costs of Intermediation 144 The inpact of Finmanci Reform (676-13C) 136 Investment Decisions, Capital Market Imperfections, and the Effects of Financial iberalization: The Ecuadorian and Indonesian Cases (67672C) 138 Risk-Weighted Capital Adequacy Requirements An Application to Developing Country Banks (67741) 141 159 Index of Studies by Depahment The Role ofanks min Enteprie Restructuring 150 The Role of Payment Systens in Financial Sedor Reform 1SO Macroeonomc Adjustment and Gnwth Divbion Central Bank Independence Its Political and Instihional Foundations (677-07) 140 Effectiveness of Ecoonuc Adjustment n Sub-Saharan Africa 109 How Do National Polices Affect Long-Run GroWth? (676-66) 124 if lation and Growth Impact of Reform in Post-Sodalist Countries 134 Investment and Growth 114 Maoeconomic Detemhnants of Extemal Remittances 131 The Macroeconomic Implications of Parallel Fbreign Exchange Markets in Developing Countries (675-30) 120 Macroccononmcs of Public Sector Deficits (675-310 121 Measuring Real Exdhange Rate Misalignment 133 Parallel Markets and Growth in Sub-Saharan Africa 133 The Political Economy of Structural Adjustment (676-37) 101 The Post-Sodalist Transition: A Systemic View 52 Services as a Major Source of Growth in the Former Soviet States (677-43) 40 Target Zones and Real Exchange Rates in Developing Countries (677-38) 129 Public Econoamcs Division Corporate Income Tax Incentives for Investment in Developing Countries 132 Economic Consequences of War-Peace Transitions in Africa Choices for Public Finance (67741) 129 Economic Impact of Military Expenditures (676-85C) 126 Fiscal Incentives Reform 129 A Framework for Evaluating Mineral Payment/Taxation Schemes (675-45C) 29 Incidence of Public Expenditures 1 (676-42C) 14 Open Ecownomy Tax Reform 1 131 Pollution and the Choice of Economic Policy Instruments in Developing Countries (676-48) 59 Revenue Uncertainty in Czechoslovakia (677-18) 127 World Energy Subsidies and Implications for Greenhouse Gas Emissions and Government Revenues (677-28) 62 Public Sector Management d Private Sector Devopment Division Cost of Business Regulation Analysis (COBRA) 57 Income Security for Old Age: Conceptual Background and Major Issues (67745) 16 Privatization of Public Entrprise Management 55 Public Goods, Private Goods, and Socal Sector Outommes (67747) 40 Regulations, Institutions, and Economic Efficency (676-94) 37 The Role of Government in the Development of Support Systems for Small and Medium-Size Enterprises 49 Welfare Consequences of Selling Public Enterprises: Case Studies from Chile, Malaysia, Mexico, and the United Kingdom (675-4C) 28 Socialist Economies Reform Unit Elements of Social Transformation (tivatization) 43 Enterprise Behavior and Economic Reforms A Comparative Study in Central and Eastern Europe (676-99) 38 InoDme Distnbution during the Trantion 23 Industial Reforms and Productity in Chinese Enteprise (675-38) 26 160 IndA of Sudies by Dq.rbent Labor Markets in Transitional Socalist Countries (677-20) 87 Macmeconomic Catastrophes 41 Privatization in Eastem Europe 56 Privatization of the Former USSR 44 Social Transfers and Income Distnbution 21 Trade Policy Division Adjustment, Income Distribution, and Poverty 17 Conunodity Exports and Real Income in Africa (676-70) 105 The Design of Tariff Refoma1 Theory, Evidence, and [mplications (676-77) 106 Economic Growth and Trade Policy in Westem Africa: Implications of the Degradation of the Vegetation Cover (676-97) 61 Economic Integration in Sub-Saharan Africa 112 Equipment Prices and Trade Policies for Developing Country Manufacuring Industries: A Pilot Study of Brazil (676-61) 103 Export Supply Response in Agricalture 112 The Impact of EC-1992 and Trade Integration in Selected Mediterranean Countries (675-6(C) 99 New Dimensions in Regional Integration (677-12C) 107 Pesticide Externalities, Comparative Advantage, and Commodity Trade: Cotton in Andhra Pradesh, India (676-92C) 60 Regulations Against Unfair Imports. Effects on Developing Countries (675-52C) 99 Volume on Industrial Competition,Productivity, and Trade Regimes (677-10) 107 Economic Development Institute National Economic Managenent Division The Labor Market in Transitional Socialist Eoonomies A Macroeconomic Perspective 128 Studis and Traning Design Division The Evolution, Character, and Structure of the Japanese Civil Service and Its Role in Shaping the Interrelationships between Government and the Private Sector 51 The Japanese Main Bank System and Its Relevance for Developing and Transforming Sodalist Economies 147 Environment Department Enviromtal Assessments ad Prograns Division Enterprise Ownership and Pollution (677-44) 63 Environmental Policy and Research Division Dryland Management 66 EconDmic Evaluation of Energy 67 Economywide Policies and the Enviromnent 71 Forest and Agridculture Evaluation 65 Global Environment Issues 71 Improved Accounting of Natural Resours and the Environment for More Sustainable Resource Management (675-43C) 59 Pollution Control and Environmental Management System 75 161 hula of Studi by Department Industry and Energy Department Energy Deuelapment Divisin Electric Power Utility Efficiency Study (676-450 34 Factors Influencing the Accuracy of Cost and Schedule Estimates for Power Generation Projects in Developing Countries 48 Excs Straegy M0anagment Assistance Projet (ESMAP) The Urban Energy Transition in Developing Countries 69 Industry Deedopment Division The Basics of Consumer Policies 133 Brazil Aircraft Industry 47 Brazil Political, Institutional, and Tedhnology Development 50 Corporate Indebtedness in Turkey 145 Cross-Country Study of Small-Scale Enterprise Responsiveness in Africa 50 Diffusion of Information Technology: Opportunities and Constraints 42 Environmentlly Friendly Technology 68 Explaining Rapid Growth: Chinese Coastal Provinces and Mexican Maquiladoras (677-50) 41 woreign Direct Investment and Trade 145 High Tedmology: nplications for Developing Countries 55 Industrial PollutionrC Global Indices 68 International Pollution Patterns 65 Meeting the Fmancial Needs of Ghana's Small- and Medium-Scale Enterprises 148 Private Sector Manufacturing in Eastem Europe (676-34C) 33 The Role of Export Catalysts in Low-Income Developing Countries 112 Infrastructure and Urban Development Department Oftce of the Director The Magnal Productivity of Ifstructure in Developing Countries (676-95) 152 TrPsOprt DZSi;On Transport Twation and Road User Charges in Sub-Saharan Africa (674-370 119 Uxan Transport Evaluation 158 Urban Dwulopm Wi Divisin Housing Indicators for Policymaking. An Extensive Intemational Survey (676-68C) 151 Infrastucture Bottlenecks, Private Provisions, and Industrial Productivity4 A Study of Indonesian and Thai Cities (676-71) 151 labor Redundancy in the Transportation Sector (675-210 25 Water an Sanitatfion Divin Environmental Sanitation 73 Low-Cost Sanitation 73 Private Sector Participation in Water Supply and Sanitation 157 Resource Recovery 156 Sanitation Demand Study 74 162 Indec of Studies by Deartment Synergistic Health Effects from Water Supply and Sanitation Interventions (677-25) 152 Tunis and Rabat Water Demand Study (67540C) 27 Water Resource Policies in Metropolitan Areas 72 Willingness to Pay for Rural Water Supply 153 International Economics Department Offic of the Director The Intemational Economic Environment and Productivity Growth in Industrial and Developing Countries (676-67) 124 Debt and International Finance Division Altemative Forms of External Finance 149 Closed-End Country Funds: Theoretical and Empirical Investigation (676-07C) 136 Financing the Former USSR's Transition 114 Japanese FDI in Developing Countries Trends, Determinants, and Policies (676-57C) 137 Measurement of Commodity Price Volatldity (676-73C) 138 Secondary Market Prices (677-15) 108 International Economic Analysis and Prospects Diision Bank-Global Economic Model 134 DEC Analytical Database 135 Global Economic Model-Regional Models 131 How Integrated Is the World Capital Market? 146 International Linkages, Shocks, and Adjustment 135 Interntional Trade Diin Commodity Models 111 Commodity Price Formation and Behavior 113 Commodity Prices and the Macroeconomic Policy Mix in Industrial Countries (676-76C) 125 Commodity Risk Management 147 Comparative Studies on Perennials 65 The Cost-of-Protection Index (676-49) 102 Eastem Europe and EC-92 111 Energy Use and Global Atmospheric Pollution 75 An Evaluation of the Effectiveness of Preshipment Inspection on Trade, Capital Flight, Customs, and Other Revenue Problems of Developing Countries (677-34) 109 How Do nadequate Insurance Markets Affect Commodity Prie Stabilization Schemes? (677-06C) 139 Impact of EC Agriculhural Policies 110 International Trade and the Environment 70 Licnse Prices and Rent-Sharing in the Multi-Fibre Arrangement (676-69) 105 Manufactures Trade Modeling 114 Regional Trading Blocs 115 Strategic Trade Policies 110 Testing for Systematic Differences in Initial and Final Project Evaluations (675-15C) 119 Trade in Services 116 Trade Policy Studies 116 163 Index.of Shdies by Deay fmlutt Soci-Eonomic Daa Division Accounting for Centrally Planned Economies in Transition (676-18C) 122 Poverty and Price Measurement Update of the Cost of Basic Sustenance 22 Office of tie Vice President, Development Economics Investigating Equipment Investment and Economic Growth (676&43C) 123 Popuhation and Human Resources Departnent Offic of the Dircor Impediments to Contraceptive Use in Different Environments (675-72) 80 Educm and Employment Dion Building Resrch Capacity 93 CrossNational, Longitudinal Analysriof the Curriculum of Secondary Education, 1920485 (67740) 88 Economics of Education 94 Employment and libor Market Issues 95 Higher Education Poicy Study 92 HIgher Education-Science and Technology 95 Improving School Effectiveness and Efficiency in Developing Countries. The Case of Jamaica (67687) 83 Secondary Education Policy Study 96 Population, Heath, and Nutition Division Age at Marriage, Age at First Birth, and Fertility in Africa (676-38C) 81 ; . Causes of Mortality in Developing Counties and Eastern Europe (676-41C) 82 Determinants of Nutritional and Health Outmmes in Indonesia and Inplications for Health Policy Reforms (676-27) 81 Eco-nomic Impact of Adult Mortality (675-71) 79 Planning for Equity and Effectiveness in Public Health Institutions 96 Public Econormics of the Health Sector 95 Poverty Anasis and Poticy Dbisn - Data Analysis for Dev&fopment Policy (677-03) 15 The Economics of Nonmarket Transfers in Developing Countries (676-240 14 Evaluations of Social Sector Investments (676-90) 36 Household Investment in Human Capital and Utilization and Imeneits of Social Services (67644) 83 Human Capital Accumulation and Eaonomic Growth: An Empirical Study (677-11) 87 Impact of Market-Oriented Policy Reforms on Households in-Rural China (677-16) 39 Macroeconomic Adjustment and Poverty Relief. The Roles of Social Policy and Household Behavior (677-14) 16 PakIstan Integrated Household Survey (PISi Project 22 Policy Analysis of Poverty: Applicable Methods and Case Studies, Phase H (675-96) 12 Poverty, CGowth, and Adjustment in Pakistan (675-29C) 11 164 hdarif Stdsz byp Dqu t mee Wome in Dveopnt Diision Credit Proms for the Poor. Houehold and I UOd Ipat and Prgram Sustainability(676-59) 15 Women, Public Services, and IncDme Generon (675-14C) 78 Africa Region Southern Africa Department Popultn ad Human Rvsours Optinms Divn Household Wfare Efects of Agricultual Poicy Reiorm In Mlawi (675-91C and 67746) 11 Technical Department -df and Enagy Divmo Poliical Economy and Public anaement of State Minig and Oi Companies (6764SC) 31 Preconditions for Enterprise Development in Africa 48 Private Sector Development Intiative (FSD 58 Regional Program on Entrprise Deveopnt 57 Populatdin, Health, and Nub*tin Diion Economic and Policy Deterninants of Fertilityin S -Saha Afica (676-91) 84 Poverty and Sosad Polwy Diision Poverty and the Social Dimensio of Adjstmet In Ctse d'Jvolw A Poliy- Oriented Analysis (675-260 98 East Asia and Pacific Region Country Department U Offce of the Director Reestimafion of China's Nabonal Acounts and Growth Rate (677-17) 127 Cuntry Department m Infastctu Operaions Diion Study of Deregulation Ffects on Low-nome Households 18 Popution and Human Resoure Opeaion Diion The Determinants and Consequens of the liment of Govemt Progm In Indonesia (676-74) 36 South Asia Region Ofic of the Regiona rwe Preidet Populaton ssues in Asia 89 165 Indx Of Shudis by Deprmnt Country epatment I PopultiDn and Human Resoces Opatos Division Prima Teacher Training in Nepal: Impioving Equity for Women (676-98C) 86 Asia Technica Dea ent Envinmmmt Division Solid WasteManagem t 66 Industry, Trade,and Finance Divn Interfirm and Industry-Govemment Cooperation for Tedmology Development in Europe (676-17C0 32 PpuLti and Hmn Resow Diin Moderating Malnutrition m Asia 92 Europe and Central Asia Region Country Department , Oice of the Director Assesing the Mexdco-United States Free Trade Agreement (676-65) 104 Pbbnd Ridtnt Mission Enterprs Behavior and Competivenss (676-58) 35 Middle East and North Africa Region Country Department I Lidusty and Ern Operions Divisi Public Enterprise Management and State Holding Companies 44 Europe and Central Asia, and Middle East and North Africa Region Technical Department Agrakuw Divn Agricutural Credit in the ESAWA Rqeiono Chaactristics, Issues,and Straty 144 Populton and Humn Reauwes Diio Raeearch and Human Resource Issles in Scintific and Technological Development 89 166 Ind= of Studis by Dqpmfma Latin America and the Caribbean Region CountryDepartment IV Human Roerco Dibon Modeling Future HeaIt Trends and Costs In Chile (676-960 85 Tedmical Depeartmet Envbonnmnt DiOn Property Rights, Rent Disipation, and Environmentl Degradation in the Brazilian Amazon (677-24) 61 Human Resowrcs Division Improving the Quality of Primary Education In Latin A1meua 91 Trade, Fince, and Prvate Sedor Delopmt Dision MacreDonomic Polides, Crisis and Growth in the Long Run (673-990 117 Investnent Department Specia Opetios ad Rearch Divn Growth and Productivity in Developig Countries (677-090 86 nterational Finnce Corporation Economics Department Corporate Fnance in Developing Emonoiies (677-04) 139 Intellectua Property Rights Protection and Tedcology Trnsfer tough Foreign Direct Investment (676-19) 33 167 APPENDIX BANK RESEARCH OUTPUT Belowarelistedvarioustypesofresearchoutputarising staff, though some copies are circulated to interested *om research and policq reviewactivities at the Bank. researchers outside the Bank Toprovidemaxmumcoverageofsuchoutput,research H. Dprtmental working papers. These papers are isdefinedforthepurposesof thislistinabroaderrather produced and distributed by Policy Research depart- than a narrower sense Copies of Bank publications ments and some divisions. They disseminate quiiddy (categoriesA,E,andF) canbepurcsed from theBank findings of departmental research and are targeted pn- bookstoreorordered from the BanmsPublisher. Copies manly to specialists in the Bank. of working papers and background papers (categories L Background papers to World Development Report G-1) cunbe obtainedffrom theauthorsor the associated 1992. These papers are commissioned from researchers departments.Thefollowing of fiscal l992research inside and outside the Banl Some also come out as output are listed: Policy Research Working Papers or in other forms. A. Research-orientedbaowrittenbyBancstaffand published either by the Bank or by oher publishers Thislistalsoindudesperiodicdatapublications,suchas A. Books by Bank researchers the World Debt Tabls, that feed subsequent rsearch. B. Research by Bank staff published as part of cal- Bahl, Roy W., and Johannes Linn. 1992. Urban Public twist volumes of resear* papas. Finance in Developing Counties. New Yorti Oxford C Artdes appearig in the Bankts two economics University Press. jounals,theWorld BankEcmomicReeand WorldBank BirdsaL Nancy, and Richard Sabot, eds. 1992. Unfair Reswrh Obsar. Aduontage LaborMi rket4ndDicrinationin fretop- D. ArtidesrelatedtoBanckresechandpublishedin ing Countries. Washington, DC World Bankl non-Bank professional Journals. Bruton, Henry. 1992 The Politiad Economy of I'overty, .E Policy and Resch Series, a formal series for dis- Equit,and Growth: Sri Lanzw and Malaysia New York semination of policy and reseach work of professional Oxfod University Press. quality, with a strong policyorientadon, and of interest Byrd, William A. 1992. Chinese Industrial Finns under to a relatively wide audience. Refom. New YorLk Oxford University Press. F. WorldBankDscuion Papers,Tecnical Papers, Caprio, G., and P. Honohan, eds. 1991. Mondary Policy and other Bank papers series. InstrumentsforDevelopingCGuntries.Washington,DC World Bank Dscussion Papers. This seies provides an World Bank. outlet in the public domain for a broad range of Bank Chhibber, Ajay, and Stanley FiLscher. 1992 Econmic Re- outputthatprovidesdetailedresultsofintemrsttodevel- form in Sub-ah Afria. Washington, DC World opment practitioners-from work on narrow research Bank. topics or country-specific studies. Cleaver, IC, MK Munasinghe, M. Dyson, N. Egli, A. World Bank Talmca Papers. This series provides an Peuker, and P. Wencelius, eds. 1992. Consemtion of outletin thepublicdomain forreseachandstudiesthat West and Central Afican Rainforests. Washington, DC: am highly tedmical and aimed at a narrower audience. World Bank. Other published series. Papers in such series as the Corbo, V., and Sang-Mok Suh. 1992. Strudural Adjust- living Standards Measnrment Stady Woring Paper ment in a Newly Industrialized Country: The Koremn and Economic Development Institute series typically Ezpfince.BaltimoreJohnsHopkinsUniversityPress. focus on a spedalized topic and are designed to give Corbo,'Vittoiio,F. Coricelli, and J. Bossak 1991. Reform- prominence to Bank work on that topic or to work by a ig Central and Eastern European Economie Initia Re- particular Bank unit sultsandChaCUenges.AWorld BankSymposium. Wash- G. Policy Resrch Woaing Papa5. These working ington,DC papersareavehideforquickdissemination,sometimes Corbo, Vittorio, Stanley Fischer, and Steve Webb, eds. inaninoDmpletelypolishedformat,offindingsofwork 1992. Adjustment Lding Revisited: Policies to Restore under way in the Bank The primary audience is Bank Growth.AWorld BankSymposium. Washington, DC. 169 deMelo,Jaime,and David Tan. 1992. A General Eguilib- Africa and ceMaitennean.Baltimore JohnsHopldns inum Analysis of U.S. Trade Poicy. Cambridge. MIT University Press. Press. Lele, Uma, ed. 1992. Aid to Afrin Agriculture Lessons Feachem,RichardGA,andDeanJamison.1991.DiLse from Two Decades of Donors' Experienc. Baltimore and Mortality in Sub-Sahdan Afiica Oxford and New Johns Hopkins University Press. York Oxford University Press. Lockheed, Marlaine, and Adriaan Verspoor. 1991. Ir- Feachem, Riciard G.A, Tord ICjelstrom, Christopher pmvingPrnmany Educatio in Developing Cauntries.New J.L Murray, Mead Over, and Margaret Phillips, eds. Yorlc Oxford University Press. 1992. The Headth of Adults in the Devdoping World.New Operations Evaluation Department. 1991. Foratry: The Yorlc Oxford University Press. WorldBsExpmence.OperationsEvaluationStudy. G;arbus, Lisa, Anthony Pritchard, and Odin Knudsen. Washington, DC. World Bank. 1991. Agricultural ssues in the 1990s: Proaeedings of the _.1991. Popultion Studyand tIe World Baniz Implies- Elenth Agriculture Sector Symposium. Washington, tions fom Eight Case Studies. Operations Evaluation DC. World Bank. Study. Washington, DO World Bank. Griffin,Charles. 1992.Het Camrein Asia: A Comparave _ . 1992. World Bank Support for Industrializ2tion in Study of Cost and Finncing. Washington, DO World Korea, India, and Indonesui Operations Evaluation Bank Study. Washington, DO World Bank Hansen, Bent. 1992. The Poliical Economy of Poverty, Pandey, P.G., J. Roseboom, and J.. Anderson, eds Fquity, and Growtk Egypt and Tury. New York Ox- 1991. AgriculturiResareb Policy: International Quanti- ford University Press. tatiePerspectives. Cambridge: Cambridge University Harbison, Ralph, and Eric Hanushek. 1992. Educatin Press. Perormnce of the Poor. Lwons from Runra Nortirsst Paul, Samuel, and Arturo IsraeL eds. 1991. Nongovern- Brazi. New York Oxford University Press. mental Organizatis and the World Bank Coopetion Hazell, P., and C Ramasamy. 1991.7The Green Rev0ulion for Development. Washington, DO World Bank. Reconsidered: The Imnact of theHigh-Yilding Rice Van- Rueda-Sabater, E, R Levy, and IL Shirley. 1991. Del- eties m South IndiaL Baltimore: Johns Hopkins Univer- oping thePriuafeSector. 7Th World Bank's Experiece and sity Press. Approach. Washington, DO World Bank. Holden, Demiss, Peter Hazell, and Anthony Pritchard. Sharma,N.P. 1992. Managing the Worlds Forests: Looking 1991. Risk in cAgriultur Proceedings of the Tenth Agni- for Balance between Conservation and Development. culure Setor Symposium. Washington, DC World Kendall/Hunt Publishing Co. Bank. Tan,Jee-Pen& andAlainMlngat. 1992 Education inAsia: Husain, L, and J. Underwood. 1991. African Extenal A Comparative Study of Cost and Finacing. Washing- Fnanceinthel990s.AWorldBankSymposium.Wash- ton, DCO World Barnk ingfon, DC Thomas, V., J. Nash, and otlers. 1991. Best Pratices in IntemationalFinanceCorporation. 1992. Emerging Stock Trade Policy Reform. New Yorkl Oxford University Markets Factbook 1992. Washington, DO World Bank. Press. .1992 Investingin theEnvironment:Business Oppor- Thomas, Vinod, AjayChhlbber, Mansoor Dailami, and tunities in fhe Developing Countries. Washington, DO othes 1991. ResructuringEconomiesin Distrss:Poic World Bank Reform and the World Bank. New Yorkc Oxford Univer- Jorgensen, Steen, Magaret Grosh, and Mark Shaucter. sity Pres 1992. Bol;ivs Answer to Poverty, Economic Crisi, and UnitedNationsltevelopmentProgmmeandtheWorld Adjstmet The Emefgec Social Fund. Washington, Bank. 1992. African Deveopment Indiators. Washing- DO World Bank. ton, DC -arosmanoglu, Attila. 1991. Diversity and Consesus: van Wijnbergen, Sweder, Ritu Anand, Ajay Chhibber, Asia's Emeging Developnt Paradigm. Washington, and others 1992. Externl Debt, Fisc Policy, and Sus- DO World Bank. taiable Growth in Turkey. Baltimore Johns Hopldkns Khalilzadeh-hira, J., and A. Shah, edt 1992. Tax University Press. Policy in Dedlping Countries. A World Bank Sympo- von Pisdhke, J.D. 1991. Finance at the Frontier-Debt Ca- siun. Washington, DC pacity and the Role of Credit in thePrivate Economy. EDI Krueger, AnnT 1992. The Politcal Ecmonmy of Agricad- Development Study. Washington, DC World Bank. huad Priing Policy. VoL 5, A Synthesis of the Poltica Wells,M.,and Brandon,withL Hannah. 1992.People Economy in Developing Countries. Baltimome Johns and Parks Linking Protected Area Management with Hopkins University Press. Local Communities. Washington, DO World Bank. Krueg, AO., K Schiff, and A Valdes, eds. 1991. The World Bank. 1991.Assistance Strategies to ReducePoverty. Poli Ecnomy of Agriculural Pricing Policy. Vol. 3, Washington, DC 170 Bznk Researh Output 1 1991. Deteloping the Pribate Sector: The World tionl Agriculturl Research: A Policy Dialogue The Bank's Experina and Approach. Washington, DC Hague: ISNAR. .1991.7heEuEiwnmenhadl OxlgeaWashingon,DC Anderson, J.R, and K. Hoff. 1992. 'Technological _... * 1991. The Forest Sector. Washington, DCr (Also Change, Imperfect Markets, and Agricultural Exten- published in French and Spanish.) sion: An Overview." In X Hoff, A. Braverman, and J. * 1991. Lsons of Tax Reorm. Washington, DC Stiglitz, eds, The Econmics ofRuratOaniation. New 1 1991. Price Prospects for Major Primary Conmodi- York: Oxford University Press. ties, 1990-2000: Update, Induding Quarterly Review of Anderson, J.R., and D.H. Whit. 1991. 'SystemsThink- CommodityMuakets. Washington, DC Published quar- ing as a Perspective for the Management of Dryland terly.) Farmin." In V. Squires and P. Tow, eds., Drylnd Farm- . 199L Trends in Dcveloping Economies. Washing- ing: A Systems Approach: An Analysis of Dryland Agri- ton, DC. culture in Austrlia. Oxford: Oxford University Press. _ . 1991. The WorLd Bank and the Environment- A Armstrong, Jill, and Eduard Bos. 1992. 'The Demo- Progress Report, Fiscal 1991. Washingtn, DC. (Also graphicand Economicand Sodal linpactof AIDS."In published in French and Spanish.) J. Mann and D. Trantola, eds., AIDS in the World 2992. 1991. World Bank Atlas 1991. Baltimore: Johns Cambridge: Harvard University Press. Hopkins University Press. Birdsall, Nancy. 1992 "Health and Development: What _. 1991. World Develpment Report 1991. Baltimore: Can Research Contribute?" In L Chen, A. Kleinman, Johns Hopkins University Press. (Also published in and N. Ware, eds., Advancing Halth in Developing Arabic, Chinese, French, German, Japanese, Porta- Countries: TheRole of Social Resrack Westport, Conn2 guese, and Spanish.) Auburn House. . 1992. Gobal Economic Prospecm and the Devdoping . 1992. "Pragmatism, Robin Hood and Other Countries. Washington, DC. Themes Good Government and Social Well-Being in .199221992 WorldTables.Baltimore JohnsHopkins Developing Countries." In L Chen,A. Kleinman,and University Press. N. Ware, eds., Social Dimenons of Health Transitins. . 1992. Price Proscts forMajor Pimary Commwoi- An Internatonal Persptive. New Yorlc Oxford Uni- ties, 1990-2005: Update, Including Qurtery Revie of versity Press. CommodityMakeet.Washington,DC(Publishedquar- BirdsaJl,Nancy,and 1. Dixon. 1991. 'SomeEconomicsof terly.) Global Climate Change- TheView from the Develop- . 1992. Social Indicaors of Deveopnmt. Batimore: ingCounties."InJ.CWhit,ed.,GkbaCCinuateChangc Johns Hopkcins University Press. The Economic Costs of Mitigation and Adaption. New . 1992. Trade Polcy Reforms under Adjustmn Pro- York. Elsevier Science Publishing Co., Inc. grams. Washington, DC. Bourguignon, F., C Morrisson, and A. Suwa. 1991. .1992. Word Deb Tables 1991-92.2 volumes. Wash- "Adjustment and the Rural Sector. A Counterfactual ington, DC. Analysis of Morocco." In P. Mosley, J. Harrigan, and . 1992. World Development Report 1992. New York J.F.J. Toye, eds., Aid and Power The World Bank and Oxford University Press. (Also published in French Policy-Based Lnding. New York Routledge. and Spanish.) Bulatao, Rudolfo, and Eduard Bos. 1992. 'The Spread of . 1992. World Tables 1991 Update. Baltimore Johns Fertilitr Regulation as Collective Behavior." In F. Hopkins University Press. Phillips and J. Ross, eds., Family Planning Programmes and Fertilty. Oxford: Clarendon Press. Bulutoglu, K 1992. 'Domestic Resourc Mobilizatiow B. Articles by Bank researchers in books Tax Revenues." In C_mbodia,An Economic Assessment of Rehilitation Needs. New York: United Nations. Alderman, H. 1991. "Food Subsidies and the Poor." ln Codhrane, Susan I., and David K Guilkey. 1991. 'Fer- Ceore Psacharopolous, ed., Essas on Powert, Equity, tgity Intetions and Access to Services as Constraints and Growth. Pergamon Press. on Contraceptive Use in Colombia" In Proceedings: Andersonj.R. 1992. 'MasuringtheEfficacyofInterna- Demopgraphic and Health World Conference. tional Agricultural Research. In CIMMYT 1991 An- Commander,S.,F.Coricelli,and KStnehr. 1992. 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Wold Bank Population MacmueconomnicAnalysis (Applied to Kenya). Policy and Human Resources Department,Washington, DC Research Working Paper 767. World Barn, Africa Codirane, Susan, and D. Guilkey. 1992. "HowAcs to Regional Office, Washington, DC. ContptionAffectsFertllityandContraceptiveUse 182 Bank RewrA QMI mTunisiFPoicyResearch WorldngPaper841.World for Women's Development" Policy Research Work- Bark,PopulationandHumanResourcesDepartment, ing Paper 913. World Bank, Population and Human Washington, DC Resources Department, Washington, DC Cohen, D. 1991. "A Valuation Formula for Developing Daveri, F. 1991. "How Expectations Affect Reform Dy- Country Debt" Policy Researdh Worldng Paper 763. namics in Developing Countries." Policy Research World Bank, International Economics Department, WorldngPaper788. WorldBank,CountryEconomics Washington, DC Department, Washington, DCr Cohen, D., and T. Verdier. 1991. "Debt, Debt Relief and DeJong, Jocelyn. 1991. 'Traditional Medidne in Su- Growth: A Bargaining Approach.' Policy Research Saharan Afmim Its Inportance and Potential Policy Worling Paper 762. World Bank, Intemational Eoo- Options."PolicyWResearchWorkingPaper735.World nomics Department, Washington, DC Bank,Popuiation andHumanResourcesDepartment, Coleman, J., and Y. Qian. 1991. 'tManaging Finandal Washington, DC. Risks in Papua New Guinea: An Optimal Extral deMelo.JaimelaviddRoland-HorstandMonaHaddad. Debt Portfolio." Policy Research Worldng Paper 739. 1992. Tax Evasion and Tax Reform in a Iw-Inanme World Bank, Internafional Economics Depmament, EconomyGmenealEquilaniumEstimatesforMadagas- Washington, DC. carP Policy Reseach Working Paper 91& World Bank, Conway, P., and S. Dhar. 1991. 'The Economics of Country Ecnomics Department, Washington, DC DumpingandAntidumping."PolicyResearchWork- DemirgfiivKnmt, A. 1992. "Creditor Country Regula- ing Paper 782. World Bank, Country Economics De- tions and Commerdal Bank Lending to Developing parient, Washington, DC Coimtiese"PolicyResearchWorldngPaper9l7.Wdrld Corden, W. Mat ,1992. 'Trade Policy and Excharge Bank, Country Eanomics Department, Washigton, Rate Lssues ini the Former Soviet Unionf Policy Re- DCr sarch Worldng Paper 915. World Bank, Country Devarajan, S., and D. Rodrik 1991. 'Do the BenefLs of Economics Department, Washington, DC Fixed Exchange Rates Outweigh Their Costs? The Coricelli, F.,S.Commander,andX Staehr. 1991. 'Wages Franc Zone in Afric" Policy Research Working Pa- and Employment in the Transition to a Market per 777. World Bank, Country Economics Depart- Economy." Policy Research Worldkg Paper 736. ment, Washingt, DC WorldBank,CountryEconoxnixcsDepartment,Wash- Dhani, F., and B Mlaovic 1991. "Privatization in ingn, DC :Easten and Central Ewrope: Objecives, Constraints, CDiioelltF,andkA.Rew 1ga992.1WagesandUnemploy- andModelsof Divestit PolicyResearchWorldng ment in Poland: Recent Developnments and Policy Is- Paper 770. World Bank Country Economics Depart- sues.'PolicyResearchWorkingPaper82l.World Bank, ment, Washington, DC Country Eonomics Department, Washington, DC Diop, Francois, Kenneth Hill, and Ismail Sirageldin. Coricelli, F., and R. Rocha. 1991. "Stabilization Pro- 1991. "EcDnomic Crisis, Strucural Adjustmnut, and grams in Eastern Europe:A CompartiveAnalysis of Health in Africa. Policy Research Working Paper the Polish and Yugoslav Programs of 1990." Policy 766. World Bank, Population and Human Resources Research Worldng Paper 732. World Bank Country Department, Washingtor, DC Economics Department, Washington, DC. Dornbusch, Rudiger, and Stanley Fischer. 1991. "Mod- Csaki, C 1992. 'Transformation of Agriculture in Cen- erale Inflation." Policy Research Working Paper 807. tral Eastern Europe and the Former USS Mapjor World Bank, Office of the Vice President-Develop- Policy Isues and Perspectives." Policy Research ment Eonomics, Washington, DC WordingPaper88. WorldBankCountryEbanomics Dougherty, Christopher, and Jee-Peng TatL 1992. 'Ti- Department Washington, DC rancing Traming: Issues and Options." Policy Re- Culagovsld, Jorge, Victor Gabor, Maria Cristina Ger- search Working Paper 716 World Bank, Population many, and Charles P. Humphreys 1991. "African and HumanResourcesDepartment Washington,DC. FinancingNeedsinthe 1990sfPolicyResearchWork- Dutz,bt1991."EnrcementofCanadian 'UnfaitTrade ing Paper 764. World Bank, Africa Regional Office, laws The Case for Competition Polides as an Anti- Washingt, DC. dote for Protection." Policy Rseah Worling Paper Dailami,Mansoor,andE HanK&Lm1991.TheEffectsof 776 World Bank Country Economics Department, Debt Subsidies on Corporate Investment Behavior." Washington, DC. Policy Researci Working Paper 727. World Bank, Eatrly,W.1991."EconomicStagnation,FixedFactors, Asia Regional Office, Washington, DC and Policy Thresholds. Policy Rsearch Woridng Das, Maitreyi. 1992. The Women's Development Pro- Paper 795. World Bank, Country Economics Depart- graminkapash ACaseStudyinGroupFormation ment, Wadsington, DC 183 Eastely, W., R. Levine, R. King, and S. Rebelo 1991. Everaert, Luc. 1992 "Inflation Stabilization in Turkey: HowDotiatonalPolidesAffectLorg-RunCrowth? An Applcation of the RMSM-X Model." Policy Re- AResearchAgd." PolicyResearchWorkiPaper search Working Paper 845. World Bank, Europe and 794. World Danik, Country Economics Department, Central Asia Region, Washington, DC Washington, DC. Eymann, A, and L Schulecht. 1991. "Antidumping Easterly, W., and K. Schmidt-Hebbel. 1991. "he Enforcenentin the European Cominity." PolicyRe- Maoeconomics of Public Sector Deficits, A Synthe- search Working Paper 743. World Bank, Country Eco- ssPolicyResearchWorkingPaper775.World Bank, nomics Deatnet, Washngton, DC Country Enomics Deptment, Washington, DC Faini, R, and J. de Melo. 1991. '"Fiscal ssues in Adjust- Eaton, J. 1992 -Sovereign Debt A Primer." PoUlcy Re ment An Introduction." Policy Research Worldng search Workng Paper World BankTnwrnationa Paper 724. World Bank, Country Econoiucs Deprt- Economics Department, Washington, DC. ment, Washington, DCr Elbadawi, L 1992. 'Idacroeconomic Management and Fardoust, S,andJ.P. Zho. l992. 'Scenarios for Growth the Black Market for Foreign Excange in Sudn" in the 1990 Policy Reearch Worldng Paper 834 Policy Research Worldng Paper 899. World Bank, World Bank, Internaitional Economics Department, Country Economics Department, Washngto DC. Washington, DC .1992 "RealOvervaluation,TemnsofTradeShoiks Felstkin,A.,andA.Shah. 1992. "CenemllEquilibrium and the Cost to Agriculture in Sub-ahn Afim" Effects of Investnent Incentives in MexfcoD. Policy Poliq Research Working Paper 831. World Bank, Researc Working Paper 927. World Bank Country Country Economics Departmt, Washington, DC Economics Department, Washington, DC E:lbdawi, L, and N. Majd. 1992 -Fixed Parity of the Fernando-Arias,E991'ADynamicBargainingModel Exhnge Rate and Economic Perfomance in the of Soverign Debt." Policy Research Working Paper CFA Zone: A Comparative Study." Policy Research 778. World Bank, Interational Economics Depart- Working Paper 830. World Bank,CountrylEcononics ment, Washington, DC. Department, Washington, DCr Finger, J.M. 1991. 'The Meaning of 'Unfair' in U.S. Elbadawi, L, and K Schmidt-Hebbel. 1991. 'Uaoew- Import Policy." Policy Rsearch Worldng Paper 745. nomic Adjustment to Oi Shodks and Fiscal Reform: World Bank,CountryEconomics Department,Wash- Simulations for Zimbabwe, 1988-1995. Policy Re- ingto, DC. srch Working Paper 772. World Bank, Country _. 199L he Oigins and Evolutio of Anidumpng Economics Department, Washington, DC lbhcy P odcyRusamdcWoriaingPaper 783. Woid Rk, 1991. "Macneconomic Structure and Poicy in CounqFyniomiDeptmnLtWasigutnLC lmbabwe:AnAnalysiswithanEmpiricalMacraeco- Fmger,JJL, and S Dr. 1992. "D Rules Control Power? nomic Model, 1965-1988. Policy Research Workdng GATT Articles and Arrangements in the Uruguay Paper 771. World Bank, Country Economics Deprt- Rotund. Policy Research Worldng Paper 81& World ment, Washigton, DC. Bank, Country Ecnomics Department, Washington, Erzan, F., and C. Holmes. 1992. "he Restrictiveness of DC the Mult-Fibre Arrangement on Eastern European Fiszbein,Ariel. 1992. "Do Workers in the Iformal Sec- Trade" Polic Research Workdng Paper SM. World tor Benefit from Cuts in the Minimum Wager Policy Bank, Intermational Economics Department, Wash- Research Working Paper 826. World Bank, Latin ingto DC. Ameica and the Caribbean Regional Office, Wash- Erzan, .,and A. Yeats 1992.'Free Trade A emuts ington, DC withtheUnitedStats;WhaeslnltforlatinAmericar Forgy, Larry, Diana 14 Measham, and Anne C. Tlnker. Policy Research Working Paper 827. World Bank, 1992. "Icoporating Cost and Cost-Effectiveness International Economics Department, Washington, Analysis into the Development of Safe Motherhood DC Progams.PohcyResearchWorkingPaper846 World Estache, Antonio, and Sweder van Wijnbergen. 1992 Bank, PopulafionandHumanResourcesDepartment, "Evaluating the Asset-Bad rmiimum Tax on Cor- Washington, DC porations An Option-Pricing Approach." Policy Re- Fors, C 1991. "Stainless Steel in Sweden: Antidumping searchWorkngPaper892.WoridBank,latinAmeica Attacks Good Intnational Citizenship." Policy Re- and the Canrbbean Region, Washington, DC. search Working Paper 744. World Bank, Country Ettri, Franciis. 1992. "Measure and Intepretation of Economics Department, Washington, DC Effnctive Protection in the Presence of High Capital Cersovitz, M. 1991. "Agricultural Pricing Systems and Costs Evidence from India" Pdicy Research Work- Transportation Policy in AfricW Policy Research lug Paper 873 World Bank, Asia Regional Office, Working Paper 774. World Bank, Infrastructure and WashingUton DC. Urban Development Department, Washington. DCr 184 Bank Rawich Ouitput Gertler, M., and A. Rose. 1991. "Finance, Growth and Haddad, Lawrence, and Ravi Kanbur. 1991. Public Policy." Policy-Reseach Worldng Paper 814. -Intrahousehold lnequuityand theTheoryof Target- World Bank, CountryEconomics Depaxtment,Wash- ingf PolicyResearchWorldngPaper789. World Bank, ington, DC Office of the Vice President-Development Econom- Ghani,Ejaz. 1992. HowFmancialMarketsAffectLong- ics, Washington, DC. Run Growth: A Cro-Country Study." Policy Re- Hamermesh, Daniel S. 1992. "Unemployment Insur- seach Worlang Paper 843. World Bank, Africa Re- ance for Developing Countries." Policy Research gional Office, Washington, DC. Worldng Paper 897. World Bank, Population and Ghei, N., and t KigueL 1992. 'Dual and Multiple Human Resources Department, Washington, DC. ExchangePRateSystemsin DevelopingCountnies Some Hanson, James. 1992. "Opening the Capital Accunt A Empizical Evidence."PolicyResearchWorkingPaper Surveyofk;sues andResults. PolicyResearchWork- 881. World Bank, Country Economics Department, ing Paper 901. World Bank, Latin America and the WasIington, DC. Caribbean Region and Country Economics Depart- Gill,1ndermitS.,and SahidurRKhandker. 1991."How ment, Washington, DC. Struchtre of Production Detemines the Demand for Harm, C 1992. "The Financing of Small Frms in Ger- Human Capital." Policy Research Working Paper many." Policy Research Worldng Paper 899. World 725 World Bank, Population and Human Resources Bank, Country Economis Department, Washington, Department, Washington, DC DC Go,D. 1991. "ExternalShtksAdjustmentPolicies,and .1992. lheRelationshipbetwemBanksand Large Investment Mlustrations from a Forwi-Loolcing Firms in Germany." Policy Research Worldng Paper CCEModelofifehilippines."PolicyReserhWork- 900. World Bank, Country Economics Department, ing Paper 737. World Bank, Country Economics De- Washington, DC. partment, Washingon, DC. Hanison, A. 1991. 'The New Trade Protectiomc Price Gooptu,S.andMAS MarinezPria. 1992/'FactorsThat Effects of Antidumping and Countervailing Mea- Affect Short-Term Commei Dank Lending to De- sures in the United States." Policy Research Worldng velopingCountries.PolicyResearchWorkingPaper Paper 808. World Bank, Country Econonics Depart- 86 World Banl, Intemational Economics Depart- ment, Washington, DC ment, Washington, DC . 1991. "Openess and Growth: A rie Series, Gray, C, R. Hanson,IM. Heller, and others l991. 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Bulgaria's Evolving Bank, Asia Regional Office, Washington, DCr Lel Framework for Private Sector Development" Heaver, Richard. 1991. "Using Field Visits to Improve Policy Research Working Paper 906 World Bank, theQualityof FamilyPlanning,Health,and Nutrition Country Economics Department, Washdngton, DC. Progr A Szpervisor's Manual." Policy Research Gray,C.,and F.Stlblar. 1992.fTeEvolving LegalFrme- Worlkng Papex 797. World Bank, Population and worc for Private Sector Activity in Slovenia. Policy Human Resources Department and Asia Regional Research Working Paper 893. World Bank, Country Office, Washington, DC. Economics Department, Washington, DC Heggie, Ian G., and Vincy Fon. 1991. "Optimal User Gronau, Reuben. 1991. "Are Ghana's Roads Payg Charges and Cost RecDvery for Roads in Developing Their Wayr Policy Research Working Paper 773. 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Policy Researth Working Paper 877. dence." Policy Research Working Paper 868. World World Bank, Country Economics Deparment, Wash- Bank,PopulationandHumanResourcesDepartment, ington, DC Washington, DC Jesurun-Clements, Nancy. 1992. 'Taternalism and the Kopp,Raymond. 1992. "EconomicIncentives and Point Alleviation of Poverty." Policy Research Workdng Source Emissions: Choice of Modeling Platform." Paper 822. World Bank, Lat.America and the Carib- Policy Research Worldng Paper 920. World Bank, bean Regional Office, Washington, DC Country Economics Department, Washington, DC. Johnson-Sirleaf, E., and F. Nyijesy. 1991. 'The Outlook Kutzin,Joseph,and Howard Barnum. 1992. "HowHealth for Commercial Bank Lending to Sub-Saharan Af- Insurance Affects the Delivery of Health Care in De- rica.2 Policr Research Worldng Paper 720. World velopingCountries."PolicyResearchWorkingPaper Bank, Iternational Economics Dqpartment, Wash- 852. World Bank, Population and Human Resources ingto, DC Departmt, Washington, DC. Jun, K., and L Husain. 1992. "Capital Flows to South Levine, R. 1992. "FInancial Structues mnd Economic Asian and ASEAN Countries Trends, Detminmts, Development" Policy Research Worlkng Paper 849. and Policy Implications." Policy Research Working World Bank,CDuntryEconomicsDepartment Wash- Paper 842. World Bank, Inernational Economics De- ington, DC. partment, Washington, DC. Levine, R., and D. Scott. 1992. "Old Debts and New Kanbur, Ravi 1992. "Heterogeneity, Distribution, and Beginmings: A Policy Choice in Transitional Socialist CooperationinCommonPropertyResourceManage- Economies!" Policy Research Worldng Paper 876. 186 Bank Resrch Outpu World Bank Country Economics Department, Wash- Morisset,J. 1991. "Does Financial Liberalization Really ington, DC. Improve Private Investment in Developing Coun- Liese, Bernhard, John Wilson, Bruce Benton, and Dou- tries?' Policy Research Working Paper 717. World glas Marr. 1991. 'The Onchocerdasis Control Pro- Bank, International Economics Department, Wash- gram in West Africa: A Lng-term Commitment tD ington, DC. Success." Policy Research Working Paper 740. World Moyer,Neil, and Louis S. Thompson. 1992. "Options for BarkcPopulationandHumanResourcesDepartnent, Reshaping the Railway." Policy Research Working Washington,1DC. Paper 926. World Bank, Infrastructure and Urban Liu, L. 1991. 'Entry-Exit, Learning and Productivity Develop-nent Department, Washington, DC. Change:EvidencefromChile."PolicyResearchWork- Mukherjee,Mohua. 1991. "HowDoesBrady-TypeCom- ing Paper 769. World Bank, Country Economics De- merdal Debt Restructuring Workr Policy Research partment, Washington, DC. Working Paper 817. World Bank, Cofinancing and Lodcheed, Marlaine, and Qinghua Zhao. 1992. "The Financial Advisory Services Department, Washing- Empty Opportunity. Local Control of Secondary ton, DC. Schoolsand StudentAchievementinthePhilippines." . 1992 "'How Can Debt Swaps Be Used for Devel- Policy Research Working Paper 825. World Bank, opment?" Policy Research WorkingPaper895. World PopulationandHumanResourcesDepartment,Wash- Bank, Cofinancing and Finandal Advisory Services inglon, DC. Department, Washington, DC. Long, M., and D. Vilttas. 1991. "Financial Regulation." Nassim, Janet 1991. 'Special Programme of Research Policy Research Working Paper 803. World Bank, Development and Research Training in Human Re- Country Economics Department, Washington, DC production." Policy Research Working Paper 779. Lopez, Ramon, Ridwan Ali, and Bjorn Larsen. 1991. World Bank, Population and Human Resources De- "How Trade and Economic Policies Affect Agricul- partinent, Washington, DC. Wmre A Framework for Analysis Applied to Tanzania Norgaard, Richard. 1992. "Sustainability and the Eco- and Malawi." World Bank, Africa Regional Offl. nomics of Assuring Assets for Future Generations." Washington, DC. Policy Research Working Paper 832. World Bank, Margulis,Sergio. 1992. "Back-of-the-EnvelopeEstimates Asia Regional Office, Washington, DC of Environmental Damage Costs in Mexico." Policy Oks, Daniel. 1992. 'Stabilization and Growth Recovery Research Working Paper 824. World Bank, Latin in Mexico: Lessons and Dilemmas." Policy Research America and the Canrbbean Regional Office, Wash- Working Paper 833. World Bank, Latin America and ington, DC. the Caribbean Regional Office, Washington, DC Martin, W., and P. Wan. 1991. "Agriculture's Dedine in Olechowski, A 1991. "Chemicals from Poland: A Tem- Indonesia: Supply or Demand Determined." Policy pest in a Teacup." Policy Research Working Paper Research Working Paper 798. World Bank, Interna- 784. World Bank, Country Economics Department, tional Economics Department, Washington, DC Washington, DC Matin, K 1992. "Fiscal Adjustment and the Real Ex- Palaskas, T.,and P. Varangis. 1991. "IsThere Excess Co- change Rate." 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Department, Washington, DC McLure,C.,Jr. 1991."AConsumption-Based DirectTax Pardy, Ri 1992. "Institutional ReformsinEmergingSe- for Countries in Transition from Socialism." Policy curities Markets." Policy Research Worling Paper Research Working Paper 751. World Bank Country 907. World Bank, Country Economics Department, Economics Department, Washlington, DC. Washington, DC. Mills, A.J. 1991. 'The Cost of the District Hospital: A . 1992. "Regulatory and Institutional Impacts of Case Study from Malawi." Policy Research Working SecuritiesMarketComputerization."PolicyResearch Paper 742. World Bank, Population and Human Re- WorkingPaper866. World Bank, Country Economics sources Department, Washington, DC. Department, Washington, DC. 187 Appedix Pohl, Gerhard. 1991. "Economic Consequences of Cer- Riveros, Luis A. 1991. "Wage and Employment Policies man Reunification." Policy Research Working Paper in Czechoslovakia." Policy Research Working Paper 816. World Bank, Development Economics-Geneva 730. World Bank, Population and Human Resources Office, Washington, DC Department, Washington, DC Pohl, Gerhard, and Dubravko Mihaljek 1991. "Uncer- Riveros, Luis A., and Lawrence Bouton. 1991. "Effi- tainty and the Discrepancy between Rate-of-Peturn ciency Wage Theory, Labor Markets, and Adjust- Estimates at Project Apraisal and Project Comple- ment.' Policy Research Working Paper 731. World tion." Policy Research Working Paper 761. World Bank,PopulationandHumanResourcesDepartment, Bank, Office of the Senior Vice President, Washing- Washington, DC. ton, DC. Rocha, Roberto de Rezendc 1991. "Inflation and Stabi- Pritchett,L 1991.'"Ieasuring Real Exchange Rate insta- lization in Yugoslavia.' Policy Research Working bility in Developing Countries: Empirical Evidence Paper 752. World Bank, Country Economics Depart- and Implications.' Policy Research Working Paper ment, Washington, DC. 791. World Bank, Country Economics Department, Rocha, Roberto de Rezende, and Fernando Saldanha. Washington, DC. 1992. "Fiscal and Quasi-FLscal Deficits, Nomi-nal and Psacharopoulos, George, Carlos Rojas, and Eduardo Real: Measurement and Polcy Issues." Policy Re- Velez. 1992. "Achievement Evaluation of Colombia's search Working Paper 919. World Bank, Europe, Escuela Nuea: Is Multigrade the Answer?" Policy MlddleEast,andNorthAfriicaTechnicalDepartment, Research Working Paper 896. World Bank, Latin Washington, DC Americaand theCaribbeanRegion,Washington,DC Rofman, Rafael. 1992. "HowReducedDemand forChil- Psacharopoulos, George, and Zafiris Tzannatos. 1992. dren and Access to Family Planning Accelerated the "Latin American Women's Earnings and Participa- FertilityDedineinColombia.'PolicyResearchWDrk- lion in the Labor Force." Policy Research Working ing Paper 924. World Bank, Population and Human Paper 856. World Bank, Latin America Technical De- Resources Department, Washington, DC- partment, Washington, DC. Rogers, Peter. 1992. 'Comprehensive Water Resources Queiroz, Cesar, and Surhid Gautam. 1992. "Road Infra- Management A Concept Paper." Policy Research structure and Economic Development Some Diag- Working Paper 879. World Bank, Infrastructure and nostic Indicators." Policy Research Working Paper Urban Development Department, Washington, DC. 921. World Bank, Infrastructure and Urban Develop- Saborio, Sylvia, and Constantine Michalopoulos. 1992 ment Department, Washington, DC. "Central America at a Crossroads." Policy Research Rajagopal, D., and A. Shah 1992. "Tax Inoentives, Mar- Working Paper 922. World Bank, Washington, DC. ket Power, and Corporate Investment A Rational Sagari, Silvia, and LoicChiquier. 1992. "Coping with the ExpectationsModel Applied to Pakistani and Turkish Legacies of SubsidizedMortgageCreditin Hungary." Industries,' Policy Research Working Paper 908. Policy Research Working Paper 847. World Bank, World Bank, CountryEconomicsDepartment,Wash- Country Economics Department, Washington, DC. inglon, DC. Schmidt-Hebbel, K, and T. Muller. 1991. 'Private Invest- Raudenbush,S., S. Eamsukkawat,1L Di-lbor,M. Kamali, mentUnderMacroeconomicAdjustmentinMoroco." and W. Taoklam. 1992. "On-the-Job Improvements in PolicyResearch Working Paper787. World Bank,Coun- Teacher Competence: Policy Options and Their Ef- try Economics Department, Washington, DC fects on Teaching and Learning in Thailand." Policy Scduenk, M 1991. "She CMIEA System of Trade and Pay- Research Working Paper 889. World Bank, Popula- mentslheLegacyandtheAftermathofItsTermination!" tion and Human Resources Department, Washing- Policy Research Working Paper 753 World Bank, Coun- ton, DC ry Emnomics Deparnt, Wasingtonr DC Rebelo, S. 1991. "Growth in Open Economies." Policy Shafik,Nemat,andSushenjitBandyopadhyay.1992.xEco- Research Working Paper 799. 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World Bank, Country Economics Department, Washington, DCI Departme&,t, Washington, DC. Sinding, Steven. 1991. "Strengthening the Bank's Popu- Vaillancourt, Denise, Janet Nassim, and Stacye Brown. lation Work in the Ninelies." Polity Research Work- 1992. "Population, Health, and Nutrition: Fiscal 1991 ing Paper 802. World Bank, Population and Human Sector Review." Policy Research Working Paper 890. Resources Department, Washington, DC. World Bank, Population and Human Resources Dc- Solimano, Andrds. 1992. 'Understanding the Invest- partinent, Washington, DC. ment Cycle in Adjustment Programs: Evidence from Van de Walle, Dominique. 1992. 'he Distribution of Reforming Economies." Policy Research Working the Benefits from Social Services in Indonesia, 1978- Paper 912. World Bank, Country Economics Depart- 87." PolicyResearch WorkingPaper871. World Bank, ment, Washington, DC. Country Economics Department, Washington, DC. Stone, Andrew. 1992. "Listening to Rirms How to Use Varangis, Panos, and Ying Qian. 1992. 'Does Exchange Firm Level Surveys to Assess Constraints on Private Rate Volatility Hinder Export Growth? Additional Sector Development." Policy Research Working Pa- Evidence."PolicyResearchWorkingPaper911.World per 923. World Bank, Country Economics Depart- Bank, International Economics Department, Wash- ment, Washington, DC ington, DC Stone, Andrew, Brian Levy, and Ricardo Paredes. 1992. Vaughn, J. Patrick. 1992. "Health Personnel Develop- "Public Institutions and Private Transactions: The ment in Sub-Saharan Africa." Policy Research Work- LegalandRegulatoryEnvirormentforBusinessTrans- ing Paper 914. World Bank, Population and Human actions in Braziland Chile." PolicyResearch Working Resources Department, Washington, DC Paper 891. World Bank, Country Economics Depart- Vittas, Dimitri 1991. 'The Inpact of Regulation on ment, Washington, DC. Financial Intermediation." Policy Research Working Summers, lawrence. 1992. "Investing in All the People." Paper 746. World Bank, Country Economics Depart- Policy Research Working Paper 905. World Bank, ment, Washington, DC. Office of the Vice President-Development Econom- .1991. 'MeasuringCommercial Bank Efficiencyf ics, Washington, DC. Policy Research Working Paper 806. World Bank, Svejnar, J., and KC Terrell. 1991. "Reducing Labor Re- Country Economics Department, Washington, DC. dundancy in State-Owned Enterprises." Policy Re- . 1992. "Contractual Savings and Emerging Seca- search Working Paper 792. World Bank, Infrastruc- rities Markets." Policy Research Working Paper 858. ture and Urban Development Department, Washing- World Bank, Country Economics Department, Wash- ton, DC. ington, DC. Tarr, D. 1991. 'When Does Rent-Seeking Augment the . 1992. "Policy Issues in Financial Regulation." Benefits of Priceand Trade Reform onRationed Com- Policy Research Working Paper 910. World Bank, modities? Estimates for Automobiles and Color Tele- Country Economics Department, Washington, DC. visions in Poland." Policy Research Working Paper Viflas, Dimitri, and Augusto Iglesias. 1992. "The Ratio- 741. World Bank, Country Economic Department, nale and Performance of Personal Pension Plans in Washington, DC. Chile." Policy Research Working Paper 867. World . 1992 "VERs Under Regional Integratiorn When Bank, Country Eacnomics Department, Washington, Trade Diversion is Unambiguously Beneficial." Policy DC. Research Working Paper 839. World Bank, Country Vittas, Dimitri, and Bo Wang. 1991. 'Credit Policies in EaOnomics Department, Washington, DC Japan and Korea." Policy Research Working Paper Thorne, AlfredaL 1992. 'Issues in Reforming Financial 747. World Bank, Country Economics Department, Systems in Eastern Europe The Case of Bulgaria." Washington, DC. Policy Research Working Paper 882. World Bank, Wright, K 1992. 'Life Insurance Industry in the United Europe and Central Asia and Middle East and North Stats" Policy Research Working Paper 857. World Africa Regions, Washington, DC. BaRink, Country Economics Dlartment, Washington, DC. Ihorne, Alfredo, and Azita Dastgheib. 1992. 'Public Yawn, J. 1992. "Rural Finance in Developing Coun- Sector Debt, Fiscl Deficits, and Economic Adjust- ties" Policy Research Worldng Paper 875. World ment A Comparative Study of Six EMENA Coun- Bnink, Agriculture and Rural Development Depart- tries." Policy Research Worling Paper 840. World ment, Washington, DC. Bank,Europe, MiddleEastandNorthAfricaRegional Yeats,A. 1991. "How Conflicting Definitions of "Manu- Office, Washington, DC factures" Distort Output and Trade Statistics." Policy Tybout, J., and D. Westbrook 1991. '1Estindng Returns Research Worldng Paper 760. World Bank, Interna- to Scale with Large Imperfect Panels" Policy Research tional Economics Department, Washington, DC 189 Appedix H Departmental working papers ties from the State and Non-State Industrial Enter- prises." Research Paper 22. World Bank, Country Country Economics Dqnrtment Economics Department, Socialist Economies Reform Unit, Washington, DC. Perse, H. 1992. "The Development of Payment Instru- .1991. "PropertyRighusArrangementsand Indus- ments in Germany." Tedhnical Papers in Finance 2. trial ProductivityinChina." Research Paper2l. World World Bank,Country EconomicsDepartment, Fnan- Bank, Country Economics Department, Socialist cial Policy Division, Washington, DC. Economies Reform Unit, Washington, DC. Sheng, A., and C. Barltrop. 1992. "Establishment of Off- . 1991. "What is Special About China's Reforms." Site Surveillance Systems in Developing Countries." Research Paper 23. World Bank, Country Economics Technical Papers in Finance 1. World Bank, Country Department,SocialistEconomiesReformnUnit,Wash- Economics Department, Financial Policy Division, ington, DC. Washington, DC SoCIAL ExPENDMURES AND THER DIRIUTunoNAL IMPAcr iN INDusDtALREFORMANDPRODUCDvrIYINCHNESEENTEIRIREs EAsERN EuRoPE SEaUS AND ENTEPRimE BEHAVIOR AND EcONOmic REFoRMS: A CowAPA TIVESTuDYiNCNntALANDEAsERNEUROPESERIE Dlouhy, J. 1991. "The Impact of Social Transfers in Socialist and Market Economies." Research Paper 4. Chen, KC, G. Jefferson, and I.J. Singh. 1992. "Lessons World Bank, Country Economics Department, Social- from China's Econtomic Reform." Research Paper 5. ist Economies Reform Unit, Washington, DC. World Bank, Country Economics Department, Social- Janacek,IC 1992. "The Czechoslovak Social Policy System ist Economies Reform Unit, Washington, DC. and Social Expenditures in 1960-1990." Research Paper Estrin, S., M. Schaffer, and I.J. Singh. 1992. "v iteprise 27 World Bank, Country Economics Department, So- Adjustment in Transition Economies: Czc .,oslova- cialist Economies Reform Unit, Washington, DC. Ida, Hungary and Poland." Research Paper 27. World Khan, S. 1992 "The Incidence of Social Transfers in Bank, Country Economics Departnent, Socialist Some OECLU Countries: A Review of the Literature." Economies Reform Unit, Washington, DC. Research Paper 8. World Bank, Country Economics Fan, Q., and M. Schaffer. 1991. "Enterprise Reforms in Department,SocialistEconomiesReformUnit,Wash- Chinese and Polish Owned Industries." Research ington, DC. Paper 11. World Bank, Country Economics Depart- Milanovic, B. 1992. "Distributional Impact of Cash and ment,SocialistEconomiesReformUnit,Washington, In-Kind Transfers in Eastern Europe and Czechoslo- DC vakia." Research Paper 9. World Bank, Country Eco- Gomulka, S. 1991. "Economic Reforms in Poland, 1989- nomicsDepartment SocialistEconomiesReform Unit, 91: Aims, Policies, and Outcomes." Research Paper Washington, DC. 19. World Bank, Country Economics Department, Rutowska, I. 1991. '"ublic Transfers in Socialist and Socialist Economies Reform Unit, Washington, DC. Market Economies." Research Paper 7. World Bank, . 1991. "The Puzzles of Fairly Fast Growth and CountryEconomicsDepartment,SodalistEconomies Rapid CollapseUnderSocialism." Research Paper 18. Reform Unit, Washington, DC. World Bank,CountryEconomicsDepartment,Social- Rutowski, J. 1991. "Social Expenditures in Poland: Ma- ist Economies Reform Unit, Washington, DC jor Programs and Rccent Trends." Research Paper 1. Jefferson, G., and T. Rawski. 1992. "A Theory of Eco- WorldBank,CountryEconomicsDepartment,Social- nomicReform."ResearchPaper 25.World Bank,Coun- ist Economies Reform Unit, Washington, DC try Economics Department, Socialist Economies Re- Topinska, L 1991. "The Impact of Social Transfers on form Unit, Washington, DC. Income Distribution: Poland, 1989." Research Paper Schaffer, MN 1992. 'The Polish State-Owned Enterprise 2. World Bank, Country Economics Department, So- Sectorand the Recession in 1990." Research Paper 26. cialist Economies Reform Unit, Washington, DC. World Bank, CountryEconomicsDepartment, Social- Vukotic-Cotic,G. SocialTransfersandIncomelnequality ist Economies Reform Unit, Washington, DC. in the Ante-Bellum Yugoslavia, 1988." Research Paper Singh, LJ. 1991. "Chinaand Central andEastern Europe: 6&WorldBank,CountryEconornicsDepartment,Social- Is There a Professional Schizophrenia on Socialist ist Economies Reform Unit, Washington, DC. Reform?" Research Paper 17. World Bank, Country Economics Department, Socialist Economies Reform INcoEs D1iThBlmo1 DURINC iHE TRANsION SERIE3 Unit, Washington, DC. Xiao, C. 1991. 'The Economic Role of Chinese Central M{ilanovic, Branko. 1992. "Income Distribution in Late and Local Governments: Challenges and Opportuni- Socialism: Poland, Hungary, Czechoslovakia, Yugo- 190 Bank Research Output slavia and Bulgaria Compared." Research Paper 1. Furtado, J., and A. Bianchi. 1991. "Integraci6n de la World Bank, CountryEconomicsDepartment, Social- Ordenacid6n Ambiental en el Proceso de Desarrollo." ist Economies Reform Unit, Washington, DC. EDI Working Paper. World Bank, Washington, DC. . 1992. 'Social Costs of Transition to Capitalism: Guillaumont, P., and S. Guillaumont 1991. 'The Social Poland 1990." Research Paper 2. World Bank, Coun- Consequences of Adjustment in Africa as a Func- try Economics Department, Sodalist Economies Re- tion of Exchange Rate Policy." EDI Working Paper. form Unit, Washington, DC. World Bank, Washington, DC. (Also published in French.) Economic Development Institute Hahm, H 1992. "Financial Distress ant Public Manu- facturing Enterprise Restructuring Case Study of Ali, M. 1992. 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PUREE Background Paper . "Global Warming and Econoiic Growth" Series 41. World Bank, Washington, DC Anderson, Dennis, and William Cavendish. "Efficency Cuadra, Ernesto. 1991. "Data Collection Strategies and and Substitution in Pollution Abatement Simulation MethodsforMonitorngStudentFlows."PHREE Back- Studies in Three Sectors." ground Paper Series 43. Worid Bank, Washington, DC. Ascher, WilLiam. Copingwith theDisappointingRates Cuadra, Ernesto, and Birger FredrikserL 1992. "Scope of Return of DevelopmentProjectswith Environmen- for EfficiencyGains Resulting from Reduction in Rep- tal Aspects. etition and Dropout A Simulation Exercise." PUREE Barbier, Edward B., and Joanne C Burgess. "Agricul- Background Paper Series 55. World Bank, Washing- tural Pricing and Environmental Degradation." ton, DC Bates, Robin W., and Edwin A. Moore. "Commercial Eisemen, Thomas 0. 1992. "Private Initiatives and Tm- Energy Efficiency and the EnvironmenL' ditions of State Control in Higher Education in Sub- Beckerman, Wilfred. "Economic Development and the SaharanAfrica." PHREEBackground PaperSeries48 Environment Conflict or Complementarity?" World Bank, Washington, DC Bilsborrow, Richard. "Rural Poverty, Migration, and Kells, HRL 1992. "Performance Indicators for Higher theEnvironmentinDevelopingCountries ThreeCase Education:ACriticalReviewwith Policy Recommen- Studies." dations." PHREE Background PaperSeries 56. World Blitzer, Charles, R.S. Eckaus, Supriya Lahiri, and Bank, Washington, DC Alexander Meeraus. "Growth and Welfare Losses 195 *Appendix from Carbon Emissions Restrictions: A General Equi- Mensah, Thomas. "Exdsting and Emerging State of In- librium Analysis for Egypt.' temational Environmental Law." . '"The Effects of Restrictions of Carbon Dioxide Mink, Stephen. 'Toverty, Population, and the Environ- and Methane Emissions on the Indian Economy.' ment." 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"Eoo- Hammond, Allen, Eric Rodenburg, and Dan TunstalL nomic Growth and Environmental Quality: Time Se- "Environmental Indicators!' ries and Cross Country Evidence." Hamrin, Robert. "Business' Critical Role in Meetng Shah,Anwar,andjoanmLarsen."CarbonTlaxes,theGxeen- Developing and Environmental Challenge!' house Effect, and Developing Countries." Homer, John B. "Natural Gas in Developing Countries: . 'World Energy Subsidies and Global Carbon Evaluating the Benefits to the Environment" Emissions." Hughes,Gordon."AretheCostsofCleaningUpEastem Sinha, Chandra Shekhar. "Renewable Energy Europe Exaggerated? Economic Reform and the En- Prgranmmesin Brazil, China,India, Phillippines,and vironment" Thailand." Canbur, Ravi. "Ieterogeneity, Distribution and Coop- Slade, Margaret E. "Environmental Costs of Natural eration in Common Property Resource Manage- Resource Commodities: Magnitude and Incidence.' menL" . "DoMarketsUnderpriceNatural-ResourceCom- Levinson, Aric, and Sudhir Shetty. "Efficient Environ- modities?" ment Regulation: Case Studies of Urban Air Pollu- Sorsa, Piritta. "Environment-A New Challenge to tion." GAI? Lucas, Robert, David Wheeler, and Hemamala Hettige. Steer, Andrew, and Robert Hamrin. "Promoting Sustamin- "EconomicDevelopment,EnvironmentalRegulation, able EcDnomicDevelopmentand theRoleof lIndustry." and the Intemational Migation of Toxic Industrial Tschofen,Franziska. "Legal Contentof theNotion 'Glo- Pollution: 1960-1988." bal Commons.' " Manwan,lbrahimL'SoilConservationandUplandFarm- Webb, Sheila, and Associates. 'Waterbome Disease in ing Systems in Indonesia." Peru." 196 Distributors of World Bank Publications ARGCNllNA RNLAND KREA.EPULCO S0U7HAFRICA. 0TuWVANA, CzteHlnech,SRL A h_A.nksa Ikauppa Pan KDre Book Cwpuieln ForFwmaI Sa: Gddacu_m Pr. oax t12 P.Rats 101, Kwangwbun Oafrd Univalty Prm lEae 165.4thRfoorOk4fl/46 SF45010t n HdklO Seoul SudsenAhla S3BonemAl_ RD. 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