123(1 - World Bank Documents & Reports

123(1/Report No: 12361

'SEPT. 13

TIHíE W ORILID BANIK

RIESEAIRCHI IPRO(GRAM

1993

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THE WORLD BANK

RESEARCH PROGRAM

1993

Abstracts of Current Studies

The World BankWashington, DC

World Bank Research-Objectives and Definition

The World Bank's research program has four basic objectives:

* To support all aspects of Bank operations, including the assessment of development progress inmember countries

* To broaden understanding of the development process

* To improve the Bank's capacity to give policy advice to its members

* To assist in developing indigenous research capacity in member countries.

Research at the Bank encompasses analytic work designed to produce results with wide applicabil-ity across countries or sectors. Bank research, in contrast to academic research, is directed towardrecognized and emerging policy issues and is focused on yielding better policy advice. Althoughmotivated by policy problems, Bank research addresses longer-term concerns rather than the imme-diate needs of a particular Bank lending operation or of a particular country or sector report. Activitiesclassed as research at the Bank do not, therefore, include the economic and sector work and policyanalysis carried out by Bank staff to support operations in particular countries. Economic and sectorwork and policy studies take the product of research and adapt it to specific projects or countrysettings, whereas Bank research contributes to the intellectual foundations of future lending opera-tions and policy advice. Both activities-research and economic and sector work-are critical to thedesign of successful projects and effective policy.

Copyright @ 1993by the International Bank

for Reconstruction and Development/The World Bank1818 H Street, NW, Washington, DC 20433, U.S.A.

All rights reserved.First printing September 1993

Manufactured in the United States of AmericaISSN 0258-3143

ISBN 0-8213-2579-5

CONTENTS

Introduction 1

Studies by Program Objective Category 5

Abstracts of Current Studies 13

Poverty, Distribution, and Social Welfare 15

Private Sector Development and Public Sector Management 28

Environment and Natural Resources 61

Human Resources Development 83

Adjustment, Trade, and Debt 113

Economic Management 140

Financial Intermediation 156

Basic Infrastructure and Urban Development 171

Index of Studies by Department 179

Appendix Bank Research Output 189

iii

INTRODUCTION

This volume is a comprehensive compilation of ab- litical issues in transitional countries. The second is astracts of the World Bank's research projects in fiscal tightly focused, cutting-edge study of the economic im-1993. The abstracts reflect current concerns in economic pact of AIDS in Africa that will conclude in fiscal 1994.and social policy from the perspective of an institution Both are yielding results of considerable operationalthat pursues research to inform and guide the govern- significance.ments of its member countries and to enhance theeffectiveness of its lending operations. Reform in the former Soviet Union. Research on the new

The Bank's research agenda is shaped by opera- states of the former Soviet Union emerged as part of thetional imperatives and the development priorities of process of bringing these states into the Bank. Econo-member countries worldwide. In its research the Bank mists had a reasonable understanding of how the cen-benefits from special access to data and local expertise trally planned economic system worked, but nobodyin client countries, from its directpractical involvement could accurately predict the course that transition wouldin those countries, and from its commitment to the follow as the centrally planned system of the Sovietsolution of development problems. Its publications Unionwas dismantled, decisionmaking became increas-provide a means for disseminating research results, ingly decentralized, and the new states began movingand its operations make effective implementation- toward a market economy.and feedback-possible. The research program is a The first major Ban]k research exercise to understandsource of expert knowledge on development-espe- the nature and dynamics of these transitional economiescially on economic, technical, program, and implemen- was part of a major collaborative effort with the IMF, thetation issues. It strengthens the Bank's advice and the OECD, and the newly created EBRD undertaken at theeffectiveness of its financing. It helps the Bank's clients request of the G-7 leaders and in consultation with Sovietpursue their development objectives more effectively authorities. The results were published in 1991 as theby providing them with evidence about which devel- three-volume A Study of the Soviet Economy. As part ofopment strategies work and why. And because the that effort, the Bank managed two task forces. One wasBank collaborates with local researchers in its studies, responsibleforanalyzing issues of systemicreform (pricemuch of that work helps to develop research and ana- reform, enterprise reform and privatization, reform oflytical capabilities in the countries in which it works. the financial sector, and the legal framework for a market

In fiscal 1993, because of the rapidity with which economy). The second task force concentrated on manu-formerly planned economies are adopting market in- facturing, agriculture, and housing. This exercise wasstitutions, many projects addressed issues of private the start -f a broad-ranging research program aimed atsector development and enterprise governance. Hu- understanding the turbulent process of change and theman resource development is receiving intensive study spectrum of development initiatives being explored inin the light of research on macroeconomic performance the new independent states and Eastern Europe.that shows the importance of education and skilled Although changes in Eastern Europe are, in somelabor. And while research on determinants of poverty ways, forerunners of change in the former Soviet Union,and economic growth continues, current Bank studies central planning in the Soviet Union took root over somefocus on a range of policies and strategies to most 70 years and that longevity has made it harder for theeffectively allocate social services and public expendi- new independent states to devise and assimilate market-tures for the poor. based institutions. As lending and economic work pro-

grams are defined, research staff are asked to look at theHow Bank Research Responds to Emerging pace and extent of reform, the impediments to privateConcerns sector assumption of formerly government activities,

and the sequence and prospects for successful stabiliza-The responsiveness and breadth of Bank research tion and economic growth.

are illustrated in two recent analyses. The first is a One strand of the Bank's research is attempting toprogram of research that has spanned four years and learn how rapidly the private sector is growing in thecontinues, addressing economic, social, local, and po- new independent states and to identify factors that in-

Introduction

hibit its growth and those that support it. A start was strikes, but nowhere more so than in Africa. More thanmade in a research project on the private manufacturing 8 million African adults have already been infectedsector in St. Petersburg. This initiative hasbeen extended with HIV, and more than 1.2 million have died fromby a second project, which is surveying St. Petersburg's acquired immunodeficiency syndrome (AIDS), theexpanding private service sector. The vital role of distri- longer-term fatal complex of diseases that HIV gener-bution in the development of Russia's markets is being ates. In some African countries one person in eight isexplored by a project surveying larger Russian enter- infected, and in certain urban areas as many as a thirdprises, with an emphasis on interenterprise trading pat- of all adults are infected. The AIDS epidemic has pro-terns. The idea is to answer some basic questions: How found consequences for African development pros-are firms pricing their products, and the distribution pects because AIDS is striking primarily adults in thesystem its services? Why are goods in state shops still on most economically active and skilled age group, 15-50.sale at prices much lower than similar goods in private After HIV infection, it may take an average of 8 to 10markets? Why are there continuing shortages in state years before the onset of full-blown AIDS, which isshops when, in theory, prices have been liberalized? In always fatal. This long incubation period means thatstill another project-a study of corporate governance in even if the spread of the epidemic were halted now,Eastern Europe with a component on Russia-the focus many millions of Africans from the pool of those al-is on the structure and implications of ownership in the ready infected will die over the next two decades unlessformerly socialist economies: How are businesses in a cure is found.Eastern Europe owned, managed, and run? What role do Little is known about the economic impact of thefinancial intermediaries, such as pension and mutual AIDS epidemic to date: most research has focused onfunds, play in the governance of firms? Ownership and preventive strategies or searches for a cure. Demo-governance arrangements in these countries are in a state graphic models suggest that mortality from AIDS willof transition and will be shaped, among other things, by reduce the growth of the African population. It is likelythe legal and regulatory environment and the process of that the deaths of skilled workers will slow the growthprivatization. in per capita income and create new pockets of poverty.

One method used in research is comparative analy- But there is scant empirical evidence with which tosis-to draw lessons across countries, to see how devel- address key issues that the epidemic raises for theopments in one country apply in others. The Baltics, for Bank's lending operations and for the policies of mem-example, were the first countries in the former Soviet ber governments. MostAfricaneconomies experiencedUnion to effect macroeconomic stabilization. The conse- negative growth through the 1980s. How badly will thequences of stabilization are of significance not only for AIDS epidemic set them back or inhibit their recovery?the Baltics but for other countries that are now introduc- What will be the financial and displacement effects ofing their own currencies and need to stabilize their increased demand for medical care? What will be theeconomies. Thus, two studies are planned, one an explo- prospects for the orphans and elderly survivors leftration of the transition and fiscal balance, and the other with minimal means of support? Should householdsa comparative review of monetary institutions and poli- affected by AIDS be selected as a group for interven-cies and the transition. Such work, which has a strong tions?operational orientation, draws fruitfully on the results of To begin to answer some of these questions, re-research in other regions, where appropriate. It is help- searchers from the World Bank and the University offul, for example, to examine the dynamics of the infla- Dar es Salaam are conducting a major study to measuretionary process using the experience of Latin America as the impact of fatal adult illness on individuals, house-a backdrop, as it can highlight the risk of economies in holds, and communities and to identify cost-effectivetransition moving to hyperinflation. Yet another area of strategies for helping survivors. Studies measuring thecomparative work concerns enterprise arrears, which impact of ill health typically add the direct costs (medi-have emerged as a serious problem in many transitional cal care, transport, and so on) and indirect costs (earn-countries and which contribute to macroeconomic insta- ings lost during illness or because of death). The Worldbility. Bank/University of Dar es Salaam study addresses

these costs and a much broader set of questions. WhatThe economic impact ofAIDS in Africa. While the tran- happens to surviving household members if land and

sition to market policies is concentrated in Eastern Eu- productive assets are sold to pay for medical treat-rope and the former Soviet Union, every country is now ment? What happens to long-run prospects for chil-facing an equally new, volatile, and far more ominous dren when they are pulled out of school to take care ofchange: the accelerating spread of the human immuno- sick family members? How does the death of an adultdeficiency virus (-HV). Its toll is devastating wherever it affect the nutrition of children left behind? Are the

2

Introduction

effects of the deathsdifferent for survivingwomen than for RSB funding are reviewed by the Research Advisorymen, for children than adults, for girls than boys? The Staff. Larger initiatives are evaluated by internal andstudy is conducting a survey measuring the effect of external peer reviewers and considered by the Researchillnesses and deaths on household income, spending, Committee, which is chaired by the Bank's Chief Econo-nutrition, schooling, and other measures of well-being. mist and Vice President, Development Economics, withInformation is also being collected on community health members drawn from throughout the Bank.and schooling services, marketprices, and infrastructure. The Research Support Budget also supports activities

Fieldwork began in the fall of 1991 in a northwestern that bring new ideas in development economics into theregion of Tanzania where about one of four urban Bank, and activities that increase international under-adults and as many as one of ten rural adults are standing of the development process-notably throughinfected with HIV. Roughly 800 households are being the annual Bank Conference on Development Econom-interviewed, 700 from among those thought to have a ics, the Visiting Research Fellows Program, the Bank'shigh risk of adult death and 100 from among a group of research journals, and other research dissemination. The"healthy" households. RSB provides direct support to economic and research

The AIDS survey-which is cofinanced by the World networks in Sub-Sahara n Africa, Latin America, and theBank's Research Support Budget, USAID, and Middle East, as part of its effort to support and enhanceDANIDA-builds on the Bank's extensive experience indigenous policy research and analytical capabilities inwith household surveys through the Living Standards the Bank's client countries.Survey program and on the knowledge acquired froma microeconomic analysis of human resource issues in What's Heredeveloping countries. The Bank is well positioned toexamine from the economic perspective a problem This volume contains abstracts of Bank researchmost organizations are viewing from the much nar- projects that were ongoing or completed in fiscal 1993rower perspective of health and human services. (July 1992 through June 1993).

Abstracts are grouped by program objectives thatResearch Funding and Administration represent priorities in Bank research. Chief among these

are poverty reduction, the environment, human resourceIn fiscal 1993 more than 250 research projects of development, private sector development, and public

widely varying size on a wide variety of topics were sector management.being conducted in units throughout the Bank. Half of Abstracts describe each project's objectives, method,this research was initiated by departments, which drew and findings, identify the research team, and list associ-on their own resources (mainly staff time). Roughly 41 ated reports and publications and the project's comple-percent of research was financed by a central Bank tion date. Abstracts identified by a five-digit referencefund, the Research Support Budget (RSB), which spon- number are for research projects that have been re-sors research throughout the Bank and the Interna- viewed by the Bank's Research Committee and havetional Finance Corporation. Funding for the remaining received support from the Research Support Budget.9 percent of the research program came from outside Publications and papers produced in conjunction withagencies, as support for Bank-managed research usu- the research are listed in the appendix. Copies of Bankally cofinanced by the Bank. publications (categories A, E, and F) can be purchased or

Research activities funded only from department ordered from the Bank's bookstore or distributors (seeresources are identified and developed as components list on last page of this volume). Copies of workingof departmental work programs designed by depart- papers and background papers (categories G-I) can bement directors and reviewed at the vice presidential obtained from the authors or the associated Bank depart-level. In fiscal 1993 most departmental research origi- ments. Reprints of articles from the Bank's researchnated in the Development Economics Vice Presidency. journals (category C) maybe requested from the authors;

Staff in any department can prepare research pro- other published material can be purchased from theposals and apply for additional RSB support. Proposals publishers (categories B and D).

3

STUDIES BY PROGRAM OBJECTIVE

CArEGORY

Poverty, Distribution, and Social Welfare 15

Credit Programs for the Poor: Household and Intrahousehold Impacts and ProgramSustainability (676-59) 15

Data Analysis for Development Policy (677-03) 15Macroeconomic Adjustment and Poverty Relief: The Roles of Social Policy

and Household Behavior (677-14C) 15Impact of Market-Oriented Policy Reforms on Households in Rural

China (677-16) 16Income Security for Old Age: Conceptual Background and Major

Issues (677-45C) 16Household Welfare Effects of Agricultural Policy Reform

in Malawi (677-46C) 18Indigenous People and Poverty in Latin America: An Empirical

Analysis (677-68) 18Household Responses to Seasonal Income Fluctuations: Markets and Families

in Rural India (677-80) 19Poverty in India, 1950-90: A Dynamic Analysis of the Determinants

of the Distribution of Household Consumption (677-82) 20Spontaneous Institutions and Sustainable Rural Development

in Africa (677-88) 21Private Interhousehold Transfers in Poland, 1986-91 (677-96) 21Innovative Self-Targeting Techniques: Do They Improve

Incidence? (678-14) 22Rural Poverty and Agriculture in Mexico (678-23) 22World Bank and UNDP Strategies for Reducing Poverty: Comparisons in South

and East Asia (678-36) 23Pakistan Integrated Household Survey Project 23International Price Comparisons of Items of Basic Needs 24A Volume on Subsidies Research 24World Poverty Monitoring 25Public Expenditures and Poverty 25Welfare during the Process of Transition 26

Private Sector Development and Public Sector Management 28

Industrial Reforms and Productivity in Chinese Enterprise (675-38) 28Intellectual Property Rights Protection and Technology Transfer through Foreign

Direct Investment (676-19C) 29Regulations, Institutions, and Economic Efficiency (676-94C) 30

Note: The numbers in parentheses are reference numbers for projects funded centrally from the Research SupportBudget. A "C" suffix denotes a project completed during fiscal 1993. Projects with no reference numbers are fundedby departments.

5

Studies by Program Objective Category

Enterprise Behavior and Economic Reform: A Comparative Study in Centraland Eastern Europe (676-99) 31

Business and Consumer Services as a Growth-Promoting Sector in the Former SovietUnion (677-43) 32

Explaining Rapid Growth: Chinese Coastal Provinces and MexicanMaquiladoras (677-50) 33

Management of Drought Risks in Rural Areas (677-51) 33State Enterprise Behavior in Poland during the Economic Transformation

Program (677-58C) 34Strengthening Accountability in Public Services (677-65) 35Survey of Service Firms in St. Petersburg (677-89) 36Reforms and Productivity in Chinese Enterprises, Phase 11 (678-24) 36An Econometric Study of State Enterprise Behavior in Poland (678-25) 37Agricultural Marketing in the Former Soviet Union (678-31) 37How Retail Food Markets Responded to Price Liberalization in Russia 37Privatization in Tunisia 38The Development of Cooperatives and Other Rural Organizations 38Agricultural Public Investment 39Private Manufacturing in St. Petersburg, Russia 40Privatization in the New Independent States of the Former Soviet Union: Framework

and Initial Result 41Brazil: Political, Institutional, and Technological Development 41Land Reform and Farm Restructuring in Russia 42Marshall Plan Lessons for Productivity Enhancement 42The Post-Socialist Transition: A Systemic View 43The Role of Government in the Development of Support Systems for Small and

Medium-Size Enterprises 44Strategies for Rapid Growth: Public Policy and the Asian Miracle 44The Evolution, Character, and Structure of the Japanese Civil Service and Its Role

in Shaping the Interrelationships between Government and the PrivateSector 46

Cross-Country Study of Small-Scale Enterprise Responsiveness in Africa 46Factors Associated with the Reliability of Cost and Schedule Estimates for Power

Generation Projects in Developing Countries 47High Technology: Implications for Developing Countries 48Small-Scale Privatization in Hungary, Poland, and the Former

Czechoslovakia 48African Private Agricultural Marketing 49Privatization in Eastern Europe 49Trade Sale Privatization in Central Europe 51Privatization of Agricultural Support Services 51The Changing Role of the State: Strategies for Reforming Public Enterprises 52Indigenous Management Practices: Lessons for Africa's Management

in the 1990s 53Intergovernmental Fiscal Relations in Developing Countries 54Japanese Lessons on Technology Development 55Privatization of Public Enterprise Management 55Regulatory Policy and Regulatory Reform in Industrializing Countries 56Strategies for Competitiveness 56Tax Administration: Lessons 56The Transition of Socialist Agriculture in Europe and Asia: A Synthesis of Early

Experience 56Cost of Business Regulation Analysis 57Enterprise Adjustment in the Russian Federation 58Open Economy Tax Reform II 60

6


Environment and Natural Resources 61

Pollution and the Choice of Economic Policy Instruments in DevelopingCountries (676-48) 61

Economic Growth and Trade Policy in Western Africa: Implications of the Degradationof the Vegetation Cover, Phase II (676-97C) 62

Property Rights, Rent Dissipation, and Environmental Degradation in the BrazilianAmazon (677-24) 63

Enterprise Ownership and Pollution (677-44C) 64Economic Shocks and the Global Environment (677-75) 64Econometric Analysis of Pollution Abatement Costs (677-81C) 65Revision of the Living Standards Measurement Study Household-based Agricultural

Activities Survey Module (678-21) 66Industrial Pollution: Global Indices 66Advancing Agricultural Productivity: Technical and Behavioral Constraints 67Biotechnology and Agricultural Development 68Industrial Pollution in Developing Countries 69Integrated Land Management 70International Trade and the Environment 71Natural Resource and Environmental Information for Decisionmaking 72Environmentally Friendly Technology 72Indigenous People and Biodiversity Mapping Project 73Public Policy Instruments 73Agricultural Technology Development 74Dryland Management 75Farming Systems and Natural Resource Management: A Comparison of Successful

Experiences in Developing Countries 76Solid Waste Management 76Water Resource Policies in Metropolitan Areas 76Environmental Liability and Privatization: Implications of Different Liability

Rules 77The Urlban Energy Transition in Developing Countries 78Economywide Policies and the Environment 79Energy Use and Global Atmospheric Pollution 79Environmental-Economic Evaluation of Energy 80Land Allocation 80Study of Cotton Production Prospects for the Next Decade 81Agricultural Technology Policy 82Trade Policy and the Environment 82

Human Resources Development 83

Economic Impact of Fatal Adult Illness from AIDS and Other Causes in Sub-SaharanAfrica (675-71) 83

Impediments to Contraceptive Use in Different Environments (675-72C) 84Determinants of Nutritional and Health Outcomes in Indonesia and Implications

for Health Policy Reforms (676-27C) 85Household Investment in Human Capital and Utilization and Benefits of Social

Services (676-44) 86The Determinants and Consequences of the Placement of Government Programs

in Indonesia (676-74C) 86Improving School Effectiveness and Efficiency in Developing Countries: The Case

of Jamaica (676-87) 87

7


Economic and Policy Determinants of Fertility in Sub-SaharanAfrica (676-91) 88

Human Capital Accumulation and Economic Growth: An EmpiricalStudy (677-11C) 90

Labor Market Dynamics during the Transition of a SocialistEconomy (677-20) 90

Synergistic Health Effects from Water Supply and SanitationInterventions (677-25C) 91

The Labor Market in Transitional Socialist Economies: A MacroeconomicPerspective (677-30) 91

Gender Differences in Schooling Decisions, Employment, and Earningsin Pakistan (677-39C) 92

Cross-National, Longitudinal Analysis of the Curriculum of SecondaryEducation, 1920-85 (677-40C) 92

Public Goods, Private Goods, and Social SectorOutcomes (677-47C) 93

The Dynamic Interrelationships between Nutrition, Morbidity, and LaborProductivity in Rwanda (677-52) 94

The Evolution of Labor Markets and the Social Safety Net in Central and EasternEurope (677-62) 95

Gender-Specific and Age-Cohort-Specific Education Stock for DevelopingCountries (677-69C) 96

Labor Markets and Employment Issues: Kenyaand C6te d'Ivoire (677-73) 96

Public-Private Interactions in the Health Sector in DevelopingCountries (677-95) 97

The Costs and Outputs of Turkish Higher Education (678-05) 97Training, Technological Capability, and Firm-Level

Productivity (678-11) 98Female Labor Market Participation and Child Welfare

in Africa (678-12) 98Contributions of Secondary Education to Per Capita Growth in the Leading Newly

Industrializing Countries of Asia (678-27) 99Measuring the Impact of User Fee Increases: The Second Round of the Indonesian

Resource Mobilization Study (678-30) 100Enterprise Training Strategies and Productivity: A Cross-National

Study (678-39) 101Women's Rights to Land and Agricultural Performance in Sub-Saharan

Africa 101Improving the Quality of Primary Education in Latin America 102Wealthier Is Healthier 103Building Research Capacity 103Economics of Education 105Review of Population Issues in Economic and Sector Work 106Development Convergence 106Higher Education Policy Study 107Labor Market Policy Handbook 108Managing the Social Cost of Adjustment 108Population and Economic Growth 109Science and Technology Education 110Statistical Indicators of Female Participation in Education in Sub-Saharan

Africa 111Private Provision of Social Services 111

8


Adiustment, Trade, and Debt 113

The Macroeconomic Implications of Parallel Foreign Exchange Marketsin Developing Countries (675-30C) 113

The Political Economy of Structural Adjustment (676-37C) 113The Cost-of-Protection Index (676-49C) 115Equipment Prices and Trade Policies for Developing Country Manufacturing

Industries: A Pilot Study of Brazil (676-61) 116Assessing the Mexico-United States Free Trade Agreement (676-65C) 116License Prices and Rent Sharing in the Multi-Fibre

Arrangement (676-69C) 117Commodity Exports and Real Income in Africa (676-70) 118The Design of Tariff Reform: Theory, Evidence,

and Implications (676-77C) 119Volume on Industrial Competition, Productivity, and Trade

Regimes (677-10C) 119Secondary Market Prices for Developing Country Debt: Data Collection and Initial

Analysis (677-15C) 120An Evaluation of the Effectiveness of Preshipment Inspection on Trade, Capital

Flight, Customs, and Other Revenue Problems of DevelopingCountries (677-34) 121

Target Zones and Real Exchange Rates in Developing Countries (677-38C) 121External Debt and Burden Sharing (677-55C) 122Foreign Exchange Auction Markets and Exchange Rate Unification in Sub-Saharan

Africa (677-64C) 122Adjustment in Africa: Reforms, Results, and the Road Ahead (677-67) 123Abandonment of the Fixed Exchange Rate Regime in Latin America

in the 1980s (677-71) 124Issues in the Design of a Stabilization Program in Russia (677-83) 125Understanding Bilateral Trade Flows in East Asia (677-86) 125Informational Value of Import License Auctions: An Empirical

Study (677-91) 126The Ruble Shortage Phenomenon in Members of the Ruble Currency

Zone (678-08) 126A Deep-Parameter Approach to the Real Exchange Rate and Trade

Distortions (678-09) 127Antidumping: Follow-Up on Newly Emerging Issues (678-16) 127Regionalism and South Asia Trade (678-22) 127The Role of Export Catalysts in Low-Income Developing Countries 128Exchange Rate Misalignment 128Asset and Liability Management 129Commodity Models 129The Effects of Adjustment Policies on Investment and Growth 130Investment in Low- and Middle-Income Countries 130Regional Integration in Sub-Saharan Africa 131Regional Trading Blocs 132Trade in Services 132Voluntary Export Restraints and the Republic of Korea's Trade Policy 133Manufactures Trade Modeling 134The U.S. Textile Industry under the Multi-Fibre Arrangement 134Commodity Price Formation and Behavior 135Commodity Risk Management 135Eastern Europe and EC-92 136The Trade Impact of the Breakup of the Former Soviet Union 136

9


Regional Integration in Asia 136Trade Policy Studies 137Tariff Uniformity and Optimality 137Controlling Recidivism 137China's Trade Regime 138GATT Rules and Developing Countries 138

Economic Management 140

How Do National Policies Affect Long-Run Growth? (676-66C) 140Total Factor Productivity Growth in Industrial and Developing

Countries (676-67C) 140Evaluations of Social Sector Investments (676-90) 141Reestimation of China's National Accounts and Growth Rates (677-17C) 142Revenue under Uncertainty in Eastern Europe (677-18) 143World Energy Subsidies and Implications for Greenhouse Gas Emissions

and Government Revenues (677-28C) 143Economic Consequences of War-Peace Transitions in Africa: Choices for Public

Finance (677-31) 144Income Distribution, Fiscal Policy, Political Instability,

and Growth (677-49C) 145Subnational Finance in Transition Economies: Broadening the Framework

for Analysis (677-70) 145Construction of an Integrated Data Base for the Former Soviet Union's Economic

Accounts (677-99) 147Evaluation of Applied Macroeconomic Models for Developing

Countries (678-02C) 147Economic Consequences of Demographic Change in Developing

Countries (678-10C) 148Patterns of Growth: Further Work on National Policies and Long-Run

Growth (678-26) 148Technology Spillovers, Agglomeration, and Foreign Direct

Investment (678-29) 149The Economic Role of the State in Nations of the Former Soviet

Union (678-32) 149Energy Pricing Study 149Measuring the Incomes of Economies of the Former Soviet Union 150Corporate Income Tax Incentives for Investment in Developing

Countries 150Estimating Per Capita Income Based on Purchasing Power of Currencies 151Money and Relative Prices in Brazil 152Bank-Global Economic Model 152DEC Analytical Database 153Inflation and Growth Effects of Reform in Post-Socialist Countries 153International Linkages, Shocks, and Adjustment 154The Composition of Public Expenditure and Economic Performance 154The Macroeconomic Management of the Transition from Socialism 154

Financial Intermediation 156

Corporate Finance in Developing Economies (677-04C) 156Central Bank Independence: Its Political and Institutional

Foundations (677-07C) 156

10


Risk-Weighted Capital Adequacy Requirements: An Application to DevelopingCountry Banks (677-41) 157

Financial Integration and Development in Sub-Saharan Africa (677-74) 153Exchange Rate Commitments and Central Bank Independence (677-77) 158Market Structure and Market Outcomes: The Mexican Stock

Exchange (677-97) 159Equity Portfolio Investment in Developing Countries (678-01) 159Foreign Direct Investment in a Macroeconomic Framework (678-15) 160Stock Market Development and Financial Intermediary Growth (678-37) 160Agricultural Credit in the Europe and Central Asia, and Middle East and North

Africa Regions: Characteristics, Issues, and Strategy 161Corporate Indebtedness in Turkey 162Banking in Transitional Socialist Economies 162Global Capital Shortage 163Financial Market Integration 163Nondebt Private Flows 164External Finance Supply Studies 165How Integrated Is the World Capital Market? 165Financing the Former Soviet Union's Transition 165Risk Management in Agriculture 166The Japanese Main Bank System and Its Relevance for Developing

and Transforming Socialist Economies 166Foreign Direct Investment and Trade 167Meeting the Financial Needs of Ghana's Small- and Medium-Scale

Enterprises 167Contractual Savings 168Housing Finance 168Foreign Direct Investment: Determinants and Consequences 169The Role of Payment Systems in Financial Sector Reform 169

Basic Infrastructure and Urban Development 171

Infrastructure Bottlenecks, Private Provision, and Industrial Productivity: A Studyof Indonesian and Thai Cities (676-71) 171

The Marginal Productivity of Infrastructure in DevelopingCountries (676-95C) 171

Analysis of the Results from the Extensive Survey of Housing Indicatorsin 52 Countries (677-48C) 172

Enhancing Urban Productivity: Determinants of Optimal Expenditureon Infrastructure, Human Resources, and Consumption PublicGoods (677-66) 173

Infrastructure Inadequacies in Mexico (677-98) 174The Debate on Modernization of Irrigation Systems 174Demand-Based Approach to Urban Sanitation 175Urban Transport Evaluation 176Private Sector Participation in Water Supply and Sanitation 176

11

ABSTRACTS OF CURRENT STUDIES

POVERTY, DISTRIBUTION, AND SOCIAL

WELFARE

Credit Programs for the Poor: Household Responsibility: Education and Social Policy Depart-and Intrahousehold Impacts and Program ment-Shahidur Khandker; and South Asia, CountrySustainability Department I, Population and Human Resources Op-

erations Division-Martin Karcher. With Zahed Khan,Ref. no. 676-59 Baqui Khalily, Mark Pitt, and Hussain Samad. The

This research seeks to identify the household and Bangladesh Institute of Development Studies is contrib-intrahousehold effects of credit on income, employ- uting staff time, and the government of Norway isment, education, nutrition, and other household out- providing funding.comes. It will also examine the sustainability of three Completion date: January 1994.major credit programs in Bangladesh, the participationof women in the credit programs, and the effects of theirparticipation on various household outcomes. The Data Analysis for Development Policyproject is part of the Education and Social PolicyDepartment's research on the causes and consequences Ref no. 677-03of improving the productivity of women. This research compirises a series of studies designed

Access to affordable credit for productive activities to show how the correct use of household-level data cancan remove the obstacle of low savings for the poor and inform policy. The studies cover saving, poverty andhelp improve their income and employment. The ques- inequality, price and tax reform and demand analysis,tion is how affordable credit can be delivered to the household composition and individual welfare, andpoor. Experience in such countries as Bangladesh sug- private and social security. The research draws heavilygests thatgroup-based creditprograms maybe effective on the cumulative experience of the Living Standardsvehicles for disbursing credit to the poor. But little is Measurement Study (LSMS) surveys and on other dataknown about how group-based credit programs work sets, for example, for India and Taiwan (China). Theand whether the programs are sustainable. data obtained from the LSMS surveys were designed for

The research will address this issue by examining the policy analysis, not just for the measurement of certaincost structures of three credit programs in Bangladesh aspects of living conditions, and it is for this purpose(BRAC, the BRDB, and the Grameen Bank), and the that the studies are conducted.estimated effects of the programs on households and on The study will produce a series of papers, as well asthe members of the households. It will pay particular abookprovidinga range of examples thatshow how theattention to the distribution of such effects by gender. analysis of data can be used to provide information and

To identify the household and intrahousehold effects quantitative evidence for policy design.of credit, a random sample survey of 1,800 households Responsibility: Policy Research Department, Povertyhas been conducted in three rounds over a year in and Human Resources Division-Emmanuel Jimenez.Bangladesh, jointly with the Bangladesh Institute of With Angus Deaton, Princeton University.Development Studies. A nutrition survey of a subsample Completion date: October 1993.of households has been conducted, and an educationtest has been administered to assess numeracy andliteracy in rural Bangladesh. In addition to the indi- Macroeconomic Adjustment and Povertyvidual- and household-level data, program- and com- Relief: The Roles of Social Policymunity-level information has been collected from sec- and Household Behaviorondary and administration sources. These data will beanalyzed to examine the effect and the sustainability of Ref. no. 677-14Cthe credit programs. Between 1985 and 1990 Peru undertook a heterodox

The project's output will be disseminated through stabilization program, and experienced a dramatic re-working papers and workshops in Washington, DC, and cession after 1987. Social expenditures rose during theBangladesh. The final output will be published in a book. first two years of the program, but after 1987 assistance

15

Poverty, Distribution, and Social Welfare

programs virtually dried up. Previous research, based holds. In the early 1980s agricultural production in-on household surveys in 1985-86 and in 1990, revealed creased dramatically. No further large increases arethat average per capita consumption in Lima, Peru, fell anticipated, however, as it appears that the gains fromby 50 percent over this period. this new policy have now been reaped.

This research first explored whether certain house- This research project intends to obtain answers to theholds in Lima were better protected than others from following questions: What are the main determinants ofdrops in consumption, and whether these households the productivity of agricultural households in ruraldisplayed any distinctive characteristics in 1985-86. Char- China? Would removal of restrictions on factor marketsacteristics explored include access to credit and private (credit, labor, and land) produce further increases intransfernetworks, employment, education, gender, and agricultural output? How has the household responsi-age. bility system affected income distribution, and what are

The research then explored changes in household the principal determinants of the variation in incomesbehavior between the two survey years. The research across rural households in China?investigated changes in educational investment, in mi- Answering these questions requires detailed house-gration patterns, and in private transfer networks. Do hold-level information. Atpresent,household-level datahouseholds reduce the allocation of resources to educa- sets from China are rare. This project will collect datation during adverse economic shocks? Which house- from about 1,500 households in 30 villages in Hebei andhold members migrate overseas? And do private trans- Liaoning provinces. The research will be based on mi-fer networks grow or shrink? croeconomic models of rural household behavior.

The study identified two characteristics that make The results are expected to shed light on two broadhouseholds less susceptible to and more able to adapt to policy questions. First, what would be the effect onmacroeconomic shocks: high levels of education, and productivityoffurtherliberalization of the rural economyreceipt of transfers from relatives or friends overseas. In (that is, ending restrictions on hiring of labor, privatecontrast, households with a large number of children provision of credit, and buying, selling, and renting ofare more vulnerable. Surprisingly, female-headed house- land)? And second, what avenues are available forholds are not more vulnerable. further reducing poverty in rural areas of China?

The findings will contribute to the current debate on Responsibility: Policy Research Department, Povertyappropriate social policy in developing countries, par- and Human Resources Division-Paul Glewwe. Withticularly during macroeconomic adjustment, when tem- Loren Brandt, University of Toronto; and Barbara Sands,porary downturns in economic activity may result. If University of Arizona. The National Academy of Sci-households undertake activities to protect consumption ences, United States, and the International Develop-in the short run which reduce labor productivity in the ment Research Centre, Canada, are providing funding.long run-such as reducing educational investment Completion date: April 1994.and sending the most qualified members overseas-these may be activities that social programs should aimto prevent. Further, if private transfer networks tend to Income Security for Old Age: Conceptualweaken as economic conditions worsen, public transfer Background and Major Issuesschemes may be desirable.

The findings will be disseminated through Living Ref. no. 677-45CStandards Measurement Study Working Papers and The proportion of the world's population that is oldjournal articles. is large and growing, and this group is often poor. Many

Responsibility: Policy Research Department, Poverty countries face huge fiscal burdens because of promisesand Human Resources Division-Paul Glewwe. With they have made to provide income security to theirGillette Hall, Cambridge University. older citizens. Government policies regarding old age

Completion date: December 1992. security have large implications for the labor and capitalmarkets, the growth potential and fiscal stability, andthe income distribution in a society. These policies have

Impact of Market-Oriented Policy Reforms long been debated in industrial countries. More re-on Households in Rural China cently, they have become a matter of concern in devel-

oping countries as well. This study is designed to helpRef. no. 677-26 countries reevaluate their old policies and formulate

In the 1980s China dismantled the commune system, new ones.in which land was communally owned and farmed, and Although most developing countries have long hadreplaced it with the household responsibility system, in some formal public or private pension programs, orwhich land is leased to and worked by individual house- both, the coverage of these programs has often been

16


limited to formal labor markets in urban areas. Old age or unexpectedly low rates of return in the economy. Asecurity for the rest of the population has been provided third pillar provides fiscal incentives for nonmandatorythrough extended family arrangements, mutual aid so- savings and annuities, such as tax incentives for job-cieties, and other informal mechanisms. But as extended based pension plans. And a fourth pillar consists offamily ties weaken because of urbanization and mobil- purely voluntary personal savings and family arrange-ity, and as the proportion of the population that is old ments. These continue the informal system of old agegrows because of medical improvements and declining security and still play an important role in most coun-fertility, these countries will be forced to reevaluate tries even after formal systems are put in place.their reliance on informal systems. This is now happen- Most countries with formal systems today have theing in many African and Asian countries. The challenge redistributive pillar, publicly managed on a largely pay-facing them is how to shift to formal systems of income as-you-go basis. In some countries this has been supple-maintenance without accelerating the decline in infor- mented by a tax-advantaged nonmandatory savings-mal systems, and how to avoid the mistakes that other annuity pillar. Many countries do not have a separatecountries have made as they design their formal sys- mandatory savings-annuity pillar. This research sug-tems. gests that such a pillar be created and that some of the

The need to reevaluate policy is even more pressing burden of old age security be shifted in that direction.for countries that, in the past, introduced formal pro- The study also considered the advantages and disad-grams of old age security whose costs have now risen to vantages of private management of that pillar.a point that they can no longer afford, as in many Latin The precise mix of these four pillars will vary fromAmericanandEasternEuropean countries. Forexample, country to country, depending on economic circum-because of generous early retirement provisions com- stances, objectives, and initial conditions. The studybined with high rates of evasion, the ratio of workers to evaluated in some detail the effect of different mixes ofretirees in some of these countries is less than 2 to 1. Not these pillars on benefits, costs, and their distribution,surprisingly, these countries have been unable to pay and the difficulties in the transition from one system tothe promised benefits and have reduced the real value another.by failing to index pensions or by cutting the income In addition to these basic structural issues, the studyreplacement rate. The challenge they face is how to considered important design features of each pillar,redesign their formal systems so that they will be sus- particularly of the public redistributive pillar that is thetainable and have the most favorable effects on eco- mainstay of the formal systems in many countries. Itnomic growth and equity. considered possible reforms of these design features to

Several alternative models for providing old age increase the effectiveness and equity and decrease thesecurity are in place in different countries. These vary in costs of the old age security system.many ways, but the most basic structural differences The study's findings will be disseminated in a flag-concern their objectives (for example, savings and in- ship report in the winter of 1994, followed by severalsurance versus redistribution), whether they are largely conferences in a variety of countries now reevaluatingfunded in advance or financed on a pay-as-you-go basis, their old age security systems. A supplementary vol-and their degree of reliance on public versus private ume containing selected background papers is alsomanagement. The choice among these models has broad plannedimplications for the operations of the labor and capital Responsibility: Policy Research Department, Financemarkets, the fiscal system, and, consequently, for the and Private Sector Development Division-Estellelevel, growth, and distribution of GNP. James, Ash Demirgilq-Kunt, Louise Fox, RobertPalacios,

This study analyzed the effects of these models based Anita Schwarz, and Montserrat Pallares-Mirelles, Pub-on the experience of industrial and developing coun- lic Economics Division-Christine Wallich, Trade Policytries, as well as on simulations of representative coun- Division-Donald Keesing, and Transition and Macro-tries. It tested the hypothesis that a multipillar system is Adjustment Division--Klaus Schmidt-Hebbel; and Fi-preferable to any single method for providing old age nancial Sector Development Department-Dimitrisecurity. In such a system one pillar mandates savings Vittas. With Mukul Asher, National University of Sin-and annuities, so that people are required to set aside gapore; Eric Davis, Bank of England; Barry Bosworthresources during their working years to take care of and Gary Burtless, Brookings Institution; Maria Cattell,their needs when they are older. This pillar also insures Bryn Mawr College; Robert Holzmann, L. Boltzmannagainst individual risks, such as uncertain longevity. Institute for Analyses of Economic Policy, Austria; Sal-Another pillar redistributes income to old people who vador Valdez-Prieto, Catholic University, Santiago,did not earn enough when they were young to build an Chile; Patricio Arrau, Ilades-Georgetown Universityadequate cushion of savings. This pillar may also insure Program, Santiago, and Ministry of Finance, Chile; Janeagainst group risks, such as unexpectedly high inflation Falkingham and Paul Johnson, London School of Eco-

17


nomics; Deborah Mitchell, Australian National Univer- journal article will be written, and a monograph onsity; Olivia S. Mitchell, Cornell University; and Jeffrey household food security will present a comparativeNugent, University of Southern California. analysis of the 1988-89 and 1990-91 data.

Completion date: June 1993. Responsibility: Southern Africa Department, Popula-tion and Human Resources Operations Division-Joyde Beyer, and Agriculture Operations Division-Rich-

Household Welfare Effects of Agricultural ard Anson and Robert Christiansen. With Pauline Pe-Policy Reform in Malawi ters, Thomas Tomich, Peter Walker, and Catherine La-

ger, Harvard Institute for International Development;Ref no. 677-46C and Anil Deolalikar. The Center for Social Research,

This research assessed the effects of the liberalization Malawi, contributed staff time, and USAID and theof the grain market on the income, production, food Harvard Institute for International Development pro-security, and nutrition of smallholders in Southern vided financial support.Malawi. The longitudinal data it collected will help Completion date: April 1993.monitor the effects of the policy change, and allow the Reports:responses of and the effects on households of different Peters, P.E. 1992. "Monitoring the Effects of Grain Marketsocioeconomic types to be differentiated by the house- Liberalization on the Income, Food Security, and Nutritionholds' status as net food buyers or sellers, by whether of Rural Households in Zomba, South Malawi."they are labor-constrained, and by whether they have Peters, P.E., and M.G. Herrera, with T.F. Randolf. 1989. "Cashsurplus land. The research provides much more de- Cropping, Food Security and Nutrition: The Effects oftailed information on household production and con- Agricultural Commercialization among Smallholders insumption decisions than is usually available, and makes Malawi."possible the testing of hypotheses about the effect of Peters, P.E., with C. Lager. Forthcoming. "The Effects of Grainchanging food prices. The analysis proposed actions Market Liberalization on Income, Food Security, andthat could be taken to enhance the positive effect and Nutrition of Smallholders in Malawi."reduce the negative effect on households of liberalizinggrain trade. A parallel study in three areas of Malawiwas conducted by the Center for Social Research of the Indigenous People and Poverty in LatinUniversity of Malawi, and the Bank has studied related America: An Empirical Analysisissues inMalawi and other countries (the MADIA study).This research is comparable with studies done by the Ref. no. 677-68International Food Policy Research Institute in African It is well known that, worldwide, indigenous peopleand other countries, and will help improve the under- are in a worse economic and social position than non-standing of the effects of policy reforms on food secu- indigenous people. The indigenous people of Latinrity, income, and nutrition. America live in extreme poverty. Yet there is little docu-

The study used data collected in 1986-87as abaseline. mentation of their actual position. One objective of thisA new data set was collected for 200 households in six study was to document the socioeconomic conditions ofvillages by trained interviewers who lived in the vil- indigenous people using empirical data from nationallages during the fieldwork. Income and expenditure surveys. It represents the first major attempt to empiri-data were collected every two weeks from September cally document poverty among the indigenous popula-1990 to August 1991, or once every one to two months, tion in four major Latin American countries.depending on the data. The data include income, expen- The goals of the project were to estimate the extentditure, crop production and sales, off-farm employ- and determinants of poverty among Latin America'sment, food storage, nutrition status (anthropometric indigenous population; to compare the living condi-measures), and morbidity. Household calorie intake tions of the indigenous population with those of thewas measured. Grain traders were interviewed to find nonindigenous population; to examine differences inout who is trading, how much is traded, and how the educational and occupational attainment between themarket is organized. Grain prices were recorded, and indigenous and nonindigenous populations; to analyzeethnographic data on the households were collected. the overall earnings differential between indigenousAppropriate quantitative methods were used to ana- and nonindigenous workers; and to review the findingslyze the data. with a view toward developing policy suggestions and

The research findings will be disseminated through identifying areas for further analytical work. The studyresearch reports and seminars in the Bank and in Malawi, was intended to contribute to the Bank's poverty reduc-organized by the Center for Social Research. At least one tion strategy.

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The study used household surveys from four Latin 1028. World Bank, Latin America and the CaribbeanAmerican countries-Bolivia, Guatemala, Mexico, and Technical Department, Washington, DC.Peru. The data were for 1989, except for the data for . 1993. "The Cost of Being Indigenous in Bolivia." WorldPeru, which were for 1991. The study used standard Bank, Latin America and the Caribbean Technical Depart-

techniques to estimate poverty incidence, the inter- ment, Washington, DC.ethnic distribution of income, and the interethnic distri- . 1993. "The Cost of Being Indigenous in Latin America:bution of social indicators. It also estimated interethnic An Empirical Analysis of Educational Attainments." Papereducation, occupation, and earnings differentials, and presented at the Comparative and International Educationconducted policy simulations. The research provided Society conference, Kingston, Jamaica, March 15-18.econometric estimates of the differential wage structure . 1993. "The Effects of Gender and Ethnicity on Educa-for indigenous and nonindigenous workers and decom- tional Attainment: The Case of Indigenous Women in Latinposed the overall earnings differential. America." Paper presented at the Comparative and

Poverty among Latin America's indigenous popula- International Education Society conference, Kingston,tion is pervasive and severe. The study found that in Jamaica, March 15-18.Guatemala, for example, while more than two-thirds of .1993. "Gender, Ethnicity, and Education in Latinthe total population is poor, almost 90 percent of the America." World Bank, Latin America and the Caribbeanindigenous population is poor. Being indigenous con- Technical Department, Washington, DC.siderably increases the probability of being poor. But . 1993. "Indigenous People and Poverty in Bolivia: Anhuman capital characteristics have a significant impact Empirical Analysis." Paper presented at the Canadianon lowering the incidence of poverty. The study found Economics Association meetings, Ottawa, Canada, June 4-6.a strong correlation between schooling attainment and . 1993. "Indigenous People and Poverty in Latin America:ethnicity, and between schooling attainment and pov- An Empirical Analysis." World Bank, Latin America and theerty category. Indigenous people have much lower Caribbean Technical Department, Washington, DC.levels of schooling relative to the nonindigenous popu- . Forthcoming. "Schooling and Nonschooling Activities oflation, and equalization of schooling levels would lead Peruvian Youth." World Bank, Latin America and theto a considerable increase in indigenous people's rela- Caribbean Technical Department, Washington, DC.tive earnings.

The study's results can feed into country povertyassessments and analyses of the interethnic distribution Household Responses to Seasonal Incomeof income and social indicators. The results of the em- Fluctuations: Markets and Familiespirical analysis point to areas of appropriate interven- in Rural Indiation, such as increased provision of education for indig-enous people. The study highlights the importance of Ref. no. 677-80the ethnicity-poverty connection. The effort to analyze Income seasonality is a pervasive feature of poorpoverty and devise strategies for its reduction cannot agrarian economies. In the semiarid tropics of Indiaignore the ethnic component. farm incomes fluctuate much more markedly across

Responsibility: LatinAmerica and the Caribbean, Tech- agricultural seasons than across years. Most previousnical Department, Office of the Director; and Human research on risk and insurance in developing countriesResources Development and Operations Policy, Office has focused on year-to-year fluctuations in income. Thisof the Vice President-George Psacharopoulos and research poses a question central to economic and socialHarry Anthony Patrinos. With M. L. Gonzalez and D. policy: Canconsumptionsmoothingbeachieved throughMacisaac. The Economic Commission for Latin America private means? If not, or if households pursue veryand the 'Caribbean is participating in the research. costly strategies, there is a potential role for government

Completion date: September 1993. policy. If seasonal consumption transfers-market andReports: informal-play a central role, income stabilization or

Coenen, J., ed. 1993. "Socioeconomic Conditions of the seasonal employment programs may be offsetby reduc-Indigenous People of the Americas: An Annotated Bibliogra- tions in private transfers.phy." World Bank, Washington, DC. The research addresses three main questions: First, to

Lee, H. 1993. "The Ethnic Dimension of Poverty and Income what extent do households smooth their consumptionDistribution in Latin America." World Bank, Washington, across agricultural seasons? Second, how is this smooth-DC. ing accomplished? Do households rely on credit mar-

Patrinos, Harry A., and George Psacharopoulos. 1992. "Socio- kets, nonmarket transfers, or potentially more costlyeconomic and Ethnic Determinants of Grade Repetition in strategies? And third, do credit transactions andBolivia and Guatemala." Policy Research Working Paper nonmarket transfers play distinct roles in buffering

19


seasonal income fluctuations, or are they direct substi- address are these: What does the time series of house-tutes for each other? hold consumption distributions in India since its inde-

The research drew for its analysis on a survey by the pendence look like? What has happened to poverty andInternational Crops Research Institute for the Semi- inequality over this period? Has the experience differedArid Tropics in India. The survey provides panel data among states and between urban and rural areas? Howon household consumption expenditures, debt, does the distribution of consumption (and hence pov-intrahousehold transfers, and income. The first part of erty) respond to changes in economywide and sectoralthe research developed some stylized facts about sea- variables? How important has economic growth beensonal income fluctuations using nine years of data from compared with changes in relative inequalities? Whatthree villages. The second part of the research used time- role has the sectoral composition of economic growthseries data on village rainfall to decompose seasonal played? How important have changing wages, prices,income changes econometrically into their anticipated and interest rates been? What role have public expendi-and unanticipated components. The response of con- tures played, particularly the expanding set of directsumption, debt, and transfers to these different compo- antipoverty interventions since the mid-1970s?nents can reveal whether and how households achieve The answers to these questions are hotly debated inconsumption smoothing. the literature on poverty in India. For example, some

Among the preliminary findings of the project is that observers have ascribed the apparent improvement infarm income fluctuates greatly across seasons in all the living standards of the poor during the 1980s to thethree study villages, and that these seasonal fluctua- substantial growth in direct public interventions. Oth-tions dominate year-to-year changes in income. Sea- ers have said that economic growth did most of thesonal fluctuations are also not uniform, at least in some work, and that (if anything) the fiscal burden of thevillages, and thus may have a large unpredictable com- direct interventions may have hurt the poor. Even theponent. Perhaps the most significant finding so far is link between sectoral variables (such as the fortunes ofthat aggregation across seasons obscures the role of agriculture) and the distribution of consumption is con-intrahousehold transfers in smoothing consumption. A tested, as that link depends critically on the perfor-regression analysis reveals that, although such transfers mance of consumption smoothing arrangements, ondo not appear to play a significant role at the yearly which views differ widely.level, they do respond to income shocks at the seasonal The literature on the determinants of poverty inci-level. This suggests that the potential crowding-out dence over time in India has focused almost exclusivelyeffect of government policies on private transfer activity on rural poverty. An approach that is more economywidemay indeed be large at the seasonal level. is needed. Furthermore, the models used in the past

Responsibility: Policy Research Department, Poverty have been static, and thus unable to reflect the likelyand Human Resources Division-Emmanuel Jimenez. stickiness in the distribution of consumption arisingWith Hanan Jacoby, University of Rochester; and from intertemporal consumption and savings behavior.Emmanuel Skoufias, University of Colorado at Boulder. The empirical models used in the literature have also

Completion date: October 1993. been fairly ad hoc, and have not been grounded in anexplicit choice theoretic model of consumption behav-ior. This can seriously cloud the interpretation of em-

Poverty in India, 1950-90: A Dynamic pirical results. The literature has also suffered fromAnalysis of the Determinants of the many data and measurement inadequacies.Distribution of Household Consumption Yet India has relatively good data on the poor. While

half the developing countries have no nationally repre-Ref. no. 677-82 sentative household survey that permits a convincing

About40percentofthepeopleinthedevelopingworld estimation of the distribution of household consump-living on less than a dollar a day reside in one country- tion or income for the 1980s, India has four such surveysIndia. Crisis and adjustment in India have brought the spanning the decade. Indeed, for India a time series ofcountry to what is arguably the most important time for consumption distributions can be compiled spanningthe poor since its independence in 1947. Decisions made 40 years. This provides a unique opportunity to empiri-there over the next couple of years or so will matter to their cally study the link between consumption distributionswell-being in both the short and the long term. and the key macroeconomic and sectoral variables

This research project plans to help inform those thought to be important influences on progress in re-decisions, by looking closely at the past evolution of ducing poverty.living standards and at how they have been affected by The research project will develop a tractable eco-the economy and by policy. The key questions it will nomic model relating the interpersonal distribution of

20


household consumption to prices, public expenditures, of how to create an enabling environment to help theseand relevant exogenous variables such as conditions of institutions flourish.the monsoon. The project will compile a consistent time- In this pilot phase of the project, researchers willseries data set of household consumption distributions identify three spontaneous institutions in South Africaby state over the 40 years (about 30 are available) and (a sample to be expanded in the full study to 40 institu-collate this with time-series data on the macroeconomy, tions in six countries). Each institution will be given athe sectoral composition of incomes, factor prices, and grant large enough to undertake a significant activitypublic expenditures and revenues over the same period. but small enough not to dwarf the institution's currentIt will use the data set to calibrate the model and to study scale. The grants will be made under two conditions-the determinants of changes in poverty measures. that they be used for a development purpose, and that

A second stage of the project will investigate the researchers be allowed to interview the institution'sextent to which the revealed differences across states in members to determinE! how they made the decision onthe evolution of poverty over these 40 years are expli- the use of the funds.cable in the differences in policies pursued, particularly Researchers will rapidly document the setting ofthe composition of public spending. each participating institution, including the policy envi-

The project is still at an early stage. The work to date ronment, using a set of sociocultural variables devel-has focused on assembling the data, which involves oped for that purpose. The interviews on the decision-substantial archival work. A complete data set of con- making process, and an assessment of the results of eachsumption distributions going back to the early 1950s has institution's undertaking, will be conducted about sixbeen compiled, along with data on demand patterns months after the grants are made.and prices, and analysis of the data is under way. The findings of these case studies and the findings on

The project will produce a series of research papers. sociocultural settings will be used to analyze the rela-Some of the output will be used in the forthcoming tions among the policy and sociocultural environments,

poverty assessment for India. Seminars will be held in the behavior of spontaneous institutions, the obstaclesIndia and at the World Bank and various universities, they encounter, and the outcomes they achieve.

Responsibility: Policy Research Department, Poverty Responsibility: Environmentally Sustainable Devel-and Human Resources Division-Martin Ravallion and opment, Office of the Vice President-Pierre Landell-Gaurav Datt. Mills. With Robert Klitgaard, L. Avellini, M. Moeletsi,

Completion date: December 1993. W. Schentz, D. Sikhosana, K. Tayor, G. Zondi, and H.Zwane, University of Natal.

Completion date: Octoberl993.Spontaneous Institutions and SustainableRural Development in Africa

Private Interhousehold TransfersRef. no. 677-88 in Poland, 1986-91

Accumulating experience with rural developmentefforts in Africa suggests that the most successful efforts Ref no. 677-96center on local organizations-and that the most suc- Can those Eastern European families that are mostcessful local organizations are spontaneous institutions. severely impoverished during the transition from so-These institutions are understood tobevoluntary, coop- cialism to capitalism rely on private family safety netserative activities aimed at development and initiated, for support? And which are the households that cannotwithout outside intervention, by the participants them- rely on such private support? Answering these ques-selves--and therefore appropriate to the local sociocul- tions is important for governments of countries withtural conditions. Examples are savings and creditgroups economies in transition. These governments are underand producers' cooperatives. political pressure to maintain social spending, but many

This research is designed to shed light on how spon- are forced by economic circumstances to redirect sometaneous. institutions work. How do they make deci- cash transfers and to reduce certain in-kind benefits.sions? What rural development problems do they con- Knowing the size of the informal private safety net issider most important, and what obstacles-including in critical because private transfers determine how muchthe policy environment-do they face in addressing public assistance to the poor is necessary.these problems? And how do the local sociocultural and Despite the potential importance of family networksother conditions affect each of these variables? The duringEasternEurope's transition, little isknownaboutanswers to these questions will contribute to govern- the magnitude and incidence of private transfers orments' and international organizations' understanding about how these networks function. This researchproject

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seeks to fill that gap in knowledge. It will draw prima- consumptionpatternsmaynotdiffersignificantlyacrossrily on the Household Budget Survey for Poland spon- income groups.sored by Poland's Central Statistical Agency. The As part of a general reform of its food subsidy system,project's main components are the following: Tunisia is implementing two innovative self-targeting

* Producing a snapshot of transfer activity. The first task approaches. In the first, the "superior goods" approach,is to measure the size and prevalence of interhousehold it is easing government market controls to allow thetransfers during theyearpreceding economic transition in private sector to introduce high-quality, unsubsidizedPoland to answer several basic questions about private products that appeal to upper-income consumers, whotansfers. Do they flow from the more fortunate to the would then consume less of the subsidized products. Inpoor? Do they occur predominantly within or across the second, a variation of the "inferior goods" approach,different types of residence? Do transfers flow primarily it is introducing different types of packaging and usingfrom young to old or vice versa? generic ingredients to differentiate goods in a particular

* Estimating a transfer function. Suppose a household product line. Products packaged in the lowest-qualityexperiences a severe income shortfall. How might pri- cartons or containing generic ingredients serve as thevate transfers respond? To answer this question, the vehicles for the subsidies. These perceived "inferior"research will estimate private transfers as a function of features discourage consumption by wealthier consum-pre-private-transfer income, controlling for other im- ers, although the intrinsic quality of the subsidizedportant determinants of private transfers. products remains good.

* Adding an intertemporal dimension. What is likely to Lack of systematic data makes it difficult to ascertainhave happened to the incidence of transfers during the whether this approach has improved the distribution oftransition that occurred between 1989 and 1991? This subsidies across income groups, as theory suggests itpart of the research is promising but must be explor- should. To assess whether the reforms have improvedatory because the quality of the panel data is not yet the incidence of food subsidies-by channeling a largerknown. share of the money spent on the program to the poor-

Responsibility: Policy Research Department, Poverty this research project is conducting a survey of aboutand Human Resources Division-Emmanuel Jimenez. 1,000 households, both rural and urban, that were in-With Donald Cox, Boston University; W. Okrasa, Social cluded in the 1990 Household Expenditure Survey. TheScience Research Council, Poland; and the Polish Cen- survey includes both quantitative and qualitative ques-tral Statistical Office. tions on the consumption of subsidized foods.

Completion date: February 1994. The study will also look at the practical issues in-volved in implementing a self-targeted program usingquality differentiation. The findings will help Tunisian

Innovative Self-Targeting Techniques: policymakers fine-tune the program and provide in-Do They Improve Incidence? sight to other countries implementing self-targeting

reforms.Ref. no. 678-14 Responsibility: Middle East and North Africa, Coun-

Targeting is sometimes used in poverty alleviation try Department I, Agricultural Operations Division-programs to reduce leakage to the nonpoor and concen- Laura Tuck. With Kathy Lindert. The Tunisian Nationaltrate expenditures on those with the greatest need. Yet Statistics Office is conducting the survey.targeting also entails costs: the administrative costs of Completion date: December 1993.screening beneficiaries and of preventing fraud, forexample. In food programs common targeting tech-niques, such as food stamps, rely on individual assess- Rural Poverty and Agriculture in Mexicoment (such as means-testing) or group assessment (suchas geographic location) to distinguish between the needy Ref no. 678-23and the nonneedy. There has been a dearth of information about rural

An alternative method is self-targeting. A self-tar- poverty in Latin America, particularly in Mexico. Thisgeted program makes subsidized food products avail- project, the first part of a two-part study on poor farmersable to all, but is designed to discourage higher-income in Mexico, is focusing on the agricultural aspects of ruralgroups from consuming them. In this approach subsi- poverty because a majority of the rural poor earn theirdies are placed on foods--such as "inferior" goods- living from agriculture. The project's main objective isconsumed primarily by the poor. The difficulty is in to characterize the rural poor using farm productionidentifying the appropriate foods to carry heavy subsi- decisions, land rights, household characteristics, anddies. The local dietmay include no "inferior" goods, and external factors, among other things. This work will

22


draw on the results of a previous survey of farmers and interest, and compare these changes with those of sociala resurvey of a subsample of the same farmers. The aim indicators.is to identify the most important constraints facing poor The study's findings will be reported in a paperfarmers, as compared with farmers in general, and to slated for presentation at the 1994 American Economicadvance the understanding of the rural poor. The study Association meetings in Boston.will also draw comparisons between the characteristics Responsibility: South Asia, Country Department III,of the rural poor and those of the urban poor. Office of the Director--Paul Isenman; and Policy Re-

The study will address farm production and resource search Department, Poverty and Human Resourcesmanagement decisions in the context of constraints Division-Paul Glewwe.facing optimal decisions. This pilot study will also pro- Completion date: October 1994.vide evidence of the feasibility of the second phase byperforming a preliminary econometric analysis of thefarmers across two agricultural years. Pakistan Integrated. Household Survey

The goal of the second phase will be to assess the Projectflexibility or responsiveness of poor farmers to thechanges in economic incentives that have arisen from The Poverty Analysis and Policy Division, in collabo-sectoral reforms, as well as to the changes that may stem ration with Pakistan's Federal Bureau of Statistics (FBS),from the impending free trade agreement with the has undertaken a broad-based household survey de-United States and Canada. The second phase will allow signed primarily to help assess the impact of policyconclusions to be drawn about the relative effects of initiatives on women, the poor, and other vulnerablealtering or removing the constraints facing poor farm- groups in Pakistan. The impetus for the project comesers, and make suggestions for improving these reforms. from a concern shared by the government of Pakistan

Responsibility: Policy Research Department, Trade and the donor community that many issues raised inPolicy Djivision-John Nash. With Ramon Lopez and recent development plans could not be adequately ad-Julie Stanton, University of Maryland; and Felix Velez, dressed with existing information. These issues includeInstituto Technologico Autonomo, Mexico City. reducing poverty and expanding basic services, lit-

Completion date: December 1993. eracy, and school enrollment; improving women's well-being and economic status; reducing malnutrition andinfant mortality; and expanding small and household-

World Bank and UNDP Strategies based enterprises and rural off-farm employment. Byfor Reducing Poverty: Comparisons providing the database necessary for in-depth analysesin South and East Asia of these issues, the project will help policymakers to

design sectoral policies and programs more effectively.Ref. no. 678-36 It is particularly timely given Pakistan's need to curtail

The World Bank has recommended that poverty republic expenditures in the face of increasingly tightduction policies follow a two-pronged approach: promo- fiscal constraints. A set of policy studies designed aroundtion of general economic growth, and special programs to basic development issues forms an integral part of theincrease human capital formation and provide safety nets Pakistan Integrated Household Survey (PIHS) project.to vulnerable groups. The UNDP likewise recommends a The PIHS uses an integrated questionnaire format,two-pronged strategy of growth and meetingbasic needs, innovative field techniques developed under the aus-but emphasizes the second. A perception persists among pices of the Living Standards Measurement Studysome observers that the World Bank approach is another (LSMS), extensive trainng and supervision of field staff,name for "trickle-down" economic policies. and a computer-based data management system de-

This research will investigate whether that character- signed to improve data quality and reduce the timeization is a fair one. Focusing on two or three Asian between the collection of raw data and their use incountries that have had very different experiences in the policy analysis. The initial phase of the project, in whichpast 30 years-Pakistan, Sri Lanka, and perhaps Malay- policy objectives were defined and the survey was pre-sia-the study will clarify the issues and assess whether pared, was completed in December 1990. A comprehen-the differences in the World Bank and UNDP policy sive one-year survey measuring the social and eco-recommendations are as big as some have claimed. It nomic attributes of households and communities waswill update and modify cross-sectional regressions to completed in December 1991, and initial tabulationsput previous such exercises in proper perspective. And from the survey (the PIHS Statistical Abstract) wereit will look at changes in income and expenditure pov- circulated in April 1992. The abstract provides a com-erty over time in two or three countries of particular prehensive picture of the social and economic status of

23


households in Pakistan. Studies were undertaken in the Yonas Biru. The United Nations, OECD, EUROSTAT,areas of poverty reduction, determinants of fertility and the Austrian Central Statistics Office have partici-outcomes, schooling, and the economic role of women. pated in the research.

The third phase of the PIHS project has three major Completion date: September 1993.components: (1) training for FBS staff, (2) a program ofpolicy studies and research, and (3) three years of datacollection, with a shift in emphasis from developing a A Volume on Subsidies Researchdatabase designed for broad program and policy analysisto expanding the data base in order to monitor changes in Despite generally impressive progress in reducingpoverty and important development indicators. The pub- poverty over the past 30 years, the persistence of wide-lication of a set of quarterly social and development spread poverty and its correlates presents a challenge toindicators based on the new survey is proposed. governments and development institutions alike. The

Responsibility: Policy Research Department, Poverty need for cost-effective poverty reduction strategies hasand Human Resources Division-Emmanuel Jimenez taken on special urgency in recent years as budgetand ValerieKozel. With Eshya Mujahid-Mukhtar; Sarnia constraints have tightened. As a result, interest in theRaoof Ali; Akbar Noman; Salman Zaidi; Kamran Ali; concept of targeting government spending toward theGhazala Mansuri; Sohail Agha; Shanaz Kazi, PIDE; poor has grown. Likewise, there is heightened interestHelen Garcia; and Juan Mufioz and Beatrice Godoy, in the distributional impact of government spendingSistemas Integrales. The Federal Bureau of Statistics, and the effect of public programs on the welfare of thePakistan, is contributing staff time, and the UNDP poor in terms of particular outcomes (health status,(Islamabad) and the USAID are providing financial consumption, and so on).support. This project aims to respond to the widespread and

Completion date: June 1993. growing interest in these topics-and the importance ofunderstanding these issues for effective poverty allevia-tion. The research, which comprises both theoretical

International Price Comparisons of Items and empirical studies, concerns public expenditure ben-of Basic Needs efit incidence; the effectiveness of public spending (from

a poverty alleviation perspective); and the role andMany analysts prefer to compare poverty lines ex- scope for better targeting of public spending toward the

pressed in national currencies on the basis of values poor. Some of the studies use primary data, particularlyconverted to a common currency by purchasing power from household surveys, and others survey the litera-of currency (PPC) rates (for example, World Development ture. A number of the empirical studies use econometricReport 1991) rather than exchange rates. In the absence estimation to address their research questions; othersof appropriate information, the practice is to use PPC use noneconometric techniques such as benefit inci-rates for consumption as conversion factors. A more dence analysis to explore the distribution of govern-appropriate conversion factor would be one that re- ment subsidies and other issues.flects the relative prices of the basic needs items that The research highlights the following points: Mea-poor people normally purchase. suring the distributional impact of the benefits from

This study uses detailed price and expenditure data public spending and determining the effectiveness ofproduced by the United Nations International Com- targeted programs and their targeting mechanisms inparison Program (ICP) to analyze relative prices for alleviating poverty are extremely complex. The desir-different sets of items and estimate international price ability of alternative instruments must be decided on aindices for basic needs items. The research involves case-by-case basis. In particular, the usefulness of tar-defining analytically the criteria for choosingbasic needs geting must be evaluated in the context of each policyitems, selecting them from the ICP data base, and com- environment, ideally on the basis of the relevantputing PPC rates for different sets of countries at differ- counterfactual. Among many other factors, the behav-ent points in time. ioral responses of participants and others must be taken

Preliminary findings indicate that PPC rates for neces- into account when designing and evaluating antipov-sities are often higher than those for consumption or GDP erty programs; a number of the studies demonstrateand that use of the new estimates may alter our views that these responses can have a large effect on theabout the relative well-being of poor people in different poverty alleviation potential of different schemes.countries with comparable levels of per capita income. The research was presented at a World Bank confer-

Responsibility: International Economics Department, ence in June 1992 and is expected to be published in aSocio-Economic Data Division-Sultan Ahmad and forthcoming book.

24


Responsibility: Policy Research Department, Public generally rising poverty incidence in Latin America andEconomics Division-Dominique van de Walle. With Africa, and generally falling incidence in Asia. PovertyKimberly Nead. The Ministry for Development Coop- increased in about one-third of the countries.eration of the Netherlands is contributing funding to Preliminary results were used in Implementing thethe research. World Bank's Strategy to Reduce Poverty: Progress and

Completion date: December 1993. Challenges (World Bank, Washington, DC, 1993). TheReport: results have also been used in recent World Development

van de Walle, Dominique, and Kimberly Nead, eds. Forthcom- Reports. Work on linking the data to social indicatorsing. Public Spending and the Poor: Incidence and Targeting. and access to public services is in progress.

Responsibility: Policy Research Department, Povertyand Human Resources Division-Martin Ravallion,

World Poverty Monitoring Gaurav Datt, and Shaohua Chen.Completion date: June 1994.

Is poverty increasing in the developing world? This Reports:question is surprisingly difficult to address convinc- Anand, S., and Martin Ravallion. 1993. "Human Developmentingly using existing data sources because little effort has in Poor Countries: On the Role of Private Incomes versusgone into compiling and analyzing the available distri- Public Services." Journal of Economic Perspectives (Winter).butional data on a reasonably comparable basis. Yet Chen, Shaohua, Gaurav Datt, and Martin Ravallion. 1993. "Isthere is a clear need to do so-to help monitor progress Poverty Increasing in the Developing World?" Policyin reducing poverty and as a first step toward under- Research Working Paper 1146. World Bank, Policy Researchstanding the causes and effects of changing distribu- Department, Washington, DC.tion. This project aims to monitor progress in reducing Ravallion, Martin, Gaurav Datt, and Dominique van de Walle.aggregate poverty using a consistent compilation of 1991. "Quantifying Absolute Poverty in the Developingdistributional data from household surveys. World." Review of Income and Wealth (December).

Estimates of various poverty measures are availablefrom numerous studies of individual countries, buttheir use for monitoring world poverty is questionable Public Expenditures and Povertybecause of comparability problems. Past work at thecountry level has used poverty lines appropriate to each Public expenditure programs play an important rolecountry. But there is a marked tendency for the real in poverty alleviation, income redistribution, and safetyvalue of local poverty lines to increase with the average net provision in many countries. The past 10 years haveincome of a country. This fact clouds attempts to com- seen tremendous advances in the use of household-pare and aggregate across countries using the poverty level data sets to explore a vast array of issues relating todata available in standard (secondary) sources. The use public expenditures as access to good data has mark-of official exchange rates also biases international pov- edly improved, at least for some countries.erty comparisons. This project therefore turns to the This research aims to develop and use econometricprimary data sources and reestimates all poverty mea- techniques on household-level data sets to learn moresures on a consistent basis. Local currencies are con- about the wide range of factors underlying the inci-verted to constant purchasing power parity. The project dence of public expenditures and, where feasible, aboutis also taking care to test the robustness of comparisons dynamic issues in incidence and social income provi-across regions and over time to measurement assump- sion. The research also aims to improve on the standardtions. To date, there are 40 countries in the data set, with methodology for public expenditures incidence work.18 at two points in time over the period 1981 to 1991. And the research will explore the closely related issue of

The estimates indicate that around 1990 more than fiscal federalism and countries' revenue-collecting andone billion people-roughly one in three-were living other constraints-constraints that can have conse-on less than a dollar a day. The incidence of absolute quences for poverty and inequality.poverty in the developing world as a whole remained The project has recently completed part of a study onstatic during the second half of the 1980s. With the dynamic issues in incidence using new panel data oncumulative distribution of consumption changing only consumption and social incomes from the Hungariannegligibly, the number of poor-by any consumption Household Budget Surveys of 1987 and 1989. The studystandard for defining what "poor" means-has been reviews Hungary's social safety net and the changesgrowing at the same rate as the aggregate population of that occurred during the period of study. It attempts tothe developing world, about 2 percent a year. But there throw light on such questions as: How have the reformsis marked variation among regions and countries, with instituted so far performed? How has the incidence of

25


social spending been affected? What are the implica- and the government, education and health personnel,tions for future reform? pensioners, single parents, and so on. This is not the

While social incomes are redistributive-they ac- "residual poverty" found in most other countries. Thecount for higher shares in the consumption of the poor social implications of the changed composition of pov-than in that of the rich-they are not well targeted. In erty must not be overlooked.both survey years the richest group received more than This research will focus on the two most importanttwice the social income of the poorest. Disaggregating new developments: the emergence of unemployment,social incomes shows that targeting performance differs and open poverty (related only in part to unemploy-between components: family allowance receipts de- ment). Until recently, the institutional framework re-crease sharply as the standard of living increases; the quired to deal with these phenomena has been lacking,opposite is true of pensions. and substantial institutional adjustments are required.

The study also attempts to distinguish policy impacts The study will attempt to answer the following ques-on persistent poverty from transient poverty. To do so it tions:uses a new approach in which consumption changes * What social and professional groups have ben-overtime are simulated with and withoutpolicy changes, efited most from the change?allowing for behavioral responses. Poverty increased * Who are the losers?over the period, and would have increased even more if * What happened to the overall income inequality?not for the gains in social income that protected many * Who are the new poor?households from poverty. Almost all of the safety net's * What is the relationship between unemploymentability to protect the poor is found to be due to higher and emerging poverty?average outlays rather than improved targeting. * How did wage distribution change?

The project plans case studies on Viet Nam's public * What types of skills have become obsolete?spending, and possibly Tunisia's, from the pointof view * Should unemployment benefits be open-ended?of the poor. Another case study will examine the distri- * Should early retirement for those with obsolescentbutional impact of public expenditures in India, at the skills be encouraged?level both of center-state fiscal relations and of house- * Is universal welfare a financially feasible alterna-holds' access to public services. tive, and, if so, can such support be delivered with the

A workshop on the research was held July 21, 1993, in existing social infrastructure?Budapest, with 30 participants from universities and Transition from socialism to capitalism is a historicalgovernment ministries. experiment without precedent. Only a priori judgments

Responsibility: Policy Research Department, Public about changes in the above elements can be made. FewEconomics Division-Dominique van de Walle and empirical studies on these issues exist, in part becauseSanjay Pradhan. the change is so recent. The purpose of this study is to fill

Completion date: March 1995. these lacunae.Reports: The study is organized in three parts. First, it will

Ravallion, Martin, Dominique van de Walle, and Madhur produce an overview of the social policy and socialGautam. 1993. "Testing the Social Safety Net: A Dynamic- achievements at the end of the socialist period. Second,Behavioral Analysis for Hungary." World Bank, Washing- it will conduct empirical studies of the changes thatton, DC. have occurred since, looking both at the actual out-

van de Walle, Dominique, Martin Ravallion, and Madhur comes (poverty, wage levels, unemployment, incomeGautam. 1993. "Poverty and Social Spending in Hungary." distribution) and at the new policies designed to dealWorld Bank, Washington, DC. with the problems (unemploymentbenefits, divestment

by enterprises of their social support role, and so on).Third, the research will analyze the key problems

Welfare during the Process of Transition and use cross-country analysis to draw lessons both forBank policy and for policymakers in reforming coun-

As income distribution becomes more unequal and tries. The mostimportantissues are the following: Shouldincomes decline in Eastern Europe and the former So- universal welfare benefits be introduced? Is means-viet Union, poverty increases. A new type of poor has testing possible if income levels are difficult to gauge? Isappeared. Because of the general slide in incomes large self-targeting (for example, through public works) anchunks of the population, including the middle class, alternative? Should unemployment insurance be intro-become poor. The new poor include not only unem- duced in all countries?ployed urban workers, but many employed but badly The project uses data published by the countries'paid skilled workers, administrative staff in enterprises statistical offices. It combines descriptive and analytical

26


approaches (testing a number of hypotheses) and uses * Wage distribution, fairly egalitarian under com-the technical approaches derived from the analysis of munism, shows some signs of becoming more unequal.Gini and concentration coefficients. * The main beneficiaries of the transition appear to

The project's analysis of income distribution at the be those with strong private sector orientation and skillsend of communist rule in the five Eastern European in high demand in the market economy, such as manag-countries has produced some preliminary findings: ers, accountants, and economists.

* Incomedistributioninsocialistcountrieswasfairly * The main losers are most industrial workers andegalitarian, with little difference in average incomes mid-level clerical staff.among social groups. Responsibility: Policy Research Department, Transi-

* Farmers tended to enjoy incomes at least at parity tion and Macro-Adjustment Division-Brankowith those of urban workers. Milanovic, Carlos Cavalcanti, and Victor Gabor. With

* Urban workers were most affected by the eco- Rutkowska; Carol Graham, Brookings Institution;nomic decline as their income plummeted in the past Alistair McAuley, Essex University, U.K.; LuisaFerreira;five to 10 years. and Nanak Kakwani, University of New South Wales.

* A higher share of the private sector in the economy Completion date: June 1995.is associated with greater inequality in income distribu- Reports:tion. Graham, Carol. Forthcoming. "The Political Economy of Safety

* Social transfers have no redistributive function Nets during Market Transitions: The Case of Poland." Inbecause they are almost uniform across income groups. Carol Graham, ed., Democracy, Markets, and the Poor: New

* Direct taxes are both small and broadly propor- Coalitions for Economic Reform. Washington, DC: Brookingstional to income. Institution.

In looking at the first effects of stabilization in Po- Milanovic, Branko. Forthcoming. "Income Distribution in Lateland, the research found the following: Socialism: Poland, Hungary, Czechoslovakia, Yugoslavia,

* The real wages of urban workers declined more and Bulgaria Compared." Journal of Comparative Economics.than the incomes of other social groups. _. Forthcoming. "The Social Costs of Transition to Capital-

* Unemployment increased most among middle- ism: Poland 1990-91." In Alan Taylor and Alfred Schipke,income classes. eds., Transition to a Market Economy. Springer.

27

PRIVATE SECTOR DEVELOPMENT

AND PUBLIC SECTOR MANAGEMENT

Industrial Reforms and Productivity hypotheses and issues relating to the effect of specificin Chinese Enterprise reforms that are being empirically investigated, using

the firm-level data, are as follows:Ref. no. 675-38 * The nature of management contract systems (and

The objective of this research is to identify and ana- there are half a dozen of these) under which an enter-lyze the factors affecting the productivity and the effi- prise operates has a significant effect on the level andciency of Chinese enterprises and to evaluate the impact growth rates of total factor productivity.of industrial reforms in China. This activity is particu- * The type of ownership under which an enterpriselarly valuable because it will assess the effect of ongoing operates (state-owned, collective, and town-village en-reforms in the industrial sector. The project also aims to terprises) has a significant effect on the level and growthincrease the research capacity of the collaborating Chi- rates of total factor productivity.nese institutions. * The greater the freedom to lay off and recruit

The project seeks to answer several research and workers that is granted to an enterprise under laborpolicy questions: To what extent and in what industries market reforms, the greater the total factor productivity.has reform increased total factor productivity? Why do * The relative efficiency of capital is related to theproductivity, growth, and efficiency differ among dif- source ofinvestmentfinance(governmentbudgets,bankferent types of enterprises, and how can the difference loans, or retained earnings).be accounted for? How do different policies influence * The degree of domestic market competition isthe production and investment behavior of enterprises? positively related to the levels and growth rates of total

The project uses enterprise-level panel data sets for factor productivity.up to 1,200 firms in China for the period up to 1989, and * The degree of openness to foreign trade-as mea-for 1,500 firms for 1990, to analyze issues relating to the sured,first,bygreateraccesstoforeignexchangethroughbehavior of industrial enterprises. The data cover all higher retention rates and, second, by a lower percent-branches of industry, types of ownership, and sizes of age of exports and imports through government foreignfirms, and will allow a detailed comparative analysis of trade corporations-is positively related to the level andchanges in productivity. The data sets were obtained growth rates of total factor productivity.from three collaborating institutes: the Institute of Eco- * Over time, there will be a convergence of factornomics for the Chinese Academy of Social Sciences (IE returns among industries as evidence of the increasingat CASS), the Research Center for Rural Development of role of factor and product markets.the State Council (RCRD), and the Economic Systems * The incidence of product innovation is positivelyReform Institute (ESRI). related to the degree of domestic and foreign competi-

The first phase of the project focused on data collection.tionand organization. The firstresurvey was carried out The project has produced 22 working papers, a num-during the fall of 1990 and was designed to update all ber of which have been published in journals or editedthe existing survey data to 1989. But the existing data volumes, and an edited volume of 16 contributed pa-did not have enough observations on collectives and pers. Informal workshops will be held throughout thetown-village enterprises, and data on some key indus- project to discuss the research findings.trial branches, especially heavy industry, were missing. Responsibility: Policy Research Department, Transi-To correct these shortcomings, a unified survey was tion and Macro-Adjustment Division-Inderjit Singh,designed with the assistance of the collaborating insti- Alan Gelb, and Dilip Ratha; East Asia and Pacific, Coun-tutes. This survey, which was carried out in June 1991, try Department II, Office of the Director and Countryupdated industrial information for 1,000 enterprises up Operations Division; and Research Advisory Staff-to 1990, including 500 new enterprises (in place of 400 Shahid Yusuf. With V. K. Chetty, Indian Statistical Insti-enterprises that had reported implausible data). tute; Gary Jefferson and A. Lewel, Brandeis University;

The remainder of the project will focus on empirical Wenyi Xu, Brandeis University and Wuhan University;analysis of these data sets. Examples of several key Thomas Rawski, University of Pittsburgh; Richard Day,

28

Private Sector Development and Public Sector Management

University of Southern California; Zvi Griliches; Lin . 1991. "Industrial Restructuring in Socialist Economies inQinsong, RCRD; and ZhangXeujun. The Chinese Acad- Transition: Some Preliminary Observations." World Bank,emy of Social Sciences, the Research Center for Rural Country Economics Department, Socialist Economies ReformDevelopment of the State Council, and the Economic Unit, Washington, DC.Systems Reform Institute are contributing staff time. Singh, Inderjit, Geng Xiao, and Dilip Ratha. "Non-State

Completion date: June 1994. Enterprises as an Engine of Growth: An Analysis ofReports: Provincial Industrial Growth in Post-Reform China."

Chen, Kang. 1992. "The Failure of Recentralization in China: Xiao, Geng. 1990. "The Impact of Property Rights Structure onInterplays among Local Governments and the Center." In Productivity, Capital Allocation, and Labor Income inArye Hillman and Branko Milanovic, eds., Transition from Chinese State and Collective Enterprises." World Bank,Socialism in Eastern Europe: Domestic Restructuring and Foreign Country Economics Department, Washington, DC.Trade. Washington, DC: World Bank. _. 1991. "The Economic Role of Chinese Central and Local

Chen, Kang, Lnderjit Singh, and Gary H. Jefferson. 1992. Governments: Challenges and Opportunities from the State"Lessons From China's Economic Reform." Journal of and Non-State Industrial Enterprises." World Bank, CountryComparative Economics 16 (2):201-25. Economics Department, Washington, DC.

Fan, Qimiao, and Mark E. Schaffer. 1990. "Enterprise Reforms in _. 1991. "Managerial Autonomy, Fringe Benefits, andChinese and Polish-Owned Industries." Ownership Structure: A Comparative Study of Chinese State

Gelb, Alan, Gary Jefferson, and Inderjit Singh. "Can Communist and Collective Enterprises." World Bank, Country Econom-Economies Transform Incrementally?" ics Department, Washington, DC.

Hsueh, Tien-tung, Thomas G. Rawski, and Kai-yuen Tsui. "The _ . 1991. "Property Rights Arrangements and IndustrialImpact of Reform on China's State Industry: A Regional Productivity in China." World Bank, Country EconomicsPerspective." Department, Washington, DC.

Jefferson, Gary H. 1991. "Decomposing Sources of Changes in _. 1991. "What is Special about China's Reforms?" Worldthe Dispersion of Factor Returns: An Evaluation of Chinese Bank, Country Economics Department, Washington, DC.Industry."

Jefferson, Gary H., and Thomas G. Rawski. 1992. "A Theory ofEconomic Reform." Intellectual Property Rights Protection

Jefferson, Gary H., Thomas G. Rawski, and Yuxin Zheng. 1992. and Technology Transfer through Foreign"Growth, Efficiency, and Convergence in China's State and Direct InvestmentCollective Industry." Economic Development and CulturalChange 40(2):239-66. Ref. no. 676-19C

. 1992. "Innovation and Reform in Chinese Industry: A This research project was concerned with the effectsPreliminary Analysis of Survey Data." of intellectual property rights protection on technology

Jefferson, Gary H., and Inderjit Singh, eds. Forthcoming. China's transfer through foreign direct investment. AccordingIndustrial Enterprises: Performance in the Transition. to many observers, multinational firms are unlikely to

Jefferson, Gary H., and Wenyi Xu. 1991. "Assessing Gains in transfer their newest or most effective technologies toEfficient Production among China's Industrial Enterprises." countries with weak systems of intellectual propertyPolicy Research Working Paper 877. World Bank, Country rights protection. And they are less likely to invest at allEconomics Department, Washington, DC. in such countries than in those with stronger protection

. 1991. "The Impact of Reforms on Social Enterprises in of such rights. But there has been little or no empiricalTransition: Structure, Conduct, and Performance in Chinese analysis to test whether these hypotheses are correct,Industry." Journal of Comparative Economics 15:45-64. and, if so, to estimate how much strong protection of this

Rawski, Thomas G. 1991. "How Fast Has Chinese Industry sort affects technology transfer. The purpose of thisGrown?" study was to shed new light on these topics.

. 1992. "Progress without Privatization: The Reform of A three-part empirical study was carried out. First,China's State Industries." interviews were conducted with executives from a se-

. "An Overview of Chinese Industry in the 1980s." lected sample of major multinational firms to seewhether,Rawski, Thomas G., and Gary H. Jefferson. 1992. "A Theory of according to these firms, intellectual property rights

Economic Reform." Brandeis University, Waltham, Mass.; protection has a significant effect on foreign direct in-University of Pittsburgh, Pittsburgh, Penn. vestment. Second, the research sought to identify the

Singh, Inderjit. 1991. "China and Central and Eastern Europe: Is key differences between the systems of protection thatThere a Professional Schizophrenia on Socialist Reform?" are said by particular kinds of firms to be acceptable, andWorld Bank, Country Economics Department, Washington, the systems of protection that are said to be unaccept-DC. able. Third, the research tested whether the nature of a

29


country's system of intellectual property rights has had institutional arrangements, regulatory rules, and thea measurable effect on the amount of direct investment sustainability of reform. It examined the question ofin that country by various kinds of U.S. firms. whether-and if so, how-institutional arrangements,

Responsibility: Economics Department, International regulatory rules, and the sequencing of privatizationFinance Corporation-Guy Pfeffermann. With Edwin and regulatory reforms should differ for countries withMansfield. different institutional endowments. And it examined

Completion date: April 1993. how technological change and regulation affect eachother, and how technological change affects thesustainability of reform.

Regulations, Institutions, and Economic The research completed suggests that sustained pri-Efficiency vate investment in utilities will take place only if the

"basic engineering" foundations of a regulatory systemRef no. 676-94C are in place. Only then will there be credible commit-

Regulatory reforms to promote efficient private sec- ment to a set of rules that protect private investorstor participation have been introduced in many indus- against arbitrary administrative actions and societytrial and developing countries, but there is still only against regulatory capture.limited empirical knowledge about what determines AnApril 1993 conference inWashington, DC, broughtwhether such reforms succeed. This research, built on together Bank staff and academics working on telecom-the new "institutional economics," investigated how munications, power, and water, as well as on privatiza-regulatory reforms promote efficient private sector par- tion and regulation more broadly, to discuss the re-ticipation in developing countries and what is neces- search results. The theme of the conference was the needsary to ensure that the reforms are successful. to move beyond theoretical rules of pricing and compe-

The research compared the regulatory experiences tition and ideal models of regulatory structures to de-of five countries in the telecommunications sector, a sign regulatory systems that fit a country's institutionssector whose mix of monopolistic and competitive ac- and provide credible commitment to private investors.tivities and pace of technological change present di- Countriesthatlackstronginstitutionalfoundationsmayverse and complex regulatory issues. The countries have to settle for less efficient approaches if their regu-studied, which include Chile, Jamaica, the Philippines, latory system as a whole is to be workable.and the United Kingdom, have a wide variety of regu- The research identified four distinct approaches tolatory experiences and institutional capacities. regulation, ranked from most demanding to least de-

The country case studies looked in detail at the manding in their requirements of domestic institutions:institutional arrangements for regulation (for example, * Open-ended regulatory systems that delegate dis-the relationships between policymakers, regulatory au- cretionary power to independent regulators (for ex-thorities, and firms, and the mechanisms for conflict ample, the United Kingdom)resolution), and the content of regulatory rules-the * Regulation based on complex, specific rules thatareas commonly addressed in standard, operationally provide regulated utilities with strong incentives tooriented approaches. operate efficiently (for example, benchmark regulation

This research also went beyond the standard ap- in Chile)proach, however, by examining institutional arrange- * Regulation based on simple, specific rules thatments and regulatory rules in a richer, more complex set provide adequate restraints against arbitrary adminis-of interrelations. First, it highlighted the relation be- trative action or capture, but at some efficiency loss (fortween the sustainability of the regulatory regime and example, Jamaica)the sector's performance, and explored the ways in * International guarantees against noncommercialwhich institutional arrangements and regulatory rules risk as a potential alternative for countries that lack thecan influence sustainability. And second, unlike the domestic institutions to put in place any workable regu-standard approach, which typically treats institutional latory system.arrangements and regulatory rules as exogenous vari- As two disastrous earlier episodes in Chile and Ja-ables that policymakers can shape with relatively few maica suggest, private investment in utilities is unlikelyconstraints, this research treated sustainability, institu- to be sustained in countries in which the "fit" betweentional arrangements, and regulatory rules as endog- regulatory systems and domestic institutions is bad.enous variables whose characteristics are influenced by With this kind of mismatch, efforts at privatization maya country's institutional endowment. end in disappointment, recrimination, and demands for

To produce lessons with practical application for renationalization.countries planning regulatory reform, the research tested Responsibility: Policy Research Department, Financea number of hypotheses about the relations among and Private Sector Development Division-Brian Levy,

30


Ahmed Galal, and Alice Hill; and Asia Technical De- behavior in the industrial sector: (1) growth, productiv-partment, Industry, Trade, and Finance Division-Bjorn ity, and efficiency of industrial enterprises; (2) indus-Wellenius. With Pablo Spiller, University of Illinois; and trial employment, labor market adjustment, and behav-Hadi Esfahani. ior of enterprises; (3) the effect of changes in corporate

Completion date: June 1993. governance and of privatization on enterprise perfor-Reports: mance; (4) fiscal and financial aspects of firm behavior

Esfahani, Hadi Selehi. 1993. "Regulations, Institutions, and and their relationship to macroeconomic stability; (5)Economic Performance: The Political Economy of the development of a theory of firm behavior in the transi-Philippines' Telecommunications Sector." tion; and (6) comparative experience and lessons from

Galal, Almed. 1993. "Regulation, Commitment, and Develop- reforms in different settings.ment of Telecommunications in Chile." The research is tracking reforms over a period of four

Hill, Alice, and Manuel Angel Abdala. 1993. "Regulation, years and evaluating their effect on industrial enter-Institutions, and Commitment: Privatization and Regulation prises. Analytical studies are being carried out to shedin the Argentine Telecommunications Sector." light on the effect of economic reforms on enterprise

Levy, Brian, and Pablo T. Spiller. 1993. "Regulation, Institutions, behavior and response. Data on more than 5,000 firms inand Commitment in Telecommunications: A Comparative each country for 1980-90 and 1991-94 will be used toAnalysis of Five Country Studies." estimate parameters for the levels and rates of change of

Spiller, Pablo T., and Cezley I. Sampson. 1993. "Regulation, such performance indicators as output, sales, employ-Institutions, and Commitment: The Jamaican Telecommuni- ment, profitability, indebtedness, and total factor pro-cations Sector." ductivity and the components of technical and alloca-

Spiller, Pablo T., and Ingo Vogelsang. 1993. "Regulation, tive efficiency of firms across industries, regions, andInstitutions, and Commitment: The British Telecommunica- countries. These will then be related to key changes intions Sector." institutional characteristics (ownership, management,

and market competition) and in economicpolicies (trade,prices, taxes, subsidies, and exchange rates) to measure

Enterprise Behavior and Economic the impact of key reforms and address some of the keyReform: A Comparative Study hypotheses listed above.in Central and Eastern Europe Finally, the research will attempt to develop theories

of enterprise behavior during the transition to a marketRef. no. 676-99 economy and test them using stylized facts developed

The Czech Republic, Hungary, Poland, and Slovakia from information drawn from the analytical results andare undertaking bold reforms as they move toward the case studies of enterprises carried out in an earliermarket economies based on a system of private property phase of the research. The project is designed to permitrights. Their transition is likely to be difficult for several some comparisons with parallel studies on China. Thereasons. Factor markets are underdeveloped, owner- research will focus on firm-level adjustments and re-ship rights and legal and commercial institutions are sponses and will try to isolate the effects of privatiza-lacking, and there are tensions between the objectives of tion. Differences in policy among the countries willstructural change (requiring increased investments) and help-through cross-country comparison-in under-those of stabilization (requiring tight credit). At the standing the relation between reform programs andsame time, these countries are being subjected to exter- firms' responses.nal economic shocks-such as the collapse of the Coun- The project will complement this analytical, econo-cil for Mutual Economic Assistance (CMEA) trading metric work with two additional research efforts. First,system, which has forced firms to find non-CMEA sup- it will carry out additional annual case studies of 12 to 15pliers and to compete in international markets. firms in each country, focusing on firms'decisionmaking

How industrial enterprises are responding and what in an effort to understand their adaptation to the newlyis happening to their performance, viability, productiv- emerging policies and market environment. And sec-ity, and. efficiency are crucial questions on which the ond, it will conduct surveys of more than 200 firmssuccess of the reforms will depend. This research aims to representative of the manufacturing sectors in the Czechcontribute to the understanding of this adjustment and Republic, Hungary, and Poland to augment the infor-response-an understanding essential for policymakers mation on enterprise behavior gathered in the project'sguiding the reform process. first phase with data on property rights and other insti-

The research is using firm-level data obtained from tutional factors relating to reforms-data that are un-the central statistical oganizations of the Czech Repub- available through statistical offices. The impact of, andlic, Hungary, Poland, and Slovakia to explore six major response to, new policies and systemic reforms arethematic areas relating to enterprise adjustment and difficult to assess using macroeconomic data; the sur-

31


veys will permit the study to more directly relate enter- Johnson, Simon, Heidi Kroll, and Mark Horton. Forthcoming.prise-specific information about institutional changes "New Banks in the Former Soviet Union: How Do Theyand specific reforms to enterprise performance. Operate?" In Anders Aslund and Richard Layard, eds.,

Responsibility: Policy Research Department, Transi- Reforming the Russian Economy.tion and Macro-Adjustment Division-Inderjit Singh Jorgensen, Erika A., Alan Gelb, and Inderjit Singh. 1990. "Theand Alan Gelb; and Europe and Central Asia, and Behavior of Polish Firms after the 'Big Bang': Findings fromMiddle East and North Africa Regions. With Joseph a Field Trip." World Bank, Country Economics Department,Brada, Arizona State University; Mark Schaffer, Lon- Washington, DC.don School of Economics; Jan Svejnar, University of Lehmann, Hartmut, and Mark E. Schaffer. 1992. "Productivity,Pittsburgh; Saul Estrin, London Business School; Employment and Labor Demand in Polish Industry in theStanislaw Gomulka, London Schoolof Economics; Adam 1980s: Some Preliminary Results from Enterprise-levelTorok; Jana Matesova; and Marek Belka. Collaborating Data." London School of Economics.in the project are the Research Center of Central Plan- Schaffer, Mark E. 1992. "The Enterprise Sector and Emergencening, Poland; Research Institute of Industrial Econom- of the Polish Fiscal Crisis, 1990-92."ics at the Hungarian Academy of Sciences, Hungary; - . 1992. "The Polish State-Owned Enterprise Sector and theCenter for Economic Research and Graduate Education Recession in 1990." Comparative Economic Studies (April).at Charles University, Czech Republic; Czechoslovak Singh, Inderjit. 1991. "China and Central and Eastern Europe: IsManagement Center, Czech Republic; London Business There a Professional Schizophrenia on Socialist Reform?"School; Universidade Catolica Portuguesa, Portugal; and . 1991. "Industrial Restructuring in Socialist Economies inReforme et Ouverture des Systemes (post) Economiques Transition: Some Preliminary Observations." World Bank,at the University of Paris. The central statistical offices of Country Economics Department, Washington, DC.the Czech Republic, Hungary, Poland, and Slovakia are Torok, Adam. 1993. "Hungarian Industry and the Economiccollaborating in the provison of data. Transition: A Survey."

Completion date: December 1993.Reports:

Brada, Josef C. 1993. "Breaking Up is Hard to Do: The Econom- Business and Consumer Servicesics of Creating Independent Czech and Slovak Republics." as a Growth-Promoting Sector

Brada, Josef C., and Arthur E. King. 1991. "Sequencing in the Former Soviet UnionMeasures for the Transformation of Socialist Economies toCapitalism: Is There a J-Curve for Economic Reforms?" Ref no. 677-43

Brada, Josef C., Inderjit Singh, and Adam Torok. 1993. "Hungar- Services have played an increasingly strong role inian Enterprise Behavior in the Transition." industrial market economies, reaching two-thirds of

Estrin, Saul, Mark Schaffer, and Inderjit Singh. 1992. "Enterprise GNP in some countries. They have played a smaller roleAdjustment in Transition Economies: Czechoslovakia, in the new independent states of the former SovietHungary, and Poland." Paper presented at the IMF/World Union, which are undergoing a general contraction inBank Conference on the Macroeconomic Situation in Eastern output and employment. Business and consumer ser-Europe, Washington, DC, June. vices are of particular interest, since they are an impor-

Gomulka, Stanislaw. 1991. "The Causes of Recession Following tant factor in improving static and dynamic efficiency,Stabilization." enhancing the quality of life, generating jobs, and pro-

.- 1991. "Economic Reforms in Poland, 1989-91: Aims, viding good opportunities for the expansion of thePolicies, and Outcomes." private sector-throughjoint ventures as well as wholly- 1991. "Polish Economic Reform: Principles, Policies and owned domestic companies.Surprises." The purpose of this research is to estimate the poten-

- 1991. "The Puzzles of Fairly Fast Growth and Rapid tial contribution of services to economic growth in theCollapse under Socialism." former Soviet Union, by identifying the gap between the

. 1992. "Economic, Social, and Political Problems in expected and actual levels of service activities in theseEconomic Transformation: The Case of Poland, 1989-91." countries and by looking at the experience with growth

- 1992. "On the Design of Economic Policy: The Challenge in services of other socialist countries in transition.of Eastern Europe." Drawing on international cross-country, time-series

Johnson, Simon, and Santiago Eder. 1992. "The Prospects of data sets, the research will first undertake a comparativePrivatization in the Ukraine." analysis of the importance of services at different levels

Johnson, Simon, Heidi Kroll, and Santiago Eder. 1992. "Strategy, of development. Services will be measured by valueStructure, and Spontaneous Privatization." In Vedat Milor, added, employment, compensation of employees, in-ed., The Political Economy of Privatization in Post-Communist vestment, and household consumption; various proxyand Reforming Communist States. indicators, as well as GNP per capita, will be used for the

32


level of development. Services will be broken down into a more conventional investigation using published re-three subsectors: infrastructure services (transport, com- gional data.munication, and housing), public services (education, Through its firm-level survey in two of the highest-health, and public administration), and business and growthregionsinthedevelopingworld(southernChinaconsumer services (all other services). Particular em- and northern Mexico), the study is mapping variousphasis will be given to the last category. knowledge flows and agglomeration effects and identi-

The study, after first providing an international com- fying the leverage points at which these long-run driv-parison, will use historical data on services in the Soviet ers of growth can be influenced.Union to explore differences in the level of services Responsibility: Private Sector Development Depart-among the new independent states in recent years. This ment-Ashoka Mody and Fang-Yi Wang; and Policyquantitative analysis will be complemented by a quali- Research Department, Trade Policy Division-Arvindtative analysis of the evolution of services, especially Panagariya. With Paul Romer, University of California,business and consumer services, since 1985 in the former Berkeley; Andrei Shleifer, Harvard University;Soviet Union and in other socialist economies in transi- Guillermo Abdel Musik; and Helen Garcia. The Devel-tion, such as China, the Czech Republic, Hungary, Po- opment Research Center, China, is contributing staffland, and Slovakia. time.

With a look toward the future, the study will simu- Completion date: September 1993.late the potential contribution of services to future value Report:added, employment, and household consumption, and Wang, Fang-Wi, and Ashoka Mody. 1993. "Explainingwill identify a policy agenda to facilitate the rapid Industrial Growth in Coastal China: Economic Reforms ...expansion of services. and What Else?" World Bank, Private Sector Development

Responsibility: Policy Research Department, Transi- Department, Washington, DC. Draft.tion and Macro-Adjustment Division-Martha de Melo,William Easterly, Gur Ofer, and Olga Sandler. WithGennadi Zoteev, Center for Information and Soviet Management of Drought RisksTechnology. in Rural Areas

Completion date: June 1994.Ref. no. 677-51

Many agricultural regions in the developing worldExplaining Rapid Growth: Chinese Coastal are periodically subject to severe droughts, which canProvinces and Mexican Maguiladoras have devastating effects on household incomes and

consumption, especially for the poor. To protect theirRef. no. 677-50 consumption against drought risks, rural households

A question of central interest to the Bank's opera- engage in a variety of risk management strategies. Sometional work and policy advice is this: When does the of these-income diversification, intercropping, farmprocess of economic growth become self-sustaining? In fragmentation, and seasonal migration for employmentother words, when does growth provide positive feed- outside the region-are intended primarily to reduceback to generate continued growth? A significant body income losses in drought years. Other strategies-bor-of work has emphasized the importance of providing rowing from local stores and money lenders, draw-firms with the right incentives and price signals to allow down of food stocks, dissavings, sale of assets, andeconomically efficient decisions. Recent analysis also participation in government relief programs-are es-reminds us that investment in physical capital and sentially coping devices designed to protect consump-knowledge-generating activities, inflows of high-qual- tion once income losses have occurred.ity international knowledge, and self-sustaining ag- The possibilities for effective risk management varyglomeration effects have a powerful impact on growth. markedly across regions and across households within

In contrast to most existing studies, this study views regions. But several studies have shown that the pooreconomywide or regional growth through the eyes of typically have the least ability to manage drought risks.individual firms. Its strategy is to seek the perception of In extreme cases they may suffer from inadequate nutri-firms on the resources they draw from their environ- tional intake during droughts. And some sink into long-ment and to discern how they use these resources to term debt or become permanently dispossessed of theirimplement growth strategies. productive assets.

In keeping with the study's emphasis on analyzing The primary purpose of this study is to determine,the microeconomics of growth, the main data source for within the context of selected study regions, the latentthis research is a survey it conducted of firms (360 in demand for improved credit and insurance for betterChina and 100 in Mexico). The study is also conducting managing drought risks. The study seeks to determine

33


how much improved (formal sector) insurance and cope with droughts and to identify those most in need ofcredit different types of rural households would be government assistance. The study will provide infor-willing to buy on a full-cost basis. The study uses mation on the effectiveness of existing governmentexisting household survey data from study regions in relief programs, and estimate the demand for theseBurkina Faso and South India. Both data sets include services by rural households. .is information will bedata from the same households for a severe drought and useful for improving the design and targeting of droughta subsequent normal year. assistance programs.

The study first examines the variation in individual Responsibility: Agriculture and Natural Resourceshousehold response to drought, focusing on the types of Department, Agricultural Policies Division-Jock R.risk management strategies used by different types of Anderson, Peter Hazell, and Apparao Katikineni; andhouseholds and the extent to which they are successful Policy Research Department, Poverty and Human Re-in buffering income and consumption losses during sources Division-Harold Alderman. With Madhurdroughts. Second, the study seeks to model household Gautam; and Tom Reardon, Michigan State University.decisions to measure the costs and benefits to household Completion date: December 1993.welfare of individual risk management strategies and toquantify their contribution to the drought coping that isachieved. Third, the study uses the model to derive the State Enterprise Behavior in Poland duringlatent demand for improved credit and insurance in- the Economic Transformation Programstruments. Because the latent demand for these instru-ments will be derived from an econometric model, it Ref no. 677-58Cwill be directly conditioned by the risk management State enterprise reform has emerged as a key issue instrategies that the households already use. Thus, to the all the reforming economies of Eastern and Centralextent that these are already cost-effective, the latent Europe owing to the size of the state sector as measureddemand for insurance will be smaller. Some of the by its share in GDP, exports, and tax revenues. In 1992,available risk management strategies include govern- the third year of Poland's Economic Transformationment relief programs; because these are essentially in- Program (ETP), some signs of industrial revival ap-come transfers in drought years, they reduce the de- peared, even among state-owned enterprises (SOEs).mand for improved credit and insurance. But the avail- This is surprising because of the slow pace of privatiza-ability of data on household participation in these pro- tion and bank reform, and the absence of basic changesgrams in the study regions makes it possible to control for in the governance or incentive system of SOEs.such programs inthe model and to conduct counterfactual This research attempted to ascertain why SOEs wereexperiments to see how their removal would affect the at last beginning to respond to the ETP. The expectationlatent demand for improved credit and insurance. in 1990 was that SOEs would squander assets and then

Throughout the research emphasis is given to ana- ask the government for a bailout.lyzing differences in behavior among different types of The results are based on repeat visits in late 1992 to 75households (defined by income groups, resource en- large manufacturing SOEs scattered throughout Polanddowments, and occupation). Special attention is given and incorporating considerable product diversity. Theseto analyzing the efficiency with which poorer house- firms, which had also been visited in mid-1991, werehold groups are able to cope with droughts and to their characterized by declining sales and profits and risinglatent demand for improved credit and insurance. stocks of finished goods, raising questions about their

The results so far suggest that relatively simplified response capacity. Monthly data covering June 1989models based on dynamic programming formulations through June 1992 were obtained on sales, costs, profits,of the drought decisions of farmers do yield both ana- wages, bank borrowings and interfirm credit, tax ar-lytic insight and equation forms that can be estimated rears, excess wage tax penalties (paid on wages in excesseconometrically from the available survey data. They of a legislated wage), and so on. Qualitative questionsthus provide good indications that, for the first time, focused on the credibility of the reform, labor adjust-quantitative information about the costs and benefits of ment and reactions to the excess wage tax, the role of banksrisk management strategies traditionally used by rural in enterprise transformation, possible solutions to thehouseholds can be assembled. Once the more cost- social assets problem, and long-run strategy, includingeffective strategies have been identified, it is then pos- sequencing of privatization and restructuring.sible to think about how these strategies might be The data show firms to have been vigorous in theirstrengthened through project and policy interventions. responses. Labor has been shed across the board-cut

It should also be possible to identify the effectiveness by 27 percent for the sample as a whole between Sep-with which different types of households are able to tember 1989 and June 1992. Although some firms are

34


clearly in trouble, there are also emerging success sto- _. 1993. "Transforming State Enterprises in Poland:ries. Firms were evaluated based on their financial Microeconomic Evidence on Adjustment." Policy Researchperformance in the first six months of 1992, by which Working Paper 1101. World Bank, Europe and Central Asia,time the temporary distortions of 1990 and 1991 could Country Department II, Washington, DC.be presumed to have vanished. "Successful" firms havetended to emphasize change in product mix, haveachieved greater efficiency in use of energy and materi- Strengthening Accountability in Publicals, have been more successful in controlling unit labor Servicescosts and wages, and have borrowed conservativelyfrom banks. Managers have been instrumental in the Ref no. 677-65process of change. Lack of accountability has been identified as a major

Interviews with managers and the quantitative infor- reason for the unsatisfactory public services in manymation collected suggest that four factors have been developing countries. The traditional systems and prac-crucial in eliciting this response: tices for ensuring public accountability have become

* The government's "no bailout" signal has been overloaded, and users lack options under conditions ofconsistent and unambiguous from the start, despite monopoly and asymmetric information. "Voice" de-occasional political instability. scribes the phenomenon of the public seeking better

* Rapid trade liberalization (by increasing competi- performance from providers of public services. This cantion) and the elimination of subsidies (by signaling hard take the form of participation in user groups that com-budgets) forced companies to focus on efficiency and municate to providers the needs and preferences of theprofits. service beneficiaries.

* Banks changed their behavior as a result of im- This research will attempt to identify the conditionsproved supervision and governance in late 1991, dimin- and organizational mechanisms necessary for voice toishing soft loans and beginning to direct resources to be effective. To do so, the study will field-test twobetter firms. hypotheses: first, that under monopoly conditions the

* SOE managers care about their reputations and public's use of voice will lead to improved accountabil-identify their success with that of the firm. ity and, second, that improved accountability will lead

Interestingly, managers see eventual privatization as to improved efficiency and equity in public services.inevitable, and many expect to be rewarded at that time. The hypotheses will be tested on a sample of nineBut they also overwhelmingly believe that prior restruc- water user groups in different villages in Indonesia, allturing is necessary to deal with excess labor, social playing defined roles with respect to irrigation systems.assets, and the like. The study's most important finding, Three of the groups have voice mechanisms and collecttherefore, is that hard budgets and import competition service fees, three have voice mechanismsbut collect nocan induce restructuring among SOEs even when pri- service fees, and three have no formal voice mecha-vatization lags. To the extent that SOEs have begun nisms and collect no service fees. Whether voice leads torestructuring, they are better positioned for privatiza- improved public accountability will be measured by thetion. service providers' responsiveness to users' complaints,

The study's findings have been presented to the the extent to which providers make known the "rules ofBrookings Panel (spring 1993) and to the Economies in the game," enabling users to perform their tasks effi-Transition Discussion Group, Institute for International ciently, and the decentralization of the providers' agencyEconomics (June 1993). structures and adaptation of their monitoring and in-

Responsibility: Europe and Central Asia, Country De- centive systems. Whether improved accountability leadspartmentl, Poland ResidentMission-BrianPinto. With to improved public services will be tested through anMarek Belka and Stefan Krajewski, Lodz University, assessment of changes in both public accountability andPoland. service outcomes.

Completion date: December 1992. If voice mechanisms are found to have a positiveReports: effect on public accountability and the quality of public

Hume, Ian, and Brian Pinto. 1993. "Prejudice and Fact in service delivery, their technical, legal, and organiza-Poland's Industrial Transformation." Finance and Develop- tional features will be of interest to policymakers. Alsoment (June)18-20. of interest will be the manner in which a service fee

Pinto, Brian, Marek Belka, and Stefan Krajewski. 1993. "Trans- operates as a voice mechanism, which will have impli-forming State Enterprises in Poland: Evidence on Adjust- cations for the financial and budgetary policies govern-ment by Manufacturing Firms." Brookings Papers on Economic ing service providers, and the degree to which externalActivity (July). agents (such as nongovernmental organizations) play a

35


catalytic role in support of voice. And the study may and the new independent states of the former Soviethighlight organizational structures and processes that Union. This project will address issues related to indus-agenciesneedtoadopttostrengthenthepublicaccounta- trial restructuring and ownership reform in China dur-bility of service providers. ing its economic transition, building on an earlier re-

Responsibility: Private Sector Development Depart- search project ("Reform and Productivity in Chinesement-Mark Schacter. With Samuel Paul and Soesilo Enterprises, Phase I," ref. no. 675-38). The researchPartodarsono. should be of direct interest to Chinese policymakers and

Completion date: April 1994. to the international policy community concerned withChina's economic reform program.

The project will examine issues relating to industrialSurvey of Service Firms in St. Petersburg concentration and market structure, as well as the rela-

tionship between enterprise performance, profitability,Ref. no. 677-89 and adjustment behavior. The data sets obtained in the

New start-ups and privatized firms are contributing earlier study provide the initial data base for the analy-to the development of the private sector throughout sis. Thisresearchwillaugmentthatinformationwith firm-Russia. Some of these firms are producing manufac- level data from the State Statistical Bureau on enterprisestured goods, but most are providing services-trans- of all ownership types. The studywill use standard econo-port, trade, financial services, business services, con- metric techniques. Where issues of simultaneity or a trun-sumer services, and public-service-type services, such cated sample arise, two-stage least squares, probit, oras health and education. other methods of analysis may be appropriate.

This research aims to develop an in-depth under- Using the data sets, the project seeks to answerstanding of the characteristics and constraints of private several specific policy questions related to ownershipservice firms in St. Petersburg through a survey of such and industrial structure, including these:firms. The St. Petersburg area is not typical, but it * Why has the output from large and medium-sizeappears to have good potential for development be- enterprises remained stable at 40 to 44 percent sincecause of its location and attractiveness, its culture's 1978 while output from the state-owned sector hastraditional western orientation, and the high share of declined nearly 80 percent?trained professionals in its work force. The project's * How are these shifts in production associated withfocus on service firms provides a perspective that has ownership, profitability, export performance, produc-not yet been explored. tivity, industrial branch, and geographic location?

The project's survey covers 86 firms that satisfy three * How do the growth of the non-state-owned sector,criteria: more than 50 percent of revenues from services, the decline of state-owned enterprises, and change inmore than 50 percent privately owned, and more than ownership status contribute to change in the ownership50 percent domestically owned. Thus, itexcludes major- profile among China's large and medium-size enter-ity-ownedjoint ventures. The survey questionnaire cov- prises?ers a broad range of subjects, including the background * In which industrial branches and geographic loca-of the entrepreneurs, employment and wage data, the tions are these changes most concentrated? Among themarket environment, and the firms' performance. state-owned enterprises reporting a change in their

Responsibility: Policy Research Department, Transi- ownership status, are there characteristics that make thetion and Macro-Adjustment Division-Martha de Melo, enterprises "ripe" for change in ownership, such asGur Ofer, and Olga Sandler. With Elena Belora, Leontief degree of profitability, industrial branch, or geographicCenter. location?

Completion date: September 1993. Responsibility: Policy Research Department, Transi-tion and Macro-Adjustment Division-Inderjit Singh,Alan Gelb, and Dilip Ratha; and East Asia and Pacific,

Reforms and Productivity in Chinese Country Department H1, Office of the Director, andEnterprises, Phase II Country Operations Division. With V. K. Chetty, Indian

Statistical Institute; GaryJefferson and A. Lewel, BrandeisRef. no. 678-24 University; Xu Wenyi, Brandeis University and Wuhan

Although there are obvious differences between University; Thomas Rawski, University of Pittsburgh;China's industrial systems and those of other formerly Richard Day, University of Southern California; Zvicentrally planned economies, China's experience with Griliches; and Zhang Xeujun. The State Statistical Bu-enterprise reform and industrial performance provides reau is contributing staff time.important lessons for reform strategy in Eastern Europe Completion date: June 1994.

36


An Econometric Study of State Enterprise The work has concentrated on developing a data setBehavior in Poland of prices, extent of dernonopolization, and spatial price

relationships that is suitable for cross-republic compari-Ref no. 678-25 son. Sector reviews by, the Bank, official statistics of the

An earlier study on state enterprises in Poland ("State countries, and other information from Bank and Inter-Enterprise Behavior in Poland during the Economic national Monetary Fund missions provide a substantialTransformation Program," ref. no. 677-58) generated a body of raw material for such comparison.data set relating to 75 large Polish manufacturing com- Data on weekly food prices for 19 staple commoditiespanies. These data, collected monthly from June 1989 to in 132 cities of Russia during 1992 and 1993 have beenJune 1992, covered sales, costs, profits, wages, bank analyzed. They indicate that some regional price adjust-borrowings, interfirm credit, tax arrears, excess wage ments have occurred since the price liberalization ofpenalties, and so on. This project will carry out an January 1992. But many opportunities for arbitrage stilleconometric study of that data set. exist, especially across oblast (province) boundaries. It

The study will attempt to quantitatively assess vari- seems clear that oblast-level trade restrictions have per-ous aspects of public enterprise behavior. It will focus sisted despite the lack of national regulation.on wage-setting behavior, a critical issue as the firms are Further work will compare the situation in otherworker-controlled, and on issues relating to the enforce- former republics, notably the Baltics, Kazakhstan,ment of the hard budget constraint, including bank Moldova, and Ukraine, where similar food price datalending and interfirm borrowing. The analysis of wage exist, and where (particularly in the Baltics) residualsetting will provide insights on whether state compa- restrictions on private entrepreneurial activity in foodnies were concerned with their long-term health or marketing have beer more fully eliminated than inmerely in decapitalizing assets through large wage Russia.awards, and on the efficacy of the controversial excess Responsibility: Europe and Central Asia, Office of thewage tax. The hard budget constraint is clearly one of Regional Vice President-Marcelo Selowsky, and Coun-the more fundamental questions in the reforming econo- try Department IV, Natural Resource Management Di-mies of Eastern Europe: Can hard budgets be enforced, vision--Geoffrey Fox and Csaba Csaki. With Bruceand will they put the necessary pressure on state compa- Gardner, University of Maryland.nies to adjust? Completion date: December 1993.

Responsibility: International Finance Corporation,Economics Department-Brian Pinto. With Sweder vanWijnbergen, University of Amsterdam. How Retail Food Markets Responded

Completion date: December 1993. to Price Liberalization in Russia

After the liberalization of prices in Russia in JanuaryAgricultural Marketing in the Former and March 1992, most food prices were formally free toSoviet Union respond to changes in supply and demand. Yet persis-

tent dispersion of prices among different areas is greaterRef. no. 678-31 than would be expected in an environment in which

Since 1990 nearly every government in the former markets are integrated and quantities flow betweenSoviet Union has declared its intention to reform its markets in response to price differentials. This studyagricultural and food sectors and taken some steps was designed to investigate the extent to which markettoward doing so. Nowhere have such reforms gone integration increased over time, and factors inhibitingforward smoothly. Indeed, little in the way of improved rapid integration of food markets.functioning of markets or increased efficiency of food The research is based on weekly price data for 70processing and distribution has been observed. Why? foods in approximately 130 cities throughout the Rus-What have been the chief impediments to reform? How sian Federation between January and July 1992. It foundcan the constraints be removed? that cities' price deviations from the all-Russia mean

This project aims to identify the extent to which price price declined during; that period for 17 of the 19 coreliberalization reforms have in fact resulted in market commodities analyzed. The volume of food sold inprices that are responsive to demand and supply condi- monitored shops increased substantially in the weekstions, and consistent with market-determined spatial following liberalization. The geographic dispersion ofdifferences. It also seeks to identify and estimate the prices decreased significantly over time, suggestingimportance of factors that have prevented price liberal- some response of economic agents to the large priceization from being fully successful. differences. More of the reduction in price dispersion

37


took place in the period immediately following liberal- To create an environment in which substantial re-ization than in the subsequent six months. Although forms could be introduced required legal and organiza-price dispersion declined over time, the decline was tional changes. The study examined the laws that theslower than would be expected if well-developed mar- government passed in support of the privatization ef-ketswereactuallyfunctioning.Much(abouttwo-thirds) fort, demonstrating the vital role that the governmentof the remaining price distortion cannot be explained by played in promoting the transition from public to pri-traditional economic variables, such as income and vate ownership. And it analyzed in detail such aspectsproxies for transportation cost. of privatization as current status, costs of restructuring,

Further development of food markets will require marketing campaign, sales process, labor issues, broad-retention and deepening of price liberalization through ening ownership participation, incentives, and use ofthe removal of local controls and initiation of reform at privatization proceeds.the enterprise level. These reforms include privatiza- So far, privatization has taken place on a case-by-casetion, demonopolization, and new entry. basis and has involved only small and medium-size

Responsibility: Agriculture and Natural Resources enterprises. To deepen the program, the governmentDepartment, Agricultural Policies Division-Karen will need to draw up and publish a comprehensiveBrooks. With Bruce Gardner, University of Maryland. annual privatization plan. This is essential to mitigateThe Center for Economic Analysis and Forecasting, several key constraints that confront the privatizationMoscow, participated in the research, and the National program: private sector attitudes, concentration of capi-Council on Soviet and Eastern European Research con- tal, taxation and labor issues, and capital market devel-tributed funding. opment. The study examined each of these constraints

Completion date: December 1992. in detail.Report: Finally, the study examined the major factors affect-

Gardner, Bruce, and Karen M. Brooks. 1993. "How Retail Food ing the success of the privatization process in TunisiaMarkets Responded to Price Liberalization in Russia after and identified lessons that can be applied to otherJanuary 1992." Policy Research Working Paper 1140. World countries. Paramountamong these is the sustained com-Bank, Agriculture and Natural Resources Department, mitment to privatization at the highest levels of govern-Washington, DC. ment.

Findings from the study were presented at two semi-nars organized by the Economic Development Institute

Privatization in Tunisia in Cyprus and Iran.Responsibility: Cofinancing and Financial Advisory

This study attempts to provide a comprehensive Services Department, Private Sector Development andoverview of the privatization experience in Tunisia, Privatization Division-Jamal Saghir, Antoinettefocusing on the roles of the public and private sectors, Burnham, and Shyamadas Banerji.the relationshipbetween them, and how thishas changed Completion date: December 1992.over time. Report:

The study first looked at the historical background to Saghir, Jamal. 1993. "Privatization in Tunisia." CFS Discussionprivatization in Tunisia, to provide a perspective on the Paper Series 101. World Bank, Cofinancing and Financialrationale for it and the specific difficulties encountered. Advisory Services, Washington, DC.it examined key factors accounting for the growth ofpublic sector enterprises during the 1960s and 1970s, thecountry's overall economic performance and problems, The Development of Cooperativesthe debt crisis and decline in the terms of trade during and Other Rural Organizationsthe 1980s, and the need for structural adjustment of theTunisian economy. Formal cooperatives were first introduced in Sub-

Tunisia's current account deficit reached 109 percent Saharan Africa by colonial governments, often for theof GDP in 1984, while agriculture declined from 22 purpose of promoting the production of cash crops bypercent of GDP in 1965 to 14 percent in 1989. To set the peasantfarmers. After independence manySub-Saharanstage for renewed growth, Tunisia's government em- African governments adopted policies that further ac-barked on a major economic structural adjustment pro- centuated the role of cooperatives and other rural orga-gram in 1986. Reducing the role of the public sector was nizations in the agricultural sector. They became impor-a specific objective of the program. The study detailed tant channels for government-sponsored credit, inputhow this was accomplished through a multiphased supply, and marketing programs, and often had toprogram for economic and social development. operate under close guidance and control by the state.

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This study analyzed the cooperatives and other farmer Agricultural Public Investmentorganizations in several Sub-Saharan African countries.It found that past efforts by governments to promote Developing countries tend to spend more publicefficient and sustainable rural organizations have been resources in agriculture than do industrial countries.constrained by inappropriate policies. Extensive gov- But agriculture contributes almost five times more toernment intervention has tended to reduce member GDP in developing countries (25.5 percent) than inparticipation and has militated against the objective of industrial countries (4.5 percent).building self-sustained organizations. Regulation of More important than the level of government spend-prices and markets has frequently prevented rural orga- ing in agriculture, however, is the composition. Explicitnizations from becoming commercially and financially or implicit subsidies through pricing policies and trans-viable. fers to state-owned enterprises often do not contribute

There is a need for policy reform to facilitate the to sustainable growth of the sector or efficiently transferdevelopmentof sustainable rural organizations. To make income to the poorest groups. Many developing coun-cooperatives effective private sector enterprises requires tries have attempted to redirect agricultural expendi-ensuring their freedom to operate without undue re- tures, reduce subsidies, and reform agricultural policiesstrictions on their management and business activities. during periods of stabilization and adjustment. WhatIn most Sub-Saharan African countries this calls for a happened to agricultural spending when overall spend-change of cooperative policies and legislation, which in ing was cut, as it typically is under stabilization andthe past have perceived cooperative organizations as adjustment? For a sample of 32 countries that had one orbeing within the public sector domain and subject to more episodes of expenditure reduction in the 1970s,close control by government authorities. The World spending in agriculture fell in 57 percent of the epi-Bank can play a central role in this process by assisting sodes-and in 69 percent of the countries.governments in the identification of legislative, policy, Surprisingly, the cuts in agriculture were not asand institutional reforms that enable cooperatives and severe as the overall spending cuts. But during theother rural organizations to evolve into efficient and structural adjustment programs of the 1980s, agri-sustainable organizations managed by their members culture's share of total spending did decline. In coun-and capable of providing competitive services. tries receiving structural or agricultural sector adjust-

Responsibility: Africa Technical Department, Envi- ment loans, the share fell from 7.8 percent (average forronment and Sustainable Development Division-Jean 1972-83) to 7.0 percent (1984-88). This suggests thatDelion and John Peberdy, and Office of the Director- adjustment programs had an anti-agriculture effect onKevin Cleaver; Europe and Central Asia, Country De- expenditures. But the results must be interpreted cau-partment II, Agriculture and Water Supply Operations tiously, since at least some of the reductions came inDivision-Lorenz Pohlmeier; and Operations Evalua-, relatively unproductive subsidies.tion Department, Agriculture and Human Develop- This research developed a best-practices guide toment Division-Josette Murphy. With Pekka Hussi and assist Bank staff and pclicymakers in reforming publicOle Lindberg, FINNIDA; Arif Qareen, DANIDA; and expenditure policy in agriculture, and in particular toLyle Brennerman. The international and African re- make it supportive of trade policy adjustment. Thegional offices of the International Cooperative Alliance, primary objective of public spending in agriculturethe Federation of Non-Governmental Organizations of should be higher growth and productivity, not incomeSenegal, the Uganda Cooperative Alliance, the Coop- transfer. Expenditures that provide for a well-function-eratives Centers in Sweden and in Finland, the U.S. ing, efficient private agriculture sector support produc-Overseas Cooperative Development Council and its tivity and reduce poverty without income transfers.member organizations, the International Labour Any welfare objectives should be clearly identified,Organisation, the Food and Agriculture Organization of with well-defined targets and cost-efficient approaches.the United Nations, the French Caisse Centrale, and the When that is not done, expenditures tend to absorbGerman, French, and U.S. bilateral agencies contributed inordinate resources and create undesirable side-information to the research project. The Swedish Interna- effects. In general, subsidies distort resource allocationtional Development Authority contributed funding. and should be removed. Under well-defined circum-

Completion date: March 1993. stances, subsidies to promote adoption of improvedReport: technologies can play a valuable role in promoting

Hussi, Pekka, Josette Murphy, Ole Lindberg, and Lyle agricultural growth, but they should be well targetedBrenneman. 1993. The Development of Cooperatives and Other and should be removed once their original purpose hasRural Organizations: The Role of the World Bank. World Bank been met or the underlying distortion justifying theirTechnical Paper 199. Washington, DC. existence eliminated.

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Attempts to compensate agriculture for trade and projects, and the investment portfolio should include amacroeconomic policies that tax the sector are usually manageable number of projects. Project evaluation andineffective and an inefficient use of resources. Compen- selection criteria should be subject to independent re-sation may reduce efficiency and productivity, and in view. Environmental review should be an integral partany event, agriculture is often so heavily taxed by these of the evaluation process.policies that compensation would be prohibitively ex- Budget preparation should be transparent and pre-pensive. The timing of agricultural sector reforms in dictable, with timely information publicly provided.relation to macroeconomic reform (for example, re- Donor funding should be integrated into the nationalmoval of industry protection and exchange rate bias public expenditure management system, since dualagainst agriculture) is disputed. Agricultural sector re- budgetary systems rarely work well. The budgetaryforms that remove sector distortions without appropri- process should have built-in mechanisms to ensureate macroeconomic conditions may lead to worsening accountability, including a monitoring and evaluationsector conditions because of macroeconomic distor- system.tions. Creating the conditions for a productive agricul- The lack of comparable, disaggregated data on agri-tural sector in the long term requires reform of both cultural expenditures for a large sample of countriesagricultural sector and macroeconomic distortions. But significantly limits the kinds of analysis that can bemany agricultural sector reforms not directly related to done. Analysis of the factors associated with the levelmacroeconomic conditions should be implemented even and composition of agricultural expenditures-ratiosin advance of macroeconomic adjustments. of current and capital expenditures, costs of various

A number of sector problems have important bud- types of government intervention, and expenditures atgetary implications and mustbe addressed on that basis various levels of government-would make it easier toas well as on efficiency grounds. Markets for agricul- provide consistent cross-country guidance in expendi-tural goods and services should be privatized or should ture reviews and development of agricultural sectorbe pushed in that direction through the introduction of strategies. Further research is needed to examine incost-recovery measures and private contracting for gov- more detail agricultural expenditure levels, composi-ernment agricultural services. Commercial operations tion, efficiency, and adjustment.and monopoly trading operations should be privatized. Responsibility: Policy and ResearchDepartment, TradeAt a minimum, competition should be introduced by Policy Division-John Nash; Middle East and Northlifting monopoly trading status. Agricultural prices Africa, Country Department I, Agriculture Operationsshould be determined by markets. Any prices that con- Division-Odin Knudsen; and Agriculture and Naturaltinue to be set should be increasingly based on market Resources Department, Agricultural Policies Division.conditions, with prices of goods linked closely to inter- With Bonnie van Blarcom.national prices. For reasons of efficiency and the contin- Completion date: April 1993.ued availability of financing, user fees should be estab- Report:lished to recover the costs of government provision of Blarcom, Bonnie, Odin Knudsen, and John Nash. "Reform ofgoods and services, with adjustments made in the case Public Expenditures for Agriculture." World Bank, Washing-of public goods. The expenditures for a number of ton, DC.support services, such as research, extension, and live-stock support services, should be reviewed with respectto the role the private sector can play in providing these Private Manufacturing in St. Petersburg,goods. Russia

The allocation of public spending should supportpolicy goals. Public spending in agriculture should This research project characterized and evaluatedoccur within the context of a clearly defined and pub- the development of the private manufacturing sector inlicly discussed sector strategy. Important initiatives St. Petersburg, Russia, through the use of a survey of ashould be discussed openly, with the participation of group of carefully selected private manufacturers. Thethe people likely to be affected. Adequate funds should study's objectives were to obtain profiles of the newbe allocated for recurrent costs, particularly for opera- entrepreneurs and their firms, evaluate the businesstional and maintenance costs. Agriculture should notbe environment in which they operated, identify the con-viewed as a public employer of last resort. Civil service straints that they faced, and formulate recommenda-policies should correct for excessive wage bills, surplus tions for actions that might further the growth of thestaff, salary erosion, and wage compression. sector.

Economic criteria should guide investment plan- The study obtained this information through firm-ning. Funding should be allocated to higher-priority level surveys of randomly selected samples of majority

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private, domestic manufacturers thatare registered firms Privatization in the New Independent Stateswith seven or more employees. Interviewers spent three of the Former Soviet Union: Frameworkto four hours with each entrepreneur, completing a and Initial Resultspreset questionnaire containing a mix of quantitativeand qualitative information. This study compared the privatization experiences

Research questions that the research addressed inof the 15 new independent states of the former Sovietclude the following: Union. The privatization experiences share several com-

* Which reform policies adopted thus far in Russia mon features: the ambiguous status of basic propertyhave favored private sector growth, and which have rights, centralized institutional structures, extensivepref-constrained it? How are markets functioning, and what erences given for employee ownership, and limitedare the most critical distortions affecting private sector involvement of foreign investors. Privatization has notgrowth? proceeded as quickly as the states initially planned, and

* What is the composition of the new private manu- many have adopted a multitrack approach.facturing sector? What are the backgrounds of the new In a number of the states the privatization of small-managers and the origins of their firms? Which entre- scale enterprises is under way, and various mass privat-preneurs and which firms appear to hold the advantage ization programs have already been launched or arein the current environment? being designed to accelerate the transfer of state owner-

* What is the nature of the dynamics between the ship and generate widespread participation. The statesdominant state sector and the fledgling private sector? are at different stages in the development of legal frame-How has the Russian privatization program affected works for privatization. The lack of a supporting legalprivate sector growth? How are these sectors integrated, and financial infrastructure-including mechanisms forand what are the implications? enforcing contracts, financial markets, administrative

* How do the new Russian entrepreneurs differ capacity, and expertise in commercial practice-hasfrom their counterparts in Eastern Europe? often emerged as a major obstacle to privatization.

The importance of this work derives from the impor- Despite these obstacles, almost all the new indepen-tance of private sector development in the transitional dent states have successfully initiated the process ofRussian economy. As the first empirical work on the building basic legal and institutional infrastructure foremerging private sector in Russia, it brings to light a privatization, and in several implementation is pro-wealth of information about this emerging sector, re- gressing at an impressive rate.placing myths and assumptions with facts. The infor- Responsibility: Cofinancing and Financial Advisorymation it has produced about the sector's composition, Services Department, Private Sector Development anddynamics, and problems should help external agencies Privatization Division--Jamal Saghir and Robert Jalali;better assist the sector. and Legal Department, Europe and Central Asia Divi-

The research was part of a larger body of work. Three sion-Eric Haythorne and Soo Im.comparable surveys of emerging private manufacturers Completion date: May 1993.in Eastern Europe were completed in 1992, and working Report:papers have been published on each of them. A synthe- Im, Soo J., Robert Jalali, and Jamal Saghir. 1993. "Privatization in

sis piece on lessons learned from the four surveys is the Republics of the Former Soviet Union: Framework andbeing prepared. Initial Results." CFS Joint Staff Discussion Paper. World

The results of the four studies have been presented at Bank, Cofinancing and Financial Advisory ServicesWorld bank seminars and in talks at the International Department and Legal Department, Washington, DC.Monetary Fund, Harvard University, Brown Univer-sity, and the European Bank for Reconstruction andDevelopment, among others. Brazil: Political, Institutional,

Responsibility: Private Sector Development Depart- and Technological ]Developmentment-Leila Webster. With Kate Whitmore, DresdenBank; and Judith Brandsmas. The European Bank for This research examined two questions, using firm-Reconstruction and Development contributed funding level data from Brazil for the mid-1970s: How doesfor the research. market structure affect profitability? And what is the

Completion date: May 1993. role of multinational firms?Report: The study found that measures of market concentra-

Webster, Leila, and Joshua Charap. "A Survey of Private tion have an important effect on profit rates, after otherManufacturers in St. Petersburg." World Bank, Private factors are controlled for, such as the size and capitalSector Development Department, Washington, DC. intensity of the firm. Firms (both foreign and domestic)

41


in highly concentrated markets (for example, above 80 new private farmers are responding to new prices andpercent) earn about one-fourth more than firms in com- marketing procedures is key to understanding thepetitively structured markets (less than 20 percent). progress of adjustment and the opportunities for assist-Market share has an even more powerful association ing and hastening the process.with profitability. Firms with market shares approach- The sectoral adjustment is initiated by the stabiliza-ing a monopoly earn nearly one and a half times as much tion program (for example, price liberalization, higheras firms with market shares of less than 10 percent. Some interest rates, and more liberal trade policy and realign-of the effect of relative market share may be attributed ment of the exchange rate), and ultimately implementedto the greater efficiency of the leading firms, but there is through enterprise reform. The success or failure of theno way to distinguish these effects from the market stabilization program will not be determined solely bypower of dominant firms. The presence of a positive developments in the agricultural sector, but agricultureeffect of industrial concentration when market share is has implications for the trade and fiscal balances, andalso in the model provides evidence of market power. sectoral policy will affect the general stabilization pro-

The measures intended to capture the effects of bar- gram. The stabilization program and agricultural ad-riers to entry had apparently little consistent effect on justmentare interdependent; neither is likely to succeedprofitability. Product differentiation, which was found without substantial progress in the other. Enterprisetobe an important barrier to entry in creating concentra- reform is thus essential for both.tion, was found to have only weak direct effects on Among the important issues addressed in this studyprofitability. The straight-line relationship is weak, and are these:heavy advertising in the industry (10 percent of sales) * The pace of land reform and farm restructuring,adds only about one-tenth more profitability. and major factors affecting that pace.

The study's analysis of the relationship of foreign * The forms of land tenure and farm enterprise thatownership to profitability showed that Brazilian firms are emerging.are more profitable than foreign firms and that foreign- * The effects of the first two issues on land use andled industries are less profitable than domestically led farm specialization.industries. It is conceivable that the interfirm differ- * Activity in land markets, both rental and sale, andences are attributable to the inferior efficiency of multi- prices for land.national firms; it is also conceivable that interindustry * Changes in demand for inputs and arrangementsdifferences are due to more competitive behavior among for supply, including purchased inputs, labor, credit,multinationals than among Brazilian firms. transport, and services.

Responsibility: Private Sector Development Depart- * Marketing of agricultural output.ment-Claudio Frischtak, Carl Dahlman, and B. * Changes in farm earnings and earnings by peopleChaudhuri. employed in agriculture.

Completion date: June 1993. * Initial financial indicators of alternative forms ofReport: enterprise, earnings per unit of land and labor, and

Newfarmer, Richard S., and Lawrence Marsh. 1992. "Industrial outstanding debt per unit of land and labor.Structure, Market Power, and Profitability." Industry and * New arrangements for social services formerlyEnergy Department Working Paper, Industry Series 63. provided by state and collective farms.World Bank, Washington, DC. Responsibility: Agriculture and Natural Resources De-

partment, Agricultural Policies Division-Karen Brooks;and Europe and Central Asia, Country Department m,

Land Reform and Farm Restructuring Agriculture,Industry,andFinanceDivision--CsabaCsaki.in Russia The Agrarian Institute, Russia, is contributing staff time.

Completion date: June 1993.This study focuses on the reform of agricultural

producer enterprises, and particularly on land reformand farm restructuring. Enterprise reform is part of a Marshall Plan Lessons for Productivityprocess of sectoral adjustment through which activities Enhancementprofitable under new relative prices and incentives willdisplace presently unprofitable ones. Which activities The building of a modern market economy requiresshould be expanded, which should be contracted, and more than macroeconomic stabilization and privatiza-how are these decisions made by the agents managing tion. A "market infrastructure" of human capabilitiesthe enterprises? Understanding how rapidly state and and institutional know-how is needed. The emergingcollective farms are restructuring and how they and market economies of the former Soviet Union and East-

42


em Europe begin without such critical market infra- Agencies, 1948-61." World Bank, Washington, DC.structure, and they have little time to develop the needed Silberman, James M., and Charles Weiss, Jr. 1992. "Restructur-know-how in an incremental fashion. ing for Productivity: The Technical Assistance Program of the

This research reviewed the experience and achieve- Marshall Plan as a Precedent for the Former Soviet Union."ments of the technical assistance programs of the Industry Series Paper 64. World Bank, Washington, DC.Marshall Plan to understand what made those pro-grams so effective. The research then assessed the rel-evance of those programs for today-for rapidly build- The Post-Socialist Transition:ing market-related capabilities within enterprises and A Systemic Viewmarket-support institutions in the new independentstates of the former Soviet Union and in Eastern Euro- The post-socialist transition is a multidimensionalpean countries. The research was based on a review of process involving economic, political, and systemic as-about 5,000 pages of documents from personal archives pects. This project focused on three aspects of thatfrom firsthand experience in conceptualizing and launch- process:ing the Marshall Plan programs. * The design of reform programs-particularly the

The basic instruments of the Marshall Plan technical intensity and sequencing of the different components ofassistance programs were 1,250 productivity study tours, a program. Intensity refers to the choice between shockwhich brought about 20,000 Europeans in subsector or treatment and gradualism; and sequencing refers to thefunctionally specialized groups of 12 to 20 people to see interactions between the macroeconomic and liberal-firsthand the requirements of a competitive plant in the ization elements of the programs.postwar world: new concepts of organizing the work- * The reform of the state and the reemergence ofplace, new concepts of marketing and business organi- owners and markets. This refers to the changing role ofzation, and new products, designs, and engineering the state-from the dominant producer under socialismfunctions. Japan, the Republic of Korea, Taiwan (China), to the stabilizer and regulator of a market economy. Theand several other economies developed similar pro- potential role of industrial policy and other policy mea-grams. The programs helped raise, in a few years, the sures (such as restructuring) oriented to nurture anannual rate of increase in the labor productivity of emerging private sector is analyzed.Western European industry from its historic level of * The interactions between economic and politicalabout 1 percent a year to 4 percent or more. reform in economies that are simultaneously construct-

The research suggests that this approach to a mass ing both market economies and multiparty democra-transfer of information and skills has attractive features cies.that suit it to application to the new independent states The analysis was based on cross-country compari-of the former Soviet Union. Appropriately modified sons (centered on these three aspects) of patterns ofand carefully applied, the historic approach provides a post-socialist reform in Eastern Europe, Russia, anduseful model for a form of technical assistance delivery other post-socialist countries in Asia, Africa, and Latinthat would complement other current approaches. America.

The findings of the research were presented in a A conference cosponsored by the World Bank, theBank-wide seminar in October 1992. And the World Spanish Agency for International Cooperation,Bank has provided a grant to Kazakhstan to test the UNCTAD, and ECLA was held in El Escorial, Spain, inapproach in practice and construct a model for expan- July 1992 to analyze these topics. A conference volumesion within Kazakhstan and replication in other new containing the proceedings of that conference will beindependent states and in Eastern European and devel- published.oping countries. Responsibility: Policy Research Department, Transi-

Responsibility: Private Sector Development Depart- tion and Macro-AdjustrnentDivision-Andr6sSolimanoment-Carl Dah1man and MarkDutz. With GlobalTech- and Mario Blejer.nology Management, Inc. Completion date: June 1993.

Completion date: June 1993. Reports:Reports: Solimano, Andrds. 1993. "Re forma Econ6mico Contempordnee:

Dutz, Mark, and James M. Silberman. 1993. "Building Capabili- Experiencias Recientes." Pensamiento Iberoamericano Revisto deties: A Marshall Plan Type Productivity Enhancement Econoino Politico (July, special issue).Program for Eastern Europe and the Former Soviet Union." Solimano, Andr6s, Osvaldc Sunkel, and Mario I. Blejer, eds.World Bank, Washington, DC. Forthcoming. Rebuilding Capitalism: Alternative Roads After

Silberman, James M. 1992. "The History of the Technical Socialism and Dirigisme. Ann Arbor: University of MichiganAssistance Program of the Marshall Plan and Successor Press.

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The Role of Government Strategies for Rapid Growth: Public Policyin the Development of Support Systems and the Asian Miraclefor Small and Medium-Size Enterprises

The pursuit of rapid economic growth and structuralThe Bank and other donors have a long history of change is the central objective of economic policy in

lending to developing countries in support of financing most developing economies. Beginning with Japan and,for small and medium-size enterprises (SMEs) and in most recently, Indonesia, Malaysia, and Thailand, asupport of institutions that provide such enterprises number of East Asian economies have enjoyed spec-with technical and marketing assistance. The record of tacular growth and productivity performance. Thesethis lending is mixed at best, and there is continuing are economies in which government has played ancontroversy on the desirability of interventions targeted active role, and their success has renewed interest in theto support SMEs. Yet little is known about whether role of the state in managing and promoting economicgovernment interventions were in fact necessary for the growth.development of successful private (or public) financial, A common view of public policy in the high-per-technical, and marketing support systems in countries forming East Asian economies (HPAEs) is that govern-inwhich small and medium-size enterprises have played ments attempted to "assist the market" by followinga dynamic role in industrial development. The goal of strategies that emphasized three major goals: (1) in-this research was to begin to fill this crucial gap in creasing private savings and investment, (2) ensuringknowledge. rapid growth in productivity through policies to pro-

The research took the form of comparative case stud- mote technological learning, and (3) promoting theies of the role of government in developing support growth of manufactured exports. An alternative viewsystems for SMEs in countries characterized by sus- questions the need for and benefits of selective interven-tained expansion and participation of large numbers of tions to achieve these goals, and the replicability of suchSMEs in export markets. The first round of fieldwork interventions.concentrated on ascertaining from SMEs active in three This research project looked at public policy andsubsectors what their sources of financial, technical, and economic growth in HPAEs. It had four main objectives:marketing support have been. A second round ana- * Toprovideanoverviewof theprocessof growthinlyzed the impact of government on the evolution of the HPAEs by analyzing the patterns of output growth,these private (or public) support systems. The research structural change, and productivity growth in eachwas undertaken in Colombia, Japan, Indonesia, and the economyRepublic of Korea. * To describe the strategic approaches to promoting

The study's results show that government support is rapid growth taken by governments in the HPAEs, theof minor importance to those entrepreneurs who were rationale for undertaking them, and the sequencing,able to establish links with private sources of support, objectives, and outcomes of individual policy measuressuch as Chinese enterprises in Indonesia, subcontrac- * To evaluate the extent to which the rate and pat-tors in Japan, or medium-size producers in Colombia tern of growth is attributable to public policyand the Republic of Korea. Less-favored enterprises, * To assess the extent to which successful interven-such as the pribumi in Indonesia and the small leather tions in the East Asian economies may be replicable inenterprises in Colombia, benefited from government other developing countries.support, which helped them break into an otherwise The research addressed two main questions: To whatclosed market. extent can the rapid growth of real incomes in the

The study will produce a monograph for each of the HPAEsbe attributed to activist public policy? And whatfour countries, as well as a comparative volume. These elements of successful policy implementation can bewill provide both the Bank and governments an empiri- replicated outside the HPAEs? Both questions posecal foundation for developing micro-level policies to- important difficulties for the conduct of the research.ward SMEs and thereby moving beyond a priori, ideo- Two approaches to the "attribution problem" werelogically driven debates and measures. explored. The first attempted to characterize the invest-

Responsibility: Policy Research Department, Finance ment and growth path of individual HPAEs in theand Private Sector Development Division-Brian Levy, absence of policy interventions and to contrast that withand Trade Policy Division-Donald Keesing; and Pri- the actual pattern of investment and growth. Attribu-vate Sector Development Department-Carl Dahlman; tion consists of establishing whether greater levels ofand William Steel. With Albert Berry, Geoffrey Nugent, investment (either globally or in individual industries),and Shujiro Urata. earlier introduction of products or technologies (or longer

Completion date: June 1993. persistence of declining sectors), and more rapid growth

44


of total factor productivity were associated with policy for each economy and explore interrelationships amonginterventions. The second approach asked what charac- the policy areas. The comparative studies address theteristics of markets and private agents might have made attribution and replicability problems systematically,government (collective) action desirable. Empirical evi- and provide a comparative empirical perspective.dence on the nature and magnitude of interventions had The research found that the HPAEs achieved highto be related to at least three areas in which economic growth in large part because they got the basics right-theory suggests that markets may not achieve desirable high levels of domestic saving, rapid growth in agricul-outcomes: the level of savings, the sharing of risk, and tural productivity, and, in some, a head start in educa-the use of and investments in information. Both ap- tion of the labor force and capable, effective publicproaches are complementary and provide insights into administrative systems. Also important in achievingthe social benefits (and costs) of the growth strategies rapid growth was fundamentally sound developmentpursued. policy. Unusually sound macroeconomic management

Research on the problem of replicability evaluated and unusually stable macroeconomic performance pro-the initial conditions for policy implementation in the vided the essential framework for private investment.HPAEs, including economic management, civil admin- Education policies generated rapid increases in laboristration, and social organization. The nature of collabo- force skills, and agriculural policies stressed productiv-ration between business and government was also ana- ity change and did not tax the rural economy exces-lyzed, and the role of the civil service, of bureaucratic sively. And all the HPAEs kept price distortions withinincentives, and of rules and monitoring of programs reasonable bounds and were open to foreign ideas andexplored. The work on replicability focused on drawing technology.lessons for other developing economies on means for But that is not the whole story. The strategies ofemulating the high attainment of objectives, flexibility, selective promotion pursued inmostof theHPAEswereand relatively low levels of rent seeking that character- closely associated with high rates of private investmentized policy implementation in the HPAEs. and, in the fastest-growing economies, high rates of

The research covered Hong Kong, Indonesia, Japan, productivity growth. It is difficult to establish statisticalMalaysia, the Republic of Korea, Singapore, Taiwan links between growth and a specific intervention, and(China), and Thailand. A case study was undertaken for even more difficult to establish causality. But it ap-each of the HPAEs, except Japan, for which several peared that in a few economies, mainly in Northeastessays on aspects of public policy in the rapid growth Asia, in some instances, government interventions re-period are planned. In addition, comparative studies sulted in higher and more equitable growth than other-were undertaken independent of the case studies. Each wise would have occurred. The prerequisites for suc-comparative study addressed the main research objec- cess were so rigorous, however, that policymakers seek-tives across economies in four main policy areas: ing to follow similar paths in other developing econo-

* Trade and industrial policies-analysis of trade in- mies have often met with failure. First, the costs, bothcentives and institutions, the regulatory and adminis- explicit and implicit, of intervention were not allowed totrative framework, competition policies, and policies become excessive. For example, in Korea and Malaysia,for technological mastery and innovation when fiscal costs threatened the macroeconomic stabil-

* Financial markets and policies-analysis of the insti- ity during their heavy and chemical industry drives, thetutional structure, evolution, and performance of finan- governments pulled back. Second, governments incial markets, and an assessment of financial sector inter- Northeast Asia developed institutional mechanisms thatventions allowed them to establish clear performance criteria for

* Human capital and labor markets-analysis of the selective interventions and to monitor performance.structure of the labor market and the nature of human In the newly industrializing economies of Southeastcapital investments; evaluation of the extent to which Asia government interventions played a much lesspublic and private investments in skills formation were prominent and frequently less constructive role in theircomplementary; assessment of public policies to promote success, while adherence to policy fundamentals re-investments in human capital by firms and employees mained important. These economies' capacity to ad-

* Institutional structures and innovations-analysis of minister and implement specific interventions may havethe nature of institutional structures, including the civil been less. Moreover, their experience of rapid growthservice, the transparency of procedures, and interrela- has taken place in a very different international eco-tionships between the public and private sectors, focus- nomic environment. Thus, the problem is not only toing on how policies were implemented effectively. understand which policies have contributed to growth,

The case studies, besides covering each of these top- but to understand the institutional and economic cir-ics, provide the historical and macroeconomic context cumstances that made them viable.

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Responsibility: Policy Research Department, Office of achieve its high economic performance, focusing on thethe Director-John Page, Nancy Birdsall, Changyong relationship between Japan's civil service and the privateRhee, Marilou Uy, and Chang-Shik Kim, and Finance sector. It sought to deduce general lessons that could be ofand Private Sector Development Division-Ed Campos value to developing countries and other economies at-and Brian Levy; East Asia and Pacific, Country Depart- tempting to adopt a free-enterprise system.ment I, Office of the Director-Danny Leipziger, Coun- The project will culminate in a collection of paperstry Departmentl, Country Operations Division-David directed to policymakers from developing and trans-Dollar, Country Department III, Country Operations forming economies. These papers focus on three areas:Division-Amarendra Bhattacharya, and Office of the institutional aspects (for example, legal instrumentsRegional Vice President-Vinod Thomas; Economic De- and analyses of historical issues pertaining to the civilvelopment Institute, Finance, Industry, and Energy Di- service); case studies on the behavior of the civil servicevision-Sahathavan Meyanathan; and International Eco- (for example, the coordination of financial policy andnomics Department, International Trade Division-C. the effect of labor policy on industrial rationalization);Suan Tan. The Ministry of Finance of Japan provided and conclusions that examine the relevance to formerlyfunding. centrally planned economies and newly industrializing

Completion date: June 1993. economies of the lessons learned from the study ofReport: Japan's civil service.

World Bank. Forthcoming. The East Asian Miracle: Economic Responsibility: Economic DevelopmentInstitute, Stud-Growth and Public Policy. New York: Oxford University Press. ies and Training Design Division-Hyung-Ki Kim. With

Michio Muramatsu, University of Kyoto; T. J. Pempel,University of Colorado; and Kozo Yamamura, Univer-

The Evolution, Character, and Structure sity of Washington, Seattle. The Society for Japaneseof the Japanese Civil Service and Its Role Studies contributed staff time.in Shaping the Interrelationships Completion date: July 1993.between Government and the Private Sector

The large body of non-Japanese literature that exam- Cross-Country Study of Small-Scaleines how Japan transformed itself from a technologi- Enterprise Responsiveness in Africacally backward agrarian society into today's economicsuperpower pays little attention to the role of Japan's The reforms embodied in structural adjustment ef-civil service. The exceptions are a few works that focus forts have created the framework for an increased roleon the economic ministries' roles in formulating and for the private sector in African industrialization. Be-administering economic policy following World War II. cause of the low level of foreign investment and reducedBut these works do not address some important issues, direct government involvement, the local private sectorincluding these: must provide the impetus for growth in the medium

* How can Japan maintain such a relatively small term and a foundation for sustained industrialization.civil service given its pervasive role in the marketplace? Evidence suggests that the expansion of the small-scale

* How might Japan's reliance on the private sector manufacturingsectorpreceded thespread of large plantsfor economic development be adapted to the needs of in industrializing countries, displacingmicroenterprisesdeveloping countries? and cottage industries and preparing the ground for

* How does the civil service make the most effective larger-scale production by serving as a locus for theuse of its resources, including human resources? development of more efficient production and manage-

* What incentives motivate civil servants to set long- ment techniques. In Africa, however, the small-scaleterm goals? sector's expansion has lagged behind that of other re-

* How does the civil service resolve conflicting in- gions.terests, and how does it remain accountable? This study synthesizes data from surveys conducted

* How does the civil service remain relevant and in five countries that undertook structural adjustmentflexible? reforms (Ghana, Malawi, Mali, Senegal, and Tanzania)

* How did Japan minimize the effects of distortions to identify constraints on small-scale enterprise growth.to market signals introduced by political intervention? The objectives are to compare the prospects for small

* How does the civil service permit economic agents enterprise in countries with varying degrees of reformto concentrate on their business activities by maintain- and differing industrial structures; to identify trendsing order? and patterns across countries; and to enhance the under-

This project examined aspects of the role played by standing of the support of small-scale enterprises asJapan's administrative structure in helping the country dynamic agents in development.

46


The study asks five basic questions: (1) How can World Bank, Washington, DC.small-scale enterprises contribute effectively to dynamic Kessous, J. 1991. "Le Secteur Industriel au Mali: R6ponses a

private sector development in African countries? (2) In l'Ajustement." Ptude conomique Conseil, Quebec. Draft.

what ways does liberalization help and hinder these Parker, Ron, and William Steel. 1992. "Small Enterprises underenterprises? (3) What are the main constraints that pri- Adjustment in Senegal." World Bank, Washington, DC.vate manufacturers face? (4) What are the key determi- Steel, William, and Leila Webster. 1991. "Small Enterprisesnants of firms' success? (5) And what can policymakers under Adjustment in Ghana." World Bank, Washington, DC.and donors do to facilitate private sector growth? Theanswers to these questions are important for the designof strategies for private sector development, in particu- Factors Associated with the Reliabilitylar the extent to which macroeconomic policy liberaliza- of Cost and Schedule Estimates for Powertion needs to be complemented by measures at the Generation Projects in Developing Countriesinstitutional and sectoral levels in finance, technicalassistance, and regulatory reform. The costs and schedules of power generation projects

The research is based on data from interviews with affect national economic development and the financialfirms on the owners' characteristics; start-up and evolu- viability of project investors. Developing countries aretion of the business; structure of supply and demand; planning massive development programs to meet theirsources and intensity of competition; major constraints power needs. It is estimated that they plan to install 384on operations and new investment; changes in produc- gigawatts (GW) of new generating capacity during thetion, employment, sales, and other business barometers 1990s at a cost of about US$450 billion in 1989 prices.since structural adjustment; use of and demand for Power generation projects are capital-intensive and re-finance; and future outlook and plans. Firms across a quire lengthy construction periods. They account for afull range of sizes were interviewed, from micro- substantial proportion-averaging about 10 percent-enterprises to large firms. Within each country the re- of a developing country's total physical investment.sponses and constraints of firms of different sizes will be Some hydroelectric schemes and thermal power com-compared; these differences will, in turn, be contrasted plexes in the largest developing countries rank amongacross countries. In addition, firms of the same size will global megaprojects costing billions of U.S. dollars.be compared across countries. This analysis should help Even modestly sized schemes-by global standards-to identify priority areas for policy intervention. can be huge relative to the economies of small develop-

Preliminary findings suggest that before the reforms ing countries.the small-scale manufacturing sector was operating be- Reliable estimates of project costs and schedules atlow its potential in the sample countries as a result of the the time of project approval are important for justifyingdifficult business environment that it faced. Liberaliza- a project on economic grounds and for planning itstion eliminated some obstacles, generating gains in financing. Faced with the huge economic and financialproductive investment and output in this sector, but it costs of expanding power supply, governments of de-also increased competition, especially from imports. veloping countries are under pressure to ensure thatSmall-scale enterprises appeared particularly respon- power projects are selected with due consideration forsive to liberalization compared with large industries, the economic and commercial risks that arise from themany of which suffered from inefficient production uncertainty in these estimates.practices and excess capacity, and microenterprises, This research aims to help national planning andwhich tended to be constrained by lower levels of skills finance ministries, power utilities, and financing agen-and resources and by easy entry, which resulted in ciestoimprovetheselectionofpowergenerationprojectsintense competition. Successful small-scale enterprises in developing countries. It provides useful indicationswere especially likely to have made adjustments in their about the factors that have influenced the reliability ofinternal operations in the liberalizing environment. These estimates of costs and schedules-for example, whethermoves included taking advantage of the increased avail- such project characteristics as complexity (size, technol-ability of imported inputs, finding marketniches,branch- ogy) and construction arrangements (site versus factorying out into new products, and purchasing equipment. assembly) account for differences in estimating reliabil-

Responsibility: Private Sector Development Depart- ity, or the reliability of price contingencies for estimat-ment--Ron Parker, Randall Riopelle, Leila Webster, ing project financing needs. Factors found to be signifi-William Steel, Claudio Frischtak, and Mark Dutz. cantcanbe used to incorporate riskconsiderations in the

Completion date: September 1993. planning of power systems to meet power needs at leastReports: economic cost.

Frischtak, Claudio. 1990. "Adjustment and Constrained The research examines the bias and uncertainty inResponse: Malawi on the Threshold of Sustained Growth." cost and schedule estimates for power generation

47


projects. These projects are suitable for this type of with Technological Change." Industry and Energy Depart-analysis because they are based on classifiable technolo- ment Working Paper, Industry Series 52. World Bank,gies for an attributable common output. The implemen- Washington, DC.tation conditions are also amenable to this analysis Mody, Ashoka, Rajan Suri, and Jerry Sanders. 1991. "Keepingbecause power generation projects are planned, de- Pace with Change: Organizational and Technologicalsigned, and procured according to a set of well-estab- Imperatives." World Development 20(12).lished, identifiable practices. The influence of such fac- Mody, Ashoka, Rajan Suli, Jerry Sanders, and Mohantors is assessed by comparing the estimated cost and Tatikonda. 1991. "International Competition in Printedschedule at the time of project approval with the actual Circuit Board Assembly: Keeping Pace with Technologicalcost and schedule for each project in a group of about 130 Change." Industry and Energy Department Working Paper,power generation projects approved for financing by Industry Series 53. World Bank, Washington, DC.the World Bank between the mid-1960s and the mid- Mody, Ashoka, Rajan Suri, Jerry Sanders, and David VanZoest.1980s. 1991. "International Competition in the Footwear Industry:

Responsibility: Industry and Energy Department, En- Keeping Pace with Technological Change." Industry andergy Policy and Strategy Division-John Besant-Jones Energy Department Working Paper, Industry Series 51.and Jamshid Heidarian. World Bank, Washington, DC.

Completion date: September 1993.

Small-Scale Privatization in Hungary,High Technology: Implications Poland, and the Former Czechoslovakiafor Developing Countries

This study is reviewing the privatization of small-Today's factory is being transformed at a pace that is scale (fewer than 50 employees), nonmanufacturing

truly remarkable, and probably unprecedented. Some business units in the Czech Republic, Hungary, Poland,industries have already experienced profound change; and Slovakia. It is focusing primarily on businesses inno manufacturer will remain unaffected for long. The the service sectors, such as retail trade. Its objective is toability to keep pace with the ongoing change has be- identify practical lessons and operational recommenda-come an important ingredient of success. tions for decisionmakers responsible for implementing

Manufacturing processes worldwide are being small-scale privatization programs in Central and East-reconfigured by organizational innovations pioneered ern Europe and Central Asia.by the Japanese and by microelectronics-based tech- The study is composed of the following components:nologies. This research project developed a cost model * A comparative review of the various privatizationthat simulated factories with several variations in the processes, including a detailed descriptive comparisonproduction practices and technologies used. The results of small-scale privatization methods and approaches toshow that in a period of rapid technical change signifi- common issues, such as valuation, method of sale, defi-cant differences in productivity can emerge among com- nition of assets transferred, treatment of debt, condi-peting firms-even in mature sectors. These differences tions of sale, and employee preferencesare amplified if learning across innovations is cumula- * An aggregate statistical overview of the small-tive. For firms in developing countries, the findings scale privatization process, including a quantitativesuggest that efforts to effect organizational changes overview of the scope, pace, and characteristics of theshould be supplemented by close international relation- process in each countryships and appropriate infrastructure; a passive trust in * A survey of approximately 100 recently privatizedthe product cycle could be unhelpful. small-scale business units in each country (a total of 300

Responsibility: Private Sector Development Depart- surveys)ment-Ashoka Mody. * Evaluation and policy recommendations.

Completion date: September 1993. The study is a collaborative effort with the CentralReports: European University Foundation. Its findings will be

Mody, Ashoka, Jerry Sanders, Rajan Suri, Chandu Rao, and disseminated in fall 1993 through a CFS DiscussionFernando Contreras. 1991. "International Competition in the Paper.

Bicycle Industry: Keeping Pace with Technological Change." Responsibility: Cofinancingand Financial Advisory Ser-Industry and Energy Department Working Paper, Industry vices Department, Private Sector Development and Pri-Series 50. World Bank, Washington, DC. vatization Division-Kevin Young, Shyamadas Banerji,

Mody, Ashoka, Jerry Sanders, Rajan Suri, and Eric Thompson. and April Harding; Private Sector Development Depart-1991. "International Trends in Steel Mini-Mills: Keeping Pace ment-John Nellis; and Legal Department, Europe and

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Central Asia Division-Douglas Webb. With Roman range of feasible institutional structures within the pri-Frydmann, Andrej Rapaczynski, Jan Mladek, and John vate sector for coordinating food production, process-Earle,Central European University Foundation. The Min- ing, and marketing activities.istry of Privatization (Poland), State Property Agency The empirical component of the research has two(Hungary), and Ministry of Privatization (Czech Repub- parts. The first part, completed in fiscal 1992, was alic) are participating in the research. The Ministry of review and synthesis of major "success stories" in foodFinance (Japan) and the Central European University processing and marketing in developing countries. MostFoundation are contributing funding to the research. of the cases examined were for Asian and Latin Ameri-

Completion date: September 1993. can countries and covered relatively high-value horti-cultural, fish, meat, and oilseed products. The analysiscovered the roles of the public and private sectors in

African Private Agricultural Marketing commodity system development, patterns of competi-tion and vertical coordination within these commodity

Over the past two decades many countries of Sub- systems, and the market and macroeconomic contexts inSaharan Africa have experienced a stagnation or de- which these successful commodity systems developed.cline in their traditional agricultural exports and agro- The second part of the empirical research was begunindustries. Within the region there have been relatively in fiscal 1993. This work focuses on private sector activityfew cases of successful agricultural export diversifica- in Sub-Saharan Africa in the processing and marketingtion. Food processing industries remain underdevel- of higher-value food commodities and nontraditionaloped, and much of the potential for intraregional trade food exports, including livestock and fish products, freshin fresh and processed food products has not been and processed fruits and vegetables, vegetable oils, sugar,realized. While there have been adverse trends in the and spices. Based on a literature review, a survey ofinternational market conditions for Africa's leading academics and practitioners, and fieldwork in severalexport commodities, there has been a growing consen- countries, the research is combining a regionwide analy-sus that Africa's poor agricultural export and agro- sis of present patterns of private sector involvement inindustrial performance is linked more closely to various food processing and trade with detailed case studies offorms of government failure at the macroeconomic and food commodity systems and industries. Case studiessectoral levels. were undertaken on dairy and horticulture in Kenya,

This analysis has led many researchers and practitio- cashew nuts in Tanzania, vanilla in Madagascar, fisher-ners to recommend policy adjustments as well as the ies in Ghana, and soybean processing in Nigeria.restructuring of agricultural marketing systems to al- Responsibility: Agriculture and Natural Resourceslow the private sector to play a greater (or dominant) Department, Agricultural Policies Division-Gershonrole in agricultural processing and marketing activities. Feder and Steven Jaffee; Africa Technical Department,But the understanding of the actual potential of private Environmentally Sustainable Development Division-sector marketing in Africa and the actual forms that Graeme Donovan; and South Asia, Country Departmentprivate enterprises and private markets take in the II, Agriculture Operations Division-Benoit Blarel. Withcontext of African agro-industry and trade is very lim- Diane Dolinsky, U.S. Department of Agriculture; andited. This research was undertaken to assess the extent John Morton, Natural Resources Institute. The Overseasand forms of private sector activity in these areas, to Development Administration, U.K., is contributing fund-examine both successful and unsuccessful cases of pri- ing to the research.vate sector food processing and marketing, and to de- Completion date: October 1993.termine the policy, financial, or other barriers to further Reports:development in this area. Jaffee, Steven. 1992. "The Organization, Coordination, and

A conceptual framework for the research was devel- Performance of Food Marketing Systems: A Conceptualoped which combines a commodity system approach Framework."with elements from welfare and institutional econom- Jaffee, Steven, with P. Gordon. 1993. Exporting High-Value Foodics. The framework positions focal food processing and Commodities: Success Stories from Developing Countries. Worldmarketing functions and institutions within the wider Bank Discussion Paper 198. Washington, DC.producer-to-consumer chain for individual commodi-ties. Itidentifies the range of public goods and externali-ties associated with food processing and marketing that Privatization in Eastern Europemay require government intervention, assesses the tech-nical and economic characteristics of individual com- The transition in Eastern European countries frommodities and marketing functions, and identifies the socialism to market economies encompasses a variety of

49


economic, political, and social dimensions. Transforma- function and government policy addressing macroeco-tion is easier to achieve in some of these dimensions than nomic instability become effective. Without privatiza-in others. Political change-a prerequisite for economic tion, economic agents will fail to replicate the behaviorchange-once seemed difficult, if not impossible. Yet of real marketparticipants, and macroeconomic policiesonce circumstances permitted political change, the po- may have limited or even perverse effects.litical transformation in Eastern European countries The end of socialism in Eastern Europe was accom-was relatively swift. panied by an end to the socialist system of conducting

Economic transformation is more complex. A mod- international trade. The second part of the project isem functioning market economy is not only difficult to concerned with international trade issues. Socialist in-achieve. It is also often unclear what is meant by market ternational trade had been regulated through the mecha-economy. For some the idea of a market economy also nisms of the Council for Mutual Economic Assistanceincludes a broad social welfare system. For others the (CMEA). The CMEA system was the logical adjunct forconcept of the market economy implies a competitive the international transactions of a centrally plannedenvironment and unbridled free enterprise. For a third economy. The system was based on government-to-group it implies that the state would aid the market by government negotiations regarding the content of tradeidentifying enterprises with the greatest potential for and prices. This was highly regulated, planned interna-success and steering the targeted enterprises toward the tional trade that assured foreign sales and at the samemost profitable activities. An economy that has for time protected enterprises by eliminating the possibilitydecades been planned or that has experienced decen- of unplanned, disruptive competitive imports. The ex-tralized redistributive socialism cannot instantaneously treme protectionism of the system perpetuated a tech-be transformed by decree, or by good wishes and decla- nology gap that is reflected in the distinction betweenrations of intentions, into a Western market economy. "hard" and "soft" goods.This project and the book that resulted from it address With the demise of the CMEA, issues arose concern-the complexities encountered in the economic transfor- ing the adaptation of Eastern European countries' inter-mation from socialism to a market economy. national trade and payments mechanisms. Proposals

The research first addresses issues of domestic re- discussed for post-CMEA trade and payments arrange-structuring. A central theme is that eliminating central ments are directed at three issues: (1) identifying interimplanning does not necessarily imply an immediate-or arrangements to facilitate international trade in theeven a delayed-transition to a market economy. Abol- post-CMEA regime; (2) confronting the need for hardishing central planning alone merely results in decen- currency payment for imports at a time when a substan-tralized industry without the incentives provided by tial terms of trade loss has been incurred because of theprivate property rights. It characteristically entails im- switch from CMEA to international prices; and (3) speci-perfect markets with heavy state interference and ex fying the nature of interim international payments ar-post redistribution designed to equalize outcomes. rangements.

The project includes analyses of the economies in The study's analysis of trade issues contrasts the casewhich central planning was eliminated, but property for an Eastern European Payments Union (EEPU) withrights were not assigned and ex post redistribution the circumstances of the (West) European Paymentsremained pervasive. These include Yugoslavia, post- Union of the early 1950s. The similarities are the "dollar1968 Hungary, and Poland in the 1980s. These analyses shortage" and the gains from multilateralism. Althoughare supplemented by an account of economic transfor- the argument against an EEPU is that it might become amation in China, which also moved away from planned "cocoon" for the old system, the final decision ought tosocialism in the 1980s; here, too, socialism persisted be made taking into account the nature of the alterna-without central planning. The research examines sev- tive-that is, whether the alternative is defaulteral key issues: the effectiveness of government policies bilateralism or a multilateral trading system. An EEPUin regulating economic activity in reformed socialist dominates the first, but not necessarily the second.economies; the manner in which privatization may be Responsibility: Policy Research Department, Transi-accomplished; and employee ownership as a means of tion and Macro-Adjustment Division-Brankodefusing initial political opposition to private owner- Milanovic, Alan Gelb, Inderjit Singh, and Milanship. Vodopivec, and Trade Policy Division-David Tarr;

The conclusion is that eliminating central planning is Europe and Central Asia, Country Department I, Coun-only an initial, incomplete step. For the transformation try Operations Division-Zeljko Bogetic; Europe andto be effected swiftly and with minimal meandering, the Central Asia, Middle East and North Africa Technicalkey institution of a market economy-pervasive private Department, Office of the Director-Manuel Hinds;property-must be established. Only then can markets East Asia and Pacific, Country Department I, Country

50


Operations Division-Erika Jorgensen; Europe and sale privatization programs in other formerly socialistCentral Asia, Country Department m, Office of the countries tackling the piroblems of implementing a pri-Director-Constantine Michalopoulos; and Financial vatization program during the transformation to a mar-Operations Department, Division II, North America, ket economy.Asia, Pacific-Fernando Saldanha. With Arye Hillman, This study is being carried out in conjunction with aBar-Ilan University. separate study on small-scale privatization in Central

Completion date: October 1993. Europe.Reports: Responsibility: Cofinancing and Financial Advisory

Bogetic, Zeljko. 1993. "The Role of Employee Ownership in Services Department, Private Sector Development andPrivatization of State Enterprises in Eastern and Central Privatization Division-Susan Rutledge, Christina

Europe." Europe-Asia Studies (formerly Soviet Studies) (3). Kappaz, and Maziar Minovi; and Legal Department,Chen, Kang, Gary H. Jefferson, and Inderjit Singh. 1992. Europe and Central Asia Division-Martin Stewart-

"Lessons from China's Economic Reform." Journal of Smith. With Andrew Alexandrowicz, ITCA Europe;Comparative Economics 16 (2). Ladislav Venys, Anglo-American Business Institute;

Hillman, Arye L., and Branko Milanovic, eds. 1992. Transition and Joan Stein, Central Europe Trust. The Ministry offrom Socialism in Eastern Europe: Domestic Restructuring and Finance, Japan, is contributing funding to the research.

Foreign Trade. Washington, DC: World Bank. Completion date: December 1993.Hillman, Arye L., and Adi Schnytzer. 1990. "Creating the

Reform-Resistant Dependent Economy: The CMEA

International Trading Relationship." Policy Research Privatization of Agricultural SupportWorking Paper 505. World Bank, Country Economics ServicesDepartment, Washington, DC.

Michalopoulos, Constantine, and David Tarr. 1991. "Trade and Agricultural support services-such as agricultural

Payments Arrangements in Post-CMEA Eastern and Central research and extension, seed production and distribu-Europe." Policy Research Working Paper 644. World Bank, tion,plantprotection,andlivestockservices -cangreatlyPolicy and Review Department and Europe, Middle East, influence the sector's productivity, sustainability, and

and North Africa Technical Department, Washington, DC. flexibility and are an essential element of agriculturalMilanovic, Branko. 1991. "Privatization in Post-Communist development. In the past, a principal component of

Societies." Communist Economies and Economic Transformation government strategies for ensuring growth in agricul-

3:5-39. tural output has been the public provision of agricul-Shrenk, Martin. 1991. "The CMEA System of Trade and tural support services. Recently, however, as countries

Payments: The Legacy and the Aftermath of Its Termina- have struggled to achieve higher levels of economiction." Policy Research Working Paper 753. World Bank, efficiency-and spurred by growing fiscal deficits andCountry Economics Department, Washington, DC. pervasive government inefficiencies-governments

have had to reconsider their strategies. And the transi-tion from planned to market economies occurring in

Trade Sale Privatization in Central Europe Eastern European countries and the new independentstates of the former Soviet Union has sharpened the

Over the past three years privatization through trade focus on market liberalization and privatization op-sales has represented an important vehicle for the trans- tions, extending to the delivery of agricultural supportfer of medium-size and large state enterprises to the services. This research was initiated in response to theprivate sector. This study looks at the experience of the need to understand the appropriate roles of the publicformer Czechoslovakia, Hungary, and Poland and iden- and private sectors in the delivery of these services.tifies the obstacles that the governments in these coun- The research applies principles of welfare and insti-tries encountered-and their successful strategies for tutional economics to analyze the economic nature ofovercoming the obstacles. the many individual functions that constitute agricul-

The study reviews the tradeoffs inherent in the policy tural research and extension, seed production and dis-decisions made as part of the trade sale process, and tribution, plant protection, and livestock health ser-looks at how each country addressed the tradeoffs. The vices. It examines whether these functions have public orstudy is based on case studies of about six trade sale private good properties and whether their deliveryentailsprivatizations in each country; these case studies are to be externalities, moral hazard problems, or economies ofpublished asaseparatevolumecomplementingthestudy. scale. This analysis is used to develop a framework for

The results of the study are expected be useful to establishing the approp riate government and private sec-government officials responsible for implementing trade tor roles in the delivery and financing of these services.

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The study identifies and analyzes worldwide pat- Feder, and Agricultural Technology and Services Divi-terns in the mix of public and private sector involvement sion--Cornelis de Haan, Gabrielle Persley, Jitendrain the supply of agricultural services, based on inter- Srivastava, and Willem Zijp. With Steven Jaffee, Lisaviews and correspondence with research, extension, Schwartz, and Dina L. Umali. The French Foreign Min-livestock, crop, and seed specialists within the Consul- istry, CIRAD (France), and DANIDA (Denmark) aretative Group on International Agricultural Research contributing funding to the research. The Inter-Ameri-system, the academic community, and international can Institute for Cooperation in Agriculture (Costa Rica)development organizations and with industry repre- is both contributing funding to and participating in thesentatives, and on information provided in published research.sources. Drawing on published materials, project docu- Completion date: January 1994.ments, and interviews, the study has developed country Reports:case studies examining the complementary or conflict- Jaffee, Steven, and Jitendra Srivastava. 1992. Seed Systeming roles of the public and private sectors in the delivery Development: The Appropriate Roles of the Private and Publicof particular agricultural services, the evolution of insti- Sectors. World Bank Discussion Paper 167. Washington, DC.tutional arrangements in such service sectors, and the (Also forthcoming in the World Bank Research Observer.)nature of private sector service delivery systems. Umali, Dina L. 1992. Public and Private Sector Roles in Agricultural

The research has found that the public and private Research: Theory and Experience. World Bank Discussionsectors have come to play complementary roles in the Paper 176. Washington, DC.delivery of many agricultural services (with the private Umali, Dina L., Gershon Feder, and Cornelis de Haan. 1992. Thesector undertaking most commercial activities) in in- Balance between Public and Private Sector Activities in thedustrial market economies and in many of the more Delivery of Livestock Services. World Bank Discussion Papercommercially advanced developing countries. In a large 163. Washington, DC.number of developing countries, however, public sector . Forthcoming. "The Balance between Public and Privateinstitutions continue to dominate formal systems of Sector Activities in the Delivery of Animal Health Services."agricultural service delivery. In these countries a combi- World Bank Research Observer.nation of restrictive licensing, monopoly marketing ar- Umali, Dina L., and Gabrielle Persley. "Balancing the Public andrangements, subsidized public services, price interven- Private Sector Roles in Provision of Plant Protectiontions, weak legal protection, small market size, and Services." World Bank, Washington, DC.inadequate human, financial, and technical resources Umali, Dina L., Lisa Schwartz, and Willem Zijp. "Balancing thehas inhibited private sector participation, even in areas Public and Private Sector Roles in the Provision of Agricul-that have proved profitable in other countries. There is tural Extension Services." World Bank, Washington, DC.thus scope for a considerably greater role for the privatesector in the delivery of agricultural services in manydeveloping countries. The Changing Role of the State: Strategies

But the privatization of agricultural services cannot for Reforming Public Enterprisesand should not be undertaken as one broad strategy.Some agricultural services, because of their public good The dramatic shift in thinking about the role of thenature, externalities in their production or use, econo- state in the past decade has brought to the forefrontmies of scale, or other features associated with their questions about the appropriate role of government.delivery, may require some form of government inter- Thisshiftisnotconfinedtotheformerlycentrallyplannedvention. This need not entail government delivery or economies; almost all governments have announcedownership. The research has found that for many ser- measures to reduce or alter their direct involvement invices, regulation, subsidization, and taxation of private the economy. These countries propose to realign the rolesector activities have frequently proved to be more of the state by increasing the size of the unregulatedefficient forms of intervention. (and sometimes the regulated) private sector at the

The study's findings have been presented at the expense of public enterprises, to undo what they nowInternational Symposium on Public and Private Sector view as the excessive expansion of government sinceRoles in the Provision of Agricultural Support Services, World War II.held at the Inter-American Institute for Cooperation in Notwithstanding this trend, no recent attempt hasAgriculture, San Jose, on May 17-19, 1993, and at a been made to measure the degree of state shrinkage.workshop on Issues in Private Sector Development in Nor is there a satisfactory explanation of why countriesAgriculture, held at the World Bank on June 2-3, 1993. vary so widely in the intensity with which they pursue

Responsibility: Agriculture and Natural Resources public enterprise reform, in the nature of reform (forDepartment, Agricultural Policies Division-Gershon example, privatization versus commercialization under

52


public ownership), and in the economic impact of re- strategy, the study will provide a taxonomy of the mostform. This study is an attempt to fill this gap. appropriate course of action for reforming public enter-

The main questions that the study addresses are as prises under different country and enterprise circum-follows: Given differing country conditions, stances.

* Why have some countries chosen to reform expe- The research will be diseminated through a confer-ditiously while others lag behind? ence for Bank staff and others in the summer of 1994, a

* Why do reforming countries choose widely differ- policy research report, and an edited book of back-ing strategies? ground papers.

* What are the outcomes of these different strate- Responsibility: Policy Research Department, Financegies? and Private Sector Development Division-Mary

The study's main premise is that answers to these Shirley, Ahmed Galal, Ross Levine, Ash Demirgii;-questions can be traced to four factors: Kunt, Ed Campos, and N. Cisse, Trade Policy Divi-

* The political economy of public enterprises (that sion-Michael Finger and Faezeh Foroutan, Transitionis, how the rent from public enterprises will be redistrib- and Macro-Adjustment Division-Alan Gelb, Inderjituted among interest groups after reform) Singh, Vesna Petrovic, Andr6s Solimano, and Luis

* The state of development and the functioning of Serven, and Office of the Director-John Page; andthe product and factor markets Cofinancing and Financial Advisory Services Depart-

* Government capacity to write and enforce cred- ment, Private Sector Development and Privatizationible contracts with public enterprise managers, private Division-Abdul Shaikh. With Leroy Jones, Jaysector management, and regulated private monopolies Gonzalez, Bharat Nauriyal, Clemencia Torres, Pankaj

* Macroeconomic conditions. Tandon, Richard Sabot, Michael Gavin, Dae-Hee Song,By understanding how these factors influence re- V. Bruce Tolentino, Hadi Esfahani, Roberto Cordan,

form and its effectiveness, the study aims not only to Jomo Kwane Sundara, and Arup Banerji.enrich our understanding of the public enterprise phe- Completion date: May 1994.nomenon, but to aid governments in charting effectivereform strategies for their public enterprises.

To address the question of whether the role of the Indigenous Management Practices:state has diminished after a decade of privatization, the Lessons for Africa's Managementstudy will develop as broad a data base as possible, for in the 1990sas many countries as possible, for the value added,employment, investment, and numbers of public enter- This research project seeks to break new ground byprises. (The study will also test the proposition that illuminating the dynamics of indigenous institutionalexcessive government involvement in economic activ- change in governance and public administration, par-ity has an adverse effect on economic growth.) ticipation, private sector management, and accumula-

To understand the relationship between the perfor- tionand financial intermediation. Theprojectcomprisesmance of public enterprises, reform strategies, and the 14 separate empirical investigations that offer concretenature of public enterprise markets, institutions, poli- insights into how local people express their prefer-tics, and macroeconomic conditions, the study will ana- ences-whether through voice or behavior.lyze the experience of 12 countries in depth-Chile, The studies are grouped in three clusters. In the firstChina, the Czech Republic, Egypt, Ghana, India, Mexico, cluster four studies are looking at issues of governance.the Philippines, Poland, the Republic of Korea, Senegal, One is examining models of indigenous governanceand Turkey. These countries have been selected because through a comparative study of Benin and Mali. Athey exhibit varied public enterprise reform strategies, second is looking at the institution of chieftaincy ininstitutional capacity, political economy, market devel- Botswana and Ghana. Another is focusing on relationsopment, and macroeconomic conditions. in Zambia between the civil service and its clients to

For each of these countries the study will estimate the shed light on consumers' and bureaucrats' perceptionsaggregate impact of the public enterprise sector on of the responsibilities of the civil service. The last studygovernment finances, the banking system, and external in the cluster is examining the role of indigenous chan-debt over the past 10 years. It will also assess the sector's nels of information, such as folk media, in Eritrea,performance by estimating, for example, profitability in Ethiopia.relation to book value and equity, producer surplus, The studies in the second cluster focus on issues ofsavings-investment gap, and return on revalued assets. participation. They are looking at local initiative in and

Based on the evidence on the outcomes of reform and ownership of public service reform in Zambia; institu-the factors that led to and shaped the chosen reform tional responses to the AIDS crisis in Uganda and com-

53


munity empowerment through access to resources and the Netherlands Ministry of Foreign Affairs areto fight AIDS; and at the Groupement Naam in the contributing funding for the research.Sahel. Completion date: June 1994.

The last cluster comprises six studies on accumula-tion. These look at group problem solving and produc-tivity enhancement in quality control circles in Burkina Intergovernmental Fiscal RelationsFaso; the relations between culture, technology, and in Developing Countriesmanagement practices in large enterprises; and cultureand values in the management of small enterprises in The delineation of taxing and spending authorityKenya. And they look at institutional responses to and the structure of intergovernmental transfers in aevolving needs; the development of alternative finan- country have come to be recognized as of fundamentalcial intermediation institutions in Mali; and ethnic de- importance in the efficient and equitable provision ofterminants of regional economic activity. public services. This project attempted to provide a

The results of these studies will be synthesized in a framework for evaluating these arrangements. It alsovolume organized around the four themes of gover- developed empirical frameworks for examining thenance and public administration, participation, adap- efficiency and equity implications of jurisdictionalchoicetation of management practices to enterprises, and mechanisms; assessing the impact of higher-level trans-accumulation and financial intermediation. A work- fers on subnational government fiscal behavior; andshop in Africa has been proposed to obtain feedback examining the relationships between fiscal decentrali-from African practitioners on the relevance and value zation and fiscal performance.of the findings for operational use and for informing First, the project developed a framework for assess-development practice and training with the cultural ing intergovernmental fiscal relations and blueprintsmessage inherent in indigenous institutional dynam- for the reform of these relations in developing andics. transition economies. Second, the research examined, at

The findings of the research are expected to contrib- both the conceptual and the empirical level, the Tieboutute directlyto the developmentofprototypeprograms-- hypothesis that consumer mobility and inter-for example, studies on governance and participation jurisdictional competition leads to efficient provision ofshould contribute to the development of public admin- local services. In doing so, it presented and imple-istration adjustmentprograms. These prototypes should mented new empirical methods on tax and expenditureprovide ideas and information that can augment exist- incidence and on public sector allocative efficiency. Iting government and community institutions that are concluded that only under very restrictive assumptionscrucial to the success of economic adjustment pro- will "voting with the feet" and interjurisdictional com-grams. And the studies in the participation and accu- petition ensure allocative efficiency in the local publicmulation studies should help improve performance sector.through better knowledge about the links between Third, the research looked at the effect of intergov-culture, technology, and management practices in pri- ernmental transfers on local fiscal behavior. It surveyedvate enterprises. They should contribute, too, to the the theoretical and empirical literature on grants andenhancement of private sector development through modeled the incentive effects of intergovernmental trans-more strategic adaptation, renovation, and diffusion of fers to examine the impact of higher-level transfers onindigenous practices that now work at only a small subnational government budgetary choices. It exam-scale, or that slow growth in savings and in entrepre- ined the income and price effects of grants and the extentneurship. to which grants were need-compensating as opposed to

Responsibility: Africa Technical Department, Capac- effort-rewarding. And it specified a dynamic model toity Building and Implementation Support Division- examine the long-run and short-run effects of perma-Mamadou Dia, Coralie Bryant, Philip Morgan, Paula nent changes in federal grants on local public invest-Donnelly-Roark; and East Aia and Pacific, Coutry De- ment and recurrent expenditures. It is planned to ex-partment III, Country Operations Division-Habib pand this model to include the role of public capital inFetini. With Carol Lancaster; Emile Ahohe; Moses private production, to endogenize local own revenues,Kiggundu; Bernard Dasah; Monte Palmer; Asgede and to model the private sector, local governments, andHagos;DynaArhin;VernonRuttan;AlainHenri;Caisse the federal government in a full general equilibriumFranqaise; Waisfaiz; Englemann and Mwai; Irma framework.Adelman; Tamara Duggleby; and Daniel C. Bach. The The study's framework for assessing inter-Swedish International Development Authority, governmental fiscal relations has been drawn on by theNORAD, Finnish International Development Agency, Bank's operations complex in its work in several coun-

54


tries, including Albania, Brazil, China, Indonesia, Rus- opment system perforis; and how technology effortssia, South Africa, and Venezuela. The framework paper make the difference in the performance of Japanese firms.has been translated into Chinese and Russian and is The study is being carried out mainly through abeing used by several developing countries in their review of Japanese literature; additional data analysestraining program for public officials. will be carried out when they are needed.

Responsibility: Policy Research Department, Public Responsibility: Private Sector Development Depart-Economics Division-Anwar Shah and Heng-fu Zou. ment-Carl Dahlman and Masayuki Kondo.With An tulio Bomfim, University of Maryland. Completion date: June 1994.

Completion date: June 1994.Reports:

Bomfim, Antulio, and Anwar Shah. 1991. "Macroeconomic Privatization of Public EnterpriseManagement and the Division of Powers in Brazil: Perspec- Managementtives for the Nineties." Policy Research Working Paper 567.

World Bank, Country Economics Department, Washington, Governments around the world are privatizing their

DC. state-owned enterprises. A recent World Bank studyShah, Anwar. 1988. "Capitalization and the Theory of Local that examined the lessons of experience in privatization

Public Finance: An Interpretative Essay." Journal of Economic showed that ownership itself matters for improving

Surveys 2 (3):209-43. enterprise efficiency. Outright sales are preferable to. 1989. "A Capitalization Approach to Fiscal Incidence at nonownership methods of privatization because they

the Local Level." Land Economics 65 (4):359-75. transfer property rights to a clear set of owners with the. 1989. "A Linear Expenditure System Estimation of Local incentive to improve performance. But sales may notbe

Fiscal Response to Provincial Transportation Grants." Journal feasible in countries with weak capital markets, an

of Economics and Business, pp. 150-68. unfavorable policy framework, and weak regulatory. 1991. "A Fiscal Need Approach to Equalization." Paper capacity-and for enterprises for which it is difficult to

presented at the 1991 Annual Meetings of the Canadian attract private investors. In these cases significant gainsEconomic Association, Kingston, Ontario, June. can be had by bringing in aggressive private managers

.1991. The New Fiscal Federalism in Brazil. World Bank while leaving ownership in the state sector.Discussion Paper 124. Washington, DC. Management contracts, leases, and concession ar-

. 1991. "Perspectives on the Design of Intergovernmental rangements have been widely used throughout theFiscal Relations." Policy Research Working Paper 726. World world to privatize management in a variety of sectors,

Bank, Country Economics Department, Washington, DC. including industry, services, public utilities, tourism,(Also forthcoming as a World Bank Policy and Research and agriculture. Yet there are few systematic analyses ofSeries paper.) experience with these arrangements. The few available- 1992. "Empirical Tests for Allocative Efficiency in the studies, largely descriptive in nature and focused onLocal Public Sector." Public Finance Quarterly 20 (3):359-77. management contracts, show that management con-

Zou, Heng-fu. Forthcoming. "Dynamic Effects of Federal Grants tractors rarely assume risk and have little incentive to

on Local Spending." Journal of Urban Economics. improve efficiency.

Leases and concessions overcome some of these prob-lems. Under a lease the private party assumes commer-

Japanese Lessons on Technology cial risk and thus has greater incentive to enhanceDevelopment efficiency, and under a concession the holder is respon-

sible for investments. Nevertheless, because the scopeThe importance of technology in industrial develop- for government intervention over the long run can be

ment is widely recognized, especially for a country that large, private management arrangements might workcannot rely on natural resources or cheap labor. Coun- best when they are an interim step toward-rather thantries must compete in quality, productivity (cost), and a substitute for-full privatization.timeliness of delivery by making full use of technol- This study attempts to fill the existing analytical gap.ogy-which in this case includes management and skill Its goals are to examine the experience with the privat-development. ization of management so as to provide operational

This study draws lessons for developing countries guidance for Bankstaff and borrower governments. Thefrom Japan's experience in industrial technology devel- study will briefly examine the nature and structure ofopment. The study intends to produce three reports, such arrangements. It will focus on analyzing the deter-addressing how Japan successfully introduced micro- minants of success and the extent to which the perfor-electronics automation; how Japan's research and devel- mance gains from private management are sustainable.

55


Responsibility: Private Sector Development Depart- of efforts to acquire and develop technology, as well asment-Sunita Kikeri. education and technical human capital.

Completion date: June 1994. Using this analytical framework, the project willexamine 14 developing economies: the high-perform-ing East Asian newly industrializing economies (NIEs)-

Regulatory Policy and Regulatory Reform Hong Kong, the Republic of Korea, Singapore, andin Industrializing Countries Taiwan (China); the second-tier Asian NIEs-China,

Indonesia, Malaysia, and Thailand; the three most ad-This research is part of a series of studies in the vanced Latin American economies-Argentina, Brazil,

Private Sector Development Department on regulatory and Mexico; and India, Israel, and Turkey. These arepolicy and regulatory reform in industrializing coun- roughly the developing economieswith the largestvaluetries. Its purpose is to provide a survey of consumer added in manufacturing among those that are not partpolicy that will be useful to World Bank staff and to of Eastern Europe or the former Soviet Union.policymakers in industrializing countries. The study The findings of this study will be disseminatedwill synthesize recent developments in the economics through a book, a Private Sector Development Depart-literature and review the case for selective government ment working paper, and a seminar.intervention. It will conduct a systematic overview of Responsibility: Private Sector Development Depart-existing public and private initiatives in both industrial ment-Carl Dahlman and Ousa Sananikone.and developing economies, surveying the main public Completion date: June 1994.and private institutions that deal with consumer policyand the principal areas of legislation and enforcement,and highlighting differences in approach and emphasis Tax Administration: Lessonsacross countries. And it will assess appropriate policy,regulatory, and institutional initiatives for industrializ- This project builds on the World Bank's 1991 policying developing countries. paper, Lessons of Tax Reform, which identified appropri-

Responsibility: Private Sector Development Depart- ate directions for changes in tax policy in developingment-Claudio Frischtak. With Eduardo Engel, Har- countries. But this study addresses the reform of taxvard University. administration, which has received much less attention

Completion date: June 1994. The research attempts to set out the major problems thatarise in the reform of tax administration in developingand transition economies, to identify the key factors that

Strategies for Competitiveness determine appropriate solutions in different contexts,and to illustrate how some of these problems have been

Technology and technical change are among the successfully resolved in particular countries.main driving forces behind the structure of production, The research is being carried out as a desk study,opportunities for trade, increase in international com- drawing heavily from the extensive work done on taxpetitiveness, and the growth of national income. Eco- administration reform at the World Bank and the Inter-nomic development is thus intimately related to the national Monetary Fund, as well as firsthand experienceeffective use of technology to make efficient use of in a number of countries.resources and to expand the range of goods and services Responsibility: Policy Research Department, Publicproduced to satisfy needs and increase social welfare. Economics Division-Shantayanan Devarajan and

This project is concerned with the central lessons to Anwar Shah. With Amaresh Bagchi and Arindam Das-be derived from contrasting countries' industrial per- Gupta, National Institute of Policy and Public Finance;formance over the past 30 years from the viewpoint of and Richard Bird, University of Toronto.technology. Its aim is to provide a framework for ana- Completion date: July 1994.lyzing the relationship between technology and eco-nomic performance.

To put the discussion of economic performance, in- The Transition of Socialist Agriculturedustrial strategy, and technology strategy in perspec- in Europe and Asia: A Synthesis of Earlytive, and to analyze the relationship between technol- Experienceogy development and capability and economic perfor-mance, the project will examine three types of variables: This study will analyze the main directions of agri-indications of the macroeconomic environment, indica- cultural and food policy reforms in several of the social-tions of the economic incentive regime, and indications ist economies in transition in Europe and Asia in order

56


to synthesize their experiences. It will emphasize sys- The study's research results and synthesis will betemic, structural, and incentives policy reforms designed presented in book form, as well as in several topical piecesto enhance recovery and stimulate productivity and for publication in professional journals. The book andefficiency. articles will target primarily policymakers in the econo-

As the socialist revolution spread through Asia and mies in transition and in the international community.the Central and Eastern European countries, significant Responsibility: Agriculture and Natural Resourcesvariations were introduced into the Soviet agricultural Department, Agricultural Policies Division-Richardmodel to adapt it to local circumstances. These varia- Burcroff II and Apparao Katikineni; and Europe andtions have conditioned the policies now being pursued Central Asia, Country Department III, Agriculture, In-in Europe and Asia to dismantle the apparatus of collec- dustry, and Finance Division-Mohinder S. Mudahar.tivization and to encourage the transition to a market- With Justin Yifu Lin, Development Research Center ofdriven agriculture. China's accelerated gradualism, the State Council, China. Academies of agriculture andPoland'sbigbang, the RussianFederation'spartlystalled social sciences in Russia and several Eastern Europeanagricultural transition, and Ukraine's poorly articulated countries are also expected to participate. The Fordreformsareallyieldinglessons-bothpositiveandnega- Foundation is contributing funding to the research.tive-thatmightbe applicable elsewhere. It is becoming Completion date: January 1995.increasingly apparent that the transition in most econo-mies will take much longer than initially anticipated.Thus, a synthesis of the lessons that have emerged is Cost of Business Regulation Analysistimely, and it could provide useful information forpolicy designs and mid-course corrections. Over the past two years staff in the Finance and

The study's principal objective is to analyze the main Private Sector Development Division (formerly Publicdirections of agricultural and food policy reform in the Sector Management and Private Sector Developmenttransforming economies and compare the effectiveness Division) have worked on Bank operations in sevenof different instruments in inducing an agricultural countries to complete a series of studies on the impact ofrecovery and improved efficiency. Lines of inquiry will regulatory and other constraints. Two central lessonsinclude systems reform in the agroindustrial complexes for regulatory reform have emerged from these studies.(land reform, enterprise restructuring and privatiza- First, not only do binding constraints on the privatetion, framework for competition, and new roles for sector (regulatory or otherwise) vary sharply acrosspublic administration), programs to stimulate an agri- countries, the constraints that turn out to be bindingcultural recovery and the resumption of sectoral growth, often are not the ones that superficially seem to have thestrategies for longer-term structural reform in primary greatest impact. Second, the gap between formal rulesproduction, agroprocessingand marketing, international and regulatory practice can be substantial-both be-trade and rural financial markets, the incidence of food cause public officials may exercise discretion in the wayand agricultural subsidies and their financing, and food they implement rules and because firms sometimes cansecurity interventions. adapt to superficially forbidding formal requirements

The study is using a matrix approach to highlight at quite a low cost (through institutional adaptations orspecific country experience in several policy areas from modest side payments).which generalizations can be made. (The sample coun- These lessons point to the crucial importance oftries are being selected from those with advanced re- going beyond an exclusive focus on formal rules and theforms, partial reforms, and stalled or yet-to-be-an- "official" view of public officials. What is needed isnounced programs.) The research will be grounded in a careful, country-specific analysis to identify which regu-review of the extensive inventory of published and latory (and other) constraints are binding in a particularunpublished materials now available in the Bank, other setting, and to measure the costs that these constraintsinternational organizations, and host-country research impose on private firms and on the economy. Conse-institutes, concurrent surveys of land reform in China quently, one goal of the Cost of Business Regulationand Eastern Europe, and primary analyses of agricul- Analysis (COBRA) study is to develop a tool kit fortural market structure and integration. The initial work operational staff comprising two components: (1) awill consist of a literature review to formalize lines of diagnostic instrument, to learn which among the myriadinquiry and to finalize the selection of countries and of formal rules most burden the private sector in prac-reform programs to be analyzed. In parallel, designs for tice, and (2) impact assessments, to measure as preciselythe primary surveys will be completed and in-country as possible the economic costs imposed by the regula-counterparts identified. The project will then prepare tions identified by the diagnostic instrument as mostcountry and "reform" case studies. burdensome.

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While surveys of firms provide rich information on transport, and some provided trade credit for theirthe costs imposed on firms by regulation, it would be customers' purchases. This practice, the provision ofdesirable to complement them with other types of em- interenterprise credit, was an important feature of thepirical analyses that are not dependent on information enterprises' economic environment and a central focus(or perceptions) provided by entrepreneurs, and that of the research.incorporate the economic costs of regulation that extend During the first six months of 1992 the stock ofbeyond the direct burden placed on firms. Additionally, interenterprise debt in arrears rose from about R37it would be desirable for analyses to be directly compa- billion to R3.2 trillion. This dramatic increase is symp-rable-both across countries and with other sources of tomatic of the deepest conflicts in the transition. Thewelfare loss in a given country-so that they could central paradox facing reformers in Russia today con-provide a basis for judging whether the regulatory cerns the potential cost of signaling a commitment toburden in a given country is large in some absolute market incentives in an environment ripe with the po-sense. A second goal of this research is to extend the tential for market failure. To signal a commitment toanalysis of the impact of regulation to incorporate these market incentives, the government must implement aadditional considerations. policy mix that includes a low fiscal deficit, tight money,

The research will produce a portfolio of information and hard budget constraints. If the commitment is noton COBRA for distribution to operational staff. credible ex ante, enterprises will not adjust to markets

Responsibility: Policy Research Department, Finance and the government will be forced, if it carries throughand Private Sector Development Division-Ed Campos with its policy commitment, to liquidate a large numberand Mary Shirley. With Ralph Bradburd, Williams Col- of enterprises ex post.lege; and Robert Mitchell, Clark University. Clearly, this policy is dynamically inconsistent for

Completion date: June 1995. two reasons. First, imposing liquidation or bankruptcyon a large number of enterprises would create seriouspolitical problems for the central government. Second,

Enterprise Adjustment in the Russian imposing these policies would create serious economicFederation problems. Complicating the situation is interenterprise

lending, which leads to a dramatic deterioration in theThe primary problem of reform in Russia and in quality of information in the economy. Many creditwor-

other formerly socialist countries is the failure of its thy enterprises extended credit to customers of longarchitects to anticipate and recognize the emergence of standing, initially believing such debt would be repaid.a new type of enterprise, one that is unique to the period But as the customers extended debt to their customers,of transition. Enterprises of this type are neither fully many upstream enterprises found that they could nosocialist nor fully market-oriented. Rather, they are longer evaluate the likelihood that interenterprise loanssurvival-oriented, attempting to ensure their continu- would be repaid. So, many creditor enterprises losting operation despite great uncertainty in the institu- sight of their own financial viability. An external arbitertional environment. This study explores the behavior of in a bankruptcy proceeding cannot be expected to bethese enterprises using a mixture of theoretical, institu- able to evaluate an enterprise's viability when the enter-tional, and empirical techniques. prise itself cannot. Consequently, the government's

The research began by conducting a survey of 75 policy, if implemented, could lead to the wrong set ofenterprise directors in seven cities in western Russia. enterprises being shut down. Not surprisingly, theseThe survey revealed an important legacy of central problems caused the government to back down from itsplanning-the high degree of vertical dependence commitment to hard budget constraints.among enterprises. Nearly all the directors claimed that The interenterprise debt crisis was temporarily re-they were very dependent on their present trading solved by a combination of policies, including a massivepartners. Most claimed that only one or two enterprises infusion of credit into the enterprise sector by the Cen-produced their most important inputs or consumed tral Bank of Russia. But this solution fails to address thetheir most important products. This feature makes en- underlying problem (and may even exacerbate it)-thatterprise directors concerned not only with the viability enterprise directors do not view the government's com-of their own enterprises, but with the viability of their mitmentto stabilizationas credible. Consequently, manytrading partners. directors continue to pursue business as usual, resisting

Many directors were willing to use the resources of adjustment.their enterprises to help their trading partners survive. The next stage of the study explored policies, otherFor example, many downstream firms directly pur- than stabilization, that might reorient enterprises awaychased inputs for their suppliers. Other firms facilitated from survival toward markets. One hypothesis thatthe delivery of inputs to their suppliers by providing arose out of the research is that the enterprise director's

58


belief in vertical dependency may simply be a vestige of States than in Russia. The analysis suggests that plan-the central planning system and not based on an under- ners economized on the costs of central economic coor-standing of industrial market structure. Under central dination not by building very large enterprises, but byplanning, Gossnab (the State Committee for Material not building very small enterprises. Because innovationTechnical Supply) and the industrial ministries coordi- was centrally directed, small firms did not play the rolenated the distribution of goods. This system lacked they play in a market economy, and thus industryinstitutions to provide enterprises with the information evolved under a completely different process of eco-they needed to establish links with other firms on a nomic selection.decentralized basis. In effect, Gossnab and the indus- The most important finding, and the one that is mosttrial ministries created a barrier to insulate enterprises clearly linked to reorienting enterprises away from sur-from their trading partners. Thus, enterprises tended to vival, is that there is little aggregate or industry concen-become isolated, without knowledge of national and, in tration at the national level in Russia. The study classi-some cases, local market structure. So, an important fied industries as monopolies (one firm), oligopolieslegacy of central planning is a highly segmented indus- (four firms or fewer), or potentially competitive (moretrial structure based on historic trading relationships. than four firms). Although 26 percent of Russian indus-

The historic lack of economywide data on enterprise try is oligopolistic, these industries account for only 1characteristics suggests that Western observers of the percent of all industrial enterprises and less than 2Russian economy-like enterprise directors-are likely percent of total employment.to be misinformed about Russian industrial structure. Of course, industries considered competitive (thoseConsequently, the project initiated a comprehensive with more than four firms) may in fact not be competi-study on the current structure of industry in Russia. tive. Some industries may be dominated by a small

The study discovered that the conventional view of number of large firms. The study measured the effectiveindustrial structure is misinformed in two important concentration by calculating the percentage of employ-ways. First, many economists believe that enterprises in ment created by the four largest firms in an industry. Fora given industry in Russia are relatively homogeneous. an industry to be considered concentrated, its fourIn fact, industries in Russia are remarkably heteroge- largest enterprises must employ at least 60 percent of itsneous, possibly because of differences in managerial workers. Although by this measure 55 percent of Rus-skills and experience. This heterogeneity provides evi- sian industry appears concentrated, these industriesdence that under central planning, industrial ministers contain less than 7 percent of all industrial enterprisesevaluated the tradeoffs implicit in allocating resources and less than 18 percent of all industrial workers.across firms within a sector, presumably withthe goal of What are the implications of these observations?minimizing economic costs. Recognizing this heteroge- They suggest that more than one or two enterprisesneity is essential in the conduct of economic reform, must produce many of the needed inputs. The verticalparticularly in the treatment of enterprises undergoing dependency of enterprises is a perception of directors,privatization. and not based on the actual market structure. Given a

The study developed a practical guide for identifying well-functioning distribution system, enterprises shouldless productive enterprises in reforming economies, one be able to identify alternative trading partners at lowthat does not rely on using questionable price data. cost. But Russia's distribution system is not functioningUsing a simple model of economic selection under well. The information barriers created by the previoussocialism, the study demonstrated that, even in the ministerial system combine with important geographicabsence of exit, inefficient firms will tend to be allocated impediments to segment the national market into manyfewer resources than efficient ones. This tendency gen- smaller markets. Consequently, an important remedyerates a bimodal industrial structure in which inefficient for the survival orientation of enterprises is to developfirms agglomerate at one end of the size spectrum and the system of distribuCon.efficient firms agglomerate at the other. This size distri- Responsibility: Policy Research Department, Transi-bution of firms can be used to identify the less produc- tionandMacro-AdjustmentDivision-RandiRyterman,tive ones. Alan Gelb, Inderjit Singh, Annette Brown, and Dilip

Second, many economists in Russia and in the West Ratha.believe that Russian industry is characterized by very Completion date: June 1995.large enterprises operating in highly concentrated in- Reports:dustries.Russianindustrialconcentrationwas estimated Brown, A., B. Ickes, and R. Ryterman. 1993. "The Myth ofby examining the Soviet Industrial Census of 1989 and Monopoly: A New View of Industrial Structure in Russia."by comparing the Russian industrial structure with that Goldberg, L., B. Ickes, and R. Ryterman. 1993. "Departures fromin the United States and in other countries. It was found the Ruble Zone: The Implications of Adopting Independentthat very large firms are more prevalent in the United Currencies."

59


Ickes, B., and R. Ryterman. 1992. "The Interenterprise Arrears Bank, Washington, DC, 1991) into the 1-2-3 setting inCrisis in Russia." Post-Soviet Affairs 8(4):331-61. Devarajan, Lewis, and Robinson ("External Shocks,

-1993. "Entry without Exit: Economic Selection under Purchasing Power Parity, and the Equilibrium RealSocialism." Exchange Rate," World Bank Economic Review 7(1), 1993)

- 1993. "From Enterprise to Firm: Notes for a Theory of the to isolate important factors affecting investment behav-Enterprise in Transition." ior during adjustment.

- 1993. "Roadblock to Economic Reform: Inter-Enterprise Second, the study examines some of the tax reformDebt and the Transition to Markets." issues in the context of an open economy by extending

the above framework to allow for endogenous growth.The literature on endogenous growth and productivity

Open Economy Tax Reform II argues that prudent tax-financed government servicesand infrastructure affect growth; that taxes have incen-

This research looks at tax policy in an open economy. tive effects on the accumulation of human and physicalIt extends the tax models developed in earlier research capital thatcan lead to developmenttraps orfastgrowth;in order to look at dynamic issues. that government policies may play a crucial role in the

First, the study looks at the effects of tax policy and growth of human capital, the basic engine of growth inadjustment policies on investment, exports, and growth models with endogenous growth, which may eitherindevelopingcountries. The study examines what drives lead toward a perpetual growth regime or sink back toinvestment and growth in a dynamic 1-2-3 framework a Malthusian trap; and that trade and economic integra-(one country, two activities, three commodities). This tion with the rest of the world enhances growth.framework takes the forward-looking feature in Go Responsibility: Policy Research Department, Public("External Shocks, Adjustment Policies, and Investment: Economics Division-Shantayanan Devarajan, DelfinIllustrations froma Forward-Looking CGE Model of the Go, and Heng-Fu Zou. With Peter Wilcoxen.Philippines," Policy Research WorkingPaper 737, World Completion date: June 1995.

60

ENVIRONMENT AND NATURAL RESOURCES

Pollution and the Choice of Economic Policy pollutionoutcomes,andconceptualworkontheincentiveInstruments in Developing Countries effects of alternative policy instruments.

Findings have been p resented at the World Bank andRef. no. 676-48 Resources for the Future in Washington, DC, and in

This project addresses the following questions for Cambridge, Massachusetts, as well as in Indonesia, Ma-developing countries: What is the least-cost policy in- laysia, Mexico, and New Orleans, Louisiana. The finaltervention for reaching a given ambient level or effluent results will be disseminated through one or twostandard? And what are the distributional implications books synthesizing the findings, as well as through con-of such interventions across income groups? In ad- ferences.dressing these questions, the project compares stan- Responsibility: PolicyResearch Department, Public Eco-dard regulatory interventions, but also, more impor- nomics Division-Shantayanan Devarajan and Gunnartant, price-based (or tax-based) policy changes to re- Eskeland, and Poverty and Human Resources Division-duce pollution in the most efficient way. In the evalua- Emmanuel Jimenez; and. Environment Department, Pol-tion the project will systematically consider the con- lution and Environmental Economics Division-Robinstraints that developing countries face in implementing Bates. With Dina Backinezos, Robert Bacon, Neil Bruce,policy, such as enforcement, tight budgets, the cost of Guo Chia-Hsiang, Anil Deolalikar, Gregory Ellis, Robertmonitoring emissions levels, and uncertainty about Hamrin, Einar Hope, Michael Hoy, William Jack, Yahyacosts and benefits. Under these constraints such direct Jammal, Raymond Kopp, Alan Krupnick, Jeffrey Lewis,interventions as damage-based charges or regulations, Lili Liu, Bart Ostro, Mark Roberts, Emmanuel Skourfias,traditionally considered to be "first-best" instruments, Joffre Swaite, Adriaan Ten Kate, James Tybout, Christo-may in fact be costly; if so, how do they compare with pher Weaver, Robert Deacon, Tarhan Feyzioglu, Michael"second-best" indirect instruments? An important hy- Hanneman, Barbara Kanninen, Nalin Kishor, Chingyingpothesis is that indirect instruments, such as taxes and Kong, M. Layefsky, and Haran Sivam. The U.S. Censussubsidies on marketed inputs and outputs, can play a role Bureau is contributing to the research.in cost-effective pollution control. Completion date: December 1993.

Thq project consists of several case studies (Brazil, Reports:Chile, Indonesia, Mexico, and Poland). The work focuses Bacon, Robert. 1992. "Measuring the Possibilities of Interfuelon pollution problems from local sources, and is supple- Substitution." Policy Research Working Paper 1031. Worldmented by country analyses. The case studies comprise a Bank, Country Economics Department, Washington, DC.background description of pollution problems in specific Deacon, Robert T. 1992. "Controlling Tropical Deforestation: Anmetropolitan areas and analysis of the underlying causes Analysis of Alternative Policies." Policy Research Workingof pollution and the role of public policy. Sector-specific Paper 1029. World Bank, Country Economics Department,simulation models are developed to address such ques- Washington, DC.tions as: What are the economic costs of using alternative Eskeland, Gunnar S. 1991. "Curbing Pollution in Developinginstruments to reach a given target level of emissions? Countries." Finance and Development (March).How do taxes compare with direct emissions-related . 1992. "Attacking Air Pollution in Mexico City." Finance

interventions? And who benefits and who loses from the and Development (December).interventions? The parameters are derived from . 1993. "A Presumptive Pigouvian Tax on Gasoline:microeconometric analyses of specific sectors to examine Analysis of an Air Pollution Control Program for Mexicothe degree of flexibility in input substitution on the sup- City." Policy Research Working Paper 1076. World Bank,ply side. Demand-side analyses will be used to study the Policy Research Department, Washington, DC.possibilities of substitution in consumption (for example, Eskeland, Gunnar S., and Emmanuel Jimenez. 1991. "Choosinginterfuel substitution) and the incidence of alternative Among Policy Instruments for Pollution Control: Apolicy interventions. Review." Policy Research Working Paper 624. World Bank,

The case studies also include partial and general equi- Country Economics Department, Washington, DC. (Also inlibrium analyses of the role of fiscal policy in assessing World Bank Research Observer 7 (2):145-69, 1992.)

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Environment and Natural Resources

.1991. "Curbing Pollution in Developing Countries." * These insufficient controls lead to overcultivation,Finance and Development (March). which causes long-run income losses for agricultural

Jack, William. 1992. "Power Sharing and Pollution Control: communities of about one-fourth of village income.Coordinating Policies Among Levels of Government." Policy * Agricultural output price elasticities are estimatedResearch Working Paper 887. World Bank, Country at about 0.4 in the short run; in the long run they areEconomics Department, Washington, DC. negative because of the negative effect of biomass re-

Kopp, Raymond J. 1992. "Economic Incentives and Point Source duction on agricultural output.Emissions: Choice of Modeling Platform." Policy Research The second phase of the research extended the analy-Working Paper 920. World Bank, Country Economics sis to Ghana. This analysis empirically estimated pa-Department, Washington, DC. rameters similar to those in the C6te d'Ivoire analysis,

Krupnick, Alan J. 1992. "Measuring the Effects of Urban but it went further in developing an empirical smallTransportation Policies on the Environment- A Survey of general equilibrium model. This model was used toModels." Policy Research Working Paper 1030. World Bank, analyze the impactof economywide policies on nationalCountry Economics Department, Washington, DC. income after explicitly accounting for the effect of such

Ten Kate, Adriaan. 1993. "Industrial Development and Environ- policies on the environmental factor.ment in Mexico." Policy Research Working Paper 1125. World The findings for Ghana are highly consistent with theBank, Policy Research Department, Washington, DC. empirical results for C6te d'Ivoire. Clear indications

emerged that biomass is an important factor of produc-tion and that farmers take into account only a fraction of

Economic Growth and Trade Policy the true value of biomass. Moreover, the area of landin Western Africa: Implications cultivated is highly responsive to price changes. Theof the Degradation of the Vegetation main source of agricultural supply response to priceCover, Phase II incentives is the expansion of the cultivated area, which

leads to a reduction in biomass over time. The incom-Ref. no. 676-97C plete consideration of the value of biomass in land

This research tried to establish empirically the im- allocation decisions leads to significant income lossesportance of resource degradation for agricultural pro- for village communities.ductivity in Western Africa. The findings could have The small general equilibrium model of the economyimportant implications for policy evaluation. was used to measure the effect on national income and

Theresearchaddressed thefollowingquestions: What the environment of a net reduction in implicit taxationis the role of vegetation cover in agricultural growth? To of agriculture, decreased tariff protection of industry, awhat extent is there an externality? What policy instru- decrease in government employment, and a cut in gov-ments would improve the social value of natural vegeta- emient wages. The last two measures are consideredtion cover? And what effects has trade policy had in as alternative mechanisms for cutting the current gov-Western Africa on agricultural productivity, consider- ernment deficit, which appears to be the most pressinging its impact on the evolution of the vegetation cover? problem for Ghana's economy today. Ghana has made

A theoretical model was used to guide the empirical enormous progress in liberalizing its economy, particu-work. In the first phase of the research the empirical larly its trade regime. The question is whether furtheranalysis was performed using the LSS survey data for liberalization is appropriate. A second question is howC6te d'Ivoire for 1985-88 to obtain information on in- reforms are likely to affect biomass once general equilib-puts, area cultivated, real wages, rural household pro- rium interactions are accounted for.duction, and so on, and using remote sensing data on The principal finding is that, given the environmen-biomass density, area lying fallow, and area under tal externality, Ghana has already reached an approxi-closed forest. The remote sensing data were matched mately optimal degree of trade liberalization. Furtherwith the LSS data at the village level for each year. liberalization would induce slight income losses for the

The principal empirical findings from the first phase economy. Trade liberalization promotes further expan-of the research are the following: sion of the area under cultivation, which, in turn, re-

* Natural biomass is an important factor of agricul- duces biomass and is detrimental to agricultural pro-tural production, with an output elasticity of about 0.25. ductivity in the long run. This negative effect must be

* Communities do exert some control on the use of weighed against the conventional efficiency gains asso-common property resources, including biomass, but ciated with trade liberalization. The analysis shows thatthese controls are insufficient. Only about one-third of the losses caused by a reduction in biomass slightlythe social value of biomass is internalized in their land outweigh the additional conventional efficiency gainsallocation decisions. of trade liberalization.

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Althou;gh the net effect of liberalization on national Property Rights, Rent Dissipation,income is only slightly negative, the effect on the envi- and Environmental 1Degradationronmental resource is quite large. A 5 percent improve- in the Brazilian Amazonment in the domestic terms of trade of agriculture islikely to cause biomass losses of about 1.5 to 3 percent, Ref. no. 677-24according to the assumptions used. There has been much concern that the rapid settle-

The net effect of reducing government employment ment of the Amazon region will lead to the destructionand the public sector wage on national income is, how- of the rain forest and the degradation of the land. Someever, still positive and sizable. Reduction in government of the attention to this issue has centered on the role thatemployment increases the national income because of land tenure plays in decisions on resource use. Landthe low productivity of labor in government. But the tenure on Brazil's frontier is generally considered weak.lower urban wages that such a policy induces tend to The abundance of land keeps economic rents low andreduce rural out-migration, which, in turn, increases the makes investments in land ownership and protectionpressure on the biomass. This causes a significant de- generally unprofitable. As the frontier moves on, eco-cline in biomass and a fall in agricultural productivity in nomic rents gradually increase, but institutional barri-the long run. The economic losses associated with this ers often prevent the emergence of land tenure serviceslatter effect are not sufficient, however, to offset the (titling and property rights enforcement). Both situa-positive direct effects of reducing low-productivity em- tions lead to a tendency by economic agents to mine theployment in the public sector and increasing employ- resource: in the firstsituation because land's abundancement in sectors characterizedby higher labor productiv- makes new land cheaper than fertilizers and pesticides,ity. and in the second because, without the ability to exclude

The second phase also expanded the analysis of C6te others, there is no incentive for landholders to invest ind'Ivoire to a much broader and more representative the future productivity of the resource.sample. The researchers explicitly disaggregated agri- This research project examines the relations amongculture into three subsectors to consider different envi- land values, property rights, and natural resource deg-ronmental effects of the various outputs. These econo- radation in the Brazilian Amazon. The central policy-metric results are still being analyzed, and the findings relevant question of the research effort is the extent towill be reported in two forthcoming papers. which improving land tenure systems might improve

Responsibility: Policy Research Department, Trade environmental outcomes. The answer to this question,Policy Division-Maurice Schiff; Environment Depart- taking into account location, the costs of establishingment, Land, Water, and Natural Habitats Division- title, and other factors, is essential for designing theErnst Lutz; and Asia Technical Department, Public/ appropriate mix of land tenure and other policies toPrivate Sectorand Technology DevelopmentDivision- reduce deforestation. Many of the costs of definingWayne Luscombe. With Ramon Lopez, University of property rights are inherent in the process, but othersMaryland; Claudia Sepulveda; Julie Stanton; and Earth may be due to policy and political conditions, and thusSatellite Corporation. amenable to policy reform. If the costs of securing

Completion date: December 1992. property rights are high relative to the value of the land,Reports: it can be expected that open-access conditions will per-

EARTHSAT. 1991. "Ivory Coast Change Detection: Quantitative sist and thus that rents will continue to be dissipatedAssessment for Basic Land-Cover Categories for the Years through wasteful land use practices.

1985, 1986, and 1988." The research addresses three issues relating to prop-Lopez, Ramon. 1992. "Resource Degradation and Agricultural erty rights in the Amazon region. First, it develops

Productivity in Poor Tropical Areas: The Effectiveness of measures of tenure security based on the expectations ofCommunity Controls on Common Property Resources." landholders about future control over land. Second, it

.1993. "Economywide Policies, Agricultural Productivity, documents the resource costs associated with securingand Environmental Factors: The Case of Ghana." University property rights on the frontier, and analyzes how the

of Maryland, College Park. costs vary in amount and composition with the increaseLopez, Ramon, and Mario Niklitschek. 1991. "Dual Economic in economic rents as the distance from the frontier

Growth in Poor Tropical Areas." Journal of Development increases. And third, the research investigates empiri-Economics 36:189-211. cally differences in tenure security and their effects on

Lopez, Ramon, and Claudia Sepulveda. 1990. "Analysis of the choicesconcerningland use. This investigation involvesTime Consistency of the LSS Farm Data for C6te d'Tvoire comparisons of land use investment and techniques on(1985-87): Some Preliminary Results on the Estimation of a the frontier with those in more settled areas, whereProduction Function." property rights are more clearly established.

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Papers based on this research will be presented in the was relatively small because the survey strategy requiredComparative Development session of the 1993 Annual choosing plants, in all three ownership classes, that wereMeetings of the Economic History Association and the widely scattered, both across and within countries.Annual Development Conference of the Northeastern Despite the weak or ineffective formal regulation inConsortium of Universities. all survey areas, the analysis found great interplant

Responsibility: Latin America and the Caribbean Tech- differences in pollution abatement. The results stronglynical Department, Environment Division-Robert R. confirm both prior hypotheses: the adoption of wasteSchneider. With Gary Libecap, University of Arizona; treatment is strongly affected by income, both acrossand Lee Alston, University of Illinois. countries and across regions within countries, and sig-

Completion date: December 1993. nificant abatement is much more common for exposedReport: plants in rural areas.

Alston, Lee, Gary Libecap, and Robert Schneider. 1993. "The A surprising result is the apparently secondary sta-Settlement Process, Property Rights, and Land Use on the tus of plant ownership as a determinant of pollutionBrazilian Amazon Frontier: Preliminary Results and Lessons abatement One effect is quite strong and clear: privatefrom U.S. History." Paper presented at the All-University of plants are generally (but not always) more profitableCalifornia Economic History Conference, March. than public facilities, and more profitable firms have a

far stronger response to informal regulation. In thiscontext ownership has a powerful indirect effect on

Enterprise Ownership and Pollution abatement But the analysis found no effect for publicownership beyond differential profitability. Surpris-

Ref no. 677-44C ingly, and despite some anecdotal evidence to the con-The rapid pace of privatization in many economies trary,the analysis also revealed no significantdifference

has raised an important question for environmental in abatement between local private firms and branchpolicy: Do state-owned enterprises pollute more or less plants of multinationals.than facilities owned by domestic private enterprises or Thus, the study's principal finding is that "informalmultinationals? This study investigated that question regulation" of pollution can be quite potent in areas inby surveying the environmental performance of com- which formal regulation is weak or ineffective. But theparable plants in all three ownership classes. results also suggest that informal regulation is no pana-

Because formal regulation of pollution is weak or cea. Its potency is strongly affected by national andineffective in many developing countries, the research regional income. In the absence of formal sanctionsfocused on "informal regulation"--community pressure abatement also depends on firms' "willingness to pay,"for cleanup, and firms' responsiveness to such pressure. which is itself a function of profitability. The visibilityDrawn from the extremely limited prior evidence, the factor introduces another weakness: rural plants, withpreliminary research hypotheses included the following: highly visible emissions, are much more likely to abate

* Abatement is greater in higher-income areas, both even though they inflict much less damage per unit ofbecause of greater demand for pollution abatement and effluent than urban facilities.because of greater capability for organizing to confront Responsibility: Policy Research Department, Environ-polluting firms. ment, Infrastructure, and Agriculture Division-David

* Firms whose pollution is clearly visible to affected Wheeler. With Mainul Huq.communities, as opposed to those whose pollution is Completion date: November 1992."disguised" through mixing with that of many other Report:plants, would perform more abatement. Huq, Mainul, and David Wheeler. 1993. "Ownership, Process

Ideally, an empirical study of pollution would mea- Choice, and Industrial Pollution: Plant-Level Evidence fromsure air, water, and toxic pollution at the "end of pipe" Indonesia, Thailand, Bangladesh and India." World Bank,from sample facilities. Even for a limited survey, how- Policy Research Department, Washington, DC.ever, appropriate sampling and analysis of pollutantswould have been prohibitively expensive. This prelimi-nary exercise therefore focused on interplant variations Economic Shocks and the Globalin technologies applied to processing and waste treat- Environmentment within one product group. Knowledge of thesefactors is sufficient to account for a large proportion of Ref. no. 677-75variation in actual pollution. Economic policy analysis has historically focused on

The sample was drawn from a field survey of 30 pulp the domestic economy. But as the world economy hasand paper plants in four Asian developing countries: become more integrated, economic shocks caused byBangladesh, India, Indonesia, and Thailand. The sample changes in the global environment have become more

64


important. In large industrial countries external shocks been identified as a priority issue. And because eco-can cause deviations in gross domestic product as large nomic resources remain scarce, policymakers are inter-as 2 percent, and in some developing countries, 10 ested in weighing the benefits and costs of alternativepercent or more. strategies for pollution reduction.

Earlier World Bank research looked at how three kinds A sectoral focus is appropriate for benefit-cost analy-of external shock-those caused by shifts in terms oftrade, sis of industrial pollution control strategies. Differentchanges in global demand, and variations in interest industrial activities emit different types and volumes ofrate--affected the current accounts of different countries, pollutants into different media (air, water, and landand at how the countries responded. It found that the size disposal sites). These pollutants in turn pose differentof a shock's effect on a country depends on the country's degrees of risk for exposed communities and ecosys-openness to trade, the composition of its imports and tems. Finally, the cost of pollution abatement may beexports, and the size of its external debt. To respond to quite different across sectors and pollutants.external shocks, some countries combined an export- For the past two years a World Bank team comprisingpromotion strategy with tightened domestic demand to staff from the Policy Research, Environment, and Pri-improve the balance of payments. And some relied on vate Sector Development departments has collaboratedexternal financing, often suffering major problems with with the Center for Economic Studies (CES) of the U.S.external balances in the medium term as a result. Census Bureau in developing a system for analyzing

This research seeks to extend and refine the earlier industrial pollution problems in the Bank's client coun-research, on both the theoretical and the empirical side. tries. The Industrial Pollution Projection System (IPPS)On the theoretical side the research is constructing an developed by the team is based on survey informationintertemporal dynamic general equilibrium model to from tens of thousands of U.S. manufacturing facilities.test how different policy interventions-such as tariffs, First-stage development of the IPPS focused on generat-quotas, indirect taxes, and investment subsidies-affect ing estimates of emissions intensity (pollutant outputwelfare. It is testing how shocks to factor endowments, per unit of activity) at a high level of sectoral detail fortechnology, world prices, and the world interest rate hundreds of air, water, and toxic pollutants. It alsoaffect welfare, output, the real exchange rate, and the incorporated a risk factors data base from the U.S.balance of payments. And it is investigating how the Environmental Protection Agency, permitting analysisassumption that wages are sticky in the short run-so of relative exposure risk for hundreds of toxic pollut-that unexpected shocks lead to transitional unemploy- ants. The IPPS can produce detailed sectoral and re-ment-affect the conclusions reached in the first two gional estimates of pollution loads for the many clienttheoretical tests. countries that presently have no way to gauge their

On the empirical side the research is introducing industrial pollution problems.greater disaggregation into the data on exports, im- Since the inception of the IPPS, it has been clear thatports, and level of economic activity for the countries a full analytical system must also incorporate informa-included in the data base, to produce more precise tion on abatement costs. This research project focusedresults on policy responses and their results. The results on estimation of abatement cost functions at a high levelof the research are expected to yield some insights into of sectoral disaggregation. The Bank team's collabora-appropriate policy responses to external shocks. tors at the CES provided plant-level data for the 1980s

Responsibility: Development Policy Group- from the U.S. Department of Commerce's survey ofF. Desmond McCarthy; and International Economics Pollution Abatementand Control Expenditures (PACE).Department, InternationalEconomic Analysis and Pros- The PACE data include approximately 100,000 ob-pects Division-Ashok Dhareshwar. With Giovanni servations at the plant level, with separate estimates ofZanalda and Peter Neary. recurrent and capital expenditures by general category

Completion date: September 1993. for air and water pollution abatement. PACE also re-ports accompanying estimates of physical abatementfor a large number of individual air and water pollut-

Econometric Analysis of Pollution ants (both toxic and nontoxic). These data permittedAbatement Costs regression-based estimation of linear and nonlinear pol-

lutant-specific abatement cost functions at the four-Ref. 677-81C digit sectoral level of International Standard Industrial

As new environmental protection institutions are Classification (ISIC). The result is the first truly compre-established in developing countries, policy discussion is hensive set of marginal and average abatement costfocusing on the appropriate scope and timing of envi- estimates. These estimates have been made available toronmental regulation. In many cases the problem of Bank staff as an input to benefit-cost analysis of indus-emissions control in large urban industrial areas has trial pollution control policies.

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The econometric analysis of U.S. abatementcosts has have been used extensively, which are candidates foralso yielded some important insights for the Bank's elimination, and which alternate formulations weredialogue with client countries about appropriate envi- most useful. The project will evaluate data from severalronmental policy. Economists have long argued that countries to see whether the data's quality, judged bycommand-and-control approaches to pollution regula- completeness and consistency, has varied with alternatetion are relatively inefficient because uniform abate- specifications. In selected cases the project may simulatement requirements ignore large differences in sectoral the variance in composite variables when different ques-abatement costs. The econometric results of this project tion strings are used in their calculation. In the evalua-show how inefficient command-and-control policy has tion of analysis the research will give attention to topicsbeeninthe United States. For the samepollutant, similar of interest that were not addressed because of dataabatement requirements imposed on all sectors have limitations.generated average abatement costs that characteristi- Responsibility: Policy Research Department, Povertycally vary among the sectors by two orders of magni- and Human Resources Division-Margaret Grosh andtude (for example, from $10 a ton to $2,000 a ton). These Paul Glewwe. With Dean Jolliffe.numbers render a stark judgment on command-and- Completion date: February 1994.control policy, and should provide powerful evidencein favor of market-based regulatory options for theBank's client countries. Industrial Pollution: Global Indices

Responsibility: PolicyResearch Department, Environ-ment, Infrastructure, and Agriculture Division-David This project is developing the Industrial PollutionWheeler. With Raymond Hartman, Law and Economics Projection System (IPPS), a modeling system that canConsulting Group; and Robert Lucas, Boston Univer- use industry or trade data to estimate comprehensivesity. The Center for Economic Studies of the U.S. Census profiles of industrial pollution for countries, regions,Bureau participated in the research. urban areas, or proposed projects. Rapid progress in

Completion date: June 1993. slowing or reversing environmental damage in the nearReport: future will depend on reliable pollution estimates. Most

Hartman, Raymond, David Wheeler, and Manjula Singh. 1993. developing countries have little reliable information"Abatement Costs for Major Pollutants: Microeconometric about their own pollution. Therefore, there is a hugeEvidence from a Large-Scale Survey of U.S. Industrial potential demand for an IPPS among environmentalFacilities." World Bank, Policy Research Department, and industrial planners in developing countries.Washington, DC. The IPPS is being developed to exploit the fact that

the scale and intensity of industrial pollution are heavilyaffected by the scale of industrial activity, its sectoral

Revision of the Living Standards composition, and the process technologies employed inMeasurement Study Household-based production. Although most developing countries haveAgricultural Activities Survey Module little or no industrial pollution data, many have rela-

tively detailed industry survey information. The IPPS isRef. no. 678-21 designed to convert this information into the best pos-

Surveys similar to those developed by the Living sible profile of the associated pollutant output.Standards Measurement Study have been carried out in A first prototype of the IPPS has already been com-11 countries since 1985, and several more are in the field pleted. This prototype system has been developed fromor under development. The surveys' agriculture mod- a data base containing complete environmental andules contributed to their comprehensive information on economic data for about 15,000 factories in all regions ofincome and consumption and were thought to be espe- the United States. The first set of IPPS indices draws oncially important in leading toward an understanding of the U.S. Environmental Protection Agency's (EPA) Toxicpoverty, which is often concentrated among those en- Release Inventory (TRI), which records air, water, andgaged inagriculture. The agriculturemodulesareamong solid waste releases of 320 toxic substances by eachthe longest in the surveys, however, and thus add reporting plant. These data were matched at the plantsignificantly to the surveys' costs. level with U.S. Census Bureau output data from the 1987

This research will assess how well the modules have Census of Manufacturers. The aggregate toxic releasesworked in practice and how they mightbe improved to per unit of output were then calculated for differentprovide more useful information or to cost less in imple- International Standard Industrial Classification (ISIC)mentation. industry categories.

The body of analysis produced from the agriculture Three main measures were considered in aggregat-modules will be reviewed to determine which variables ing the 320 toxic substances recorded in the TRI. The first

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is the total pounds of all 320 toxic releases-whether Pollution Havens?" Paper presented at the World Bankatmospheric, effluent, or solid-per dollar's worth of Symposium on International Trade and Environment,output. Because some emissions are of greater concern Washington, DC.than others, alternative risk indices were developed Hettige, Hemamala, Robert E.B. Lucas, and David Wheeler.using the EPA's Human Health and Ecotoxicity Data- 1992. "The Toxic Intensity of Industrial Production: Globalbase (HIED), which contains several measures of toxi- Patterns, Trends, and Trade Policy." American Economiccological and carcinogenic potency for each substance. Association Papers and Proceedings (May).

The second measure of toxic intensity uses HHED ordi- Lucas, Robert E.B., David Wheeler, and Hemamala Hettige.nal indices ranging from 1 (mild) to 4 (very serious) in a 1991. "Economic Development, Environmental Regulation,linear weighted sum of toxic releases per dollar's worth and the International Migration of Toxic Industrial Pollution:of output. The implicit assumption is that the HHED 1960-88." Paper presented at the World Bank Symposium on

risk scale is inherently linear. Because this may not be a International Trade and Environment, Washington, DC.reasonable assumption, a third measure wasconstructed Martin, Paul, David Wheeler, Hemamala Hettige, and Ralphthat assumed that HHED risk factors are exponential Stengren. 1991. "The Industrial Pollution Projection System:

rather than linear. Concept, Initial Development, and Critical Assessment."To create annual toxic intensity estimates for each World Bank, Washington, DC.

country, toxic intensity measures by medium (air, wa-ter, and solid waste releases) were applied to ISIC sectorshares from the United Nations annual sectoral output Advancing Agricultural Productivity:series for each reporting country during 1960-88. Inter- Technical and Behavioral Constraintsnational data on within-sector process mix and abate-ment choices have not yet been collected; therefore, This research was part of the continuing analysis ofconstant U.S.-based output indices were adopted. Al- the global agricultural sector and its capacity to meet thethough the United States has the largest and most di- needs of growing populations. It focused on the genera-verse economy in the world, it is clear that many coun- tion and transfer of new agricultural technologies, espe-try-specific factors will affect the accuracy with which cially those emerging from the formal research system.the prototype IPPS can project industrial pollution in The research reaffirmed the central role that technicalother economies. change plays in the economic development of nations in

The key conclusion drawn from the initial analysis is which agriculture is a significant contributor to employ-that there is a need to carefully define the term "pollu- ment and the economy. It also confirmed the need fortion" in identifying priority industrial sectors. Rela- sustained and effective investment in agricultural re-tively low correlation is found between sectoral rankings search and related knowledge systems as the source ofof risk-weighted toxic release intensities, carcinogenic the needed new technologies, institutions, and policies.release intensities, and bioaccumulative metal com- For many of these the "gestation period" that elapsespound release intensities. between initial investment and social payoff is consider-

The World Bank'sWorld Development Report 1992 drew able, often running to decades. Investors, includingheavily on IPPS estimates in analyzing and illustrating donors, need patience and understanding, as well asthe industrial pollution problem in developing coun- insight and fortitude.tries. And two papers using IPPS estimates were pre- Other important findings relate to the need for re-sented at the World Bank Symposium on International search systems, both national and international, toTrade and Environment, Washington, DC, 1991. grapple with research challenges that in many cases are

Responsibility: Private Sector Development Depart- not only different from but more difficult than thosement-Hemamala Hettige; Policy Research Department, confronted in the first two decades of the green revolu-Environment, Infrastructure, and Agriculture Division- tion.David Wheeler and Shakeb Afsah; and East Asia and The research involved close interaction with insti-Pacific, Country Department III, Environment Pro- tutes supported by the Consultative Group on Interna-gram--Paul Martin. The Center of Economic Studies of tional Agricultural Research (CGIAR). Representativesthe U.S. Bureau of Census contributed data to the re- of the CGIAR, the World Bank, and other concernedsearch. institutions participated in a Bank conference at Airlie

Completion date: December 1992. House, Virginia, in October 1991. The papers from thisReports: conference, which distill considerable research and de-

Afsah, Shakeb, Hemamala Hettige, Paul Martin, and David velopment experience in the developing world, haveWheeler. "The Industrial Pollution Projection System." Draft. been compiled in a book to be published in 1993.

Birdsall, Nancy, and David Wheeler. 1991. "Trade Policy and Responsibility: Agriculture and Natural ResourcesIndustrial Pollution in Latin America: Where Are the Department, Agricultural Policies Division-Jock

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Anderson, Peter Hazell, and William Magrath, Office of Crosson, P., and Jock R. Anderson. 1992. Resources and Global

the Director-Michel Petit, and Agricultural Technol- Food Prospects: Supply and Demand for Cereals to 2030. Worldogy and Services Division-Anthony Pritchard, Bank Technical Paper 184. Washington, DC.Gabrielle Persley, andJitendra Srivastava; Latin Americaand the Caribbean, Technical Department, AdvisoryGroup-Hans Binswanger, and Country Department Biotechnology and AgriculturalII, Agriculture Operations Division-John McIntire; Af- Developmentrica Technical Department, Office of the Director-Kevin Cleaver; Asia Technical Department, Office of the As biotechnology is developed that can be applied toDirector-Richard Grimshaw, and Environment and improve agricultural production, it is important to iden-Natural Resources Development Division-James tify technology that can be used in developing countriesSmyle; International Economics Department, Interna- and to ensure that they reap some of its potential ben-tional Trade Division-Merlinda Ingco and Donald efits. This research addresses policy questions on envi-Mitchell; Consultative Group on International Agricul- ronmental risk, intellectual property rights, and Banktural Research-Donald Plucknett; and Operations policy toward support for private industry and jointEvaluation Department, Country Policy, Industry, and ventures of high risk. The study solicited papers cover-Finance Division-Dennis Purcell. ing the technical, ethical, and legal aspects of biotech-

Completion date: June 1993. nology.Reports: Although biotechnology has promise, it is far from

Anderson, Jock R. 1992. "Agronomic Research Strategy and the proven. Mostresearch and developmentis conducted inUncertain Challenge of Sustainability." In K.J. Hutchinson the industrial countries. Special efforts and innovativeand P.J. Vickery, eds., Looking Back and Planning Ahead. funding arrangements will be needed to ensure thatProceedings of the Australian Society of Agronomy developing countries can share the benefits. A new wayConference. Armidale: University of New England. must be found for supporting research and develop-

. 1992. "Scientific Advances in Agricultural Technologies ment in high-risk situations. More efforts are needed toas Opportunities for NARS: A Technology Assessment develop joint public and private ventures.Perspective." In ISNAR, Future Challenges for National The papers commissioned for the project were pre-Agricultural Research: A Policy Dialogue. Proceedings of the sented at seminars held in Canberra, The Hague,international conference Challenges and Opportunities for Melbourne, and Washington, DC, in 1988-89. A series of

NARSs in the Year 2000 and Beyond: A Policy Dialogue. The country studies commissioned in connection with theHague. study are being compiled into a data base on agricul-

. Forthcoming. "Agricultural Technology: Issues and tural biotechnology in selected countries.Opportunities for the World Bank." In Jock R Anderson, ed., Responsibility: Agriculture and Natural ResourcesAgricultural Technology: Policy Issues for the International Department, Agricultural Technology and Services Di-Community. Wallingford: CAB International. vision-Gabrielle Persley, Cornelis de Haan, and An-

-Forthcoming. "The Economics of New Technology thony Pritchard; and Latin America and the CaribbeanAdaptation and Adoption." Review of Marketing and Technical Department, Agriculture Division-MatthewAgricultural Economics 61(2, Part II). McMahon. With Peter Dart, University of Queensland.

Anderson, Jock R., ed. Forthcoming. Agricultural Technology: The Australian Centre for International AgriculturalPolicy Issues for the International Community. Wallingford: Research, the University of Queensland, and the Com-

CAB International. monwealth Scientific and Industrial Research Organi-Anderson, Jock R., and Peter Hazell. Forthcoming. "Risk zation, Australia, contributed staff time, and the UNDP

Considerations in the Design and Transfer of Agricultural provided financial support.

Technology." In Jock R. Anderson, ed., Agricultural Completion date: June 1993.Technology: Policy Issues for the International Community. Reports:

Wallingford: CAB International. Agriculture and Rural Development Department, World Bank;

Anderson, Jock R., and K. Hoff. 1993. "Technological Change, Australian Centre for International Agricultural Research;Imperfect Markets, and Agricultural Extension: An Australian International Development Assistance Bureau;

Overview." In K. Hoff, A. Braverman, and J. Stiglitz, eds., and International Service for National Agricultural Research.

The Economics of Rural Organization: Theory, Practice, and 1991. Agricultural Biotechnology: The Next "Green Revolution?"

Policy. New York: Oxford University Press. World Bank Technical Paper 133. Washington, DC.

Carr, S.J. 1993. Improving Cash Crops in Africa: Factors Influencing Persley, G.J., ed. 1990. "Agricultural Biotechnology: Opportuni-

the Productivity of Cotton, Coffee, and Tea Grown by ties for International Development." CAB International,

Smallholders. World Bank Technical Paper 216. Washington, Wallingford, U.K.

DC. . 1990. "Beyond Mendel's Garden: Biotechnology in the

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Service of World Agriculture." CAB International, more open developing economies should, on average,Wallingford, U.K. move along a less pollution-intensive path than their

Persley, G.J., L.V. Giddings, and D. Juma. 1992. "Biosafety: The closed counterparts.

Safe Application of Biotechnology in Agriculture and the The study tested these competing hypotheses in two

Environment." International Service for National Agricul- econometric projects that considered toxic intensity

tural Research, The Hague, The Netherlands. changes in all developing regions and in Latin America.

Both suggest strong dominance for the comparativeadvantage effect. Toxic-intensive materials processing

Industrial Pollution in Developing Countries has grown faster in relatively closed economies, whichhave paradoxically acquired the status of "havens" for

This research project comprised several empirical toxic pollutants. But the results do not imply that open-studies on the links between economic development, ness is environmentally benign. Other econometric worknational economic policy, and industrial pollution. has suggested that trade liberalization also stimulates

A first study looked at how industrial pollution morerapidoverallindustrialgrowth.Ingeneral,thestudyintensity changes in economic development. Usung sur- found that the growth effect of openness overwhelms thevey evidence from approximately 50,000 U.S. factories, comparative advantage effect. Thus, openeconomicpolicythe study documented enormous differences in pollu- is no substitute for effective regulation as an antidote totion intensities (or emissions per unit of output) be- dangerous growth in toxic industrial pollution.tween assembly activities and primary materials pro- Finally, the research included several studies of cleancessing activities. This disparity produces an "S-shaped" technology adoption in two sectors with extremely highdeclining trend in pollution intensity as development pollution potential-steel and wood pulp. Most of theproceeds. Typically, materials processing maintains a work was based on international panel data sets forshare of about 70 percent of an economy's manufactur- 1970-90 that differentiate production capacity by pro-ing output value until per capita income passes $2,000. cess technology. The research found three highly sig-Its share then falls rapidly to about 50 percent at $7,000, nificant sources of variation in the data. First, the onsetstabilizing thereafter. of stricter regulation has clearly catalyzed the develop-

This transition is accompanied by environmentally ment and rapid diffusion of cleaner processes in thesignificant changes in sectoral dominance in materials OECD economies. Second, these processes have incor-processing. Food and fiber processing, which are rela- porated enough nonenvironmental innovation to as-tively intensive in organic water pollutants, frequently sure significant markets in economies that have hadexert an early dominance. As development proceeds, little formal pollution control. And third, the resultsthere is typically growth in sectors that generate heavy show that the comparative advantage effect of opennessvolumes of air pollutants, such as metals processing. is strongly compounded by much faster adoption ofFinally, the pollution spotlight shifts to industrial chemi- newer, cleaner technologies.cals, plastics, and other sectors that generate dispropor- Overall, the research found that the effect of newtionate amounts of toxic and carcinogenic pollutants. technology development and diffusion has been a sig-

A second study examined the relation between na- nificant decline in the pollution intensity of interna-tional economic policy and change in manufacturing tional heavy industry In this sense tighter regulation inactivity to test the "pollution havens" hypothesis. The the OECD economies has yielded a large environmentalphrase "pollution havens" has recently been associated dividend for the world economy. In the open develop-with prospects for developing countries that liberalize ing economies this has been compounded by moretheir trading regimes. The conventional "pollution ha- rapid absorption of clean technology.vens" argument holds that reducing trade restrictions in Responsibility: Policy Research Department, Environ-economies with little or no environmental regulation ment, Infrastructure, and Agriculture Division-Davidwill encourage southward migration by heavily pollut- Wheeler, and Office of the Director-Nancy Birdsall;ing northern industries in response to lower regulatory and Private Sector Development Department-costs. By implication, developing economies that liber- Hemamala Hettige. With Robert Lucas, Boston Univer-alize their trade regimes should suffer from differen- sity; David Bloom and David Beede, Columbia Univer-tially rapid growth of pollution-intensive sectors. sity; Paul Martin, Massachusetts Institute of Technol-

An alternative view is posed by the comparative ogy; and Mainul Hucl. The Center for Economic Studiesadvantage argument: On average, low-tech assembly is of the U.S. Census Bureau participated in the research.more labor-intensive than materials processing. The Completion date: June 1993.relatively clean nature of low-tech assembly implies Reports:that standard comparative advantage playsagainstpol- Birdsall, Nancy, and David Wheeler. 1993. "Trade Policy andlution intensity in low-wage countries. By implication, Industrial Pollution in Latin America: Where are the

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Pollution Havens?" Journal of Environment and Development being used, and the technological, social, and economic2(1). changes that accompanied them. A series of background

Bloom, David, David Wheeler, and David Beede. 1993. papers were prepared on environmental change, popu-"Measuring and Explaining Cross-Establishment Variation lation, growth of agricultural production, farming sys-in the Generation and Management of Industrial Waste." tems, soil conservation, management of trees, techno-Paper presented at the American Economic Association logical change, and institutional change. A workshopAnnual Meetings, Anaheim, California, January. World was held in the district in September 1991 to reviewBank, Policy Research Department, Washington, DC. these findings with local people, and final reports are

Lucas, Robert E.B., David Wheeler, and Mala Hettige. 1992. being prepared."Economic Development, Environmental Regulation, and The study showed that while the district's popula-the International Migration of Toxic Industrial Pollution: tion had increased more than fivefold, agricultural out-1960-88." In Patrick Low, ed., International Trade and the put per capita had more than doubled in real terms. ThisEnvironment. Washington, DC: World Bank. had been achieved through a combination of bringing

.1992. "The Toxic Intensity of Industrial Production: new land into production (generally scrubland usedGlobal Patterns, Trends, and Trade Policy." American occasionally for grazing) and increasing the intensity ofEconomic Review Papers and Proceedings (May). production. At the same time there was no evidence that

Martin, Paul, David Wheeler, Hemamala Hettige, and Ralph the quality of the land resource had declined; in fact, itStengren. 1991. "The Industrial Pollution Projection System: had been enhanced by major efforts by farmers, espe-Concept, Initial Development, and Critical Assessment." cially in terrace construction, generally without officialWorld Bank, Policy Research Department, Washington, DC. support. Significant changes had occurred in farming

Wheeler, David, Mainul Huq, and Paul Martin. 1993. "Process systems, including the adoption of new products, in-Change, Economic Policy, and Industrial Pollution: Cross- puts, and technologies. The principal conclusions of thisCountry Evidence from the Wood Pulp and Steel Indus- study are as follows:tries." Paper presented at the American Economic Associa- * Market outlets were important in providing astion Annual Meetings, Anaheim, California, January. World wide a range as possible of economically and technicallyBank, Policy Research Department, Washington, DC viable land use options, permitting land users to devise

Wheeler, David, and Paul Martin. 1992. "Prices, Policies, and land use systems that were sustainable and to modifythe International Diffusion of Clean Technology: The Case of them under changing economic and social circumstances.Wood Pulp Production." In Patrick Low, ed., International * Some of the technologies adopted were aimedTrade and the Environment. Washington, DC: World Bank. primarily at resource conservation (such as terracing);

others contributed to that objective only incidentally.* The adoption of these technologies was an integral

Integrated Land Management part of the entire process of agricultural innovation, andefforts to press for the adoption of technologies solely

The problem of land resource management under for soil conservation were generally unsuccessful.pressure of increasing population has become an impor- * Land resource management innovations came fromtant concern. Earlier studies of the effect of specific many sources-some as a direct result of public initia-interventions on land resource management have had tive (such as the development of short-duration maizeslimited value because of the short time span over which for local conditions) and some despite-rather thandata are usually available, the anecdotal nature of infor- because of-public actions (such as improvements inmation on earlier periods, and the limited understand- tillage). The introduction of innovations was fostered bying of how socioeconomic variables (such as popula- strong links between the local society and the economytion) influence land resource management. at large.

Twostudieswereundertakeninthisproject. The first * These links were enhanced by an open societyreviewed changes in land management practices and with a broad development-oriented leadership struc-productivity in a semiarid district in the Machakos ture, and by increased commercialization of agricultureDistrict of Kenya over a 50-year period. The study and the development of related commercial activities.examined how this area, in which land degradation was Thus, land resource management cannotbe divorceda concern before World War II, has subsequently man- from the entire development process, and increases inaged to support a fivefold increase in population. This population or agricultural production, or both, in a low-review was carried out by the Overseas Development income area are not inevitably accompanied by landInstitute (London), with the assistance of the University resource degradation.of Nairobi. The study team undertook field surveys and The second study undertook a cross-sectional analy-archival review to ascertain changes in the condition of sis, using data from Ethiopia, to explore the relation-land resources in the district and in the farming systems ships between land degradation and agricultural and

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socioeconomic factors, such as soil type, climate, topog- Paper presented at the ESRC Development Economicsraphy, population density, and income. The study was Symposium.based largely on data collected for the Ethiopian High- Tiffen, Mary, Michael Mortimore, and Francis Gichuki.lands Reclamation Study. Materials on the relationships Forthcoming. More People, Less Erosion: Environmentalbetween population, environment, and agriculture were Recovery in Machakos Dis Irict, Kenya. London: John Wiley andreviewed to formulate possible single-relation or simul- Sons.taneous equation links for empirical testing. Empiricaltests of the proposed relationships were conducted.

The key finding of the study concerns the nature of International Trade and the Environmentthe relationship between population and soil erosion.Where the carrying capacity is fixed, if the population Of major concern for this study were the increasingexceeds that carrying capacity, erosion is increasingly pressures for environnental regulation and the per-likely. Implicit in the analysis was an assumption of a ceived danger of using trade policy to achieve environ-low and generally constant level of technology across mental goals or using environmental arguments to bol-the country. In an open, dynamic, and growing economy ster requests for industry protection. The study focusedand society, such as Kenya during the period under on the international aspects of environmental policyreview, constant technology is unlikely. Where politi- and the relation between environmental concerns,cal, economic, and social turmoil has led to stagnation, whether global or country-specific, and the use of tradeas in Ethiopia in the late 1970s and 1980s, it may be a policy instruments.reasonable assumption. The conclusions drawn from the research include the

These studies are providing significant insight into following:the extent to which local populations can adapt their * Trade measures, because they are indirect inter-methods of land resource management in a sustainable ventions, rarely offer the best means of addressingway, and the economic and social conditions that have environmental externalities.facilitated such changes. The studies will thus help in * Governments of OECD countries have shown anthe design of policies and programs aimed at support- overwhelming preference for direct regulation overing sustainable resource management. market-based policies, although regulation is frequently

Responsibility: Environment Department, Land, Wa- more costly in terms of efficiency.ter, and Natural Habitats Division-John English. With * Legitimate differences exist among countries withStein Hansen; Sverre Grepperud; and Mary Tiffen and regard toenvironmental objectives and standards. TheseMichael Mortimore, Overseas Development Institute, reflect different absorptive capacities and different so-U.K. The University of Nairobi and Kenya's Ministry of cial preferences. There should be no presumption thatReclamation and Development of Arid and Semiarid harmonization of environmental standards is a desir-Areas and Wastelands contributed staff time, and the able policy objective.Overseas DevelopmentAdministration, the Rockefeller * Where environmental problems cannot be ad-Foundation, and the Norwegian government (Sahelian equately addressed in a domestic setting, internationalStudies Program) provided funding. cooperation offers better prospects for sound environ-

Completion date: June 1993. mental outcomes than punitive unilateral actions.Reports: * Pollution abatement and control expenditures do

English, John. 1993. "Does Population Growth Inevitably Lead not seem to have had a significant effecton competitive-to Land Degradation?" Paper presented at the World Bank ness in most industries, since these expenditures repre-Agricultural Sector Symposium, Washington, DC. sent a modest share of total costs. This suggests that

English, John, Mary Tiffen, and Michael Mortimore. 1993. national differences in environmental regulations have"Land Resource Management in Machakos District, not been an important explanatory factor in the chang-Kenya: 1930-90." Environment Technical Paper 4. ing international pattern of the location of "dirty" in-World Bank, Washington, DC. dustries.

Grepperud, Sverre. Forthcoming. "Population-Environmental * Fast-growing economies with liberal trade poli-Linkages: The Case of Ethiopia." Environmental Division cies have experienced less pollution-intensive growthPaper. World Bank, Washington, DC. than closed economies.

Hansen, Stein. 1992. "Population and the Environment." Paper This research culminated in a World Bank conferencepresented at the African Development Bank Conference on in November 1991 and in the publication of the confer-Population Growth and Sustainable Development in Africa: ence papers.Trends, Issues, and Policies. Responsibility: International Economics Department,

Tiffen, Mary. 1992. "Environment, Population Growth, and International Trade Division-Patrick Low and RaedProductivity in Kenya: A Case Study of Machakos District." Safadi.

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Completion date: June 1993. and Public/Private Sector and Technology Develop-Report: ment-Barry Wayne Luscombe; and Africa Technical

Low, Patrick, ed. 1992. International Trade and the Environment. Department, Environmentally Sustainable DevelopmentWorld Bank Discussion Paper 159. Washington, DC. Division-Francois Falloux. With Charles Hutchinson,

University of Arizona; Yves Prevost; Daniel Tunstall,World Resources Institute; and Barry Haack, George

Natural Resource and Environmental Mason University.Information for Decisionmaking Completion date: June 1993.

Report:There has been a virtual explosion in the availability Hassan, Hassan M., and Charles Hutchinson. 1992. Natural

of powerful tools and platforms for collecting and man- Resource and Environmental Information for Decisionmaking.aging environmental and natural resource information Washington, DC: World Bank.covering essentially all parts of the globe in the past twodecades. The rapidity of the development has ham-pered the ability to assimilate the new information and Environmentally Friendly Technologytools into the economic development decisionmakingprocess. To contribute to this assimilation, this research In the past two decades there has been substantialassessed ways in which the new environmental and innovation in pollution-reducing technology. Evidencenatural resource information tools and technologies of this is the share of patents going to such technology inmight be most effectively incorporated in projects' de- industrial countries. That share is about 2.5 percent insign and implementation. Germany, more than 2 percent in Japan, and 1 percent in

The research examined the role of natural resource the United States. Developing countries have also doneand environmental information in project design, man- a fair amount of innovation and adaptation based inagement, monitoring, and evaluation. It addressed the part on technologies transferred from industrial coun-practical questions of why and how to use the informa- tries.tion in environmental and natural resource manage- Paralleling the growth in technology has been a rapidment. The findings of the research are intended to assist expansion in the demand for consulting and monitoringtask managers in making decisions on the use of envi- services. The world market for pollution control equip-ronmental and natural resource information. ment and related services is estimated at more than $200

The research examined the Bank's experience innatu- billion a year and is predicted to reach $300 billion byral resource and environmental information manage- 2000.ment in different geographical regions. It outlined the This project looked at new evidence relating to envi-basic steps in determining the information needs and ronmental innovation to try to determine what hasmethodologies for generating data. In most cases the stimulated the growth in new technologies and theneeded information is already available in some form. pollutioncontrol industry, and whether the results haveThe research suggested methodologies for choosing been achieved efficiently. It investigated the effect offrom existing information and filling the information environmental regulation on expenditure for pollutiongap. It outlined recent developments in computer tech- control, innovation, and the diffusion of new technol-nology relevant to environmental and natural resource ogy. And it looked athownonregulatory instruments-information management, particularly geographical in- incentive mechanisms and information channels---canformation systems. Finally, the research addressed the be brought to bear in encouraging pollution control.issue of capacity building and institution development The research drew on three main sources of informa-problems in developing countries and suggested ap- tion: a data base on patents, a defined set of capitalpropriate solutions. goods used for pollution control that can be identified in

The research also suggested possible future ap- international trade statistics, and case studies drawnproaches to the problem of natural resource and envi- from international data bases, OECD studies, and theronmental information management for developing international media.countries at the national, regional, and global levels. Tighter regulations and greater pollution controlThese approaches are closely linked to ongoing pro- expenditures were found tobe typically associated withgrams on environmental assessment and national envi- falling pollution levels. But the information availableronmental action plans. did not permit a serious cost-benefit analysis thatwould

Responsibility: Environment Department, Land, Wa- shed light on whether the decline in pollution has oc-ter, and Natural Habitats Division-Hassan M. Hassan; curred at an unacceptably high cost.Asia Technical Department, Environment and Natural The research found that rising emissions standardsResources Development Division-Glenn S. Morgan, are an important element in the effort to limit pollution,

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including in developing countries. A survey of 107 The first stage of the project is taking place in Bolivia.OECD exporters of clean technologies showed that the Centro de Investigacion y Menyo de Recuros Naturalesstrengthof environmental regulations in developingcoun- Renovables (CIMAR), a Bolivian natural resource man-tries was cited as the main factor creating a demand for agement institute, is working with the Bolivian Na-know-how and products relating to pollution control. tional Park Service and Bolivian cartographers, anthro-

The research also found that there is an important pologists, and biologists to produce two large nationalneed for good information to support government regu- maps and a report that documents the relationship oflation directly and to raise consumer awareness, whether indigenous people to areas of high biodiversity and theenvironmental efforts rely on regulation and standards country's proposed protected area regime.or on market mechanisms. Monitoring is also impor- A second stage of the project will apply the lessonstant. In Japan, where monitoring is best developed, the learned from the Bolivian experience to Cameroon andinformation generated through the monitoring of emis- the Philippines. These countries have a different socio-sions has been used effectively by local authorities and cultural and biological profile than Bolivia and are atnongovernmental organizations to negotiate standards different stages in the evolution of their protected areaand agreements with firms. regimes. Extending the project to these two countries

Responsibility: Private Sector Development Depart- will help show how the general approach needs to bement-Ashoka Mody. With Jean 0. Lanjouw, Yale Uni- adapted to specific country contexts--in these cases, toversity. the West African and Asia-Pacific regions.

Completion date: July 1993. The three countrymaps and public policy papers andReport.: the lessons learned from their design and production

Lanjouw, Jean 0., and Ashoka Mody. 1993. "Stimulating will enable ENVSP to develop a more general method-Innovation and the International Diffusion of Environmen- ology and set of operational procedures for incorporat-tally Responsive Technology: The Role of Expenditures and ing indigenous people into protected area regimes. It isInstitutions." World Bank, Private Sector Development hoped that this methodology will become standard inDepartment, Washington, DC. Draft. Bank and GEF-fundedbiodiversityconservationprojects

and that it will make a significant contribution to thegrowing worldwide effort to reconcile the sometimes

Indigenous People and Biodiversity divergent and conflicting interests of resident peopleMapping Project and nature parks.

Responsibility: Environment Department, Social PolicyInternational agencies and national governments are and Resettlement Division-Shelton H. Davis. With

becoming increasingly aware of the important role that Roland Wood and CIMAR. The Environmental Trustindigenous and other traditional rural people can play Fund, Swedish International Development Agency, isin biodiversity conservation and the management of funding the research.threatened ecosystems. These people often possess so- Completion date: July 1993.phisticated ecological knowledge that can contribute toprograms of land use and protected area management.Yet there is a paucity of information on the current Public Policy Instrumentssociocultural and demographic characteristics of indig-enous people, their relations to protected area manage- Like other countries in Central and Eastern Europe,ment regimes, and their capacity to be active partici- Poland has an extensive system of pollution chargespants in biodiversity conservation programs. that has failed to work effectively. In addition, it has

To remedy this situation the Environment introduced regulations governing ambient air qualityDepartment's Social Policy and Resettlement Division standards and emissions. This study analyzes the cost-(ENVSP) has designed an applied research project, the effectiveness of regulations in addressing Poland's se-purpose of which is to increase the Bank's and borrower vere environmental problems and the extent to whichcountries' knowledge of the relation between indig- economic instruments can help reduce emissions levelsenouspeople andbiodiversity conservation. The project and improve air quality.uses cartographic techniques, scientific information, and The study assessed the effect of several policy instru-public policy analysis to increase the information base ments-regulations, a coal tax, emissions taxes, andfor the participation of indigenous and other traditional tradable permits-on emissions of particulates, sulphurrural people in protected area management programs. dioxide, and nitrogen oxides. The study is structured inBolivia, Cameroon, and the Philippines have been cho- two stages. Stage 1 (completed) covered Poland and wassen as the site for the project because of their relatively based on a dynamic linear programming model of thelarge and culturally diverse indigenous populations. energy sector. Stage 2 (under way) uses similar model-

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ing techniques and brings the analysis to the local level, Resources for the Future Discussion Paper ENR 93-16. (Alsofocusing on the Krakow region. presented at the Fourth Annual Conference of the European

The main findings for stage 1 are as follows: Association of Environmental and Resource Economists,* Significant decreases in emissions can be expected June 30-July 3, 1993, Fontainebleau, France.)

from economic restructuring and energy price reformwithout major new environmental initiatives.

* The costs of meeting Polish regulations are not Agricultural Technology Developmentsignificantly different from the costs of meeting those ofthe European Community, although German standards The introduction of improved agricultural technol-are more expensive than both. ogy will be a key factor in determining whether the

* There are cost savings from emissions taxes and world's future population will be adequately nourishedtrading. and clothed. For some time Bank staff have been con-

* A coal tax is too blunt to be cost-effective. cerned that Bank-funded agricultural projects have not* A transition toward a more cost-effective pollu- made adequate efforts to identify sources of technology

tion abatement strategy in Poland could involve a mix- and have not used available technology to its best ad-ture of regulations, emissions taxes, and emissions trad- vantage. The Agriculture and Natural Resources De-ing. partment is therefore undertaking a general assessment

The results of stage 1 contributed to the Environmen- of available technologies, identifying major technicaltal Action Program for Central and Eastern Europe, and socioeconomic constraints to their adoption, andwhich the World Bank helped to prepare. Stages 1 and assessing mechanisms of transfer into Bank lending2 are informing the debate in Poland on a new environ- operations.mental protection act, helping the Bank position itself in In its initial phase the study is focusing on two areasits environmental operational work in Poland, and con- in which the lack of technology has been most badlytributing empirical results to the wider discussion on felt-the arid and semiarid regions of the cool subtrop-the role of policy instruments in air pollution control in ics, where technology generation has been hindered bymember countries. the poor resource base, and the livestock sector in Sub-

A workshop on Alternative Policy Instruments for Saharan Africa, where past introductions of technologythe Control of Air Pollution in Poland will be held in and overall project performance have been particularlyWarsaw on September 6-7,1993, arranged jointly by the disappointing.World Bank and the Polish Ministry of Environmental The project has completed a detailed inventory of theProtection, Natural Resources, and Forestry to dissemi- technologies used in World Bank-funded projects innate the findings of stages 1 and 2. northern China, North Africa and the Middle East, and

Responsibility: Environment Department, Pollution southern Latin America. It has analyzed farm data toand Environmental Economics Division-Robin W. establish the effect of the adoption of many of the mostBates. With W. Bojarski, Z. Parczewski, Z. Klimont, T. frequently used technologies in Morocco and producedMroczek, and A. Umer, Polish Academy of Sciences; J. a working paper on the results. A technical paper on thisSleszynski, Warsaw University; M. Toman, Resources analysis will be available by December 1993. The analy-for the Future; LondonSchoolof Economics; and UNICO, sis shows an enormous variation in the impact of eachPoland. The Government of the Netherlands, the U.S. technology; the impact is strongly dependent on institu-Environmental Protection Agency, the Foreign Office, tional arrangements and climatic conditions. The tech-U.K., and the Ministry of Environment, Poland, are nical paper will highlight the conditions under whichcontributing funding to the research. The Ministry of each technology has performed well.Environment, Poland, and the Warsaw University of A report on livestock production technologies forTechnology are contributing staff time. Sub-Saharan Africa has been published and has been

Completion date: September 1993. discussed at a seminar attended by Bank staff andReports: outside policymakers. The report was an important

Bates, Robin. 1993. "Economic Policy Instruments for the input in the formulation of a global livestock researchControl of Air Pollution in Poland." Paper presented at the strategy under the aegis of the Consultative Group on86th Annual Meeting of the Air and Waste Management International Agricultural Research.Association, Denver, Colorado. Responsibility: Agriculture and Natural Resources

Bates, Robin, J. Cofala, and M. Toman. Forthcoming. "Alternative Department, Agricultural Technology and Services Di-Policies for the Control of Air Pollution in Poland." Environ- vision--Comelis de Haan, Hamdy Eisa, and Jitendrament Working Paper Series. World Bank, Washington, DC. Srivastava. With Jacques Brossier; Peter Oram, Interna-

Toman, M., J. Cofala, and Robin Bates. 1993. Alternative tional Food Policy Research Institute; Rita Aggarwal;Standards and Instruments for Air Pollution Control in Poland. Jumanah Farah; and Winrock International. The Inter-

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national Livestock Center for Africa, the International lands are ecologically heterogeneous at a variety ofLaboratory for Research on Animal Diseases, the Cana- different spatial scales, and care must be taken to main-dian Center for International Development, the Consul- tain access to "key resources" within the range to pre-tative Group on International Agricultural Research, vent a collapse of the system.the Rockefeller Foundation, and Institut National de la The analysis developed a series of models simulatingRecherche Agronomique, Morocco, are participating in the impact of alternative range management strategiesthe research. and of variations of key economic policy variables. It

Completion date: December 1993. suggested that overgrazing is not due to the opportunis-Report: tic nature of traditional range management strategies

Winrock International. 1992. An Assessment of Animal Agriculture but to the economic and institutional conditions inin Sub-Saharan Africa. which such strategies are worked out. Given the range

of benefits received by the traditional owners and thenonmarketed nature of many of them, the results of the

Dryland Management analysis of the impact of variations in the availablepolicy variables are not always intuitive. The results

There has been considerable controversy in recent show how recent trends in policy and economic param-years over the question of whether the standard notions eters may have worked to provide incentives to tradi-of "carrying capacity" in the dryland range areas of Sub- tional producers to increase, rather than decrease, theSaharan Africa are relevant when considering policy size of their herds.toward traditional producers operating primarily in The results of this work have formed the basis of acommunal areas. This relates to changing ideas on the research workshop on New Directions in African Rangeunderlying ecological views about the impact of alter- Management being held in the United Kingdom andnative management strategies on the range ecosystem sponsored jointly with the Commonwealth Secretariat.and about the objectives of range management. These This workshop is exploring the implications of the re-views have led to a questioning of the position that the search fora number of developmentpolicyissues, rangetraditional "opportunistic" range management strate- managementand planning, alternative feed supply man-gies are responsible for much of the rangeland degrada- agement, livestock marketing, resource tenure, institu-tion that is reported to be occurring. And they have led tions (pastoral associations and grazing schemes), andto a reconsideration of appropriate policies to support pastoral administration.pastoral production as population and economic growth Responsibility: Environment Department, Pollutionincrease the pressure on the pastoral areas and disrupt andEnvironmentalEconomiesDivision-JohnEnglish;the earlier use patterns. and Agriculture and Natural Resources Department,

This research had three main objectives: to review Agricultural Technology and Services Division-recent findings and assess the current thinking on the Cornelis de Haan. With the Overseas Developmentprecision with which carrying capacity can be esti- Institute and Charles Perrings, University of California.mated, current definitions of the concept, and its rel- TheCommonwealthSecretariat, OverseasDevelopmentevance to dry African environments; to undertake, in Administration, and the Government of Norway arethe light of these studies, an analysis of the economics of contributing funding to the research.herd management under these conditions and the likely Completion date: December 1993.impact on rangeland degradation; and to assess the Reports:implications of these findings for policies on economic Behnke, Roy, and Ian Scoones. 1992. "Rethinking Rangedevelopment in dryland areas, including land tenure Ecology: Implications for Rangeland Management inand administration. Africa." Environment Working Paper 53. World Bank,

The initial review indicated some consensus on three Environment Department, Washington, DC.broad propositions regarding the ecological function- Behnke, Roy, Ian Scoones, and Carol Kerven. 1993. "Rangeing of pastoral systems in these conditions. First, a Ecology at Disequilibrium." Overseas Developmentdistinction must be made between the concepts of "eco- Institute, London.logical" and "economic" carrying capacity. While eco- English, John. 1993. "Economic and Social Policies and Landlogical carrying capacity represents the physical limit of Degradation in Dryland Areas." Paper presented to thepopulation, what constitutes an economically optimal Intergovernmental Committee for a Convention to Combatstocking rate will vary according to circumstances. Sec- Desertification, Nairobi, Kenya.ond, in Africa's dry savannas rainfall variability and Perrings, Charles. 1993. "Pastoral Strategies in Sub-Saharanother episodic events control both plant and animal Africa: The Economic and Ecological Sustainability ofpopulations, and these grazing systems may be ecologi- Dryland Range Management." Environment Working Papercally in constant disequilibrium. Third, African range- 57. World Bank, Environment Department, Washington, DC.

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Farming Systems and Natural Resource Eight case studies and an overview paper will beManagement: A Comparison of Successful completed by December 1993 and will be published ifExperiences in Developing Countries the results of the review are of sufficient interest.

Responsibility: Agriculture and Natural ResourcesThere is limited scope for opening up new lands for Department, Office of the Director-J. A. Nicholas Wallis;

agricultural use. Many of the areas still under forest Environment Department; Economic Development In-cover are rich in diverse biological species but poor in stitute; Europe and Central Asia, Country Departmentsoil nutrients. And it is widely recognized that agricul- I, Resident Mission in Turkey-Nedret Durutan; West-tural output must be raised to meet the needs of the em Africa Department, Resident Mission in Nigeria;rapidly increasing population inmost developing coun- and South Asia, Country Department I, Resident Mis-tries, as well as to alleviate poverty. The dilemma is that sion, Agriculture Division-M. Balasubramanian. Withmore intensive use of natural resources is essential to Fairless Consultores, Uruguay; and John Landers.provide the total output required, yet there seem to be Completion date: December 1993.few, if any, intensified farming systems that are indefi-nitely sustainable without continuing evolution andadjustment. Solid Waste Management

This inquiry into farming systems and natural re-source management addresses this dilemma. A set of Municipalities in developing countries have gener-studies will briefly describe selected rainfed farming ally simply dumped solid waste indiscriminately inand natural resource management systems that comply open areas. This project, part of the Water and Sanita-with sound environmental management practices and tion Division's resource recovery program, is develop-that are evolving in the light of accumulating experience ing a manual on the environmentally safe developmentand changes in context. Where intensified systems of and operation of a sanitary landfill.farm and natural resource management systems have The research to develop the manual consisted of abeen widely adopted and have stood the test of time, the review of literature on the subject. The manual has alsomacroeconomic and sector policy and the institutional been extensively reviewed by practitioners in the field.and social factors that enabled the intensified systems to The findings show that developing a landfill is envi-function successfully will be outlined. ronmentally more sound than simply dumping. Finan-

The principal goals are: cial resources need to be made available for developing* To identify, evaluate, compare, contrast, and dis- and operating landfills, or high environmental costs

seminate positive experiences with some technical will be incurred in the future. More resources need to bechanges in the management of selected rainfed farming committed to the safe disposal of solid waste (in land-systems and natural resources in tropical and subtropi- fills), rather than to the purchase of collection trucks.cal regions of the world The manual will be distributed as a UNDP-World

* To promote exchanges of experience among Bank Bank Water and Sanitation Program publication.and other staff working in different regions of the world Responsibility: Transportation, Water, and Urban De-

* To provide a set of case studies and a commentary velopmentDepartment, Waterand Sanitation Division-for use by the Economic Development Institute and its Andrew Macoun; and Asia Technical Department, En-collaborating training institutions vironment Division-Jack J. Fritz. With Luis Diaz,

* To provide the Operations Evaluation Depart- Clarence Golueke, and Lisa Reese, CAL Recovery Sys-ment with background papers that will be useful in tems; and Suhashini Karunaratne, Cornell University.preparing future audit reports on projects covered by Completion date: December 1993.the study.

Information is being collected through field visitsand correspondence with collaborators in Brazil, Bo- Water Resource Policies in Metropolitanlivia, China, Colombia, India, Kenya, Malaysia, Nigeria, Areasthe Philippines, Turkey, and Uruguay.

The main findings of the research are that the natural Better management of water resources can lead toresource management systems that are both highly significant improvement in the environmental condi-productive and apparently sustainable reveal a positive tions and the economic performance of cities. This re-integration of a sound scientific basis, a favorable public search has evaluated various policy instruments (incen-policy and investment climate, and a social context in tives, taxes, subsidies, tariffs, regulation, and legisla-which there is a balanced combination of diverse farm tion) for encouraging economically efficient and equi-types, autonomy of farmers' decisionmaking, and suffi- table use of water resources. The research will providecient cooperation among farmers. a methodology for estimating the economic value of

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water in alternative uses, the opportunity cost of water Linkages in Water Resource5 Management. World Bank

in different seasons and locations, and the cost of con- Discussion Paper. Washington, DC.served water for various water-saving technologies in Bhatia, Ramesh, Rita Cestti, and James Winpenny. Forthcoming.industrial and household sectors. The project is part of Policies for Water Conservation and Reallocation: Best Practices

a broader effort to develop water resource management Cases in Improving Economic Efficiency and Environmental

policies for the Bank. Quality. World Bank-ODI Joint Study.The conceptual approach underlying the research is Bhatia, Ramesh, and Malin Falkenmark. 1992. "Water Resources

Integrated Water Resources Planning and Management Policies and the Urban Poor: Innovative Approaches and(IWRPM). Putting this approach into operation requires Policy Imperatives." Background paper for the workingdefining the river basin(s) in which a city is located and group on Water and Sustainable Urban Development,the economically optimal instruments. Fieldwork is International Conference on Water and the Environment:carried out to estimate the economic value of water in Development Issues for the 21st Century. World Bank,

alternative uses through willingness-to-pay studies. Washington, DC.Survey data are used to quantify the cost of conserved Bhatia, Ramesh, Peter Rogers, John Briscoe, and Basawan Sinha.water to evaluate the economics of each water-saving Forthcoming. Water Demand Management and Pollutionmeasure. The economically efficient allocation of water Control in Industries: How to Use Water Tariffs, Pollution Taxes,(calculated through a systemwide optimization exer- and Fiscal Incentives. World Bank Discussion Paper. Washing-cise) is compared with the current and future allocation ton, DC.based on tradition, legislation, water rights, or adminis- Cestti, Rita, Ramesh Bhatia, and Caroline van der Berg.trative allocation. The advantages of changing institu- Forthcoming. Water Demand Management and Pollutiontional structures to achieve a more efficient allocation of Control in the Industrial and Domestic Sectors in the Jabotabekwater are quantified. Region, Indonesia. World Bank Discussion Paper. Washing-

The principal findings are that conflicts inwater use are ton, DC.likely to arise in many developing countries, particularlyaround the 45 metropolitan areas in which the populationis likely to be 4 million or more. It is necessary to identify Environmental Liability and Privatization:the time profile of these conflicts and to evaluate policy Implications of Different Liability Rulesmeasures that will encourage water conservation andinnovative operating procedures for reservoirs. This project aims to provide an overview of how

These findings draw attention to the serious water selected countries are approaching the issue of respon-quantity and quality problems likely to arise in urban sibility for past environmental damages in privatizationareas in the next decade. These should be taken into and to discuss how the approaches may have differentaccount in planning investments in the irrigation and economic and environmental implications. The researchwatersupplysectors.Adequateemphasisshouldbegiven is intended to contribute to the discussion inside andto demand management (conservation and re-allocation) outside the Bank on how liability rules may best serveas "supply options" before new investments are made. both the process of privatization and public and envi-For borrowing countries, in-depth analysis of selected ronmental health and safety.casestudieswouldindicatetheefficiencyofvariouspolicy The research is being conducted as a desk studymeasures and the institutional structures (in public and using a range of multidisciplinary Bank and non-Bankprivate sectors) that help in their implementation. primary and secondary sources. Examples include laws

Responsibility: Transportation, Water, and Urban De- and regulations of certain countries, overview articles ofvelopment Department, Waterand Sanitation Division- environmental protection legislation for selected coun-John Briscoe, Ramesh Bhatia, and Rita Cestti. With Peter tries, and journal articles presenting the results of eco-Rogers, Harvard University; Malin Falkenmark, Swed- nomic modeling and comparative country analysis. Theish Natural Science Research Council; G. Anandalingam, study seeks to produce an integrated analysis of issuesUniversity of Pennsylvania; and D. B. Gupta, National that are primarily lega[, economic, and environmentalInstitute of Public Finance and Policy, India. The Irriga- in nature. The underlying thesis is thatdifferentliabilitytion Department, Bihar, India, and the Directorate Gen- rules may produce or contribute to different outcomeseral of Water Resources Development, Indonesia, are depending on how they distribute responsibility forcontributing staff time, and the Swedish International past pollution problens, the incentives they provide toDevelopment Agency is providing funding. public and private sector actors, and sectoral character-

Completion date: December 1993. istics. An economic model is presented to analyze aReports: specific subset of issues.

Anandalingan, R., Ramesh Bhatia, Ritta Cestti, and Basawan The principal, although tentative, finding of the re-Sinha. Forthcoming. Policy Implications of Intersectoral search is that countries can benefit economically and

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environmentally when the state takes at least a substan- will be assembled with significant variation in the maintive share of the responsibility for pollution problems variables in the study-government policies, marketstemming from activities during public ownership, at conditions, urban location and type, and fuel use byleast in polluting sectors of the economy. This conclu- urban households. In addition, data on resource condi-sion, which supports findings of other, parallel studies tions will be gathered for each country. As a result, thein the Bank, is currently the basis for Bank recommenda- study will be able statistically to analyze the causes oftions to countries implementing privatization programs urban interfuel substitution, including the effect of suchand for the development of guidance materials on envi- factors as government policy or resource conditions onronmental management in privatization. urban fuel use.

The findings of the study, when final, willbe dissemi- The results of the research shed some light on thenated through internal training seminars related to en- effectiveness of existing policies, the conditions undervironmental assessment and in dialogues with bor- which transitions can be expected to occur, and therower countries. The research is also expected to result socioeconomic effect and consequences of interfuel sub-in an Environmental Working Paper. stitution. The research addresses such issues as what

Responsibility: Environment Department, Land, Wa- policies are appropriate based on the socioeconomicter, and Natural Habitats Division-Colin Rees and conditions of the urban environment, the equity impli-Olav Kjorven. cations of such policies, the implications of the availabil-

Completion date: 1993. ity of local resources for energy use, and the foreignexchange implications of importing or producing com-mercial forms of energy for household use. As expected,

The Urban Energy Transition in Developing thepreliminaryfindingsindicatethatgovernmentpolicy,Countries along with income, has a significant effect on residential

fuel use in developing countries. A somewhat surpris-With growth rates at between 3 and 7 percent a year, ing finding is that many of the poorest households in

the population of the urban areas of developing coun- urban areas of developing countries use electricity, buttries has reached startling numbers. More than 1.25 rarely use LPG. The use of wood fuel is fairly extensivebillion urban dwellers live in 360 cities with populations in all but the largest cities. These findings are prelimi-over 500,000. The high growth rates stem from high nary, however, and more analysis is needed before firmbirth rates and extensive migration from rural areas to conclusions can be drawn.cities, and they are accompanied by increased demand The work completed so far shows that governmentfor energy, food, water, and other resources. The mi- policy plays a very important role in influencing house-grants from rural areas bring with them their traditional holds to choose one fuel over another. It also shows thatpatterns of energy use, which are based mainly on the policies to promote LPG for households with incomesuse of wood for fuel. In urban areas demand for wood that are less than about US$25 per capita per month areproducts is highly concentrated, creating such difficul- likely to have disappointing results. Apparently, elec-ties as the environmental problems associated with tricity can be promoted at much lower levels of incomeharvesting trees around urban centers. because of the high value that urban households place

The purpose of this research is systematically to on lighting, although this will require substantial capi-analyze the dynamics of interfuel substitution and the tal expenditure by the electricity industry. In develop-transition from traditional to modern fuels in urban ing countries, wood fuels do not disappear completelyareas of developing countries. It also explores the feasi- as incomes rise because many high-income householdsbility of substituting kerosene, liquefied petroleum gas still use these fuels, reflecting their utility for urban(LPG), or electricity for wood-based fuels. To accom- households. But wood-based fuels do seem to disap-plish this task, the study examines the causes of interfuel pear from urban households in large metropolitan areassubstitution and the effect of interfuel substitution on with populations of more than 1 million, where woodequity and the quality of life in urban areas. The main apparently is difficult to obtain. The urban poor arehypothesis of the study is that urban income, the type affected most by urban fuel policies because they spendand location of an urban area, the wood fuel resources a significant proportion of their incomes on energy. Inaround a city, and the type of government policy will all urban areas with high energy prices the poor can spendaffect the use of fuels by urban classes in different ways. 10 to 20 percent of their cash income on fuel.

This study moves in a new direction to deal with It is important to understand the transition frommany of the inherent weaknesses in past research on wood fuels in individual urban areas and individualinterfuel substitution. The research utilizes existing sur- countries in the context of the socioeconomic forces thatveys to analyze patterns of energy use by urban area and drive the transition. Policies and projects thatrun counterclass of income. For about 45 urban locations, a data base to prevailing socioeconomic forces are bound to en-

78


counter problems. For example, encouraging tree plant- links between economywide policies and environmen-ing for the production of fuelwood in economies that are tal degradation. The results of the study will be invalu-rapidly making the transition to commercial fuels may able in Bank operations for use in redesigning and fine-be good environmental policy, but it does nothing to tuning a wide range of development policy prescrip-help alleviate energy problems in urban areas. Like- tions, including in adjustment lending, and in sharpen-wise, encouraging poor households to rely on expensive ing environment-related dialogue with borrowers.modern fuels early in the transition, when fuelwood is The objective of the project is to identify and evaluatevery cheap, may do nothing but strain the budgets of the the environmental implications of economywide poli-urban poor and of national governments. cies. The study falls within the overall applied policy

Responsibility:IndustryandEnergyDepartment,Power research program of the Environment Department fo-Development,Efficiency,andHouseholdFuelsDivision- cusing on incorporating environmental considerationsDouglas Barnes. With Liu Qian, University of Pennsylva- into Bank operations.nia; Jeffrey Dowd, U.S. Department of Energy; Kerry The first phase included a review that related adjust-Krutilla, Indiana University; William Hyde, U.S. Depart- ment-related economywide reforms to basic patterns ofment of Agriculture; and Mark Pitt, Brown University. resource use and environmental impacts. In the nextIndiana University is contributing staff time. stage 12 country case studies are being undertaken.

Completion date: January 1994. The case studies are helping to identify practicalReports: approaches for a range of countries, analyzing policy

Barnes, Douglas. 1992. "Understanding Fuelwood Prices in options that address different environmental issues.Developing Nations." Industry and Energy Department Conclusions will be drawn on the importance of envi-Working Paper, Energy Series 56. World Bank, Washington, ronmental considerations relative to the conventionalDC. development or growti contributions of policy reforms.

Barnes, Douglas, Kevin Fitzgerald, and Gordon McGranahan. Depending on whether the environmental links of poli-1991. "Interfuel Substitution and Changes in the Way cies are positive or negative, the potential for comple-Households Use Energy: Estimated Changes in Cooking and mentary or defensive environmental measures can thenLighting Behavior in Urban Java." Pacific and Asian Journal of be assessed.Energy 1 (New Series):21-49. (Also Industry and Energy Responsibility: Environment Department, PollutionDepartment Working Paper, Energy Series 29. World Bank, and Environmental Economics Division-MohanWashngton, DC.) Munasinghe and Wilfrido Cruz. With Jeremy Warford

Barnes, Douglas, and Liu Qian. 1992. "Urban Interfuel Substitu- and Stein Hansen. The Ministry of Foreign Affairs oftion, Energy Use and Equity in Developing Countries." Norway and the Swedish International DevelopmentIndustry and Energy Department Working Paper, Energy Agency are providing financial support.Series 53. (Also published in James Dorian and Fereidun Completion date: June 1994.Fesharaki, eds., International Issues in Energy Policy, Develop-ment, and Economics. Boulder: Westview Press, 1993.)

. 1993. "The Impact of Energy Pricing on the Urban Poor." Energy Use and Global AtmosphericWorld Bank, Industry and Energy Department, Washington, PollutionDC. Draft.

Energy consumption is expected to expand signifi-cantly in developing countries over the next two de-

Economywide Policies and the Environment cades. Based on the natural resource base of these coun-tries, coal can be expected to account for a large share of

The Bank's past efforts in environmental economics the expanded energy consumption-especially in largehave focused on environmental screening and assess- developing countries such as China and India.ment procedures that are mandatory for all projects. For This project is constructing models of energy de-example, a full environmental assessment is required mand in developing countries to derive expected rangesforprojectsthatarelikelytohavesignificantand diverse of energy consumption and pollution emissions in theenvironmental impacts. These would include large- major developing countries. Itisevaluating the extentofscale irrigation projects, drainage projects, and most energy conservation technologies likely to be intro-thermal power and hydropower development projects. duced in these countries. And it is examining the effectFor projects that may have only limited environmental on consumption levels of suggested measures for con-effects, the environmental analysis is appropriately re- trolling pollution emissions. These estimates are ex-duced in scale. I pected to make a valuable contribution to discussions

This project focuses on a complementary area in about domestic and international energy policies. Fi-which better understanding is urgently desired-the nally, it is proposed that the project study the effects of

79


suggested emissions control measures on the interna- tural lands to urban uses, and the environmental im-tional market for energy. pacts of the added pressure on the remaining agricul-

Responsibility: International Economics Department, tural and forestry lands. Although these costs can beInternational Trade Division-Takamasa Akiyama and high, they cannot, by themselves, justify interventionsMasayasu Ishiguro. With M. Pesaran. to change the natural pattern of spatial shifts. Nonethe-

Completion date: June 1994. less, they have caught the attention of policymakers inmany countries, both industrial and developing, andhave provided the underpinnings for an array of legis-

Environmental-Economic Evaluation lation to halt or reduce the rate of conversion of landof Energy from rural to urban uses. These legal restrictions have

been largely ineffective in developing countries.This project in the energy sector is one of several case The literature has given little attention to the implica-

studies in different sectors to develop better analytical tions of urban development for the determination of thetools for Bank staff for valuing environmental impacts process of allocating land between rural and urban usesand incorporating them into project and policy design. (between agricultural and nonagricultural uses) in de-

A joint team of Bank and Sri Lankan researchers is veloping countries. The studies that have been doneattempting to identify environmental impacts in the Sri focus mostly on industrial countries, particularly theLankan power sector, to value as many of these impacts United States. And the literature has not yet provided aas possible in economic terms, and to modify existing comprehensive assessment of the role of government inpower planning methods to include environmental influencing the allocation of land between the two sec-impacts (both quantifiable and nonquantifiable). tors. It would be desirable to know, from the point of

The research is being conducted through in-depth view of efficient allocation of resources, whether gov-field studies and surveys, followed by analysis in Sri ernment should intervene in the allocation of land be-Lanka and Washington, DC. Findings will be dissemi- tween rural and urban uses or whether the allocationnated through Bank publications, journal articles, and should be determined entirely by market forces. Aconferences. number of questions are associated with this concern.

Responsibility: Environment Department, Pollution Are market forces likely to generate an efficient alloca-and Environmental Economics Division-Mohan tion of land between rural and nonrural uses? In theMunasinghe. With Peter Meier. The Sri Lankan Minis- presence of other distortions in the economy, can directtries of Power and Energy and Environment are contrib- government intervention be welfare-increasing? If so,uting staff time, and the Ceylon Electricity Board is what kinds of policies are likely to be most effective?providing data. And why have many of the policies applied by govern-

Completion date: June 1994. ments of developing countries to slow the conversion ofrural lands into urban lands been ineffective?

Government policies that create wedges betweenLand Allocation market prices and social (or shadow) prices are pre-

dominant in developing countries. The urban bias im-There are indications that recent trends in urbaniza- plicit in these policies, often manifested in taxation

tion in developing countries will continue in years to (implicit or explicit) of the agricultural sector, facilitatescome. Population growth in a number of developing the expansion of the nonagricultural sector. In manycountries appears to be slowing, but urban population developing countries agriculture is a large share of thegrowth is still increasing. In the past 70 years the devel- economy, and taxing agriculture relative to theoping world's urban population increased fifteenfold, nonagricultural sector is seen as a temporary mecha-from about 100 million in 1920 to close to 1.5 billion in nism for transferring resources (mainly labor and capi-1990. The growth rate of the urban population in the tal) to the nonagricultural sector and for generatingdeveloping regions has ranged, on average, from 3.42 revenue for the government. If significant quantities ofpercent to 5.22 percent a year over the past four decades. land are also transferred to the nonagricultural sector

Urban growth manifests itself not only in a shift in while such policies are in place, when the time comes forpopulation-the subject of many studies on rural-urban eliminating these policies, the quantity of agriculturalmigration-but in spatial shifts. These shifts, an integral land may be smaller than optimal. But urbanization is,part of development, involve adjustment costs, such as to a large extent, irreversible because the costs of con-the dislocation of rural families living in the fringe areas verting land from urban to rural uses are extremelyof large cities (mainly those left behind by the migration high. Whether, in the presence of policies that distortprocess), the dismantling of rural infrastructure built agricultural incentives, direct intervention in the landover rural lands, the conversion of high-quality agricul- market is welfare-improving is an empirical question.

80


This research project considers these issues in two management, irrigation, and harvesting. Reforms mayAsian economies-Bangladesh and Indonesia-in which be needed in policies relating to producer prices, inputthere is significant conversion of land from rural to pricing, land tenure, tariffs, and taxes. Reforms may alsourban use and which are characterized by high popula- be needed in institutions related to the supply of inputstion density. The analysis relies on a computable general and marketing services (for example, public versusequilibrium model. This is appropriate because of the private), the competitive structure of cotton industries,significant number of intersectoral links involved and and the links between research, extension, production,because substitution in production and consumption, ginning,andmarketing.Andtheremayneedtobechangesthe structure of factor markets, and total resource en- in the product mix and market orientation, an increase indowments play significant roles in determining land the use of cotton byproducts, and greater orientationallocation. Furthermore, government policies that cut toward production for specialized market niches.across a large number of sectors and activities are likely Many governments have intervened heavily in na-to influence the process of land allocation. The effects of tional cotton production and marketing because ofthese policies cannotbe usefully analyzed withoutprop- cotton's multisectoral role, its importance as a foreignerly accounting for the interactions between the rural exchange earner, and, in some cases, its representationand urban sectors. by influential interest groups. Some of the arguments

Responsibility: Agriculture and Natural Resources for this intervention-such as economies of scale, qual-Department, Agricultural Policies Division-Ant6nio ity control, logistical barriers, and environmental con-Salazar P. Branddo; and Transportation, Water, and cerns-have strong economic and technical justifica-Urban Development Department, Urban Development tion; others do not.Division-Alain Bertaud. This study seeks to provide insight into the prospects

Completion date: December 1994. for cotton during the next decade. It emphasizes theprospects for developing a sustainable, environmen-tally friendly farming system incorporating cotton as

Study of Cotton Production Prospects one of its components. As part of the task of examiningfor the Next Decade strategies for successful development of and adjust-

ments in the cotton industry in the next decade, theCotton has a vital multisectoral role in the economies rationale for government intervention and the appro-

of many developing countries. But over the past decade priate division between the public and private sectorsthere have been wide differences in the performance of should be reevaluated.cotton industries in different countries. All cotton in- The study will examine the status of cotton produc-dustries are experiencing a number of strategic prob- tion and outline the challenges and opportunities facinglems that are affecting the competitiveness of cotton the industry during the next decade by drawing on casewith alternative crops and in the textile industry, even in studies carried out in Brazil, China, Egypt, India, Mali,countries where there has been dynamic development. Mexico, Pakistan, Tanzania, and Uzbekistan. It willProduction costs have been rising because of the in- examine a series of technological, economic, policy, andcreased cost of labor, water, and other inputs, and the institutional issues that may help explain the differ-reduction or removal of subsidies. The real price for ences among countries in the performance of their cot-cotton lint has been declining, and there has been in- ton industries. These issues concern government poli-creasing competition from alternative crops that have cies and the role of the private sector; varietal develop-become more profitable as a result of market liberaliza- ment, maintenance, and seed production; agronomiction and expanded domestic and export markets. Cot- practices; crop protection; availability and cost of in-ton yield and quality have been declining because of puts; institutional organization and links between re-weaknesses in varietal maintenance and seed multipli- search, production, and marketing; and product devel-cation and because of salinity and waterlogging associ- opment and marketing. The study will also examine theated with irrigation schemes. And there is increasing influence of government policies on the patterns ofconcern among governments, donors, and consumer development, the choice and adoption of technologiesgroups about environmental and health hazards associ- at the farm and processing levels, and market develop-ated with excessive use of pesticides. ment and efficacy.

World prices for cotton are expected to remain stag- The country case studies are being conducted bynant or to decline over the next decade. Thus, to remain study teams in each country. The country reports pro-competitive, the cotton industries of many countries duced and a synthesis report will be discussed andwill need to undergo adjustments. They may need to finalized at a workshop in Cairo in September andmake changes in varietal development and mainte- October 1994. The final report will be published innance, cultivation practices, application of inputs, pest March 1995. The findings and recommendations will

81


provide a basis for future directions in cotton research ticular challenges relating to the sustainability of agri-and development and will identify investment needs. cultural production systems, as well as institutional

Responsibility: Agriculture and Natural Resources mechanisms for research on the natural resource baseDepartment, Agricultural Technology and Services Di- underpinning agriculture and on environmental issuesvision-Hamdy Eisa; East Asia and Pacific, Country influenced by agriculture.Department II, Agriculture Operations Division-Albert Responsibility: Agriculture and Natural ResourcesNyberg and Rapeepun Jaisaard; Europe and Central Department, Agricultural Policies Division-Jock R.Asia, Country Department III, Agriculture, Industry, Anderson. The International Food Policy Research In-and Finance Division-Jorge Garcia-Garcia; Middle East stitute and ISNAR are collaborating in the research.and North Africa, Country Department II, Agriculture Completion date: June 1995.Operations Division-Youssef Fuleihan; Latin America Reports:and the Caribbean, Country Department II, Agriculture Anderson, Jock R. 1992. "Agricultural Research Institutions and

Operations Division-Louise Cord, and Country De- Priorities in an Era of Resource Scarcity: Discussion."

partment I, Environment and Agriculture Division- American Journal of Agricultural Economics 74 (5):1111-13.Malcolm Bale; South Asia, Country Department II, Ag- . Forthcoming. "Social Science in International Agricul-riculture Operations Division-Ashok Seth, and Coun- tural Research: Implications and Issues for the IARCs." Intry Department III, Agriculture Operations Division- M.P. Collinson, K. Wright Platais, and M.E. Home, eds.,Guy Motha; Eastern Africa Department, Agriculture Proceedings of the Meeting of CGIAR Social Scientists. CGIARand Environment Division-James Coates; SahelianDe- Study Paper Series. Washington, DC: World Bank.partment, Agriculture Operations Division-Chantal Anderson, Jock R., and J.B. Hardaker. 1992. "Efficacy andDejou; Legal Department, East Asia and Pacific Divi- Efficiency in Agricultural Research: A Systems View."sion-Natalie Lichtenstein, Europe and Central Asia Agricultural Systems 40 (1-3):105-23.Division-Dilek Barlas, Middle East and North Africa Anderson, Jock R., P.G. Pardey, and J. Roseboom. Forthcoming.Division-Aly Abu-Akeel, Latin America and the Car- "Sustaining Growth in Agriculture: A Quantitative Reviewibbean Division-Rudolf van Puymbroeck and Jose of National and International Agricultural ResearchAugusto Carvalho, South Asia Division-Salman Investments." Agricultural Economics.Salman and Akhtar Hamid, and Africa Division-Eliza-beth Adu and Sidi Boubacar. With Fred Gillham (studycoordinator), Carmen del Castillo, Mohamed Al-Saffy, Trade Policy and the EnvironmentThomas Bell, and Steven Jaffee. The Common Fund forthe Commodities, the Netherlands; the International This study is examining the integrated theory of openCotton Advisory Committee, United States; and Canada- economy environmental and trade policy. The studyEgypt-McGill Agricultural Response Programme, develops an integrated model of international trade andCanada, are contributing funding to the research. environmental flows using the dual approach. The find-

Completion date: March 1995. ings suggest that the optimal trade and pollution poli-cies in the presence of cross-border spillovers to thedomestic country depend on whether an emissions fee

Agricultural Technology Policy or a quantity constraint on emissions is employed in theforeign country. Both domestic tariffs and domestic

Thisprojectbuildsonthefindingsofanearlierproject, pollution fees will tend to be higher when the foreign"Advancing Agricultural Productivity," that clearly country employs an emissions fee than when it adoptsidentified the importance of a better understanding of an emissions cap. The model also confirms earlier find-the policy environment surrounding the generation, ings that optimal domestic pollution policies in an opentransfer, and implementation of agricultural technol- economy setting can differ from the traditional Pigouvianogy. This research will examine the demand and supply tax even in the absence of cross-border pollutionsituations for both agricultural production and environ- spillovers, and that the traditional optimal tariff mustbemental goods, and assess the many organizations (pub- modified to acccount for its environmental effects.lic and private, national and international) servicing the Responsibility: Policy Research Department, Tradeknowledge industries on which agriculture depends. Policy Division-Arvind Panagariya.

The research will focus on several policy issues: the Completion date: September 1995.level and stability of investment in national agricultural Report:research systems, especially in Sub-Saharan Africa; the Panagariya, Arvind, Wallace Oates, and Karen Palmer.efficiency of resource deployment (especially human "Towards Integrated Theory of Open Economy Environ-resources) in such systems, including collaborative ar- mental and Trade Policy." World Bank, Policy Researchrangements between groups of countries; and the par- Department, Washington, DC.

82

HUMAN RESOURCEs DEVELOPMENT

Economic Impact of Fatal Adult Illness sectional data. For example, analyzing household ex-from AIDS and Other Causes penditures and funerals occasioned by death from fatalin Sub-Saharan Africa illness revealed that average expenditures by house-

holds in the sample for a single death in 1991 wereRef. no. 6 75-71 approximately 20,000 Tanzanian shillings, of which 60

The AIDS epidemic presents an additional burden of percent-approximately equal to the local per capitamortality to an African population already afflicted income-was spent on funeral expenses. The availabil-with high mortality rates. The World Health Organiza- ity of income and expenditure variables (these are beingtion estimates that annual adult deaths from AIDS in currently constructed) will be useful reference pointsSub-Saharan Africa will grow from about 350,000 in and important determinants of such expenditures and1992 to more than 700,000 by 2000. Because these cases will enhance future analysis.derive entirely from existing infection, they will occur Other results emerging from the preliminary dataregardless of the effectiveness of recently initiated pro- analysis include the effects of adult deaths on schooling,grams to prevent the spread of the disease, on cultural coping behavior (such as funeral practices,

This project seeks to answer two broad research child fostering, and interhousehold transfers), and onquestion,;: What are the economic costs and impacts of the nutritional status 01: children.AIDS illness and death among adults on households The project's preliminary results were disseminatedand communities? And how can the government target at a September 1992 workshop in Bukoba, Tanzania,patient and survivor assistance programs to maximize attend2d by the governmental, nongovernmental, andthe benefit to survivors for a given government budget? international donor organizations operating in the re-The research complemnents ongoing research in the Policy gion. Results were also presented at a seminar at the U.S.Research Department's Environment, Infrastructure, Agency for International Development in january 1993,and Agriculture Division on the health impact of envi- at the annual meetings of the Population Association ofronmental degradation and in the Poverty and Human America in Cincinnati in March 1993, and at the NinthResources Division on targeting poverty assistance pro- International Conference on AIDS in Berlin in June 1993.grams. It also builds on earlier research reflected in Research results will also be presented at the EighthWorld Development Report 1993 on the importance of International Conference onAIDSinAfrica in Marrakechadult health and on the allocation of resources among in December 1993. The final results will be disseminatedinterventions to prevent and treat AIDS. through a book addressed to practitioners and

The project is conducting a socioeconomic survey of policymnakers, and papers will be submitted for publica-households in an area with a high prevalence of AIDS. tion in the Policy Research Working Paper series, theA sample of both "healthy" and severely affected house- Living Standards Measurement Study Working Paperholds is being followed longitudinally over 12 months, series, and academic journals.at six-month intervals. Because the longitudinal design Responsibility: Policy Research Department, Povertyallows the use of techniques to control for certain unob- and Human Resources Division-Mead Over; and Af-served variables and captures the time path of house- rica Technical Department, Human Resources Divi-hold responses, it will yield more complete estimates of sion-Martha Ainsworth. With Phare Mujinja, Godlikethe costs and impact of fatal illness than couldbe gleaned Koda, Innocent Semali, and George Lwihula, Univer-from a single cross-section. And by comparing severely sity of Dar es Salaam; Indrani Gupta; Thomas Wayman;affected with relatively untouched areas, the project and Beatriz Godoy and Teresa Reinaga, Sistemaswill document the stress imposed by the epidemic on Integrales, Chile. DANIDA and USAID are providinglocal coping mechanisms and the consequently higher support.burden on the affected households and individuals. Completion date: March 1994.

The survey is designed primarily for panel analysis, Report:and the data are being formatted so that this can be done Ainsworth, Martha, Godlike Koda, George Lwihula, andas soon as possible. But several interesting results Others. 1992. Measuring the Impact of Fatal Adult Illness in Sub-emerged from the analysis of the first "wave" of cross- Saharan Afica: An Ann otated Questionnaire. Living Standards

83

Human Resources Development

Measurement Study Working Paper 90. Washington, DC: ning messages have important effects in two of the threeWorld Bank. countries. Community-based distributors of family plan-

ning have important effects in two countries. Fixedfacilities have less uniform effects. The level of con-

Impediments to Contraceptive Use sumer assets of a family tends to be associated with usein Different Environments of contraception in such a way as to suggest that income

is still a constraint on contraceptive use in these coun-Ref. no. 675-72C tries even though they all have "good" family planning

This research focused primarily on access to services programs. The research did not find that access toand the motivationto restrict fertility as determinants of services had differential effects on contraceptive usecontraceptive use and fertility. The research also sought among socioeconomic groups, whether they were de-to determine whether access has different effects on fined by education, urban or rural residence, or house-different target groups. These issues were addressed in hold assets. This finding is still preliminary, however.three countries at different stages of fertility transi- The findings for Zimbabwe have contributed to ation-Colombia, Tunisia, and Zimbabwe. proposal to expand the number of community-based

The research looked at how prior access to health distributors in rural areas. They may also have somefacilities and current access to family planning affect the effect on plans by other donors to consider higher feesmotivation to restrict fertility; this workbuilt on a model for services. In Tunisia the results indicate the continuedoffertilitydeterminationoriginatedbyRichardEasterlin. importance that reducing mortality has for increasingThe research then examined the effects of motivation the motivation to restrict fertility.and family planning services on contraceptive use. The Responsibility: Population, Health, and Nutrition De-study had several unique elements. First, it used lagged partment-Susan Cochrane. With David Guilkey, Uni-information on women's access to health services at the versity of North Carolina; Dov Chemichovsky, Benbeginning of their reproductive life and the effect of this Gurion University; Mohamed Beraket; Habib Fourati,on their fertility and mortality experience. Second, it Office of Family and Population, Tunisia; G.included the motivation to space and limit fertility in Mandashona,CentralStatisticalOffice,Zimbabwe;Markfertility motivation. And third, it used simulations to Montgomery, State University of New York; Gabrieldetermine the effect of access on different target groups. Ojeda and Miguel Trias-Fargas, PROFAMILIA, Colom-The importance of this research rested in its exploration bia; Patricia Prieto; Alex Zinanga, Zimbabwe Nationalof the points at which health and family planning pro- Family Planning Council; Rafael Rofman, University ofgrams mightbe expanded to increase contraceptive use. California; Mahmoud Seklani, University of Tunis; andThe effectof programsondifferentsocioeconomic groups Abdo Yazbeck, Texas A & M University. The Tunisianand the extent to which economic factors constrain the Census Department; PROFAMILIA, Colombia; and In-use of contraception were explored to determine the ternational Resource Development/Demographic Sta-relation between poverty and access to health and fam- tistical Office, Zimbabwe, contributed funding. The Zim-ily planning programs. babwe National Family Planning Council and Zimba-

The basic model used in the research is a four-equa- bwe Central Statistical Office contributed staff time.tion structural model. The basic equations cover the Completion date: May 1993.number of births and deaths that a woman has had Reports:(poisson equations), her intentions with regard to fertil- Arroyo, Cristino R., III. 1993. "Economic Approaches toity, and her choice of contraceptive methods (multino- Modeling Fertility Determinants: A Selective Review."

mial logits). Reduced-form birth and death equations Policy Research Working Paper 1085. World Bank, Popula-were used to predict the number of living children for a tion, Health, and Nutrition Department, Washington, DC.woman, which is a determinant of fertility intentions. Cochrane, Susan H., and Laura Gibney. 1991. "Does Better

These intentions were then predicted in the equation for Access to Contraceptives Increase Their Use? Key Policy andcontraceptive choice. In addition, reduced-form multi- Methodological Issues." Policy Research Working Paper 728.nomial logitswere estimated for the choice of contracep- World Bank, Population and Human Resources Department,tive method. Washington, DC.

The research found that the determinants of fertility Cochrane, Susan H., and David K. Guilkey. 1991. "Fertilityand contraceptive use vary by country. Female educa- Intentions and Access to Services as Constraints ontion is very importantasa determinantin Colombia, less Contraceptive Use in Colombia." In Demographic and Healthimportant in Zimbabwe, and unimportant in Tunisia. Surveys World Conference: Proceedings, 1991.Access to services also has differential effects. The num- . 1992. "How Access to Contraception Affects Fertility andber of contraceptive methods available and family plan- Contraceptive Use in Tunisia." Policy Research Working

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Paper 841. World Bank, Population and Human Resources comes. This analysis focused on possible differentialDepartment, Washington, DC. effects by household income level.

. "Zimbabwe: Determinants of Contraceptive Use at the The study's findings:Leading Edge of Fertility Transition in Sub-Saharan Africa." * Services should be delivered that yield the highest

Rofman, Rafael. 1992. "How Reduced Demand for Children and net health improvement, taking into account crowdingAccess to Family Planning Accelerated the Fertility Decline out of private services. Similarly, pricing policy shouldin Colombia." Policy Research Working Paper 924. World balance the competing effects of discouraging the use ofBank, Population and Human Resources Department, services for treatable conditions (again taking privateWashington, DC. response into account) and raising revenue for the ex-

Zimbabwe, Central Statistical Office, and Demographic and pansion of treatment for other treatable conditions.Health Surveys. 1991. Zimbabwe Service Availability Survey * Regional differences in the incidence of undemu-1989-90. trition in Indonesia are explicable in terms of differences

Zinanga, Alex. 1992. "Development of the Zimbabwe Family in average income levels and the inequality of income.Planning Program." Policy Research Working Paper 1053. Differences in prices of staple foods are also an impor-World Bank, Population and Human Resources Department, tant factor. These conclusions are robust to unknownWashington, DC. variability in nutritional requirements.

* Empirical results for Indonesia indicate substan-tial price effects for the demand for services and large

Determinants of Nutritional and Health cross-price elasticities between modem and traditionalOutcomes in Indonesia and Implications care. Consistent with this result, one study in the projectfor Health Policy Reforms also found a great deal of responsiveness to insurance

coverage in terms of number of visits to modem healthRef. no. 676-27C care providers and in cost per visit.

The nutritional and health status of a population is an * The poor in Indonesia benefit less than other in-important indicator of overall well-being and a key come groups from public expenditure on health carefactor in economic productivity. This project has tried to (though reported morbidity by the poor does fall withprovide a greater understanding of the economic deter- higher public expenditures). An interpretation consis-minants of nutritional and health outcomes in Indone- tent with the findings is that higher public expendituresia. may crowd out private care (particularly traditional

The project comprised both theoretical investiga- healers frequented by the poor). In sum, public healthtions of the allocation and pricing rules for public health expenditures are not as well targeted to the poor as theycare interventions, and econometric analyses of the could be in terms of financially benefiting from subsi-determinants of nutritional and health outcomes. Its dies and in the net health impact.purpose was to quantify key parameters for informing Responsibility: East Asia and Pacific Regional Office,policy. Office of the Regional Vice President-Jeffrey Hammer;

One part of the project modeled the determinants of and Policy Research Department, Poverty and Humanundernutrition in Indonesia using a regional data base Resources Division--Martin Ravallion. With Anildeveloped for the study from the National Socio-Eco- Deolalikar, University of Washington. The Universitynomic Surveys of 1984 and 1987. The distribution of of Indonesia's Center for Child Survival and Demo-food energy intakes was modeled as a function of prices graphic Institute participated in the research.of staple foods, incomes and their distribution, and Completion date: October 1992.other relevant variables. Dominance tests were used to Reports:test the robustness of the conclusions to unknown vari- Deolalikar, Anil. 1992. "The Demand for Health Services inability in nutritional requirements. Indonesia: The Role of Prices, Service Equality, and

Another part modeled the demand for modem and Reporting of Illnesses." Presented at the World Banktraditional medical care as functions of household in- Conference on Public Expenditures and the Poor: Incidencecome, prices of medical services, other household char- and Targeting. (Also forthcoming in Dominique van deacteristics, and prices of related commodities, such as Walle and K. Nead, eds., Public Expenditures and the Poor.staple foods, using the 1987 survey data. The methodol- Washington, DC: World Bank.)ogy allowed correction for the quality of service by - . 1992. "Does the Impact of Government Health Spendingforming a predicted "unit value" for health care visits on the Utilization of Health Services by Children and onbased on family characteristics. The study also exam- Child Health Outcomes Differ by Household Expenditure?ined the effect of public expenditure on the use of health The Case of Indonesia." Presented at the World Bankcare (both preventive and curative) and on health out- Conference on Public Expenditures and the Poor: Incidence

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and Targeting. (Also forthcoming in Dominique van de Paul Schultz and Duncan Thomas, Yale University;Walle and K. Nead, eds., Public Expenditures and the Poor. Mark Pitt, Brown University; Eric Hanushek, Univer-Washington, DC: World Bank.) sity of Rochester; Anil Deolalikar, University of Wash-

Hammer, Jeffrey. 1993. "Prices and Protocols in Public Health ington; Jere Behrman, University of Pennsylvania; JohnCare." Policy Research Working Paper 1131. World Bank, Quigley,University of California, Berkeley; John Strauss,Population and Human Resources Department, Washington, Rand Corporation; Steven Stem, University of Virginia;DC. (Also forthcoming in the World Bank Economic Review.) Boyan Jovanovic, New York University; Peter Pedroni,

Ravallion, Martin. 1992. "Does Undernutrition Respond to Indiana University; Shoul Lach, Hebrew University;Incomes and Prices? Dominance Tests for Indonesia." World and Danny Quah, London School of Economics.Bank Economic Review 6(1). Completion date: January 1994.

Reports:Behrman, Jere. 1992. "Child Health and Schooling Achievement:

Household Investment in Human Capital Association or Causality?"and Utilization and Benefits of Social Behrman, Jere, and Anil Deolalikar. "Child Growth and Social

Services Services in India."

Hanushek, Eric. 1993. "School Quality and Dropout Behavior in

Ref no. 676-44 Egypt."This study examines the interaction between the Lavy, Victor. 1991. "Supply Constraints and Human Capital

demand for and the supply of social services, the impli- Investment: Schooling in Rural Ghana."cations for the use of social services, and the effects of Lavy, Victor, and J.M. Germain. 1992. "The Choice of Medical

social services on outcomes of human capital invest- Care in Ghana and the Willingness to Pay for Improvedments (such as children's health and nutritional status, Quality."adult morbidity, and children's schooling attainment Lavy, Victor, John Strauss, and Duncan Thomas. 1991. "Publicand learning achievements). In general, it seeks to an- Health Policy and Health Outcomes in C6te d'Ivoire."swer such questions as: How important are the various . 1992. "Quality of Social Services and Child Survival anddimensions of access to and quality of public and pri- Adult Health in Ghana."vate social services in determining the demand for them Pitt, Mark, and Victor Lavy. 1992. "Intra-household Resourceand their use? Specifically, it seeks to study the nature of Allocation to Health in Ghana."the effects of social service availability and quality on Quigley, John. 1991. "Modelling the Demand for Health Care inchild health; to determine the demand for health care Ghana and Simulations for Policy."and the effect of the quality of services in Ghana; to Schultz, Paul. 1992. "Consequences of Health on Labor

determine the effect of the quality of schooling on stu- Productivity in Ghana and C6te d'Ivoire."dent achievements in Indonesia, the effects of health Stem, Steven. 1992. "The Effect of Quality of Health Care onservices and the health status of adults on labor force Adult Health and Labor Force Participation in Jamaica."participation and earnings in C6te d'Ivoire, Ghana, and Thomas, Duncan. 1993. "Health Care and Child Health inJamaica, and the effect of health and education services Zimbabwe."on the nutritional and health status of children in thePhilippines; and to explore the effect of child health onschool attendance and educational achievement. The Determinants and Consequences

The research is a cross-country, cross-time study. of the Placement of Government ProgramsAnalyses focus on the integration of the supply of social in Indonesiaservices into the study of utilization and outcomes. Ituses a matching of each household survey with surveys Ref. no. 676-74Cof providers of social services. Its approach relies on the A fundamental problem in program evaluation isestimation of reduced-form relations, bypassing the that the location of programs and the timing of programidentification of the technology involved, on both the initiatives-program placement-are not likely to bedemand and the supply side. It also uses a comparison random: the decisions of governments are responsive toof the main social sectors-health and education-with attributes of the targeted populations that are not mea-the experience of several countries with different eco- sured in the data. Simple measured associations be-nomic and policy contexts, using very similar data sets tween programs and program outcomes, anticipated ordesigned for the project, and conditioned on country- unanticipated, will therefore usually not provide cor-specific circumstances. rect estimates of program effects. To overcome this

Responsibility: Policy Research Department, Poverty problem, this research project used the rich data base ofand Human Resources Division-Victor Lavy. With T. Indonesia and new methods of analysis to reveal both

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the determinants and the consequences of the place- schooling investments, results that are not apparentment of public programs, even if they are endogenously when the nonrandomness of program placement isallocated. taken into account.

Empirical results based on matched 1980 and 1985-86 The project's findings were presented at the 1992information on more than 3,000 kecamatans indicated Bank conference on Public Expenditures and the Poor.that the 1980 spatial distribution of each of the programs Responsibility: East Asia and Pacific, Country Depart-treated was significantly related to the unmeasured ment III, Population and Human Resources Operationsfixed factors relating to three important policy out- Division-Samuel Lieberman and VicentePaqueo. Withcomes-sex-specific school attendance, sex-specific child Mark Pitt and Mark Rosenzweig. The Central Bureau ofmortality, and fertility. Most notably, kecamatans with a Statistics of Indonesia participated in the research.propensity to have higher fertility received less family Completion date: April 1993.planning support, suggesting that such support is pro- Reports:vided where it is most desired. The coverage of pro- Pitt, Mark M., Mark R. Rosenzweig, and Donna M. Gibbons.grams also tended to be lower in areas in which the "The Consequences of Government Program Placement ineducational level of mothers was high, an allocation Indonesia."consistent with efficiency criteria given the finding that . "The Determinants of Program Placement in Indonesia:the effects of grade school proximity on school atten- 1980-86."dance are greater in households with less-educatedmothers. Finally, the spatial distribution of programsbecame more equal; there was clear evidence of area- Improving School Effectivenessspecific convergence in program coverage. and Efficiency in Developing Countries:

The research results indicated that the presence of The Case of Jamaicaprimary and, to a lesser extent, middle schools in vil-lages had a significant effect on the school attendance of Ref no. 676-87teenagers and that the presence of health clinics in Basic education is fundamental to economic andvillages also positively affected the schooling of females social development, and for individuals it is a principalaged 10-18. Estimates based on data stratified by the means for raising their socioeconomic status. Yet ineducational attainment of adult women indicated that many developing countries basic education is not orga-the effects of grade school proximity on the school nized to promote efficientproduction of cognitive skills.attendance of teens aged 10-14 were significantly greater Knowledge of which educational investments are mostin households in which mothers had little or no school- effective in imparting these skills would assist bothing than in households with mothers having more than governments and the World Bank in allocating resourcesa grade school education. No other program effects aimed at improving educational outcomes in develop-appeared to differ across women's education classes. ing countries.Moreover, based on the statistically preferred models, no This project seeks to demonstrate how to carry outevidence was found of any significant effects of the pres- education research that will lead to immediate andence of family planning and healthprograms on either the specific policy recommendations that canbe acted onbysurvival rates of children or cumulative fertility. ministry of education officials in developing countries,

The project's findings should contribute to the evalu- taking Jamaica as the demonstration country. It has twoation and improvement of the design of development immediate objectives that work toward this end. Theinitiatives, including World Bank-supported human first is to estimate the determinants (both householdresource activities in Indonesia and elsewhere. Specifi- and school factors) of reading comprehension and math-cally, estimates suggest that the use of cross-sectional ematics computation skills at both the primary and thedata that do not take into account the possibly nonran- secondary levels in Jamaica. The second is to combinedom spatial location of programs leads to substantial these estimates with data on costs of schooling inputs tobiases in the estimates of program effects. For example, calculate the relative cost-effectiveness of various inputcross-sectional estimates for 1980 resulted in a 100 per- mixes. This was done using data already collected in thecent underestimate of the grade school proximity effect Jamaica Survey of Living Conditions (SLC).on the school attendance of males and females aged 10- The research is based on the 1990 expanded educa-14, compared with estimates based on the pooled data tion module of the SLC, which includes detailed house-for 1980 and 1985-86, which allowed for nonrandom hold data matched with extensive data on the schoolsprogram placement. The cross-sectional estimates also attended by each child in the households surveyed. Theindicated clearly nonsensical results, such as that family data on schools include their physical, pedagogical,planning clinics significantly raise fertility and reduce managerial, and organizational characteristics, as well

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as information bearing on policy issues of central con- Ilon, Lynn. 1992. "The Unit Costs of School Inputs in Jamaica,cern to the Jamaican Ministry of Education. In addition, 1991." World Bank, Washington, DC.the data include standard measures of reading and Manderson-Jones, Mignon. 1993. "The School Feeding Pro-mathematics skills (California Achievement Test). Ana- gram." World Bank, Washington, DC.lytical techniques were employed to control for sample Morris, Ruth. 1993. "An Analysis of the Factors which Impingeselectivity, grade repetition was analyzed in detail, and on School Attendance." World Bank, Washington, DC.separate analyses were performed for boys and girls.

An innovative component of this project was theextent of Jamaican involvement. The survey instru- Economic and Policy Determinantsments were reviewed by government officials and aca- of Fertility in Sub-Saharan Africademics at the University of the West Indies; Jamaicanexperts evaluated proposals submitted under a small Ref no. 676-91grants competition; and four research studies will be Sub-SaharanAfricahasthehighestpopulationgrowthcarried out by Jamaicans under the small grants pro- rate and the highest fertility rate among the developinggram. The Jamaican involvement was intended to en- regions. And while countries in every other developingsure that the policy prescriptions derived from the region have begun to experience declines infertility, thisproject feed into the education planning process in trend has only recently shown up in Sub-Saharan Af-Jamaica. To this end, policy seminars were held with the rica, and in only three countries, Botswana, Kenya, andgovernment of Jamaica to discuss the results of this Zimbabwe. Results from the Demographic and Healthresearch. Surveys indicate an increase in these countries in the use

At the primary level, reading and mathematics of modern contraceptives and a possible decline inachievement varies considerably among students. This fertility. But what accounts for these trends and howis due in part to household welfare and students' gender sustained they will prove to be remain uncertain. More-(females outperform males). But school material and over, fertility rates in these countries are still relativelypedagogical inputs, pedagogical processes, and school high.management practices all contribute significantly to In considering a strategy for reducing fertility andstudent achievement. Differences between relatively population growth rates in Sub-Saharan Africa, know-higher-achieving schools and lower-achieving schools ing why fertility remains high and contraceptive usecan be attributed to a few key policy variables, princi- low is important. Surveys of women of childbearing agepally pedagogical and managerial practices. in Sub-Saharan Africa over the past two decades have

Responsibility: Education and Social Policy Depart- shown that there is a growing unmet need for contra-ment-Marlaine Lockheed; and Policy Research De- ceptives among certain groups of women who want topartment, Poverty and Human Resources Division- space and limit births but that, despite this trend, mostPaul Glewwe and Margaret Grosh. With Derek Gordon, couples still want very large families.University of West Indies, Jamaica (deceased); Hanan Among the factors thought to be most important inJacoby, University of Rochester; Abigail Harris, Fordham accounting for the desire for large families are high childUniversity; Lynn Ilon, State University of New York, mortality rates and women's low levels of education.Buffalo; Lorraine Blank; Dillon Aleyne; Claudia Cham- That would suggest a two-pronged approach for reduc-bers; Mignon Manderson-Jones; Ruth Morris; Hodan ing fertility: first, multisectoral policies that will lowerAddou; Nathalie Laboucher; Henri Jeancard; and the demand for children (by reducing child mortality,Qinghua Zhao, American University. The Statistical raising the level of education for females, and increasingInstitute of Jamaica and the Planning Institute of Ja- the attractiveness to parents of investing in children),maica are contributing staff time. and second, improvements in the performance of family

Completion date: December 1993. planning programs in attracting and retaining clients.Reports: The purpose of this research is to provide the necessary

Chambers, Claudia. 1993. "Attendance, Achievement, and empirical foundation for effective multisectoral popula-Aspects of the Learning Environment in Primary Educa- tion policies.tion." World Bank, Washington, DC. The project has addressed two questions: First, what

Glewwe, Paul, Margaret Grosh, Hanan Jacoby, and Marlaine is the effect of economic and social policies on fertilityLockheed. 1993. "The Determinants of Cognitive Skills in and contraceptive use in Sub-Saharan Africa? And sec-Jamaican Primary Education." World Bank, Washington, ond, how can African family planning programs beDC. made more effective in attracting and retaining clients?

Harris, Abigail. 1993. "The Validity of the California Achieve- Toward answering these questions, the project, usingment Test as a Measure of Educational Productivity in recently collected household data, has conducted com-Jamaica." World Bank, Washington, DC. parative microeconomic analyses of the economic and

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policy determinants of fertility and contraceptive use in of family planning methods at pharmacies-through14 African countries. The research focuses on four is- longer hours of operation, shorter distances, and moresues: the effect of women's education on fertility and methods offered-is associated with higher use of mod-contraceptive use; the relation between child invest- em methods in Nigeria. In Ghana, where family plan-ments and the number of children; the determinants of ning methods are more widely available at pharmacieschild mortality and the effect of child mortality on and health facilities, these factors are apparently not afertility; and the effect of the availability, price, and constraint.quality of family planning and other social services on The study's completed background papers also sug-fertility and contraceptive use. gest a number of thorny methodological issues that

The study has produced tentative findings on the mustbe confronted when considering the determinantsdeterminants of fertility: of fertility and contraceptive use. First, in countries in

* Women's schooling is associated with lower cu- which few women are schooled, the question arisesmulative fertility in all countries, in both urban and whether the observed relationships between women'srural areas, yet there are very large differences across education and fertility are due to the effect of educationcountries in the levels of female schooling and the or to some other factor correlated with education andmagnitude of the relationship. fertility. The low levels ol schooling also make it difficult

* Women's secondary schooling is universally asso- to predict accurately the effect of dramatically increas-ciated with lower fertility. In most countries there is no ing women's schooling. Second, in countries in whichrelation between primary schooling and fertility. But public and privatehealth and family planning services arethis is not always the case, and it would be worthwhile relatively scarce, results regarding the effect of serviceto identify reasons why this relationship is negative in variables on contraceptive use must be interpreted withselected countries. caution. The possibility arises that services have been

* For married women, women's education has a endogenously placed as a result of prevailing demand.stronger negative relation with fertility than does men's Responsibility: Policy Research Department, Povertyeducation, with much variability across countries. and Human Resources Division-Martha Ainsworth;

* In C6te d'lvoire higher income is associated with Population, Health, and Nutrition Department-Susanhigher fertility; in Ghana it is associated with lower Cochrane; Western Africa Department, Population andfertility. Human Resources Operations Division-Hazel Denton;

* Child mortality is also associated with higher fer- Ghana Resident Mission-Patience Stephens; and Ni-tility; in C6te d'Ivoire and Ghana a reduction of five geria Resident Mission-Esther Boohene. With Kofichild deaths would be associated with one less birth. Benefo, Brown University; Aka Kouame, University of

* In urban C6te d'Ivoire there are signs of a "tradeoff" Montreal; Mark Montgomery, State University of Newbetween numbers and "quality" of children: parents are York, Stony Brook; Itayi Muvandi, Zimbabwe Familyenrolling more children in school and having fewer of Planning Council; Raylynn Oliver, Stanford University;them. But the tradeoff does not exist in rural areas. Duncan Thomas and T. Paul Schultz, Yale University;

The study has also produced tentative findings on Bamikale Feyisetan, Obafemi Awolowo University,the determinants of contraceptive use: Nigeria; Mark Pitt, Brown University; Susan Scribner;

* In contrast to the results for fertility, women's and Kathleen Beegle, Michigan State University. Theschooling at both the primary and the secondary levels Institut National de Statistique, C8te d'Ivoire, is contrib-is associated with higher contraceptive use. uting staff time.

* Among married women, both women's and men's Completion date: December 1993.education is associated with increased contraceptive Reports:use-except in three countries, where the relationship is Ainsworth, Martha, and Andrew Nyamete. "The Impact ofobserved for women's education only. Women's Human Capital on Fertility and Contraceptive Use

* In Ghana and Nigeria proxies for wealth and per- in Sub-Saharan Africa: A Study of 10 Sub-Saharan Africanmanent income were associated with higher contracep- Countries."tive use. Benefo, Kofi, and T. Paul Schultz. "Determinants of Fertility and

* Reduced distance to the nearest health facility is Child Mortality in C6te d'Ivoire and Ghana."associated with higher contraceptive use in Nigeria, Feyisetan, Bamikale, and Martha Ainsworth. "The Effect of theeven when family planning is not offered at the facility. Quality, Price, and Availability of Family Planning onIn Ghana reduced distance to the nearest source of Contraceptive Use in N:geria."family planning is associated with higher contraceptive Montgomery, Mark, and Aka Kouame. "Fertility and Childuse, and use is higher when the nearest source is private. Schooling in C8te d'Ivo ire: Is There a Tradeoff?"

* In Nigeria family planning methods are not easily Oliver, Raylynn. "The Effect of the Quality, Price, and Availabil-obtained, even from pharmacies. Improved availability ity of Family Planning on Contraceptive Use in Ghana."

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Scribner, Susan. "Policies Affecting Fertility and Contraceptive els, focusing on the role of human capital as a determi-Use: An Assessment of Twelve Sub-Saharan Countries." nant of long-run economic growth.

Thomas, Duncan, and Ityai Muvandi. "The Demographic The study found that human capital is a cost-reducer,Transition in Southern Africa: Another Look at the Evidence not a producer of current output. This is exactly how onefrom Botswana and Zimbabwe." looks at the research and development input, which, as

van de Walle, Etienne, and Andrew Foster. "Fertility Decline in is well known, is highly human-capital-intensive, withAfrica: Assessment and Prospects." most research and development expenditures consist-

ing of salaries paid to scientists and engineers.The study shows that cross-section production func-

Human Capital Accumulation and Economic tion estimation will wrongly assign to human capital aGrowth: An Empirical Study negligible role even though it is the engine of growth.

When looking at all the countries together, the studyRef. no. 677-11C found some evidence of a cost-reduction effect of hu-

This research had four primary objectives: man capital, although the estimated effect is smaller* To develop an empirically viable framework in than it should be. Nevertheless, the project made a start

which to analyze the role of human capital investment at quantifying human capital's productivity-enhancingin the process of economic growth role, and illustrated some virtues and drawbacks of the

* To explore the use and role of different aggregate hypothesis as formulated by the study.measures of human capital-from the narrower con- Responsibility: Policy Research Department, Povertycept of schooling to a broader measure that includes and Human Resources Division-Victor Lavy. Withinvestment in health and nutrition-in the process of Boyan Jovanovic, New York University; Shaul Lach,economic growth Hebrew University; Danny Quah, London School of

* To compare this role to that of other potential Economics; and Peter Pedroni, Columbia University.growth factors, withparticular emphasis on the tradeoffs Completion date: May 1993.between physical and human capital investments Reports:

* To evaluate the role of countries' skill endow- Jovanovic, Boyan, Shaul Lach, and Victor Lavy. 1992. "Growthments in the process of producing and adopting new and Human Capital's Role as an Investment in Costtechnologies, and in contributing to the endogenous Reduction."growth of total factor productivity. Pedroni, Peter. 1993. "Human Capital, Endogenous Growth,

On the basis of these relationships, the research made and Cointegration for Multi-Panel Countries."inferences about the consequences of a broad range ofnational economic policies that directly or indirectlyinfluence the economic incentives to invest in human Labor Market Dynamics duringcapital versus physical infrastructure capital. And, in the Transition of a Socialist Economythe light of these inferences, the research reexamined anumber of issues that pertain to these tradeoffs. For Ref. no. 677-20example, given that the choice between taxing income This project seeks to provide hard evidence concern-or taxing financial wealth affects private incentives to ing the patterns of job mobility associated with theinvest in human versus physical capital, what is the transition of a socialist economy to a market economy.likely time profile of the tradeoffs involved? And given And it will formulate labor market policies and pro-that the most effective means of favoring one form of grams to facilitate the transition both by encouragingaccumulation over another vary according to the pre- the efficient reallocation of labor and by spreading thecise role of human capital in the growth process- costs equitably among different segments of the popu-depending, for example, on whether human capital acts lation.as a source of unbounded accumulation in itself or The research addresses the following questions.simply as a primary factor in the research sector-is it Which labor group is most at risk of becoming unem-better to emphasize primary education or specialized ployed? What is the length of post-displacement unem-post-secondary education? ployment? Which group of the labor force is reem-

The study used data sets available in the Bank Eco- ployed first, and which one finds difficulties in securingnomic and Social Database (BESD) for the national new jobs? How do the salaries of reemployed individu-accounts data on physical capital investment and GDP als compare with their previous earnings and with thein the empirical approach. It first prepared the data for earnings of other workers under similar conditions andanalysis, then developed further the theoretical and characteristics? Are there certain groups of workersempirical frameworks and estimated the various mod- whose earnings losses are especially large?

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The analysis is based on an estimation of hazard greater risk because it Introduces new pathogens intomodels, for analyzing the determinants of labor market the household. The study also found that the harmfultransitions, and an estimation of earnings functions, for effects of contaminated drinking water are much greateranalyzing the determinants of displaced workers' reem- in neighborhoods with good community sanitation thanployment earnings. The study is using data on the in those with very poor sanitation (with similar relation-Republic of Slovenia, which possesses an extremely rich ships apparently prevailing when sanitation is mea-administrative data set on the personal characteristics sured at the household level). And it found thatand work history of virtually all labor force participants. breastfeeding and good[ sanitation form a set of sequen-

Preliminary results-presented atseminars in Prague, tial barriers protecting infants from diarrheal pathogensthe Ministry of Labor of Slovenia, and the World Bank- and that, therefore, breastfeeding is most importantshow that during the transition, the advantage of young when the sanitation barrier is not in place.workers and those with more education in finding jobs Responsibility: Transportation, Water, and Urban De-increases, and that receiving unemployment compensa- velopment Department., Water and Sanitation Division-tion strongly discourages workers from leaving unem- John Briscoe. WithJames Vanderslice and David Guilkey,ployment. University of North Carolina.

Besides a comprehensive final report, the project will Completion date: December 1992.produce three interim reports: on transitions out of Report:unemployment, on the performance of recent entrants Vanderslice, James, and John Briscoe. 1993. "All Coliforms Areinto self-employment, and on the post-displacement Not Created Equal: A Comparison of the Effects of Waterexperiences of individuals who lose their jobs. Source and In-House Water Contamination on Infantile

Responsibility: Policy Research Department, Transi- Diarrheal Disease." Waer Resources Research 29(7):1983-96.tion and Macro-Adjustment Division-MilanVodopivec. With Katharine Abraham, University ofMaryland. The Statistical Office of Slovenia, Pension The Labor Market in Transitional Socialistand Invalid Fund of Slovenia, and Employment Office Economies: A Macroeconomic Perspectiveof Slovenia are contributing staff time.

Completion date: April 1994. Ref. no. 677-30This research project will provide empirical and ana-

lytical treatment of the effects of key policy changes onSynergistic Health Effects from Water the labor market in a number of transitional socialistSupply and Sanitation Interventions economies. The research will allow a more precise un-

derstanding of the nature of the unemployment beingRef. no. 677-25C generated, of the relation between wage and employ-

Many attempts have been made to quantify the effect ment behavior, and of the consequences of incomeson health of improving water supply and sanitation. But regulation under a range of country experiences.few studies have considered factors that may modify The transition inevitably implies rising unemploy-the relation between environmental sanitation and ment and significant changes in wage- and employ-diarrheal disease. ment-setting procedures. To improve the understand-

This research project investigated whether environ- ing of these changes, the project addresses these ques-mental interventions have a synergistic effect in reductions: What are the consequences for employment ofing diarrheal disease. The research was based on data recent stabilization programs? Whatare the characteris-from the Cebu Longitudinal Health and Nutrition Sur- tics of the unemployed, and what policies, given thevey, a community-based survey of more than 3,000 nature of the unemployment that has been generated,children in Cebu, Philippines, that collected informa- can be adopted to reduce the level and persistence oftion on families' socioeconomic and demographic char- unemployment? What are the main features of wageacteristics, sources of drinking water, sanitation facili- and employment setting in the socialized sector and inties, household hygienic conditions, feeding patterns the emergingprivate sector? Whatare the consequencesand food preparation practices, and diarrheal morbid- for aggregate wages and employment of differing wageity from birth to two years of age. and employment behavior in these two sectors of the

The research found that water contamination that economy? With regard to wage setting, do incomesoccurs inside a household does not pose a serious risk to policies effectively restrain inflation-and with whatchildren's health because the pathogens contaminating associated efficiency costs?the water are those already infecting the household The research has two closely related components.members. A contaminated source of water poses a much The first, largely empirical, involves detailed country

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studies. These will provide an explicit macroeconomic cycle of underinvestment in human resource develop-framework in which labor market variables will be ment, particularly for females. Nevertheless, findingscentral. Monthly or quarterly time series-or both- from the Pakistan Integrated Household Survey (PIHS)covering prices, wages, employment, and unemploy- suggest that women's contribution to the economy isment will be generated. In addition to aggregate data, substantially larger than reported in official statistics.the country studies rely, where feasible, on data from This discrepancy could result from the fact that theestablishments and from surveys, particularly for PIHS, unlike government data collection initiatives,changes in employment and for factors determining used female interviewers to gather information fromtransitions in employment. female respondents. Because cultural norms favoring

The second component is comparative and analyti- female seclusion may constrain Pakistani women fromcal. The analytical work centers on wage bargaining, responding directly to male interviewers, the use ofemployment setting, unemployment dynamics, and the female interviewers may be justified despite the higherdesign of incomes policies. indirect costs.

The rapid development of unemployment and the This research assessed the accuracy of the PIHS datafall in real wages in the transition economies make it base as a preparatory step in the planning of a broadcritical for policymakers to understand the nature and agenda of research and policy analysis thatwill be baseddynamics of these novel phenomena. The research will on the PIHS data base. The study assessed the internalprovide policymakers with a clear analysis of the nature consistency of the data base, compared basic indicatorsof the unemployment, the extent of wage flexibility, and with recent surveys in Pakistan, and selectivelythe implications of wage behavior in both private and reinterviewed households in Pakistan. Special empha-socialized sectors for overall employment. It will pro- sis was given to areas where findings differ from pub-vide a comprehensive overview of experience with a lished statistics, such as female labor force participationvariety of incomes policies. And it will draw out the and unemployment. A second objective was to identifycosts and benefits of such policies and their efficiencies the extent to which supply-versus-demand factors dif-at particular stages of reform. ferentially determine low levels of school enrollments

Two workshops for the researchers were held in the forboys and girls, and measure the expected private andCzech Republic in July 1992 and April 1993, and a major social returns to public investments in girls' education.conference summarizing the results from the first empiri- The findings confirmed the accuracy of the PIHS datacal stage of the research project will be held at the World base, and thus its suitability for use in policy analysisBank in October 1993. A conference volume will be pre- and research. PIHS information on female contributionspared for publication immediately after this meeting. to the labor force was found to be a conservative estimate.

Responsibility: Economic Development Institute, Na- Totheextentthatwomen'scontributiontotheeconomytional Economic Management Division-Simon Com- of Pakistan is revealed to be greater than previouslymander, Cecilia Ugaz, and Richard Jackman; and Policy estimated, increased investments in women can be justi-Research Department, Transition and Macro-Adjust- fied not only on equity grounds, but on grounds of in-mentDivision-FabrizioCoricelli and Milan Vodopivec. creased growth and economic efficiency. Greater invest-With Olivier Blanchard, Massachusetts Institute of Tech- ment in human resource development for women can benology; JanSvejnar, University ofPittsburghand CERGE; expected to yield both direct and indirect benefits.I. Beleva, Institute of Economics, Bulgaria; M. Nenova- Responsibility: Policy Research Department, PovertyAmar, Agency for Economic Development, Sofia, Bul- and Human Resources Division-Valerie Kozel andgaria; R. Yemtsov, Moscow State University; M. Emmanuel Jimenez. With Ghazala Mansoori, BostonErbenova, CERGE; J. Kollo and B. Vilagi, Institute of University. The Pakistan Federal Bureau of StatisticsEconomics, Hungary; K. Rybinski and K. Hagemayer, contributed data to the research.Warsaw University; John Earle, CEU, Prague; and G. Completion date: October 1992.Oprescu, CRIMM, Bucharest, Romania.

Completion date: April 1994.Cross-National, Longitudinal Analysisof the Curriculum of Secondary Education,

Gender Differences in Schooling Decisions, 1920-85Employment, and Earnings in Pakistan

Ref. no. 677-40CRef no. 677-39C The explosion of compulsory, universal, mass educa-

Thereisevidencethatwomenhavenotsharedequally tion throughout the world has led to much researchin the benefits of Pakistan's recent economic growth, attention to the organization, financing, and gover-and that this is both the cause and the result of a vicious nance of secondary education systems. But little atten-

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tion has been given to the content of these education 1920-1990." World Bank, Education and Social Policysystems, to the amount of variation across societies, and Department, Washington, DC.to the sources of the variation. This research was an Meyer, John W., David Kamens, and Aaron Benavot. 1992. "Theeffort to correct the considerable gap in understanding. Legitimation of New Knowledge: Nineteenth Century

The main issue the research addressed is whether a Origins and Twentieth Century Diffusion of Education."world consensus is emerging across nation-states con- Journal of Curriculum Studies (February).cerning the knowledge that secondary students should . 1992. "Variant Forms: Cases of Countries with Distinctformally study as part of their preparation for further Curricula." In John W. Meyer, David Kamens, and Aaronstudy or for the labor force. Current theorizing about the Benavot, eds, Schooled Knowledge for the Masses: World Cultureemergence of a "world society" leads to an expectation and National Curricula, 1920-1986. London: Falmer Press.of increasing standardization of the formal content of Meyer, John W., David Kamens, and Aaron Benavot, eds. 1992.mass and elite education. It remains to be seen whether Schooled Knowledge for the Masses: World Culture and Nationalelite education is also subject to world cultural norms Curricula, 1920-1986. Lordon: Falmer Press.that result in increasingly homogeneous formal contentacross national education systems.

The research analyzed the kinds of formal knowl- Public Goods, Private Goods, and Socialedge to which national policymakers expect general Sector Outcomessecondary students to be exposed. The data were com-piled by a group of Stanford University researchers Ref. no. 677-47Cabout five years ago. This group collected and coded Many countries have experienced improvements inofficial reports of the kinds of courses and the amount of measures of their health status and educational attain-time spent on different subjects in primary and second- ment over the past decades. This raises policy questions:ary education for many countries and for a long period How much of the improvement has come as a result ofof time (1920-85). economic growth alone, and how much is attributable to

Curriculum in most countries is generally a matter of policy measures? And what are the relative effects ofnational policy, and these data consist of official na- different forms of intervention? Public health and edu-tional curricular timetables listing the proportions of cation expenditures sometimes provide truly publicschool periods to be devoted to such topics as math, goods or are directed at correcting standard marketscience, social studies, languages, physical education, failures. But sometimes they provide services that aremoral or religious instruction, the arts, and, sometimes, basically private and that mainly crowd out privatevocational training. These data specify either the amount expenditures.of time to be spent on each subject or the proportion of This research project was designed to get at thetime devoted to each subject. The data set emphasizes relative effects of different policy determinants of healthtracks that lead to higher education, even though in status and educationalattainment for a variety of coun-many countries only a small percentage of individuals tries. The working hypothesis was that those policiescompleting the coursework in that track will actually be and services that provide genuinely public goods andselected for higher education. correct market failures will have more impact on out-

This work fills an important need for an understand- come indicators than those that primarily substitute foring of the evolution of the content of secondary educa- private goods.tion. In preparation for the Education and Social Policy The research collected panel data-time series ofDepartment's secondary education policy paper and to provinces or regions-for a variety of countries to testhelp Bank staff in evaluating and designing secondary this hypothesis, to note patterns in the types of policyschool projects, it is important to understand cross- that appear to make a difference to health in differentnational and historical trends in subject matter empha- contexts, and to explore the substitutability of publicsis. The approach of this study-sweeping in compari- and private expenditures in health care and in highersons across time and space-adds a much-needed con- education (subject to availability of data on privatetext for substantive discussion in the field. sectors). The analysis was designed to explain infant

Responsibility: Education and Social Policy Depart- mortality rates (and mortality rates as available) byment-Donald B. Holsinger. With John Meyer, Stanford income, proportion of the population with safe water,University; David Kamens, Northern Illinois University; proportion covered by basic immunizations (preferablyAaron Benavot,Hebrew University; andYun-Kyung Cha. the diphtheria-pertussis-tetanus series), and available

Completion date: November 1992. measures of public curative care effort. The last variableReports: may be in physical terms (publicly employed physi-

Kamens, David, John W. Meyer, and Aaron Benavot. 1993. "The cians per capita) or in monetary terms based on budgetChanging Context of World Secondary Education Systems, data. For education, outcome measures include enroll-

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ment ratios, graduation rates for those who enroll, and Hammer, Jeffrey S., Ijaz Nabi, and James Cercone. 1993. "Publiccontinuation rates for those who graduate from pri- Goods, Private Goods, and Health Status in Malaysia."mary, secondary, and higher levels. The explanatory World Bank, Washington, DC.variables are income, educational spending at different James, Estelle, Elizabeth M. King, and Ace Suryadi. 1993.levels, and allocation of spending between teachers and "Finance, Management, and Costs of Public and Privateother inputs. For both health and education and when Schools in Indonesia." Paper presented at the Internationalprivate expenditure data are available, the hypothesis Symposium on the Economics of Education, Manchester,that higher public expenditures "crowd out" private U.K., May 18-21.spending for services with private benefits canbe testeddirectly.

The study's results for health vary across countries- The Dynamic Interrelationshipsboth in the basic conclusions and in robustness to speci- between Nutrition, Morbidity,fication and estimation technique. Consistently, such and Labor Productivity in Rwandapublic health interventions as safe water, sanitation,and immunizations were found to be related to health Ref. no. 677-52gains. A recurrent question in both development theory

For curative measures, the results vary. No effect was and development policy is this: How much does nutri-found for public provision in some countries (Malaysia tional and health status influence labor productivityand Viet Nam), and in those in which there is an effect and, hence, incomes in developing economies? Some(the Philippines, for example), the effect shows up only research has been conducted on this question, primarilyin poorer parts of the country. The interpretation is that research using static empirical models estimated onpublic provision makes a net addition to medical ser- cross-sectional data sets. But to answer it convincinglyvices when targeted to the poor but adds little when it requires isolating one link in the potentially complexsubstitutes for private care among those with higher and dynamic interrelationshipsbetweennutritionalsta-incomes. tus, sickness, and productivity. Longitudinal data sets

The education study examined the partnership be- offer a way of doing so, but their use requires takingtween the public and private sectors in different coun- seriously the (difficult) econometric problems that cantries. The perception ofa public-private dichotomy isfar arise in consistently estimating dynamic models withfrom accurate. Public schools have found ways to raise such data.resources from parents to supplement inadequate pub- This project has several goals:lic funds, and private schools have been able to demand * To quantify the effects of household incomes andsubstantialpublicsupportforbothsalaryandnonsalary other socioeconomic characteristics on the nutritionalexpenditures. These partnerships not only provide intakes of children and adults inasample of householdsmeans for schools to mobilize resources. They also in Rwandaappear to engender greater efficiency in schools. One * To model the interrelationships between nutri-study (supported in partby this project) found,based on tional intakes, anthropometric measures, and morbid-an analysis of data froma 1991-92 survey of about80,OOO ity spells separately for children and adults within aprimary schools in Indonesia, that some amount of local system of dynamic simultaneous equationsor private funding in schools seems to enhance effi- * To examine the effects of nutrition, morbidity, andciency, as measured by unit costs, given a fixed level of socioeconomic environment on the productivity ofquality. This result may occur because different sources adults.of funds have different objectives and place different The project is investigating the links between house-constraints on the uses of their funds. hold incomes, nutritional intakes, morbidity patterns,

Responsibility: Policy Research Department, Finance and productivity by estimating a system of dynamicand Private Sector Development Division-Estelle equations on data on individuals from 270 householdsJames, and Poverty and Human Resources Division- in Rwanda. The analysis incorporates the biomedicalElizabeth M. King; and East Asia and Pacific Regional andbehavioral aspects of thevariables, and investigatesOffice, Office of the Vice President-Jeffrey S. Hammer. the influence of seasonal factors on the nutritional in-With Pia Malaney, Harvard University; and Aly Sy. takes and morbidity patterns. Using the estimated pa-

Completion date: May 1993. rameters of the model, the project is also simulating theReports: effects on labor productivity of different policy options

Hammer, Jeffrey S., and Sheikh Hossein. 1993. "Public Expendi- affecting health and nutritional status.ture and Health Status in Southeast Asia." World Bank, The project's "value added" over past research onWashington, DC. these issues arises from its use of an unusual longitudi-

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nal data set for Africa in identifying the link between training is overspecialized and inflexible. And healthhealth and productivity; it will view that link within a has declined sharply in some of the countries. In allpotentially complex and dynamic model of the interre- sectors there is an almost complete absence of incentiveslationships between nutritional status, sickness, and to use resources efficiently.productivity. Specialized econometric methods will be Whataretheimplicationsofthesefindingsforpolicy?needed to get at these effects convincingly. Given that human resources are just as important an

Responsibility: Policy Research Department, Poverty ingredient in economic growth as investment in physi-and Human Resources Division-Martin Ravallion. cal capital, two key conclusions emerge. First, the stateWith Alok Bhargava, University of Houston; and will continue to play a role in the social sectors, thoughChristophe Muller, DELTA, Paris. in new ways: its intervention will come more through

Completion date: September 1993. public funding and regu lation of private sector activity,and less through public provision. Second, notwith-standing the fiscal crisis, some reforms cannot wait until

The Evolution of Labor Markets economic growth resumes.and the Social Safety Net in Central Short-run policy must concentrate on surviving (fis-and Eastern Europe cally and politically) the early transition and on taking

actions that are a necessary precursor to medium-termRef no. 677-62 policy developments. Short-runpolicies should concen-

The market-oriented reforms being adopted by the trate on alleviating unemployment, on relieving abso-formerly socialist economies of Central and Eastern lute poverty through income transfers, on reducingEurope and of the former Soviet Union have had two preventable diseases (targeting resources to vulnerableoverarching effects: a widening of the income distribu- populations, such as mothers, children, and the elderly,tion as unemployment and poverty rise, and a sharp and giving immediate a:tention to shortages of essentialdecline in output leading to a fiscal crisis. The demands drugs and supplies), and on motivating teachers andon the social safety net are therefore rising at precisely ensuring the supply of educational materials. Otherthe time that resources are becoming scarcer. important short-run policies include building the regu-

This research examined the nature of the transition latory structures necessary to underpin medium-termprocess, in particular the economic and political driving policy developments and designing policy in areas inforces it creates and the constraints that policymakers which implementation takes time.face in reforming their countries. It reviewed policies Medium-term policies cannot be set out very pre-relating to labor markets, social insurance, family sup- cisely, not leastbecause they depend on the evolution ofport and poverty relief, education and training, and economic outcomes and political choices, which willhealth and health care. The policies, designed to support differ across countries. But they include increased in-the overall goals of the reform while respecting fiscal vestment in human capital and upgrading of adminis-constraints, all derive from decisions already made (for trative capacity.example, laws already in place) and from the nature of The research will result in a book aimed at policy-the transition process. The countries differ significantly, makers in the countries concerned that is intended to bebut they share important common objectives and com- practical (with an emphasis on implementation) andmon constraints. The study thus proposes a policy strat- accessible to a wide readership.egy that is broadly relevant to all the transition econo- Responsibility: Europe and Central Asia, Countrymies. DepartmentlI, Human Resources Operations Division-

The research rests on three bases: economic theory, Ralph W. Harbison, Bruno Laporte, Alexander Preker,analytical work on the nature of the transition process, David Fretwell, and Sandor Sipos, and Country Depart-and the wide-ranging operational experience of the ment III, Human Resources Operations Division-researchers. The study also drew extensively on Bank Michal Rutkowski; Economic Development Institute,sector work and on other research. National Economic Management-Richard Jackman;

The evidence supports the view that unemployment and Latin America and. the Caribbean, Country Depart-and poverty have increased sharply during the early ment IV, Human Resources Operations Division-Juliantransition. The inherited systems of labor market orga- Schweitzer. With Nicholas Barr, lain Crawford, andnization, income transfers, education, and health care Stanislaw Gomulka, London School of Economics; Saulare in important respects poorly suited to the needs of a Estrin, London Business School; Richard Feachem, Lon-market economy. Labor market institutions are poorly don School of Hygiene and Tropical Medicine; Alanequipped to deal with large-scale unemployment. In- Thompson, U.K. Department of Social Security; andcome transfers are poorly targeted. Much education and Igor Tomes, Charles University, Prague.

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Completion date: December 1993. education stock of women of childbearing age than withReport: that of older women.

Barr, Nicholas, ed. Forthcoming. Human Resources in Transition: Responsibility: Education and Social Policy Depart-The Evolution of Labor Markets and the Welfare State in Central ment and Policy Research Department, Poverty andand Eastern Europe. Washington, DC: World Bank. Human Resources Division-Elizabeth M. King. With

Ashutosh Dubey, University of Maryland; and M. AnneHill, Baruch College and City University of New York.

Gender-Specific and Age-Cohort-Specific Completion date: June 1993.Education Stock for Developing Countries Reports:

Dubey, Ashutosh, and Elizabeth M. King. 1993. "Gender-Ref. no. 677-69C Differentiated and Age-Differentiated Education Stock

A stated objective of education policy in developing Methodology and Data Sources for Developing a Newcountries over the past two decades has been to provide Database." World Bank, Washington, DC.basic education to all segments of society. The basis for . 1993. "Gender-Differentiated and Age-Differentiatedthis objective is the substantial evidence of the benefits International Education Stock Series." World Bank,of education to society and to individuals. It improves Washington, DC.health, and thus productivity and the quality of life. Itincreases people's access to paid employment. And itenhances people's ability to communicate and to coor- Labor Markets and Employment Issues:dinate activities with others. Kenya and Cte d'Ivoire

There is also evidence of specific benefits from edu-cating women. Educated women tend to have smaller Ref. no. 677-73families, and their children have a higher probability of This research is examining survey data from C6tesurvival and are often healthier and better educated. d'Ivoire and Kenya to investigate policy-relevant issuesCountries with higher female enrollment rates have relating to the labor market. For C6te d'Ivoire the re-shown higher levels of economic productivity, lower search draws on data from Living Standards Measure-fertility and infant and maternal mortality rates, and ment Study surveys, and for Kenya it relies chiefly onlonger life expectancy than countries with lower female the Urban Labor Force Survey of 1986 and the Ruralenrollment rates. Labor Force Survey of 1988-90. The issues being inves-

Most of the studies that have produced this evidence tigated can be organized into three sets based on the areaused enrollment rates to measure educational levels of policy that they inform.because estimates of the total education stock have not Research on the first set of issues will contribute tobeen available for most countries. A recent World Bank the evaluation of wage policies, and of price policies asstudy, however, constructed an education stock series they affect rural earnings. The research looks first at thefor 86 countries by using a perpetual inventory method. size structure of employment in the formal and informalPast enrollments were summed up, but corrected for sectors, in both rural and urban areas, and at its changesschool repetition and dropout rates and for mortality over time. It examines changes in the pattern of earningsrates. in the different sectors. The findings, combined with the

This research project extended that earlier study by data on changes in employment, allow testing of theconstructing a gender-differentiated and age-differenti- recent hypothesis that wage differentials among sectorsated education stock series. It improved on the method- have virtually disappeared. The findings should alsoology of the earlier study by allowing dropout rates to throw light on earnings (and possibly productivity) invary across grades, and by allowing the length of the the large informal sector, about which there is littleprimary and secondary school cycles to differ in the information.estimation. As with the earlier study, human capital was The research also looks at labor migration. In theassumed to be durable and to be lost only through 1960s wages in Kenya's urban formal sector were mark-mortality. edly increased to stabilize the labor force and thus

The new data base will help in distinguishing the improve productivity. The project investigates whetherbenefits of educating women from those of educating the fall in formal sector wages since then and the squeez-men, and in testing whether there are significant differing of wage differentials among sectors have had anences between those benefits. The analysis of the social effect on the permanent urban settlement of the workbenefits of educating women will be sharpened by the force. It investigates whether circulatory migration hasage-differentiated data, since infant mortality, for ex- declined in the past decade as a result of the shrinkingample, is likely to be more highly correlated with the cushion provided by the rural sector to marginal urban

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workers. And it assesses the mobility of labor-how employment, and on the amount of effort they put in ineasily it can move between jobs and sectors without the two sectors. Designing practical and enforceableserious problems in earnings and employment, contracts that provide appropriate incentives to physi-

The second set of issues is relevant to policies affect- cians requires background data on the relevant charac-ing the supply side of the labor market, principally teristics of public and private health care systems. Fi-education and training policies. Here the research looks nally, any innovation in the physicians' work regimeat whether there have been changes in returns to educa- should take into account the needs of the patients. Thistion and in wage differentials between different occupa- requires a demand-side study to identify the factors thattions. influence patients' choice of provider, patients' esti-

Finally, the third set of issues should help bring into mated expenditure on health care, types of servicesfocus the importance of regional policies, such as received, and types of services desired.interregional transfers and policies encouraging alter- Data are lacking on many of these issues. Thus, thisnative growth poles. The research analyzes regional project has undertaken a new primary data collectionvariations in income and interregional flows of labor. effort in Egypt, which will include interviews withThis analysis, combined with data on regional varia- policymakers, bureaucrats, and public and private hos-tionsinpopulation density and croppingpatterns, should pital administrators familiar with the problems of healthhelp in understanding the patterns of, and constraints care in developing countries and of the privatization ofto, migration. governmentfacilities. Datawill alsobe collected through

The project's analysis of data from Kenya's labor a field survey of local health personnel and healthforce surveys has been completed. facilities.

Responsibility: Africa Regional Office, Office of the Responsibility: Middle East and North Africa,Chief Economist-Dipak Mazumdar and Gurushri Country Department II, Population and HumanSwamy. Resources Operations Division-Douglas Keare and

Completion date: December 1993. Mohua Mukherjee.Report: Completion date: October 1993.

Mazumdar, Dipak. 1993. "Kenya: Wages and Employment."

World Bank, Africa Regional Office, Washington, DC. Draft.

The Costs and Outputs of Turkish HigherEducation

Public-Private Interactions in the HealthSector in Developing Countries Ref. no. 678-05

The expansion of higher education in developingRef. no. 677-95 countries over the past 20 years has outstripped the

There are vast differences in developing countries financial and management capacities of governments,between provision, financing, and delivery of health often resulting in low-quality teaching and researchcare by the public sector and that by the private sector. efforts. With declining public budget allocations, espe-These differences-some in management style and some cially to universities, policymakers need to considerin different appreciation and interpretation of objec- alternative means of providing education with the re-tives--add a new dimension to the already vexing prob- sources available to these institutions. Questions aboutlem of health care delivery. Recurrent budget deficits the costs of alternative means have become critical inmake a study of these issues even more critical. many developing countries, but few studies on the costs

This study has as one of its objectives to examine the and financing of higher education have been conducted.efficiency implications of government health personnel This study will examine higher education in Turkey,practicing privately, a form of public-private interaction where the system isin crisis. The goal is to determine thein the production and delivery of health care that is costs of higher educalion and to analyze the economiespervasive in developing countries. The study seeks to of scale and scope by estimating cost functions.identify incentive mechanisms that would be compat- The first phase of the study will describe the unitible with optimal effort levels by the health personnel in costs of higher education institutions by program area,the public sector. type, location, and ownership. It will determine the

The study has developed a theoretical model to study distribution of spending by component, such as aca-the effect of government health personnel practicing in demic activities, organized research costs, and adminis-two markets. Estimating this model requires data on trative costs, and examine the factors that influence thephysicians' earnings in the two markets, on the alloca- level and composition of unit costs. Full-time studentstion of their time between the primary and secondary will be used as a measure of output.

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The second phase will estimate cost functions and technology, education, and trade-on firms' invest-investigate the degrees of economies of scale and scope ments in research and development, purchased know-across institutions and program areas, such as social how, and worker training. The second objective is toscience, engineering, and medicine. estimate the effect of these investments on firms' pro-

Cost and output data will be collected for 28 public ductivity and rates of productivity growth. It will esti-institutions and one private institution and will be used mate the effects of training and technology investmentsin regression analysis to derive the underlying cost on firms' productivity using production function mod-functions. Cross-sectional cost functions will be esti- els in which the endogenous and truncated nature ofmated for all universities and for eight academic subject these investments is treated econometrically.areas. A multiproduct cost function will be used to The research is based on firm-level data from thecalculate the capacity of the institutions to teach on the Census of Manufacturing of Taiwan (China). These databasis of four outputs-undergraduate, masters, and areuniqueinreportingfirm-levelexpendituresontrain-doctoral enrollments, and faculty research. The number ing and technology, in addition to a wealth of informa-of publications will be used as a proxy for research tion on production. One set of analyses uses the 1986output. Estimates will be given to determine the most Manufacturing Census to estimate a three-equationefficient mix of outputs. structural model of training investments, technology

This study should provide a useful guide for allocat- choice, and production. A second set of analyses willing public resources for education and for improving rely on firm-level panel data created by linking the 1986efficiency in higher education in Turkey. And it should and 1991 Censuses of Manufacturing. The study willserve as a model for other developing countries looking use the panel data to identify the causal effects of train-at the costs and outputs of their education systems. ing and technology on productivity, while controlling

Responsibility: Europe and Central Asia, and Middle for a variety of econometric issues that arise in analysesEast and North Africa Technical Department, Human of dynamic economic phenomena.Resources and Social Development Team-Stephen The preliminary analyses using the 1986 CensusHeyneman; and Europe and Central Asia, Country indicate that key determinants of both training andDepartmentll, HumanResources Operations Division- technology investments are a firm's size, its exportMichael Mertaugh. The Ministry of Higher Education, orientation, and the skill composition of its work force.Turkey, is participating in the research, and the Univer- Training has a large positive effect on firms' productiv-sity of Minnesota is providing financial support. ity, and the productivity effects of worker training are

Completion date: June 1994. much larger for firms that invest in technology than forthose that do not. Consistent with the new economicgrowth models, these findings suggest that investments

Training, Technological Capability, in human capital and technology have interactive ef-and Firm-Level Productivity fects on raising firms' productivity.

Findings of the research were presented in a paper atRef. no. 678-11 the World Symposium on the Economics of Education,

In many developing countries where productivity Manchester, England, in May 1993.gains from factor reallocation have been largely ex- Responsibility: Private Sector Development Depart-hausted, it is recognized that purposeful investments- ment-Hong Tan. With Bee-Yan Aw and Geeta Batra,in both human and technological capital-will be re- Pennsylvania State University. The Academia Seneca,quired to raise rates of productivity growth in the manu- Taiwan (China), is participating in the research.facturing sector. How to accomplish this is less clear. Completion date: June 1994.There is only limited understanding of the factors that Report:shape the incentives of firms to invest in worker training Aw, Bee-Yan, and Hong W. Tan. 1993. "Training, Technologicaland in such technological improvements as research Capability, and Productivity: A Firm-level Analysis ofand development, of the complementarities between Taiwanese Manufacturing." World Bank, Washington, DC.these two kinds of capital, of the productivity outcomesof these investments, and of the appropriate role ofgovernment in training and technology policy. Female Labor Market Participation

This research has two main objectives. The first is to and Child Welfare in Africaimprove the understanding of firms' behavior in mak-ing decisions about worker training and technology. Ref. no. 678-12The research will investigate the effect of different firm As African countries restore macroeconomic stabil-attributes-industry, size, age, export orientation, and ity, there is a need for policies directed toward raisingforeign ownership-and policy variables-including women's productivity and incomes. At the same time,

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attention needs to be given to how changes in labor countries have dramatically increased coverage of sec-market conditions affect women's labor force activity ondary education without experiencing the desiredeco-and their allocation of time in general, and how these nomic transformation. Japan and other newly industri-changes affect child welfare. Increasing family resources alizing countries, however, have long been seen asthrough women's market work should, all things equal, examples of countries that have successfully achievedimprove children's nutrition. But women's time in growth through explicit human resource developmentnonmarket activities is also an important input into the policies, including secondary education. The resultsproduction of infants'and children's health; children of imputed to these policies have been higher per capitaworking mothers may be at nutritional risk because income and lower income inequality.these women lack the time to, for example, make use of Secondary education has expanded rapidly in thepublic services. So there is a need for an understanding newlyindustrializing economies, yet theyhave adoptedboth of how women's economic status can be improved different strategies to achieve their economic and socialand ofhow thepotentially deleterious effects of women's objectives. These strategies include the following:changing economic roles on the welfare of children can * Developing the structure of secondary educationbe prevented. (type of institution, length of course, curricular empha-

This research investigates the effects of women's labor sis, stratification of schooling)market participation on the allocation of their time to such * Diversifying the curriculum within the generaldomestic activities as preparing food, breastfeeding, and secondary streamvisiting health clinics. What is the relationship of these * Financing institutions and providing student sup-health-related activities and inputs to nutrition? Does the port (balance between public and private financing,additional household income associated with women's reliance on fees, general or specific grants as mecha-work offset the potential negative effects of reductions in nisms for financing institutions, and scholarships, grants,time-intensive home activities? or loans as forms of student support)

The project uses two data sets from Sub-Saharan * Stimulating private ownership and managementAfrica that were collected in more general studies of of institutions.African economies in transition: the Conakry (Guinea) This study seeks to test the basic proposition thatHousehold Welfare Surveycollected by CornellUniver- secondary education plays an important role in raisingsity from a sample of 1,725 households, and data col- labor productivity wiihin industry, and in facilitatinglected from 1,800 households in Maputo during 1991- the structural adjustment from agriculture to manufac-92. The project will produce two analyses of labor force turing and to more capital-intensive services. It com-participation and of self-employment, segmented by pares the following development indicators of threesector and gender. And the project will develop a meth- Southeast Asian countries-Malaysia, the Republic ofodology for modeling the simultaneous choice of female Korea, and Thailand:participation and sector of employment with invest- * Percapitaincomegrowthalongwithmajorsourcesments in child nutrition either directly or by means of of economic growth (investment in secondary educa-intermediaryinputs,includingdecisionsonbreastfeeding tion, investment in physical capital, and investment inand weaning and participation in child weighing and research and development or technology transfer, all asvaccination programs. a percentage of GDP)

Responsibility: Policy Research Department, Poverty * Population grow thrates and women's educationaland Human Resources Division-Harold Alderman. attainmentWith David Sahn, Cornell University. * Export growth rate

Completion date: September 1993. * Education of the labor force.The study comprises three elements. First, it will

carry outa general sta tistical review of the developmentContributions of Secondary Education of secondary education in the Asian region from 1950 toto Per Capita Growth in the Leading Newly 1990. Second, it will review the history of secondaryIndustrializing Countries of Asia education in the three countries, focusing on economic

and social trends and the implications for secondaryRef. no. 678-27 education in coverage, function, and structure; internal

An increase in a nation's education level is viewed as efficiency; external efficiency; and equity and quality.a prime contributor to economic growth and poverty Finally, it will perform a comparative analysis of thealleviation. The transformation from a low-productiv- effects of alternative patterns and strategies for devel-ity to a high-productivity economy requires technologi- oping secondary education in response to changingcal capability that is often associated with at least a economic and social demands and severe budgetarysecondary education. But since World War II some constraints.

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Responsibility: Education and Social Policy Depart- were implemented. A resurvey of the same householdsment-Donald Holsinger and Omporn Regel. With and providers is scheduled to begin in July 1993, ap-Walter McMahon and Chang Won Jang, University of proximately 12 to 18 months after the price-qualityIllinois; and Vichai Tunsiri, National Education Com- interventions were put in place.mission, Thailand. The IRMS will use the longitudinal data to measure

Completion date: February 1994. the effect of the experimental changes in price andReports: quality on the use of medical care and on the health

Boediono, and W. McMahon. 1992. "Indonesia: Education, outcomes. The study will be the first in a developingEconomic, and Social Development: Second 25-Year country to use such experimentally generated data. TheDevelopment Plan and Sixth 5-Year Development Plan." large and truly random variations in prices and qualityCenter of Informatics, Office of Educational and Cultural that are introduced in the experiment will allow muchResearch and Development, Indonesia Ministry of Education better estimation of price and quality effects than inand Culture. previous studies.

Knight, J.N., and R. Sabot. 1990. Education, Productivity, and The study comprises four main parts. First, it willInequality. Oxford: Oxford University Press. complete the second-round follow-up household and

Nehru, Vikram, Eric Swanson, and Ashutosh Dubey. 1993. "A provider surveys and put the data set into the publicNew Database on Human Capital Stock." Policy Research domain. Second, it will investigate the effects of the costWorking Paper 1124. World Bank, International Economics of medical care (monetary costs, as well as the cost inDepartment, Washington, DC. travel and waiting time) and the effects of providers'

Lau, Lawrence, Dean T. Jamison, and Frederic Louat. 1991. quality characteristics (for example, drug availability,"Education and Productivity in Developing Countries: An staff qualifications, service availability, and sanitaryAggregate Production Function Approach." Policy Research conditions) on the utilization of preventive and curativeWorking Paper 612. World Bank, Population and Human medical care. Utilization is measured by individuals'Resources Department, Washington, DC. choices of providers for the treatment of illness. The

Psacharopoulos, George. 1993. "Returns to Investment in study focuses on the extent to which there is substitutionEducation." Policy Research Working Paper 1067. World between different types of providers, such as public andBank, Latin America and the Caribbean, Office of the private providers, clinics, and hospitals. It will use theDirector, Washington, DC. results to project the effects on revenue and utilization of

user fees and willingness to pay for improved accessand quality. It will also use the results to determine the

Measuring the Impact of User Fee Increases: effectof increases in fees for curative care on the demandThe Second Round of the Indonesian for preventive care. In addition, the study will assess theResource Mobilization Study effect of the prices, accessibility, and quality of public

medical care on the demand for and supply of privateRef. no. 678-30 health care. And it will examine the effect of health

The Indonesian Resource Mobilization Study (IRMS) insurance on the demand for health care and the marketis designed to overcome weaknesses in the data typi- potential of health insurance.cally used to conduct research on resource mobilization, Third, the study will determine who benefits fromthe demand for medical care, and the determinants of the user fee policy. To do so, the study will examinehealth outcomes. The study incorporates five key im- whether the effects of medical care prices, providerprovements. It is a case-control study where interven- quality, and public health investments differ by indi-tions are made in some facilities and not in others. It vidual and household characteristics. For example, docollects longitudinal panel data. It introduces large varia- these policies primarily benefit poor or better-off house-tions in price across facilities. It includes measures of holds? Does female education determine who benefitsquality of care. And it measures the effect of price and and how? And what is the cost-effectiveness of target-quality on health outcomes and utilization of health care ing subsidies through geographic price discrimination?services. Finally, the study will investigate the effects of medi-

The study will raise user fees and improve the quality cal care prices, provider quality characteristics, andof service at selected health care facilities in experimen- public health interventions (water and sanitation im-tal regions in two provinces of Indonesia-East provements, nutrition and supplementation programs,Kalimantan and West Nusa Tenggara. The interven- and immunization programs) on health status. Thetions have been implemented over the past year. A indicators of health status include the symptoms andbenchmark survey of more than 6,000 households and duration of illness, child growthas measured by changes1,000 health care providers in both experimental and in height and weight, activity-of-daily-living (ADL)control regions was conducted before the interventions measures of physical functioning, and self-assessments

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of general health status. These indicators of health status several related topics, such as labor turnover, compen-allow the measurement of effects on individuals of all sation policies, and technology choice. The country dataages, from infants to the elderly. will be pooled for cross-national analyses. Determi-

Responsibility: East Asia and Pacific, Country Depart- nants and outcomes of enterprise training will be re-ment III, Population and Human Resources Operations lated to differences, both within and across countries, inDivision--Samuel Lieberman and Vicente Paqueo; and educational and vocational training systems, regulationIndonesia Resident Mission-Rozany Deen. The Rand in product and factor markets, training policies, tradeCorporation and Lembaga Demografi, University of regimes, and macroeconomic conditions.Indonesia, are collaborating in the research. The research will result in country studies, written

Completion date: May 1994. jointly with local country consultants; a final reportsummarizing the cross-national study, its findings, andthe policy implications; an international conference for

Enterprise Training Strategies both country researchers and policymakers; and a bookand Productivity: A Cross-National Study on enterprise training.

Responsibility: Private Sector Development Depart-Ref. no. 678-39 ment-Hong Tan; Policy Research Department, Pov-

It is widely recognized that enterprises are the single erty and Human Resources Division-Elizabeth King;largest source of post-school training, and that enter- Latin America and the Caribbean, Country Departmentprise training can be the most effective way to develop II, Country Operations 1 and Environment Division-the skills of the work force. Nonetheless, in many coun- Ana Revenga; and South Asia, Country Department II,tries little is known about the extent, form, and produc- Population and Human Resources Operations Divi-tivity of enterprise training; its links to the macroeco- sion-Tawhid Nawaz. With Eliakim Katz, York Univer-nomic and institutional factors that shape both incen- sity; Lisa Lynch, Tufts University; Robert Zemsky andtives for enterprises to train and the outcomes of train- Peter Cappelli, University of Pennsylvania; Sano Yoko,ing investments; and the kinds of government training Yoshio Higuchi, and Atsushi Seike, Keio University;policies that are appropriate in different national cir- Shunichiro Umetani, Tokyo Gakugei University;cumstances. Data on enterprise training are scarce. This Anuwar Ali, Osman Rani Hassan, and Rajah Rasiah,paucity of data, coupled with the very limited theoreti- University Kebangsaan, Malaysia; Roberto Flores Lima,cal and empirical research on enterprise training, has Secretariat of Labor and Social Welfare, Mexico; andmeant that in many developing countries training poli- Edgar Baldion, SENA, Colombia. The Economic Planningcies are often designed and implemented in a vacuum of Unit, Malaysia; Secretariat of Labor and Social Welfare,knowledge. Mexico; and SENA, Colombia, are participating in the

This research seeks to fill this gap in knowledge by research. The International Development Research Cen-fielding asetof linked surveys of enterprises andworkers tre (Canada), the U.S. Department of Education, and thein a sample of countries with varying levels of economic Japan Institute of Labor are providing funding.and technological development, educational and voca- Completion date: March 1995.tional training systems, and geographic location. Thesample, which may be expanded, now includes Colom-bia, India, Japan, Malaysia, Mexico, and the United Women's Rights to Land and AgriculturalStates. From each enterprise covered, the surveys will Performance in Sub-Saharan Africaelicit information on its attributes, its work force, workorganization, training strategies, technology, and pro- In most Sub-Saharan African countries in which ag-duction. And from a random sample of its employees, riculture is the main source of livelihood, access to landthe surveys will elicit information on personal charac- remains a principal determinant of poverty and socialteristics, prior work histories, training experiences, and well-being. Women's rights of access to and use of landcompensation. These surveys will be augmented with are conditioned by the positions of their householdspolicy-related variables culled from secondary sources. within the broader socioeconomic organization of their

The survey data will be used in several ways. For communities-and by the distribution of authorityeach country, they will first be used to characterize the within the household. As a result of historical processesincidence, levels, sources, and patterns of training. Sub- leading to agricultural commercialization and intensifi-sequently, structural models of training and production cation, women are a primary work force on farms.will be estimated to identify the determinants of enter- Estimates by the International Labour Organisationprise training, by source and type of training, and the suggest that the share of agricultural labor contributedeffects of different kinds of training on firm-level pro- by women in Sub-Saharan Africa is among the highestductivity. These data will also be used to investigate in theworld (42.7percent). Thissuggests thatneglecting

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the role of women in agricultural production may un- Repetition continues to be high even in the upper pri-dermine countries' ability to realize their development mary grades. In addition, recent work in Chile andgoals. But although the critical role of women in devel- Costa Rica has shown that most children completingopment is now widely acknowledged, there remains primary education have mastered less than half theconsiderable analytic confusion concerning the inter- content of the national curriculum. The achievement ofplay between women's status in society and productive children in rural schools and in urban slum schools isefficiency. Solutions that seek to target rural women as most deficient, especiallyin higher-order thinking skills.individuals rather than as members of rural multi- The only children doing consistently well, as defined byenterprise households may not be particularly efficient the national curriculum in these countries, are those inin increasing farm productivity or easily implemented fee-charging private schools, which generally serve theby borrower governments. middle and upper classes.

Rural women do not constitute a single homog- Public expenditure on education per inhabitant ineneous category for whom a particular policy interven- the LAC region increased in real terms between 1970tion would be uniformly appropriate. At least four and 1980, decreased significantly between 1980 andbroad categories of women in rural Africa may be 1985, and then began to recover. In some countriesidentified: those from landless or near-landless house- highly vocal lobbying and interest groups have suc-holds, those from small cultivators' households, those ceeded in protecting the higher levels of education fromfrom large-farm or predominantly commercial farming the economic recession-to the detriment of basic edu-households, and those from female-headed households. cation. But there are now major efforts in the LACThe most disadvantaged of these households, which re- region, many supported by World Bank loans, to im-quire urgent attention, are the female-headed and land- prove the quality of primary education. Loans totalingless or near-landless households. The two often overlap. more than $1 billion are under way or being prepared in

This study assessed the extent to which access to land Belize, Bolivia, Northeast Brazil, Chile, Colombia, Costaby women is derived, limited, insecure, or tenuous, and Rica, the Dominican Republic, Ecuador, El Salvador,how this leads to low agricultural productivity of fe- Haiti, Honduras, Mexico, the state of Sao Paulo, andmale-managed farms in Sub-Saharan Africa. The study Venezuela. The Bank playsa major leadership role in therelied on a review of the existing literature to critically region; its support to primary education has increasedanalyze and distinguish between aspects of productive from an average of $20 million a year in 1985-90 to anefficiency and those relating to social welfare. It argued expected $500 million a year in 1991-95.that policy interventions addressing the two problems These efforts represent significant changes in atti-must, of necessity, be separate if they are to achieve their tudes and expenditures, but there is much we do notintended effect. know and understand about how best to achieve the

Responsibility: Agriculture and Natural Resources goals of increased learning and school retention. TheDepartment, Agricultural Policies Division-Shem gaps in our knowledge can be roughly categorized asMigot-Adholla. inadequate knowledge of and information on inputs,

Completion date: December 1992. outputs, and the relations between them in primary edu-cation, and inadequate understanding of how to designeffective interventions and to deliver services in such

Improving the Quality of Primary Education areas as textbooks, teacher training, and preschooling.in Latin America This study sought to contribute to the improvement

of Latin America's primary education by undertaking

Current gross primary school enrollment ratios of five tasks. First, it analyzed a set of comparative educa-

more than 90 percent in nearly all Latin American and tion indicators on LAC countries. Second, it reviewed

Caribbean (LAC) countries and more than 100 percent the literature on student learning and the causes of

in many countries in the region show that most have repetition and drop-out in the LAC region. Third, itachieved the quantitative goal of having nearly enough studied the use of information for decisionmaking.physical places in primary education to serve the school- Fourth, it conducted case studies of effective school

age population. But primary education in the LAC practices. And fifth, it undertook operational reviews of

region continues to be beset by grade repetition and key project design issues, especially in the areas ofinadequate learning, especially in the first grade, and preschooling, textbooks, teacher training, and financingthe region continues to lag behind-especially in repeti- of primary education.tion rates-not only industrial countries but many low- The study made several key recommendations:income countries in Africa and Asia. First-grade repeti- * Future strategies for primary schooling shouldtion is reported to be more than 50 percent for Brazil and include support for targeted, cost-effective programs ofmore than 30 percent for Bolivia, Ecuador, and Peru. early childhood development.

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* New teaching strategies for the Latin America and The correlation with income is often dismissed as merelyCaribbean region should include multigrade teaching, an association with no policy implications.flexible promotion, audience- and context-specific in- This research, undertaken as background for Worldstruction, new methods of teaching reading, and bilin- Development Report 1993, investigated whether the linkgual education. between income and health status across countries was

* At a minimum, Latin American and Caribbean causal or simply associative. And it assessed the magni-countries should invest five dollars per student in teach- tude of cross-country mortality differences and recenting and learning materials, and the quality and use of performance due to income.these materials should be improved. The research used cross-country data on income,

* Investments in quality improvement in the Latin education, and three measures of health status (lifeAmerica and Caribbean region would add about 15 expectancy and infant and child mortality) in regres-percent to the unit cost of primary education, an afford- sions. The causal nature of the relationship was investi-able increase. gated using instrumental variables that, by using only

* The monitoring of educational processes should the component of income variation otherwise unrelatedemphasize measuring sets of key quality indicators and to health status, identified the structural effect of incomeassessing student learning and pedagogical practices in on health (as distinct from mere statistical correlation).the classroom. By using terms of trade shocks and other exogenous

The study's final report was completed in May 1993, instruments, the research verified the validity of theand distributed and discussed during a meeting of the usual (ordinary least squares) regressions.ministries of education of Latin America and the Carib- The study's most important finding was that thebean in Santiago, Chile, in June 1993. elasticity of infant (or child) mortality with respect to

Responsibility:Latin America and the CaribbeanTech- income was between 0.2 and 0.4. Differences in growthnical Department-Lawrence Wolff, Eduardo Velez, rates of per capita income accounted for roughly 40and Jorge Valenzuela, and Country Department I, Popu- percent of all cross-country variation in declines inlation and Human Resources Operations Division- infant mortality. Both of these are substantially lowerRobin H orn; East Asia and Pacific, Country Department than simple cross-country regressions of levels of mor-III, Population and Human Resources Operations Divi- tality on levels of income would suggest, but muchsion-imelda Martinez; and Economic Development higher than (and statistically different from) the zeroInstitute, Human Resources Division-Carlos Rojas. causal effect some would assert. The study also calcu-With Ernesto Schiefelbein, UNESCO-OREALC, Chile; lated the expected health implications of the reducedRobert Myers, The Consultative Group on Early Child- growth rates of the 1980s.hood Care and Development; Mariano Herrera, Centro The findings suggest that both income and otherde Investigaciones Culturales y Educativas, Venezuela; social policies have an independent causal effect onand Ruben Klein, Teresa Rosevley de Neibauer, and health status and that neither can be ignored in theSergio Costa Ribeiro, Fundaqao Carlos Chagas, Brazil. overall design of policy.

Completion date: May 1993. Responsibility: Office of the Vice President, Develop-Report: mentEconomics-LantPritchett and Lawrence H. Sum-

Wolff, Lawrence, Ernesto Schiefelbein, and Jorge Valenzuela. mers.1993. "Improving the Quality of Primary Education in Latin Completion date: May 1993.America: Towards the 21st Century." Latin America and the Report:Caribbean Technical Department Regional Studies Program Pritchett, Lant, and Lawrence H. Summers. 1993. "Wealthier isReport 28. World Bank, Washington, DC. Healthier." Policy Research Working Paper 1150. World

Bank, Office of the Vice President, Development Economics,Washington, DC.

Wealthier Is Healthier

Explaining the declines in infant mortality across Building Research Capacitycountries over recent decades has important implica-tions for the formulation of policy. Some look at the very As countries shift the emphasis of education policystrong relationship across countries between health sta- from school expansion to educational effectiveness, thetus and per capita income and conclude that raising information needs of policymakers change. More infor-incomes is a key element. Others look at the large mation is required about trends in students' learningdifferences in health and mortality outcomes for coun- achievement and about how the effectiveness of inputstries with similar levels of income and conclude that differs among schools. This sort of information is lack-differences in social and health policies are responsible. ing in most developing countries, and where available,

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itis frequently out of date. One agreement reached at the Completion date: June 1993.Jomtien Conference on Education for All was that there Reports:was need to assess learning achievement and to use Bellew, Rosemary, and Levi Nyagura. 1991. "Building Educa-assessments for improving education management. tional Research Capacity in Zimbabwe." World Bank,

Educational assessment for education management Population and Human Resources Department, Educationand policymaking is receiving increasing attention in and Employment Division, Washington, DC. Draft.Bank lending operations. The first project supporting Gongar, Othello. 1992. "Planning and Management in Bank-systems for assessing learning achievements for moni- financed Education Projects, 1981-83 and 1989-91." Worldtoring purposes was approved in fiscal 1988, and in the Bank, Population and Human Resources Department,past four years such projects have increased both abso- Education and Employment Division, Washington, DC.lutely and as a share of education projects. But to ensure Draft.the quality and success of Bank-supported research and Harris, Abigail M. 1991. "Effective Assessment of Educationalassessment components, significant human and capital Progress: A Review of Strategies for Measuring Learninginvestments are required. Achievement." PHREE Background Paper 91/34. World

This project thus sought to develop strategies to Bank, Population and Human Resources Department,strengthen local capacity for developing assessment tests, Washington, DC.designing survey research, and processing and analyzing Holsinger, Donald. 1991. "Building Research Capacity indata-all for purposes of policy analysis. The project Brazil." World Bank, Population and Human Resourcesreviewed World Bank lending for education research, Department, Washington, DC. Draft.testing, and management, and reviewed international Ilon, Lynn. 1992. "A Framework for Costing Tests in Thirddonor experience in developing education research ca- World Settings." PHREE Background Paper 92/65. Worldpacity. It examined experiences in building education Bank, Population and Human Resources Department,research capacity in three developing countries. And it Washington, DC.explored institutional and social conditions under which King, Kenneth. 1991. "Building Capacities in the Developingapplied sciences flourish in developing countries, draw- World: A Review of Experience in the Field of Education."ing suggestions from these experiences on how donors World Bank, Population and Human Resources Department,can help strengthen education policy research capacity. Washington, DC. Draft.

The project has provided Bank staff with a nontech- Larach, Linda, and Marlaine Lockheed. 1992. "World Banknical, general overview of the purposes of educational Lending for Educational Testing, General Operationalassessments and the advantages and disadvantages of Review." PHREE Background Paper 92/62R. World Bank,different types of standardized tools for measuring Population and Human Resources Department, Washington,student learning. It has also provided a review of basic DC.concepts related to measuring learning, educational Lockheed, Marlaine. 1991. "Multidimensional Evaluation:inputs, and processes. It has developed a test-costing Measures for Both Right and Left Sides of the Equation."program and an educational assessment sourcebook to PHREE Background Paper 91/46. World Bank, Populationassist in the development of Bank-supported testing and Human Resources Department, Washington, DC.components. The sourcebook includes r6sum6s of book- . 1992. "World Bank Support for Capacity Building: Thelets, a glossary of assessment terms, an annotated bibli- Challenge of Educational Assessment." PHREE Backgroundography, and all the technical papers on student assess- Paper 92/54. World Bank, Population and Human Resourcesment prepared in the study. Department, Washington, DC.

The project has provided technical support for Bank . 1993. "Educational Assessment Sourcebook." Worldprojects in all regions, sponsored two training work- Bank, Education and Social Policy Department, Washington,

shops on measurement and assessment, along with a DC. Draft.seminar on the use of the test-costing program for Bank Lockheed, Marlaine E., and Alastair G. Rodd. 1991. "Worldstaff, and cosponsored with the Economic Development Bank Lending for Education Research, 1982-89." PolicyInstitute three regional seminars (Africa, Asia, and Latin Research Working Paper 583. World Bank, Population andAmerica) on national assessment systems. And it has Human Resources Department, Washington, DC.disseminated information at and produced papers for Nielsen, Dean. 1991. "Building Research Capacity in Thailand."several international conferences. World Bank, Population and Human Resources Department,

Responsibility: Education and Social Policy Depart- Washington, DC. Draft.ment-Marlaine Lockheed. With Linda Larach, Lynn . 1992. "Building Educational Research Capacity: AIlon, Abigail Harris, Alastair Rodd, Donald Holsinger, Synthesis of Experiences in Three Developing Countries."Othello Gongar, Levi Nyagura, Abby Riddell, Kenneth World Bank, Population and Human Resources Department,King, and Dean Nielsen. Washington, DC. Draft.

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Economics of Education Related to assessing the role of the state in educationinvestments is measuring the effect of the labor market

This research examined key overarching economic on how much and what type of schooling individualsissues in the education sector. The issues included the want to invest in. Past studies of the determinants ofappropriate allocation of resources among differentlevels education investments in developing countries haveof education, the relative roles of the state and the private rarely modeled or estimated this effect, but findingssector in the provision and financing of education, and froma preliminary study in this program is that parents'methods for assessing the cost-effectiveness and equity own work experience influences their perception of theimplications of policy and of specific interventions. future market return to schooling and thus their invest-

The research began with a survey of the literature in ment in their children's education. This exploratorythe economics of education to identify the analytical study, based on the Malaysia Family Life Surveys inpriorities for a broader work program in fiscal 1994. One 1976 and 1989, did not make full use of the panel naturestudy reviewed the literature on the contributions of of the data. Nonetheless, it estimated earnings functionseducation to development, particularly that on the mea- for parents which yielded information on family-spe-surement of externalities. Measuring the benefits of cific perceptions of labor market conditions; it theneducation has always been difficult and controversial, linked these estimates to the decisions that parentsespeciallywhen differentiatingbetweenbasic and higher subsequently made about their children's schooling.education or between general and technical education. This two-year research program culminated in anAnother study revisited methodological issues pertain- international symposium on the economics of educa-ing to measuring the cost-effectiveness of schooling tion,heldinManchester,U.K.,inMayl993,andcofundedpolicies. The study concluded that there is substantial by three donor agencies--the British Council, the Over-scope for improving the current approaches. It summa- seas Development Administration, and the Deutscherized the evidence on the marginal value of schooling Gesellschaft filr Technische Zusammenarbeit. Threeoutputs and on schooling production relations, and broad topics discussed at the symposium were marketobserved that substantial efficiency gains are to be had and nonmarket returns to education, costs and financ-from better information for parents about schools and ing of education, and the roles of the state and theeducation policies. private sector in delivering education services. Partici-

Two studies examined the partnership between the pants took stock of progress in our knowledge in thepublic and private sectors in providing education, and field, identified gaps in the knowledge, and presentedits effect on access, quality, and equity. In most develop- challenges for future research and policy work.ing countries the central government carries the burden Responsibility: Education and Social Policy Depart-of financing a large part of the education sector. But ment and Policy Research Department, Poverty andtightening budget constraints and expanding education Human Resources Division-Elizabeth M. King. Withdemands have increased the need to consider alterna- RajendraSwamy;KathrynAnderson,VanderbiltUniver-tive sources of funding and modes of delivery. Even sity; M. Anne Hill, Baruch College; Jere Behrman, Univer-public schools have found ways of mobilizing resources sity of Pennsylvania; Franqois Orivel, Institut de Recher-from parents who are willing to supplement public che sur L'Economie deL'Education; Ace Suryadi, Indone-resources to keep schools open and ensure a certain sian Ministry of Education and Culture; Yan Wang, Ken-standard of learning for their children. The ability of tucky University; and Martin Weale, Cambridge Univer-poor children to afford schooling may thus be a real sity. The British Council, the Overseas Development Ad-barrier to increasing their enrollment and completion ministration, and the DeutscheGesellschaftfiirTechnischerates. One study was based on the Socioeconomic House- Zusammenarbeit contributed funding.hold Survey in Indonesia for 1989, which collected Completion date: June 1993.specific information about households' out-of-pocket Reports:expenditures for schooling. This study calculated the Anderson, Kathryn, Elizabeth M. King, and Yan Wang. 1993.affordability of public and private schooling for differ- "Feedback Effects of the Labor Market on Schooling inent income groups, and estimated the extent to which Malaysia." Paper presented at the annual meeting of theschooling costs in public or private schools reduced Population Association of America, Cincinnati, April.enrollment rates and progression through the school Behrman, Jere. 1993. "Measuring the Cost-Effectiveness ofcycle. The other study was based on a 1991-92 survey of Schooling Policies: Revisiting Issues of Methodology." Paperabout 80,000 primary schools in Indonesia which ob- presented at the International Symposium on the Economicstained information on the resources (by source of fund- of Education, Manchester, May.ing) available to public and private schools and schools' Hill, M. Anne, and Elizabeth M. King. 1993. "Women'sexpenditures (by type). Education and Economic Well-Being."

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James, Estelle, Elizabeth M. King, and Ace Suryadi. 1993. would therefore help in the design of programs and"Finance, Management, and Costs of Public and Private policies to meet and accommodate existing populationEducation in Indonesia." Paper presented at the Interna- pressures or changes and complement the present em-tional Symposium on the Economics of Education, Manches- phasis on rates of population growth and the impor-ter, May. tance of family planning.

King, Elizabeth M. 1992. "Education Policy and the Poor in The review, completed at the end of fiscal 1993, willIndonesia." lead to the development and dissemination of training

.Forthcoming. "Economics of Gender and Educational tools. It will also provide input for a booklet beingChoices." The International Encyclopedia of Education (second prepared for the International Conference on Popula-edition). Oxford: Pergamon Press. tion and Development to be held in Cairo in September

Orivel, Franqois. 1992. "Analytical Priorities in the Economics of 1994.Education." Responsibility: Population, Health, and Nutrition

Weale, Martin. 1992. "Education, Externalities, Fertility, and Department-Tom Merrick and Janet Nassim.Economic Growth." Policy Research Working Paper 1039. Completion date: June 1993.World Bank, Population and Human Resources Department,Washington, DC.

Development Convergence

Review of Population Issues in Economic Unlike most studies on the convergence of produc-and Sector Work tivity, this research includes both industrial countries

and up to 88 developing countries, and examines evi-There is a widespread perception that World Bank dence on the convergence of both productivity and

economic and sector work is insufficiently informed social indicators across countries and over time. Theabout the implications of demographic trends. Many results indicate that productivity (measured by pur-economic and sector reports routinely include popula- chasing-power-parity-adjusted GDP per capita) is nottion data, such as the size and rate of growth of a converging among groups of developing countries andpopulation. But there is little attention to such factors as between these groups and industrial countries. There isage and sex composition and geographic distribution, to strong evidence of convergence for several social indi-rates of change in these variables, and to their implica- cators that are good measures of human welfare, how-tions for planning in the sector concerned. Both internal ever, such as life expectancy, caloric intake, and primaryand external reviews of Bank work in population have school enrollment ratios. Other social indicators showmade these criticisms, but exhortations to do more and little evidence of convergence.better have had little response. One basic conclusion is that a given absolute or

To contribute to increased understanding of-and proportional increase in per capita GDP in very low-attention to-the implications of demographic trends, income developing countries is generally associatedthis study reviewed recent reports-with particular with greater improvements in the social indicators thatattention to poverty assessments, social sector reports, measure human welfare than a similar increase in perand economic reports focusing on the social sectors-to capita GDP in middle-income developing countries. Toidentify examples of best practice that can be emulated the extent that improving welfare is the objective ofthrough dissemination and training. Its aim was to development efforts, it is efficient to focus such effortsshow how consideration of demographic trends can be on low-income developing countries.an aid to sector work, strengthening analysis across The data used in this research are drawn from theseveral important dimensions: the implications ofpopu- World Bank Economic and Social Database, and thelation change for the relationship between the sector analysis uses the usual multivariate statistical tech-and the wider economy, particularly issues of efficiency niques.and resource mobilization and allocation; internal effi- The results were presented at a conference, "Histori-ciency issues, such as resource allocation in the sector; cal Perspectives on the International Convergence ofand equity concerns. Productivity," held in New York in April 1992. A paper

The study found that in the main the criticisms are summarizing the results is forthcoming.borne out. But it also found some interesting examples Responsibility: World Development Report Office-of the use of a demographic perspective which help to Gregory K. Ingram. With Anupa Bhaumik.clarify need, coverage, utilization, and resource issues. Completion date: October 1993.If more widely used, these approaches would focus Report:attention on the present and future needs of the popula- Ingram, Gregory K. 1992. "Social Indicators and Productivitytion, and the characteristics of groups to be served. They Convergence in Developing Countries." Policy Research

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Working Paper 894. World Bank, Research Advisory Staff, An Effective Instrument for Cost Recovery in Higher

Washington, DC. (Also forthcoming in William J. Baumol, Education?" World Bank Research Observer 8 (1):71-90.

Richard R. Nelson, and Edward N. Wolff, eds., Convergence Arcelo, Adriano. 1993. "Governance and Management Issues in

of Productivity. New York: Oxford University Press.) Philippine Higher Education."

Brunner, Jose J. 1993. "Governance and Higher Education in

Chile."Higher Education Policy Study Eisemon, Thomas. 1993. "Higher Education and the State in

Uganda." World Bank, Washington, DC.

Many countries have invested considerable resources Eisemon, Thomas, and Jamil Salmi. 1993. "African Universitiesin building and developing their systems of higher and the State: Prospects for Reform in Senegal and Uganda."education, often with the assistance of donor agencies, Higher Education 25:151-68.including the World Bank. Yet in many instances these Eisemon, Thomas, John Sheehan, George Eyoku, Franklin vaninvestments have not been effective in establishing the Buer, Delane Welsch, Louisa Masutti, Nat Colletta, and Leecapacity to train the high-level manpower and produce Roberts. 1993. "Strengthening Uganda's Policy for Investingthe new scientific and technological knowledge neces- in University Development." Policy Research Workingsary to sustain economic growth and development. Paper 1065. World Bank, Population and Human ResourcesGovernments are therefore trying to reform their higher Department, Washington, DC.education systems to improve performance. Gonzalez, Andrew. 1993. "Government and Higher Education

This policy study identifies options for improving in Developing Countries: The Philippines."performance in higher education. It focuses on the roles Hancil, V. 1993. " Higher Education, Science, and Change inof the government and the private sector, strategies for Eastern and Central Europe: The Czech and Slovakthe effective mobilization, allocation, and use of re- Republics."sources, the role of higher education in scientific and Levy, Daniel C. 1993. "Towards State Supervision? Changingtechnological development, the cost-effectiveness of in- Patterns of Governance in Mexican Higher Education."vestments in different inputs, and options for diversify- Majumdar, Tapas. 1993. "Government and Higher Education ining higher education structures and alternative delivery India."modes. Marquis, Carlos. 1993. "ArgEntine Federal Government and the

The policy study has been developed through a Universities."process of simultaneous research, review, and consulta- Min, Weifang. 1993. "Autonomy and Accountability: Antion. Research papers and country studies have been Analysis of the Changing Relationships between thecommissioned to assemble the empirical evidence that Government and Universities in China."will underpin the policy recommendations. Reviews of Ngu, J.L. 1993. "Governance: The Cameroon Experience."the literature on several subjects linked to the role and Piskunov, D. 1993. "Higher Education and Change in Russia."performance of higher education systems (economic Rao, V.V. Bhanoji. 1993. "Graduate Unemployment in Indone-contribution of higher education, financing issues, gov- sia: Trends, Implications, and Policy Directions."emance, and equity) and a review of World Bank lend- Sadlack, J. 1993. "Legacy and Change: Higher Education and theing for higher education have been conducted. A world- Restoration of Academic Science in Romania."wide consultative meeting was held in July 1991 in Sawyerr, Akilagpa. 1993. "Relations between Government and

Kuala Lumpur, Malaysia, to identify the concerns of Universities."higher education policymakers and specialists in mem- Schwartzman, Simon, and Lucis Klein. 1993. "Higher Educationber states. And a number of regional consultative meet- and Government in Brazil."ings have been held in Africa, Asia, and Latin America Selvaratnam, Viswanathan., 1993. "Innovations in Higherto promote a collaborative process of analysis and infor- Education: Singapore at the Competitive Edge."mation sharing with higher education leaders from _ . 1993. "University Autonomy versus State Control: Thedeveloping countries and representatives of donor agen- Singapore Experience."cies. Selvaratnam, Viswanathan, Angela Ransom, and Khoo Siew

Responsibility: Education and Social Policy Depart- Mun. 1993. "Improving Higher Education in Developingment-Jamil Salmi, Thomas Eisemon, and V. Countries."Selvaratnam. With Omporn Regel and Robin DePietro- Sivalon, John C. 1993. "The State and Higher Education inJurand. Tanzania."

Completion date: February 1994. Srisa-an, Wichit. 1993. "Government-University Relationships:Reports: The Case Study of Thailand."

Albornoz, Orlando. 1993. "Government and Higher Education Thulstrup, Erik W. 1992. The BilateralProgramme for Enhancement

in Developing Countries: The Venezuela Case." of Research Capacity in Developing Countries. EvaluationAlbrecht, Douglas, and Adrian Ziderman. 1993. "Student Loans: Report 104. Dan.8L/Eva. Copenhagen: DANIDA.

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Labor Market Policy Handbook Responsibility: Policy Research Department, TradePolicy Division-Richard Sabot and Jaime de Melo.

To intervene or not to intervene? With respect to With Richard Freeman, Harvard University; and Arupgovernment labor market policy, for many developing Banerji, Williams College.countries that is not the question. As employers, regula- Completion date: April 1994.tors, imposers of taxes, and providers of subsidies,governments of developing countries have a pervasiveinfluence on the interactions of purchasers and sellers of Managing the Social Cost of Adjustmentlabor services, and thus on labor market (and macroeco-nomic) outcomes. Events over the past decade have produced a climate

Accepting this influence as a given (at least in the of economic change and adjustment in industrial andmedium term), this research attempts to answer this developing countries. The performance of labor mar-question: How can governmentlabor marketpolicies best kets-in facilitating the movement of labor from newlybedesignedsoastomaximizethedifferencebetweentheir noncompetitive to newly competitive sectors and inpositive effects and their costs? Related questions are: encouraging the accumulation of skills for emergingWhich policies are most (or least) likely to permit adjust- industries and technologies-is increasingly recognizedmentto economic change and thus contribute to economic as important in managing the social cost of economicgrowth? How do labor market policies interact with other adjustment. Rigid labor markets can produce slowerpolicies-for example, fiscal and monetary policies and economic growth, price instability, and unemployment.exchangerateregimes? Towhatextentistheoptimallabor The effects of the past decade's events, particularly themarketpolicyregimeforacountrysensitivetothecountry's globalization of trade and the movement toward mar-economic circumstances? ket economies, will continue to put pressure on labor

Possible topics to be covered include public sector markets in the 1990s.pay and employment policy; severance pay (more gen- This study is concerned with how to improve theerally, issues related to the reduction of excess employ- competitive operation of labor markets and increase thement in the public sector); regulation of (private sector) efficiency of private and public spending on educationemploymentcontracts, including hiringand firing laws; and training. Itaddresses twoprincipal questions: Whatminimum wages, regulation of incentive systems (bo- policy interventions should be given priority in labornuses and profit-sharing), and (private sector) pay; pay- market reforms? And what labor market strategies canroll (social security) taxes; and regulation of unions and be used to manage the social cost of economic and laborindustrial relations (public sector). reforms? The first phase of the study began with a

For each of the policies on which the research will review, through background and state-of-the-art pa-focus, it will lay out analytically, in a way that is clear pers, of the World Bank's treatment of labor marketand accessible to policymakers, the factors that, for a issues in its economic and sector work. The secondparticular intervention, can make the difference be- phase will synthesize the findings and initiate addi-tween a relatively high-cost, low-benefit policy package tional studies where gaps in knowledge are found.and a low-cost, high-benefit policy package. Thebackground and state-of-the-artstudieswill pro-

The research will then illustrate the framework with vide a foundation for identifying "best practices" toa set of country case studies that would draw heavily on improve the performance of labor markets, particularlymaterial in the World Bank's archives and the experi- as they affect women and poverty. The initial review ofence of the Bank's country economists. The experience Bank economic and sector work, covering 1985-90, indi-of a country that got the labor market policy interven- cated a need to improve the quality of economic andtion "right" would be contrasted with that of a country sector work on labor markets and strengthen the policythat got it "wrong." The aim would be to bring out the dialogue. The studies completed in phase one havelessons for other developing countries. provided a foundation for improving this dialogue

Bank staff are frequently asked by policymakers for through theirassessmentof policy impediments to com-advice on the best design for labor market policies. For petitive labor markets and identification of labor marketexample, as the governments of Eastern Europe un- strategies to manage the social cost, including unem-dergo the transition to market economies, they must ployment, of economic adjustment programs and im-decide which labor market policies are most appropri- prove the political sustainability of these programs.ate, and it is natural for them to turn to the Bank for The results of the research in phase one will beadvice. The purpose of this research is toprovide, through summarized in a best-practices paper, accompanied bya handbook on labor market policy, a foundation on a volume of the edited studies. Interim products of thewhich a policy dialogue could be built. research have been used in training seminars for Bank

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staff on how to improve the performance of labor mar- World Bank, Education and Social Policy Department,

kets. Working papers and policy notes have been circu- Washington, DClated in the Bank and to country policymakers. Findings Stevenson, Gail. 1992. "How Public Sector Pay and Employmentwill be published in specialized journals and presented Affect Labor Markets: Research Issues." Policy Researchin professional meetings, at national seminars in several Working Paper 944. World Bank, Population and Humanregions, and to donors and other international agencies. Resources Department, Washington, DC.

Responsibility: Education and Social Policy Depart-ment-Arvil Van Adams, Zafiris Tzannatos, GuilhermeSedlacek, Alejandra Cox-Edwards, and AmitDar; Policy Population and Economic GrowthResearch Department, Poverty and Human ResourcesDivision--Elizabeth King; Europe and Central Asia, There are two critical questions in determining poli-Country Department II, Human Resources Operations cies aimed at reducing population growth. First, isDivision--David Fretwell, Susan Goldberg, and Jolanta population growth at the rates observed in the absenceHess; and Middle East and North Africa, Office of the of policy interventions welfare-reducing? Second, if itVice President-Ishac Diwan. With Ray Marshall, Luis is, what policies are effective in reducing populationRiveros, Ricardo Paredes, Robert Goldfarb, Daniel growth? In particular, i.s the expansion of family plan-Hamermesh, Harry Katz, Sarosh Kuruvilla, Lowell ning programs effective?Turner, Duane Leigh, Ramon Lopez, Stephen Mangum, This research attempts to provide insight into each ofGarth Mangum, Janine Bowen, Olivia Mitchell, Sandra these questions (in inverse order) by examining, first,Wilson, and Gail Stevenson. the relationship between actual fertility and its determi-

Completion date: June 1994. nants and, second, the relationship between populationReports: growth and growth in per capita income.

Adams, Arvil Van. 1993. "Developing Effective Employment To address the first question, the study assembledServices." HRO Dissemination Notes 9. World Bank, the results of a number of household surveys on actualEducation and Social Policy Department, Washington, DC. fertility and fertility preferences that have been under-

Adams, Arvil Van, and others. 1992. The World Bank's Treatment taken in the past two decades to examine the relation-of Employment and Labor Market Issues. World Bank Technical ship between actual fertility, desired fertility, and thePaper 177. Washington, DC: World Bank. determinants (related to both child demand and family

Fretwell, David. 1993. Developing Effective Employment Services, planning programs) of desired fertility.World Bank Discussion Paper 208. Washington, DC: World To address the second question, the study assembledBank. cross-country data on labor force growth, investment,

Goldfarb, Robert S., and Arvil Van Adams. 1993. Designing a human capital, and other growth determinants to assessSystem of Labor Market Statistics and Information. World Bank the independent effect of labor force growth on outputDiscussion Paper 205. Washington, DC. per worker. It used these data in two ways. First, it

Hamermesh, Daniel S. 1992. "Unemployment Insurance for calculated factor accumulation (rates of growthof physi-Developing Countries." Policy Research Working Paper 897. cal and human capital per worker) so that it couldWorld Bank, Population and Human Resources Department, decompose the growth of output per worker into perWashington, DC. worker accumulation and total factor productivity (TFP).

Katz, Harry C., Sarosh Kuruvilla, and Lowell Turner. 1993. Second, it examined the variation in the impact of labor"Trade Unions and Collective Bargaining." Policy Research force growth across various types of countries (forWorking Paper 1099. World Bank, Education and Social example, by region, by endowment, and by incomePolicy Department, Washington, DC. level).

Leigh, Duane E. 1992. "Retraining Displaced Workers: What There are four preliminary findings. First, actualCan Developing Countries Learn from the Experience of fertility across countries is explained almost entirely byOECD Nations?" Policy Research Working Paper 946. World variations in desired fertility across countries, with al-Bank, Population and Human Resources Department, most no role for variations in the cost of contraceptivesWashington, DC. or in access to them. Second, variations in desired fertil-

Mangum, Stephen L., Garth L. Mangum, and J. Bowen. 1992. ity are well explained by various "child demand" deter-"Strategies for Transitional Employment Creation during minants. Third, in the long-run data labor force growthStructural Adjustment." Policy Research Working Paper 947. shows no effect on the growth of output per worker, noWorld Bank, Population and Human Resources Department, effect on the rate of accumulation, and no effect on TFP.Washington, DC. Fourth, the research was unable to identify useful varia-

Mitchell, Olivia S. 1993. "Trends in Retirement Systems and tions across countries onthe impact of labor force growth.Lessons for Reform." Policy Research Working Paper 1118. Contrary to expectations, poorer, less-well-endowed

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countries did not show more negative effects of popula- Responsibility: Education and Social Policy Depart-tion growth than richer countries. ment-ErikW. Thulstrup (fiscal 1993) and Lauritz Holm-

The policy implications of these findings are still Nielsen (fiscal 1994). With Kin Bing Wu; Bojana Boh andunclear. But they suggest that supply-oriented mea- Ales Musar, ICCS; and Jacques Gaillard, ORSTOM.sures to reduce fertility by lowering the cost of contra- DANIDA is contributing funding for the research.ception are unlikely to have a large effect on population Completion date: June 1994.growth and that more effort could be spent in identify- Reports:ing those countries in which population growth was Boh, Bojana. 1993. "Environmental Issues in Secondarywelfare-reducing. Education." World Bank, Washington, DC.

Responsibility: Office of the Vice President, Develop- Boh, Bojana, and A. Kornhauser. 1992. "Environmental

ment Economics-Lant Pritchett. Education in Central and Eastern European Countries:Completion date: June 1994. Problems and Prospects."Reports: Gaillard, Jacques, and Erik Thulstrup. "North-South Coopera-

Pritchett, Lant. 1993. "The Determinants of Fertility: Fertility tion: Contributions to Research Capacity Building."

Desires and the Cost of Contraception." Hage, D., and others. 1992. "World Bank Lending for Secondary

. Forthcoming. "The Determinants of Fertility: Child School Science: A General Operational Review." PHREE

Demand and the Cost of Contraception." Background Paper 58R. World Bank, Population and Human

Pritchett, Lant, and Jeff Kling. 1993. "Population Growth and Resources Department, Washington, DC.

Economic Growth: Is It Factor Accumulation or TFP?" Hoffmann, R. 1992. "Some Reflections on Science in the Low-

. 1993. "Where in the World is Population Growth Bad?" Income Economies." PHREE Background Paper 71. World

Bank, Population and Human Resources Department,

Washington, DC.

Science and Technology Education Kells, H. 1992. "Performance Indicators for Higher Education: A

Critical Review with Policy Recommendations." PHREE

In recent years scientific and technological knowl- Background Paper 56. World Bank, Population and Humanedge has become the most important factor determining Resources Department, Washington, DC.comparative advantage in many areas of production. Kornhauser, A. 1992. "University-Industry Cooperation underThe potentially immense effect on development of sci- Constraints: Experience of the International Center forentific and technological training, research, and appli- Chemical Studies, Ljublijana, Slovenia." PHREE Backgroundcations is beginning to be recognized in most develop- Paper 67. World Bank, Population and Human Resourcesing countries, but they often find it difficult to identify Department, Washington, DC.effective strategies in this area. Kruytbosch, C. 1993. "Science and Technology Indicators in

This research is designed to produce important in- Devaloped and Developing Countries: Availability, Quality,puts for policy studies, in both higher education and and Utility." World Bank, Washington, DC.secondary education. The research is conducting a gen- Musar, Ales. 1993. "Equipment for Science Education: Con-eral operational review of scientific and technological straints and Opportunities." World Bank, Washington, DC.projects in the Bank. And it is conducting studies on how Muskin, J. 1992. "World Bank Lending for Science and Technol-to improve research quality at developing country uni- ogy." PHREE Background Paper 51R. World Bank, Popula-versities, on higher education indicators, on cooperation and Human Resources Department, Washington, DC.tion between universities and industry, on scientific and Parker, L. 1992. "Industry-University Collaboration in Devel-technological education and research in the newly in- oped and Developing Countries." PHREE Background Paperdustrializing economies of East Asia, and on scientific 64. World Bank, Population and Human Resourcesand technological indicators in developing countries. Department, Washington, DC.

The research has contributed to the secondary educa- Thulstrup, Erik. 1992. "Evaluation Report: The Bilateraltion study through a comprehensive study of school Programme for Enhancement of Research Capacity inscience in developing countries and an operational re- Developing Countries." DANIDA, Copenhagen.view of Bank lending for school science. Cross-cutting . 1992. "Evaluation Report: Capacity Building for Researchcontributions to higher and secondary education work in Traditional Fermented Food Processing in Ghana."will come from ongoing studies on environmental edu- DANIDA, Copenhagen, and World Bank, Washington, DC.cation in Central and Eastern Europe and on training for . 1992. "Evaluation Report: Remote Sensing for Environ-science teachers. The study's results are being trans- mental Monitoring in Ghana." DANIDA, Copenhagen, andferred to Bank operational staff through an informal World Bank, Washington, DC.Science Group network that has been established in the . 1992. "Evaluation Report: Strengthening TechnologyBank. Formal training for Bank staff was provided in a Assessment Capacity in Ghana." DANIDA, Copenhagen,one-week flagship seminar in Knoxville in April 1992. and World Bank, Washington, DC.

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. 1992. "Improving the Quality of Research in Developing tems. Second, the study presented data from existingCountry Universities." PHREE Background Paper 52. World sources for the 46 countries in Sub-Saharan Africa.Bank, Population and Human Resources Department, The study used 18 indicators providing informationWashington, DC. on the performance of education systems which were

. 1992. "Natural Resources for Development: Evaluation of formulated to take advantage of country-level statisticsa Botanical Research Collaboration between Denmark and from existing sources. These indicators are grouped intoEcuador." DANIDA, Copenhagen, and World Bank, three categories of educational performance: access,Washington, DC. attainment, and accomplishment. Data on achievement

. 1992. "World Bank Lending for Science and Technology." were notincluded because data comparable acrosscoun-In Society, Science and Government. Warsaw: State Committee tries are not available. The study produced suggestionsfor Scientific Research. on two uses for the statistics-international and country

.1993. "Science Education for Development." World Bank, comparisons, and country profiles-and examples ofWashington, DC. the kinds of analysis that are possible.

. 1993. "Scientific Research for Development." World Responsibility: Africa Technical Department, HumanBank, Washington, DC. Resources Division-Ward Heneveld, Teresa Hartnett,

Ware, S. 1992. "The Education of Secondary Science Teachers in Mubina Hassanali Kirmani, and Adhiambo Odaga; andDeveloping Countries." PHREE Background Paper 68. Southern Africa Department, Population and HumanWorld Bank, Population and Human Resources Department, Resources Operations Division-Janet L. Leno.Washington, DC. Completion date: June 1995.

. 1992.. "Secondary School Science in Developing Coun- Report:tries: Status and Issues." PHREE Background Paper 53. Hartnett, Teresa, and Ward Heneveld. 1993. "StatisticalWorld Bank, Population and Human Resources Department, Indicators of Female Participation in Education in Sub-Washington, DC. Saharan Africa." AFTHR Technical Note 7. World Bank,

Wu, Kin Bing. 1992. "Higher Education in Hong Kong: Africa Technical Department, Human Resources Division,Investment in Science and Technology during the Time of Washington, DC.Political and Economic Change." PHREE Background Paper70. World Bank, Population and Human ResourcesDepartment, Washington, DC. Private Provision of Social Services

. 1992. "Science Education in Hong Kong." World Bank,Washington, DC. This research looked at issues relating to private

. 1993. "Science and Technology Education and Economic sector involvement in the provision of health and edu-Development in South Korea." World Bank, Washington, DC. cation services.

. 1993. "Science and Technology Education and Economic The proportion of students enrolled in private ratherDevelopment in Taiwan." World Bank, Washington, DC. then public schools varies greatly among countries. In

developing countries the proportion of secondary stu-dents enrolled in private schools is consistently higher

Statistical Indicators of Female Participation than in industrial countries. The study sought explana-in Education in Sub-Saharan Africa tions for this. It also sought explanations for the seem-

ingly random variation across countries in this propor-Along with the growing recognition of the impor- tion for a given level of education and at a given stage of

tance of female education for development has come an development. It identified differentiated demand andenormous need for data to informpolicy discussionwithin nonprofit supply-both of which stem from culturaland amongcountries. Perhapsnowhere is thisneed greater heterogeneity, especially religious heterogeneity-asthan in Sub-Saharan Africa, where female participation in the principal explanations for these variations.education is inordinately low and disparities between The study hypothesized that the proportionatelyfemales and males vary greatly among countries. heavy enrollment in private secondary schools in devel-

This study responded in two ways to the need for oping countries stems from limited public spending.statistics on female education. First, it defined statistical This creates an excess demand from people who wouldindicators that canbe used to describe the level of female prefer to use the public schools but are involuntarilyparticipation and the disparities between males and pushed into the private sector. The study modeledfemales in education systems. One form for these indi- limited public spending on secondary education as acators that was introduced by the study is the concept of collective decision that is strongly influenced by thethe "gender ratio" as a generic tool for comparing male many families in developing countries that opt for manyand female participation in education across all indica- children, and thatcan consequently afford to invest onlytors used to assess the performance of education sys- small amounts in each child.

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In the health sector the study showed--consistent newlyavailable resources mayalsocreate opportunitieswith public choice theory-that government actions are to alter the equilibrium.neither equitable nor efficient in developing countries. Responsibility: Policy Research Department, FinanceIn general, they increase the real income of influential and Private Sector Development Division-Estellemiddle- and upper-income groups, despite the fact that James.the greatest mortality gains would come from directing Completion date: December 1995.health spending to the poor. Reports:

Assuming that this implicit model of government Birdsall, Nancy, and Estelle James. 1992. "Health, Government,behavior is correct, the study then examined why gov- and the Poor. The Case for the Private Sector." Policyernment health interventions would become increas- Research Working Paper 938. World Bank, Countryingly less effective. High mortality in developing coun- Economics Department, Washington, DC. (Also forthcomingtries is related more to poverty than it used to be, and in J. Gribble and S. Preston, eds., Policy and Planningpressure on governments to finance health care for the Implications of the Epidemiological Transition.)middle class and the rich is increasing because the James, Estelle. 1993. "Why Do Different Countries Choose apopulation is aging and the costs of handling adult Different Public-Private Mix of Educational Services?"chronic diseases are rising. Journal of Human Resources 28 (Summer). (Also available as

The inequity and inefficiency of government health Policy Research Working Paper 1069, World Bank, Policyprograms reflectthe currentpolitical equilibrium, which Research Department, Washington, DC.)cannot easily be changed. Opportunities for change, James, Estelle, Elizabeth King, and Ace Suryadi. 1993. "Finance,including marginal changes in the distribution of politi- Management, and Costs of Public and Private Schools incal power, must be recognized and exploited wherever Indonesia." Paper presented at the International Symposiumthey arise. Information that increases public awareness on the Economics of Education, Manchester, U.K. (Alsoof current inequities, fiscal stress, and tactical use of forthcoming in Economics of Education Review.)

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ADJUSTMENT, TRADE, AND DEBT

The Macroeconomic Implications of Parallel and Ibrahim Elbadawi; Europe and Central Asia, Coun-Foreign Exchange Markets in Developing try Department III, Country Operations Division 3-Countries Daniel Kaufmann; and Yaw Ansu (World Bank Nairobi

office). With Steve O'Connell, Swarthmore College; SaulRef. no. 675-30C Lizondo, International MVonetary Fund; Janie Aron, Ox-

This project examined macroeconomic aspects of the ford University; Richard Hausmann, IESA, Venezuela;use of parallel foreign exchange markets in developing Steve Kamin, Federal Reserve; Graciela Kaminsky, Uni-countries. It focused on the factors that lead to the versity of California at San Diego; Nancy Marion,adoption or emergence of exchange rate systems with a Dartmouth College; and Sule Ozler, UCLA.parallel foreign exchange market (for example, dual Completion date: March 1993.exchange rates), and the conditions required for suc-cessful exchange rate unification. The literature pro-vides strong evidence of an inverse relationship be- The Political Economy of Structuraltween the ratio (premium) of the parallel to the official Adjustmentexchange rate and economic growth. This project exam-ined the determinants of the premium, and the impact it Ref. no. 676-37Chas on the fiscal deficit, on the balance of payments, and The World Bank has increasingly recognized theon inflation. A central question the research addressed importance of political support for the successful adop-is when adoption of dual exchange rates is appropriate. tion and implementation of structural adjustment pro-

The analysis was based on case studies on Argentina, grams. But little is known about why political commit-Ghana, Mexico, Sudan, Tanzania, Turkey, Venezuela, ment to adjustment has been stronger in some countriesand Zambia, and cross-country analysis involving a than in others. This project sought to advance the under-broader sample. standing of the political economy of structural adjust-

The research findings show that in the short run the ment, focusing on the effect of program design andparallel exchange rate (and hence the premium) is deter- institutional arrangements.mined primarily by monetary and fiscal policy and The project sponsored studies of eight countries thatexpectations about devaluation of the official exchange are newly democratic or undergoing political liberaliza-rate. Large premia are thus generally the result of un- tion: Chile, Mexico, Nigeria, Poland, Senegal, Spain, Thai-sound macroeconomic policies. The available evidence land, and Turkey. Each country study examined the inter-also indicates that in most developing countries large action of politics and policy reform in two policy areas:premia increase the size of the budget deficit, mainly stabilization and fiscal reform, and trade and exchangebecause the public sector is a net seller of foreign ex- rate reform. The project also included cross-country statis-change. The research also found that, because of leak- tical studies on the effect of different political regimes onages, the use of parallel foreign exchange markets has inflation and stabilization in middle-income countries.only limited effectiveness in controlling capital flows. In The case studies addressed the political issues in bothaddition, the evidence indicates that adopting a dual the initiation and sustaining phases of the adjustmentsystem on a temporary basis can be useful in smoothing programs. The research looked at how political leaders,the impact of maxi-devaluation on domestic inflation. particularly in the sustaining stage, handled the task of

The project's case studies have been completed, and building a coalition of winners from the program. Sixan overview paper is being prepared. Earlier versions of conclusions from the case studies stand out:the papers were presented at conferences sponsored by 1. Political liberalization, especially the introductionthe project at Oxford University (April 1992) and at the of democracy, complicates the political management ofWorld Bank (June 1992). In addition, papers were pre- economic reform, but it also provides the governmentsented at international conferences and at seminars at with advantages, such as the popularity of democracy,universities and policy organizations. and increased legitimacy and credibility.

Responsibility: Policy Research Department, Transi- 2. Although political business cycles do not manifesttionand Macro-AdjustmentDivision-Miguel A.Kiguel themselves in ways that are clearly visible in macroeco-

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Adjustment, Trade, and Debt

nomic data, new governments of all sorts-and espe- America that have switched between authoritarian andcially democratic ones-seem to enjoy a honeymoon democratic regimes, there is systematically higher infla-during which it is advantageous to launch economic tion during the democratic phases and in the yearsreform, because people are more likely to be willing around the transitions, compared with the authoritar-then to wait to see positive economic results. Con- ian phases.versely, just before an election or when a government The findings of the research have been presented at afaces the threat of being overthrown, an adjustment number of workshops and conferences. These include aprogram is unlikely to succeed, because people will be seminar sponsored by the Macroeconomic Adjustmentshort of patience and the government will be short of and Growth Division of the Country Economics Depart-credibility on the persistence of the new policy regime. ment (August 1991); Latin American meetings of the

3. In a democratic context governments with close Econometrics Society (August 1991); the annual meet-ties to the labor movement are more likely than busi- ing of the American Economic Association (Januaryness-oriented governments to be able to sustain an 1992); the World Bank Conference on Voting for Re-adjustment program because they are better able to form: Political Economy of Structural Adjustment inbargain with labor, making credible promises of future New Democracies (May 1992); and the Middle Eastor noneconomic benefits as compensation for the up- Economic Association (January 1993).front concessions from labor that are typically necessary Responsibility: Policy Research Department, Transi-for adjustment. tion and Macro-Adjustment Division and Latin America

4. A reform program is more likely to succeed if a and the Caribbean, Country Department III, Countrypolitically insulated agency spearheads the reform ef- Operations Division 2-Steven Webb. With Stephanforts. Those in such an agency usually have close per- Haggard, University of California, San Diego; Albertosonal ties with the political leader of the reform. To Alesina, Harvard University; Genaro Arriagada,sustain the reform, however, this personal link must Corporacion Tiempo 2000: Programa Asesoriaeventuallybe de-emphasized, and the reforming agency Legislativa; Carlos Bazdresch, CIDE; Nancy Bermeomust acquire its own institutional identity and popular andJeffreyHerbst, PrincetonUniversity; Richard Doner,

support. Emory University; Jose Garcia Duran, Barcelona Uni-5. The pace of implementation that works best politi- versity; Barbara Geddes, UCLA; Blanca Heredia, ITAM;

cally varies according to the type of economic problem Simon Johnson, Duke University; Samba Ka, Johnsrequiring reform. For acute macroeconomic imbalances, Hopkins University; Robert Kaufman, Rutgers Univer-a shock program works best politically, because of the sity; Marzena Kowalska; Anek Laothamatas, Thamsatinitially strong public perception of a need for reform; University; Adebayo Olukoshi, Nigerian Institute ofthis perception then dissipates quickly, though perhaps International Affairs; Ziya Onis, Bogazici University;temporarily, as soon as even part of the program is put Dani Rodrik, Columbia University; and Nicholas van dein place. Trade liberalization, however, is rarely a re- Walle, Michigan State University. The Internationalsponse to an acute problem, and it seems to work best Center for Economic Growth provided financial sup-politically, all else being equal, when introduced more port.gradually, so that people can see the benefits of liberal- Completion date: June 1993.ization and start to move into the group winning from it. Reports:

6. Presenting reforms in a package is often crucial to Alesina, Alberto. 1992. "Political Models of Macroeconomictheir political acceptability. People who lose or do not Policy and Fiscal Reform." Policy Research Working Paperperceive their potential gain from one measure will 970. World Bank, Country Economics Department, Washing-nonetheless accept it if it is part of a package that ton, DC.includes other measures from which they clearly ben- Doner, Richard, and Anek Laothamatas. Forthcoming. "Theefit. For instance, trade liberalization, whose beneficia- Political Economy of Structural Adjustment in Thailand."ries are rarely identified in advance, can be made politi- Policy Research Working Paper. World Bank, Washington,cally acceptable if packaged with an urgently needed DC.stabilization. Packaging considerations often need to be Haggard, Stephan, and Robert Kaufman. 1991. "Democracy,balanced against countervailing considerations of the Political Transition, and Inflation in Middle-Incomeoptimal pace. Countries."

The cross-country analysis of political regimes and . 1990. "The Political Economy of Inflation and Stabiliza-inflation outcomes produced two major findings. First, tion in Middle-Income Countries." Policy Research Workingamong middle-income countries, democratic regimes Paper 444. World Bank, Country Economics Department,do not have systematically higher inflation than au- Washington, DC.thoritarian regimes. And second, in countries in Latin Haggard, Stephen, and Steven Webb. 1993. "What Do We Know

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about the Political Economy of Structural Adjustment?" operationality of the methods and, more important,World Bank Research Observer (July). their empirical significance: in more than half of the

Haggard, Stephan, and Steven Webb, eds. Forthcoming. Voting annual observations, the index showed a rise in protec-for Reform: Economic Adjustment in New Democracies. New tion when the trade-weighted average tariff-equivalentYork: Oxford University Press. of the quotas showed a fall.

Onis, Ziya, and Steven Webb. 1992. "Political Economy of Policy For lack of a well-based measure, analysts have usedReform in Turkey in the 1980s." Policy Research Working a variety of indices that have well-known problems.Paper 1059. World Bank, Country Economics Department, One common measure is the trade-weighted average ofWashington, DC. tariffs and of tariff-equivalents of quotas, where these

can be measured. Recently, Bank analysts have beenusing a second index focused on tariff dispersion-the

The Cost-of-Protection Index trade-weighted coefficient of the variation of tariffs.Both measures have been used to track liberalization in

Ref. no. 676-49C developing countries over time and in comparison withIn evaluating trade policy, analysts typically face each other and with industrial countries. The current

problems in making comparisons over time or between method reveals the shortcomings of these conventionalcountries. When a country liberalizes trade restrictions, techniques and provides an alternative for use inhow can the progress be consistently measured? And policymaking both for the Bank and for national au-how can progress be compared between countries, an thorities. In its simple f orm it requires no more informa-issue that arises in trade negotiations? The different tion than the Bank already collects.methods that have been used for such measures have The findings of the research have been disseminatedlimitations. This research project centered on a cost-ofthrough collaborationwith the Bank's regional offices inprotection index that combines the standard cost-oftheir applied work, through a number of Bank seminarsprotection analysis with index number theory. The re- and at conferences. In addition, a theoretical and meth-search was part of a larger effort in the Bank to quantify odological summary of the issue has been prepared thatthe detrimental effects of protection. shows in detail the method of the index number con-

The cost-of-protection index number concept consis- struction and serves as a quick reference for economiststently ranks tariff and quota distortions on a basis that involved in trade reform.allows comparison among countries and over time. For Responsibility: International Economics Department,tariffs, the index is based on a measure of the uniform International Trade Division-Will Martin, Ulrichtariff, equivalent in welfare to the present differentiated Reincke, and Raed Saf.adi. With James Anderson, Bos-tariff system. For quotas, the index expresses the uni- ton College; Peter Neary, University College, Dublin;form volume reduction from free trade quantities which Geoffrey Bannister, University of Texas; and Swederwould be equivalent in welfare to the present differen- van Wijnbergen.tiated quota structure. For tariffs and quotas together, Completion date: January 1993.the index is an appropriate average of the two. Reports:

The research project had three parts. First, the theory Anderson, James E. 1992. "Tariff Index Theory." Policy Researchwas applied to assess the level of protection in the Working Paper 1023. World Bank, International Economicsclothing and textile sector that major developing coun- Department, Washington, DC.try exporters faced in the main industrial markets dur- . 1993. "Measuring Trade Restrictiveness in a Simple CGEing thel980s under the Multi-Fibre Arrangement(MFA). Model, with Appendibc A Manual for Using the TRISecond, a software package based on the Bank's stan- Spreadsheet Model."dard EKCEL program was developed to allow ready Anderson, James E., and Geoffrey Bannister. 1992. "The Tradeevaluation of the implications of any given level of tariff Restrictiveness Index: An Application to Mexican Agricul-protection, and of change in tariffs. And third, the ture." Policy Research Working Paper 874. World Bank,project applied the theory, using primary data, in an in- International Economics Department, Washington, DC.depth case study of Mexico, with an emphasis on agri- Anderson, James E., and '. Peter Neary. 1992. "A New Ap-culture. In a follow-up study during 1993, this package proach to Evaluating Trade Policy." Policy Researchis being used to evaluate the effective level of protection Working Paper 1022. World Bank, International Economicsand the consequences of reform in a range of countries Department, Washington, DC.to provide a benchmark against which country econo- . 1992. "The Trade Restrictiveness of the Multi-Fibremists can compare estimates for their own countries. Arrangement."

The project included a pilot study of the Hong Kong- - . 1993. "Measuring the Restrictiveness of Trade Policy."U.S. MFA trade. This study demonstrated the . Forthcoming. "Domestic Distortions and International

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Trade." Policy Research Working Paper. World Bank, suppliers to other markets either do notbid at all or haveInternational Economics Department, Washington, DC. limited their activity in Brazil. Before 1990, a complex

Anderson, James E., J. Peter Neary, and Raed Safadi. 1992. "An game was played in which Brazilian textile firms ad-Empirical Framework for Measuring the Restrictiveness of justed the kinds of machinery they ordered so that theyTrade Policy: Theory and Results." could obtain an import license on the grounds that there

was no local similar, while Brazilian machinery manu-facturers extended the range of machines they pro-

Equipment Prices and Trade Policies duced to block import license applications. After thefor Developing Country Manufacturing 1990 trade liberalization these practices and the accom-Industries: A Pilot Study of Brazil panying economic costs largely but not entirely disap-

peared. But the perceived cost and risk of financingRef. no. 676-61 equipment exports to Brazil was still limiting competi-

This project tests the hypothesis that the "law of tion among exporters and worsening the terms onwhichsimilars" or "domestic availability" style of licensing the equipment was sold from the viewpoint of theequipment imports by developing countries excludes Brazilian textile firms.some potential foreign machinery suppliers or other- Separate papers are being written on the Europeanwise reduces competition between foreign suppliers, survey, the Brazilian survey, and the theoretical frame-raises foreign currency prices or worsens other selling work. These will be incorporated in a synthesis paperterms or both, and leads to the choice of overspecified or which will appear initially as a World Bank Policyotherwise inappropriate imported equipment. The Research Working Paper and subsequently will be sub-project also considers the hypothesis that the credit risks mitted to an appropriate journal.faced by suppliers of equipment to highly indebted Responsibility: Policy Research Department, Tradecountries also worsen the terms on which machinery Policy Division-Garry Pursell. With Dean Spinanger,and equipment are imported. If these hypotheses are Kiel Institute of World Economics, Germany; Thomascorrect and the terms of trade for equipment are wors- Magyar; Barbara Spencer, University of British Colum-ened, another dimension is added to the well-known bia, Vancouver; Nalin Kishor; and Geeta Sethi.economic costs of import substitution policies that lead Completion date: October 1993.to higher-cost local production.

To assess how well these hypotheses can be testedempirically, the research has been narrowed to a pilot Assessing the Mexico-United States Freestudy of exports of garment and textile machinery from Trade AgreementGermany, Italy, and Switzerland to Brazil. Brazil waschosen in the expectation that the trade policy liberaliza- Ref. no. 676-65Ction in 1990 would allow useful comparisons of the The NorthAmericanFree Trade Agreement(NAFTA)before-and-after situations in import licensing, and be- among Canada, Mexico, and the United States is ex-cause its external indebtedness has greatly increased the pected to go beyond reducing or removing trade barri-credit risks perceived by foreign equipment suppliers ers for agricultural and manufactured products. It isand their banks. also expected to liberalize such areas as direct foreign

The study's empirical work consists of small, struc- investment and key services-transport, communica-tured interviews with and questionnaire surveys of tions, insurance, and banking. For Mexico, the agree-textile machinery exporters and other firms and organi- ment can be expected effectively to cement the majorzations in Germany, Italy, and Switzerland and similar structural reforms that it has undertaken over the pastsurveys of importing textile manufacturing and other few years by increasing the difficulty of policy reversals.relevant firms and organizations in Brazil. This is being This will send a strong signal to potential foreign inves-supplemented by an analysis of World Bank subproject tors, making increased direct foreign investment likely.data, and byindependentstatistical analysis (separately The agreement could thus have broad implications forfinanced) of unit value data from official trade statistics. Mexico's economy, and it raises a number of policyA theoretical conceptual framework for analyzing the issues.effects of the "law of similars" import licensing that has This research project examined NAFTA's likely ef-been developed is being developed further to take ac- fects on Mexico, focusing on three questions with a viewcount of the empirical findings. toward policy. First, what will trade liberalization in

The field work has so far broadly confirmed the agriculture mean for the economy as a whole? Second,hypotheses. In particular, it is clear that a number of how will opening up the services sector affect both theEuropean textile machinery firms which are regular sector itself and the sectors that use its outputs? Third,

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to what extent can we expect major changes in firms' License Prices and Rent Sharingdecisions on location and in trade patterns after a free in the Multi-Fibre Arrangementtrade agreement in industry? And if we can expectsubstantialforeign direct investment, what are the likely Ref. no. 676-69Cimplications for Mexico's aggregateproductivity growth Most welfare analyses of the Multi-Fibre Arrange-and hence for long-term growth prospects? ment (MFA) have been based on static models that

The research had a two-track structure. First, it looked assume perfect competition in all relevant markets. Thisin detail at six sectors: maize, sugar, services, textiles research tested the assumption of perfect competitionand apparel, motor vehicles and parts, and maquiladoras by looking at evidence on rent sharing, license price(border industries that operate under a special tariff paths, and imputed license prices.regime). The research examined the potential effects for Strong evidence of imperfect competition will haveeach sector of its inclusion in the free trade agreement- implications for policymaking and World Bank opera-such as those on employment and trade. Second, the tions concerning the MFA and other quota agreements.project conducted an economywide analysis of the ef- The results of the research may lead to reassessments offects of NAFTA. The analysis focused on intersectoral evaluations of welfare in the presence of quotas, newlinks and spillovers, using the results of the sectoral considerations during the phaseout of the MFA, newstudies, and on policy changes (regulation of foreign evaluations of the gains from the MFA for the partiesinvestment, for example) that affect the economy as a involved, and insights into optimum policies for thewhole. administration of quota licenses in exporting countries.

The results of the research could help in formulating In its investigation of rent sharing the project testedpolicy, both on which sectors the parties should bring whether all quota license rents accrue to the exportinginto the agreement and on the design of policy packages, country. It did so by testing whether an exportingif any are required, to ease Mexico's adjustment to the country's apparel price, which includes the quota li-conditions resulting from the agreement. The findings cense price, tariffs, and transport costs, is equal to theshould also be of general policy interest, for several domestic apparel price in the importing country, andreasons: this is the first free trade agreement among whether exogenous changes have the effect that com-developing and industrial countries; the agreement is petitive models predict. The research allowed for homo-expected to cover new areas (services and direct foreign geneous goods, differentiated goods, quality differences,investment); and other Latin American countries may and category composition differences, and comparedsoon establish similar agreements. the behavior of quota-restricted and unrestricted coun-

Responsibility: Latin America and the Caribbean, tries.Country Department II-Sweder van Wijnbergen; The actual cost of the MFA quotas to exportingMiddle East and North Africa, Country Department II, developing countries could be considerably higher thanCountry Operations Division-Alberto Musalem;Policy conventional estimates. For U.S. apparel imports from aResearch Department, Finance and Private Sector De- number of countries, the preliminary findings point tovelopment Division-Asli Demirgiiq-Kunt; Financial equal sharing of the rents between the exporters and theSector Development Department-Dimitri Vittas; and importers. With this rent sharing, not only do exportingInternational Economics Department, International developing countries have reduced export volumes,Trade Division-Patrick Low. With Santiago Levy, but, contrary to the prevailing wisdom, they do notSECOFI, Mexico; and Anthony Venables, University of receive all the scarcity rents the quotas generate. ThisSouthampton, U.K. The Mexican Ministries of Agricul- casts doubt on the existing estimates of the welfareture and Finance and SECOFI, Mexico, contributed staff effects of the MFA, as these estimates all assume that notime. rent sharing occurs.

Completion date: August 1992. In a static model, under perfect competition, the keyReports: determinant of a quota license price is its scarcity. But in

Levy, Santiago, and Sweder van Wijnbergen. 1992. "Transition a dynamic model the quota license price has two addi-Problems in Economic Reform: Agriculture in the Mexico- tional components-asset market value and optionU.S. Free Trade Agreement." Policy Research Working Paper value. And the common practice of allocating quota967. World Bank, Latin America and the Caribbean, Country licenses according to past performance creates anotherDepartment II, Washington, DC. component-the renewal value. The study modeled the

van Wijnbergen, Sweder, and Santiago Levy. 1992. "Mexican influences of these four components and tested theAgriculture in the Free Trade Agreement: Transition models empirically us ing monthly data on license pricesProblems in Economic Reform." OECD Technical Paper 63. and quota use from Hong Kong and Indonesia. TheParis. analysis of Hong Kong license price paths found that

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license prices behave in a complex manner that depends Krishna, Kala, and K. Bergl6f. "Rent-Sharing in the Multi-Fibreon their asset value and their option value, with the Arrangement: U.S. Apparel Imports from Bangladesh."

market structure also having an important influence. Krishna, Kala, Will Martin, and Ling Hui Tan. "Imputing

This casts further doubt on the assumption of perfect License Prices: Limitations of a Cost-Based Approach."

competition. Krishna, Kala, and Ling Hui Tan. 1992. "Rent-Sharing in the

The study's research on imputed license prices tested Multi-Fibre Arrangement: Evidence from U.S.-Hong Kongempirically the usual practice of using Hong Kong Trade in Apparel." Policy Research Working Paper 1003.license prices to impute the license prices in other MFA- World Bank, International Economics Department, Washing-

constrained exporting countries when those license ton, DC.prices are not easily obtainable. Using license prices . Forthcoming. "The Dynamic Behavior of Quota Licensefrom Hong Kong and Indonesia, the research found that Prices: Theory and Evidence from the Hong Kong Apparelthe imputing procedure tends to overestimate license Quotas." Policy Research Working Paper. World Bank,prices, probably due to limited substitutability between International Economics Department, Washington, DC.labor and capital, differences in quality, hidden quota . "Rent Sharing in the Multi-Fibre Arrangement: Evidenceallocation costs, and market imperfections. This research from U.S. Apparel Imports from Korea."suggests that existing welfare estimates of the conse- . "Notes on the Implications of India's MFA Quotaquences of the MFA need to be recalculated because the Allocating System."quota rents are considerably smaller than previously . "Rent Sharing in the Multi-Fibre Arrangement: U.S.thought, and thus the welfare costs of the MFA to Apparel Imports from Thailand."developing countries much larger.

The research covered the apparel exports to the UnitedStates from Bangladesh, Hong Kong, India, Indonesia, Commodity Exports and Real IncomeItaly, Mexico, Pakistan, the Republic of Korea, and in AfricaThailand, although data limitations restricted the em-pirical possibilities for some of the countries. The find- Ref. no. 676-70ings of the research project have been disseminated There has long been a concern that a simultaneousthrough seminars at the World Bank and the National expansion of commodity exports by several developingBureau of EconomicResearch, thePolicyResearchWork- countries could cause a decline in export prices largeing Paper series, conferences and seminars, and articles enough to reduce the export revenues and real incomesin professional journals. The findings will be brought of exporting countries. Earlywritings argued thatworldtogether in a volume. demand for primary products was inelastic and that

Responsibility: International Economics Department, therefore any productivity gains in exports were likelyInternational Trade Division-Will Martin and Ulrich to be passed on to importing countries through a changeReincke. WithKala Krishna,Pennsylvania State Univer- in the terms of trade that favored them. Later analysessity and National Bureau of Economic Research; Ling countered this argument. But the more efficient use ofHui Tan, Harvard University; and Geoffrey Bannister, production resources envisioned by structural adjust-University of Texas. Data were provided by ministries ment programs has renewed the concern. There is par-of industry or commerce of Bangladesh, Hong Kong, ticular concern about commodities said to exhibit lowIndonesia, Republic of Korea, Sri Lanka, Thailand, the price elasticity of demand, such as coffee and cocoa-United Kingdom, and the United States. exports critical for some African countries.

Completion date: December 1992. This research seeks to ascertain whether the concernReports: is justified. The study focuses on cocoa because it ac-

Ahmed, K. "Rent Sharing in the Multi-Fibre Arrangement: The counts for a large share of the exports of many AfricanCase of Pakistan and the United States." Massachusetts countries, African countries have a large share of theInstitute of Technology, Cambridge, Mass. world market in this commodity, and it is exported only

Bannister, Geoffrey J. Forthcoming. "Rent Sharing in the Multi- by developing countries.

Fibre Arrangement- The Case of Mexico." Policy Research The project is analyzing the current situation in Afri-Working Paper. World Bank, International Economics can and non-African cocoa-exporting countries, focus-Department, Washington, DC. ing on how cocoa exports affect the rest of the economy

Erzan, Refik, Kala Krishna, and Ling Hui Tan. 1991. "Rent and how they affect tax revenues, tradebalance, and real

Sharing in the Multi-Fibre Arrangement: Theory and incomes. Econometric studies of the cocoa sector exam-Evidence from U.S. Apparel Imports from Hong Kong." ine the likely effects of deviations from the current statePolicy Research Working Paper 597. World Bank, Interna- on the countries' export earnings, tax revenues, and realtional Economics Department, Washington, DC. income. Because cocoa is extremely important both as a

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source of export earnings and as a contributor to GDP, comparinga country wIth international norms and iden-the general equilibriumimplications are important. More tifying critical features for improvement.to the point, for a major export, the welfare and income The study gathered the complete tariff codes of 38effects of export taxes cannot be evaluated correctly countries at the complete tariff code line level of detailwithout taking into account import restrictions as well. for each country. In addition to data on tariff rates, itFor this reason, for countries in which cocoa is very collected data on tariff imports and, for some countries,important in the economy-such as Cameroon, C6te tariff revenue. For several countries tariff rates wered'Ivoire, and Ghana--equilibrium models have been available for a sequence of years. Using this data, theconstructed. For other countries, modeling is partial study summarized the distribution of tariff rates (forequilibrium. Cocoa sector equations will be estimated example, means, standard deviations, maximum, mini-econometrically, and some other sectors of the economy mum, skewness) and carried out analytical work on thewill be calibrated. Ultimately, country models will be complexity of tariff codes and its relation to tariff varia-linked through the world cocoa market when all coun- tion. In addition, for three countries the study relatedtries compete against one another. tariff revenue line by line with the official tariff rate and

Responsibility: Policy Research Department, Trade recorded import value.Policy Division-ArvindPanagariyaand Maurice Schiff. The most important findings for policy are as follows:With Robert Chambers and Ramon Lopez, University of * Distributions of tariffs were high and highly dis-Maryland; T. N. Srinivasan, Yale University; Alan Win- persed.ters, University of Birmingham; Laurian Rutavisire, * Distributions of tariff rates are highly skewed,National Bank of Commerce;Dani Rodrik, NBER; Indrani with a few very high rates, so that a concertina reformGupta; Kamil Yilmaz; and Claudia Sepulveda. from the top will likely have very little impact (despite

Completion date: April 1994. its effect on the average).Reports: * A large fraction of tariff variation occurs within

Panagariya, Arvind, and Maurice Schiff. 1992. "Commodity very fine distinctions between items of the tariff code, soExports and Real Incomes in Africa: A Preliminary Analy- moves toward uniformity will be important in reducingsis." In Ajay Chhibber and Stanley Fischer, eds., Analysis of protection.Economic Reform in Africa. * The relationship between tariff rates and tariff- 1992. "Taxes versus Quotas: The Case of Cocoa Exports." revenue is only tenuous, so the revenue implications ofIn I. Goldin and L.A. Winters, eds., International Dimensions a tariff reform depend very heavily on the structure andof Structural Adjustment: Implications for Developing Country types of exemptions.Agriculture. Cambridge University Press. Responsibility: Policy Research Department, Trade

. 1993. "Optimum and Revenue Maximizing Trade Taxes Policy Division-Lant Pritchett and Geeta Sethi.in a Multicountry Framework: Theory and Application to Completion date: June 1993.Cocoa.." Reports:

Pritchett, Lant, and Geeta Sethi. 1993. "Tariff Rates, TariffRevenue, and Tariff Reform: Some New Facts." Policy

The Design of Tariff Reform: Research Working Paper 1143. World Bank, Policy ResearchTheory, Evidence, and Implications Department, Washington, DC.

. 1993. "Tariff Rates: What Do We Know? What Do WeRef. no. 676-77C Care?"

During the 1980s many countries undertook tradepolicy reforms, one element of which was to liberalizeimports. This liberalization took the form of reducing Volume on Industrial Competition,foreign exchange controls, reducing nontariff barriers Productivity, and Trade Regimes(such as quantitative restrictions and licensing), andreforming tariffs. This study assessed the levels of tariffs Ref. no. 677-1OCand the structure of tariffs in the prereform period to According to received wisdom, protectionist tradeidentify the most important issues in the design of tariff regimes hurt manufacturing productivity and fosterreforms, both for economic efficiency and for revenue noncompetitive market structures. But the empiricalmobilization. importance of these consequences is not well docu-

The objective of the research was to assemble and mented,andthetransmissionmechanismslinkingpolicyanalyze the available information about tariff rates and and performance are riot well understood.tariff codes to produce a compendium of data that This research attempted to provide an empiricalwould be useful to economists designing reforms in basis for generalization on both of these issues. Unlike

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earlier efforts to link trade and performance, which have industry improvements in performance, both in factorbeen at the sectoral level, this project was based on large productivity and in pricing behavior. But the exploita-panels of data on plants from six developing coun- tion of scale economies is unlikely to be a major sourcetries-Chile, Colombia, C6te d'Ivoire, Mexico, Morocco, of productivity gain in most cases, and the promotion ofand Turkey. This approach enabled researchers to dis- bigness is not advisable unless there is clear engineeringtinguish dimensions of microeconomic adjustment that evidence to the contrary. Entry and exit can perform aare hidden in sectoral-level analysis. The study was able significant cleansing role by weeding out low-produc-to exploit new methods for studying scale economies, tivity plants, so, on efficiency grounds, policies thatplant-level productivity trajectories, and industrial evo- impede turnover (for example, severance pay laws) arelution (entry, exit, and growth). undesirable. Finally, if there is a case for actively pro-

This research augmented country studies completed moting foreign direct investment it probably rests onin the research project "Industrial Competition, Produc- something other than positive learning spillovers fortive Efficiency, and Their Relation to Trade Regimes" domestic producers.with new overviews that bring their results together Responsibility: Policy Research Department, Tradeand with three new studies that pursue in detail topics Policy Division-Jaime de Melo, Ann Harrison, andof special interest. Faezeh Foroutan, and Public Economics Division-Lili

Several basic findings have emerged. First, entry and Liu; and Middle East and North Africa Regional Office,exitpatterns in Chile, Colombia, and Morocco challenge Office of the Regional Vice President-Mona Haddad.the popular notion that entry and exit barriers are espe- With James Tybout and Daniel Westbrook, Georgetowncially high in developing countries (for example, be- University; Mark Roberts, Pennsylvania State Univer-cause of capital market imperfections). Nonetheless, sity; J. M. Grether, University of Geneva; David Roland-there is evidence that foreign competition puts down- Holst, Mills College; and Alan Winters, University ofward pressure on domestic tradable sector prices. This Birmingham.pressure appears to be most significant in sectors in Completion date: May 1993.which production is concentrated in the hands of rela- Report:tively few and market power is thus most likely to be Tybout, James, and Mark Roberts, eds. Forthcoming. Industrial

present. Competition, Productivity, and Trade Regimes: The Evidence.

Higher levels of productive efficiency also appear tobe associated with exposure to foreign competition.Sectors undergoing trade liberalization tend to show Secondary Market Prices for Developingreductions in the cross-plant dispersion in productivity Country Debt: Data Collection and Initiallevels and increases in average productivity rates. More- Analysisover, in one very open country (Chile) newly createdplants have productivity levels above those of dying Ref no. 677-15Cplants, so entry and exit improve productivity. The secondary market for developing countries'com-

Contrary to popular belief, efficiency gains do not mercial bank debt is the principal vehicle for transfer-appear to come mainly from the exploitation of internal ring ownership of the debt among banks and otherscale economies. In most sectors plant-level returns to investors. The market has increased drastically in effi-scale appear to be modest. Furthermore, if anything, ciency in recent years. Prices are increasingly used astrade liberalization is associated with plant size reduc- indicators of the relative creditworthiness of countriestions, probably because foreign competition shifts de- and as a benchmark in formulating debt reduction andmand curves inward. And there is no evidence thus far restructuring packages negotiated by developing coun-that trade regimes have any effect on the size distribu- tries. But there is little research explaining secondarytion through entry and exit, once fluctuations in aggre- market debt prices.gate demand are controlled for. This research aimed to contribute to the understand-

On openness to foreign investment, comparisons of ing of secondary market debt prices. It collected data onmultinationals with domestically owned plants in Mo- secondary market prices from traders in secondaryrocco and Venezuela show that multinationals are more markets. These data are as comprehensive as possible inefficient. But the presence of multinationals does not number of countries, frequency of exported prices, his-appear to create spillover effects that improve produc- tory of prices available, and number of instruments. Thetivity among domestically owned plants in the same project stripped the raw prices, and tested the liquidityindustries. and efficiency of the market by conducting standard

For policymakers, the most fundamental implication efficiency tests and examining the relative importanceis that trade liberalization can lead to significant intra- of creditor-specific factors in explaining prices.

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The project produced a data base of prices and a imports. Preliminary findings indicate that there is nodescription of the terms of the corresponding instru- significant effect. No conclusions can be drawn, how-ments; and a data base of stripped prices (raw prices ever, until more comprehensive studies have been un-cleaned of the value of enhancements and other inden- dertaken.tures). It also produced two papers, the first analyzing Responsibility: International Economics Department,the efficiency of the post-Brady bond market and relat- International Trade Division-Patrick Low anding prices to creditworthiness indicators. These papers Alexander Yeats; and Occidental and Central Africaare targeted to Bank economists, outside researchers, Department, Country Operations Division-Luc Dedeveloping country policymakers, and financial market Wulf. With Geoffrey Bannister, T. Manuelyan-Atinc,participants and P. Alizadeh.

Responsibility: International Economics Department, Completion date: October 1993.Debt and International Finance Division-StijnClaessens Report:and Sudarshan Gooptu. With Robert Cumby, New York Yeats, Alexander. 1991. "Can Preshipment Inspection Offset

University. Noncompetitive Pricing of Developing Countries' Imports?

Completion date: June 1993. The Evidence from Madagascar." Policy Research Working

Reports: Paper 610. World Bank, Intemational Economics Depart-

Cumby, Robert C. 1993. "The Efficiency of the Post-Brady ment, Washington, DC.

Market for Developing Country Bonds." Council of

Economic Advisors, Washington, DC.

. 199:3. "Secondary Market Prices and Creditworthiness Target Zones and Real Exchange RatesIndicators." Council of Economic Advisors, Washington, in Developing CountriesDC.

Ref. no. 677-38CThere is reason to believe that a target zone regime is

An Evaluation of the Effectiveness an appealing exchange rate systemfor developing coun-of Preshipment Inspection on Trade, Capital tries facing large swings in their terms of trade or inFlight, Customs, and Other Revenue capital flows. The regime could enable the countries toProblems of Developing Countries preserve the advantages of having a nominal anchor-

the central parity-while allowing the exchange rate toRef. no. 677-34 move within the band.

Merchandise imports into developing countries are This research presented stylized facts on the use ofoften seen to be overpriced, to suffer defects in quality target zones in industrial countries and in developing

and quantity, and to lead to practices of over- and countries-Chile, Colombia, and Mexico. It briefly de-underinvoicing with adverse consequences for customs scribed the main features of the regime in each countryrevenue collection and exchange controls. Preshipment and then, for each country, presented facts on the size ofinspection has been perceived as a way to reduce these thebands, the frequencyand size of realignments, move-adverse effects. The use of such services has been recom- ments of the exchange rate within the band, rules ofmended by the Bank where imports are being brought central bank intervention, and so on.in under structural adjustment funding. This research The project also developed an analytical frameworkattempt; to define the appropriate role for preshipment for the design of exchange rate bands in developinginspection or for its use with other services. countries. The model focuses on the factors that deter-

The research is being conducted at two levels. First, mine the optimal width of the band, and the size andstudies are being carried out in developing countries in timing of realignments of the central parity. The projectthe African, Asian, and Latin American regions. The tested the empirical relevance of the predictions of thecountry case studies examine in detail how preshipment model with available data from industrial countries andinspection has performed in different functions. Sec- Chile, Colombia, and Mexico. It concluded with anond, through analysis of data provided by inspection evaluation of the applicability of target zones for devel-firms and analysis of trade statistics, the research is oping countries.attempting to isolate the impact of preshipment inspec- Responsibility: Policy Research Department, Transi-tion in the countries in which it is practiced. tionand Macro-AdjustmentDivision-MiguelA.Kiguel

A pilot statistical study of Madagascar, where and Ibrahim Elbadawi. With Gil Bufman; Alexpreshipment inspection hasbeen in place since 1983, has Cukierman and Leonardo Leiderman, Tel Aviv Univer-been conducted to determine the effect of preshipment sity; and Neita Ghei.inspection on average prices paid for manufactured Completion date: June 1993.

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Reports: tivity when combined with relatively high levels ofCukierman, Alex, Miguel Kiguel, and Leonardo Leiderman. human capital. From the creditors' viewpoint, it ap-

1993. "Balancing Credibility and Flexibility in the Choice of pears (albeit not conclusively) that no major creditorExchange Rate Bands." class has been spared the expected financial losses and

. 1993. "Transparency and the Evolution of Exchange Rate that, given currentlevels of indebtedness, financial risksFlexibility in the Aftermath of Disinflation." Paper presented may be even higher for official creditors than for com-at a conference on Financial Aspects of the Transition from mercial creditors. In theory, the efficiency gains in DDSRStabilization to Growth, Tel Aviv University, Tel Aviv, June operations are relatively small. The impact on the risks6-7. and financial position of official creditors should there-

fore be of primary importance in the decision to supportthese operations.

External Debt and Burden Sharing Responsibility: International Economics Department,Debt and International Finance Division-Eduardo

Ref no. 677-55C Fernandez-Arias, Ash Demirgiq-Kunt, and Ning Zhu.Many developing countries have seen investment With Jeremy Bulow, Stanford University; Daniel Cohen,

and growth rates drop during the debt crisis. How much CEPREMAP, France; and Ken Rogoff, Princeton Uni-debt-related liquidity and incentive effects and non- versity.debt-related factors contributed to the slowdown is Completion date: June 1993.subject to debate. The policy response in many countries Reports:was to undertake officially supported debt and debt Bulow, Jeremy, Ken Rogoff, and Ning Zhu. 1993. "On theservice reduction (DDSR) operations. The effect of these Efficiency Impact of Debt Restructuring: Valuing an Optionoperations on development is difficult to assess and is under Moral Hazard." World Bank, International Economicsstill unclear. Department, Washington, DC.

At the same time, commercial creditors retrenched, Cohen, Daniel. 1993. "Foreign Finance and Economic Growth:and the share of official debt in developing country An Empirical Analysis." World Bank, Internationalexternal debt, especially multilateral debt, increased Economics Department, Washington, DC.substantially. If this trend continues, the changing com- Demirgiiq-Kunt, Asli, and Eduardo Fernandez-Arias. 1992.position of debt may alter the repayment rules that "Burdensharing Among Official and Private Creditors."countries have followed in the past when confronted Policy Research Working Paper 943. World Bank, Interna-with debt service difficulties and, therefore, the relative tional Economics Department, Washington, DC.risk for each creditor class.

This research analyzed and assessed two broad is-sues. First, it examined the links between external fi- Foreign Exchange Auction Marketsnance and development, those forged through both the and Exchange Rate Unificationeffect of external finance on the volume of domestic in Sub-Saharan Africainvestment and the effect of external finance on produc-tivity. This research, based on a large sample of develop- Ref no. 677-64Cing countries over the past three decades, analyzed the Parallel foreign exchange markets in Sub-Saharaneffect of external finance on investment and growth in Africa are typically major markets with large premia.the context of a "new" growth model. Such markets can entail considerable costs. Trade and

Second, the study looked at the financial risks of production are diverted into illegal channels, narrow-private and official creditors and the financial burden ing the tax base, and flight from domestic currencysharing among them. It focused on the analysis of the reduces the savings base for domestic investment, con-benefits of DDSR operations, looking at the efficiency straining growth. Widespread speculative activity is an-gains associated with DDSR operations and the finan- other result. There is thus a strong case for eliminatingcial repercussions among the parties involved. This parallel markets.research was based on inferences from econometric Two types of flexible arrangements have been usedwork on the determinants of commercial bank second- in Sub-Saharan Africa to unify foreign exchange mar-ary market prices in a multicreditor valuation model. kets: interbank markets in foreign exchange, and for-Bounds on the efficiency gains in DDSR operations were eign exchange auction markets. Auctions are usefulanalytically derived and estimated based on secondary where institutional capacity is inadequate for a decen-market price information. tralized foreign exchange market, where a few commer-

External finance appears to make its most important cial banks have historically been dominant and there iscontribution to growth not through its effect on the a danger of collusion, or where sources of foreign ex-volume of investment but through its effect on produc- change are limited. But auctions have disadvantages,

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including administrative requirements and the poten- * The gradualism that is achievable through an auc-tial for rent seeking or for government manipulation of tion allows learning by agents, and institution buildingthe exchange rate. In Sub-Saharan Africa, therefore, the and deepening of markets, ultimately toward an effi-importance of auctions is as a transitional device to an cient interbank market.efficient interbank market. * The use of a reserve price provides a strong mac-

This research drew on recent theoretical work and on roeconomic-policy-based signal for auction agents be-case studies on Ghana, Nigeria, Uganda, and Zambia to cause the reserve price is based on a secondary marketconduct a detailed empirical study of the functioning of (bureaux) price. Further, by serving as a floor and byforeign exchange auctions in Sub-Saharan Africa. Its being fairly predictable, a reserve price helps achieveobjective was to identify the microecononic and macro- stabilization.economic determinants ofasuccessfultransitionthrough The study has produced a detailed set of policyauction markets to sustainable exchange rate unifica- recommendations, contained in two papers, that couldtion in interbank markets. have direct operational consequences.

First, the study examined issues relating to micro- Responsibility: Policy Research Department, Transi-economic management and auction design. It compared tion and Macro-Adjustment Division-Ibrahimthe properties of different types of auctions-their capac- Elbadawi. With Janine Aron, Oxford University.ity to generate revenue, their allocation of foreign ex- Completion date: June 1993.change (and thus their efficiency), and the effects of their Reports:informational features on bidding behavior. It examined Elbadawi, Ibrahim, and Janine Aron. "A Typology of Foreignthe opportunities in different auctions for collusion on Exchange Auctions in Sub-Saharan Africa." Paper presentedbids and for manipulation of the rate by the central at the International Conference of the Western Economic

bank. And it looked at episodes of speculative behavior, Association.and the reasons for them, which can provide important . "Some Lessons for the Micro-Design and Management of

lessons for both auction management and macroeco- Foreign Exchange Auctions from Sub-Saharan Africa." Paper

nomic policy. presented at the International Conference of the Western

Second, the study addressed questions relating to Economic Association.

macroeconomic outcomes during auctions. It surveyedthe literature on the sequencing and timing of macro-economic policy during exchange rate unification, and Adjustment in Africa: Reforms, Results,compared predictions derived from the survey with and the Road Aheadempirical outcomes during stable and unstable epi-sodes of foreign exchange auctions. It sought to deter- Ref. no. 677-67mine whether auctions have been successful in unifying This study addresses three questions: To what extentmultiple exchange rate markets, measuring progress by did Sub-Saharan African adjusting countries undertakethe evolution of the black market premium. policy reforms? Did those policy reforms restore growth?

The results of the research corroborate the generally And what is ahead for adjustment in Africa? Since manyaccepted proposition that a successful exchange rate African countries have only recently undertaken adjust-reform depends crucially on a stable macroeconomic ment programs, the study focuses on those reforms thatenvironment. In the context of Sub-Saharan Africa the countries can implement relatively quickly and that aredecision to unify exchange rates amounts essentially to expected to reverse the economic decline rapidly. Thesea commitment by the authorities to shift the nominal reforms include adopting realistic exchange rate policy,anchor from the exchange rate to the money supply. increasing fiscal discipline, moving to reasonable posi-

Further, the research shows that the micro design tive real interest rates, liberalizing agricultural market-features of a foreign exchange auction are more than a ing and pricing, liberalizing trade, privatizing publicmere transmission mechanism for a sufficiently sustain- enterprises, decontrolling prices, eliminating directedable macroeconomic environment. This is because mac- credit, increasing domestic competition, and reorientingroeconomic credibility requires more than consistent public spending to high-priority areas. The study fo-policy relating to the fundamentals (fiscal and monetary cuses on a sample of 29 countries in Sub-Saharan Africapolicy); it also depends crucially on agents' behavior in that had adjustment programs in place at some pointresponse to their perceptions of commitment to reform. during 1987-90.Auction design can modify and direct agents' behavior To evaluate systematically how much policy reformin the following ways: has taken place, the study assesses where countries

* Transparent rules and management diminish stand in relation to the "policy frontier"-where coun-speculation, thereby leading to a realistic exchange rate tries would be located if they implemented the basicand fostering confidence in the economic reform. adjustment policy reforms. The policy frontier consists

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of sound macroeconomic policies supportive of growth, policy reforms. Countries have been classified into threeincentives for the production of tradables, little govern- groups depending on whether their macroeconomicment intervention in markets, and public spending pri- policies improved somewhat, improved only slightly,orities favoring the provision of basic social services and or deteriorated. Changes in macroeconomic policies-infrastructure. The indicators used to determine where which have a large effect on the extent of trade reformcountries are in relation to the policy frontier include the and on agricultural pricing policies-are associated withblack market premium in the foreign exchange market, a positive turnaround in outcomes. While increases inthe extent of real depreciation relative to average devel- external flows have provided some impetus to growth,oping countries outside Africa, the fiscal deficit, there is a clear association between improvements inseignorage, real interest rates, inflation, and a govern- macroeconomic policies and changes in growth rates.ment intervention index combining the extent of agri- Responsibility: Policy Research Department, Transi-cultural export crop marketing liberalization, tion and Macro-Adjustment Division-Christine Jones,demonopolization of other key public sector monopo- Miguel Kiguel, and Lawrence Bouton, and Trade Policylies, and the extent of price controls. Progress in other Division-John Nash and Faezeh Foroutan; Office ofareas-such as trade reform, public enterprise reform, the Vice President, Development Economics-Lantand financial sector reform-is also assessed. Pritchett; Environment Department, Pollution and En-

Most of the adjusting Sub-Saharan African countries vironmental Economics Division-Wilfrido Cruz andentered the 1980s well inside the policy frontier, though Hafeez Shaikh; and Financial Sector Development De-some were further from it than others. Many adjusting partment-YoonJeCho,Jo AnnPaulson, Gerard Caprio,countries have come a long way in key reforms. But even and Andrew Sheng.those that progressed most still have some distance to Completion date: August 1993.go. And in policy performance the adjusting countries Report:in the sample still lag behind the advanced, high-growth World Bank. Forthcoming. Adjustment in Afria: Reforms, Results,adjusters in other regions. and the Road Ahead. Washington, DC.

The study focuses onthe change in growthrates-theturnaround in growth-as the major indicator of whetheradjustment is paying off in the near term. Adjustment Abandonment of the Fixed Exchange Ratepolicy shifts are not likely to remove deep-rooted im- Regime in Latin America in the 1980spediments to growth in the short term. But over the longterm the rate of growth is the most important indicator Ref no. 677-71of whether development efforts, of which adjustment is This research project examines the abandonment ofa part, are reducing the disparities in growth between fixed exchange rate regimesbyanumber of LatinAmeri-Africa and other regions. The question is whether the can countries during the 1980s and the concomitantpositive turnaround will bring countries back up to permanent increases in their inflation rates. It also stud-their historically lower trend level of growth, or whether ies the policy inferences for similar circumstances.it will shift them onto a higher growth path. The evi- The study seeks to outline the reasons for the aban-dence to date suggests that countries withhigher growth donment of the fixed exchange rate regime and theturnarounds also have higher rates of growth, but that consequences it has had for external competitivenessno country has moved onto an accelerated growth path. and macroeconomic performance. In addition, it at-This is in part because none of the adjusting countries tempts to understand whether the rise in inflation ob-could be said to have put in place sound, sustainable served in the countries covered in the study resultedmacroeconomic policies or to have produced clear signals from larger budget deficits or from the change in ex-on private-sector-led growth. It also reflects the enormous change rate regime. And it tries to discernwhatprompteddevelopment challenge facing African countries, the abandonment of the fixed exchange rate: Was it the

Of the 29 adjusting countries, 14 had a positive turn- severity of the shocks of the 1980s or a change in philoso-around in GDP growth in 1987-91, meaning that their phy in which external competitiveness took precedenceaverage GDP growth rates were higher in 1987-91 than over price stability that induced these countries to movein the first half of the decade. Fourteen other countries to a flexible exchange rate regime?had a negative turnaround, meaning that GDP growth The study's findings willbe relevant for economies inrates declined in the second half of the decade relative to other regions that adhere to a fixed exchange rate (forthe first. Changes in policy explain part of the variation example, the CFA countries in Africa). They will alsoin the size of the growth turnaround. provide lessons on how to avoid changes in exchange

The study has developed an index of macroeconomic rate policy that have a permanent effect on inflation.policy stance and changes based on a combined index of The project intends to perform an in-depth analysisperformance on monetary, fiscal, and exchange rate of the macroeconomic policies before and after the

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regime switch in the economies that formerly had fixed Understanding Bilateral Trade Flowsexchange rates. For control groups, the study will use in East Asiarate regimes in much earlier periods under differenttypes of shocks. The study will focus on countries that Ref. no. 677-86abandoned the fixed exchange rate in the 1980s-Costa With regional trade schemes apparently here to stay,Rica, the Dominican Republic, Ecuador, El Salvador, knowing what kinds of schemes are likely to expandGuatemala, Honduras, Paraguay, and Venezuela. trade has become important. This study seeks to add to

Responsibility: Latin America and the Caribbean, the understanding of regional trade flows by looking atCountry Department l, Country Operations Division- the determinants of bilateral trade relationships.Demetris Papageorgiou and Valeriano Garcia. With For a country whose trade liberalization is to take aNissan Liviatan and Blanca Moreno-Herrero. preferential course, it is necessary to identify trading

Completion date: November 1993. partners with which that country exhibits most comple-mentarity. There are different hypotheses about whatdetermines complemertarity in trade. Building on the

Issues in the Design of a Stabilization work done with the gravity model in analyzing tradeProgram in Russia flows, the study tests empirically the validity of these

hypotheses and systematically assesses the relative im-Ref. no. 677-83 portance of the different determinants of comple-

Russia has suffered a dramatic reduction in short- mentarity.term output. Government revenues have declined One hypothesis is that distance determines comple-sharply. Monetary expansion to finance money-losing mentarity: countries trade more intensively with theirenterprises (particularly in the military-industrial area) neighbors than with more distant economies. Another isand maintain wages is reaching hyperinflation propor- that complementarity depends on relative per capitations. GDP: the richer an economy, the more intensively an-

This research examines two issues that these condi- other country will trade with it. For a pair of richtions raise. First, if we take as a given that the govern- countries, the more similar their per capita incomes, thement needs to finance some income maintenance dur- more intensive the trade between them; for poor coun-ing the transition, how should the income support be tries, the opposite could be true.designed? Should itbe "in situ," that is, at the enterprise A third hypothesis is that distance and per capitalevel? Or should it be given to workers only if they agree income together may matter: the effect of an increase into leave the enterprise? Both have costs and benefits. the per capita income of a partner country may itselfIncome support given in situ may help in the restructur- depend on distance. The closer a pair of trading part-ing of an enterprise and the reabsorption of workers if ners, the greater the effect of an increase in the income ofthe enterprise has some future-that is, the transfer will one on the other's exports.act as a transfer of "working capital." Is it possible to The research also assesses what effects the economicdesign the transfer in such a way as to encourage re- slowdown in North America and Europe will have onstructuring and privatization? If the system operates as East Asian exports, both within and outside the region.in the West-where unemployment benefits are given Will East Asia's intraregional trade intensify, and if so,only outside enterprises-it could encourage mobility how much? And would increased intraregionaland retraining (it could be designed in conjunction with trade be sufficient to sustain the region's high levels ofa retraining program). growth?

Second, what are the macroeconomic tradeoffs of To address these two sets of questions, the study isproviding such income support? What is the maximum assembling a model and data set that can be used toamount of income maintenance that the government assess the effect of changes in incomesworldwide on thecan afford that would still be consistent with a program bilateral trade flows of a country. The model and dataaimed at reducing the rate of inflation to a particular set are constructed to permit annual updating and totarget? incorporate country-specific effects.

The research will identify new areas of inquiry, par- Preliminary findings suggest that an Asia-wide dis-ticularly at the microeconomic level. Its results are ex- criminatory trading bloc is not feasible because of bothpected to be relevant for the other new independent internal and external factors. Ultimately, East Asia'sstates. interests will be best served by a strategy that keeps the

Responsibility: Europe and Central Asia, Office of the world trading system open. For this, Japan must take theRegional Vice President-Marcelo Selowsky. With Felipe lead and play a role similar to that played by England inLarrain, Catholic University the nineteenth century and by the United States in the

Completion date: September 1994. post-World War II era.

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Responsibility: Policy Research Department, Trade The findings will provide guidance on designingPolicy Division-Arvind Panagariya. With Sumana import license auctions and interpreting the size of bids.Dhar. The results will be useful not only for trade liberaliza-

Completion date: January 1994, tion programs but as guidance for using auctions toReport: distribute export licenses in cases in which developing

Panagariya, Arvind. 1993. "Should East Asia Go Regional? No countries have agreed to control their exports as part ofand Maybe." negotiated trading arrangements, such as the Multi-

Fibre Agreement.Responsibility: Policy Research Department, Trade

Informational Value of Import License Policy Division-David Tarr. With Preston McAfee,Auctions: An Empirical Study University of Texas at Austin; Wendy Takacs, Univer-

sity of Maryland; Jim Tybout, Georgetown University;Ref no. 677-91 and Daniel Vincent, Northwestern University.

Over the past decade a consensus has emerged in Completion date: October 1994.developing countries on the advantages of an open Report:trading regime. Many of these countries are reforming Takacs, Wendy E. 1993. "Import License Auctions and Tradetheir restrictive trade regimes. One important aspect of Liberalization: Theory and Experience." World Bank,trade policy reform is the movement away from discre- Washington, DC.tionary policy instruments-such as import licensing orquotas-toward a more transparent regime based ontariffs alone. For policymakers formulating a reform The Ruble Shortage Phenomenonstrategy it would often be useful to know the degree of in Members of the Ruble Currency Zoneprotection provided by the existing regime. But this isoften difficult to assess if the primary instruments of Ref. no. 678-08trade control are licensing requirements, quotas, or After the dissolutionof the SovietUnionin 1991 mostother forms of quantitative trade restrictions (QRs). of the new independent states opted to use the ruble asConversion of QRs to tariffs would be facilitated by a their national currency. But in 1992 the perceived disad-method of estimating the tariff rates that would dupli- vantages ofacommoncurrencyincreasingly outweighedcate the economic effects of the current restrictions. the advantages, and countries began introducing theirEconomists have frequently suggested auctioning im- own currencies (Estonia, Kyrgyzstan, and Ukraine) orportlicenses asameans of determining the tariff equiva- currency supplements (Belarus and Georgia). An im-lent of existing QR regimes. portant factor driving countries to introduce new cur-

This research attempts to answer two related ques- rencies or supplements was the recurrent shortage oftions: How can import license auctions be designed to rubles, which prevented the timely payment of wagesprovide accurate estimates of the tariff equivalents of and salaries and led to social discontent.QR regimes? And does the evidence from the experi- Policies to alleviate the "cash shortage" have focusedence of Australia and New Zealand-the two countries on adding currency to circulation or raising the velocitywith extensive experience with import license auctions- of money. Recently, countries have introduced currencyindicate that bids accurately measure tariff equivalents? supplements to circulate concurrently with the ruble.

The research is divided into three tasks. First, it will Countries have also imposed limits on cash withdraw-develop a model of bidding behavior in import license als from savings accounts to maintain cash balances forauctions based on auction theory. This task will gener- other transactions. These policies have been largelyate insights on bidding behavior and the interpretation ineffective because they do not address the root cause ofof the bids under alternative types of auctions and the problem.provide recommendations on the design of auctions to This research project seeks to identify the causes ofmaximize the reliability of the bids as measures of tariff the currency shortage and to propose economic policiesequivalents. Second, it will use econometric analysis of for eliminating it. The study will use a simple generalbids in the Australian and New Zealand auctions to equilibrium framework to illustrate the issues and con-investigate conditions under which bids track tariff clusions. And it will test alternative hypotheses basedequivalents closely. And third, it will use data on ex post on the data collected.observed values at which licenses traded in the second- The project's main theme is that the currency short-ary market to test the validity of the theory, tighten the age is a manifestation of financial disintermediation andconnection between observed bids and the value of the that the solution therefore lies not in increasing thelicenses, and develop a method for deriving estimates of quantity of currency in circulation or introducing a newtariff equivalents from bidding profiles. currency (or currency supplement) but in implement-

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ing monetary, fiscal, and financial sector policies that this flurry of GATT cases bring discipline to the use ofpromote financial intermediation. The findings of the antidumping?research can be expected to contribute to a key policy * What are the possibilities for substituting compe-decision of the new independent states-on the intro- tition law for antidumping regulations? How effectiveduction of an independent currency-as well as to the would competition law be in controlling the problemsdesign of macroeconomic stabilization policies, that should be controlled and, at the same time, in

Responsibility: Europe and Central Asia, Country De- avoiding the excesses characterizing the use of anti-partment IV, Country Operations Division 2-Wafik dumping?Grais and Chandrashekar Pant. With Patrick Conway, The findings of this research will be important toUniversity of North Carolina at Chapel Hill. developing countries for two reasons. First, developing

Completion date: October 1993. countries, as frequent victims of antidumping actions,have an interest in improved discipline over such ac-tions. And second, developing countries are prospec-

A Deep-Parameter Approach to the Real tive users of antidumping regulations; incorporatingExchange Rate and Trade Distortions competitionlawconceptsmayhelplimittradeinterven-

tion to those cases in which it is truly in the nationalRef no. 678-09 economic interest.

Several empirical studies have attempted to estimate In analyzing the ef-icacy of GATT dispute proce-the impact of import tariffs on the real exchange rate. dures in controlling antidumping, the research will firstThese studies rely on reduced-form econometric esti- identify the cases-which countries have complainedmations and are thus subject to the Lucas critique-that about which antidumping actions by which countries?is, that the estimated parameters are not invariant to Second, the documents, briefs, and other materials re-policy changes and are thus not useful in forecasting the lated to the cases will be reviewed, and interviews willeffect of policy changes. This forecasting ability is espe- be conducted with representatives of the governmentscially important for developing countries, which have involved, to identify the dimensions of antidumpingrecently undertaken significant policy reforms. regulation that have been called into question. Third,

This study estimates fully specified models and de- the research will analyze, against the background of therives policy-invariant values of the parameters of prefer- public choice logic of the GATT (that is, how it attemptsences and production opportunities-the so-called "deep to influence national decisions on trade policy), how theparameters." These models are not subject to the Lucas changes in practice requested in the cases would changecritique. the scope of antidumping, and how that change of scope

The results of the modeling on the effect of tariffs on the would, in turn, discipline the use of antidumping.real exchange rate were compared with those of other The research will take similar steps to analyze pro-studies for Chile. Surprisingly, the value obtained, -0.80, posals to use competition law in place of antidumpingis four to five times larger than those in the other studies. regulations.

Responsibility: Policy Research Department, Trade Responsibility: Policy Research Department, TradePolicy Division-Maurice Schiff. With Jorge Antonio Policy Division-Michael Finger. With K. C. Fung, Uni-Quiroz, ILADES/Georgetown University, Santiago, versity of California at Santa Cruz.Chile; Robert Chambers, University of Maryland; and Completion date: December 1993.Claudio Montenegro.

Completion date: October 1993.Regionalism and South Asia Trade

Antidumping: Follow-Up on Newly Ref no. 678-22Emerging Issues South Asian economies have been less integrated in

world markets than many developing economies, par-Ref. no. 678-16 ticularly East Asian economies. They traded relatively

An earlier World Bank study ("Regulations against little with the rest of the world and with each other asUnfair Imports: Effects on Developing Countries," ref. theypursued inward-oriented trade development strat-no. 675-52) documented the rise of antidumping to egies and relied on trade barriers to promote industrial-become one of the most frequently used means of re- ization. But in recent years several economies in thestricting imports. This study examines issues that have region have begun liberalizing their trade regimes. In-arisen since the completion of that research: dia and Sri Lanka, for example, have been eliminating

* A number of antidumping actions have been ap- quantitative restrictions, simplifying their tariff struc-pealed to the GATI dispute settlement mechanism. Will tures, and reducing tariff rates.

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This research has two primary objectives. First, it will This research explored these issues through a firm-explore how regional integration in South Asia, under level investigation using quantitative, qualitative, andvarious scenarios, might affect the outcome of the Uru- historical (dynamic) data and information about humanguay Round. Second, it will analyze the potential im- resource development, private sector development, andpact of India's economic liberalization on its neighbors export development. The data were drawn from a num-or, more generally, the issue of the relative pace of ber of Sub-Saharan African countries and from Hongliberalization among neighbors in the absence of eco- Kong and Italy.nomic integration. Responsibility: Private Sector Development Depart-

The project will prepare a quantitative model to ment-Yung Whee Rhee and Katharina Katterbach;explain bilateral trade flows among South Asian econo- and the Eastern Africa Department. With T. Belot; C.mies and the rest of the world. And it will analyze the Audin; and A. Bowring, Women's World Banking. Theeffect on the region's economies of the formation of U.S. Agency for International Development providedother trading blocs. financial support.

Uncertainty about the outcome of the Uruguay Round Completion date: December 1992.of the GATT negotiations and enthusiasm for regional Report:approaches to trade in Europe and North America have Tolley, George, Vinod Thomas, John Nash, and James Snyder.fueled interest in Asia on similar approaches. It is there- Forthcoming. "What We Know About Agricultural Prices:fore important to discuss the policy implications for Policies, Politics, and Supply." In volume in honor of D. GaleSouth Asia of different scenarios of regionalism in the Johnson. University of Chicago Press.rest of the world and the impact that trade liberalizationin some economies in the region will have on others. Thestudy's findings on these issues should contribute to the Exchange Rate MisalignmentBank's industrial and trade reform discussions with theeconomies in the region. This study adopted a definition of the equilibrium

Responsibility: South Asia Region, Office of the Vice real exchange rate (ERER) that sees it as a function of thePresident-Rui Coutinho. With T. N. Srinivasan, Yale current and future expected values of other real vari-University. ables (the "fundamentals") rather than as a fixed num-

Completion date: April 1994. ber-as inthe purchasing-power-parity (PPP) approach.This concept of the equilibrium real exchange rate isnecessarily intertemporal, and the study developed a

The Role of Export Catalysts in Low-Income forward-looking model that accounts for this feature. ADeveloping Countries desirable property of the model is that the presence of

stochastic nonstationarity and cointegration results in aThe most profound economic development lessons simple estimating framework.

of the past four decades derive from the superb perfor- The study applied the model to three countries-mance of outward-oriented development strategies. But Chile, Ghana, and India-to estimate the equilibriumthe deeper lessons on the intricacies of initiating indus- real exchange rate, the short-run dynamics of the actualtrial development in an outward direction in low-in- real exchange rate, the ERER index, and the correspond-come developing countries have yet to be explored and ing real exchange rate misalignment. And for Chile thearticulated. For Sub-Saharan Africa the decline in real study used a simple simulation model centered on theper capita GDP during the 1980s by more than 2 percent two real exchange rate equations to assess the potentiala year is evidence of the poor performance of the strategies implications for external competitiveness of a recentlypursued in the region. The most challenging task in the effected nominal exchange rate revaluation policy. Chile1990s is to find practical means for initiating an outward- and Ghana represent examples of a very proactive styleoriented development strategy in these countries. of macroeconomic and exchange rate policy. India, how-

Research and operational support work in the Bank ever, has maintained elaborate controls but followedduring the 1980s and the last half of the 1970s identified conservative macroeconomic and exchange rate policy.two major building blocks that are critical in low-in- The estimation results of the long-run cointegrationcome developing countries for initiating industrial de- equation of the equilibrium real exchange rate and thevelopment in an outward direction: export policy re- corresponding dynamic error-correction specificationgimes and export catalysts. More recent research has strongly corroborated the model and produced fairlyfocused on the role of collaboration between small- and consistent results across the three countries. And themedium-scale firms from industrial and newly indus- derived ERER indexes and the corresponding rates oftrializing countries and firms in developing countries, real exchange rate misalignment are consistent with theparticularly in Sub-Saharan Africa. ERER definition in that they confirm that the ERER is

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nota fixed, immutable number. This implies that simple research are robust to estimation techniques andPPP modeling of the real exchange rate could be a subperiods.misleading simplification. The derived indicators were Responsibility: International Economics Department,fairly successful in reproducing the salient episodes and Debt and International Finance Division-Stijncharacteristics of the three countries. Claessens; Financial Operations Department, Office of

Responsibility: Policy Research Department, Transi- the Director-Lester Seigel; and Information, Technol-tion and Macro-Adjustment Division-Ibrahim ogy, and Facilities Department, Information Engineer-Elbadawi. ing Division-Jerome Kreuser. With Bernard Dumas,

Completion date: March 1993. HEC; and Philippe Jorion and Roger Wets, University ofReport: California at Irvine.

Elbadawi, Ibrahim. Forthcoming. "Estimating Long-Run Completion date: June 1993.Equilibrium Real Exchange Rates." Policy Research Working Report:

Paper. World Bank, Policy Research Department, Washing- Dumas, Bernard, and Philippe Jorion. 1993. "The Optimal

ton, DC. Composition of External Debt: Application to Chile." HEC,Jouy-en-Josas, and University of California at Irvine.

Asset and Liability ManagementCommodity Modells

Many developing countries are exposed to currencyrisk(movementsincross-currency exchangerates). Large This project comprises ongoing research on themovements in their debt and debt service occur in construction and improvementof globalcommoditymod-response to swings in the exchange rates of the indus- els used in the International Trade Division's work intrial countries. developing the outlook for primary commodity markets,

This research looked at issues relating to exchange analyzing price policy for individual developing coun-rate risks for developing countries. First, it defined risk tries, and studying the effects of trade interventions.properly and distinguished movements in exchange The research has developed econometric models ofrates that can be anticipated from those that are unan- global markets, with a reasonable disaggregation to theticipated and thus lead to exchange risk. Second, the country and regional level.research determined that exchange rate risks-the un- Responsibility: International Economics Department,anticipated changes in exchange rates-can lead to ad- International Trade 1Division-Takamasa Akiyama,verse impacts on a country when assets are not balanced Maurice Thigpen, Mudassar Imran, Maw-Cheng Yang,with liabilities. Jonathan Coleman, Panos Varangis, Donald Larson,

Because a large share of the debt of many developing Donald Mitchell, and Merlinda Ingco. With Brent Borrell.countries is in dollars and most exports are denomi- Completion date: June 1993.nated in dollars, it may appear that there are still large Reports:exposures. But the research found that cash flows (or the Akiyama, Takamasa. 1992. "Is There a Case for an Optimaldirection of trade patterns and the basket used for Export Tax on Perennial Crops?" Policy Research Workingmanaging the domestic currency) are not relevant mea- Paper 554. World Bank, International Economics Depart-sures when export and import prices and volumes may ment, Washington, DC.be influenced by the exchange rates of a developing Akiyama, Takamasa, and Jonathan R. Coleman. 1993. "Acountry's main competitors and its trading partners. Production Function-Based Policy Simulation Model ofThe research indicates that the historic relationships Perennial Commodity Markets." Policy Research Workingbetween prices and exchange rates may dictate a certain Paper 1097. World Bark, International Economics Depart-optimal currency composition. ment, Washington, DC.

The research used Chile as a case study to verify this Akiyama, Takamasa, and Panos Varangis. 1991. "Priceanalytical model. It developed econometric techniques Stabilization for Raw Jute in Bangladesh." Policy Researchthat allow for a distinction between short-run and long- Working Paper 813. World Bank, International Economicsrun relationships between prices (and values) and ex- Department, Washingt:on, DC.change rates. It then applied these techniques, using Borrell, Brent. 1991. "How a Change in Brazil's Sugar Policieshistorical figures for Chile for 1972-91. The research Would Affect the World Sugar Market." Policy Researchfound that, because of a long-term, inverse relationship Working Paper 642. World Bank, International Economicsbetween export revenues (especially for copper) and Department, Washington, DC.exchange rates, a large fraction of nondollar (particu- Borrell, Brent, and Maw-Cheng Yang. 1990. "EC Bananaramalarly deutsche mark) debt would have been called- 1992." Policy Research Working Paper 523. World Bank,more than Chile actually borrowed. The results of the International Economics Department, Washington, DC.

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Coleman, Jonathan R., Takamasa Akiyama, and Panos N. private investment. This suggests dominant comple-Varangis. 1993. "How Policy Changes Affected Cocoa mentary relationships between the two types of invest-Sectors in Sub-Saharan African Countries." Policy Research ment.Working Paper 1129. World Bank, International Economics * The (lagged) growth rate of GDP has a significantDepartment, Washington, DC. positive effect on private investment.

Coleman, Jonathan R., and Maurice E. Thigpen. 1991. An * The foreign debt overhang and variables measur-Econometric Model of the World Cotton and Non-Cellulosic Fibers ing the degree of macroeconomic instability-such asMarkets. World Bank Staff Commodity Working Paper 24. the variance of the real exchange rate and of the inflationWashington, DC: World Bank. rate-have a negative and significant effect on private

- 1991. "Impact of Cotton Market Developments in China investment.and the Soviet Union on the United States Cotton Market." * The level of the real exchange rate has an insignifi-Paper presented at the Beltwide Cotton Conference, San cant negative effect on the level of private investment.Antonio, Texas, January. In addition, the analysis noted an asymmetry be-

. 1993. "Should Sub-Saharan Africa Expand Cotton tween the effects of macroeconomic policies on invest-Exports?" Policy Research Working Paper 1139. World Bank, ment and growth and the effects of liberalization poli-International Economics Department, Washington, DC. cies. Policies of macroeconomic restraint, when sharp

Larson, Donald F., and others. 1991. "Abolishing Green Rates: and protracted, adversely affect the level of investmentThe Effects on Cereals, Sugar, and Oilseeds in West in the short term. Liberalization policies, however, tendGermany." Policy Research Working Paper 607. World Bank, to affect the composition and productivity of invest-International Economics Department, Washington, DC. ment more, and they do so slowly over time. This

Thigpen, Maurice E., and Jonathan Coleman. 1991. "Oil Market asymmetryshould be considered in the design of growth-Disturbances: Short-Term Implications for World Textile oriented adjustment programs.Consumption with Emphasis on Cotton." Paper presented at The project's findings were presented at a Bank con-the Beltwide Cotton Conference, San Antonio, Texas, ference in March 1991.January. Responsibility: Policy Research Department, Transi-

tion and Macro-Adjustment Division-Luis Serven andAndr6s Solimano. With Robert Pindyck, Massachusetts

The Effects of Adjustment Policies Institute of Technology.on Investment and Growth Completion date: June 1993.

Reports:This project sought to contribute to the understand- Oks, Daniel, and Andres Solimano. Forthcoming. "Economic

ing of how adjustment policies affect capital formation Growth after Reform: The Cases of Chile and Mexico."and growth. Many policies affect the rate of GDP growth Serven, Luis, and Andrds Solimano, eds. Forthcoming. Fromthrough their impact on investment, which is one of the Adjustment to Sustainable Growth: The Role of Capital Forma-principal determinants of growth. tion. Washington, DC: World Bank.

The study observed two worrisome trends concern-ing investment in the practice of adjustment. First, pub-lic and private investment tends to fall at the beginning Investment in Low- and Middle-Incomeof an adjustment program involving comprehensive Countriesmacroeconomic restraint. In several cases the drop ininvestment rates was found to be quite sharp. And This research tested the hypothesis that commoditysecond, there is a considerable lag in the response of price shocks (such as the decline in oil prices) have beenprivate investment to liberalization policies. underestimated as a direct cause of declining invest-

The study's empirical component included analysis ment in the 1980s. The study estimated a microeconomicon East Asian, Latin American, and some African econo- investment model to determine the relative importancemies. The main finding of this analysis is that the cycle of three explanations for Mexico's investment decline inof initial contraction followed by (in several cases) a the early 1980s:long investment pause in the aftermath of adjustment is * The decline in oil pricesconfirmed for economies that started their adjustment * The termination of capital inflowsprograms from very deteriorated macroeconomic con- * The effects of debt overhang and uncertainty.ditions. The study used investment data for private indus-

On the determinants of investment, the econometric tries between 1981 and 1985-the first time that suchanalysis showed the following: data have been used in addressing these issues. The data

* There is a positive and significant relationship indicate that the main microeconomic mechanism driv-between the level of public investment and the level of ing the decline in investment was a rise in the relative

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price of investment goods--especially the relative price to evaluate the future prospects of regional integrationof machinery (a traded good in Mexico). Moreover, the in Sub-Saharan Africa. The research began with a sur-decline in trade (driven by falling world oil prices) vey of the major regional integration schemes in Sub-explains much of the increase in this relative price. Saharan Africa, examining each scheme's declared goals

The decline in Mexico's international terms of trade and achievements. After surveying theory and practice,was probably the most important ultimate cause of the the research concluded that, when the economic charac-increased relative cost of machinery, but the reversal in teristics of Sub-Saharan African countries and theirnet capital inflows to Mexico probably also played a role trading relations with their world partners are appro-in increasing this relative price. On this point the evi- priately taken into account, too much was expecteddence is less clear. The study found little evidence that from regional integration, especially with regard to thethe effects of debt overhang and uncertainty had much integration of the goods markets. The theoretical ben-to do with the decline in investment. efits that could have been derived from regional integra-

Investment in Texas and Louisiana (which were also tion went unattained for a host of complex reasons. Fore-riding the oil boom of 1973-81) also fell in 1981-86, and most among them is the disparity among the partners inadverse commodity price shocks also affected many level of economic development and the ensuing unevenother heavily indebted countries, Commodity price distributionof the gains from regionalintegration, coupledshocks (such as Mexico's decline in oil prices) have been with the inability of the partners to work out acceptableinsufficiently emphasized as a direct cause of declining and functional compensation mechanisms.investment levels in the 1980s in the literature on the The research used detailed trade statistics to assesseffects of the international debt crisis. the current level of intraregional and intra-Sub-Saharan

Responsibility: International Economics Department, African trade and to construct indices of trade imbal-International Economic Analysis and Prospects Divi- ance for each grouping considered. The research alsosion-Andrew Warner. used the gravity model to estimate econometrically the

Completion date: June 1993. potential or expected level of intra-Sub-Saharan tradeReport: and to compare this potential with actual trade. The

Warner, Andrew M. 1993. "Did the Debt Crisis or Declining Oil econometric analysis showed no systematic gap be-Prices Cause Mexico's Investment Collapse?" Policy tween the actual level of intra-Sub-Saharan AfricanResearch Working Paper 1102. World Bank, International trade and the expected level.Economics Department, Washington, DC. (Also forthcoming With regard to future prospects, the research foundin Journal of International Money and Finance). that if regional integration in Sub-Saharan Africa is tobe

pursued, as in the past, as an import substitution strat-egy, albeit at a regional. level, the chances of success will

Regional Integration in Sub-Saharan Africa continue to be meager. But the research also suggestedthat regionalism can be pursued in other, more fruitful

After achieving independence, all Sub-Saharan Afri- ways if the emphasis is shifted from goods marketscan countries attached considerable importance to re- toward coordinating and harmonizing policy.gional integration as a development strategy-as evi- Regional integration schemes continue to be activelydenced by the fact that all joined one or more regional pursued in the region. Thus, this research has consider-integration schemes. Interest in regionalism in Africa able relevance for Bank operations, and some of itshas recently strengthened in parallel with the renewed findings have indeed been put to use in operations.interest in regional agreements elsewhere in the world. Responsibility: Policy Research Department, TradeIt was thought that regional integration would enable Policy Division-Faezeh Foroutan.Sub-Saharan Africa to attain economic growth and pros- Completion date: June 1993.perity by allowing individual countries to overcome the Reports:barriers represented by their small size and poor human Foroutan, Faezeh. 1992. "Regional Integration in Sub-Saharanand physical capital endowments and break away from Africa: Experience and Prospects." Policy Research Workingheavy reliance on an undiversified structure of exports. Paper 992. World Bank, Policy Research Department,Yet, despite the numerous attempts to achieve regional Washington, DC.integration, Sub-Saharan African markets remain sur- - . 1993. "Regional Integration in Sub-Saharan Africa: Pastprisingly isolated from each other. Production and ex- Experience and FuturE Prospects." In Jaime de Melo andports show few fundamental structural changes, and Arvind Panagariya, ed s., New Dimensions in RegionalSub-Saharan Africa's growth record since the mid-1970s Integration. Oxford: Basil Blackwell.has been very disappointing. Foroutan, Faezeh, and Lant Pritchett. Forthcoming. "Intra-Sub-

The purpose of this research was to analyze the Saharan African Trade: Is It Too Little?" Journal of Africanreasons for the gap between expectation and reality and Economies.

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Regional Trading Blocs Trade in Services

Interest in regional trading arrangements-among in- The international dimension of service transactionsdustrial countries, among developing countries, and became a major policy issue in the 1980s. It was pushedamong industrial and developing countries-has grown to the forefront of policy agendas for both industrial andconsiderably in recent years. The reasons for the height- developing countries by the Multilateral Trade Nego-ened interest may be different in each case and are not tiations on services conducted in the framework of thealways clear. This research concentrated on identifying Uruguay Round. Independent of the negotiations, how-the gains and losses, particularly for developing countries, ever, the dynamism of foreign direct investment infrom participation in such arrangements, the effects on services throughout the 1980s, the large internationalthird countries, and the effects on the multilateral process labor movements, and the increase in the tradability ofof trade reform. It conducted detailed studies of the impli- knowledge-based services were all instrumental in ac-cations for Mexico of its participation in the proposed centuating the economic importance of internationalNorth American Free Trade Agreement. It also looked at transactions in services.the benefits and costs of a regional trading arrangement International transactions in services encompassfor the East Asian or South and East Asian countries. cross-border trade (such as transborder data flows),

The research examined the potential gains to Latin movement of consumers (such as tourism), temporaryAmerican countries from a free trade agreement (FTA) labor movements, and transactions related to foreignwith the United States. It found that the FTA would, on direct investment. Strictly speaking, international mi-the basis of existing trade barriers, raise Latin American gration is not included in this definition, but the distinc-exports by only 8 to 9 percent, with Brazil and Mexico tion between temporary and permanent migration isgaining the most. The increases in exports realized by not always easily established.others would be relatively smaller because they pres- This research was designed to address conceptualently face lower barriers. questions regarding international transactions in ser-

The research looked at how Multi-Fibre Arrange- vices and to provide updated information on the impor-ment (MFA) quotas currently on U.S. imports from tance of services and international migration in theMexico will be replaced by rules of origin designed to world economy. It also addressed the implications formaintain the essential features of the existing regime. It developing economies of liberalizing trade in services.found that Mexico's compliance with a "multiple trans- The study assembled balance-of-payments and for-formation" rule of origin should not be onerous because eign direct investment data on service-related activitiesof the high dependence on U.S. inputs. for industrial and developing countries. It analyzed the

Finally, the research looked at the effects of a U.S.- costs and benefits of liberalizing international serviceMexico bilateral liberalization of sweetener trade. It transactions and prepared an inventory of autonomousfound that piecemeal bilateral changes could impose liberalization movements in developing countries overhuge costs on third-country sugar exporters. Elimina- the period 1986-91.tion of protection of sugar producers in Mexico and the The research argued that the concept of comparativeUnited States could increase the world price by an advantage can be applied to international transactionsestimated 15 percent. in services. Like the liberalization of trade in goods,

Responsibility: International Economics Department, liberalizing services will produce benefits in the form ofInternational Trade Division-Alexander Yeats, Carlos increased efficiency in the allocation of resources andPrimo Braga, and Patrick Low. expanded consumption possibilities. The possibility that

Completion date: June 1993. the liberalization of services would entail an increase inReports: foreign direct investment and labor flows is an addi-

Bannister, Geoffrey, Patrick Low, and Christopher Holmes. tional benefit because these effects should expand the1992. "North American Free Trade in Textiles and Apparel: scope for diffusing knowledge and may lead to in-A Case of Constrained Liberalization." World Bank, creases in the productivity of existing domestic re-Washington, DC. sources. The study also shows that an autonomous

Borrell, Brent, and Jonathan R. Coleman. 1991. "Gains from liberalization movement in the services sector has beenTrade in Sugar and the U.S.-Mexico Free Trade Agreement." evolving in developing countries since 1986.World Bank, Washington, DC. The study also looked at international migration,

Erzan, Refik, and Alexander Yeats. 1992. "Free Trade Agree- reviewing global and regional trends in populationments with the United States: What's in It for Latin movements, conceptual issues, and recent trends in theAmerica?" Policy Research Working Paper 827. World Bank, volume of remittance flows. It analyzed the extent toInternational Economics Department, Washington, DC. which trade, aid, and development can be expected to

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stem future migration flows and the relationship be- restricted markets. This implies that, should any rentstween international trade and migration. occur because the quotas are binding, the exporting

The study shows that directly measurable economic countries will get those rents. How to administer li-flows from international migration are substantial and censes and how to dispose of these rents then becomethat migration can affect the character of trade in com- additional policy issues for exporting countries subjectmodities and services. Over generations, rapid economic to VERs. How should the quota rights be distributed,development can be expected to moderate the pressures and who should get the rents? Another characteristic ofthat produce out-migration. But over the short term, VERs is that they are usually negotiated for broaddevelopmentcan increase the propensities for movement, product categories (the tightly defined product catego-bothbecause development itself altersprevious social and ries under the MFA are exceptions). This means thateconomic patterns and because trade, aid, and develop- there is room for adjustment in the product mix withinment policies often unwittingly work at cross-purposes. firms in exporting countries. Will there typically be

Responsibility: International Economics Department, product upgrading or product downgrading?International Trade Division-Carlos A. Primo Braga. This study looked at how Korea (and other successfulWith Sharon Stanton Russell, Massachusetts Institute of East Asian manufacturing exporters) handled theseTechnology; and Michael S. Teitelbaum, Alfred P. Sloan VERs. It reviewed the distinguishing characteristics ofFoundation. The Transnational Corporations and Man- VERs, as well as the evidence on Korean quota utiliza-agement Division of the United Nations contributed to tion rates in the European Community, which are per-this research by providing access to its data base on sistently high compared with those of most other ex-foreign direct investment. porting countries. The study then analyzed incentives

Completion date: June 1993. for product mix adjustment under a VER, showing thatReports: quality upgrading is not a necessary outcome. The study

Primo Braga, Carlos A. 1993. "International Transactions in provided evidence on price and quality shifts for KoreanServices: A Primer." Background paper for the United leather footwear exports during the Orderly MarketingNations and the World Bank, Liberalizing International Agreement negotiated by Korea with the United States.Transactions in Services: A Handbook. New York: United The analysis, carried cut at a very disaggregated level,Nations; and Washington, DC: World Bank, forthcoming. indicated that there were rents (and hence binding quo-

Russell, S.S., and M.S. Teitelbaum. 1992. International Migration tas), but also mild quality downgrading.and International Trade. World Bank Discussion Paper 160. The natural question to ask of countries that haveWashington, DC. coped successfully with VERs is what they have done

right. The study argued that the two-tier quota alloca-tion mechanism (as well as transferability among quota

Voluntary Export Restraints holders) must have been an important factor contribut-and the Republic of Korea's Trade Policy ing to their successful adjustment. The study developed

a simple model that shows how a two-tier allocationSuccessful exporters of manufactures such as the mechanism, though inefficient, mops up the rents from

Republic of Korea and Taiwan (China) increasingly producers by inducing them to diversify their exportsencountered nontariffbarriers (NTBs) in industrial coun- towards hitherto unrestricted markets.try markets for their principal exports as their market The study conducted a case study of Korean export-shares grew and as industrial economies lost the use of ers' adjustment to the footwear VER. It examined thetariffs as an instrumentof protection. Thebest-known- negotiations with the United States and the ensuingandperhapsmostdamaging-nontariffbarrierhasbeen domino effect that occurred as the VER spread to otherthe successive rounds of bilateral quotas negotiated countries. This domino effect is an additional rationaleunder the Multi-Fibre Arrangement (MFA). But NTBs for the two-tier quota allocation mechanism. The studyspread to many commodities in the early 1970s, and by also carried out a partial equilibrium econometric andthe late 1970s a significant share of Korean exports was simulation analysis of the welfare effects of the footwearunder some form of NTB. Coping with NTBs therefore VER. The simulations suggest that, despite the potentialbecame a major concern for Korean trade policy. benefits of rent transfers, VERs are still likely tobe costly

Besides the tightly negotiated bilateral quotas under for exporting countries. The study suggests, however,the MFA, voluntary export restraints (VERs) were the that Korea adopted policies that minimized the adverseinstrument most frequently used to control exports. effects of VERs.VERs, like most other NTBs, are negotiated outside of Responsibility: Policy Research Department, Tradethe GATT on a bilateral basis. The negotiations invari- Policy Division-Jaime de Melo.ably stipulate that exporters administer licenses to the Completion date: July 1993.

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Manufactures Trade Modeling Participation of Developing Countries." Presented at theODI Conference on Economic Prospects for Developing

Trade in manufactures is the fastest-growing compo- Countries: Patterns of Industrial Production and Developingnent of trade for developing countries. To improve our Country Trade, London, October.understanding of these trade flows and of their poten- Martin, William, and Koji Yanagishima. 1993. "Concerted Tradetial, this project constructed a number of global models Liberalization and Economic Development in the Asia-for analyzing such trade. Pacific Region." Paper presented for study on East Asian

The work has combined econometric analysis and Regional Initiative, World Bank, June.simulation modeling. It has developed an econometricmodel of the determinants of manufactures exports andused it to provide evidence on the magnitude of the key The U.S. Textile Industrybehavioral parameters-the elasticities of response of under the Multi-Fibre Arrangementaggregate manufactures exports to changes in relativeprices. It then incorporated these parameters into a This research will attempt to answer two questions:simulation model of world manufactures trade. Why has the U.S. textile industry been more successful

The study has used the manufactures trade simula- than other U.S. industries in obtaining protection? Andtion model to investigate the "fallacy-of-composition" why has protection since the 1930s tended to be in theargument: that individual countries may be made better form of negotiated export restraints?off by an expansion of their manufactures exports, but The analysis of the case will be broken down intothat developing countries as a group would be made three time periods. For each period the analysis willworse off if they all expanded their exports simulta- proceed by identifying the groups that were activelyneously. The research placed considerable importance involved, the arguments-both for and against protec-on specifying the precise cause of the expansion of tion-that they presented, the background politics ofmanufactures exports. For the most important case-in trade policy against which their arguments would havewhich the expansion is due to improvements in produc- been evaluated, and the mechanics of applying policy totivity or the accumulation of specific factors in the particular cases.manufacturing sector-the study obtained a result that The study will analyze the U.S. industry, to deter-was exactly the opposite of that implied by the fallacy- mine how and why it became organized. In each period,of-composition argument. A simultaneous expansion was the cotton manufactures industry more closelyof manufactures exports in all developing countries organized than other U.S. industries? That is, does thisactually increased the gains experienced by each devel- dimension differentiate between the textile industryoping country region. The declines in export prices and other industries?resulting from expansion of manufactures exports ben- The research will look at industries in exportingefited the developing countries, which are net importers countries. For example, it will attempt to identify theof manufactures and which frequently have relatively impetus for the Japanese industry's organization by thestrong trade linkages in manufactures. 1930s into an entity that could negotiate and police

The project developed a revised and extended ver- export limits. And it will look at the development of thesion of the manufactures trade model in 1993 to analyze industries in other countries as they became significantconcerted trade liberalization options in the Asia-Pa- exporters, to determine whether the MFA had an impor-cific region for the Bank's East Asia regional office. tant effect on how these industries evolved. Were there

Responsibility: International Economics Department, other, perhaps internal influences?International Trade Division-William Martin, Koji The study will analyze the behavior of consumers,Yanagishima, and Nader Majd. retailers, and wholesalers. It will assess whether mov-

Completion date: December 1993. ing to the next potential supplier was always the lower-Reports: cost strategy for purchasers.

Martin, William. 1992. "The Fallacy of Composition and The behavior of fiber producers in the United StatesDeveloping Country Exports of Manufactures." World Bank, will also be analyzed. When the industry was domi-Washington, DC. nated by cotton and Japan was an important export

. 1992. "A Numerical Model of World Trade in Manufac- market for U.S. cotton, did U.S. cotton producers objecttures." World Bank, Washington, DC. to restrictions on imports from Japan? Did Japan ever

Martin, William, and S. Gurmu. 1991. "Growth, Structural threaten to switch sources of cotton? The study will lookTransformation, and Trade in Manufactures." World Bank, at what arguments were made, who made them, and toWashington, DC. whom these arguments were addressed. For example,

Martin, William, and Vasilis Panoutsopoulos. 1991. "The did Japanese producers attempt to influence U.S. publicChanging Composition and Direction of Trade and the opinion? Was the U.S. textile industry unique in taking

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on the argument that protection would abet the spread Responsibility: International Economics Department,of communism? International Trade Division-Takamasa Akiyama, Panos

An important part of the story is how the U.S. indus- Varangis, and Boum-Jong Choe. With Pravin Trivedi.try and the leading foreign exporters used existing trade Completion date: June 1994.policy mechanisms, and how they influenced the cre- Reports:ation of new mechanisms. Akiyama, Takamasa, and Fravin K. Trivedi. 1991. "Stabilizing

Responsibility: Policy Research Department, Trade Imported Food Prices for Small Developing Countries: AnyPolicy Division-J. Michael Finger. Role for Futures?" Paper presented at the 21st International

Completion date: March 1994. Conference of Agricultural Economists, Tokyo, August.Alogoskoutis, G., and Panos Varangis. 1992. "OECD Fiscal

Policies and the Relative Prices of Primary Commodities."Commodity Price Formation and Behavior Policy Research Working Paper 955. World Bank, Interna-

tional Economics Department, Washington, DC.Developing countries are heavily dependent on ex- Choe, Bourn-Jong. 1990. "Commodity Price Forecasts and

ports and imports of primary commodities. They are Futures Prices." Policy Research Working Paper 436. Worldthus very susceptible at both micro and macro levels to Bank, International Economics Department, Washington,sharp changes in commodity prices. A better under- DC.standing of commodity price behavior would lead to .1990. "The Metals Price Boom of 1987-89: The Role ofbetter price policies, including better policies for man- Supply Disruptions and Stock Changes." Policy Researchaging price risks. A better understanding would also Working Paper 542. World Bank, International Economicsimprove the International Trade Division's ability to Department, Washington, DC.forecast prices-to the extent that it is possible. Achiev- _. 1990. "Rational Expectations and Commodity Priceing an improved understanding of commodity price Forecasts." Policy Research Working Paper 435. World Bank,behavior requires answers to such questions as: What International Economics Department, Washington, DC.are the main influences on commodity price move- _. 1992. "The Precautionary Demand for Commodityments? How do these factors influence price move- Stocks."ments? Are these influences random? Palaskas, Theodosios B., and Panos N. Varangis. 1991. "Is There

This research seeks to contribute to the understand- Excess Co-Movement of Primary Commodity Prices? Aing of commodity price behavior by investigating the Cointegration Test." Policy Research Working Paper 758.statistical properties of the time series of prices. It also World Bank, International Economics Department, Washing-investigates the relations between macroeconomic vari- ton, DC.ables (such as interest rates, exchange rates, inflation Qian, Ying. 1990. "Do Steel Prices Move Together? Arates, and industrial production) and the formation and Cointegration Test." Policy Research Working Paper 453.behavior of primary commodity prices. And it examines World Bank, International Economics Department, Washing-the relation between stockholding behavior and com- ton, DC.modity price movements. Trivedi, Pravin K. 1991. "Time-Series Behavior of Some

The research has found that there is a highly nonlinear Commodity Prices."relation between stocks of a commodity and its price Trivedi, Pravin K., and Panos Varangis. 1991. "Excess Co-movements. When stocks decline to low levels, the movement of Commodity Prices: A Statistical Illusion?"ability to dampen price movements is sharply reduced. Varangis, Panos. 1990. "How Integrated Are Tropical TimberMost commodity prices do not appear to follow a ran- Markets?" Policy Research Working Paper 465. World Bank,dom walk, as long believed. Stock-out periods are peri- International Economics Department, Washington, DC.ods of linear dependence in the series. Of the macroeco-nomic variables, the real interest rate exerts the stron-gest influence on commodity prices. Commodity Risk Management

Itisgenerallynotpossible toforecastcommoditypricesaccurately. The preliminary results of this study suggest High exposure to volatility in primary commoditythat greater emphasis should be put on the use of financial prices continues to bedevil many developing countries.market instruments for managing commodity price risk. The International Economics Department's technicalFor this reason also, Bank project evaluation should pay assistance program on managing commodity price riskmore attention to analyzing the riskiness of projects in- is helping them manage the risk through the use ofvolving primary commodities. Where possible, price- financial market instruments. This research will sup-hedgingstrategiesshouldbe incorporated. Industrialcoun- port the department's technical assistance efforts in thistry policies that affect real interest rates will have an area. First, it will further investigate circumstances inimportant influence on primary commodity prices. which it may be useful to use domestic stabilization

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schemes in conjunction with financial hedging instru- Larson, Donald F., and Jonathan Coleman. 1991. "The Effects ofments. And second, it will evaluate the possibility of Option-Hedging on the Costs of Domestic Price Stabilizationsubstituting electronic trading of forward contracts for Schemes." Policy Research Working Paper 653. World Bank,

the (absent) futures markets for some commodities. International Economics Department, Washington, DC.Research over the past year has concentrated on the

role that financial risk management instruments canplay in hedging commodity price risks. An important Eastern Europe and EC-92role and an immediate application in managing pricerisks over short- and long-term periods can be seen in This project is looking at the trade responses to thethe participation of developing countries in trade in collapse of the Council for Mutual Economic Assistancepetroleum and petroleum products-whether as ex- (CMEA) and the breakup of the former Soviet Union.porters or as importers. Other research pointed to the And it is examining the new trading relationships de-benefits that the use of the new financial instruments- veloping between Central and Eastern Europe, Westerncommodity swaps and commodity bonds---could have Europe, and the new independent states of the formerin managing the risks associated with developing coun- Soviet Union.tries' foreign debt portfolios. Besides the working papers Responsibility: International Economics Department,produced, a book will be published on the department's International Trade Division-Alexander Yeats, Bartekexperience with technical assistance in this area. Kaminski, and Refik Erzan.

Responsibility: International Economics Department, Completion date: June 1994.International Trade Division-Ronald C. Duncan, Panos Reports:Varangis, and Ying Qian, and Debt and International Erzan, Refik, Christopher Holmes, and Raed Safadi. 1992. "HowFinance Division-Stijn Claessens. The Federal Office Changes in the Former CMEA Area May Affect Internationalfor Economic Affairs, Switzerland, is providing finan- Trade in Manufactures." Policy Research Working Papercial support. 973. World Bank, International Economics Department,

Completion date: June 1994. Washington, DC.Reports: Kaminski, Bartek. 1993. "The Foreign Trade Dimension of the

Akiyama, Takamasa, and Panos Varangis. 1991. "Price Market Transition in Poland." Policy Research Working

Stabilization for Raw Jute in Bangladesh." Policy Research Paper 1144. World Bank, International Economics Depart-

Working Paper 813. World Bank, International Economics ment, Washington, DC.

Department, Washington, DC.

Claessens, Stijn, and Jonathan Coleman. 1991. "Hedging

Commodity Price Risks in Papua New Guinea." Policy The Trade Impact of the BreakupResearch Working Paper 749. World Bank, International of the Former Soviet UnionEconomics Department, Washington, DC.

Claessens, Stijn, and Ying Qian. 1991. "Risk Management in This project is analyzing the trading relationships ofSub-Saharan Africa." Policy Research Working Paper 593. the former Soviet Union (FSU) with the industrial andWorld Bank, International Economics Department, Washing- developing countries since its breakup. Ongoing workton, DC. is looking at the trading relationship between the new

Claessens, Stijn, and Panos Varangis. 1991. "Hedging Crude Oil independent states and India and at the trade barriersImports in Developing Countries." Policy Research Working that the FSU republics face in the OECD countries.Paper 755. World Bank, International Economics Depart- The research has contributed to a seminar for thement, Washington, DC. executive directors of the World Bank on developments

Coleman, Jonathan R., and Donald F. Larson. 1991. "Tariff- in the foreign trade of the new independent states of theBased Commodity Price Stabilization Schemes in Venezu- former Soviet Union.

ela." Policy Research Working Paper 611. World Bank, Responsibility: International Economics Department,International Economics Department, Washington, DC. International Trade Division-Alexander Yeats and

Coleman, Jonathan R., and Ying Qian. 1991. "Managing Financial Bartek Kaminski.

Risks in Papua New Guinea: An Optimal External Debt Completion date: June 1994.

Portfolio." Policy Research Working Paper 739. World Bank,International Economics Department, Washington, DC.

Larson, Donald F. 1993. "Policies for Coping with Price Regional Integration in AsiaUncertainty for Mexican Maize." Policy Research Working

Paper 1120. World Bank, International Economics Depart- This study, part of a larger research effort organizedment, Washington, DC. by the Bank's East Asia and Pacific Region, Office of the

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Vice President, examines the potential for a "principal Borrell, Brent, and Maw-Cheng Yang. 1992. "EC Bananaramasupplier" exchange of trade liberalizations among Asian 1992: The Sequel-The EC Commission Proposal." Policydeveloping countries. The study posits that each Research Working Paper 958. World Bank, Internationalcountry's concessions will be made on a most-favored- Economics Department, Washington, DC.nation basis-that is, that the reductions of import bar- Hughes Hallett, A.J. 1992. "The Impact of EC-92 on Developingriers by the participating Asian developing countries Countries' Trade: A Dissenting View." Policy Researchwill be applied to imports from all countries, not just to Working Paper 885. World Bank, International Economicsimports from other Asian developing countries. Department, Washington, DC.

The basic idea of the analysis is to follow the format Martin, Will. 1993. "What Would Happen If All Developingof early rounds of GATT negotiations: to restrict the Countries Expanded Their Manufactured Exports." Policy"spillover" of benefits from concessions to the countries Research Working Paper 1110. World Bank, Internationalthat make reciprocal concessions by identifying a basket Economics Department, Washington, DC.of goods that these countries import principally from Primo Braga, Carlos A., and Alexander Yeats. 1992. "Howeach other. After identifying this basket, the analysis Minilateral Trading Arrangements May Affect the Post-will determine for each participating country the value Uruguay Round World." Policy Research Working Paperof the exports on which it will receive concessions and 974. World Bank, International Economics Department,the value of the imports on which it will make conces- Washington, DC.sions. The plausibility of such a set of concessions being Qian, Ying, and Ronald C. Duncan. 1993. "Privatization,agreed to will be assessed by comparing the degrees of Concentration, and Pressure for Protection: A Steel Sector"balance" (between concessions made and concessions Study." Policy Research Working Paper 1112. World Bank,received) among countries and by comparing the de- International Economics Department, Washington, DC.gree of "internalization" (percentage of concessions Qian, Ying, and Panos Varangis. 1992. "Does Exchange Ratereceived by participating countries rather than outsid- Volatility Hinder Export Growth? Additional Evidence."ers)withinternalizationfiguresfromearly GATTrounds. Policy Research Working Paper 911. World Bank, Interna-

Responsibility: Policy Research Department, Trade tional Economics Department, Washington, DC.Policy Division-J. Michael Finger. Safadi, Raed, and Alexander Yeats. 1993. "The North American

Completion date: June 1994. Free Trade Agreement: Its Effect on South Asia." PolicyResearch Working Paper 1119. World Bank, InternationalEconomics Department, Washington, DC.

Trade Policy Studies

This ongoing project in the International Trade Divi- Tariff Uniformity and Optimalitysion focuses on issues relevant to the performance of theinternational trading system and trade issues of general This study is analy2ing the optimality of uniformrelevance for World Bank member countries. In the tariffs and value-added taxes. It views trade reform as acoming year the research will look at several issues. part of the overall tax reform and explains under whatFirst, it will examine the use of "rules of origin." These circumstances tariff and tax uniformity is desirable. Theappear to be the cutting edge of protectionism in the findings of the analysis were presented at a conferencemove away from tariffs. Second, it will develop tariff- in India in August 1993,equivalentmeasures of rules of originand othernontariff The project will also pull together, for publication informs of protection. Third, it will analyze the role of a symposium issue of the Economic Studies Quarterlyantidumping, safeguards, and minimum export prices (published in Japan), papers written in the Policy Re-in developing country trade policy. And fourth, it will search Department over the past six years on the eco-investigate the likelihood of the extension of competi- nomics of tariff unifornity.tion policy disciplines into the international arena. Responsibility: Policy Research Department, Trade

Responsibility: International Economics Department, Policy Division-Arvind Panagariya, and Public Eco-International Trade Division-Ronald Duncan, nomics Division-Shantayanan Devarajan.Alexander Yeats, Patrick Low, and Will Martin. Completion date: December 1994.

Completion date: June 1994.Reports:

Bannister, Geoffrey, and Patrick Low. 1992. "Textiles and Controlling RecidivismAppare] in NAFTA: A Case of Constrained Liberalization."Policy Research Working Paper 994. World Bank, Interna- Constituent pressures for trade restrictions are inevi-tional Economics Department, Washington, DC. table. A government, to maintain its momentumtoward

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trade liberalization, must have orderly procedures not China's Trade Regimeonly to develop and advance new liberalization initia-tives, but to respond to constituent pressures for new or This research project has systematically analyzed thecontinued protection in a manner that does not compro- complex trade regime of China. It argues that the corner-mise the process of liberalization. That is, it needs to find stone of Chinese trade policy has been export promo-a way to control recidivism. tion: China has engaged in both geographical and sec-

To control recidivism, a government must find a way toral targeting. The research also found that the strictto say no to requests for protection-a way that does not export quotas given to state enterprises played an im-turn the rebuffed petitioner into an active enemy of the portantroleinChina'sspectacularperformanceinworldliberalization program. The government mustalso avoid markets during the 1980s.backsliding into the administrative quicksand of bu- This research has contributed to the East Asian Miraclereaucratic protectionism-a phenomenon that in the study.1980s significantly changed the liberality of trade poli- Responsibility: Policy Research Department, Tradecies of industrial countries. Policy Division-Arvind Panagariya.

This project centers on studies of about 10 develop- Completion date: September 1995.ing countries that have implemented significant trade Report:policy reforms. It will identify incidents in which a Panagariya, Arvind. 1993. "Unravelling the Mysteries of China's

country has considered or allowed a significant excep- Foreign Trade Regime." World Economy (January).

tion to its liberalization program. Examples of theseincidents would include a case in which a country hascreated a protectionist instrument such as a reference GATT Rules and Developing Countriesprice system or an antidumping system, or has imposedimport restrictions that were a significant departure This project comprises a series of studies of problemsfrom or reversal of its liberalization program. In a case of the GATT system thatare of particular importance forin which a specific restriction has been introduced, the developing countries.research will identify the nature of the economic prob- A study that examined the GATT's influence onlem facing the sector thatpressed for exceptional protec- regional arrangements found that the GATT's rulestion and isolate the causes of the problem. It will be regarding the properties required of a regional arrange-important to determine whether the sector's situation ment have not been rigorously applied-in large partwas, in fact, exceptional. The research will then identify because the GATT member countries found that theythe argument that the sector used to justify its request did not give expression to concerns considered impor-for exceptional protection, and the administrative or tant in cases brought forward. The GATT as an institu-political mechanisms through which a proposal for tion, however, has been important. It has provided aexception was transformed into a reality. Past experi- venue that countries outside regional trading blocs canence indicates that it is important to look into the rheto- use to defend their access to those markets.ric and into the process of such events. A second study reviewed the recent explosion of

In some cases the policy event under study will be the legal antidumping and other actions to restrict imports.passage of an antidumping law, or the adoption of a It concluded thatrecent changes in GATT rules concern-reference price system or some other sort of "safeguard" ing these actions have not strengthened the GATT's disci-procedure. The reasons for creating such a policy instru- pline over such actions. Instead, these changes are thement are often economic problems encountered by a product of pressures from the major users of such instru-few sectors: it is always tempting for a government to ments to broaden the scope of GATT rules until theymake a rule rather than to make a decision when it is sanction the wider applications to which the users havepushed hard to make an exception to a general policy. been driven by their own countries' domestic politics.

The project will provide a tabulation of the ways in A third study looked at antidumping in the context ofwhich developing countries have approached this issue the GATT dispute settlement mechanism. It concludedand analyze best practice among developing countries, that the same pressures that have stretched the GATTAnd it will prepare a model safeguards regulation that rulestoallowincreasingapplicationofantidumpingmea-would put into practice the lessons learned in the analy- sures are now working to render the GATT dispute settle-sis of developing country experience. ment mechanism ineffective. GATT findings concentrate

Responsibility: Policy Research Department, Trade on procedural errors that can be corrected without liftingPolicy Division-J. Michael Finger. the antidumping measure being challenged.

Completion date: January 1995. Responsibility: Policy Research Department, Trade

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Policy Division-J. Michael Finger. Uruguay Round." In Robert M. Stem, ed., Analytical andCompletion date: June 1996. Negotiating Issues in the Global Trading System. Ann Arbor:Reports: University of Michigan Press.

Finger, J. Michael. 1993. "GATT's Influence on Regional Finger, J. Michael, and K.C. Fung. 1993. "Can CompetitionArrangements." In Jaime de Melo and Arvind Panagariya, Policy Control '301'?" Paper for discussion at a researcheds., New Dimensions in Regional Integration. London: seminar on Approaches to Competition Policy in Interna-Cambridge University Press. tional Trade, Hochschule St. Gallen, Switzerland, September

Finger, J. Michael, and Sumana Dahr. Forthcoming. "Do Rules 16-18.Control Power? GATT Articles and Agreements in the

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ECONOMIC MANAGEMENT

How Do National Policies Affect Center for Economic Growth contributed funding to theLong-Run Growth? research.

Completion date: March 1993.Ref no. 676-66C

This project analyzed cross-country and case studyevidence to quantify the effects on per capita growth of Total Factor Productivity Growthfinancial sector policy, macroeconomic policy, foreign in Industrial and Developing Countriesdirect investment, fiscal policy, investment in equip-ment, and educational attainment. The basic message Ref. no. 676-67Cemanating from the research is that fundamentals do This research was part of a larger effort by the Bankwork: deep financial systems, good infrastructure, mac- to improve its understanding of why the growth rates ofroeconomic stability, education of boys and girls, and countries differ so markedly over the long term. Theopenness to foreign direct investment will generate main objective of theresearchwas to quantifythesourceshigher growth in an economy than it would experience of long-term economic growth in industrial and devel-if it lacked these fundamentals. oping countries.

The project's main findings include the following: Considerable effort was devoted in the research to* The deepening of the financial sector importantly collecting and improving time-series data on human

stimulates economic growth over subsequent years by and physical capital stock for a wide range of industrialimproving resource allocation and increasing produc- and developing countries. A new data base on humantivity growth. capital stock was developed for 85 countries covering

* Investment is critical-but some investments are the period 1960-87. The series were built from enroll-more critical than others. Policies that cripple equipment data using the perpetual inventory method: thement investment cripple growth. Another key is infra- data were adjusted for mortality and corrected for coun-structure-public investment in transport and commu- try-specific grade repetition and drop-out rates. Analy-nications yields very high social returns. sis suggested that these education stock data could

* An increase in female education lowers popula- serve as a useful proxy for human capital in productiontion growth and raises school enrollment by both girls function analysis.and boys. Women's average years of education have Similarly, a new data base on physical capital stockbeen rapidly catching up to men's in Asia-but not in estimates was prepared for 92 developing and indus-Africa. trial countries for 1960 to 1990. A special effortwas made

* Growth is unstable; countries can be success sto- to compile investment series from 1950 onward for asries one decade and disappointments the next. While many countries as possible, and these were then aggre-getting policies right is critical for growth, policy re- gated according to a perpetual inventory method. Informs over the period 1970-90 were often not dramatic addition, alternative techniques were used to estimateenough to offset bad shocks. an initial capital stock; a modified Harberger approach

The results of the project were presented at a confer- was considered most suitable.ence in February 1993. And the data used in the studies Aggregate production functions were then estimatedare being compiled into a compatible, easily accessible using cross-section, time-series, pooled regressions toform for speedy distribution to meet the demand that estimate the contributions of production inputs andthe project has generated. total factor productivity to overall economic growth. In

Responsibility: Policy Research Department, Transi- addition to standard within-regressions, error correc-tion and Macro-Adjustment Division-William East- tion models were used to estimate total factor produc-erly, Ross Levine, and LantPritchett. With Stanley Fischer tivity growth.and Michel Kremer, Massachusetts Institute of Technol- The data estimated during the project-human andogy;RobertBarro,HarvardUniversity;RobertKingand physical capital stock and total factor productivitySergio Rebelo, University of Rochester; and Paul Romer, growth-are available in electronic form and will beUniversity of California at Berkeley. The International distributed on diskette to researchers within the Bank as

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well as to outside analysts and other research organiza- The projects chosen represent a spectrum of socialtions. investments with a variety of outcome measures in

Responsibility: International Economics Department, countries at different stages of development. The re-Office of the Director-Vikram Nehru, International search has used quantitative evaluation methodolo-Economic Analysis and Prospects Division-Ashok gies-reflexive comparisons, matched comparisons, andDhareshwar, and Socio-Economic Data Division-Eric experimental designs--and qualitative assessments toSwanson. With Jere Behrman, University of Pennsylva- assess and demonstrate the applicability and validity ofnia; Ashutosh Dubey, University of Maryland; Alain different methodological approaches.D'Hoore, Johns Hopkins University; Kavita Mathur; Each quantitative evaluation seeks to answer theand Qingying Kong, Georgetown University. same counterfactual question: What would the welfare

Completion date: June 1993. of the beneficiaries have been if the project had not beenReports: implemented or if some aspect of it had been changed?

Behrman, Jere R., and M. Rosenzweig. 1993. "Aggregate Data on Since these social sector evaluations involve sophisti-Schooling Investments and Stocks: Data Problems and Their cated econometric approaches, a paper on the technicalConsequences." University of Pennsylvania, Department of approaches to estimating counterfactual results will beEconomics. Draft. commissioned as part of the project.

Nehru, Vikram, and Ashok Dhareshwar. 1993. "New Estimates The YTEPP in Trinidad and Tobago is a Bank-of Total Factor Productivity Growth." World Bank, Interna- financed program that prepares youth for employmenttional Economics Department, Washington, DC. Draft. and entrepreneurship. In July 1993 the YTEPP will

. Forthcoming. "A New Database on Physical Capital complete the third tracer study of program graduatesStock: Sources, Methodology, and Results." Revista Analisis and of a control group that was constructed using ade Economico. matched comparison. The results of the research to date

Nehru, Vikram, Eric Swanson, and Ashutosh Dubey. 1993. "A reveal that over the course of the year since their gradu-New D'atabase on Human Capital Stock Sources, Methodol- ation, 22.3 percent of the YTEPP graduates had made anogy, and Results." Policy Research Working Paper 1124. attempt to set up their own business, compared with 4.5World Bank, International Economics Department, Washing- percent of the non-YTEPP control group. Furthermore,ton, DC. before undergoing YTEPP training 13.6 percent of the

students had been employed, compared with 46.1 per-cent one year after graduation. In response to manage-

Evaluations of Social Sector Investments ment concerns, the tracer study is also following up onspecific groups of graduates (such as those who have

Ref. no. 676-90 been setting aside savings from wage work to start theirThe World Bank routinely reviews project loans, but own businesses).

rarely evaluates the effect of an investment on social Evaluating Bolivia's complex SIF has called for allwelfare. Given the Bank's central focus on poverty and three evaluation strategies: a reflexive comparison tothe increased emphasis on obtaining reliable on-the- evaluate the impact in the health sector, a matchedground results from development projects, there is a comparison in water and sanitation, and an experimen-need for an institutionalized evaluation process that tal design in education. A pilot evaluation is beingwill allow task managers and policymakers to assess the completed in the El Chaco region of Bolivia before thequality of social sector investments. This research is evaluation is extended to the rest of the country. Theattempting to develop such a methodology. baseline survey in the El Chaco region was completed in

The researchers worked with project managers and June 1993. This will be followed by a qualitative assess-government officials in designing, monitoring, and evalu- ment to complement the quantitative work.ating components of three ongoing Bank projects in the The Venezuelan evaluation project illustrates theLatin America and Caribbean region: the Bolivian Social difficulties associated with conducting evaluations inInvestment Fund (SIF), the Venezuelan Social Develop- anunstable political environment. The evaluationprojectment Project, and the Youth Training and Employment has survived numerous cabinet reshufflings and thePartnership Program (YTEPP) in Trinidad and Tobago. breakdown of the Perez government. But even though

The objectives of the research are to ascertain the there has been no change in the objective of the evalua-extent to which the projects have increased the welfare tion-to study the health and nutritional impact of theof the beneficiaries above what it would have been in the PAMI program by analyzing administrative recordsabsence of the project; to evaluate the adequacy and from the clinics and the PAMI Foundation-uncertain-cost-effectiveness of the instruments used to target the ties have delayed the project and reduced its scope fromprojects; and to provide methodological guidance for a countrywide impact evaluation to an evaluation in thechoosing among competing social sector investments. federal district and the state of Trujillo. The most recent

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Economic Management

Venezuelan household survey is being examined to nificance of more accurate inflation reporting on officialdetermine the effectiveness of the targeting. GNP deflators and hence official GNP growth rates.

The study will produce a book containing a case The research depended most heavily on China's 1987study of each of the social sectorprojects and a synthesis. input-output tables (published in 1991), on customsA workshop will be held in the fall of 1995 to assess the statistics, and on a variety of officially published pricefindings and lessons from the evaluation studies. indices. Input-output analysis had three parts: transfers

Responsibility: Latin America and the Caribbean, of transactions from nonservice to service sectors inCountry Department II, Human Resources Operations ways more consistent with system of national accountsDivision-John Newman; and Policy Research Depart- (SNA) methodology, correction estimates for scope ofment, Poverty and Human Resources Division-Mar- data collection, especially for housing and rural ser-garet Grosh and Laura Rawlings. The Education and vices, and use of the input-output table's mathematicalSocial Policy Department is collaborating in the study. dual to estimate what prices would be if Maoist-era highWith James Heckman, University of Chicago; Charles industrial profits and related pricing had adjusted moreManski, Institute for Research on Poverty; and Burt effectively under price reform. The last component,Barnow, Johns Hopkins University. The Ministry of the price adjustments consistent with hypothetically moreFamily and the Central Statistical Office, Venezuela; SIF competitive profits, is controversial because it concep-and the National Statistical Office, Bolivia; and YTEPP, tually bridges into analytical areas usually reserved forTrinidad and Tobago, are contributing staff time. purchasing-power-parity analysis.

Completion date: December 1994. Taking textiles as numeraire, the study showed thatReports: maximum adjustments to 1987 GNP are 6 percent for

Heckman, James. "Techniques and Information Requirements consistency improvements, 21 percent for scope expan-for Estimating Counterfactuals in Evaluations of Social sion, and 21 percent for profit and price shifts. Com-Sector Investments." pounded, the maximum adjustment is 55 percent. For

Manski, Charles. "Using Choice-Based Samples in the Evalua- foreign trade, domestic export costs of foreign exchangetions of Social Sector Investments." implicit in input-output data showed that, relative to

Newman, John, Paul Gertler, and Laura Rawlings. "Evaluating the official exchange rate, textile costs were consistent,Social Sector Programs in Developing Countries: A Case for butenergy (low) and machinery (high) foreign exchangeOpportunistic Randomization." costs diverged significantly. For inflation and GNP de-

flators, the most extreme underreporting assumptionsstill made it difficult to reduce long-term real growth in

Reestimation of China's National Accounts the 1980s to below 5 percent a year (from more than 9and Growth Rates percent). This finding indicates that China's real growth

in this period was, by any reasonable measure, dra-Ref. no. 677-17C matic.

Incompatible statistical systems and rapid growth in These results show that more work is needed topoorly reported sectors challenge accurate measure- establish a foreign-exchange-rate basis for dollar mea-ment of gross national product (GNP) in transforming sures of China's GNP and that Chinese statistical effortscentrally planned economies. More generally, contro- to improve measures of inflation, especially for expen-versies over the accuracy of U.S.-dollar measures of diture accounts, are critical. New work is under way inChina's GNP have amplified the importance of under- both these areas.standing how much China's domestic statistical system Responsibility: East Asia and Pacific, Country Depart-is responsible for the underreporting of the country's mentI, Office of theDirector-ShahidYusuf, and Coun-GNP. This study's detailed reestimation of China's do- try Operations Division-Peter Harrold; and Office ofmestic-priced GNP for 1987, using a combination of the Vice President, Development Economics-Rameshinput-output and other, more controversial methods, Chander. With Albert Keidel, Rock Creek Research, Inc.explored the quantitative significance of systemic statis- Completion date: March 1993.tical distortions. It showed that China's domestic-cur- Reports:

rency GNP could only be a maximum of 55 percent Keidel, Albert. 1992. "How Badly Do China's National Accountslarger than official data indicate. Underestimate China's GNP?" Presented at a seminar at the

The study explored the quantitative significance for World Bank in December 1992. Rock Creek Research, Inc.China's GNP of statistical shortcomings in consistency, and World Bank.scope, and valuation in domestic data collection and . 1993. "China: Verifying the Accuracy of GNP Measures."processing. It more briefly explored China's domestic Presented at a seminar in Peking in April 1993. Rock Creekvaluation of foreign trade flows and the potential sig- Research, Inc. and World Bank.

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Economic Management

Revenue under Uncertainty in Eastern Eastern Europe, particularly in the former Czechoslova-Europe kia. Firm estimates are impossible in an economy under-

going such a fundamental transformation. So, to pro-Ref no. 6:77-18 duce plausible illustrations of the revenue performance,

As Eastern European economies undertake reforms the project is developing an analytical and accountingon all fronts in their transition to market-based systems, framework that considers the significant factors oftheir revenues are becoming uncertain. The uncertain- change-such as shifting tax bases, uncertain param-ties have several sources. eters, and nascent tax administration with potential

First, the economic transformation will lead to radi- collection problems. The analysis will bring the impliedcal changes in the underlying tax bases, with corre- uncertainty in revenue in greater focus, much like thesponding instability in revenues. For example, the value financial appraisal of a risky project. For each factor thatadded of services will rise as the distribution system is generates revenue uncertainties, a full range of possibledecentralized. The scale of enterprises will shrink as values and some measure of likelihood canbe specified.services grow and as the large socialized enterprises are This will result in a risk assessment of what wouldbroken up and privatized. The number of individual happen to revenue for each set of conditions identified.taxpayers, including self-employed entrepreneurs, will Each revenue analysis will encompass many "what-likely increase. The shifts to services, smaller enter- if" scenarios, including the most likely outcome, someprises, and individual taxpayers will make it generally measure of risk dispersion around the expectation, andharder to collect taxes. Moreover, an important source the relative likelihood for any range of outcomes. Forof revenue-profit remittances from state enterprises- cases in which the best estimate of revenue is verywill be replaced by direct taxes. The revenue that the uncertain, the policy responses to achieve stabilizationdirect taxes will yield is uncertain; profits might fall or other macroeconomic goals might be quite differentbecause of difficulties in transition, and the share of from the policy responses in those cases in which rev-profits going to interest payments-generally not enue estimates are more certain.taxed-will increase. Responsibility: Policy Research Department, Public

Second, with reform, new taxes are imposed on a Economics Division-Delfin Go and Heng-Fu Zou. Withshifting economy, requiring a tax administration ori- Pekka Sinko.ented toward collecting revenues from thousands of Completion date: September 1993.private individuals and firms. Revenues might fallsharply because of the uncertain collection rates that arelikely before a new system becomes fully operative. World Energy Subsidies and ImplicationsAnd privatization is often accompanied by tax avoid- for Greenhouse Gas Emissionsance, as agents switch to transactions that are less tax- and Government Revenuesable.

Third, the transition brings with it such problems as Ref. no. 677-28Cthe slower-than-expected rate of privatization. Slow Economists have long argued that subsidizing en-privatization in turn implies that a large segment of ergy distorts consumption and production decisionssupply is unable to respond efficiently to liberalized and that it can have adverse consequences for govern-prices. Thus, the expanded tax bases promised by a ment revenues and the protection of local and globalmore productive market economy can be attained only environments. Yet such subsidies are quite pervasive inin the long run. emerging market economies and developing nations. If

Fourth, the dismantling of CMEA trade in Eastern energy resources were to be priced according to theirEurope has led to the disappearance of traditional ex- true opportunity costs, these nations could improveport markets, while the prices of such inputs as fuel and their economic and fiscal performance while furtheringraw material imports have soared, resulting in wide- local and global environmental objectives.spread declines in output. This study reviewed energy pricing practices by type

For transition economies attempting to project and of fuel and energy and by sector in major emergingplan budgets, it is critical to understand how each of market economies and developing nations. It estimatedthese factors affects revenue. Adding to the difficulty of levels of subsidies for coal, natural gas, and petroleumplanning budgets are the changing behavioral relation- products and determined the implications of the subsidiesships during the transition. There is a range of possibili- for greenhouse gas emissions (in particular, carbon emis-ties for such parameters as the savings rate. sions), government revenues, and consumer welfare.

This research project is examining the implications A formal sectorally disaggregated model was speci-for public revenue of different causes of uncertainty in fied to estimate the effect on energy consumption and

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Economic Management

carbon emissions of removing subsidies. The model $60 a ton of carbon would be needed in these countriesallows for differences in own-price elasticities and at an annual cost (in forgone output and adjustment) ofinterfuel substitution elasticities across sectors and fu- $15.5 billion.els. The study used data on 1990-91 consumption and on Adjusting energy prices to reflect their true opportu-end-user prices of fossil fuels and electricity by sector nity costs is the first step in an environmentally respon-that were collected from a variety of sources, including sible and fiscally prudent development strategy. TheWorld Bank sources, OECD energy statistics, and inter- emerging market economies and developing nationsnational energy annuals published by the Energy Infor- that adopt such policies sooner rather than later willmation Administration. reap rich economic gains.

Preliminary estimates indicate that annual fossil fuel Responsibility: Policy Research Department, Publicsubsidies total more than US$215 billion. This repre- Economics Division-Anwar Shah; and Europe andsents about 20-25 percent of the total value of fossil fuel Central Asia, and Middle East and North Africa Techni-consumption at world prices. China, Poland, and the cal Department, Environment Division-Bjorn Larsenformer Soviet Union account for a disproportionate and Gordon Hughes. With Isidro Soloaga, University ofshare of these subsidies, although substantial subsidies Maryland.exist in Argentina, Brazil, the Czech Republic, Egypt, Completion date: February 1993.India, Indonesia, Mexico, Saudi Arabia, Slovakia, and Reports:Venezuela. Most oil-exporting countries heavily subsi- Larsen, Bjorn. 1993. "World Fossil Fuel Subsidies and Globaldize domestic consumption of petroleum. Oil-import- Carbon Emissions in a Model with Interfuel Substitution."ing developing countries, however, usually tax gasoline Larsen, Bjorn, and Anwar Shah. 1992. "Combating the Green-but subsidize kerosene, diesel, and heavy oil. Most house Effect." Finance and Development (December).developing countries price electricity (hydro- or fossil- . 1992. "Tradable Carbon Emissions Permits and Interna-fuel-based) well below its long-run marginal cost of tional Transfers." Paper presented at the 15th Annualproduction. Subsidies for petroleum products account International Conference of the International Association forfor 55 percent of total world subsidies, those for coal for Energy Economics, Tours, France, May.23 percent, and those for natural gas for 21 percent. . 1992. "World Fossil Fuel Subsidies and Global CarbonAmong petroleum products, fuel oils received the larg- Emissions." Policy Research Working Paper 1002. Worldest subsidies in dollar value. Bank, Office of the Vice President, Development Economics,

Removing fossil fuel subsidies worldwide would Washington, DC.reduce carbon emissions in some countries by morethan 20 percent and global carbon emissions by about 7

percent--equivalent to about 15 percent of OECD emis- Economic Consequences of War-Peacesions---assuming no change in world prices of fossil Transitions in Africa: Choices for Publicfuels. If all subsidies were eliminated simultaneously, Financeworld prices of fossil fuels could be expected to declinerelative to the price path without a removal of subsidies. Ref no. 677-31A decline in world prices could stimulate demand in A number of African economies have been severelynonsubsidizing countries and partially offset estimated disrupted by civil war in the past three decades. Withreductions in carbon emissions. But it would have only the end of conflict, these economies face both challengesa minor effect on emissions reductions in most subsidiz- and opportunities in economic management. Publicing countries. infrastructure and delivery systems are often heavily

The removal of fossil fuel subsidies would entail damaged and require rebuilding topermita resurgenceshort-run adjustment costs for energy-intensive sectors of private activity. The end of conflict allows a redirec-and households. The severity of such adjustment costs tion of public spending from military and security pur-will depend on the level of subsidies removed, the share poses to this rebuilding. But the redirection may not beof energy in production and consumption expendi- easy to achieve, for several reasons. The transition totures, and the possibilities for substitution between peace is accompanied by macroeconomic effects on thetypes of energy or fuel and between energy and other balance of payments, labor supply, and exports thatinputs or goods. complicate economic management. Institutions and their

Externalassistance,ifavailable,couldeasesuchpains. roles are often in flux. And the transition may requireFor OECD countries, such assistance offers a potential substantial resources-for example, for military demo-alternative to global carbon emissions reductions at a bilization and for resettling refugees.lower cost than taxing carbon domestically. For ex- This research project is examining the economic im-ample, to achieve an equivalent reduction in tons of plications of the transition to peace, focusing on publiccarbon emissions in the OECD countries, a carbon tax of finance management. It uses a largely inductive ap-

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proach, seeking an appreciation of the common prob- Subnational Finance in Transitionlems, constraints, and opportunities that war-tom Afri- Economies: Broadening the Frameworkcan states face at the end of conflict, and analyzing the for Analysischoices that need to be made by governments and theimplications of those choices. The research focuses on Ref no. 677-70such areas as the public expenditure choices to facilitate The fiscal decentralization taking place in many East-market integration and the short-term supply response; ern European countries is in part a reaction to thesocial safety net issues; the redefining of the role of the previously tight central political control. But it also hasstate; and policy reforms for the recovery of the private roots in the movement to privatize the economy and insector. The project combines fieldwork in Ethiopia, central governments' strained fiscal situation. And theUganda, and possibly Mozambique with a wider desk aspirations and role of local government are becomingreview of completed transitions to peace in other coun- stronger.tries in Africa and elsewhere. The ongoing reforms in subnational government

Responsibility: Policy Research Department, Public finance are much more important than generally recog-Economics Division-Sanjay Pradhan; and the Africa nized. First, subnational governments account for a farRegional Office. With Paul Collier, David Bevan, and larger share of the budget (as much as 50 percent of totalJan Gunning, Center for the Study of African Economies outlays) than in most developing or industrial market(CSAE), Oxford University; and Jean-Paul Azam, Uni- economies. Second, intergovernmental relations are in-versity of Clermont Ferrand and CSAE. timately tied up with major reform issues of privatiza-

Completion date: August 1993. tion, the social safety net, and stabilization. And, withinthe fiscal sector, tax policy, deficit control, and inter-governmental finance can be compared to three legs

Income Distribution, Fiscal Policy, Political supporting economic reform; unless each leg is properlyInstability, and Growth set up, the entire edifice may collapse.

The traditional analysis of intergovernmental financeRef no. 677-49C examines the fiscal functions of subnational and central

Two of the more active fields in economics today are government in terms of their respective roles and re-economic growth and political economy. Botharerooted sponsibilities for stabilization, income distribution, ex-in empirical questions: Which factors determine growth? penditure provision, the appropriate assignment of taxAnd why do countries adopt different policies? This functions, and the design of a transfer system thatstudy explored the links between these two fields by provides appropriate incentives. For the subnationalcritically examining the empirical literature and under- sector, the benefitmodel of serviceprovision suggests thattaking some new empirical work on the relationships local governments-whose role is essentially that of ser-among four variables-economic growth, political in- vice provider-finance themselves to the extent possiblestability, democratic institutions, and income inequal- by charging for the services they provide, with local taxes

ity. making up the difference, supplemented as necessary byThe study's major findings include the following: transfers and, to a limited degree, borrowing.* Regime instability, rather than type of regime (for These issues are important in the transitional econo-

example, dictatorship or democracy), influences growth. mies also, but this traditional approach misses several* There is no support for the hypothesis that demo- key features of local government roles in the formerly

cratic institutions are not conducive to growth. socialist economies. First, the emphasis on the local* Thereappearstobeacausallinkbetweenaskewed government as service provider ignores its pervasive

income distribution and sociopolitical instability, and role as producer and as owner, and the complicatedbetween sociopolitical instability and lower investment. relationships between enterprises and government in

The research findings were disseminated through a most transition economies. Local governments' role asWorld Bank workshop in August 1992. owner means that they have a major role to play in

Responsibility: Policy Research Department, Public privatization, as either a potential impediment or sup-Economics Division-Shantayanan Devarajan. With porter. And the asset stock-a potential source of rev-Alberto Alesina, National Bureau of Economic Research enue-conferred on them in the decentralization pro-and Harvard University. cess suggests that attitades toward privatization of these

Completion date: December 1992. assets is a dimension of local government finances thatReport: needs considerable attention in any discussion of local

Alesina, Alberto, and Roberto Perotti. 1993. "The Political government financial reform in transition economies.Economy of Growth: A Critical Survey of the Recent Second, the traditional approach ignores the shrink-Literature and Some New Results." ing role of government: in most transition economies,

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government, both local and central, played a major structures; intergovernmental fiscal reform must beproduction role in the economy, and the expenditure viewed as an ongoing process in transition economies.side of the budget is cluttered with expenditures-not This research project will explore the need for aonly subsidies,but direct investment, inventory finance, broader framework for analysis of decentralization andand wages-that are not the responsibility of govern- intergovernmental fiscal issues in the transition econo-ment in market economies. Government revenue is mies. Such a framework would incorporate the likeli-declining more rapidly than governments are able to hood of continuing structural changes in the economydivest themselves of these expenditure responsibilities, and of political shifts, the likelihood that intergovern-contributing to macroeconomic pressures. At the mental reforms will proceed simultaneously with stabi-subnational level, net expenditure reductions may be lization and the need to provide a safety net, the likeli-infeasible: enterprises owned by government finance a hood of continued (local) public ownership on a signifi-wide range of essentially budgetary outlays, including cant scale albeit with privatization as the objective, andmany social sector outlays that will need to be taken the likelihood of continued vestiges of price and wageover by local governments. These and other increased controls and other rigidities. Accounting for these ele-expenditure needs-especially in the social safety net ments is crucial to ensure a comprehensive and accuratearea, which is now almost uniformly an assigned re- analysis of decentralization.sponsibility of subnational governments-and declin- The obvious need for flexibility in changing circum-ing revenue possibilities, make it difficult to control stanceshas led central governments topreserve degreesdeficits in the local public sector and lead to demands for of freedom by continuing the negotiated tax sharingincreased transfers from equally hard-pressed national systems of the past. But this is less and less acceptable togovernments. local governments seeking greater autonomy and where

The level, design, and effects of such transfers are demands are being made for fair treatment. It is alsothus a key aspect of the emerging intergovernmental incompatible with greater efficiency in local serviceand local government finance systems of transition provision. A particular challenge lies in replacing theseeconomies, as is the development of practical measures bargained outcomes with transfer structures that pro-of tax capacity and expenditure need for use in such vide an intergovernmental fiscal framework-of grants,transfer formulas. The successful design of a transfer shared revenues, and discretionary tax powers-that issystem is key to macroeconomic stabilization and the sufficiently firm, but also compatible with structuralability of subnational governments to carry out their changes and reform.newly assigned social safety net functions. The methodology will combine empirical analyses

A particular problem arises with user charges; the and case studies, building on earlier work on Hungary,need to coordinate user charge reforms with wage re- Romania, and the federal states of China and Russia.form and with more general price reforms to avoid Country selection will be governed by data availability.undue impact on income and profits, and thus on govern- The research will examine the importance of ownershipment revenues, complicates the analysis. In the past these for subnational governments, and the relations betweengovernments used fixed prices (including rents and other fiscal decentralization and privatization and betweenurban user fees) and wage controls as part of their distri- fiscal decentralization and the safety net. It will alsobutional tool kit. They are now being asked, in a reform examine the developmentof newsystems of subnationalenvironment, to "get the prices right" and to use tax governmentfinance, including intergovernmental trans-policies and targeted subsidies instead. Changes in these fers and local tax and user for systems that have attrac-public sector prices could lead to major distributional tive allocative and resource mobilization properties andshifts if not properly coordinated with other reforms. that address equalization issues, and the need to replace

Finally, major changes in the economic structure and subnational revenues from enterprise ownership, andin wages and prices imply potentially large shifts in tax thus enhance privatization.bases. One can expectboth shifts within a tier of govern- Some of the issues to be examined are suitable forment in the tax bases of different regions within a empirical analyses. Preliminary investigation suggestscountry (for example, a gain in value added in a pri- that it should be possible to undertake the following formary-product-producing area after price liberalization at least a few countries:and a corresponding loss in the consuming jurisdiction), * An analysis of the expenditure patterns of theand shifts in the tax base between levels of government, present intergovernmental fiscal regimes and their dis-depending on how taxes have been assigned or shared. tributional-equalization effectsThese shifts must be taken into account when designing * An analysis of the regional-interjurisdictionalan intergovernmental fiscal system. Greater flexibility is equalizing effects of existing transfer systems in theneeded than in countries with more fixed economic selected countries

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* Estimates of local taxable capacity-an essential ments and one for the MS Windows environment on theelement of a sound transfer formula for selected coun- PC. The first version will use a command line languagetries in a shell similar to UNIX or a variety of other operating

* Simulation of alternative transfer formulas using systems. This will run on standard PCs and the Worlddemographic and other variables in selected countries Bank mainframe. The planned Windows version wouldand an analysis of their implications for equalization be developed to resemble more conventional spreadsheetand efficient resource allocation software. All the software is being developed in the C

* Estimates of the implications of these reassign- programming language and will be self-documenting.ments for fiscal balance at the subnational level. The World Bank has already made a considerable

The project is expected to produce a book-length investment in the FSU input-output and trade data.manuscript setting out the issues, a case study of each Providing these data in an electronic data base withcountry, empirical studies, conclusions, and policy rec- flexible aggregation software will create a valuable in-ommendations. formational resource to support further operations and

Responsibility: Europe and Central Asia, and Middle research.East and North Africa Technical Department, Infra- The FSU data base is expected to complement ongo-structure Team-Robert Ebel; and Europe and Central ing work of the Trade Policy Division in quantitativeAsia, Office of the Director--Christine Wallich. With analysis of trade and economic restructuring in thisRichard Bird, University of Toronto. region. It is also intended to support other policy re-

Completion date: June 1994. sponsibilities. When it has been approved in its finalform, the data base will be turned over to IECSE to makeit readily available to the largest possible interested

Construction of an Integrated Data Base community.for the Former Soviet Union's Economic Responsibility: Policy Research Department, TradeAccounts Policy Division-David Tarr; and International Eco-

nomics Department, Socio-Economic Data Division-Ref. no. 677-99 Boris Blazic-Metzner. With David Roland-Holst, Mills

Reliable accounting information is indispensable for College.the design of sound economic policies. For the new Completion date: October 1993.independent states of the former Soviet Union (FSU),the quality of the policies they are designing as part oftheir economic restructuring efforts inevitably depends Evaluation of AppIlied Macroeconomicon the quality of the data that can be obtained on Models for Developing Countrieseconomic conditions. Greater access to comprehensiveand standardized FSU data would strengthen many Ref. no. 678-02Caspects of the policy advice and operational responsi- Applied economic models play a critical role in thebilities of the international agencies providing support World Bank's operational work in country projectionsin this region and facilitate their dialogue with local and policy simulations. Tools widely used by the Bankgovernments. in operations and in policy research range from simple

This project is assembling a set of tabular economic accounting consistency frames (known as RMSM-Xaccounts, currently in an input-output format, for the models) to complex behavioral models.new independent states, and integrating them with To use such models to full advantage, a better under-software for convenient on-line access and a variety of standing of their strengths and weaknesses-withinaggregation and data extraction functions. The software and outside the Bank-is needed. The empirical andis designed to allow flexible aggregation across sectors theoretical soundness of these models should be criti-and regions and can produce extract tables to be down- cally assessed.loaded for use with spreadsheet and other analytical This research effort evaluated the development ofsoftware. these models and their application by the Bank, compar-

The basic information for the data base was obtained ing them with the most current, widely read macro-from the International Economics Department, Socio- economics literature and with other macro models de-Economic Data Division (IECSE). This information con- signed for use in developing countries. Included weresists of input-output tables for each of the 15 new comparisons with the modeling approach of the Inter-independent states and a trade flow matrix. national Monetary Fund.

The software will be developed in two forms, one The project comprised three studies. The first tookcompatible with most mainframe and DOS environ- stock of the universe of applied macroeconomic models

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for developing countries. The second provided an ana- to illuminate population and development relation-lytical overview of models developed and used at the ships. It ferreted out effects of demographic change onBank, including accounting consistency models (the investment and saving, and on education. For each ofWorld Bank's RMSM-X) and general equilibrium mod- these variables, the study replicated and extended theels with goods, asset, and labor markets (suchas RMSM- two or three models that have attracted the most atten-XX and Macor). The third study evaluated all macroeco- tion in the literature, using the country samples used innomic models currently used for macroeconomic pro- those studies. And the study carried out a rigorousjections and policy simulations in the Bank's operations assessment of whether the economic-demographic rela-complex. The study critically reviewed these applica- tionships found in this type of data set are indeedtions and provided recommendations for their improve- changing over time.ment and possible transfer to developing countries. Third, each of the major competing models was

The studies and their main findings will be dissemi- subjected to sensitivity testing.nated through a World Bank conference, professional This project is a first step toward formulating ajournals, and a book. coherent research plan that examines economic-demo-

Responsibility: Policy Research Department, Transi- graphic relationships in an empirically defensible for-tion and Macro-Adjustment Division-Klaus Schmidt- mat. It will help inform operational questions aboutHebbel and Luis Serven. With Peter Montiel, Oberlin choices between national family planning expendituresCollege; Jaume Ventura, Harvard University; and Dou- and direct health and education programs.glas Smith, Columbia University. Responsibility: Population, Health, and Nutrition

Completion date: June 1993. Department-WilliamMcGreevey and Thomas Merrick.Completion date: June 1993.

Economic Consequences of DemographicChange in Developing Countries Patterns of Growth: Further Work

Ref. no. 678-10C on National Policies and Long-Run Growth

Attempts to analyze the influence of population Ref no. 678-26growth on economic development are essential, but are This follow-up project to "How Do National Policiesalso fraughtwith controversy and empirical difficulties. Affect Long-Run Growth?" (ref. no. 676-66) is intendedAt the center of the debate on economic-demographic to continue toprovidepieces of evidence thatwill fitintolinks is the widely obtained statistical result (from data the larger picture of how countries achieve rising stan-collected in the 1960s and 1970s) showing a general lack dards of living. It aims to stimulate continued researchof correlation between the pace of per capita economic on the connections between policy and growth by con-growth and the pace of population growth. This "revi- solidating the data from the earlier project and makingsionist" finding flies in the face of strongly held beliefs the data easily accessible to researchers and analysts. Andamong those who expect rapid population growth to itwill investigate some questionsraised during the courseslow economic progress. But recent exploratory evi- of the earlier research and a related conference that havedence based on cross-country data may reveal a nega- not been answered. These questions include the follow-tive association between population and economic ing:growth for the 1980s, marking a sharp departure from * How do social indicators and disaggregated GDPthe pattern of the 1960s and 1970s. measures respond to some of the same policy indicators

This project updated the debate on the economic- considered in earlier growth research?demographic links. First, it conducted cross-national * How do growth patterns differ across continents?analyses of the effects of alternative population (and * How do trade and capital restrictions affect growthfertility) growth rates on per capita income growth. It patterns?combined cross-sectional and time-series data, includ- * Throughwhichchannelsdopoliciesaffectgrowth?ing data for the 1980s and early 1990s, and used sensitiv- In addition to disseminating and extending the largeity analysis to assess the robustness of the results. It data base from the first research project, this study willlooked at the effects of density and size of population as exploit the data to explore additional dimensions of thewell as growth, and attempted to incorporate demo- growth-policy nexus.graphic embellishments into recent empirical setups of Responsibility: Policy Research Department, Transitionthe "new growth economics literature." and Macro-Adjustment Division-William Easterly and

Second, the research identifed areas where case stud- Ross Levine. With Reza Baqir, Harvard University.ies and alternative analytical approaches might be used Completion date: December 1994.

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Technology Spillovers, Agglomeration, on the experience of other countries making the transi-and Foreign Direct Investment tion somewhat successfully and the experience of capi-

talist countries.Ref. no. 678-29 The project will look at international historical expe-

Despite the voluminous literature on foreign direct rience that may permit generalizations about the role ofinvestment (FDI) in the 1960s and 1970s, the empirical the state. It will contrast the roles played by the state inevidence on the benefits from FDI remains slim. This widely discussed capitalist models (Germany, the Re-research seeks to fill that gap by focusing on three public of Korea, and Spain), and produce possible gen-aspects of foreign investment in developing countries. eralizations about common factors. It will examine theFirst, the research will examine the extent to which experience in other countries making the transitionforeign investment in Mexico and Venezuela has infrom socialism more or less successfully-for example,creased wages in the manufacturing sector. Second, it China, Hungary, and Poland. And it will identify initialwill examine the determinants of export behavior in and boundary conditions of an economic and socio-Mexico, focusing on the role of foreign investment and political nature that are likely to influence the transitionagglomeration economies. Third, it will test for the role process.of agglomeration economies and foreign presence to The study will include an analytically coherent, de-explain total factor productivity growth in Mexican scriptive review of the experience to date of some of thefirms. countries engaged in the transition to market economies

This research complements other work in the World and a comparison of the circumstances, structures, andBank on the determinants and benefits of foreign invest- policies of some of the more successful capitalist coun-ment. Related work includes the International Econom- tries.ics Department's research on the determinants and con- Responsibility: Europe and Central Asia, Country De-sequences of FDI, which focuses on cross-country deter- partment IV, Country Operations Division 2-Wafikminants of FDI and its impact on growth. This research, Grais and Chandrashekar Pant. With Lance Taylor andhowever, focuses on more microeconomic aspects. The Muru Tiwari, Massachusetts Institute of Technology.International Economics Departmentis currentlyexam- Completion date: October 1993.ining the financial aspects of FDI (such as its role as asource of external financing or a source of investment),while this research examines the role of FDI in raising Energy Pricing Studywages, promoting exports, and encouraging technol-ogy transfer. Removing subsidies to the energy sector is often

Responsibility: Policy Research Department, Trade proposed as a way to enhance economic efficiency andPolicy Division-Ann Harrison. With Brian Aitken, In- increase government revenues. Policymakers sometimesternational Monetary Fund; and Gordon Hanson, Uni- resist this change on grounds that increased energyversity of Texas. prices will fuel inflation, retard growth, and hurt the

Completion date: April 1994. poor.This project sought to shed light on the debate by

examining six case studies of countries in which energyThe Economic Role of the State in Nations prices were increased. Applying a common framework,of the Former Soviet Union each of the studies attempted to isolate the effect of the

energy price increase on government revenues, growth,Ref. no. 678-32 the structure of production, prices, and income distribu-

Newly formed states will play pivotal roles in the tion.unfolding economic transformations of the nations of Preliminary findings indicate that, overall, increasesthe former Soviet Union (FSU). The great unknown is in energy prices had a favorable effect on economichow states in different countries will have to change to performance. The reduction in fiscal deficits compen-perform market-generating and -supporting functions sated (in terms of inflationary pressure) for the directwhile avoiding actions that cripple equitable redistribu- increase in one or two prices in the consumption basket.tions of income and wealth and sustained economic Industrial substitutability and the low share of energy ingrowth. production meant that the effect on production was

As FSU countries seek to make the transition from a slight. Finally, the effect on income distribution was alsosocialist system to a market economy, they are looking mild because energy's share in the poor's consumptionto different models for the role the state can play in the basket differs little from its share in the consumptioneconomy. This project seeks to provide insights based basket of the rich.

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Responsibility: Policy Research Department, Public capita income. Among the 15 FSU economies, EstoniaEconomics Division-Shantayanan Devarajan and had the highest estimate and Tadjikistan the lowest.GunnarEskeland. With Balbir Singh, NorwegianSchool These estimates, while subject to significant uncertainty,of Economics. are considered reliable enough to be used to assign the

Completion date: October 1992. new FSU economies to income categories for Bank ana-lytical and operational purposes. The internationallycomparable data base developed on the FSU economies

Measuring the Incomes of Economies would permit integration of the FSU economies intoof the Former Soviet Union global studies and international comparisons.

Responsibility: International Economics Department,Drastic changes since 1990 in the economic systems Socio-Economic Data Division-John O'Connor, Boris

and policies of states in Eastern Europe and the former Blazic-Metzner, and Jong-goo Park; and Europe andSovietUnion (FSU) and their increasing integration into Central Asia Regional Office. With Dimitri Steinberg,the global economy have renewed worldwide interest Intelligent Decision Systems; Gyorgy Sandor; Irisin assessing their economic performance. But this work Balvany; Thomas Kearney; Andrew Stollar; Adnanhas been frustrated by the practical problems of finding Mazarei; James Noren; and the U.S. Census Bureau'sreliable information and by the conceptual problems of Center for International Research.converting the available information to internationally Completion date: December 1992.comparable terms. These problems are particularly seri- Reports:ous for the FSU, where 15 separate economies have Socio-Economic Data Division. 1992. "Measuring the Incomes ofemerged from a highly centralized, nonmarket economy. Economies of the Former Soviet Union." Policy Research

This research aimed primarily to derive the national Working Paper 1057. World Bank, International Economicsaccounts of individual FSU economies and to construct Department, Washington, DC.the conversion factor for translating their income fig- Steinberg, Dimitri. 1992. "Economies of the Former Soviet Union:ures into U.S. dollar terms for 1990 to allow comparison An Input-Output Approach to the 1987 National Accounts."with incomes of market economies. Policy Research Working Paper 1060. World Bank, Interna-

The research constructed the national accounts of tional Economics Department, Washington, DC.each FSU economy for 1987-90 through two differentapproaches. One was based on detailed data on incomeand outlay by major economic agents, and the other was Corporate Income Tax Incentivesbased on input-output tables. The basic information for Investment in Developing Countriescame mostly from official sources and includes somepreviously unpublished data. The results of the two Corporate income tax instruments are often used inapproaches were virtually identical for 1987; for other developing countries as a part of industrial strategy, toyears they differed, but not significantly. But there was stimulate investment or to influence its sectoral or re-greater uncertainty for price data than for quantity data. gional allocation, or both. The most widely used instru-

The study examined different options to determine ments are tax holidays, initial depreciation or invest-an appropriate ruble-dollar conversion factor. It con- ment allowances, tax credits, and tax rebates. Thesecluded that using the available exchange rate informa- measures immediately lead to an exogenous decrease intion, even with some adjustments, would be inappro- tax revenue. As incentives for investment, they may alsopriate. So it developed a new method for estimating the resultin abuilt-in increase in tax revenuebybroadeningconversion factor. Relying on a "bridge" of the purchas- the tax base. The net effect of these measures on taxing power parity (PPP) of currencies between planned revenue, and thus on the fiscal deficit, greatly dependsand market economies, the method adjusted the FSU's on their effect on investment. For this reason it is of greatPPP according to the PPP-exchange-rate deviations of interest to policymakers to know whether these mea-comparable market economies to arrive at the FSU sures ultimately lead to the erosion of tax revenues and,conversion factor. The same method was applied to five thus, to the deterioration of the fiscal deficit. And if so,Eastern European economies to check the applicability it is important to know how cost-effective these invest-of the method for similar economies. ment incentives are-that is, how the extra investment

The study derived per capita GNP estimates for the they generate compares with the revenue loss or theFSU as a whole and for the 15 FSU economies for 1990. deficits towhich they give rise. These questionswere theThe estimate for the FSU was $2,870 per person, which central theme of this research.ranks the FSU above Brazil, Bulgaria, and Poland but To accomplish its aim, the research developed abelow the former Czechoslovakia and Portugal in per simultaneous econometric model that captures the in-

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teraction of corporate income tax policy with the tax Report:revenue, tax base, and private investment in a develop- Ehdaie, Jaber. 1991. "Revenue-Generating and Investmenting country. The model comprises two blocks: revenue Incentive Aspects of the Corporate Income Tax System inand investment. In the revenue block the study em- Pakistan: An Agenda for Reform." World Bank, Countryployed Ehdaie's method ("An Econometric Method for Economics Department, Washington, DC.Estimating the Tax Elasticity and the Impact on Rev-enues of Discretionary Tax Measures, Applied to Malawiand Mauritius," Policy Research Working Paper 334, Estimating Per Capita Income BasedWorld Bank, Country Economics Department, Wash- on Purchasing Power of Currenciesington, DC, 1990) to estimate the effect of corporateincome tax policy on revenues and to generate time- To improve international comparability of per capitaseries data on the realized corporate income tax rate, income, the World Bank has been supporting the Uniteddefined as the average effective corporate income tax Nations'International Comparison Program (ICP) in itsrate net of the changes caused by factors other than effort to develop estimates of purchasing power ofcorporate income tax instruments. The realized corpo- currency (PPC) rates. These rates can be used as anrate income tax rate reflects all changes in the corporate alternative to exchange rates for converting nationalincome tax structure, including the statutory tax rate, currency estimates of gross national product into U.S.exemptions, tax holidays, tax allowances, tax credits dollars. Since benchmark estimates of PPC rates are notand rebates, and efficiency of the tax administration. In available for all countries and all years, it is necessary tothe investment block the study modified Khan's invest- find methods for filling the gaps.ment function-a neoclassical model of investment that This research assessed past attempts at shortcut andtakes into account the relevant structural features and reduced information methods of estimating PPC-baseddata problems of developing countries--by explicitly per capita income for countries that did not participateincorporating the realized corporate income tax rate in ICP surveys. And it suggested a method that wouldinto the corporate income tax policy. produce satisfactory results for a large number of coun-

The model was then applied to time-series data (1973- tries. This method uses regression techniques to estab-90) for Pakistan, where corporate income tax instru- lish a structural relationship between PPC-based esti-ments were used extensively to stimulate private in- mates of per capita income and a set of explanatoryvestment during the 1980s. The econometric estimation variables for the sample of countries that participated inof the model indicates that the corporate income tax did ICP surveys. It then uses that relationship to producenot play a significant role in stimulating private invest- estimates for countries that did not participate in thement in Pakistan but that public investment in infra- surveys. The investigation centered on the empiricalstructure did. To determine how cost-effective these finding that the differencebetween exchange-rate-basedinvestment incentives were, the model was simulated estimates-such as those in the World Bank Atlas-andfor two policy scenarios: first, no change in the corporate PPC-based estimates produced by the ICP is inverselyincome tax structure during 1980-90 and, second, in- related to per capita income and that most of the differ-vestment in infrastructure of the additional revenue ence results from differences in the relative price ofthat would have been generated without corporate in- services. A set of variables bearing on differences in thecome tax incentives over the same period. The simula- price of services was explored for possible explanationstion results show that, on average, a 1 rupee increase in of the empirical finding.private investment due to corporate income tax incen- The principal finding was that two variables-Worldtives costs the government 5 rupees in lost corporate Bank Atlas estimates of per capita income, and second-income tax revenue, and that 5 rupees in extra public ary school enrollment ratios-were good predictors ofinvestment in infrastructure leads to 1.8 rupees in extra PPC-based estimates of per capita GNP. The relation-private investment. ship was found to be stable over time and space and for

Thus, corporate income tax incentives erode tax rev- different levels of income. The preferred regressionenues, undermining the government's fiscal deficit re- equation was used to Estimate PPC-based numbers forduction effort, while failing to play a significant role in non-ICP countries. These estimates formed the basis forstimulating private investment. As an incentive for the numbers published in the table on income distribu-private investment, public investment in infrastructure tion and PPC estimates of GDP (World Developmentcosts the government less than tax incentives. Indicators table 30) in the World Bank's World Develop-

Responsibility: Policy Research Department, Public ment Report 1992 and World Development Report 1993.Economics Division-Jaber Ehdaie. The results of the exercise were presented in a World

Completion date: March 1993. Bank seminar in June 1992.

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Responsibility: International Economics Department, effects. There is also some evidence of cointegrationSocio-Economic Data Division-Sultan Ahmad, Yonas among M1, agricultural prices, and industrial prices. IfBiru, and Nam Pham. the hypothesis of cointegration is accepted and a single

Completion date: March 1993. shock is identified as the common source of the perma-Report: nent nominal movements of the series, the permanent

Ahmad, Sultan. 1992. "Regression Estimates of Per Capita GDP shock raises levels of money and prices proportionatelyBased on Purchasing Power Parities." Policy Research in the long run. During the adjustment process the priceWorking Paper 956. World Bank, International Economics level leads money with little shift in relative prices.Department, Washington, DC. Responsibility: Agriculture and Natural Resources

Department, Agricultural Policies Division-AntonioBrandio. With David Orden, Virginia Polytechnic Insti-

Money and Relative Prices in Brazil tute.Completion date: May 1993.

The purpose of this research was to evaluate some ofthe dynamic interactions between money and prices inthe highly inflationary Brazilian economy. An impor- Bank-Global Economic Modeltant concern was the effects of monetary expansion onrelative prices. One prominent view holds that agricul- The Bank's Global Economic Model (Bank-GEM) istural prices tend to be more flexible than nonagricultural the underlying forecasting and scenario tool for theprices in the short run and that positive shocks to money Short-term Outlook and Global Economic Prospectsthus lead to a shift in relative prices that favors agricul- papers. The system consists of 144 single-country struc-ture, and negative shocks to the opposite. Alternatively, tural models that forecast the key macroeconomic indi-if there are rigidities, such as a fixed or slowly pegged cators of each country. The countries are linked consis-nominal exchange rate, in the short run a domestic tently through trade and financial markets. The forecastmonetary expansion could shift relative prices against is based on the assumptions of the Planning Assump-tradedgoods, includingimport-competingand exported tions Committee and on the unified survey. The basicagricultural products. Furthermore, money can be pas- accounting framework is consistent with that of thesive-accommodating price increases that also affect RMSM-X, but limited to a three-sector split-public,relative prices rather than leading movements in the private, and foreign sector.price levels. In the long run any of these effects is The DEC Analytical Database (DAD) supports thistempered by the tendency for monetary expansions to work, and MAXSIMis the computer software thatmakeshave equiproportional effects on the price level, and the project feasible. Prototype models are specified forthus neutral effects on relative prices. individual developing countries. Countries are mapped

The effects of monetary expansion on prices in Brazil into model types. On the real side of the current account,have been investigated in several recent studies. This behavioral equations are estimated based on the experi-research reassessed and extended those studies, taking ence with the regional prototype models being devel-into account the most recent period, during which infla- oped for the GEM-Regional Models research project.tion in Brazil accelerated. While the high and volatile Time-series cross-section techniques are used to esti-rates of money growth and inflation make it difficult to mate parameters for each group of countries. The tradespecify statistically adequate models of money and links are specified on the basis of the United Nationsprices for the recent period, recent methodological de- bilateral trade matrices, which are expanded to 144 x 144velopments in time-series analysis facilitate our under- countries, refined with IMF DOT data, and made consis-standing of the possible dynamic adjustments and long- tent through the RAS method. Financial variables arerun equilibrium relationships between money and prices linked directly.in the economy. The research has shown that it is possible to assemble

For the 1960s and 1970s, the results of this research data for macroeconomic accounts for essentially allconfirm earlier research that found that monetary shocks countries. These data and the model can be managed onhad only short-lived effects on relative prices and were personal computers at zero marginal cost usingnot the dominant source of relative price fluctuations. MAXSIM. The use of pooled data to estimate modelRates of money growth and inflation increased and parameters has shown promising results. Globally linkedwere highly volatile in the 1980s through the early model simulation results suggest that the model will be a1990s, with a substantial increase in agricultural whole- powerful tool for forecasting and for analyzing scenarios.sale prices. The price forecast errors are highly corre- Bank-GEM provides the Bank's operations complexlated contemporaneously, suggesting either a common with an analytical tool to assess the consequences ofunderlying shock or strong within-month interactive global events for almost any country in the world. It can

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Economic Management

be used as a descriptive device, and as a prescriptive tool DAD has so far been used in a variety of descriptivefor finding optimal policy responses to external shocks. studies (for example, trends in global savings and in-

The results of model specifications and estimations vestment) and for the estimation of models of manyare disseminated through International EconomicAnaly- countries and regions. It has demonstrated a capabilitysis and Prospects Division working papers, and fore- for efficiently handling a global data base comprisingcasts and scenario analyses are published in the Global more than 100,000 series on a personal computer. Thus,Economic Prospects papers. expensive and cumbersome computers are no longer

Responsibility: International Economics Department, required to process and manage global model systems.International Economic Analysis and Prospects Divi- This creates opportunities for analysts in all countries tosion--Christian E. Petersen, Karsten Pedersen, T. G. monitor their countries as linked components of theSrinivasan, and Shigeru Otsubo. world system, using their own hardware and readily

Completion date: June 1994. transferable data and software.Reports: DAD will be disseminated electronically after addi-

Pedersen,.Karsten N. 1993. "The Prototypical Developing tional validation and testing.Country Model in Bank-GEM." Paper presented at an Responsibility: International Economics Department,International Symposium of Economic Modeling, Athens, International Economic Analysis and Prospects Divi-June. sion-Elliot J. Riordan and Abdel Illah Stambouli, Sys-

Petersen, Christian E., and others. 1991. "Bank-GEM: A World tems Division-Ibrahim Levent, and Socio-EconomicBank Global Economic Model." Paper presented at a Project Data Division-Boris Blazic-Metzner. The United Na-LINK conference, Moscow, September. tions (DIESA) is contributing data to the research.

_ 1991. "The Structure of a World Bank Economic Model." Completion date: June 1994.Paper presented at a Brookings, OECD, CEPR, and KDIconference, Seoul, May.

Petersen, Christian E., and T. G. Srinivasan. 1993. "Effects of a Inflation and Growth Effects of ReformRise in G-7 Real Interest Rates on Developing Countries." in Post-Socialist CountriesPaper presented at a CEPR conference, Oxford, April.

This project analyzes the impact of macroeconomicpolicies on inflation and growth in reforming socialist

DEC Analytical Database economies. The research focuses on the following ques-tions:

The DEC Analytical Database (DAD) being devel- * What has been the effect of price reform and sub-oped in this project will fill the need for a minimal but sequent stabilization efforts in Eastern European econo-consistent set of macroeconomic data that covers all mies on their rate of inflation? Why was the initial effectcountries and hence permits analysis and modeling at on the price level of eliminating most price controls sothe global level of aggregation, and for any region large? Why has there been in some countries-such asdesired by the user. DAD organizes data on national Bulgaria, Poland, and Romania-so much inertia inaccounts, trade, balance of payments, debt, government inflation in the aftermath of price reform and in condi-finance, money, and prices into a coherent three-sector tions of aggregate excess supply and slack in theframework-private, public, and rest-of-world-for economy? Did it make a difference in the velocity ofabout 140 countries. This is a cornerstone of the global disinflation and the degree of output response whethermodeling effort of the International Economic Analysis money-based stabilizalion (Bulgaria and Romania) orand Prospects Division (IECAP). exchange-rate-based stabilization (Hungary and Po-

Before starting DAD, IECAP spent a year developing land) was pursued?and vetting a suitable global accounting framework and * What is the shape of the (full) output cycle intesting it with benchmark data for 1985 for certain reforming socialist countries? How long will it take forregions. In DAD, this framework is filled with indi- the economies of Eastern Europe to startgrowing again?vidual-country series of maximum length, using stan- The research is concentrating its analysis on Easterndard Bank nomenclature and the most authoritative Europe, and it is reviewing the international experiencestandardized data available through the Bank's central with stabilization and growth to illuminate patterns offiles (the Bank's Social and Economic Database). The macroeconomic adjustment in formerly socialist coun-work has also included meticulously filling gaps in the tries.data through additional sources and staff estimates, and Responsibility: Policy Research Department, Transi-developing efficient means for updating data, changing tion and Macro-Adjustment Division-Andr6sbase years, and manipulating the data for analysis and Solimano.projections. Completion date: June 1994.

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Economic Management

Reports: easily measured objective of public expenditure. Pre-Solimano, Andres. Forthcoming. "The Post-Socialist Transitions liminary work using pooled cross-section time-series

in Comparative Perspective: Policy Issues and Experience." data has yielded some surprising results. It found thatWorld Development, the share of public expenditure devoted to current ex-

Solimano, Andrds, and David Yuravlivker. Forthcoming. penditure is positively-and that to capital expenditure"Inflation and Stabilization in Post-Socialist Transitions: The is negatively-associated with long-term economicCase of Hungary." growth. The shares of expenditure devoted to health

and education are not significantly related to growth,and the shares going to transport and communication

International Linkages, Shocks, are negatively associated with growth.and Adjustment Building on these results, this research seeks to iden-

tify the factors that make certain types of public expen-Over the period 1973-89 countries faced a number of diture productive and other types unproductive. The

external shocks. They have tried to adjust to these shocks study will extend the cross-country time-series datain different ways and with different records of success. base to include a more detailed breakdown of publicIdentifying the countries that were highly successful in expenditures and data on the output of public spending.adjusting to shocks and the policies they used would It will undertake a pilot case study of the Philippines,yield helpful lessons for future economic management. where the link between expenditure composition and

This work is the initial thrust of a planned larger economic growth can be examined at the aggregate,research task on international linkages, transmission sector, program, and project levels, and a rich set ofmechanisms, the nature of shocks to be expected, and country-specific factors can be incorporated. The goal ismodes of coping with shocks while maintaining growth. to develop indicators-beyond the usual ones of histori-

The basic methodology is that used by Balassa and cal trends and comparator-country data-that shouldMcCarthy (Adjustment Policies in Developing Countries, be considered when deciding which components of1975-83: An Update, World Bank Staff Working Paper public expenditure to expand or cut in a program of675, Washington, DC, 1984), in which, in the first phase, fiscal adjustment.a shocks-and-adjustmentdecomposition isderived from Responsibility: Policy Research Department, Publicthe current account identity. The extent and composi- Economics Division-Shantayanan Devarajan, Vinayation of shocks and adjustments are then related, in the Swaroop, Sanjay Pradhan, Heng-Fu Zou, and Min Zhu.second phase, to various policy measures to identify the Completion date: March 1995.measures used by countries successful in adjusting toshocks.

The study is still in progress, but the following tenta- The Macroeconomic Managementtive hypothesis gives a flavor of the kind of results that of the Transition from Socialismcan be expected: It appears that countries that are moreopen are likely to be subject to shocks of larger magni- This task integrates several studies on the problem oftude, but are also likely to adjust more quickly and achieving and maintaining macroeconomic stabilityeffectively. while effecting a transition from a socialist to a largely

The findings are expected to identify modes of eco- private market economy. The structural policy elementsnomic management more conducive to growth in an of such a transition are likely to include price and marketenvironment in which there will be continued shocks. liberalization, an opening to trade (usually with a sharp

Responsibility: Development Policy Group- exchange rate devaluation and, for many countries, inF. Desmond McCarthy; and International Economics the face of a systemic disruption of trading relation-Department, International Economic Analysis and Pros- ships), decentralization of production decisions (withpects Division-Ashok Dhareshwar. privatization or at least the rapid growth of nonstate

Completion date: June 1994. firms).Country experience in Eastern Europe, the former

Soviet Union, Central America, and even East AsiaThe Composition of Public Expenditure suggests that maintaining macroeconomic balanceand Economic Performance through such a transition is not easy. Typical symptoms

of macroeconomic weakness include sharp declines inThis research project examines the link between the fiscal revenues-due in large part to the sharply declin-

compositionof public expenditure and economicgrowth. ing state enterprise sector-at the same time that theIt focuses on economic growth as the salient and most need grows for fiscal resources, to cushion the effect of

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Economic Management

the transition, and difficulties increase in the banking credit markets in Eastern Europe, interenterprise ar-system, both because of the stock of old debts and rears in Eastern Europe and Russia, macroeconomicbecause of the weakness of market-based credit assess- management in China, and comparisons of reform inments on the flow of new loans. There is usually also a Eastern Europe and Latin America. Work in fiscal 1994large increase in interenterprise arrears, representing in will proceed from this basis. In addition to continuingpart an extension of normal trade credit and in part macroeconomic research and review (which on Easterninvoluntary credit that binds solvent and insolvent en- Europe will emphasize the areas of banking andterprises together. interenterprise credit markets), the project will likely

Interactions between the microeconomic and macro- include analyses of the interaction between transitioneconomic aspects of reform are of great importance. and fiscal balance in selected states of the former SovietSome aspects of macroeconomic management are thus Union. This work will address the paradox of why asset-hotly debated. Has stabilization policy been excessively rich governments are typically placed under such se-contractionary, undermining the ability of economies to vere fiscal stress. It will be carried out in an integratedrestructure? Should the potential revenue aspectsweigh framework of research and operational support. It isheavily in the consideration of privatization strategies? also planned to review the macroeconomics of newWhen is the introduction of a new currency appropri- currencies, an important issue for many states of theate? Is there a macroeconomic case for or against gener- former Soviet Union. In addition, a study of the processalized debt cancellation and forgiveness? What lessons of recovery in two stabilized Latin American countriesfor the transition economies emerge from stabilization is under way, and is being extended to Eastern Europe.plus liberalization efforts in other countries? What les- Responsibility: Policy Research Department, Transi-sons do the leading reformers offer the other countries? tion and Macro-Adjustment Division-Alan Gelb,

In fiscal 1993 this project produced a book on the Fabrizio Coricelli, Klaus Schmidt-Hebbel, Luis Serven,macroeconomic situation in Eastern Europe based on a and Andr6s Solimano.Bank-IMF conference organized by the Transition and Completion date: June 1995.Macro-Adjustment Division. The book assessed the rea- Report:sons for the apparent output decline in Eastern Europe's Blejer, Mario, Fabrizio Coricelli, Alan Gelb, and Guillermo Calvo,

economies and the prospects for recovery. Research in eds. 1993. Eastern Europe in Transition: From Recession to

fiscal 1993 also included studies on the operation of Growth. World Bank Discussion Paper 196. Washington, DC.

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FINANCIAL INTERMEDIATION

Corporate Finance in Developing Economies countries because of the access that they have-despitenational capital controls-to the international capital

Ref no. 677-04C market?The limited amount of research on corporate finan- The research relied on three researchmethods: econo-

cial structures in developing countries has left some metric analysis of accounting and stock market data forbasic, policy-relevant questions unanswered. One rea- developing country corporations; interviews with cor-son for the dearth of studies on the subject has been the porate managers and others; and case histories of alack of suitable data. But with the recent emergence of small subset of developing country corporations.stock markets in developing countries, more informa- Responsibility: InternationalFinanceCorporation,Eco-tion on company accounts has become available. These nomics Department-MichaelAtkinand BahramSalimi,accounts allowed researchers of the International Fi- and Central Asia, Middle East, and North Africa De-nance Corporation to study, in a systematic fashion, partment, Division 1-Javed Hamid. With Ajit Singh,corporate finance in nine developing countries (India, Queen's College, Cambridge, U.K.Jordan, Malaysia, Mexico, Pakistan, the Republic of Completion date: May 1993.Korea, Thailand, Turkey, and Zimbabwe).

The study found that, despite the wide variation inthe structures of corporate finance in these countries, Central Bank Independence: Its Politicalthe structures nevertheless differ in important ways and Institutional Foundationsfrom those in industrial countries. Corporations in de-veloping countries use external finance (long-term debt Ref no. 677-07Cor equity) far more than internal finance: the median The World Bank is increasingly advising govern-corporation among Korea's top 50 financed nearly 90 ments on the reform of institutions, including centralpercent of its growth from external finance. In contrast, banks. Therefore, it seems important to understand thecorporations in industrial countries use mainly internal factors that can enhance the independence of centralsources to finance their growth. A second striking con- banks and their commitment to maintaining macroeco-trast was found in the use of equity finance. For large, nomic stability. This research sought to deepen thatlisted corporations in Korea, equity finance accounts for understanding.up to 40 percent of their growth, and for those in Turkey, The research developed broadly based and detailedmore than 60 percent. In the leading OECD economies indices of central bank independence for both industrialnet new stock issues account for only 2 to 3 percent of and developing countries and used them to understandcorporate growth. cross-country variations in the average level and the

This project tested the robustness of the results of the variability of the rate of inflation, and to test for otherearlier research by expanding the sample of corpora- possible effects. The research collected, besides legaltions; it extended the work on the relations between criteria for independence (such as tenure of the centralcorporate characteristics; and it attempted to explain the bank governor, appointment procedure, formal state-differences observed in the financial structures among ment of objectives, and limitations on borrowing by thedeveloping countries and between developing and in- government), data on the actual turnover of centraldustrial countries. It addressed such questions as: How bank governors for 65 countries since 1950 or the timeare a corporation's capital structure and financing pat- that the bank was established. This indicator of inde-tern affected by such characteristics as its age, size, and pendence often diverges from the degree of indepen-variability in earnings, whether it is a multinational, and dence implied by the central bank's charter. Furtherwhether it produces capital goods rather than, say, country-specific information was obtained throughconsumer goods? How much do corporate capital struc- questionnaires sent to informed individuals in the cen-ture and financing patterns affect growth? And is there tral banks of various countries.a convergence of capital structure and financing pat- The study found that indicators of central bank inde-terns among the very largest corporations in developing pendence contribute significantly to explaining infla-

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Financial Intermediation

tion. The legal indicators of independence are less im- Risk-Weighted Capital Adequacyportant in the developing countries than in the indus- Requirements: An Applicationtrial countries, and the rate of turnover of the head of the to Developing Country Banksbank contributes significantly to explaining a country'sinflation performance, especially in developing coun- Ref. no. 677-41tries. In July 1988 the Basle Committee on Banking Regu-

The research tested for the long-term effects of cen- lations and Supervision Practices reached an agreementtral bank independence on important real variables, on a framework for measuring capital adequacy andsuch as the rate and variability of growth, real interest setting minimum standards for international banks.rates, and private investment. The real effects of central This agreement established a system of risk-based stan-bank independence are weaker than the effects on infla- dards of capital adequacy for the deposit institutions oftion, and they often do not show up at all in aggregate the major industrial countries. The two goals of thedata. Low central bank independence reduces the agreement are, first, to increase the stability of the interna-chances for a country to have high growth, after other tional banking system and, second, to harmonize govern-factors affecting growth are controlled for, but there are ment supervision and regulation of internationally activemany countries with relatively high central bank inde- banks. The Basle Agreement undoubtedly represents apendence that nevertheless do not enjoy strong growth. major step toward regulatory convergence in industrial

The broader political context matters for central bank countries.independence. Instability in fundamental political insti- The trend toward harmonization and unification hastutions increases the turnover of the central bank gover- spilled over to the developing countries, as bankingnor in some countries, and in countries in which this supervisors of more and more developing countrieshappens, the inflationary effect of the political instabil- have started adopting the Basle risk-weighted capitalityis greater. And where central bank turnover is occur- adequacy guidelines, often at the World Bank's behest.ring in apparent response to political instability, it has Egypt, Mexico, TunisiJa, and Turkey are just a few ex-greater inflationary effects than where central bank amples of countries that have adopted the guidelines.turnover occurs without apparent relation to political Because the guidelines were developed with industrialevents. country institutions in mind, it is important to analyze

The findings of the research have been presented in whether these guidelines, without any adjustments,several forums: a National Bureau of Economic Re- wouldalsobeappropriatefordevelopingcountrybanks.search (NBER) Political Economy workshop (Novem- For developing countries to achieve the two goals ofber 1991); a Country Economics Department, Macroeco- the Basle Agreement, institutional risks and capitalnomic Adjustment and Growth Division seminar (No- must be defined and measured appropriately by thevember 1991); a Federal Reserve Banking seminar (May regulators of individual countries. In a firm's financial1992); a Carnegie-Rochester conference (November structure, capital plays the role of an income shock1992); the annual meeting of the American Economic absorber for those who hold stakes in the cash flows ofAssociation (January 1993); and an NBER Growth Con- the firm. Capital and loan loss provisions represent theference (April 1993). aggregate of accounts that, for a given stakeholder,

Responsibility: Policy Research Department, Transi- absorb increases and decreases in a firm's current andtion and Macro-Adjustment Division-Steven Webb. anticipated future earnings. The amount of capital ap-With Alex Cukierman, University of Tel Aviv. propriate for a bank can be defined only relative to a

Completion date: June 1993. given set of risks-it is the amount that would minimizeReport: the loss exposure of a deposit insurer (be it a fund or the

Cukierman, Alex, Pantelis Kalaitzidakis, Lawrence H. Summers, government itself). In turn, risk must be defined as theand Steven B. Webb. 1993. Central Bank Independence, Growth, net exposure of an institution's capital to loss from allInvestment, and Real Rates. Carnegie-Rochester Conference sources. Forbanks, the most common risks are credit risk,Series 39. Amsterdam: North Holland. interest rate risk, foreign exchange rate risk, and manage-

Cukiernan, Alex, and Steven B. Webb. 1993. "Political Influence ment risk. Ideally, eachbank's capital adequacy shouldbeon the Central Bank: International Evidence." determinedbasedonitsriskiness,withriskierbanksbeing

Cukiernan, Alex, Steven B. Webb, and Bilin Neyapti. 1992. subject to a more stringent capital requirement."Measuring the Independence of Central Banks and Its But in most developing countries it is difficult toEffect on Policy Outcomes." World Bank Economic Review obtain accurate information, if any, on the quality of6(3):353-98. (Received Yavor Prize from the Horowitz banks' loan portfolios. Accounting standards are inad-Institute, Tel Aviv University, for best 1992 article on equate, disclosure is poor, and markets do not functiondevelopment issues.) well. Moreover, banks are not able to hold a fully diver-

157


sified portfolio because of exchange restrictions and information as a source of structural market failure. Thelack of information and technical expertise. cost to formal institutions of obtaining information on

This research project seeks to develop ways to get and transacting business with small private sector cli-around these problems and improve the risk assess- ents and informal financial agents can be high.ment and capital measurement functions of regulators In investigating alternative explanations for frag-in developing countries. The main question the research mentation and ways to improve integration, the re-seeks to answer is how to design and apply an effective search will focus on the costs and risks of financialcapital adequacy requirement in developing countries, transactions between different segments and on thewhere the quality of information severely undermines incentives for such transactions. It will develop hypoth-measurement and monitoring, and restrictions on di- eses explaining different aspects of fragmentation andversification exacerbate the risks. Specifically, the re- test them with data gathered through questionnairessearch addresses the question of how capital adequacy administeredinfour Africancountrie&-Ghana,Malawi,guidelines can help improve risk management of the Nigeria, and Tanzania-in the formal and informalfinancial sector in developing countries, to prevent a sectors, in urban and rural locations, and to clients andrecurrence of the large financial imbalances and high-risk institutions.activities that led to debt and bank crises in the 1980s. The study's main task is to administer the question-

The research will result in a comprehensive and naires to formal, semiformal, and informal financial insti-analytical policy paper that will identify workable solu- tutions and borrowers in the sample countries to obtaintions to problems that arise when developing country the data necessary to test the research hypotheses. In eachinstitutions are asked to comply with Basle capital ad- country it will attempt to gather in-depth informationequacy guidelines. This analysis will make it possible to from 20 branch banks and 30 informal and semiformalstructure capital adequacy guidelines with rules for lenders in urban areas and from the same number in ruralcapital definition, risk assessment, and enforcement areas. A more limited survey of 20 to 30 formal sectordesigned for application in developing countries. clients and 20 to 30 informal clients will be conducted to

Responsibility: Policy Research Department, Finance verify the information provided by the institutions and toandPrivateSectorDevelopmentDivision-AsliDemirgtii- assess the degree of overlap among clientele.Kunt. With Edward Kane, Boston University. The study will analyze direct and indirect links be-

Completion date: September 1993. tween segments, and differences in risks, transactioncosts, and intermediation costs among different catego-ries of intermediaries and borrowers. The research will

Financial Integration and Development also analyze the comparability of terms and conditionsin Sub-Saharan Africa for contracts across different segments and the extent to

which clients can choose among segments as measuresRef. no. 677-74 of the degree of integration.

Research has shown that the fragmentation of finan- Responsibility: Private Sector Development Depart-cial markets in Africa impedes mobilization of financial ment-Hemamala Hettige and William F. Steel. Withresources and financial intermediation. This fragmenta- Machiko Nissanke, Overseas Development Institute,tion has been attributed in large part to repressive London; Ernest Aryeetey, University of Ghana; andfinancial policies and to structural and institutional Carlos Cuevas, Ohio State University. The Swedishfeatures associated with low economic and financial International Development Authority and the Africandevelopment. Reforms aimed at liberalizing the finan- Economic Research Consortium are providing financialcial sector have had only limited-or, at best, delayed- support for the research, and the Overseas Develop-effect on domestic resource mobilization and on access mentInstitute is both providing fundingand participat-to finance for Africa's potentially dynamic small private ing in the research.sector investors, who operate mostly outside the formal Completion date: December 1994.financial system.

This research project addresses this central question:What explains the existence of dualism in African finan- Exchange Rate Commitments and Centralcial markets and its persistence despite liberalization of Bank Independencethose markets? The research seeks to identify policy,structural, and institutional measures that can acceler- Ref. no. 677-77ate (or impede) financial integration, deepening, and This research will examine the substitutability orintermediation in African countries. Recent research on complementarity between exchange rate regimes andthe causes of fragmentation has focused on imperfect central bank independence as commitment devices to

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help maintain policies aimed at price stability. It will Despite the theoretical importance of trading sys-complement earlier research that demonstrated the im- tems, little is known about their effects on trading be-portance of central bank independence for price stabil- havior. The purpose of this research is to analyze theity in developing and industrial countries, and for growth market structure of the Mexican Stock Exchange-Bolsain developing countries. Mexicana de Valores (3MV)-and the implications of

The study will use accommodation of money growth that structure for daily stock prices and trading vol-to past inflation as the key (inverse) indicator of the umes. The study is designed to shed light on how recentdegree to which a central bank pursues policies to decisions on market structure at the BMV have affectedachieve price stability. Focusing on accommodation, price and volume behavior. For example, has tradingrather than inflation outcomes, will enable the study to behavior changed substantiallyas markets have openedobtain a clearer picture of the determinants of the central up to foreign investors? Does permitting local corpora-bank's policy stance on inflation. And it will allow the tions access to foreign capital markets have implicationsstudytoestimatejointly and compare the effects of central for trading activity in the home market? Answers tobank independence and different types of exchange rate these questions will be useful to regulators andarrangements on the tendency to accommodate. policymakers in other emerging markets who face deci-

The research will be conducted in two steps. First, for sions related to the internationalization of their markets.a sample of about 60 countries at all income levels, The research will draw on daily stock price andaccommodation equations will be estimated in which volume data on a number of shares listed on the BMV.high-powered money growth is regressed on domestic And it will estimate econometric models of price andand foreign inflation or past wage inflation, or both. volume behavior and analyze how that behavior isSecond, the measures of accommodation from those affected by changes in the regulatory and trading frame-equations will be related to central bank independence work.and to type of exchange rate regime. Responsibility:InternationalFinanceCorporation,Eco-

Responsibility: Policy Research Department, Transi- nomics Department-Jack Glen. With Ian Domowitz,tion and Macro-Adjustment Division-Miguel Kiguel; Northwestern University; and Ananth Madhavan, Uni-and Latin America and the Caribbean, Country Depart- versity of Pennsylvania. The Bolsa Mexicana de Valoresment III, Country Operations Division 2-Steven Webb. has provided data for the research.With Alex Cukierman, University of Tel Aviv; and Completion date: June 1994.Charles Guo, P. Rodriguez, and Kenneth Xu, GeorgetownUniversity.

Completion date: June 1994. Equity Portfolio Investment in DevelopingCountries

Market Structure and Market Outcomes: Ref. no. 678-01The Mexican Stock Exchange This research is analyzing the determinants of and

constraints to equity portfolio flows to developing coun-Ref. no. 677-97 tries. Although these forms of external finance still

The belief in markets' importance in promoting eco- represent a relatively small share of the flows to devel-nomic development has gained widespread acceptance oping countries in the aggregate (about 10 percent ofin recent years. Along with this has come increased aggregate net resource flows), they have become anemphasis on the role of the stock market. In theory the increasingly important source of finance for some de-stock market allocates capital by analyzing the risk of veloping countries.each company and rewarding investors appropriately. The emergence of these portfolio flows raises a num-But this theory takes the market as a black box that ber of issues:information enters and that gives forth an efficiently * Is this a sustainable form of external financing ordetermined price. does it represent "hol: money?" What is the role of

Increasingly, market microstructure theories have external and domestic factors in motivating these flows?underlined the importance of stock markets' institu- What are (or can be) the sources (investors) for this typetional features as important determinants of price beof finance, and what volume of financing can be ex-havior. These new theories suggest that policymakers, pected in this form?through their choice of trading systems and other insti- * What is the effect of foreign flows (in terms oftutional features, can influence trading and price behav- volatility) on money supply, the foreign exchange rate,ior. To the extent that this translates into more efficient and reserves management; on the aggregate financialdetermination of prices, all concerned are better off. market, such as the overall stock price level; and on the

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costof capital forindividual firms? What type of domes- additional foreign exchange for balance-of-paymentstic regulation is called for? support, focusing on the differences among individual

* How important are the benefits of these flows developing countries or a variety of groups of develop-other than as a source of external financing? For ex- ing countries.ample, what is the role of stock markets in resource The second part of the study addresses the effect ofallocation and managerial control? FDI on growth, which is generally thought to be posi-

* What are the barriers (in both developing and tive. In the presence of distortions, however, its effect onindustrial countries) to a free flow of funds, and how growth may be minimal, and FDI could even be welfare-important are they? What are the opportunity costs-in reducing. Preliminary analysis indicates that FDI in-terms of higher costs of capital-associated with these flowsareassociatedwithhigherratesof economic growthbarriers? in some developing countries but with lower rates of

The research will examine these issues largely through growth in others. The study investigates the causes ofempirical tests. It will also assess the return and diversi- such differential impacts, concentrating on the effect offication benefits for an investor in an industrial country interactions between economic distortions and FDI in-of investing in these markets. The research will cover all centive-disincentive packages on the effectiveness ofemerging-market countries (about 20), using data from FDI in promoting economic growth. This analysis willthe International Finance Corporation's Emerging Mar- answer the question as to why the effect of FDI appearskets Database. The research will cover price and rate-of- to differ so markedly among countries and pinpointreturn behavior (cross-section and time-series) for indi- ingredients of policy packages that raise or lower FDIvidual stocks and market indexes. It will also investigate efficiency.American Deposit Receipt issues and country funds. It In addition to papers discussing its findings, thewill use a variety of methods, derived mostly from the project will produce a data base of indicators on tradeinternational capital asset pricing models used for tests and financial distortions, and the incentive-disincentiveamong industrial countries. packages of FDI in various developing countries. The

Responsibility: International Economics Department, data base will be made available to outside researchers.Debt and International Finance Division-Stijn Responsibility: International Economics Department,Claessens, Kwang Jun, and Sudarshan Gooptu. With Debt and International Finance Division-StijnCampbell Harvey, Duke University; Linda Tesar, Uni- Claessens; Policy Research Department, Trade Policyversity of California, Santa Barbara; Ingrid Werner and Division-Ann Harrison; and East Asia and Pacific,Geert Bekaert, Stanford University; Cheol Eun, Univer- Country Department I, Country Operations Division-sity of Maryland; and E. Han Kim, University of Michi- David Dollar. With Maxwell Fry, University of Birming-gan. ham.

Completion date: December 1993. Completion date: February 1994.

Foreign Direct Investment Stock Market Development and Financialin a Macroeconomic Framework Intermediary Growth

Ref. no. 678-15 Ref no. 678-37This project analyzes the financial aspects and the Empirical evidence suggests that financial services-

growth-impactaspects of foreigndirectinvestment (FDI). mobilizing savings, managing risk, allocating resources,It will provide the first large cross-country study of the and facilitatingtransactions-importantly influenceandfinancial effects of FDI and will expand the existing are importantly influenced by economic development.literature on the effect of FDI on growth by considering A larger literature demonstrates that financial crises,the impact of both incentive-disincentive packages and such as widespread bank failures and stock marketdistortions in a large group of developing countries. collapses-can impede and even reverse economic ad-

The research looks firstatthe financial aspects of FDI. vances. In light of these observations and experience,One of the most important financial aspects of FDI is the World Bank in the 1980s began devoting an increas-whether it represents primarily a source of external ing amount of attention to improvement of countries'financing or a source of investment. The national ac- financial systems and to coping with financial crises thatcounting identities indicate that FDI can either raise threaten economic prosperity. Throughout this periodinvestment or relieve foreign exchange shortages (or a World Bank programs focused on core financiallinear combination of the two which sums to zero) but themes-loosening interest rate controls, reducing gov-not both. Thus, the study addresses the question of ernment involvement in credit allocation, and rational-whether FDI increases domestic investment or provides izing the taxation of financial intermediaries-and on

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managing banking failures, rehabilitating insolvent of data-those on firms recently assembled by the Inter-banks, and training bank managers and supervisors. national Finance Corporation, the IFC's data on emerg-More recently, World Bank programs have stressed the ing markets, and the measures on stock market develop-development of capital markets in general and stock ment constructed in the first part of the study. Improv-markets in particular. Yet there is little work on measuring our understanding of the link between stock marketing the level of stock market development and compre- development and corporate financing will improve ourhending the relationship between stock market devel- comprehension of the interactions between stock mar-opment and the functioning of financial intermediaries. ket development and intermediary activities. And dis-

This research project seeks to improve our under- section of the relationship between stock market devel-standing of the role of stock markets in financial sector opment, intermediary behavior, and corporate financ-development by constructing measures-and therefore ing decisions will represent an important step toward acriteria--of stock market development, relating these more complete understanding of how the process ofmeasures to the development of financial intermediar- financial sector development affects investment andies, and evaluating how stock market development efficiency at the firm level, and a more precise view ofinfluences firms' financing decisions. how financial services affect economic development.

First, the study will construct measures of stock Responsibility: Policy Research Department, Financemarket development. These measures should have a and Private Sector Development Division-Aslinumber of immediate and long-term uses. Such mea- Demirgiiq-Kuntand Ross Levine. With RobertKorajczyk,sures quantify the level of development and help gauge North Western University; Robert King, University ofimprovements in the stock market. They will allow Rochester; and Mark Gertler, University of Wisconsin.analysts to monitor the evolution of a country's stock Completion date: October 1994.market and provide a criterion for assessing the successof policies designed to improve the stock market. In thelonger run such indicators will facilitate more research Agricultural Credit in the Europeon how the financial sector influences economic devel- and Central Asia, and Middle East

opment. and North Africa Regions: Characteristics,Second, using purely descriptive statistics, the re- Issues, and Strategy

search will illustrate the codevelopment of stock mar-kets, banks, mutual funds, pension funds, and other The recent issuance of World Bank policies guidingnonbank financial intermediaries. This will allow the financial sector operations and the resulting decline instudy to address such questions as this: Does the role of lending for agricultural credit in the Europe and Centralbanks in the economy become less important as stock Asia, and Middle East and North Africa regions bring tomarkets develop, or are there complementarities be- light the need to examine closely Bank experience intween banks and stock markets so that banks flourish as agricultural credit. This need is highlighted by the lessstock markets develop? Similarly, the research will docu- than satisfactory performance of agricultural creditment the evolution and interactions among stock mar- projects in many countries of the region.kets and pension funds, mutual funds, and other Because of the limited information on rural credit,nonbank financial intermediaries. This documentation the first cbjective of this study was to review the perfor-will represent a first step toward characterizing finan- mance of the rural credit systems of the countries in thecial sector development. The research will also investi- regions. The second objective was to examine experi-gate conceptually the links between stock market and ence with Bank credit projects and their contribution tofinancial intermediary development. Both the empirical the improvement of these credit systems. The last objec-and conceptual work of this part of the study will enrich tive was to develop a strategy on rural finance for theour comprehension of financial sector development and regions within which country-specific strategies wouldaugment our ability to dissect the mechanisms through be developed.which the services provided by financial markets and The study was based on a review of all availableinstitutions affect and are affected by economic activity. information on rural credit in countries of the regions,

Third, the research will look at how the financing particularly Middle Eastern and North African coun-patterns of firms change as stock markets develop. As tries. Nine countries were included in the study, ofstock markets develop and firms raise more capital by which six had undertaken World Bank projects. Theissuing shares, will the debt-equity ratio of firms fall, or experience in two countries of Central Europe was alsowill borrowing also increase, so that the debt-equity included in the study. Three country case studies wereratio either remains constant or rises? The study will carried out to study in detail the experience in imple-examine how stock market development influences the menting Bank credit projects and the effect of suchcomposition of corporate financing using a combination projects.

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The study concluded that Bank lending in the regions fections that affect Turkish companies' access to exter-should shift from its basis in the traditional thinking on nal finance. Second, the project attempted to determineagricultural credit to embrace the broader concept of whether borrowing from a privately run developmentrural finance. The study recommended strengthening finance corporation-the Turkish Industrial Develop-rural financial intermediation-rather than depending ment Bank (TSKB)-had any influence on the determi-on external funds-as a means of financial development nants of corporate indebtedness. In particular, it at-not only of agriculture but of the entire rural sector. This tempted to see whether the fact that the TSKB had betterconclusion was premised on the observation that suffi- project appraisal and monitoring capabilities reducedcient capital can be mobilized from within the rural the degree to which firms' borrowing suffered fromsector. problems of imperfect information and contract en-

Commercial banks-the principal rural deposit tak- forcement.ers-are reluctant to lend to agriculture and normally The project relied on the literature on the determi-move deposits out of the sector. To reverse the flow of nants of corporate capital structure and utilized bothcapital, governments have established specialized agri- simple regression and more complex latent variablecultural credit institutions. These institutions are the analyses. To address the second issue, two disjointedmost important source of formal credit, but most have sets of firm-level data were used, the first from thenot performed well. World Bank projects that have Capital Markets Board and the second from the TSKB.relied on these credit institutions as financial intermedi- The research has led to two principal findings. First,aries have made only a limited contribution to improv- firms seem to have easier access to trade credit than toing financial performance and attaining credit policy short-term bank loans. This finding is consistent withreform. the widespread view that trade credit is an important

The basic strategy proposed by the study is to de- source of financing in developing countries. Second,velop specialized agricultural credit institutions into there is some evidence that being a client of the TSKBeffective rural financial institutions. Bank support is facilitates firms'efforts toraise short-termbank loans; inproposed for attaining management and financial au- particular, TSKB firms seem to be less affected by agencytonomy, mobilizing rural deposits, and diversifying problems that arise because of imperfect informationlending to meet the credit demands of the entire rural and costly contract enforcement. Thus, it seems that thesector. This proposed strategy is being used in the screening and monitoring functions carried out by thedesign of new rural finance projects and in dialogues TSKB facilitates firms' efforts to raise financing fromwith rural financial institutions in countries of the re- other lenders.gions. Responsibility: Private Sector Development Depart-

The findings of the research have been presented at a ment-Izak Atiyas. With Haluk Unal, University ofseminar on Rural Finance at Ohio State University, Maryland.Columbus, Ohio (November 1991), and at a seminar on Completion date: October 1992.Emerging Strategies in Rural Finance in the Middle Eastand North Africa Region sponsored by the Africa RuralFinance Group (June 1992). Banking in Transitional Socialist Economies

Responsibility: Europe and Central Asia, and MiddleEast and North Africa Technical Department, Agricul- The objective of this research project was to pursueture Division--Orlando Sacay. With Melisa Agabin and the proposition-not an original one-that a narrowlyPrice Gittinger. defined and amply regulated banking system is best

Completion date: September 1992. suited to the conditions in European transitional social-Report: ist economies. It brought to the debate the perspective of

Sacay, Orlando. 1992. "Availability of Credit for Livestock the bank supervisor, to whom the responsibility forProduction in Eastern Europe." Presented at the Conference ensuring the safety and soundness of the banking sys-on Livestock Production in Eastern Europe, Budapest, tem will fall. The study emphasized that bank supervi-Hungary, April. sion cannot be relied on as the principal means for

achieving financial soundness. Bank supervision can-not avert problems that will arise because of inappropri-

Corporate Indebtedness in Turkey ate policy.The study led to several findings. First, governments

This research project addressed two issues. First, it need to promote the achievement of certain fundamen-analyzed the determinants of corporate indebtedness in tal objectives of bank regulatory policy, and the finan-Turkey with a view toward identifying market imper- cial soundness of the banking system is important to the

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achievement of those objectives. Second, proposals in- Completion date: November 1992.tended to assist the transition of the nonfinancial sector Report:may have adverse long-run consequences for banks' McCarthy, F. Desmond. 1992. "Is There a Capital Shortage?"financial soundness. And third, bank supervisors can- World Bank, Development Policy Group, Washington, DC.not reasonably be expected to mitigate the threats tofinancial soundness inherent in functional and owner-ship policies that envision universal-type banking. Su- Financial Market Integrationpervisors attempting to ensure financial soundnessin transitional socialist economies face obstacles. This project investigated the degree of integration of

Responsibility: Financial Sector Development Depart- developing country capital markets into the global capi-ment-David Scott. tal market, reviewed the determinants of capital flight,

Completion date: November 1992. and updated estimates of capital flight. Its main themeswere the advantages and disadvantages of (dejure or defacto) developing country integration into the global

Global Capital Shortage capital market and the relationship of this integration tothe management of shocks.

This researchexamined the question of whether there An economy's financial integration with the outsideis a capital shortage from three perspectives: quantity, world (the extent of capital mobility across its borders)price, and wealth. The broad conclusion is that there is is a key determinant of some of its most importantno imminent shortage. Investment share, capital-out- macroeconomic properties. Yet little is known about theput ratios, and composition of investment do not sug- financial integration of many developing economies.gest anything abnormal in the current period. Long- An important stumbling block in the empirical assess-term real interest rates are somewhat above normal but ment of financial integration (openness) is the multiplic-well below the high level of the 1980s. Wealth increased ity of approaches to measuring it.rapidly in the 1980s. This was accompanied by strong This study described and evaluated different tests offlow demand for high-return investment together with capital mobility, surveyed existing evidence, and ap-lower savings rates on the supply side. In the early plied four tests of capital mobility to assess the degree to1990s, as total returns on investment moderate, real which the many developing countries tested haveinterest rates are expected to ease. The slowdown in achieved integration with the world financial markets.wealth accumulation is also associated with higher say- The four tests are the magnitude of gross capital flows,ings rates. Both effects should contain any significant the uncovered interest rate parity, the strength of say-rise in real rates. Estimates of needs at the global level ing-investment correlations, and behavior of domesticsuggest that total new demand for investment is not consumption over time. The evidence suggests thatexpected to exceed US$100 billion to US$200 billion a most developing countries can be considered to beyear for the next five years. This is viewed as a relatively financially open-in only 18 of the 57 developing coun-modest change that can be partially offset by higher tries classified did the data fail to show financial open-savings, and it is not expected to lead to increases of ness-and that many countries may be experiencingmore than one to two percentage points in real rates. increased integration with world financial markets.

Developing countries are expected to remain a rela- In its investigation of capital flight the study esti-tively minor presence in the global scene. But some, mated capital flight using alternative methodologies.those that have the appropriate policy mix and offer a While these methodologies differ in approach, the iden-stable political environment, are expected to attract tities used inbalance-of-payments data make them closesome additional flows. These will be driven by higher in the final measurement. Capital flight is a much morepotential returns in these markets and also by recent widespread phenomenon than commonly thought.trends in portfolio risk management toward diversifica- Compared with countries' GDP, capital flight is evenlytion. distributed, and the capital flight-GDP Lorenz curve is

The findings of the research were presented at an close to the 45-degree line.American Economics Association conference in Decem- This research contributed to the 1993 edition of theber 1992 and at an International Economic Outlook Bank's Global Economic Prospects.conference in October 1992. Responsibility: International Economics Department,

Responsibility: Office of the Vice President, Develop- Debt and International Finance Division-Ronaldment Economics-Lawrence H. Summers; and Devel- Johannes, Stijn Claessens, and Masood Ahmed. Withopment Policy Group-F. Desmond McCarthy. With Nlandu Mamingi, David Naude, David Stewart, SimonAhmed El-Hamri. Ajayi, and Peter Montiel.

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Completion date: February 1993. ventionally perceived but largely represents the amountReports: of creditable foreign taxes for investors.

Chang, K., Constantijn Claessens, and R. Cumby. 1993. Second, the study examined the financing of U.S."Conceptual and Methodological Issues in the Measurement direct investment abroad. It used a theoretical model toof Capital Flight." Presented at the conference on Some examine how foreign investors can use debt finance toIssues Related to Capital Flight from Latin America, reduce their host country tax liability and to reduce theChristian-Albrechts Universitit, Kiel, January. capital investment distortion on account of foreign taxes.

Claessens, Constantijn, and David Naude. Forthcoming. Findings based on U.S. Department of Commerce data"Recent Estimates of Capital Flight." Policy Research for 1982-89 show that U.S. affiliates use leverage in high-Working Paper. World Bank, Washington, DC. tax environments and in cases in which the affiliates face

Montiel, Peter. 1993. "Capital Mobility in Developing Countries: high foreign wage bills relative to assets. This confirmsSome Measurement Issues and Empirical Estimates." Policy the general notion that leverage can be used to ward offResearch Working Paper 1103. World Bank, International tax and wage pressures on the firm.

Economics Department, Washington, DC. The study also sought to identify the characteristicsof FDI that determine the average foreign tax rate paid.It found that, generally, the taxation of FDI is positively

Nondebt Private Flows related to the ratio of plant and equipment expendituresto the firm's assets, and negatively related to the relative

The project looked at three aspects of flows of private size of the wage bill. The second relationship suggestscapital. that host country tax authorities serve to offset labor's

First, it examined the effects of taxation on foreign claims on foreign capital. Interestingly, the measure ofdirect investment (FDI) using country-specific data. The taxation that best reflects foreign investment character-study found that home country taxation has had a istics in industrial countries is income and payroll taxes,significant effect on foreign direct investment. This find- while for developing countries it is a broader measure ofing contrasts sharply with the conclusions of past stud- all host country taxes on the foreign establishment.ies, which have not supported any systematic effect of Third, the research looked at international trading ofthe home country's tax system on FDI either empirically equities and the cost of capital. It investigated the equi-or on theoretical grounds. The study's main approach librium asset pricing mechanism in a partially inte-was to distinguish the roles of different tax parameters grated world capital market in which some assets arein identifying alternative channels for the tax effects on internationally tradable and others are not. The majorFDI. The home country statutory tax rate was claimed to findings of the study's theoretical models and simula-measure the effect of home country taxation on the tion are as follows:income from FDI originating in a residence system * Nontraded assets are priced according to a worldcountry, and the home country effective tax rate was systematic risk, reflecting the externality effect gener-expected to measure a possible tax effect on the substi- ated by the traded assets, as well as a country-specifictution between domestic and foreign investment. The risk.host country's effective tax rate should represent the * Nontraded firms of a country get a free ride frominvestment incentives of undertaking FDI or simply the their traded counterparts-thatis, nontraded firmsben-amount of creditable foreign tax payments. efit from integration without incurring the concomitant

The most robust of the statistical results, based on costs.data on investment into the United States from each of * Notwithstanding the relatively small number of10 other countries during 1980-89, is that the home traded securities, the world capital market maybe muchcountry statutory tax rate has had a significantly nega- more integrated than it appears, due to the asset pricingtive effect on FDI from the residence system countries. externality effect.This result is supplemented by the finding that the same * To maximize the indirect benefit from partial inte-variable had no significant effect on FDI from the terri- gration, dual-listed assets or country funds should betorial system countries. The finding that tax rates are of chosen so that they have the highest correlation with thethe opposite sign in the estimated equations supports domestic market portfolio.the presence of alternative channels for the effects of the The study's results were presented at a workshop inhome country tax system on FDI. The weak perfor- November 1992 for Bank and IFC economists.mance of the host country tax variables in the estimated Responsibility: International Economics Department,equations, coupled with the mixed results in the previ- Debt and International Finance Division-Kwang W.ous literature, may suggest that the host country tax Jun, Stijn Claessens, Sudarshan Gooptu, and Punamdoes not affect investment incentives as much as con- Chuhan. With Joosung Jun, Yale University; Harry

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Huizinga, Stanford and Triberg Universities; and Cheol The extent of cross-border capital markets integra-S. Eun, University of Maryland. tion can be directly assessed by examining nominal

Completion date: February 1993. interest rate parity conditions. Another direct methodReports: could be devised based on the tendency of the return to

Eun, Cheol S., Stijn Claessens, and Kwang Jun. 1992. "Interna- capital to equalize in different countries, although it

tional Trading of Equities and the Cost of Capital." Draft. would be a difficult test to conduct because of complexi-

Huizinga, Harry. 1992. "The Financing and Taxation of U.S. ties in tax systems.Direct Investment Abroad." Draft. Feldstein and Horioka proposed a different method

Jun, Joosung. 1992. "The Effects of Taxation on Foreign Direct for such an assessment based on the size of the correla-

Investment: Evidence from Country-Specific Data." Draft. tion coefficient between national savings and domesticinvestment rates. Their tests produce counterintuitiveresults that also contradict those obtained from direct

External Finance Supply Studies tests of nominal interest parity conditions. So, the issueof the actual extent of international capital markets

This research looked at the long-term trends in the integration, or the degree of international capital mobil-amounts and forms of external capital flows to develop- ity, remains unsettled.ing countries. It identified recent forms of commercial This research assessed the validity of the savings-bank lending to developing countries and attempted to investment correlation coefficient as a metric for thedetermine how much of this lending is secured. And it measurement of cross-border capital mobility. It usedassessed the prospects for growth in lending guaran- two methodologies to accomplish this task. The first

teed by export credit agencies. methodology is based on the argument that a validThe research contributed to the 1993 edition of the metric should indicate high capital mobility among

Bank's Global Economic Prospects. regions of an advanced industrial country, where capi-Responsibility: International Economics Department, tal is known to be mobile. The second is based on the

Debt and International Finance Division-Ronald argument that indications of a valid metric should be

Johannes, Masood Ahmed, and Ning Zhu. With Cliff consistent with those obtained on the basis of depar-Papik. tures from the real interest rate parity. In both cases the

Completion date: May 1993. tests fail to reject the null-that is, the research fails toReport: reject the Feldstein-Horioka hypothesis.

Tambe, W., and Ning Zhu. "Export Credits: Review and Responsibility: International Economics Department,Prospects." International Economic Analysis and Prospects Divi-

sion-Jalaleddin Jalali.Completion date: May 1993.

How Integrated Is the World Capital Market?

The extent of integration of an economy's capital Financing the Former Soviet Union'smarket with those in the rest of the world is an important Transitionparameter for analysts and policymakers. It signifi-cantly affects, among other things, the effectiveness of The transition of the former SovietUnionwill requiregovernments' fiscal and monetary policies, the inci- a great deal of new financing. In addition, the formerdence of certain taxes, and the effect of changes in Soviet Union will need to resolve internally andprivate savings and government deficits on capital ac- externally how it will deal with old debt as well as thecumulation. The results of perfect integration of the claims it holds on developing countries. These are newinternational capital markets include the following: issues from both a conceptual and a practical point of

* Government deficits will not crowd out private view.investment. This research carried out three tasks to contribute to

* Savings promotion policies will notbe effective in the understanding of these issues. First, it analyzedreducing the current account deficit. different ways of dealing with the old debt. Second, it

* An. increase in national savings will not raise do- analyzed the claims of the former Soviet Union onmestic investment and labor productivity. developing countries and possible options for dealing

* Monetary and tax policies cannot alter the real net with them. And third, it developed a conceptual andrate of return on domestic investment. analytical model topro ectbalance-of-payments require-

* Taxes on capital income will induce a capital out- ments for each of the new independent states of theflow, shifting the tax burden to domestic labor and land. former Soviet Union.

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The transition the former Soviet Union faces presents Anderson, Jock R., and J.B. Hardaker. 1993. "Risk Analysis ina new challenge in modeling adjustment and external Agriculture: Theory, Methods, and Application." FAOfinancing. The research developed a methodology that Training Division, Rome.used trade data (inter- and extrarepublic), debt stocks, Anderson, Jock R., and Peter B.R. Hazell. Forthcoming. "Riskand evidence from cross-country comparisons. And it Considerations in the Design and Transfer of Agriculturalquantified the role of foreign capital inflows in support- Technology." In Jock R. Anderson, ed., Agriculturaling the transition in both an initial period of depressed Technology: Policy Issuesfor the International Community.output and over the medium term, using a forward- Wallingford: CAB International.looking model of savings behavior. The new indepen- Quiggin, J., and Jock R. Anderson. 1992. "Risk Adjustment indent states will need substantial capital inflows to coun- Benefit-Cost Analysis." World Bank, Agriculture and Ruralterbalance the initial fall in domestic savings and invest- Development Department, Washington, DC. Draft.ment.

Responsibility: International Economics Department,DebtandlntemationalFinanceDivision-StijnClaessens The Japanese Main Bank System and Itsand David Naude. With Michael Dooley, University of Relevance for Developing and TransformingCalifornia at Santa Cruz. Socialist Economies

Completion date: June 1993.Report: There are three main models for banking. The first is

Dooley, Michael. 1992. "Medium-Term Financing Needs of the the Anglo-American model, in which securities marketsIndependent States of the Former Soviet Union." University are well developed and play an important role. Theof California at Santa Cruz. second is relationship banking, which involves close

ties between borrowers and the banks. The third is thebanking system of planned economies, in which the

Risk Management in Agriculture banks' main role is the allocation of resources accordingto national plans.

Price and output risks in agriculture can have impor- The Japanese main bank system (JMBS) is a uniquetant negative effects on cash cropping, technology adop- fourth model. It combines an intimate relationship withtion, investments in land improvements and conserva- the client with a system in which the main bank acts astion, and the welfare of the poor. Concern with these a syndicator of loans to its clients with other banks andeffects has been an important factor driving the agricul- financial institutions. This permits banks to help theirtural policy interventions of many countries and under- clients make decisions during periods of financial dis-lying their reluctance to more fully embrace market tress, and also permits reciprocal relations among banksliberalization policies. in the appraisal, monitoring, and supervision of assisted

This research has analyzed the various policies and enterprises.institutional arrangements through which governments This research project carried out a theoretical andand private agents can directly or indirectly ameliorate empirical analysis of the JMBS and the functions itthe negative implications of price and output volatility performed during Japan's accelerated industrialization.in agriculture. Of particular interest are insurance And it assessed the relevance of the JMBS as an institu-schemes, futures markets, and price policies. The re- tional mechanism for promoting rapid industrializationsearch has also sought to develop practical methods of in the developing economies and the transforming so-incorporating risk management considerations into the cialist economies, particularly in the private sector.design and appraisal of Bank projects. The research compared the Japanese model with the

The research was conducted through literature re- German universal banking system, the Korean bankingview, analysis of secondary data, and case studies. The system, a Latin American bank, and the Indian bankingfindings have been disseminated through policy guide- system. A set of papers prepared for the project examineline papers, seminars, and participation in operational key features of the JMBS and its evolution; discuss howmissions. the main bank system works; detail comparative coun-

Responsibility: Agriculture and Natural Resources try studies of relationship banking; and discuss theDepartment, Agricultural Policies Division-Peter relevance of the JMBS to other countries, lessons learnedHazell, Jock Anderson, and Apparao Katikineni. from the analysis of the JMBS, and implications for

Completion date: June 1993. developing and transforming economies.Reports: Responsibility: Economic DevelopmentInstitute,Stud-

Anderson, Jock R., and J.L. Dillon. 1992. Risk Analysis in Dryland ies and Training Design Division-Hyung-Ki Kim. WithFarmingSystems. Farm Systems Management Series 2. Rome: Hugh Patrick, Columbia University. The Center of Japa-FAO. nese Business and Economy of Columbia University,

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and the Economy of Japan Program at Stanford Univer- veying the nature of demand for finance by SMEs andsity contributed staff time. also investigating the constraints on both formal and

Completion date: July 1993. informal financial institutions, the research will drawconclusions on ways that Ghana's financial develop-ment could be hastened to facilitate growth of an effi-

Foreign Direct Investment and Trade cient, dynamic private sector.Ghana has liberalized its financial policies and re-

This research project seeks to identify the main deter- structured its banking system as part of its Economicminants of foreign direct investment in developing Recovery Program. In principle, the removal of interestcountries. The results should help countries that are rate ceilings and direct allocation of credit should estab-analyzing their policies with a view toward attracting lish more suitable conditions for SME lending. Butgreater inflows of foreign investment by shedding light evidence indicates that there is little increase in suchon what factors are more effective in encouraging for- credit. While SMEs cite lack of access to finance as aneign investment. important constraint on their operation and growth,

The study is conducting an analysis of cross-sec- banks suggestthatapplicationsfromcreditworthySMEstional, time-series data on investment originating in the are insufficient to utilize those resources that are avail-United States (for 1977-90) and in Japan (1981-90). It is able. This may result in part from the banks' insistenceplanned to extend this analysis to investment in Taiwan on property as collateral, given the difficult they face in(China) and Germany. The purpose of the analysis, assessing creditworthiness through other methods.which covers investment in 40 to 50 developing coun- One component of the study involves conductingtries, is to determine whether tax incentives or more interviews at a range of financial institutions to assessfundamental factors, such as human capital and infra- their relative abilities to provide financial services tostructure, are more effective in attracting private invest- SMEs. The interviews focus on the institutions' access toment. information on small-scale entrepreneurs, the transac-

The research has found that tax incentives seem to tion costs involved, and the risks they face. For banks,have a weak and ambiguous effect in attracting foreign the transaction costs of SME lending are high because itdirect investment, and that good infrastructure and a is difficult and time-consuming to obtain the informa-stable political and economic situation (the creditwor- tion needed to appraise SME loan proposals. Further,thiness of a country, for example) have a very important perceived risks are high because of economic uncer-effect, tainty, the high turnover rate among SMEs, and the lack

Some of the research conducted is being linked with of risk-sharing arrangements. Banks' deposit structuresefforts in the East Asia and Pacific and the South Asia are predominantly short-term, and they remain ori-Regional Offices. As part of these efforts, a survey of 175 ented toward short-term commercial finance.Japanese investors was conducted with the assistance of The second component is a survey of more than 100Japan's Ministry of International Trade and Industry. A firms of different sizes. SMEs in Ghana make little use ofseminar was conducted in the International Finance informal financial mechanisms, either as savers or asCorporation in March 1991 for Bank and IFC staff to borrowers. This is in part because the informal savingsdiscuss the findings of the research. schemes involve relatively small sums compared with

Responsibility: Private Sector Development Depart- the amounts required by SMEs. Borrowing from mon-ment-Ashoka Mody. With Susmita Dasgupta; Sarabjit eylenders is rare because their rates are high. Hence,Sinha; and Krishna Srinivasan, Indiana University at most SMEs finance their operations and growth fromBloomington. internal funds. Although many would have difficulty

Completion date: September 1993. using and repaying credit, some SMEs with strongReport: demand and growth potential could benefit from greater

Wheeler, David, and Ashoka Mody. 1992. "International access to credit at rates close to those prevailing in theInvestment Location Decisions: The Case of U.S. Firms." formal financial sector.Journal of International Economics 33 (August):57-76. Research findings so far indicate that efforts to ex-

pand finance available to SMEs through financial liber-alization and the creation of an SME credit program

Meeting the Financial Needs of Ghana's have not been sufficient to generate substantially moreSmall- and Medium-Scale Enterprises lending to SMEs. Two sets of forces (monetary tighten-

ing and pressure to restructure banks) have workedThe purpose of this study is to investigate the capac- against SME lending since liberalization. In tightening

ity of the financial system in Ghana to meet the needs of their procedures to improve performance, banks havesmall- and medium-scale enterprises (SMEs). By sur- centralized credit analysis, decisionmaking, and super-

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vision of loans; this centralization is not conducive to in both industrial and developing countries, assesseslending to SMEs. In addition, there has been no im- their effect on the economy, and evaluates policies forprovement in their information base on projects or their promotion. One of its principal objectives is toclients, or the acceptability of substitute collateral to examine the economic and regulatory issues involved inlanded property. promoting contractual savings.

Despite the SMEs' strong interest in credit, commer- In the first part of the project, papers that deal withcial banks' profit orientation may deter them from sup- policy issues will be prepared, and in the second part,plying credit to SMEs because of the higher transaction papers will be drafted on experiences in both industrialcosts or risks involved. The study's findings suggest and developing countries. These papers will be col-three preliminary lessons. First, priority shouldbe given lected for publication in a book.to the working capital needs of SMEs. This would help This project complements the Policy Researchto keep the transaction costs low, because banks would Department's work on old age security.have to concentrate on the entrepreneur's track record Responsibility: Financial Sector Development Depart-rather than on project appraisal, which is difficult and ment-Dimitri Vittas. With Michael Skully; Augustocostly. Second, an appropriate point of intervention for Iglesias, Habitat AFP; Kenneth Wright; Michael BarthSME investment loans would be when enterprises need and Martin Grace, Georgia State University; and Tho-significant external finance to graduate to a new level. mas Rabe, European Commission and Treuhandanstalt.And third, although under the existing procedures few Completion date: June 1994.bankable SMEs come forward, a change in procedures Reports:affecting authority and incentives at the bank branch Grace, Martin, and Michael Barth. 1992. "The Regulation andlevel may yield a greater volume of SME projects. Industrial Organization of the U.S. Non-Life Insurance

Responsibility: Private Sector Development Depart- Industry." World Bank, Country Economics Department,ment-Hemamala Hettige and William F. Steel; and Financial Policy and Systems Division, Washington, DC.Western Africa Department, Industry and Energy Op- Vittas, Dimitri. 1990. "Economic and Regulatory Issues oferations Division. With Ernest Aryeetey and A. Baah- Contractual Savings Institutions." World Bank, CountryNuakoh, University of Ghana; and Tamara Duggleby. Economics Department, Financial Policy and SystemsThe National Board for Small-Scale Industries, Ghana, Division, Washington, DC.is providing financial support. . 1992. "Contractual Savings and Emerging Securities

Completion date: September 1993. Markets." Policy Research Working Paper 858. World Bank,Reports: Country Economics Department, Washington, DC.

Aryeetey, Ernest, A. Baah-Nuakoh, Tamara Duggleby, . 1992. "The Simple(r) Algebra of Pension Plans." WorldHemamala Hettige, and William F. Steel. "Meeting the Bank, Country Economics Department, Financial Policy andFinancial Needs of Small- and Medium-Sized Enterprises in Systems Division, Washington, DC.Ghana." Draft. Vittas, Dimitri, and Augusto Iglesias. 1992. "The Rationale and

Baah-Nuakoh, A., and William F. Steel. "Background Paper on Performance of Personal Pension Plans in Chile." PolicySME Demand for Finance: Ghana." Draft. Research Working Paper 867. World Bank, Country

Duggleby, Tamara J. " Best Practices in Innovative Small Economics Department, Washington, DC.Enterprise Finance Institutions." World Bank, Washington, Vittas, Dimitri, and Michael Skully. 1991. "Overview ofDC. Contractual Savings Institutions." Policy Research Working

Duggleby, Tamara J., Ernest Aryeetey, and William F. Steel. Paper 605. World Bank, Country Economics Department,1992. "Formal and Informal Finance for Small Enterprises in Washington, DC.Ghana." Industry and Energy Department Working Paper, Wright, Kenneth M. 1992. "The Life Insurance Industry in theIndustry Series Paper 61. World Bank, Washington, DC. United States: An Analysis of Economic and Regulatory

Hettige, Hemamala. 1992. "Toward Financial Deepening in Sub- Issues." Policy Research Working Paper 857. World Bank,Saharan Africa: An Analytical Framework." World Bank, Country Economics Department, Washington, DC.Washington, DC.

Housing FinanceContractual Savings

In most developing countries relatively little mort-Contractual savings institutions (such as pension gage credit is supplied voluntarily, in large part because

funds and life insurance companies) can make a signifi- of the high cost of enforcing contracts, a form of transac-cant contribution to the development of long-term debt tion cost. In most countries it is the cost of postcontractand equity markets. This project reviews their progress governance rather than the ex ante cost of producing

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contracts that explains the restrained supply of mort- tionship between pollution intensity and foreign invest-gage credit. This is an important distinction because ex ment. This issue draws on the current debate regardingante costs are dictated by technological conditions- the importance of lower environmental regulations as athat is, the nature of the production function-and thus motive for foreign investment.little can be done to change these costs. The costs of Responsibility: Policy Research Department, Tradegovernance, however, are more amenable to change. So Policy Division-Ann Harrison.if there are significant gains from reducing these costs, Completion date: March 1995.institutional reforms may help realize them. Reports:

This research found that in the lowest-income coun- Aitken, B., and Ann Harrison. 1993. "Does Foreign Investmenttries the ex ante transaction costs of providing housing Generate Technology Transfers?" World Bank, Policyfinance are probably sufficiently high per dollar of loan Research Department, Washington, DC.that low levels of demand explain the relatively small Harrison, Ann. 1993. "DFI: Determinants and Consequences."size of this sector. But in most other developing coun- World Bank, Policy Research Department, Washington, DC.tries housing finance systems could grow more sponta-neously and rapidly if there were more effective ex postcontract enforcement procedures. This growth would The Role of Payment Systems in Financialimprove the efficiency of financial systems and reduce Sector Reformthe distortions in the economy. So the economic benefitsof reducing transaction costs in this sector are likely to Payment systems are the basic infrastructure of thebe significant. financial sector. They are the grid or the mechanisms by

Responsibility: Transportation, Water, and Urban De- which transactions are cleared through financial inter-velopment Department, Urban Development Division- mediaries, paid, and settled. In recent years attempts toRobert M. Buckley; and Latin America and the Carib- introduce indirect and market-based instruments inbean, Country Department 111, Infrastructure Opera- monetary policy in many developing countries, particu-tions Division-Thakoor Persaud. The Federal National larly in transitional socialist economies, have faced theMortgage Association is participating in the research. problems of highly defective or inefficient payment

Completion date: June 1994. systems. An inefficient payment system hinders enter-Reports: prise production, limits the growth of money markets

Buckley,:Robert. 1993. "Housing Finance in Developing for savings mobilization and monetary control, and canCountries: The Role of Credible Contracts." Economic require large increases in the money supply to financeDevelopment and Cultural Change. payments liquidity.

Buckley, Robert, Barbara Lipman, and Thakoor Persaud. 1993. This study will examine these and other issues relat-

"Mortgage Design under Inflation and Real Wage Uncer- ing to payment systems in formerly socialist countriestainty: The Use of a Dual Index Investment." World and in developing countries. Of particular significanceDevelopment 21 (3):455-64. are the changes in telecommunications and computing

technology to speed up the clearing and settlement ofinterenterprise payments. Traditionally, payment sys-

Foreign Direct Investment: Determinants tems were centralized, strictly controlled by the state,and Consequences and often state-owned. In such an environment delays

in payment processing capability were not associatedDespite the voluminous literature on foreign direct with a need to hold idle balances to clear and settle

investment (FDI) in the 1960s and 1970s, the empirical interenterprise payments. The state provided the creditevidence on the benefits from FDI remains slim. This needed to"finance" interenterprise trade, and this creditresearch seeks to fill that gap by focusing on several was internal to the monobank structure that existed.aspects of foreign investment in developing countries. With the movement away from automatic and inter-First, the study will examine the relationship between nally provided state credit, enterprises were required toforeign investment and technology spillovers-do mul- provide this credit sup ply. Consequently, improvementstinationals act as a means of transferring the latest in the timeliness of clearing and settlement will reducetechnology to the host country? Second, the study will the need of enterprises for payments "working capital,"look at the general determinants of foreign investment and lead toexpansion of the moneysupply. A more timelyin manufacturing. It will examine the importance of payment system will also promote the development ofimport barriers, industry concentration, and other fac- market-based financia. instruments for monetary control.tors to examine what determines foreign investment in These relationships between payments, enterprisedeveloping countries. Finally, it will examine the rela- growth, development of money market instruments,

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and the money supply are universal and apply to tran- A first conference on payment systems in developingsitional socialist economies as well as to industrial and countries is expected to be held in fiscal 1994 to launchdeveloping countries. Thus, policy lessons and best studies on such key payment system issues as design,practice standards observed inindustrialcountries, suit- standards of operation, accessibility, connectibility,ably modified for important differences in institutional monetary and supervisory implications, and the role ofstructures, are the best guides for recommended changes private sector and the central bank.in the operation of payment systems in other countries. Responsibility: Financial Sector Development Depart-Many of these payment system policy lessons and rela- ment-Andrew Sheng, Fernando Montes-Negret, andtionships with macroeconomic goals will be contained Setsuya Sato. With David Humphrey, University ofin a book being prepared to develop and provide a basic Florida.set of principles regarding payment system improve- Completion date: December 1995.ments.

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BASIC INFRASTRUCTURE AND URBAN

DEVELOPMENT

Infrastructure Bottlenecks, Private productivity have been major topics of empirical inves-Provision, and Industrial Productivity: tigation. Different researchers have arrived at very dif-A Study of Indonesian and Thai Cities ferent results and, thus, at divergent policy conclusions.

Most of the work in this area is based on data fromRef no. 6.76-71 industrial countries, notably the United States and the

This research will investigate the contribution of G-7 countries, and the policy debate focuses on them.investment in infrastructure to industrial productivity Much less work has been done on these effects in devel-and economic growth. It will also study private sector oping countries, and yet the issues are critical for devel-participation in the supply of infrastructure services. opment strategy and are classical ones in developmentUnderstanding the relation between public infrastruc- economics.ture services (as inputs for manufacturing) and the The Bank has traditionally been a major lender for,productivity of industry is important for policy and and guide on, infrastructure development in the devel-lending operations. oping world, and it participates in public expenditure

The research will first study the effects of deficiencies reviews in borrower countries. Thus, the search forin infrastructure on the costs and productivity of manu- credible and quantifiable answers to the question offacturing firms. Second, it will compare the effects of how investment in infrastructure affects growth is im-infrastructural deficiencies on industrial growth in re- portant to the World Bank's functions and to the effortsgional cities with those in the most important, or pri- to enhance the effectiveness of its operations. An im-mate, city of Indonesia and Thailand. And third, it will proved understanding of the growth effects of infra-conduct a contestability analysis for private sector par- structure investment-for example, with regard to whatticipationinsuchpublicinfrastructureservicesaspower, kind of country characteristics determine the intensitywater, telecommunications, and transport. of the effects and how the effects are mediated-would

Using industrial census data and establishment sur- help the Bank determine how it should distribute itsvey data to be collected, the study will then estimate own efforts and resources.econometric models for firms' cost functions and con- Further downstream in the Bank's work an improvedstruct simulation models to study efficiency gains to understanding of these effects and of the methods formanufacturing industries from alternative market struc- estimating them at the country level should supplementtures with varying degrees of public and private sector the information required for planning country pro-participation in the supply of infrastructure services. gran s, for selecting projects, and for evaluating projects

Responsibility: Transportation, Water, and Urban De- (which must be done without knowledge of possiblevelopmentDepartment, Urban DevelopmentDivision- spillover effects and typically involves rather specula-Kyu Sik Lee and Satyendra Verma. With Alex Anas, tive forecasts of benefits). And it should help guideState University of New York; Michael Murray, Bates public expenditure reviews, which tend to be domi-College, Maine; and Hasfarm Consultants. The Indone- nated by short-run considerations and lack guidance onsian Central Bureau of Statistics, Institute of Technology how to determine the longer-term costs of alternativeBandung, and the Thailand Development Research In- expenditure decisions.stitute are contributing staff time, and USAID, Jakarta, is Research experience in this area and a critique ofproviding funding. different strands of recent work point to problems of

Completion date: June 1994. specification and method and to obvious questions ofdata availability that need to be explored when theinvestigation focuses on developing countries. This re-

The Marginal Productivity of Infrastructure search on the marginal productivity of infrastructure inin Developing Countries developing countries was therefore devised as a pilot

study. The study tested alternative approaches toRef. no. 676-95C aggregative analysis, both on multicountry data and on

In recent years the effects of investment in public the data of a single country, and on ways of interpretinginfrastructure on economic growth and on total factor results consistently with theory. It also examined the

171

Basic Infrastructure and Urban Development

availability of data that the research has shown to be . 1993. "The Effect of Transportation Networks onnecessary for a wider investigation. Economic Growth." Columbia University, New York; and

The study's results (some of which have yet to be World Bank, Washington, DC.assembled) come from several different lines of re- Canning, David, Marianne Fay, and Roberto Perotti. 1992.search. An innovative feature of the aggregative studies "Infrastructure and Growth." World Bank, Transportation,on a panel of more than 100 developing countries and on Water, and Urban Development Department, Washington,data for Indonesia is the introduction of infrastructure DC.stocks-roads, railways, electricity, and telephones-in Hulten, Charles R. 1992. "Public Infrastructure Capital and thephysical terms (for example, kilometers of paved road). Aggregate Production Function: Specification Issues inThe multicountry studies, which pooled cross-sectional Estimating the Marginal Productivity of Infrastructure inwith time-series data, suggest that transport and tele- Developing Countries." University of Maryland, Nationalcommunications networks have high marginal produc- Bureau of Economic Research, and World Bank.tivity and contribute substantially to growth. Growth in . 1993. "Optimal Growth with Public Infrastructureeither kind of network has a very small short-run effect, Capital: Implications for Empirical Modeling." University ofbut a large one over a longer period of 10 to 20 years. Maryland, National Bureau of Economic Research, andInfrastructure capital (of these kinds) does not appear to World Bank.function like other capital inputs into production. It seemsto be necessary but not sufficient for growth of output.

A study focusing on transport infrastructure (road Analysis of the Results from the Extensiveand rail kilometers) suggests that the rate of return is Survey of Housing Indicators in 52 Countriesvery high in middle-income countries undergoing rapiddevelopment, but much lower for slow-growing devel- Ref no. 677-48Coping countries or for industrial countries. Again, the Housing is an important economic sector in mosteffect appears to be slow in coming but long-lived. A countries. Yet there is no framework for measuring itslimited case study using Indonesian data suggests that performance, nor are there internationally comparableroad infrastructure and public power have a substantial data that would permit housing policy to be adequatelyeffect in raising investment in equipment at the (manu- informed. The Housing Indicators Program, of whichfacturing) industry level. The statistical significance and this project is part, is designed to fill an importantmeaning of such results are contingent on what other conceptual and empirical gap-by developing a frame-variables (observed or unobserved) are controlled for in work to measure the performance of the housing sectorthe estimation. as a whole, collecting data on key aspects of the sector's

The conclusions from these studies are still sugges- performance in 52 countries, analyzing reasons for dif-tive rather than definitive, but the results are expected to ferences among countries in the sector's performance,be hardened in later research that the pilot study indi- and developing tools for integrating housing indicatorscates will be promising. Even then, the question of why into the formulation and implementation of housinginfrastructure is as productive as it appears to be in a policy. The Housing Indicators Program is a joint un-group of countries remains open. Going further toward dertaking of the United Nations Centre for Humananswering this question may require more disaggre- Settlements (UNCHS) and the World Bank. It is alsogated data (such as are available for a few countries), supported by several other bilateral and multilateraland experiments of the kind implied by the further agencies.studies of infrastructure specification issues and of the An earlier component of the program conductedtheoretical basis for empirical modeling of the growth- surveys in 52 countries on all five continents. Eachinfrastructure relation. survey sought to obtain values for 25 key indicators of

Responsibility: Transportation, Water, and Urban De- housing sector performance, 10 alternate indicators,velopment Department, Office of the Director-Arturo and 20 indicators designed to quantify the regulatoryIsrael. With Gordon A. Hughes; David Canning, Co- and institutional framework in which the housing sec-lumbia University and Queen's University, Belfast; tor operates. A series of regional meetings was held withCharles Hulten, University of Maryland and National country-based consultants to discuss the data and theBureau of Economic Research; Christine Kerr; and Esra preliminary findings.Bennathan. This study then undertook an analysis of the data

Completion date: January 1993. using a variety of econometric models. These modelsReports: focus on testing hypotheses about the relation between

Canning, David, and Marianne Fay. 1993. "The Effect of measures of housing sector performance and variablesInfrastructure Networks on Economic Growth." Columbia characterizing the economic, demographic, and policyUniversity, New York; and World Bank, Washington, DC. frameworks of different countries.

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The project's key findings suggest that housing sec- .1993. "The Housing Indicators Program." Vol. 1, "Reporttor performance is as heavily influenced by policy as by of the Executive Director." World Bank, Transportation,a country's resources, and that the regulatory frame- Water, and Urban Development Department, Washington,work for the sector is of critical importance. Moreover, DC.indicators of housing sector performance can be used Angel, Shlomo, and Stephen K. Mayo, with Michael Heller anddiagnostically to suggest priorities for policy reform in William Stephens, Jr. 1993. "The Housing Indicatorsparticular countries. Program." Vol. 4, "The Extensive Survey Instrument."

A monograph is being produced that summarizes World Bank, Transportation, Water, and Urban Develop-the findings of the project, including information on ment Department, Washington, DC,both the comparative performance of the countries' Angel, Shlomo, Stephen K. Mayo, and William L. Stephens, Jr.housing sectore and the factors responsible for differ- 1992. "The Housing Indicators Program: A Report onences in performance. Preliminary findings were dis- Progress and Plans for the Future." World Bank, Infrastruc-seminated through a series of regional workshops ture and Urban Development Department, Washington, DC.held from November 1991 through February 1992, and Mayo, Stephen K. 1993. "South African Housing Sectorworkshops in the Bank in the spring and summer of Performance in International Perspective." World Bank,1992. Transportation, Water, and Urban Development Depart-

Presentations of the study's findings were made at ment, Washington, DC.the International Conference on Housing Indicators inEurope, November 1992, Delft, The Netherlands; theHuman Settlements Commission biannual meetings, Enhancing Urban Productivity:April 1993, Nairobi, Kenya; the annual convention of Determinants of Optimal Expenditurethe National Association of Realtors (United States), on Infrastructure, Human Resources,October 1992, Honolulu, Hawaii; a conference of the and Consumption Public GoodsAmerican Real Estate and Economics Association, Octo-ber 1992, Los Angeles, California; and the Conference Ref. no. 677-66on Urban Development in the ASEAN Countries, Octo- Public infrastructure hasbeen identified as one sourceber 1992, Bangkok. of agglomeration economies, and there is reasonably

Responsibility: Transportation, Water, and Urban De- strong evidence that the spatial clustering of economicvelopmentDepartment, Urban Development Division- activities leads to reductions in production and transac-Stephen K. Mayo. With Shlomo Angel; Paul Strassmann, tions costs. Because of infrastructure's role in enhancingMichigan State University; and Marja Hoek-Suit, Uni- productivity in urban areas, investment in infrastruc-versity of Pennsylvania. The UN Centre for Human ture has received renewed attention in developing andSettlements and the U.S. Agency for International De- transitional economies. But how much should be spentvelopment provided financial support. on infrastructure-and how much on other public

Completion date: June 1993. goods-given fiscal constraints, policy goals, anReports: economy's internal fea tures, and foreign aid flows? This

Angel, Shlomo, and Stephen K. Mayo. 1992. "African Housing research project evaluates that question.Sector Performance: A Comparative Perspective." World The study's empirical analysis relies in part on aBank, Infrastructure and Urban Development Department, general equilibrium framework for analyzing the opti-Washington, DC. mal mix of public expenditures on infrastructure, hu-- 1992. "ASEAN Housing Sector Performance: A Compara- man resources, and consumption public goods, and thetive Perspective." World Bank, Infrastructure and Urban optimal mix of taxes on wages, domestic output, andDevelopment Department, Washington, DC. urban property. Although this theoretical framework is

- 1993. "Asian Housing Sector Performance: Proposed used to simulate the effects of changes in external assis-Directions for Future World Bank Assistance." World Bank, tance and other parameters on the optimal fiscal mix,Transportation, Water, and Urban Development Depart- and to generate testable hypotheses, the main focus ofment, Washington, DC. the project is on the empirical analysis of determinants

- 1993. Housing: Enabling Markets to Work. World Bank of fiscal mixes, and determinants of rates of return toPolicy Paper. Washington, DC: World Bank. World Bank projects.

- 1993. "The Housing Indicators Program." Vol. 2, The first part of the study analyzes empirically the"Indicator Tables." World Bank, Transportation, Water, and determinants of the optimal allocation of public expen-Urban Development Department, Washington, DC. diture to infrastructure, human resources, and con-

. 1993. "The Housing Indicators Program." Vol. 3, sumption public goods, drawing on World Bank cross-"Preliminary Findings." World Bank, Transportation, Water, sectional data bases. The results of the analysis areand Urban Development Department, Washington, DC. expected toprovide useful information for policymaking

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on the internal features of an economy that influence The second part incorporates the sectoral elasticitiespublic investment in infrastructure, human capital, and into a broader macroeconomic framework in which theconsumption goods, as well as other fiscal choices. The interaction between the creation of infrastructure andanalysis will also provide estimates of the incremental changes in market interest rates is analyzed. The impli-effects of external assistance on the relevant public cations of increased spending on infrastructure, aimedexpenditure and tax rates. at increasing the productivity of private capital, are

The second part of the study explores the link be- considered.tween the economic rates of return of World Bank- Responsibility: Latin America and the Caribbean,supported projects and the tax and expenditure policies Country Department II, Country Operations Divisionof the host government and other policy-related vari- 1-NeilRogerandFrankLysy. With AndrewFeltensteinables. This analysis builds on the World Development and Jiming Ha, University of Kansas.Report 1991 study of the macroeconomic-policy-related Completion date: September 1993.determinants of the productivity of World Bank projects. Reports:It readdresses the issues of complementarity of public Feltenstein, Andrew, and Jiming Ha. 1993. "The Role ofinvestment in different sectors and the effects of eco- Infrastructure in Mexican Economic Reform." World Bank,

nomic institutions on the productivity of investments. Washington, DC.Responsibility: Europe and Central Asia, Country De- _. 1993. "The Social and Economic Benefits of Mexican

partment I, Country Operations Division-Zeljko Infrastructure." World Bank, Washington, DC.

Bogetic. With Dennis Heffley and Susan Randolph,University of Connecticut.

Completion date: September 1993. The Debate on Modernization of IrrigationSystems

Infrastructure Inadequacies in Mexico The design of irrigation systems is critical to theiroperation and maintenance. Progress in the industrial

Ref no. 677-98 countries has led to modem irrigation designs, but theirMexico's economic reform program since the crisis of relevance to irrigation in developing countries has been

1982 is a Latin American success story. The cornerstone questioned. And failures reported in the application ofmacroeconomic stabilization combined orthodox and modern designs have given rise to arguments against

sustained fiscal retrenchment with heterodox, tempo- their application.rary wage, price, and nominal exchange rate controls. This research examined the relationship of modernThe far-reaching structural reforms included liberaliza- design to the operation and performance of irrigationtion of trade, finance, and investment, and privatiza- systems, and the reasons for the reported failures.tion. The expected implementation of the North Ameri- The research reviewed a large number of perfor-can Free Trade Agreement in 1994 will consolidate these mance studies, and identified and studied cases of large-reforms. The program has seen a return to positive scale success in the transfer of modern technology.income growth in the past four years, an expected Many recentprojects were found to be conventional andreduction in inflation from triple to single digit in 1993, not modern; attempts to incorporate new hardware andand rapid and massive capital inflows. fragments of new operations had been incorrectly car-

Despite these successes and the promising prospects ried out and led to failure.for the medium term, there is concern about the failure of Modernization depends on the proper application ofgrowth to respond more strongly to the sweeping eco- the sophisticated hardware available, which in turnnomic reforms, unlike growth in other reformers, such as depends on staff having adequate education, aware-Chile and Indonesia. One hypothesis is that sustained ness, and initiative. Modern design permits the maxi-fiscal retrenchment may have led to infrastructure inad- mum use of advanced concepts of hydraulic engineer-equacies that are constraining productivity and growth. ing and the meaningful application of agronomic sci-

This research will explore issues relating to infra- ence, irrigation engineering, and economics to irriga-structure's role in Mexico's reform. The project has two tion schemes. The perceived failures of modem designsparts. The first is an econometric analysis of the sectoral have resulted because of improper selection of struc-elasticities of Mexican industries with respect to three tures, poor design of the irrigation components, andtypes of infrastructure-electricity, transportation, and lack of an adequate operation and maintenance plan,communications. The estimated elasticities, combined rather than because of the failure of the design itself.with measures of the stock of public infrastructure, are The research shows that successful modernization isused to determine how much output has been lost possible if trained operators are available, communica-because of the decline in the stock of infrastructure. tions systems are in place, water delivery is reliable,

174


operating; rules are clearly defined, the irrigation infra- dural issues remain unresolved, such as the coordina-structure for water control is in place, and the hydraulic tion of maintenance among residents, service providers,design is flexible enough to allow water to be delivered and outside organizations. Nevertheless, the condominialin response to agricultural and social needs. system represents an innovative and responsive inter-

Responsibility: Agriculture and Natural Resources De- mediary technology in urban sanitation. The intensivepartment, Natural Resources Division-Herve involvement of project beneficiaries in selecting thePlusquellec, Ashok Subramanian, and Hans Wolter. With level of technology, imp lementing the project, and oper-Charles Burt, California Polytechnic State University. ating the feeder network has worked well in some cases

Completion date: July 1993. and during some periods, but has had uneven resultsReport: overall.

Plusquellec, Herve, Charles Burt, and Hans Wolter. 1992. "The A second study is investigating the determinants ofDebate on Modernization of Irrigation Systems." World the willingness to pay for sanitation services. The resultsBank, Washington, DC. of this research would provide a basis for policy deci-

sions on such issues as technology choice, coverage,subsidies, and tariffs. A number of country studies have

Demand-Based Approach to Urban been conducted (Burkina Faso, C6te d'Ivoire, Ghana,Sanitation Pakistan, and the Philippines) to test the applicability of

the contingent valuation method and investigate theIn most developing countries available resources for research questions. A similar study is under way in

urban sanitation services are inadequate for providing Brazil, and the next studies are planned for Guinea andall urban residents with a high level of service. Thus, Nigeria. The findings thus far indicate that the contin-hard choices need to be made if adequate levels of gent valuation method can be used by the Bank and byservice are to be extended to all-rather than high levels developing country policymakers in preparing urbanof service to a few. The old vision of urban sanitation sanitation projects. It is planned to pool the results of allplanning relied on one proven technology--conven- the country studies to produce a manual on designing,tional sewerage. This technology was applied to the conducting, and analyzing willingness-to-pay surveys.largest area possible until financial resources were ex- The overriding question in sanitation planning is:hausted. How can we use these breakthroughs to improve invest-

The limitations of the old vision prompted studies ment choices for citywide provision of sustainable ur-that led to the development of technologies at the other ban sanitation services in the context of constrainedextreme of the cost spectrum-low-cost, on-site sanita- resources? A combination of desk and pilot studies istion systems, mainly improved latrines. This develop- developing a new vision of urban sanitation planning.ment produced two challenges: how to expand the This new vision-strategic sanitation planning-entailsmenu of supply options to include intermediate-cost mapping a fuller set of supply options, assessing de-sewerage technologies, and how to incorporate demand mand (the type of services consumers want and areconsiderations in the planning process. willing to pay for), matching supply and demand

A review of wastewater collection systems has led to through an affordable, sustainable set of choices, andthe identification of two innovative and promising tech- identifying the appropriate financing and institutionalnologies: the simplified sewerage system and the requirements for implementing such a vision. The newcondominial system, both developed and implemented vision has been incorporated in two UNDP-fundedin Brazil. A survey was conducted to evaluate the per- strategic sanitation planning projects in Burkina Fasoformance and the costs of these systems. For the simpli- and in Ghana. It is also being followed in a Bank projectfied sewers, the survey found that conventional design in the Philippines aimed at developing a national strat-standards have been reviewed and modified to reflect egy for urban sanitation.some of the advances in hydraulic design, the availabil- Preliminary results show that the strategic approachity of maintenance equipment, and engineering judg- holds promise for rational investment choices forments. For the condominial system, the survey compared citywide provision of sanitation services in developingsix Brazilian cities in which the systems had been in countries. But the existing incentive structures are gen-place for at least seven years, and one city in which the erally not conducive to such an approach. So it is neces-system is being built. sary to make certain policy changes (financial, techno-

Preliminary results of the survey show that the logical, and legal) to facilitate the introduction of such acondominial system developed and spread in an unstruc- demand orientation in urban sanitation investment de-tured and almost spontaneous fashion throughout Bra- cisions.zil over the past 10 years and is now becoming standard The results of the study will be disseminated throughin many cities. Many significant technical and proce- a series of publications. The first, a book titled Strategic

175


Sanitation Planning: A Demand-Based Approach to Urban Countries." World Bank, Transportation, Water, and UrbanSanitation in Developing Countries, will be addressed to Development Department, Washington, DC. Draft.policymakers, sector professionals, and external sup- Joy, Stewart. 1993. "Evaluating Large Urban Transportport agencies. Projects." World Bank, Transportation, Water, and Urban

Responsibility: Transportation, Water, and Urban De- Development Department, Washington, DC. Draft.velopmentDepartment,Water and Sanitation Division- Mackie, Peter. "The Bank's Economic Evaluation MethodologyAlbert Wright, Harvey A. Garn, Alexander E. Bakalian, Applied to the Transport Sector." World Bank, Transporta-and Vijayjagannathan. With Dale Whittington, Donald tion, Water, and Urban Development Department, Washing-Lauria, and Jeffrey Hughes, University of North Caro- ton, DC. Draft.lina; and Anjum Altaf, University of Karachi. The UNDP Zimmerman, Sam. 1993. "Urban Transport Policy: Reviewis providing financial support. Issues." World Bank, Washington, DC. Draft.

Completion date: January 1994.Reports:

Altaf, Anjum. Forthcoming. "Household Demand for Improved Private Sector Participation in Water SupplyWater and Sanitation in a Large Secondary City: Findings and Sanitationfrom a Study in Gujranwala, Pakistan." UNDP-World BankWater Decade Program Report. World Bank, Washington, Urban water supply services in developing countriesDC. are plagued by weaknesses. The quality and reliability

Altaf, Anjum, and Jeffrey A. Hughes. Forthcoming. "Willing- of service are often low. Access to service is often inad-ness to Pay for Improved Sanitation in Ouagadougou, equate. With few exceptions, water utilities are typifiedBurkina Faso." UNDP-World Bank Water Decade Program by high costs caused by low capacity utilization, highReport. World Bank, Washington, DC. levels of unaccounted-for-water, and a tendency to be

Bakalian, Alexander, Albert Wright, Richard Otis, and Jose de overstaffed. The inflated costs, along with low costAzevedo Netto. 1993. "Simplified Sewers Meet Demands." recovery from consumers, result in poor financial per-Water Environment and Technology (March):58-62. formance and a chronic and unsustainable reliance on

Watson, Gabrielle. Forthcoming. "Condominial Sewer System in subsidies. The resulting lack of operating funds con-Brazil: An Evaluation." strains the purchase of spare parts and fuel, compromis-

ing operational efficiency and the quality of service andleading to further deterioration of cost recovery. The

Urban Transport Evaluation underlying cause of these failures appears to be aninappropriate regulatory and institutional framework.

This project examined the implications of the exter- Broader research on institutional performance is ex-nalities of urban transport projects for the way in which amining the effect of various institutional arrangementsthe Bank evaluates such projects. on performance and the costs and benefits of alternative

The research first looked at the valuation of time arrangements. This research is examining experiencesavings for travelers. Second, it investigated the possi- with different forms of private sector participation inbility of using formal methods of multiple criteria analy- water supply operations and the regulatory implica-sis, particularly to bring the treatment of environmental tions of these forms. An important objective is to iden-effects into the project design and selection phase. Most tify what essential regulatory functions are appropriaterecently, the research has focused on the evaluation of for the public sector, what institutional arrangementsmass rapid transit schemes in urban areas. are conducive to effective regulation, and how capacity

Responsibility: Transportation, Water, and Urban De- to regulate effectively can be developed.velopment Department, Transport Division-Richard Experience with different institutional arrangementsScurfield, Kenneth Gwilliam, and John Flora. With Peter and regulatory frameworks for water supply services inMackie, Institute of Transport Studies; Stephen Glaister, both industrial and developing countries is being exam-London School of Economics; Roger Allport; Stewart ined. These arrangements, which range from entirelyJoy; and Sam Zimmerman. public to fully private, are being compared with respect

Completion date: June 1994. to quality and cost of service, complexity of regulatoryReports: approach, stability and sustainability of improvements

Allport, Roger. 1993. "Urban Metros: The Key Issues." World inperformance,adaptabilitytovariousdevelopingcoun-Bank, Transportation, Water, and Urban Development try contexts, and contribution to long-term capacityDepartment, Washington, DC. Draft. building in both the public and the private sector.

Glaister, Stephen, and John Bates. 1992. "The Valuation of Time Several forms of contractual arrangements with pri-Savings for Urban Transport Projects in Developing vate firms seem promising. These range from service

176


contracts and management contracts to more compre- The research findings have been presented at Worldhensive lease contracts and concessions. Differentforms Bank seminars on private sector delivery of social ser-are suited to different contexts. In several cases in which vices and privatization and public enterprise reform.such contractual arrangements have been used in devel- Responsibility: Transportation, Water, and Urban De-oping countries, the technical efficiency and the quality velopmentDepartment, Water and Sanitation Division-of service have improved substantially and the costs Harvey A. Garn and Thelma Triche.appear to be equal to or lower than the cost of less Completion date: December 1994.reliable services in other countries. For a number of Reports:reasons these contractual forms of private sector partici- Mejia, Abel, and Thelma Triche. 1993. "Arranging Concessionspation may actually facilitate effective regulation. for Water Supply and Sewerage Services: Lessons from

Unlikeperformance contracts withpublic enterprises, Buenos Aires and Caracas." Infrastructure Notes WS-10.which have had limited success, contracts with private World Bank, Transportation, Water, and Urban Develop-

firms seem to have a better record in maintaining the ment Department, Washington, DC.arms-length relationship (autonomy) and incentives for Triche, Thelma A. 1990. "Private Participation in the Delivery ofperformance (accountability). This has been due at least Guinea's Water Supply Services." Policy Research Workinginpartto the contracts' limited duration and the credible Paper 477. World Bank, Infrastructure and Urban Develop-threat of their termination or nonrenewal. Commitment ment Department, Washington, DC.to adequate cost recovery has been enhanced since it is . 1990. "Private Participation in Water Supply." Infrastruc-a prerequisite for private involvement. ture Notes WS-1. World Bank, Infrastructure and Urban

One of the principal advantages of contractual forms Development Department, Washington, DC.of private sector participation is that they simplify regu- . 1990. "Private Participation in Water Supply in C6telation and provide opportunities to develop regulatory d'Ivoire." Infrastructure Notes WS-2. World Bank, Infra-capacity and credibility. A small but competent over- structure and Urban Development Department, Washington,sight department or authority is sufficient to administer DC.and enforce an initial contract. If the regulatory frame- . "Private Sector InvDlvement in Water Supply." Nagarlokwork is not in place, it can be incorporated into a (Urban Affairs Quarterly, Indian Institute of Publicmanagement contract, lease contract, or concession for Administration) 22 (4):55-59.a single urban area. As experience is gained, similar _. 1993. "The Institutional and Regulatory Framework forarrangements may be adopted in other cities and a Water Supply and Sewerage: Public and Private Roles."comprehensive framework for the sector can evolve. Infrastructure Notes VS-9. World Bank, Transportation,Capacity can be reinforced by short-term technical as- Water, and Urban Development Department, Washington,sistance for periodic in-depth contract reviews or the DC.renegotiation of fees. Triche, Thelma, and Hiroshi Ueno. 1993. "Private Sector

Success in attracting private firms and the effective- Participation in Infrastructure in Nigeria, Part II: Urbanness of these arrangements in achieving efficiency and Water Supply." World Bank, Washington, DC. Draft.equity goals depend on careful preparation of the regu- Triche, Thelma, and Guillermo Yepes. 1993. "Chile's Waterlatory framework and draft contracts. Bank-supported Supply and Sewerage Regulatory Reforms." Infrastructuretechnical assistance for thepreparationphase hasplayed Notes WS-11. World Bank, Transportation, Water, andand will continue to play an important role, even if Bank Urban Development Department, Washington, DC.financing for sector assets is notrequired. In many cases Water and Sanitation Division. 1993. "Potential Private Sectorsuccess also depends on the availability of donor financ- Participation in Lima's Water Services: Report of a Work-ing for rehabilitation and investment that will contrib- shop." Water and Sanitation Utilities Partnership Report 2.ute to the financial viability of the operating contract. A World Bank, Washington, DC.major challenge for the Bank is to adapt its procurement . 1993. "Utility Reform and Environmental Clean-Up inguidelines so that it can continue to finance investments Formerly Socialist Countries: Report of a Workshop on thein the context of such contracts. Finally, guarantees to Baltic Sea." Water and Sanitation Utilities Partnershipprotect investors against political risks would help to Report 3. World Bank, Transportation, Water, and Urbanattract more private investment. The Bank's role in this Development Department, Washington, DC.area is evolving.

177

INDEX OF STUDIES BY DEPARTMENT

Agriculture and Natural Resources Department

Office of the DirectorFarming Systems and Natural Resource Management: A Comparison of Successful

Experiences in Developing Countries 76

Agricultural Policies DivisionAdvancing Agricultural Productivity: Technical and Behavioral Constraints 67African Private Agricultural Marketing 49Agricultural Technology Policy 82How Retail Food Markets Responded to Price Liberalization in Russia 37Land Allocation 80Land Reform and Farm Restructuring in Russia 42Management of Drought Risks in Rural Areas (677-51) 33Money and Relative Prices in Brazil 152Privatization of Agricultural Support Services 51Risk Management in Agriculture 166The Transition of Socialist Agriculture in Europe and Asia: A Synthesis

of Early Experience 56Women's Rights to Land and Agricultural Performance in Sub-Saharan

Africa 101

Agricultural Technology and Services DivisionAgricultural Technology Development 74Biotechnology and Agricultural Development 68Study of Cotton Production Prospects for the Next Decade 81

Natural Resources DivisionThe Debate on Modernization of Irrigation Systems 174

Cofinancing and Financial Advisory Services Department

Private Sector Development and Privatization DivisionPrivatization in the New Independent States of the Former Soviet Union:

Framework and Initial Results 41Privatization in Tunisia 38Small-Scale Privatization in Hungary, Poland, and the Former

Czechoslovakia 48Trade Sale Privatization in Central Europe 51

Development Policy Group

Economic Shocks and the Global Environment (677-75) 64International Linkages, Shocks, and Adjustment 154

179

Index of Studies by Department

Economic Development Institute

National Economic Management DivisionThe Labor Market in Transitional Socialist Economies: A Macroeconomic

Perspective (677-30) 91

Studies and Training Design DivisionThe Evolution, Character, and Structure of the Japanese Civil Service

and Its Role in Shaping the Interrelationships between Governmentand the Private Sector 46

The Japanese Main Bank System and Its Relevance for Developing and TransformingSocialist Economies 166

Education and Social Policy Department

Building Research Capacity 103Contributions of Secondary Education to Per Capita Growth in the Leading Newly

Industrializing Countries of Asia (678-27) 99Credit Programs for the Poor: Household and Intrahousehold Impacts and Program

Sustainability (676-59) 15Cross-National, Longitudinal Analysis of the Curriculum of Secondary Education,

1920-85 (677-40C) 92Economics of Education 105Gender-Specific and Age-Cohort-Specific Education Stock for Developing

Countries (677-69C) 96Higher Education Policy Study 107Improving School Effectiveness and Efficiency in Developing Countries: The Case

of Jamaica (676-87) 87Managing the Social Cost of Adjustment 108Science and Technology Education 110

Environment Department

Land, Water, and Natural Habitats DivisionEnvironmental Liability and Privatization: Implications of Different Liability

Rules 77Integrated Land Management 70Natural Resource and Environmental Information for Decisionmaking 72

Pollution and Environmental Economics DivisionDryland Management 75Economywide Policies and the Environment 79Environmental-Economic Evaluation of Energy 80Public Policy Instruments 73

Social Policy and Resettlement DivisionIndigenous People and Biodiversity Mapping Project 73

Environmentally Sustainable Development

Office of the Vice PresidentSpontaneous Institutions and Sustainable Rural Development in Africa (677-88) 21

180


Financial Sector Development Department

Banking in Transitional Socialist Economies 162Contractual Savings 168The Role of Payment Systems in Financial Sector Reform 169

Industry and Energy Department

Energy Policy and Strategy DivisionFactors Associated with the Reliability of Cost and Schedule Estimates for Power

Generation Projects in Developing Countries 47

Power Development, Efficiency, and Household Fuels DivisionThe Urban Energy Transition in Developing Countries 78

International Economics Department

Office of the DirectorTotal Factor Productivity Growth in Industrial and Developing

Countries (676-67C) 140

Debt and International Finance DivisionAsset and Liability Management 129Equity Portfolio Investment in Developing Countries (678-01) 159External Debt and Burden Sharing (677-55C) 122External Finance Supply Studies 165Financial Market Integration 163Financing the Former Soviet Union's Transition 165Foreign Direct Investment in a Macroeconomic Framework (678-15) 160Nondebt Private Flows 164Secondary Market Prices for Developing Country Debt Data Collection and Initial

Analysis (677-15C) 120

International Economic Analysis and Prospects DivisionBank-Global Economic Model 152DEC Analytical Database 153How Integrated Is the World Capital Market? 165Investment in Low- and Middle-Income Countries 130

International Trade DivisionCommodity Models 129Commodity Price Formation and Behavior 135Commodity Risk Management 135The Cost-of-Protection Index (676-49C) 115Eastern Europe and EC-92 136Energy Use and Global Atmospheric Pollution 79An Evaluation of the Effectiveness of Preshipment Inspection

on Trade, Capital Flight, Customs, and Other Revenue Problemsof Developing Countries (677-34) 121

International Trade and the Environment 71License Prices and Rent Sharing in the Multi-Fibre Arrangement (676-69C) 117Manufactures Trade Modeling 134Regional Trading Blocs 132

181


The Trade Impact of the Breakup of the Former Soviet Union 136Trade in Services 132Trade Policy Studies 137

Socio-Economic Data DivisionEstimating Per Capita Income Based on Purchasing Power of Currencies 151International Price Comparisons of Items of Basic Needs 24Measuring the Incomes of Economies of the Former Soviet Union 150

Office of the Vice President, Development Economics

Global Capital Shortage 163Population and Economic Growth 109Wealthier Is Healthier 103

Policy Research Department

Office of the DirectorStrategies for Rapid Growth: Public Policy and the Asian Miracle 44

Environment, Infrastructure, and Agriculture DivisionEconometric Analysis of Pollution Abatement Costs (677-81C) 65Enterprise Ownership and Pollution (677-44C) 64Industrial Pollution in Developing Countries 69

Finance and Private Sector Development DivisionThe Changing Role of the State: Strategies for Reforming Public Enterprises 52Cost of Business Regulation Analysis 57Income Security for Old Age: Conceptual Background and Major

Issues (677-45C) 16Private Provision of Social Services 111Public Goods, Private Goods, and Social Sector Outcomes (677-47C) 93Regulations, Institutions, and Economic Efficiency (676-94C) 30Risk-Weighted Capital Adequacy Requirements: An Application to Developing

Country Banks (677-41) 157The Role of Government in the Development of Support Systems for Small

and Medium-Size Enterprises 44Stock Market Development and Financial Intermediary Growth (678-37) 160

Poverty and Human Resources DivisionData Analysis for Development Policy (677-03) 15The Dynamic Interrelationships between Nutrition, Morbidity, and Labor

Productivity in Rwanda (677-52) 94Economic Impact of Fatal Adult Illness from AIDS and Other Causes in Sub-Saharan

Africa (675-71) 83Economic and Policy Determinants of Fertility in Sub-Saharan

Africa (676-91) 88Female Labor Market Participation and Child Welfare in Africa (678-12) 98Gender Differences in Schooling Decisions, Employment, and Earnings

in Pakistan (677-39C) 92Household Investment in Human Capital and Utilization and Benefits of Social

Services (676-44) 86

182


Household Responses to Seasonal Income Fluctuations: Markets and Familiesin Rural India (677-80) 19

Human Capital Accumulation and Economic Growth: An EmpiricalStudy (677-11C) 90

Impact of Market-Oriented Policy Reforms on Households in RuralChina (677-16) 16

Macroeconomic Adjustment and Poverty Relief: The Roles of Social Policyand Household Behavior (677-14C) 15

Pakistan Integrated Household Survey Project 23Poverty in India, 1950-90: A Dynamic Analysis of the Determinants

of the Distribution of Household Consumption (677-82) 20Private Interhousehold Transfers in Poland, 1986-91 (677-96) 21Revision of the Living Standards Measurement Study Household-based Agricultural

Activities Survey Module (678-21) 66World Poverty Monitoring 25

Public Economics DivisionThe Composition of Public Expenditure and Economic Performance 154Corporate Income Tax Incentives for Investment in Developing Countries 150Economic Consequences of War-Peace Transitions in Africa: Choices

for Public Finance (677-31) 144Energy Pricing Study 149Income Distribution, Fiscal Policy, Political Instability,

and Growth (677-49C) 145Intergovernmental Fiscal Relations in Developing Countries 54Open Economy Tax Reform II 60Pollution and the Choice of Economic Policy Instruments in Developing

Countries (676-48) 61Public Expenditures and Poverty 25Revenue under Uncertainty in Eastern Europe (677-18) 143Tax Administration: Lessons 56A Volume on Subsidies Research 24World Energy Subsidies and Implications for Greenhouse Gas Emissions

and Government Revenues (677-28C) 143

Trade Policy DivisionAgricultural Public Investment 39Antidumping: Follow-Up on Newly Emerging Issues (678-16) 127China's Trade Regime 138Commodity Exports and Real Income in Africa (676-70) 118Construction of an Integrated Data Base for the Former Soviet Union's Economic

Accounts (677-99) 147Controlling Recidivism 137A Deep-Parameter Approach to the Real Exchange Rate and Trade

Distortions (678-09) 127The Design of Tariff Reform: Theory, Evidence, and Implications (676-77C) 119Economic Growth and Trade Policy in Western Africa: Implications

of the Degradation of the Vegetation Cover, Phase II (676-97C) 62Equipment Prices and Trade Policies for Developing Country Manufacturing

Industries: A Pilot Study of Brazil (676-61) 116Foreign Direct Investment: Determinants and Consequences 169GATT Rules and Developing Countries 138Informational Value of Import License Auctions: An Empirical

Study (677-91) 126Labor Market Policy Handbook 108

183


Regional Integration in Asia 136Regional Integration in Sub-Saharan Africa 131Rural Poverty and Agriculture in Mexico (678-23) 22Tariff Uniformity and Optimality 137Technology Spillovers, Agglomeration, and Foreign Direct

Investment (678-29) 149Trade Policy and the Environment 82Understanding Bilateral Trade Flows in East Asia (677-86) 125The U.S. Textile Industry under the Multi-Fibre Arrangement 134Volume on Industrial Competition, Productivity, and Trade

Regimes (677-10C) 119Voluntary Export Restraints and the Republic of Korea's Trade Policy 133

Transition and Macro-Adjustment DivisionAdjustment in Africa: Reforms, Results, and the Road Ahead (677-67) 123Business and Consumer Services as a Growth-Promoting Sector in the Former Soviet

Union (677-43) 32Central Bank Independence: Its Political and Institutional

Foundations (677-07C) 156The Effects of Adjustment Policies on Investment and Growth 130Enterprise Adjustment in the Russian Federation 58Enterprise Behavior and Economic Reform: A Comparative Study in Central

and Eastern Europe (676-99) 31Exchange Rate Commitments and Central Bank Independence (677-77) 158Exchange Rate Misalignment 128Evaluation of Applied Macroeconomic Models for Developing

Countries (678-02C) 147Foreign Exchange Auction Markets and Exchange Rate Unification in Sub-Saharan

Africa (677-64C) 122How Do National Policies Affect Long-Run Growth? (676-66C) 140Industrial Reforms and Productivity in Chinese Enterprise (675-38) 28Inflation and Growth Effects of Reform in Post-Socialist Countries 153Labor Market Dynamics during the Transition of a Socialist

Economy (677-20) 90The Macroeconomic Implications of Parallel Foreign Exchange Markets

in Developing Countries (675-30C) 113The Macroeconomic Management of the Transition from Socialism 154Patterns of Growth: Further Work on National Policies and Long-Run

Growth (678-26) 148The Political Economy of Structural Adjustment (676-37C) 113The Post-Socialist Transition: A Systemic View 43Privatization in Eastern Europe 49Reforms and Productivity in Chinese Enterprises, Phase I (678-24) 36Survey of Service Firms in St. Petersburg (677-89) 36Target Zones and Real Exchange Rates in Developing Countries (677-38C) 121Welfare during the Process of Transition 26

Population, Health, and Nutrition Department

Economic Consequences of Demographic Change in DevelopingCountries (678-10C) 148

Impediments to Contraceptive Use in Different Environments (675-72C) 84Review of Population Issues in Economic and Sector Work 106

184


Private Sector Development Department

Brazil: Political, Institutional, and Technological Development 41Corporate Indebtedness in Turkey 162Cross-Country Study of Small-Scale Enterprise Responsiveness in Africa 46Enterprise Training Strategies and Productivity: A Cross-National

Study (678-39) 101Environmentally Friendly Technology 72Explaining Rapid Growth: Chinese Coastal Provinces and Mexican

Maquiladoras (677-50) 33Financial Integration and Development in Sub-Saharan Africa (677-74) 158Foreign Direct Investment and Trade 167High Technology: Implications for Developing Countries 48Industrial Pollution: Global Indices 66Japanese Lessons on Technology Development 55Marshall Plan Lessons for Productivity Enhancement 42Meeting the Financial Needs of Ghana's Small- and Medium-Scale Enterprises 167Private Manufacturing in St. Petersburg, Russia 40Privatization of Public Enterprise Management 55Regulatory Policy and Regulatory Reform in Industrializing Countries 56The Role of Export Catalysts in Low-Income Developing Countries 128Strategies for Competitiveness 56Strengthening Accountability in Public Services (677-65) 35Training, Technological Capability, and Firm-Level Productivity (678-11) 98

Transportation, Water, and Urban Development Department

Office of the DirectorThe Marginal Productivity of Infrastructure in Developing Countries (676-95C) 171

Transport DivisionUrban Transport Evaluation 176

Urban Development DivisionAnalysis of the Results from the Extensive Survey of Housing Indicators

in 52 Countries (677-48C) 172Housing Finance 168Infrastructure Bottlenecks, Private Provision, and Industrial Productivity: A Study

of Indonesian and Thai Cities (676-71) 171

Water and Sanitation DivisionDemand-Based Approach to Urban Sanitation 175Private Sector Participation in Water Supply and Sanitation 176Solid Waste Management 76Synergistic Health Effects from Water Supply and Sanitation Interventions (677-25C) 91Water Resource Policies in Metropolitan Areas 76

World Development Report Office

Development Convergence 106

185


Africa Region

Office of the Chief EconomistLabor Markets and Employment Issues: Kenya and Cate d'Ivoire (677-73) 96

Southern Africa Department

Population and Human Resources Operations DivisionHousehold Welfare Effects of Agricultural Policy Reform in Malawi (677-46C) 18

Technical Department

Capacity Building and Implementation Support DivisionIndigenous Management Practices: Lessons for Africa's Management in the 1990s 53

Environment and Sustainable Development DivisionThe Development of Cooperatives and Other Rural Organizations 38

Human Resources DivisionStatistical Indicators of Female Participation in Education in Sub-Saharan Africa 111

Europe and Central Asia Region

Office of the Regional Vice PresidentAgricultural Marketing in the Former Soviet Union (678-31) 37Issues in the Design of a Stabilization Program in Russia (677-83) 125

Country Department I

Country Operations DivisionEnhancing Urban Productivity: Determinants of Optimal Expenditure on Infrastructure,

Human Resources, and Consumption Public Goods (677-66) 173

Country Department II

Human Resources Operations DivisionThe Evolution of Labor Markets and the Social Safety Net in Central and Eastern

Europe (677-62) 95

Poland Resident MissionState Enterprise Behavior in Poland during the Economic Transformation

Program (677-58C) 34

Country Department IV

Country Operations Division 2The Economic Role of the State in Nations of the Former Soviet Union (678-32) 149The Ruble Shortage Phenomenon in Members of the Ruble Currency Zone (678-08) 126

186


Middle East and North Africa Region


Agricultural Operations DivisionInnovative Self-Targeting Techniques: Do They Improve Incidence? (678-14) 22


Population and Human Resources Operations DivisionPublic-Private Interactions in the Health Sector in Developing Countries (677-95) 97

Europe and Central Asia, and Middle East and North Africa Technical Department

Agriculture DivisionAgricultural Credit in the Europe and Central Asia, and Middle East and North Africa

Regions: Characteristics, Issues, and Strategy 161

Human Resources and Social Development TeamThe Costs and Outputs of Turkish Higher Education (678-05) 97

Infrastructure TeamSubnational Finance in Transition Economies: Broadening the Framework

for Analysis (677-70) 145

East Asia and Pacific Region

Office of the Regional Vice PresidentDeterminants of Nutritional and Health Outcomes in Indonesia and Implications for Health

Policy Reforms (676-27C) 85


Office of the DirectorReestimation of China's National Accounts and Growth Rates (677-17C) 142

Country Department III

Population and Human Resources Operations DivisionThe Determinants and Consequences of the Placement of Government Programs

in Indonesia (676-74C) 86Measuring the Impact of User Fee Increases: The Second Round of the Indonesian Resource

Mobilization Study (678-30) 100

South Asia Region

Office of the Regional Vice PresidentGender Differences in Schooling Decisions, Employment, and Earnings

in Pakistan (677-39C) 92

187


Regionalism and South Asia Trade (678-22) 127


Office of the DirectorWorld Bank and UNDP Strategies for Reducing Poverty: Comparisons in South

and East Asia (678-36) 23

Latin America and the Caribbean Region


Country Operations DivisionAbandonment of the Fixed Exchange Rate Regime in Latin America

in the 1980s (677-71) 124


Country Operations Division IAssessing the Mexico-United States Free Trade Agreement (676-65C) 116Infrastructure Inadequacies in Mexico (677-98) 174


Human Resources Operations DivisionEvaluations of Social Sector Investments (676-90) 141

Technical Department

Office of the DirectorImproving the Quality of Primary Education in Latin America 102Indigenous People and Poverty in Latin America: An Empirical

Analysis (677-68) 18

Environment DivisionProperty Rights, Rent Dissipation, and Environmental Degradation in the Brazilian

Amazon (677-24) 63

International Finance Corporation

Economics Department

Corporate Finance in Developing Economies (677-04C) 156An Econometric Study of State Enterprise Behavior in Poland (678-25) 37Intellectual Property Rights Protection and Technology Transfer through Foreign Direct

Investment (676-19C) 29Market Structure and Market Outcomes: The Mexican Stock Exchange (677-97) 159

188

APPENDIX

BANK RESEARCH OUTPUT

Below are listed various types of research output arising G. Policy Research Working Papers. These workingfrom research and policy review activities at the Bank. papers are a vehicle for quick dissemination, sometimesTo provide maximum coverage of such output, research in an incompletely polished format, of findings of workis defined for the purposes of this list in a broader rather under way in the Bank. The primary audience is Bankthan a narrower sense. Copies of Bank publications staff, though some copies are circulated to interested(categories A, E, and F) can be purchased or ordered researchers outside the Bank.from the Bank's bookstore or distributors (see list on last H. Departmental working papers. These papers arepage of this volume). Copies of working papers and produced and distributed by departments and somebackground papers (categories G-I) can be obtained divisions. They disseminate quickly findings of depart-from the authors or the associated Bank departments. mental research and are targeted primarily to specialistsReprints of articles from the Bank's research journals in the Bank.(category C) may be requested from the authors; other I. Background papers to World Development Reportpublished material can be purchased from the publish- 1993. These papers are commissioned from researchersers (categories B and D). The following types of fiscal inside and outside the Bank. Some also come out as1993 research output are listed: Policy Research Working Papers or in other forms.

A. Research-oriented books written by Bank staff andpublished either by the Bank or by other publishers. A. Books by Bank ResearchersThis list also includes periodic data publications, such asthe World Debt Tables, that feed subsequent research. Bagchi, Amaresh, J.L. Bajaj, and William Byrd, eds. 1992.

B. Research by Bank staff published as part of col- State Finances in India. New Delhi: Vikas Publishinglected volumes of research papers. House.

C. Articles appearing in the Bank's two economics Bagchi, Amaresh, and N. Stern, eds. 1992. Public Financejournals, the World Bank Economic Review and World Bank and the Planning Process. New York: Oxford Univer-Research Observer. sity Press.

D. Articles related to Bank research and published in Barltrop, Chris J., and Diana McNaughton. 1992. Bank-non-Bank professional journals. ing Institutions in Developing Markets. Vol. 2, Interpret-

E. Policy and Research Series, a formal series for dis- ingFinancial Statements. Washington, DC: World Bank.semination of policy and research work of professional Barnum, Howard, and Joseph Kutzin. 1993. Public Hos-quality, with a strong policy orientation, and of interest pitals in Developing Countries: Resource Use, Cost, Fi-to a relatively wide audience. nancing. Baltimore: Johns Hopkins University Press.

F. World Bank Discussion Papers, Technical Papers, Bos, Eduard, My T. Vu, and Ann Levin. 1993. Worldand other Bank papers series. Population Projections, 1992-93 Edition: Estimates and

* World Bank Discussion Papers. This series provides Projections with Related Demographic Statistics. Balti-an outlet in the public domain for a broad range of Bank more: Johns Hopkins University Press.output that provides detailed results of interest to devel- Braverman, Avishay, Karen Brooks, and Csaba Csaki.opment practitioners-from work on narrow research 1993. The Agricultural Transition in Central and Easterntopics or country-specific studies. Europe and the Former USSR. Washington, DC: World

* World Bank Technical Papers. This series provides an Bank.outlet in the public domain for research and studies that Braverman, Avishay, Ravi Kanbur, Ant6nio Branddo,are highly technical and aimed at a narrower audience. and others. 1992. Commodity Price Stabilization and

* Other published series. Papers in such series as the Policy Reform: An Approach to the Evaluation of theLiving Standards Measurement Study Working Paper Brazilian Price Band Proposals. World Bank Regionaland Economic Development Institute series typically and Sectoral Study. Washington, DC.focus on a specialized topic and are designed to give Carbajo, Jose, ed. 1993 Regulatory Reform in Transport-prominence to Bank work on that topic or to work by a Some Recent Experiences. World Bank Symposium Se-particular Bank unit. ries. Washington, DC.

189

Appendix

del Rosso, Joy Miller. 1992. Investing in Nutrition with Marer, Paul, Janos Arvay, John O'Connor, MartinWorld Bank Assistance. Washington, DC: World Bank. Schrenk, and Daniel Swanson. 1992. Historically

de Melo, Jaime, and Arvind Panagariya, eds. 1992. The Planned Economies: A Guide to the Data. Washington,New Regionalism in Trade Policy. Cambridge: Cam- DC: World Bank.bridge University Press. McIntire, John, Daniel Bourzat, and Prabhu Pingali.

Dombusch, Rudiger, ed. 1992. Policymaking in the Open 1992. Crop-Livestock Interaction in Sub-Saharan Africa.Economy: Concepts and Case Studies in Economic Perfor- World Bank Regional and Sectoral Study. Washing-mance. New York: Oxford University Press. ton, DC.

Faini, Riccardo, and Jaime de Melo, eds. 1993. Fiscal McNaughton, Diana, Donald G. Carlson, Clayton Dietz,Issues inAdjustmentinDevelopingCountries.NewYork: and others. 1992. Banking Institutions in DevelopingSt. Martin's Press. Markets. Vol. 1, Building Strong Management and Re-

Farvacque, Catherine, and Patrick McAuslan. 1993. sponding to Change. Washington, DC: World Bank.Politiques Foncires des Villes en D6veloppement. Paris: Moser, Caroline. 1993. Gender Planning and Development:Association pour le D6veloppement des Etudes Theory, Practice and Training. London: Routledge.Frangais. Pearce, David W., and Jeremy J. Warford. 1993. World

Finger, J. Michael, ed. 1993. Antidumping: How it Works Without End: Economics, Environment, and Sustainableand Who Gets Hurt. Ann Arbor: University of Michi- Development. Washington, DC: World Bank.gan Press. Psacharopoulos, George, and Zafiris Tzannatos. 1992.

Hassan, Hassan M., and Charles Hutchinson. 1992. Women's Employment and Pay in Latin America: Over-Natural Resource and Environmental Information for view and Methodology. World Bank Regional andDecisionmaking. Washington, DC: World Bank. Sectoral Study. Washington, DC.

Hillman, Arye L., and Branko Milanovic, eds. 1992. The . 1993. Case Studies on Women's Employment and PayTransition from Socialism in Eastern Europe: Domestic in Latin America. Washington, DC: World Bank.Restructuringand Foreign Trade. Regional and Sectoral Rottenberg, Simon, and others. 1993. ThePoliticalEconomyStudy. Washington, DC: World Bank. ofPoverty, Equity, and Growth: Costa Rica and Uruguay.

Hoff, Karla, Avishay Braverman, and Joseph E. Stiglitz, New York: Oxford University Press.eds. 1993. The Economics ofRural Organization: Theory, Schiff, Maurice, and Alberto Valdes. 1992. The Plunder-Practice, and Policy. New York: Oxford University ingofAgriculture in Developing Countries. Washington,Press. DC: World Bank.

Journey, William K., Paul Skillicorn, and William Spira. _ .1992. The Political Economy ofAgricultural Pricing1993. Duckweed Aquaculture: A New Aquatic Farming Policy: A Synthesis of the Economics in Developing Coun-System for Developing Countries. Washington, DC: tries. Baltimore: Johns Hopkins University Press.World Bank. Serven, Luis, and Andr6s Solimano. 1993. The Transition

Kahnert, Friedrich, and Gilbert Levine. 1993. Ground- from Adjustment to Growth: The Role of Capital Forma-water Irrigation and the Rural Poor: Optionsfor Develop- tion. Washington, DC: World Bank.ment in the Gangetic Basin. Washington, DC: World Tzannatos, Zafiris, and David Sapsford. 1993. The Eco-Bank. nomics of the Labor Market. Baskingstoke, U.K.:

Kikeri, Sunita, John Nellis, and Mary Shirley. 1992. Macmillan Education.Privatization: The Lessons of Experience. Washington, UNDP-World Bank Water and Sanitation Program.DC: World Bank. 1992. Improving Servicesfor the Poor: A Program Strategy

King, Elizabeth M., and M. Anne Hill. 1993. Women's for the 1990s. Washington, DC: World Bank.Education in Developing Countries: Barriers, Benefits, _ . 1993. UNDP-World Bank Water and SanitationandPolicies. Baltimore:JohnsHopkins UniversityPress. Program Annual Report 1991-92. Washington, DC:

Levin, Henry M., and Marlaine E. Lockheed, eds. 1993. World Bank. (Also published in French.)Effective Schools in Developing Countries. Washington, Vittas, Dimitri. 1992. Financial Regulation: Changing theDC: Falmer Press. Rules of the Game. Washington, DC: World Bank.

Low, Patrick. 1993. Trading Free: The GATT and U.S. World Bank.1992. An Agricultural Strategy for Albania.Trade Policy. New York: The Twentieth Century Fund. Washington, DC.

Lutz, Ernst. 1993. Toward Improved Accounting for the . 1992. China: Long-Term Issues and Options in theEnvironment. A World Bank Symposium. Washing- Health Transition. Washington, DC.ton, DC. . 1992. China: Reform and the Role of the Plan in the

Maddison, Angus, and associates. 1992. The Political 1990s. Washington, DC.Economy of Poverty, Equity, and Growth: Brazil and . 1992. China: Strategies for Reducing Poverty in theMexico. New York: Oxford University Press. 1990s. Washington, DC.

190

Bank Research Output

.1992. Commodity Markets Quarterly Review. Wash- . 1993. Caribbean Region: Access, Quality, and Effi-ington, DC. ciency in Education. Washington, DC.

___. 1992. Commodity Price Data Sheet. Washington, _ . 1993. Caribbean Region: Current Economic Situa-DC. tion, Regional Issues, and Capital Flows, 1992. Washing-

. 1992. The Environmental Data Book. Washington, ton, DC.DC. . 1993. China: The Achievement and Challenge ofPrice

___. 1992. Global Economic Prospect Update. Washing- Reform. Washington, DC.ton, DC. . 1993. Commodity Markets Quarterly Review. Wash-

. 1992. Kenya: Re-Investing in Stabilization and Growth ington, DC.through Public Sector Adjustment. Washington, DC. _ . 1993. Commodity Price Data Sheet. Washington,

_ . 1992. Market Outlook for Major Primary Commodi- DC.ties. Washington, DC. _ . 1993. Effective Family Planning Programs. Wash--_. 1992. Mauritius: Expanding Horizons. Washing- ington, DC.ton, DC. . 1993. Energy Efficiency and Conservation in the

. 1992. Mongolia: Toward a Market Economy. Wash- Developing World: The World Bank's Role. A Worldington, DC Bank Policy Paper. Washington, DC. (Also published

. 1992. Namibia: Poverty Alleviation with Sustainable in Spanish.)Growth. Washington, DC. . 1993. Estonia: The Transition to a Market Economy.

. 1992. Paraguay: Country Economic Memorandum. Washington, DC.Washington, DC. (Also published in Spanish.) .1993. Global Economic Prospects. Washington, DC.

. 1992. Poland: Decentralization and Reform of the .1993. Guyana: From Economic Recovery to SustainedState. Washington, DC. Growth. Washington, DC.

. 1992. Poland: Health System Reform. Washington, .1993. Housing: Enabling Markets to Work. A WorldDC. Bank Policy Paper. Washington, DC.-_ . 19,92. Price Prospects for Major Primary Commodi- . 1993. Latvia: The Transition to a Market Economy.ties, 1990-2005: Update, Including Quarterly Review of Washington, DC.Commodity Markets (Second Quarter 1992). Washing- .1993. Lithuania: The Transition toaMarket Economy.ton, DC. Washington, DC.

. 1992. Price Prospects for Major Primary Commodi- . 1993. Poland: Income Support and the Social Safetyties, 1990-2005: Update, Including Quarterly Review of Net during the Transilion. Washington, DC.Commodity Markets (Third Quarter 1992). Washing- . 1993. Poverty Reduction Handbook. Washington,ton, DC. DC.

__ . 1992. Quarterly Update of Commodity Price Fore- . 1993. Quarterly Update of Commodity Price Fore-casts. Washington, DC. casts. Washington, DC.

.1992. Russian EconomicReform: Crossingthe Thresh- . 1993. Social Indicators of Development. Baltimore:old of Structural Change. Washington, DC. (Also pub- Johns Hopkins University Press.lished in Russian.) _ . 1993. Tanzania: AIDS Assessment and Planning.

. 1992. Statistical Handbook: States of the Former Washington, DC.USSR.. Washington, DC. . 1993. Turkey: Infbrmatics and Economic Moderniza-

___. 1992. Trends in Developing Economies 1992. Wash- tion. Washington, DC.ington, DC. . 1993. Turkey: Women in Development. Washing--. 1992. Venezuela and the World Bank: Preparing for ton, DC.the Future. Washington, DC. (Also published in Span- . 1993. The World Bank's Role in the Electric Powerish.) Sector: Policies for Effective Institutional, Regulatory, and

. 1992. The World Bank and the Environment. Wash- Financial Reform. World Bank Policy Paper. Washing-ington, DC. (Also published in French and Spanish.) ton, DC. (Also published in Spanish.)-. 1992. World Bank Atlas, 25th Anniversary Edition. _ .1993. World Development Report 1993. New York:

Baltimore: Johns Hopkins University Press. Oxford University Press. (Also published in French_ . 1992. World Debt Tables 1992-93. 2 volumes. Wash- and Spanish.)

ington, DC. .1993. World Tables 1993. Baltimore: Johns Hopkins. 1992. World Tables 1992. Baltimore: Johns Hopkins University Press.

University Press._ . 1993. Arab Republic ofEgypt: An Agricultural Strat-

egy for the 1990s. Washington, DC.

191

Appendix

B. Chapters by Bank Researchers in Books Kong. Tokyo: Nordica International Ltd. and AsianProductivity Organization.

Alderman, Harold. 1993. "Issues for Food Security in Jaffee, Steven. 1993. "ContractFarmingin the Shadow ofPakistan." In Agha Sajjad Haider and others, eds., Competitive Markets: The Experience of KenyanAgricultural Strategies in the 1990s: Issues and Policies. Horticulture." In P. Little and M. Watts, eds., PeasantsIslamabad: Pakistan Association of Agricultural So- Under Contract: Contract Farming and Agrarian Trans-cial Scientists. formation in Sub-Saharan Africa. Madison: University

Braga, Carlos Alberta Primo. 1993. "Brazil." In P.H. of Wisconsin Press.Boeker, ed., Latin America's Turnaround. San Fran- _ . 1993. "How Private Enterprise Organized Agri-cisco: Institute for Contemporary Studies. cultural Markets in Kenya." In D. Bigman and P.

.1993. "The Newly Industrializing Economies."In Berck, eds., Food Security and Food Inventories in Devel-M.B. Wallerstein, M.E. Mogee, and R.A. Shoen, eds., oping Countries. London: Lab International.Global Dimensions of Intellectual Property Rights in Sci- James, Estelle. 1992. "The Distribution of Benefits fromence and Technology. Washington, DC: National Acad- Nonprofit Organizations." In C. Clotfelter, ed., Whoemy Press. Benefits from the Nonprofit Sector? Chicago: University

Brooks, Karen. 1993. "Enhancing Impacts of Policy Re- of Chicago Press.forms in the Former USSR." In J.W. Helmuth and D.F. James, Estelle, and Nancy Birdsall. 1993. "Government,Hadwiger, eds., International Agricultural Trade and Health and the Poor: The Case for the Private Sector."Market DevelopmentPolicyinthel990s. Westport,Conn.: In J. Gribble and S. Preston, eds., The EpidemiologicalGreenwood Press. Transition: Policy and Planning Implications for Develop-

Devarajan, Shantayanan, and Jaime de Melo. 1992. "Rela- ing Countries. Washingon, DC: National Academytive Performance of CFA Franc Zone Members and Press.Other Countries." In I. William Zartmann, ed., Europe Kaminski, Bartlomiej. 1992. "Poland: Underpinning theand Africa: The New Phase. Boulder, Colo.: Lynne Transition: The Shadow of the Round Table Agree-Rienner Publishers. ments." In Christopher Saunders, ed., Economics and

Devarajan, Shantayanan, and Robert J. Weiner. 1993. Politics of Transition. London: MacMillan Press."La Degradaci6n de Los Recursos Naturales y Las Kishor, N.M. 1993. "Impact of Pesticide Externalities onCuentas Nacionales de Ingresos." In Rosfo Vargas Production and Trade in Agricultural Commodities:and Mariano Bauer, eds., Mexico-Estados Unidos: The Case of Cotton Cultivation in Coastal AndhraEnergia y Media Ambiente. Mexico, D.F.: Universidad Pradesh." In J. Kerr and others, eds., Natural ResourceNacional Aut6noma de M6xico. Economics of India: A Guidebook for Researchers and

Domingo, Lita J., and Elizabeth M. King. 1992. "The Role Policymakers. New Delhi: Oxford and IBH Publishing.of the Family in the Process of Entry to Marriage in Knudsen, Odin, and John Nash. 1993. "AgriculturalAsia." In Elza Berquo and Peter Xenos, eds., Family Price Stabilization and Risk Reduction in DevelopingSystems and Cultural Change. Oxford: Clarendon Press. Countries." In R. Bautista and A. Valdes, eds., Trade

Erzan, Refik, and Alexander Yeats. 1992. "U.S.-Latin Macroeconomic Policies in Developing Countries. SanAmerica Free Trade Areas: Some Empirical Evidence." Francisco: International Center for Economic Growth.In Sylvia Saborio and others, eds., The Premise and the Lee, Kyu Sik. 1993. "How Nigerian Manufacturers CopePromise: Free Trade in the Americas. Newark, N.J.: Trans- withInfrastructural Deficiencies: Private Alternativesaction Publishers. to Public Provisions." In Shabbir Cheema, ed., Urban

Gulati, A., and P.K. Sharma. 1993. "Fertilizer Pricing Management:PoliciesandInnovationsinDevelopingCoun-and Subsidy in India: An Alternative Perspective." In tries. Westport, Conn.: Praeger Publishers.S.P. Seetharaman, ed., Agricultural Input Marketing. Lockheed, Marlaine. 1992. "Enrollments, Facilities, andNew Delhi: Oxford and IBH Publishing. Finances: International Differences." In Encyclopedia

Hallberg, K., and W.E. Takacs. 1992. "Colombia's Expe- of Educational Research (6th edition). New York:riencewithImportLicenseAuctions."InM.E. Kreinin, Macmillan for Educational Research Association.ed., International Commercial Policy: Issues for the 1990s. Nash, John. 1993. "The World Bank's Experience withWashington, DC: Taylor and Francis. Trade Liberalization: Some New Light on Old Ques-

. 1992. "Trade Reform in Colombia, 1990-94." In tions." In M.E. Kreinin, ed., International CommercialAlvin Cohen and Frank Gunter, eds., The Colombian Policy: Issues for the 1990s. Washington, DC: TaylorEconomy: Issues of Trade and Development. Boulder, and Francis.Colo.: Westview Press. Takacs, W.E. 1992. "Do Bids in Quota Auctions Reveal

Hau, Timothy D. 1993. "Road Pricing: An Advisable Tariff Equivalents? Some Evidence from Australia."Option?" In L.H. Wang and Anthony Yeh, eds., Keep In K. Fatemi, ed., International Trade and Finance Asso-a City Moving: Urban Transport Management in Hong ciation: 1992 Proceedings. Laredo, Texas: Laredo State

University Press.192


Thomas, Vinod, and John Nash. 1992. "Trade Policy ized Economy of Turkey." World Bank Economic Re-Reform: Recent Evidence from Theory and Practice." view 7(2):191-217.In R. Adhikari, C. Kirkpatrick, and J. Weiss, eds., Krishna, Kala. 1993. "Theoretical Implications of Imper-Industrial and Trade Policy Reform in Developing Coun- fect Competition on Quota License Prices and Auc-tries. New York: Manchester University Press. tions." World Bank Economic Review 7(1):113-36.

Krumm, Kathie L. 1993. "A Medium-Term Frameworkfor Analyzing the Real Exchange Rate, with Applica-

C. Articles Published in the World Bank tions to the Philippines and Tanzania." World BankEconomic Review and World Bank Research Economic Review 7(2'):219-45.Observer Levy, Brian. 1993. "An Institutional Analysis of the

Design and Sequence of Trade and Investment PolicyAlbrecht, Douglas, and Adrian Ziderman. 1993. "Stu- Reform." World Bank Economic Review 7(2):247-62.

dent Loans: An Effective Instrument for Cost Recov- .1993. "Obstacles to DevelopingIndigenous Smallery in Higher Education?" World Bank Research Ob- and MediumEnterprises: AnEmpirical Assessment."server 8(1):71-90. World Bank Economic Review 7(1):65-83.

Borrell, Brent, and Ronald C. Duncan. 1992. "A Survey Levy, Santiago, and Sweder van Wijnbergen. 1992.of the Costs of World Sugar Policies." World Bank "Maize and the FreeTrade Agreementbetween MexicoResearch Observer 7(2):171-94. and the United States." World Bank Economic Review

Claessens, Stijn. 1992. "The Optimal Currency Compo- 6(3):481-502.sition of External Debt: Theory and Applications to McLure, Charles E., Jr. 1992. "A Simpler Consumption-Mexico and Brazil." World Bank Economic Review Based Alternative to the Income Tax for Socialist6(3):503-28. Economies in Transition." World Bank Research Ob-

__ . 1993. "Alternative Forms of External Finance: A server 7(2):221-37.Survey." World Bank Research Observer 8(1):91-117. Mitra, Pradeep. 1992. "The Coordinated Reform of Tar-

Cuddington, John T. 1993. "Modeling the Macroeco- iffs and Indirect Taxes." World Bank Research Observernomic Effects of AIDS, with an Application to Tanza- 7(2):195-218.nia." World Bank Economic Review 7(2):173-89. Mundlak, Yair, and Donald F. Larson. 1992. "On the

Cukierman, Alex, and Nissan Liviatan. 1992. "The Dy- Transmission of World Agricultural Prices." Worldnamics of Optimal Gradual Stabilizations." World Bank Economic Review 6(3):399-422.Bank Economic Review 6(3):439-58. Musgrove, Philip. 1993. "Feeding Latin America's Chil-

Cukierman, Alex, Steven B. Webb, and Bilin Neyapti. dren." World Bank Research Observer 8(1):23-45.1992. "Measuring the Independence of Central Banks O'Connell, Stephen A. 1992. "Uniform Commercialand Its Effect on Policy Outcomes." World Bank Eco- Policy, Illegal Trade, and the Real Exchange Rate: Anomic Review 6(3):353-98. Theoretical Analysis." World Bank Economic Review

Devarajan, Shantayanan, Jeffrey D. Lewis, and Sherman 6(3):459-79.Robinson. 1993. "External Shocks, Purchasing Power Schmidt-Hebbel, Klaus, Steven B. Webb, and GiancarloParity, and the Equilibrium Real Exchange Rate." Corsetti. 1992. "Household Saving in DevelopingWorld Bank Economic Review 7(1):45-63. Countries: First Cross-Country Evidence." World Bank

Dornbusch, Rudiger, and Stanley Fischer. 1993. "Mod- Economic Review 6(3):529-47.erate Inflation." WorldBank Economic Review 7(1):1-44. Steel, William F., and Leila M. Webster. 1992. "How

Eaton, Jonathan. 1993. "Sovereign Debt: A Primer." Small Enterprises in Ghana Have Responded to Ad-World Bank Economic Review 7(2):137-72. justment." World Bank Economic Review 6(3):423-38.

Eskeland, Gunnar S., and Emmanuel Jimenez. 1992. Tait, Alan A. 1992. "A Not-So-Simple Alternative to the"Policy Instruments for Pollution Control in Devel- Income Tax for Socialist Economies in Transition: Aoping Countries." World Bank Research Observer Comment on McLure." World Bank Research Observer7(2):145-69. 7(2):239-48.

Finger, J. Michael. 1992. "Dumping and Antidumping: Westbrook, M. Daniel, and James R. Tybout. 1993. "Es-The Rhetoric and the Reality of Protection in Indus- timating Returns to Scale with Large, Imperfect Pan-trial Countries." World Bank Research Observer els: An Application to Chilean Manufacturing Indus-7(2):121-43. tries." World Bank Economic Review 7(1):85-112.

Hammer, Jeffrey S. 1993. "The Economics of Malaria The World Bank Water Demand Research Team. 1993.Control." World Bank Research Observer 8(1):1-22. "The Demand for WaterinRuralAreas: Determinants

Harrison, Glenn W., Thomas F. Rutherford, and David and Policy Implications." World Bank Research Ob-G. Tarr. 1993. "Trade Reform in the Partially Liberal- server 8(1):47-70.

193

Appendix

D. Articles Related to Bank Research and Bakalian, Alex, Albert Wright, and others. 1993. "Sim-Published in Non-Bank Professional plified Sewerage Meets Demands: A Modified DesignJournals Provides a Lower Cost Alternative." Water Environ-

ment and Technology 5(March):58.Adams, Arvil Van, John Middleton, and Adrian Bartone, Carl, and Janis Bernstein. 1993. "Improving

Ziderman. 1992. "Market-Based Manpower Planning Municipal Solid Waste Management in Third Worldwith Labor Market Signals." International Labour Re- Countries." Resource Conservation and Recycling 8(N1-view 131(3):261-79. 2):43-54.-. 1992. "Vocational and Technical Education and Bhat, Ramesh. 1993. "The Private-Public Mix in Health

Training." Prospects 22(2). Care in India." Health Policy and Planning 8(1):43-56.Adams, Dale W., and John D. von Pischke. 1992. Bissell, B. 1992. "World Bank Human Resources Devel-

"Microenterprise Credit Programs: Deja-vu." World opment Assistance to India." Journal ofFamily WelfareDevelopment 20(10):1463-70. 38(3):81.

Adams, Richard H., and Harold Alderman. 1992. Blanchard, OliverJean, Changyong Rhee, and Lawrence"Sources of Income Inequality in Rural Pakistan: A Summers. 1993. "The Stock Market, Profit, and Invest-Decomposition Analysis." Oxford Bulletin of Econom- ment." Quarterly Journal of Economics 108(1):115-36.ics and Statistics 54(4):591-608. Bogetic, Zeljko. 1993. "The Role of Employee Owner-

Addison, T., and L. Demery. 1993. "The Impact of Mac- ship in Privatisation of State Enterprises in Easternroeconomic Adjustment on Poverty in the Presence of and Central Europe." Europe Asia Studies 45(3):463-81.Wage Rigidities." Journal of Development Economics Bogetic, Zeljko, and Dennis Heffley. 1992. "Market Syn-40(April):331-48. dicalism and Market Imbalances." Journal of Compara-

-_ . 1993. "Labor Markets, Poverty and Adjustment." tive Economics 16(4):670-87.Journal of International Development 5(2):135-43. Bohm, Peter. 1993. "Incomplete International Coopera-

Ahluwalia, Deepak. 1993. "Public Distribution of Food tion to Reduce Co2 Emissions: Alternative Policies."in India: Coverage, Targeting and Leakages." Food Journal of Environmental Economics and ManagementPolicy 18(1):33-54. 24(3):258-71.

Alderman, Harold. 1993. "Intercommodity Price Trans- Borrell, Brent, and Maw ChengYang. 1992. "Bananaramamittal: Analysis of Food Markets in Ghana." Oxford 1992." Developing Economies 30(3):259-83.Bulletin of Economics and Statistics 55(1):43-64. Bos, Eduard, and Rudolfo A. Bulatao. 1992. "The Demo-

Anand, Sudhir, and S.M. RaviKanbur. 1993. "Inequality graphic Impact of AIDS in Sub-Saharan Africa: Short-and Development: A Critique." Journal ofDevelopment Term and Long-Term Projections." International Jour-Economics 41(1):19-43. nal of Forecasting 8(3):367-84.

Anand, Sudhir, and Martin Ravallion. 1993. "Human Briscoe, John. 1992. "Poverty and Water Supply: How toDevelopment in Poor Countries: On the Role of Pri- Move Forward." Finance and Development 29(4):16-19.vate Incomes and Public Services." Journal ofEconomic . 1993. "Incentives Key to Improving Water andPerspectives 7(1):133-50. Sanitation Services." Water and Waste Management

Anderson, Jock R. 1992. "Agricultural Research Institu- International 8(2):28-36.tions and Priorities in an Era of Resource Scarcity: . 1993. "When the Cup is Half Full." EnvironmentDiscussion." American Journal of Agricultural Econom- 35(4):7-36.ics 74(5):1111-13. Brooks, Karen M. 1992. "Stabilization, Sectoral Adjust-

. 1993. "Review of C. Peter Timmer, Agriculture ment, and Enterprise Reform in the Agricultural Sec-and the State: Growth, Employment, and Poverty in De- tor of Russia." American Journal of Agricultural Eco-veloping Countries." Journal of Developing Areas nomics 74(5):1163-69.27(2):250-52. Buckley, Robert, Barbara Lipman, and Thakoor Persaud.

. 1993. "Review of D. L. Plucknett and others, 1993. "Mortgage Design under Inflation and RealNetworkinginInternationalAgriculturalResearch."Jour- Wage Uncertainty: The Use of a Dual Index Instru-nal of Developing Areas 26(2):268-70. ment." World Development 21(3):455-64.

Anderson, Jock R., and J. Brian Hardaker. 1992. "Effi- Burns, Robert E. 1993. "Irrigated Rice Culture in Mon-cacy and Efficiency in Agricultural Research: A Sys- soon Asia: The Search for an Effective Water Controltems View." Agricultural Systems 40(1-3):105-23. Technology." World Development 21(5):771-89.

Andrews, Craig B. 1992. "Mineral Sector Technologies: Calvo, Guillermo A., and Fabrizio Coricelli. 1993. "Out-Policy Implications for Developing Countries." Natu- put Collapse in Eastern Europe: The Role of Credit."ral Resources Forum 16(3):212-20. International Monetary Fund Staff Papers 40(1):32-52.

194


Caprio, Gerard, and Patrick Honohan. 1993. "Excess Derbra, R. 1993. "Deregulation of Urban Transport inLiquidity and Monetary Overhangs." World Develop- Chile: What Have We Learned in the Decade 1979-ment 21(4):523-33. 1989." Transport Reviews 13(1):45-59.

Carbajo, jose. 1993. "Regulations and Economic Incen- Devarajan, Shantavanan, and Chalongphobtives to Reduce Automotive Air Pollution." Science of Sussangicarn. 1992. "EffectiveRates ofProtection whenthe Total Environment 134(1-3):383-93. Domestic and Foreign Goods are Imperfect Substi-

Coate, Stephen, and Martin Ravallion. 1993. "Reciproc- tutes." Review of Economics and Statistics 74(2):701-11.ity without Commitment: Characterization and Per- Dixon, John A., Louise Fallon Scura, and Tom van't Hof.formance of Informal Insurance Arrangements."Jour- 1993. "Meeting Ecological and Economic Goals: Ma-nal of Development Economics 40(1):1-24 rine Parks in the Caribbean." Ambio 22(2-3):117-25.

Cohen, Michael. 1993. "Megacities and the Environ- Dobozi, Istvan. 1993. "Impact of Market Reforms onment." Finance and Development 30(2):44-47. Future Patterns of Nonferrous Metal Consumption of

Contandriopoulos, A.P., C.C. Rivero, M. Kaddar, and the Former Soviet Union." Natural Resources Forumothers. 1993. "Evaluation of Recent Changes in the 17(1):15-32.Financing of Health Services: Introduction." WHO _ . 1993. "State Enterprises, Supply Behavior and

Technical Report Series 829:1-74. Market Volatility: An Empirical Analysis of the WorldCoricelli, Fabrizio, and Gian Maria Milesi-Ferretti. 1993. Copper Industry." Resources Policy 19(1):40-50.

"On the Credibility of Big-Bang Programs: A Note on Dollar, David. 1993. 'Technological Differences as aWage Claims and Soft Budget Constraints in Econo- Source of Comparative Advantage." American Eco-mies in Transition." European Economic Review 37(2- nomic Review 83(2):431-35.3):387-.95. Drum, Bernard. 1993. "Privatization in Africa." Colum-

Corricelli, Fabrizio, and A. Thorne. 1993. "Dealing with bia Journal of World Business 28(1):144-49.Enterprises' Bad Loans." Economics of Transition Duncan, Ronald C. 1993. "Agricultural Export Pros-1(1):112-15. pects for Sub-Saharan Africa." Development Policy Re-

Cowley, P.R. 1993. "Preliminary Cost-Effectiveness view 11(1):31-45.Analysis of an AIDS Vaccine in Abidjan, C6te d'Ivoire." Easterly, William. 1992. "How Much'Does Policy AffectHealth Policy 24(2):145-53. Growth?" Cuadernos de Economia 87(August):295-305.

Cropper, Maureen L., L. Deck, Nalin Kishor, and Ken- Easterly, William, and Sergio Rebelo. 1993. "MarginalnethE. McConnell. 1993. "Valuing Product Attributes Income Tax Rates and Economic Growth in Devel-Using Single Market Data: A Comparison of Hedonic oping Countries." European Economic Review 37(2-and Discrete Choice Approaches." Review of Econom- 3):409-17.ics and Statistics 75(2):225-32. Eisemon, Thomas 0., and Jamil Salmi. 1993. "African

Cummings, Ronald G., and Vahram Nercissiantz. 1992. Universities and the State: Prospects for Reform in"The Use of Water Pricing as a Means for Enhancing Senegal and Uganda." Higher Education 25(2):151-68.Water Use Efficiency in Irrigation: Case Studies in El-Ashry, Mohamed T. 1993. "Balancing Economic De-Mexico and the United States." Natural Resources Jour- velopment with Environmental Protection in Devel-nal 32(4):731-55. oping and Lesser Developed Countries." Journal ofthe

Dadush,Uri,andPaulArmington. 1993. "FourthGrowth Air and Waste Management Association 43(1):18-24.Pole." International Economic Insight 4(May-June):2-4. . 1993. "Development Assistance Institutions and

De Long, J. Bradford, and Lawrence Summers. 1992. Sustainable Development." Washington Quarterly"EquipmentInvestment and Economic Growth: How 16(2):83-96.Strong is the Nexus." Brookings Papers on Economic Elbadawi, Ibrahim. 1992. "Terms of Trade, CommercialActivity 2:157-99. Policy, and the Parallel Market for Foreign Exchange:

de Melo,jaime, and Arvind Panagariya. 1992. "The New An Empirical Model of the Real Exchange Rate."Regionalism." Finance and Development 29(4):37-40. Journal of African Finance and Economic Development

de Melo, Jaime, D. Roland-Holst, and M. Haddad. 1993. 1(2):1-25."Fraude et reform6 de la fiscalit6 dans une 6conomie Eskeland, Gunnar S. 1992. "Attacking Air Pollution inA faible revenu: analyse A travers un mod6le CGE Mexico City." Finance and Development 29(4):28-30.appliqu6 a Madagascar." Revue d'Economie du Evans, William N., and loannis N. Kessides. 1993. "Lo-Developpement 1:63-89. calized Market Power in the United States Airline In-

de Melo, Jaime, and L.A. Winters. 1993. "Price and dustry." Review of Economics and Statistics 75(1):66-75.Quality Effects of VERs Revisited: A Case Study of . 1993. "Structure, Conduct, and Performance inKorean Footwear Exports." Journal of Economic Inte- the Deregulated Airline Industry." Southern Economicgration 8(1):33-57. Journal 59(3):450-67.

195

Appendix

Ewing, Andrew, Barbara W. Lee, and Roger Leeds. Haddad, Lawrence, and Ravi Kanbur. 1992. "IsThere an1993. "AcceleratingPrivatizationinEx-Socialist Econo- Intrahousehold Kuznets Curve? Some Evidence frommies." Columbia Journal of World Business 28(1):158-67. the Philippines." Public Finance 47(S):77-93.

Faiz, Asif. 1993. "Automotive Emissions in Developing Hannah, Lawrence, Karl Kim, and Edwin S. Mills. 1993.Countries: Relative Implications for Global Warming, "Land Use Controls and Housing Prices in Korea."Acidification and Urban Air Quality." Transportation Urban Studies 30(1):147-56.Research Part A: Policy and Practice 27(3):167-86. Heath, John R. 1992. "Further Analysis of the Mexican

Faiz, Asif, and J.A. Delarderel. 1993. "Automotive Air Food Crisis." Latin American Research ReviewPollution in Developing Countries: Outlook and Con- 27(3):123-45.trol Strategies." Science of the Total Environment 134(1- Honohan, Patrick. 1992. "Price and Monetary Conver-3):325-34. gence in Currency Unions: The Franc and Rand

Fallon, Peter R., and Robert E.B. Lucas. 1993. "Job Secu- Zones." Journal of International Money and Financerity Regulations and the Dynamic Demand for Indus- 11(4):397-410.trial Labor in India and Zimbabwe." Journal of Devel- Honohan, Patrick, and Izak Atiyas. 1993. "Intersectoralopment Economics 40(2):241-75. Financial Flows in Developing Countries." Economic

Feder, Gershon, Lawrence J. Lau, Justin Yifu Lin, and Journal 103(418):666-79.Xiaopeng Luo. 1992. "The Determinants of Farm In- Ickes, Barry W., and Randi Ryterman. 1992. "The Inter-vestment and Residential Construction inPost-Reform enterprise Arrears Crisis in Russia." Post-Soviet AffairsChina." Economic Development and Cultural Change 8(4):331-61.41(1):1-26. James,Estelle. 1993. "WhyDoDifferentCountriesChoose

Feder, Gershon, and Dina Umali. 1993. "The Adoption a Different Public-Private Mix of Educational Ser-of Agricultural Innovations: A Review." Technology vices?" Journal ofHuman Resources 28(3):571-92.Forecasting and Social Change 43(3/4). Kambou, G., S. Devarajan, and M. Over. 1993. "Les

Finger, J. Michael. 1992. "The Meaning of 'Unfair' in Effets Economique de L'6pid6mie du SIDA en AfriqueUnited States Import Policy." Minnesota Journal of Subsaharienne: Une Analyse d'6quilibre G6n6ral."Global Trade 1(1):35-56. Revue d'Economie du D6veloppement 1(1):37-62.

Floor, Willem. 1992. "The Dutch on Khark Island: A Khadr, Ali Mahmoud. 1992. "Technology CommitmentCommercial Mishap." International Journal of Middle and Strategic Resource Pricing: A Linear QuadraticEast Studies 24(3):441-60. Model." Resources and Energy 14(3):215-31.

Frischtak, Claudio. 1992. "Banking Automation and Khemani, Rughuir S., and Daniel M. Shapiro. 1993. "AnProductivity Change: The Brazilian Experience." World Empirical Analysis of Canadian Merger Policy." Jour-Development 20(12):1769-84. nal of Industrial Economics 41(2):161-77.

Glewwe, Paul, and G. Hall. 1992. "Unorthodox Adjust- Kim, Linsu, and Carl Dahlman. 1992. "Technology Policyment and Poverty in Peru." Finance and Development for Industrialization: An Integrative Framework and29(4):10-13. Korea's Experience." Research Policy 21(5):437-52.

Goodhart, Charles A.E., and Marcelo Giugale. 1993. Kraft, Evan, and Milan Vodopivec. 1992. "How Soft is"From Hour to Hour in the Foreign Exchange Mar- the Budget Constraint for Yugoslav Firms?" Journal ofket." Manchester School of Economic and Social Studies Comparative Economics 16(3):432-55.61(1):1-34. Landell-Mills, Pierre. 1992. "Governance, Cultural

Gray, Cheryl, and Franjo D. Stiblar. 1993. "The Evolving Change, and Empowerment." Journal ofModern Afri-Legal Framework for Private Sector Activity in can Studies 30(4):543-67.Slovenia." University ofPennsylvania Journal ofInterna- Larsen, Bjorn, and Anwar Shah. 1992. "Combattingtional Business Law 14(2):119-67. the Greenhouse Effect." Finance and Development

Grilli, Enzo, and M. Riess. 1992. "EC Aid to Associated 29(4):20-23.Countries: Distribution and Determinants." Welt- Lee, Kyu Sik. 1992. "Spatial Policy and Infrastructurewirtschaftliches Archiv (Review of World Economics) Constraints on Industrial Growth in Thailand." Re-128(2):202-20. view of Urban and Regional Development Studies 4(2).

Gulati, Ashok. 1992. "Rapporteur's Report on Agricul- Lee, Kyu Sik, and Alex Anas. 1992. "Costs of Deficienttural Policy in the Light of New Trade and Industrial Infrastructure: The Case of Nigerian Manufacturing."Policy." Indian Journal of Agricultural Economics 47(3). Urban Studies 29(7):1071-92.

Gulati, Ashok, and Rajni Katula. 1992. "Institutional Leechor, Chad, and Jack Mintz. 1993. "On the TaxationCredit to Agriculture: Issues Related to Interest and of Multinational Corporate Investment when the De-Default Subsidy." Journal of Indian School of Political ferral Method Is Used by the Capital Exporting Coun-Economy 4(4):701-29. try." Journal of Public Economics 51(1):75-96.

196


Leitmann, Josef, Carl Bartone, and Janis Bernstein. 1992. McKibbin, Warwick J., and Mark Sundberg. 1993. "Im-"Environmental Management and Urban Develop- plications for the Asia Pacific Region of Coordinationment: Issues and Options for Third World Cities." of Macroeconomic Policies in the OECD." Journal ofEnvironment and Urbanization 4(2):131-40. Policy Modeling 15(11,:13-48.

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Silverman, Jerry M. 1993. Public Sector Decentralization: . 1992. Statistical Handbook: States of the FormerEconomic Policy and Sector Investment Programs. World USSR. Studies of Economies in Transformation 3.Bank Technical Paper 188. Washington, DC. Washington, DC.

Speirs, Mike, and Ole Olsen. 1992. Indigenous Integrated _. 1992. Strategy fir African Mining. World BankFarming Systems in the Sahel. World Bank Technical Technical Paper 181. Washington, DC. (Also pub-Paper 179. Washington, DC. lished in French.)

Spurling, Andrew, Teck Y. Pee, Godwin Mkamanga, .1992. Strategy for Forest Sector Development. Worldand Christopher Nkwanyana. 1992. Agricultural Re- Bank Technical Paper 182. Washington, DC.search in Southern Africa:AFrameworkforAction. World World Bank, FAO, and UNIDO. 1992. World and Re-Bank Discussion Paper 184. Washington, DC. gional Supply and Demand Balances for Nitrogen, Phos-

Subbarao, Kalanidhi, and Laura Raney. 1993. Social phate, and Potash, 1990/91-1996/97. World Bank Tech-Gains from Female Education: A Cross-National Study. nical Paper 176. Washington, DC.World Bank Discussion Paper 194. Washington, DC. Wyznikiewcz, Bohdan, Brian Pinto, and Maciej

Takano, Yoshiro. 1992. Nippon Telegraph and Telephone Grabowski. 1993. Coping with Capitalism: The NewPrivatization Study: Experience of Japan and Lessons for Polish Entrepreneurs. IFC Discussion Paper 18. Wash-Developing Countries. World Bank Discussion Paper ington, DC: World Bank.179. Washington, DC. Xie, Mei, Ulrich Kuffner, and Guy Le Moigne. 1993.

Teerink, John R., and Masahiro Nakashima. 1993. Water Using Water Efficiently: Technological Options. WorldAllocation, Rights, and Pricing: Examples from Japan and Bank Technical Paper 205. Washington, DC.the United States. World Bank Technical Paper 198. Yaron, Jacob. 1992. Assessing Development Finance Insti-Washington, DC. tutions: A Public Interest Analysis. World Bank Discus-

Thomas, Duncan, Victor Lavy, and John Strauss. 1992. sion Paper 174. Washington, DC.Public Policy and Anthropometric Outcomes in C6te Zhiri, Abdelwahed, and Paul Murphy. 1992. Distanced'Ivoire. Living Standards Measurement Study Work- Education in Anglophone Africa: Experience with Second-ing Paper 89. Washington, DC: World Bank. ary Education and Teacher Training. EDI Analytical

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G. Policy Research Working Papers World Bank, International Economics Department,Washington, DC.

Ades, Alberto F., Miguel A. Kiguel, and Nissan Liviatan. Anderson, Dennis. 1992. "Economic Growth and the1993. "Exchange-Rate-Based Stabilization: Tales from Environment." Policy Research Working Paper 979.Europe and Latin America." Policy Research Work- World Bank, Office of the Vice President, Develop-ing Paper 1087. World Bank, Country Economics ment Economics, Washington, DC.Department, Washington, DC. Anderson, James E. 1992. "Tariff Index Theory." Policy

Ahmad,Sultan. 1992. "Regression Estimates of Per Capita Research Working Paper 1023. World Bank, Interna-GDP Based on Purchasing Power Parities." Policy tional Economics Department, Washington, DC.Research Working Paper 956. World Bank, Interna- Anderson, James E., and J. Peter Neary. 1992. "A Newtional Economics Department, Washington, DC. Approach to Evaluating Trade Policy." Policy Re-

Ajayi, S. Ibi. 1992. "An Economic Analysis of Capital search Working Paper 1022. World Bank, Interna-Flight from Nigeria." Policy Research Working Paper tional Economics Department, Washington, DC.993. World Bank, Western Africa Department, Wash- Arriagada, Ana-Maria, and Adrian Ziderman. 1992.ington, DC. "Vocational Secondary Schooling, Occupational

Akiyama, Takamasa, and Jonathan R. Coleman. 1993. Choice, and Earnings in Brazil." Policy Research"A Production Function-Based Policy Simulation Working Paper 1037. World Bank, Population andModel of Perennial Commodity Markets." Policy Human Resources Department, Washington, DC.Research Working Paper 1097. World Bank, Interna- Arroyo, Cristino R., III.1993. "Economic Approaches totional Economics Department, Washington, DC. ModelingFertility Determinants: A Selective Review."

Aksoy, M. Ataman. 1992. "The Indian Trade Regime." Policy Research Working Paper 1085. World Bank,Policy Research Working Paper 989. World Bank, Population andHumanResourcesDepartment,Wash-South Asia Regional Office, Washington, DC. ington, DC.

. 1992. "Protection and Industrial Structure in Ascher, William. 1992. "Coping with the DisappointingIndia." Policy Research Working Paper 990. World Rates of Return on Development Projects that AffectBank, South Asia Regional Office, Washington, DC. the Environment." Policy Research Working Paper

Aksoy, M. Ataman, and Helena Tang. 1992. "Imports, 965. World Bank, Office of the Vice President, Devel-Exports, and Industrial Performance in India, 1970- opment Economics, Washington, DC.88."Policy ResearchWorking Paper 969. World Bank, Bacon, Robert. 1992. "Measuring the Possibilities ofSouth Asia Regional Office, Washington, DC. Interfuel Substitution." Policy Research Working Pa-

Alam,Asad,andSarathRajapatirana. 1993. "Trade Policy per 1031. World Bank, Country Economics Depart-Reform in Latin America and the Caribbean in the ment, Washington, DC.1980s." Policy Research Working Paper 1104. World Bahl, Roy. 1992. "The Administration of Road UserBank, Latin America and the Caribbean Technical Taxes in Developing Countries." Policy ResearchDepartment, Washington, DC. Working Paper 986. World Bank, Infrastructure and

Alderman, Harold, and Christina H. Paxson. 1992. "Do Urban Development Department, Washington, DC.the Poor Insure? A Synthesis of the Literature on Risk Baldwin, George. 1992. "Targets and Indicators in Worldand Consumption in Developing Countries." Policy Bank Population Projects." Policy Research WorkingResearch Working Paper 1008. World Bank, Agricul- Paper 1048. World Bank, Population and Humanture and Rural Development Department, Washing- Resources Department, Washington, DC.ton, DC. Baneth, Jean. 1993. "Fortress Europe and Other Myths

Alesina, Alberto. 1992. "Political Models of Macroeco- Concerning Trade." Policy Research Working Papernomic Policy and Fiscal Reform." Policy Research 1098. World Bank, Geneva Office, Washington, DC.WorkingPaper 970. World Bank, Country Economics Bannister, Geoffrey, and Patrick Low. 1992. "TextilesDepartment, Washington, DC. and Apparel inNAFTA: A Case of Constrained Liber-

Allen, Chris, David Currie, T.G. Srinivasan, and David alization." PolicyResearch WorkingPaper994. WorldVines. 1992. "How OECD Policies Affected Latin Bank, International Economics Department, Wash-America in the 1980s." Policy Research Working Pa- ington, DC.per 954. World Bank, International Economics De- Barbier, Edward B., and Joanne C. Burgess. 1992. "Agri-partment, Washington, DC. cultural Pricing and Environmental Degradation."

Alogoskoufis, George, and Panos Varangis. 1992. "OECD Policy Research Working Paper 960. World Bank,Fiscal Policies and the Relative Prices of Primary Office of the Vice President, Development Econom-Commodities." Policy Research Working Paper 955. ics, Washington, DC.

204


Barnes, Guillermo. 1992. "Lessons from Bank Privat- Blackshaw, Philip W., and Louis S. Thompson. 1993.ization in Mexico." Policy Research Working Paper "Railway Reform in the Central and Eastern Euro-1027. World Bank, Country Economics Department, pean Economies." Policy Research Working PaperWashington, DC. 1137. World Bank, Europe and Central Asia Technical

Bates, Robin W., and Edwin A. Moore. 1992. "Commer- Department and Transportation, Water, and Urbancial Energy Efficiency and the Environment." Policy Development Department, Washington, DC.Research Working Paper 972. World Bank, Office of Blitzer, Charles R., R.S. Eckaus, Supriya Lahiri, andthe Vice President, Development Economics, Wash- Alexander Meeraus. 1992. "Growth and Welfareington, DC. Losses from Carbon Emissions Restrictions: A Gen-

Beckerman,Wilfred. 1992. "Economic Developmentand eral Equilibrium Analysis for Egypt." Policy Researchthe Environment: Conflict or Complementarity?" Working Paper 963. World Bank, Office of the VicePolicy Research Working Paper 961. World Bank, President, Development Economics, Washington, DC.Office of the Vice President, Development Econom- . 1992. "How Restricting Carbon Dioxide andics, Washington, DC. Methane Emissions Would Affect the Indian

Bennathan, Esra, Julie Fraser, and Louis S. Thompson. Economy."PolicyResearchWorkingPaper978. World1992. "What Determines Demand for Freight Trans- Bank, Office of the Vice President, Development Eco-port?" Policy Research Working Paper 998. World nomics, Washington, DC.Bank, Infrastructure and Urban Development De- Boadway, Robin, and Anwar Shah. 1992. "How Taxpartment, Washington, DC. Incentives Affect Decisions to Invest in Developing

Bernhart, Michael H. 1992. "Strategic Management of Countries." Policy Research Working Paper 1011.Population Programs." Policy Research Working Pa- World Bank, Country Economics Department, Wash-per 996. World Bank, Population and Human Re- ington, DC.sources Department, Washington, DC. Bobadilla, Jose Luis, and Cristina de A. Possas. 1992.

Bertrand, Jane T., and Judith E. Brown. 1992. "Family "How the Epidemiological Transition Affects HealthPlanning Success in Two Cities in Zaire." Policy Re- Policy Issues in Three Latin American Countries."search Working Paper 1042. World Bank, Population Policy Research Working Paper 987. World Bank,and Human Resources Department, Washington, DC. Population and Human Resources Department, Wash-

Bilsborrow, Richard E. 1992. "Rural Poverty, Migration, ington, DC.and the Environment in Developing Countries: Three Borrell, Brent, and Maw-Cheng Yang. 1992. "ECCase Studies." Policy Research Working Paper 1017. Bananarama 1992: The Sequel-The EC CommissionWorld Bank, Office of the Vice President, Develop- Proposal." Policy Research WorkingPaper958. Worldment Economics, Washington, DC. Bank, International Economics Department, Wash-

Binswanger, Hans, and Shahidur Khandker. 1992. "The ington, DC.Impact of Formal Finance on the Rural Economy of Bos, Eduard, My T. Vu, and Ann Levin. 1992. "East AsiaIndia." Policy Research Working Paper 949. World and Pacific Region, South Asia Region PopulationBank, Agriculture and Rural Development Depart- Projections, 1992-93 Edition." Policy Research Work-ment, Washington, DC. ing Paper 1032. Wor.d Bank, Population and Human

Bird, Richard, and Christine Wallich. 1993. "Fiscal De- Resources Department, Washington, DC.centralization and Intergovernmental Relations in Braga, C.A. Primo, and Alexander Yeats. 1992. "HowTransition Economies: Toward a Systemic Frame- Minilateral Trading Arrangements May Affect thework of Analysis." Policy Research Working Paper Post-Uruguay RoundWorld." Policy ResearchWork-1122. World Bank, Policy Research Department, Wash- ing Paper 974. World Bank, International Economicsington, DC. Department, Washington, DC.

Birdsall,Nancy. 1992. "Another Look at Population and Branddo, Ant6nio Salazar P., and Will Martin. 1993.Global Warming." Policy Research Working Paper "Implications of Agricultural Trade Liberalization for1020. World Bank, Country Economics Department, the Developing Countries." Policy Research WorkingWashington, DC. Paper 1116. World Bank, Agriculture and Rural De-

. 1993. "Social Development is Economic Develop- velopment Department and International Trade De-ment." Policy Research Working Paper 1123. World partment, Washington, DC.Bank, Policy Research Department, Washington, DC. Bulatao, Rodolfo A., and Eduard Bos. 1992. "Projecting

Birdsall, Nancy, and Estelle James. 1992. "Health, Gov- the Demographic Impact of AIDS." Policy Researchernment, and the Poor: The Case for the Private Sec- Working Paper 941. World Bank, Population andtor." Policy ResearchWorking Paper938. World Bank, Human Resources 'Department, Washington, DC.Country Economics Department, Washington, DC.

205

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Bulatao, Rodolfo A., and Patience W. Stephens. 1992. Policy Research Working Paper 1129. World Bank,"Global Estimates and Projections of Mortality by International Economics Department, Washington,Cause, 1970-2015." Policy Research Working Paper DC.1007. World Bank, Population and Human Resources Coleman, Jonathan R., and Chris Jones. 1992. "Measur-Department, Washington, DC. ing Welfare Changes from Commodity Price Stabili-

Caprio, Gerard, Jr. 1993. "Financial Reform Lessons and zation in Small Open Economies." Policy ResearchStrategies." Policy Research Working Paper 1107. Working Paper 1021. World Bank, International Eco-World Bank, Policy Research Department, Washing- nomics Department, Washington, DC.ton, DC. Coleman, Jonathan R., and M. Elton Thigpen. 1993.

Catsambas, Thanos. 1993. "Government Expenditures "Should Sub-SaharanAfrica Expand Cotton Exports?"as a Citizens' Evaluation of Public Output: Public Policy Research Working Paper 1139. World Bank,Choice and the Benefit Principle of Taxation." Policy International Economics Department, Washington,Research Working Paper 1090. World Bank, Europe DC.and Central Asia Regional Office, Washington, DC. Commander, Simon, and Fabrizio Coricelli. 1992. "Out-

.1993. "Public Output and Private Decisions: Con- put Decline in Hungary and Poland in 1990-91: Struc-ceptual Issues in the Evaluation of Government Ac- tural Change and Aggregate Shocks." PolicyResearchtivities and Their Implications for Fiscal Policy."Policy Working Paper 1036. World Bank, Economic Devel-Research Working Paper 1108. World Bank, Europe opment Institute and Country Economics Depart-and Central Asia Regional Office, Washington, DC. ment, Washington, DC.

Chen, Shaohua, Gaurav Datt, and Martin Ravallion. Cukierman, Alex, Miguel A. Kiguel, and NissanLiviatan.1993. "IsPovertyIncreasinginthe DevelopingWorld?" 1992. "How Much to Commit to an Exchange RatePolicy Research Working Paper 1146. World Bank, Rule: Balancing Credibility and Flexibility." PolicyPolicy Research Department, Washington, DC. Research Working Paper 931. World Bank, Country

Choe, Boum-Jong. 1992. "The Precautionary Demand Economics Department, Washington, DC.for Commodity Stocks." Policy Research Working Cvikl, Milan, Evan Kraft, and Milan Vodopivec. 1993.Paper 935. World Bank, International Economics De- "The Costs and Benefits of Slovenian Independence."partment, Washington, DC. Policy Research Working Paper 1126. World Bank,

Claessens, Stijn. 1993. "Equity Portfolio Investment in Policy Research Department, Washington, DC.Developing Countries: A Literature Survey." Policy Davis, Shelton H., and Alaka Wali. 1993. "IndigenousResearch Working Paper 1089. World Bank, Interna- Territories and Tropical Forest Management in Latintional Economics Department, Washington, DC. America."PolicyResearchWorkingPaper 1100. World

Claessens, Stijn, Ishac Diwan, and Eduardo Fernandez- Bank, Environment Department, Washington, DC.Arias. 1992. "Recent Experience with Commercial Deacon, Robert T. 1992. "Controlling Tropical Defores-Bank Debt Reduction." Policy Research Working Pa- tation: An Analysis of Alternative Policies." Policyper 995. World Bank, International Economics De- Research Working Paper 1029. World Bank, Countrypartment, Washington, DC. Economics Department, Washington, DC.

Claessens,Stijn,DanielOks,andSwedervanWijnbergen. Dean, Judith M. 1992. "Trade and the Environment."1993. "Interest Rates, Growth, and External Debt: The Policy Research Working Paper 966. World Bank,Macroeconomic Impact of Mexico's Brady Deal." Office of the Vice President, Development Econom-Policy Research Working Paper 1147. World Bank, ics, Washington, DC.International Economics Department, Washington, de Melo, Jaime, and Sumana Dhar. 1992. "Lessons ofDC. Trade Liberalization in Latin America for Economies

Claessens, Stijn, and George Pennacchi. 1992. "Deriving in Transition." Policy Research Working Paper 1040.Developing Country Repayment Capacity from the World Bank, Country Economics Department, Wash-Market Prices of Sovereign Debt." Policy Research ington, DC.Working Paper 1043. World Bank, International Eco- de Melo, Jaime, Claudio Montenegro, and Arvindnomics Department, Washington, DC. Panagariya. 1992. "Regional Integration, Old and

Clarke, George R.G. 1992. "More Evidence on Income New." Policy Research Working Paper 985. WorldDistribution and Growth." Policy Research Working Bank, Country Economics Department, Washington,Paper 1064. World Bank, Country Economics Depart- DC.ment, Washington, DC. de Melo, Jaime, Arvind Panagariya, and Dani Rodrik.

Coleman, Jonathan R., Takamasa Akiyama, and Panos 1993. "The New Regionalism: A Country Perspec-N. Varangis. 1993. "How Policy Changes Affected tive." Policy Research Working Paper 1094. WorldCocoa Sectors in Sub-Saharan African Countries." Bank, Country Economics Department, Washington,

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Demery, Lionel, and Christiaan Grootaert. 1993. "Cor- Easterly, William, and Sergio Rebelo. 1992. "Marginalrecting for Sampling Bias in the Measurement of Income Tax Rates and Economic Growth in Develop-Welfare and Poverty: The Case of the C6te d'Ivoire ing Countries." Policy Research Working Paper 1050.Living Standards Survey." Policy Research Working World Bank, Country Economics Department, Wash-Paper 1081. World Bank, Africa Technical Depart- ington, DC.ment, Washington, DC. Eggerstedt, Harald, Rebecca Brideau Hall, and Sweder

Demirgi;-Kunt,Asli. 1992. "DevelopingCountry Capi- van Wijnbergen. 1993. "Measuring Capital Flight: Atal Structures and Emerging Stock Markets." Policy Case Study of Mexico." Policy Research WorkingResearch Working Paper 933. World Bank, Country Paper 1121. World Bank, Latin America and the Car-Economics Department, Washington, DC. ibbean Regional Office, Washington, DC.

Demirgig-Kunt, Ash, and Enrica Detragiache. 1992. Eisemon, Thomas Owen, John Sheehan, George Eyoku,"Interest Rates, Official Lending, and the Debt Crisis: Franklin Van Buer, Delane Welsch, Louisa Masutti,A Reassessment." Policy Research Working Paper Nat Colletta, and Lee Roberts. 1993. "Strengthening932. World Bank, International Economics Depart- Uganda's Policy Environment for Investing in Uni-ment, Washington, DC. versity Development." Policy Research Working Pa-

Demirgii-Kunt, Ash, and Eduardo Fernndez-Arias. per 1065. World Bank, Population and Human Re-1992. "Burden Sharing Among Official and Private sources Department, Washington, DC.Creditors."PolicyResearchWorkingPaper943.World Elbadawi, Ibrahim A. 1992. "World Bank AdjustmentBank, International Economics Department, Wash- Lending and Economiic Performance in Sub-Saharanington, DC. Africa in the 1980s: A Comparison of Early Adjusters,

DemirgUq-Kunt, Ash, and Harry Huizinga. 1992. "Bar- Late Adjusters, and Nonadjusters." Policy Researchriers to Portfolio Investments in Emerging Stock Mar- Working Paper 1001. World Bank, Country Econom-kets." Policy Research Working Paper 984. World ics Department and, Africa Technical Department,Bank, Country Economics Department, Washington, Washington, DC.DC. Elbadawi, Ibrahim A., Dhaneshwar Ghura, and Gilbert

Denizer, Cevdet, and Alan Gelb. 1992. "Mongolia: Uwujaren. 1992. "World Bank Adjustment LendingPrivatization and System Transformation in an Iso- and Economic Performance in Sub-Saharan Africa inlated Economy." Policy Research Working Paper 1063. the 1980s: A Comparison with Other Low-IncomeWorld Bank, Country Economics Department, Wash- Countries." Policy Research Working Paper 1000.ington, DC. World Bank, Country Economics Department and

Devarajan, Shantayanan, Vinaya Swaroop, and Heng- Africa Technical Department, Washington, DC.fu Zou. 1993. "What Do Governments Buy? The Com- Elbadawi, Ibrahim A., and Nader Majd. 1993. "Macro-position of Public Spending and Economic Perfor- economic Framework for an Oil-Based Economy: Themance." Policy Research Working Paper 1082. World Case of Bahrain." Policy Research Working PaperBank, Country Economics Department, Washington, 1133.World Bank, PolicyResearch Department, Wash-DC. ington, DC.

Diwan, Ishac, Vihang Errunza, and Lemma W. Senbet. .1993. "Managing a Nonrenewable Resource: Say-1992. "The Pricing of Country Funds and Their Role in ings and Exchange -Rate Policies in Bahrain." PolicyCapitalMobilization for EmergingEconomies."Policy Research Working Paper 1134. World Bank, PolicyResearch Working Paper 1058. World Bank, Interna- Research Department, Washington, DC.tional Economics Department, Washington, DC. Elbadawi, Ibrahim A., and Robert de Rezende Rocha.

Drabek, Zdenek, Kamil Janacek, and Zdenek Tuma. 1992. "Determinants of Expatriate Workers' Remit-1993.. "Inflation in Czechoslovakia, 1985-91." Policy tances in North Africa and Europe." Policy ResearchResearch Working Paper 1135. World Bank, Interna- Working Paper 1038. World Bank, Country Econom-tional Economics Department, Washington, DC. ics Department, Washington, DC.

Dundar, Halil, and Jennifer Haworth. 1993. "Improving Erzan, Refik, Christopher Holmes, and Raed Safadi.Women's Access to Higher Education: A Review of 1992. "How Changes in the Former CMEA Area MayWorld Bank Project Experience." Policy Research Affect International Trade in Manufactures." PolicyWorking Paper 1106. World Bank, Education and Research Working Paper 973. World Bank, Interna-Social Policy Department, Washington, DC. tional Economics Department, Washington, DC.

Easterly, William, Paolo Mauro, and Klaus Schmidt- Eskeland, Gunnar S. 1993. "A Presumptive PigouvianHebbel. 1992. "Money Demand and Seignorage-Maxi- Tax on Gasoline: Analysis of an Air Pollution Controlmizing Inflation." Policy Research Working Paper Program for Mexico City." Policy Research Working1049. World Bank, Country Economics Department, Paper 1076. World Bank, Country Economics Depart-Washington, DC. ment, Washington, DC.

207

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Estache, Antonio, and Kangbin Zheng. 1992. "Manag- Republic." Policy Research Working Paper 1051.ing Pollution Control in Brazil: The Potential Use of World Bank, Country Economics Department, Wash-Taxes and Fines by Federal and State Governments." ington, DC.Policy Research Working Paper 929. World Bank, Gray, Cheryl W., RebeccaJ. Hanson,and MichaelHeller.Latin America and the Caribbean Regional Office, 1992. "Legal Reform for Hungary's Private Sector."Washington, DC. Policy Research Working Paper 983. World Bank,-. 1993. "Pollution Control in a Decentralized Country Economics Department, Washington, DC.

Economy: Which Level of Government Should Subsi- Gray, Cheryl W., and William Jarosz. 1993. "Foreigndize What in Brazil." Policy Research Working Paper Investment Law in Central and Eastern Europe."1066. World Bank, Latin America and the Caribbean Policy Research Working Paper 1111. World Bank,Regional Office, Washington, DC. Policy Research Department, Washington, DC.

Faini, Riccardo, Jaime de Melo, and Wendy Takacs. Green, Cynthia P.1992. "Strategic Management of Fam-1993. "A Primer on the MFA Maze." Policy Research ily Planning Programs." Policy Research WorkingWorking Paper 1088. World Bank, Country Econom- Paper 976. World Bank, Population and Human Re-ics Department, Washington, DC. sources Department, Washington, DC.

Feltenstein, Andrew, and Jiming Ha. 1993. "An Analy- Grootaert, Christiaan. 1993. "The Evolution of Welfaresis of Repressed Inflation inThree TransitionalEcono- and Poverty under Structural Change and Economicmies." Policy Research Working Paper 1132. World Recession in C6te d'Ivoire, 1985-88." Policy ResearchBank, International Economics Department, Wash- Working Paper 1078. World Bank, Africa Technicalington, DC. Department, Washington, DC.

Foreit, Karen G. 1992. "Private Sector Approaches to _ . 1993. "How Useful Are Integrated HouseholdEffective Family Planning." Policy Research Working Survey Data for Policy-Oriented Analyses of Pov-Paper 940. World Bank, Population and Human Re- erty? Lessons from the C6te d'Ivoire Living Standardssources Department, Washington, DC. Survey." Policy Research Working Paper 1079. World

Foroutan, Faezeh. 1992. "Regional Integration in Sub- Bank, Africa Technical Department, Washington, DC.Saharan Africa: Experience and Prospects." Policy Grootaert, Christiaan, and Ravi Kanbur. 1993. "TheResearch Working Paper 992. World Bank, Country Lucky Few amidst Economic Decline: DistributionalEconomics Department, Washington, DC. Change in C6te d'Ivoire as Seen through Panel Data

Fry, Maxwell J. 1993. "Foreign Direct Investment in a Sets, 1985-88." Policy Research Working Paper 1113.Macroeconomic Framework: Finance, Efficiency, In- World Bank, Africa Technical Department, Washing-centives, and Distortions." Policy Research Working ton, DC.Paper 1141. World Bank, International Economics _ . 1993. "A New Regional Price Index for C6teDepartment, Washington, DC. d'Ivoire Using Data from the International Compari-

Gardner, Bruce, and Karen M. Brooks. 1993. "How sons Project." Policy Research Working Paper 1080.Retail Food Markets Responded to Price Liberaliza- World Bank, Africa Technical Department, Washing-tion in Russia after January 1992." Policy Research ton, DC.Working Paper 1140. World Bank, Agriculture and Haddad, Mona. 1993. "How Trade Liberalization Af-Natural Resources Department, Washington, DC. fected Productivity in Morocco." Policy Research

George, Anita, and Jacques Morisset. 1993. "Does Price Working Paper 1096. World Bank, Policy ResearchUncertainty Really Reduce Private Investment? A Department, Washington, DC.Small Model Applied to Chile." PolicyResearch Work- Hall, David 0. 1992. "Biomass." Policy Research Work-ing Paper 1114. World Bank, Latin America and the ing Paper 968. World Bank, Office of the Vice Presi-Caribbean Regional Office, Washington, DC. dent, Development Economics, Washington, DC.

Gittinger, J. Price, and Carol Bradford. 1992. "World Hammer, Jeffrey S. 1993. "Prices and Protocols in PublicBank Project-Financed Research on Population, Health Care." Policy Research Working Paper 1131.Health, and Nutrition." Policy Research Working World Bank, Population, Health, and Nutrition De-Paper 1046. World Bank, Population and Human partment, Washington, DC.Resources Department, Washington, DC. Harris, John R., Fabio Schiantarelli, and Miranda G.

Gooptu, Sudarshan. 1993. "Portfolio Investment Flows Siregar. 1992. "How Financial Liberalization in Indo-to Emerging Markets." Policy Research Working Pa- nesia Affected Firms' Capital Structure and Invest-per 1117. World Bank, International Economics De- ment Decisions." Policy Research Working Paper 997.partment, Washington, DC. World Bank, Country Economics Department, Wash-

Gray, Cheryl W. 1992. "The Legal Framework for Pri- ington, DC.vate Sector Activity in the Czech and Slovak Federal

208


Harrison, Glenn W., Thomas F. Rutherford, and David Ecuador." Policy Research Working Paper 1092.G. Tarr. 1992. "Piecemeal Trade Reform in Partially World Bank, Country Economics Department, Wash-Liberalized Economies: An Evaluation for Turkey." ington, DC.Policy Research Working Paper 951. World Bank, Johnson, Brooke R.,Janie Benson, Janet Bradley, AuroraCountry Economics Department, Washington, DC. Rdbago Ordofiez, Catia Zambrano, Leonard Okoko,

Hau, Timothy D. 1992. "Congestion Charging Mecha- Leticia Vdsquez ChAvez, Paulina Quiroz, and Khamanisms for Roads: An Evaluation of Current Practice." Rogo. 1993. "Costs oF Alternative Treatments for In-Policy Research Working Paper 1071. World Bank, complete Abortion." Policy Research Working PaperInfrastructure and Urban Development Department, 1072. World Bank, Pcpulation and Human ResourcesWashington, DC. Department, Washington, DC.-_ . 19,92. "Economic Fundamentals of Road Pricing: Kaminski, Bartlomiej. 1993. "The Foreign Trade Dimen-A Diagrammatic Analysis." Policy Research Working sion of the Market Transition in Poland: The Surpris-Paper 1070. World Bank, Infrastructure and Urban ingExportPerformance and Its Sustainability." PolicyDevelopment Department, Washington, DC. Research Working Paper 1144. World Bank, Interna-

He, Dong, and Robert Pardy. 1993. "Stock Market De- tional Economics Department, Washington, DC.velopment and Financial Deepening in Developing Kate, Adriaan Ten. 1993. "Industrial Development andCountries: Some Correlation Patterns." Policy Re- the Environment in Mexico." Policy Research Work-search Working Paper 1084. World Bank, Country ing Paper 1125. World Bank, Policy Research Depart-Economics Department, Washington, DC. ment, Washington, DC.

Hee, Michael. 1992. "The 'Pedigree' of IEC Conversion Katz, Harry C., Sarosh Kuruvilla, and Lowell Turner.Factors for Per Capita GNP Computations for the 1993. "Trade Unions and Collective Bargaining."World Bank's Operational Guidelines and Atlas." Policy Research Working Paper 1099. World Bank,Policy Research Working Paper 953. World Bank, Education and Social Policy Department, Washing-International Economics Department, Washington, ton, DC.DC. Kaufmann, Daniel, and Yan Wang. 1992. "How Macro-

Higgins, Paul A., and Harold Alderman. 1992. "Labor economic Policies Affect Project Performance in theand Women's Nutrition: A Study of Energy Expendi- Social Sectors." Policy Research Working Paper 939.ture, Fertility, andNutritionalStatusinGhana." Policy World Bank, Europe and Central Asia Regional Of-Research Working Paper 1009. World Bank, Agricul- fice, Washington, DC.ture and Rural Development Department, Washing- Kiguel, Miguel A., and Nissan Liviatan. 1992. "Stoppington, DC. Three Big Inflations (Argentina, Brazil, and Peru)."

Horton, Susan. 1992. "Unit Costs, Cost-Effectiveness, Policy Research Working Paper 999. World Bank,and Financing of Nutrition Interventions." Policy Country Economics Department, Washington, DC.Research Working Paper 952. World Bank, Popula- King, Robert G., and Ross Levine. 1993. "Finance andtion and Human Resources Department, Washing- Growth: Schumpeter Might Be Right." Policy Re-ton, DC. search Working Paper 1083. World Bank, Country

James, Estelle. 1992. "Income Security for Old Age: Economics Department, Washington, DC.Conceptual Background and Major Issues." Policy Kishor, Nalin M. 1992. "Pesticide Externalities, Com-Research Working Paper 977. World Bank, Country parative Advantage, and Commodity Trade: CottonEconomics Department, Washington, DC. in Andhra Pradesh, India." Policy Research Working

__ . 1993. "Why is There Proportionately More En- Paper 928. World Bank, Country Economics Depart-rollmentinPrivate Schoolsin Some Countries?"Policy ment, Washington, DC.Research Working Paper 1069. World Bank, Country Kraft, Evan, and Milan Vodopivec. 1992. "How Soft isEconomics Department, Washington, DC. the Budget Constraint for Yugoslav Firms?" Policy

Jaramillo, Fidel, Fabio Schiantarelli, and Andrew Weiss. Research Working Paper 937. World Bank, Country1993. "Capital Market Imperfections Before and After Economics Department, Washington, DC.Financial Liberalization: A Euler-Equation Approach Krishna, Kala, and Ling Hui Tan. 1992. "Rent-Sharing into Panel Data for Ecuadorian Firms." Policy Research the Multi-Fibre Arrangement: Evidence from U.S.-Working Paper 1091. World Bank, Country Econom- Hong Kong Trade in Apparel." Policy Research Work-ics Department, Washington, DC. ing Paper 1003. World Bank, International Economics

__ . 1993. "The Effect of Financial Liberalization on Department, Washington, DC.the Allocation of Credit: Panel Data Evidence for

209

Appendix

-. 1993. "The Dynamic Behavior of Quota License Lipton, Michael, and Martin Ravallion. 1993. "PovertyPrices: Theory and Evidence from the Hong Kong and Policy." Policy Research Working Paper 1130.Apparel Quotas." Policy Research Working Paper World Bank, Policy Research Department, Washing-1136. World Bank, International Economics Depart- ton, DC.ment, Washington, DC. Lovei, Laszlo. 1992. "An Approach to the Economic

Krupnick, Alan J. 1992. "Measuring the Effects of Urban Analysis of Water Supply Projects." Policy ResearchTransportation Policies on the Environment: A Sur- Working Paper 1005. World Bank, Europe and Cen-vey of Models." Policy Research Working Paper 1030. tral Asia Regional Office, Washington, DC.World Bank, Country Economics Department, Wash- Lucas, Robert E.B. 1992. "Toxic Releases by Manufactur-ington, DC. ing: World Patterns and Trade Policies." Policy Re-

Landau, Daniel. 1993. "The Economic Impact of Mili- search Working Paper 964. World Bank, Office of thetary Expenditures." Policy Research Working Paper Vice President, Development Economics, Washing-1138. World Bank, Policy Research Department, Wash- ton, DC.ington, DC. Lucas, Robert E.B., David Wheeler, and Hemamala

Larsen, Bjorn, and Anwar Shah. 1992. "World Fossil Hettige. 1992. "Economic Development, Environmen-Fuel Subsidies and Global Carbon Emissions." Policy tal Regulation, and the International Migration ofResearch Working Paper 1002. World Bank, Office of Toxic Industrial Pollution, 1960-88." Policy Researchthe Vice President, Development Economics, Wash- Working Paper 1062. World Bank, Office of the Viceington, DC. President, DevelopmentEconomics, Washington, DC.

Larson, Donald F. 1993. "Policies for Coping with Price Lyon, Andrew. 1992. "Taxation, Information Asymme-Uncertainty for Mexican Maize." Policy Research tries, and a Firm's Financing Choices." Policy Re-Working Paper 1120. World Bank, International Eco- search Working Paper 936. World Bank, Countrynomics Department, Washington, DC. Economics Department, Washington, DC.

Le Houerou, Philippe, and Hector Sierra. 1993. "Esti- Mangum, Stephen L., Garth L. Mangum, and Janinemating Quasi-Fiscal Deficits in a Consistency Frame- Bowen. 1992. "Strategies for Creating Transitionalwork: The Case of Madagascar." Policy Research Jobs during Structural Adjustment." Policy ResearchWorking Paper 1105. World Bank, Africa Technical Working Paper 947. World Bank, Population andDepartment, Washington, DC. Human Resources Department, Washington, DC.

Leigh, Duane E. 1992. "Retraining Displaced Workers: Martin, Will. 1993. "What Would Happen If All Devel-What Can Developing Countries Learn from OECD oping Countries Expanded Their Manufactured Ex-Nations?" Policy Research Working Paper946. World ports?" Policy Research Working Paper 1110. WorldBank, Population and Human Resources Department, Bank, International Economics Department, Wash-Washington, DC. ington, DC.

Levine, Ross, and Sara Zervos. 1993. "Looking at the Martin, Will, and Julian M. Alston. 1992. "An ExactFacts: What We Know about Policy and Growth from Approach for Evaluating the Benefits from Techno-Cross-Country Analysis." Policy Research Working logical Change."Policy ResearchWorking Paper 1024.Paper 1115. World Bank, Policy Research Depart- World Bank, International Economics Department,ment, Washington, DC. Washington, DC.

Levinson, Arik, and Sudhir Shetty. 1992. "Efficient En- Matin, Kazi M. 1992. "Openness and Economic Perfor-vironmental Regulation: Case Studies of Urban Air mance in Sub-Saharan Africa: Evidence from Time-Pollution (Los Angeles, Mexico City, Cubatao, and Series Cross-Country Analysis." Policy ResearchAnkara)."Policy Research Working Paper942. World Working Paper 1025. World Bank, Country Econom-Bank, Office of the Vice President, Development Eco- ics Department, Washington, DC.nomics, Washington, DC. McNamara, Regina, Therese McGinn, Donald Lauro,

Levy, Santiago, and SwedervanWijnbergen. 1992. "Tran- and John Ross. 1992. "Family Planning Programs insition Problems in Economic Reform: Agriculture in Sub-Saharan Africa: Case Studies from Ghana,the Mexico-U.S. Free Trade Agreement." Policy Re- Rwanda, and the Sudan." Policy Research Workingsearch Working Paper 967. World Bank, Latin America Paper 1004. World Bank, Population and Humanand the Caribbean Regional Office, Washington, DC. Resources Department, Washington, DC.

Lewis, Maureen A., Margaret B. Sulvetta, and Gerard M. McNelis, Paul D., and Klaus Schmidt-Hebbel. 1992.LaForgia. 1992. "Public Hospital Costs and Quality in "Financial Liberalization and Adjustment in Chilethe Dominican Republic." Policy Research Working and New Zealand." Policy Research Working PaperPaper 934. World Bank, Latin America and the Carib- 1026. World Bank, Country Economics Department,bean Regional Office, Washington, DC. Washington, DC.

210


Milanovic,Branko. 1992. "Distributionallmpact of Cash Pearce, David. 1992. "Economic Valuation and theNatu-and In-Kind Social Transfers in Eastern Europe and ralWorld."PolicyResearchWorkingPaper988. WorldRussia." Policy Research Working Paper 1054. World Bank, Office of the Vice President, Development Eco-Bank, Country Economics Department, Washington, nomics, Washington, DC.DC. Peters, Hans Jilrgen. 1992. "Service: The New Focus in

Mitchell, Olivia S. 1993. "Trends in Retirement Systems International Manufacturing and Trade." Policy Re-and Lessons for Reform." Policy Research Working search Working Paper 950. World Bank, Infrastruc-Paper 1118. World Bank, Education and Social Policy ture and Urban Development Department, Washing-Department, Washington, DC. ton, DC.

Montiel, Peter J. 1993. "Capital Mobility in Developing .1993. "The International Ocean Transport Indus-Countries: Some Measurement Issues and Empirical try in Crisis: Assessing the Reasons and Outlook."Estimates." Policy Research Working Paper 1103. Policy Research Working Paper 1128. World Bank,World Bank, International Economics Department, Transportation, Water, and Urban Development De-Washington, DC. partment, Washington, DC.-. 1993. "Fiscal Aspects of Developing Country Picciotto, Robert. 1992.. "Participatory Development:Debt Problems and Debt and Debt-Service Reduction Myths and Dilemmas." Policy Research Working Pa-Operations: A Conceptual Framework." Policy Re- per 930. World Bank, Washington, DC.search Working Paper 1073. World Bank, Interna- Pindyck, Robert S., and Andr6s Solimano. 1993. "Eco-tional Economics Department, Washington, DC. nomic Instability and Aggregate Investment." Policy

Mukherjee, Mohua. 1992. "Factors Affecting Private Research Working Paper 1148. World Bank, PolicyFinancial Flows to Eastern Europe, 1989-91." Policy Research Department, Washington, DC.Research Working Paper 948. World Bank, Pinto, Brian, Marek Belka, and Stefan Krajewski. 1992.Cofinancing and Financial Advisory Services Depart- "Microeconomics of Transformation in Poland: Ament, Washington, DC. Survey of State Enterprise Responses." Policy Re-

Nag, Moni. 1992. "Family Planning Success Stories in search Working Paper 982. World Bank, Europe andBangladesh and India." Policy Research Working Central Asia Regional Office, Washington, DC.Paper 1041. World Bank, Population and Human .1993. "Transforming State Enterprises in Poland:Resources Department, Washington, DC. Microeconomic Evidence on Adjustment." Policy

Nehru, Vikram. 1993. "How International Economic Research Working Paper 1101. World Bank, EuropeLinks Affect East Asia." Policy Research Working and Central Asia Regional Office, Washington, DC.Paper 1127. World Bank, East Asia and Pacific Re- Pritchett, Lant, and Geeta Sethi. 1993. "Tariff Rates,gional Office, Washington, DC. Tariff Revenue, and Tariff Reform: Some New Facts."

Nehru, Vikram, Eric Swanson, and Ashutosh Dubey. Policy Research Working Paper 1143. World Bank,1993. "A New Database on Human Capital Stock: Policy Research Department, Washington, DC.Sources, Methodology, and Results." Policy Research Pritchett, Lant, and Lawrence H. Summers. 1993.Working Paper 1124. World Bank, International Eco- "Wealthier is Healthier." Policy Research Workingnomics Department, Washington, DC. Paper 1150. World Bank, Office of the Vice President,

Nunberg, Barbara. 1992. "Managing the Civil Service: Development Economics, Washington, DC.What LDCs Can Learn from Developed Country Re- Psacharopoulos, George. 1992. "Ethnicity, Education,forms." Policy Research Working Paper 945. World and Earnings in Bolivia and Guatemala." Policy Re-Bank, Country Economics Department, Washington, search Working Paper 1014. World Bank, LatinDC. America and the Caribbean Technical Department,

Onis, Ziya, and Steven B. Webb. 1992. "Political Economy Washington, DC.of Policy Reform in Turkey in the 1980s." Policy . 1993. "Returns to Investment in Education: AResearch Working Paper 1059. World Bank, Country GlobalUpdate." PolicyResearch WorkingPaper 1067.Economics Department, Washington, DC. World Bank, Latin America and the Caribbean Re-

Patrinos, Harry Anthony, and George Psacharopoulos. gional Office, Washington, DC.1992. "Socioeconomic and Ethnic Determinants of Psacharopoulos, George, and Ying Chu Ng. 1992. "Earn-Grade Repetition in Bolivia and Guatemala." Policy ings and Education in Latin America: Assessing Pri-Research Working Paper 1028. World Bank, Latin orities for Schooling Investments." Policy ResearchAmerica and the Caribbean Technical Department, Working Paper 1056. World Bank, Latin AmericaWashington, DC. and the Caribbean Technical Department, Washing-

ton, DC.

211

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Psacharopoulos, George, Jorge Valenzuela, and Mary Schmidt-Hebbel, Klaus, and Luis Serven. 1992. "Dy-Arends. 1993. "Teachers' Salaries in Latin America: A namic Response to Foreign Transfers and Terms-of-Comparative Analysis." Policy Research Working Trade Shocks in Open Economies." Policy ResearchPaper 1086. World Bank, Latin America and the Car- Working Paper 1061. World Bank, Country Econom-ibbean Technical Department, Washington, DC. ics Department, Washington, DC.

Qian,Ying, and Ronald C. Duncan. 1993. "Privatization, Schwarz, Anita M. 1992. "How Effective Are DirectedConcentration, and Pressure for Protection: A Steel Credit Policies in the United States? A Literature Sur-Sector Study." Policy Research Working Paper 1112. vey." Policy Research Working Paper 1019. WorldWorld Bank, International Economics Department, Bank, Country Economics Department, Washington,Washington, DC. DC.

Rajaram, Anand. 1992. "Tariff and Tax Reform: Do Scott, David H. 1992. "Revising Financial Sector PolicyWorld Bank Recommendations Integrate Revenue in Transitional Socialist Economies: Will Universaland Protection Objectives?" PolicyResearch Working Banks Prove Viable?" Policy Research Working PaperPaper 1018. World Bank, Country Economics Depart- 1034. World Bank, Country Economics Department,ment, Washington, DC. Washington, DC.

Rama, Martin. 1993. "How Labor Markets and Imper- Selden, Thomas M., and Michael J. Wasylenko. 1992.fect Competition Affect Tariff Policy." Policy Research "Benefit Incidence Analysis in Developing Countries."Working Paper 1149. World Bank, Policy Research Policy Research Working Paper 1015. World Bank,Department, Washington, DC. Country Economics Department, Washington, DC.- 1993. "Rent-Seeking Trade Policy: A Time-Series Shah, Anwar, and Bjorn Larsen. 1992. "Carbon Taxes,Approach." Policy Research Working Paper 1142. the Greenhouse Effect, and Developing Countries."World Bank, Policy Research Department, Washing- Policy Research Working Paper 957. World Bank,ton, DC. Office of the Vice President, Development Econom-

Rashad, Hoda. 1992. "A Reappraisal of How Oral ics, Washington, DC.Rehydration Therapy Affected Mortality in Egypt." Sheng, Andrew, and Yoon Je Cho. 1993. "Risk Manage-Policy Research Working Paper 1052. World Bank, ment and Stable Financial Structures." Policy Re-Population andHumanResourcesDepartment, Wash- search Working Paper 1109. World Bank, Policy Re-ington, DC. search Department, Washington, DC.

Rebelo, Jorge M. "Preparing Multiyear Railway Invest- Simmons, George B., Sara Koerber, and Ruth Simmons.ment Plans: A Market-Oriented Approach." Policy 1992. "Techniques for Improving Client Relations inResearch Working Paper 1006. World Bank, Latin Family Planning Programs." Policy Research Work-America and the Caribbean Regional Office, Wash- ing Paper 975. World Bank, Population and Humanington, DC. Resources Department, Washington, DC.

Revenga, Ana, Michelle Riboud, and Hong Tan. 1992. Slade, Margaret E. 1992. "Do Markets Underprice Natu-"The Impact of Mexico's Retraining Program on Em- ral-Resource Commodities?" Policy Research Work-ployment and Wages." Policy Research Working Pa- ing Paper 962. World Bank, Office of the Vice Presi-per 1013. World Bank, Latin America and the Carib- dent, Development Economics, Washington, DC.bean Regional Office and Industry and Energy De- . 1992. "Environmental Costs of Natural Resourcepartment, Washington, DC. Commodities: Magnitude and Incidence." Policy Re-

Rosenzweig, Mark R., and Hans P. Binswanger. 1992. search Working Paper 991. World Bank, Office of the"Wealth, Weather Risk, and the Composition and Vice President, Development Economics, Washing-Profitability of Agricultural Investments." Policy Re- ton, DC.search Working Paper 1055. World Bank, Latin Socio-Economic Data Division. 1992. "Measuring theAmerica and the Caribbean Technical Department, Incomes of Economies of the Former Soviet Union."Washington, DC. Policy Research Working Paper 1057. World Bank,

Rueda-Sabater, Enrique, and Andrew Stone. 1992. "C6te International Economics Department, Washington,d'Ivoire: Private Sector Dynamics and Constraints." DC.Policy Research Working Paper 1047. World Bank, Solimano, Andr6s. 1992. "After Socialism andCountry Economics Department, Washington, DC. Dirigisme-Which Way?" Policy Research Working

Safadi, Raed, and Alexander Yeats. 1993. "The North Paper 981. World Bank, Country Economics Depart-American Free Trade Agreement: Its Effect on South ment, Washington, DC.Asia." Policy Research Working Paper 1119. WorldBank, International Economics Department, Wash-ington, DC.

212


Sorsa, Piritta. 1992. "The Environment: A New Chal- . 1993. "Swiss Chilanpore: The Way Forward forlenge to GATT?" Policy Research Working Paper 980. Pension Reform?" Policy Research Working PaperWorld Bank, Office of the Vice President, Develop- 1093. World Bank, Country Economics Department,ment Economics, Washington, DC. Washington, DC.

Steinberg, Dmitri. 1992. "Economies of the Former So- Vittas, Dimitri, and Craig Neal. 1992. "Competition andviet Union: An Input-Output Approach to the 1987 Efficiency in Hungarian Banking." Policy ResearchNational Accounts." Policy Research Working Paper Working Paper 1010. World Bank, Country Econom-1060. World Bank, International Economics Depart- ics Department, Washington, DC.ment, Washington, DC. Vodopivec, Milan. 1992. "The Effects of Democratic

Stevenson, Gail. 1992. "How Public Sector Pay and Determination of Wages: Theory and Evidence fromEmploymentAffectLabor Markets: ResearchIssues." Self-Managed Firms." Policy Research Working Pa-Policy Research Working Paper 944. World Bank, per 971. World Bank, Country Economics Depart-Population and HumanResourcesDepartment,Wash- ment, Washington, DC.ington, DC. Vu, My T., Eduard Bos, and Ann Levin. 1992. "Europe

Subbarao, Kalanidhi, and Laura Raney. 1992. "Social and Central Asia Region, Middle East and NorthGains from Female Education: A Cross-National Africa Region Population Projections, 1992-93 Edi-Study." Policy Research Working Paper 1045. World tion." Policy Research Working Paper 1016. WorldBank, Population and Human Resources Department, Bank, Population and Human Resources Department,Washington, DC. Washington, DC.

Takacs,WendyE. 1992. "HowlmportProtectionAffects . 1992. "Latin America and the Caribbean Regionthe Philippines' Motor Vehicle Industry." Policy Re- (and Northern America) PopulationProjections, 1992-search Working Paper 1035. World Bank, Country 93 Edition." Policy Research Working Paper 1033.Economics Department, Washington, DC. World Bank, Population and Human Resources De-

Talley,SamuelH. 1993. "AreFailproof BankingSystems partment, Washington, DC.Feasible? Desirable?"Policy Research WorkingPaper Wagstaff, Adam, and Howard Barnum. 1992. "Hospital1095. World Bank, Country Economics Department, Cost Functions for Developing Countries." PolicyWashington, DC. Research Working Paper 1044. World Bank, Popula-

Tarr, David G. 1993. "How Moving to World Prices tion and Human Resources Department, Washing-Affects the Terms of Trade in 15 Countries of the ton, DC.Former Soviet Union." Policy Research Working Pa- Warner, Andrew M. 1993. "Did the Debt Crisis or De-per 1074. World Bank, Country Economics Depart- clining Oil Prices Cause Mexico's Investment Col-ment, Washington, DC. lapse?" Policy Research Working Paper 1102. World

Unal, Haluk, Ash Demirgfi-Kunt, and Kwok-Wai Bank, International Economics Department, Wash-Leung. 1992. "The Brady Plan, the 1989 Mexican Debt ington, DC.Reduction Agreement, and the Bank Stock Returns in Weale, Martin. 1992. "Education, Externalities, Fertility,the United States and Japan." Policy Research Work- and Economic Growth." Policy Research Workinging Paper 1012. World Bank, International Economics Paper 1039. World Bank, Population and HumanDepartment, Washington, DC. Resources Department, Washington, DC.

van Wijnbergen, Sweder. 1993. "Enterprise Reform in Webb, Sheila, and associates. 1992. "Waterborne Dis-Eastern Europe."PolicyResearchWorkingPaper 1068. eases in Peru." Policy Research Working Paper 959.World Bank, Europe and Central Asia Regional Of- World Bank, Office of the Vice President, Develop-fice, Washington, DC. ment Economics, Washington, DC.

Varangis,Panos,EltonThigpen,and Takamasa Akiyama. Ziderman, Adrian, and Robin Horn. 1993. "Many Paths1993. "Risk Management Prospects for Egyptian Cot- to Skilled Employment A Reverse Tracer Study ofton." Policy Research Working Paper 1077. World Eight Occupations in Colombia." Policy ResearchBank, International Economics Department, Wash- Working Paper 1075. World Bank, Population andington, DC. Human Resources Department, Washington, DC.

Vittas, Dimitri. 1993. "The Simple(r) Algebra of Pension Zinanga, Alex F. 1992. "Development of the ZimbabwePlans." Policy Research Working Paper 1145. World Family Planning Program." Policy Research WorkingBank, Financial Sector Development Department, Paper 1053. World Bank, Population and HumanWashington, DC. Resources Department, Washington, DC.

213

Appendix

H. Departmental Working Papers Khan, M.,J. Western, and S. Hossain. 1992. "Sustainabilityof Social Sector Projects: The Asian Experience." EDI

Agriculture and Natural Resources Department Working Paper.Kim, Hyung-Ki. 1993. "Building Scientific and Techno-

Josiah, S.J., and N. Jones. 1993. "Root Trainers in Seed- logical Infrastructure in Developing Countries." EDIling Production Systems for Tropical Forestry and Working Paper.Agroforestry." Agriculture and Natural Resources Osius, Margaret, and B. Putnam. 1992. "Banking andTechnical Paper 4. Financial Risk Management Training Handbook."

Landis, E., N. Jones, and J. Smyle. 1993. "Commercial EDI Working Paper.Applications of Cloning for Forest Plantations." Agri- Satia, J. 1992. "Sustainable Population, Health, and Nu-culture and Natural Resources Technical Paper 5. trition Services: The Experience of South Asia." EDI

Miller, J.H., and N. Jones. 1993. "China National Affor- Working Paper.estation Project: Technological Improvements." Agri- Sellen, Daniel. 1993. "District Agricultural Develop-culture and Natural Resources Technical Paper 3. ment Strategies in Kenya: Policy Analysis of Com-

Plusquellec, Herve, and Mei Xie. 1993. "Land Acquisi- modity Systems." EDI Working Paper.tion for Construction of Canals, Drains and Access Ward, Mary Elizabeth, ed. 1993. "Banking and FinancialRoads." Agriculture and Natural Resources Issues ManagementTraining ProgramTraining Handbook."Paper. EDI Working Paper. (Also published in Russian.)

Wie, Thee Kian. 1993. "Industrial Structure and SmallEconomic Development Institute and Medium Enterprise Development in Indonesia."

EDI Working Paper.Anderson, Kym. 1993. "Textiles and Clothing in Global

Economic Development: East Asia's Dynamic Role." Environment DepartmentEDI Working Paper.

Anubhai, Prafull, and V. Mote. 1993. "India's Textile Barbier, Edward B., and Joane C. Burgess. 1992. "Malawi:Industry: Case Study of Subsectoral Restructuring." Land Degradation in Agriculture." Environment De-EDI Working Paper. partment Divisional Working Paper 37.

Ariff,Mohamed.1993. "International TradingRules and Bartelmus, Peter, Ernst Lutz, and Stefan Schweinfest.Industrializing Countries." EDI Working Paper. 1992. "Integrated Environmental and Economic Ac-

Bombarolo, F., J. Hardoy, P. Perelman, and L. Perez counting: A Case Study for Papua New Guinea."Coscio. 1992. "El Rol de las Organizaciones No Environment Department Working Paper 54.Gubernamentales en la Reduccion de la Pobreza Bernstein, Mark. 1993. "Costs and Greenhouse GasLecciones de America Latina y el Caribe." EDI Work- Emissions of Energy Supply and Use." Environmenting Paper. Department Divisional Working Paper 40.

Crosnier, Jacques M. 1993. "Securit6 alimentaire et Current, Dean, and Ernst Lutz. 1992. "A Preliminaryd6veloppement: La chaine alimentaire du sol A la Economic and Institutional Evaluation of Selectedtable." EDI Working Paper. Agroforestry Projects in Central America." Environ-

de Moura Castro, C., D. Wilson, and J. Oliveira, eds. ment Department Divisional Working Paper 38.1992. "Innovations in Educational and Training Tech- El Serafy, Sala. 1993. "Country Macroeconomic Worknologies." EDI Working Paper. and Natural Resources." Environment Department

Faruqi, Shakil, ed. 1992. "Glossary: Banking and Fi- Working Paper 58.nance, English-Russian/Russian-English." EDI Work- Grubler, Arnulf, and Nebojsa Nakicenovic. 1992. "Inter-ing Paper. national Burden Sharing in Greenhouse Gas Reduc-

Frischtak, Claudio R. 1993. "The Changed Role of the tion." Environment Working Paper 55.State: Regulatory Policies and Regulatory Reform in Huq, Mainul, and David Wheeler. 1993. "Pollution Re-Industrializing Countries." EDI Working Paper. duction without Formal Regulation: Evidence from

Hill, Hal. 1992. "Foreign Investment and Industrial Bangladesh." Environment Department DivisionalTechnological Development." EDI Working Paper. Working Paper 39.

. 1993. "The Indonesian Textiles and Garments King, Kenneth, and Mohan Munasinghe. 1992. "GlobalIndustries Structure: Developments and Strategies." Warming: Key Issues for the Bank." EnvironmentEDI Working Paper. Department Divisional Working Paper 36.

Hunter, Janet. 1993. "The Japanese Experience of Eco-nomic Development." EDI Working Paper.

214


Perrings, Charles. 1993. "Pastoral Strategies in Sub- Riveros, Luis. 1993. "The Effects of Wage Indexation on

Saharan Africa: The Economic and Ecological Adjustment, Inflation and Equity." Human ResourceSustainability of Dryland Range Management." Envi- Development and Operations Working Paper.ronment Department Working Paper 57. Selvaratnam, Viswanathan. 1993."InnovationsinfHigher

Van Orsdol, Kark G., Ines G. Girsback, and Juli K. Education: Singapore at the Competitive Edge."Armstrong. 1993. "Greenhouse Gas Abatement ASTHR Technical Paper.Through Non-Forest Biomass Production: Allocating Ware, Sylvia A. 1992. "The Education of SecondaryCosts to Global and Domestic Objectives." Environ- Science Teachers in Developing Countries." PHREEment Department Working Paper 59. Background Paper 68.

von Amsberg, Joachim. 1993. "Project Evaluation and Wu, Kin Bin. 1992. "Higher Education in Hong Kong:the Depletion of Natural Capital: An Application of Investment in Science and Technology During thethe Sustainability Principle." Environment Depart- Time of Political and Economic Change." PHREEment Working Paper 56. Background Paper 70.

Education and Social Policy Department Industry and Energy Department

Adams, Arvil Van. 1993. "Labor Market-Oriented Re- Atiyas, Izak, and Hasan Ersel. 1992. "The Impact offorms in Socialist Economies." Human Resource De- Financial Reform: The Turkish Experience." IENPinkvelopment and Operations Working Paper. Industry Series 65.

Clarke, Prema, Brunhilda Forlemu, and Pablo Stansbery. Barnes, Douglas. 1992. "UnderstandingFuelwood Prices1992. "Secondary Education in Developing Coun- in Developing Nations." Energy Series Paper 56.tries: Annotated Bibliography." PHEE Background Frischtak, Claudio, and Richard Newfarmer. 1992. "For-Paper 63. eign Investment, Market Structure and Industrial

Copple, Carol. 1992. "Education and Employment Re- Performance." IEN Pink Industry Series 69.search and Policy Studies: Annotated Bibliography." Industry and Energy Department. 1992. "RestructuringPHREE Background Paper 72. for Productivity: The Technical Assistance Program

Eisemon, Thomas Owen. 1992. "Lending for Higher of the Marshall Plan as a Precedent for the FormerEducation: An Analysis of World Bank Investment, Soviet Union." IEN Pink Industry Series 64.1963-1991." PHREE Background Paper 66R. Jechoutek, Karl, Sadharn Chattopadhya, Riaz Khan, and

Hoffman, Ronald. 1992. "Some Reflections on Science in others. 1992. "Steam Coal for Power and Industrythe Low-Income Economies." PHREE Background Issues and Scenarios." Energy Series Paper 58.Paper 71. Newfarmer, Richard, and P. Marsh. 1992. "Industrial

Ilon, Lynn. 1992. "A Framework for Costing Tests in Structure, Market Power and Profitability." TEN PinkThird World Settings." PHREE Background Paper 65. Industry Series 63.

Kornhauser, Aleksandra. 1992. "University-Industry Oduolowu, Akin. 1992. "An Evaluation of World Bank-Cooperation Under Constraints: Experience of the Funded Petroleum Exploration Promotion Programs,International Center for Chemical Studies, Ljubljana, 1980-1990." Energy Series Paper 59.Slovenia." PHREE Background Paper 67. Steel, William, Ernest A. Aryeetey, and Tamara

Larach, Linda P., andMarlaineE. Lockheed. 1992. "World Duggleby. 1992. "Financial Deepening in Sub-SaharanBank Lending for Educational Testing: General Op- Africa: Theory and Innovation." IEN Pink Industryerational Review." PHREE Background Paper 62R. Series 62.

Paredes, Ricardo D. 1993. "Job Security and Labor Mar- _ . 1992. "Formal and Informal Finance for Smallket Adjustments in Developing Countries." Human Enterprises in Ghana." IEN Pink Industry Series 61.Resource Development and Operations Working Pa- Webster, Leila. 1992. "Private Sector Manufacturing inper. Hungary: A Survey of Firms." IEN Pink Industry

Parker, Linda E. 1992. "Industry-University Collabora- Series 67.tioninDeveloped and DevelopingCountries."PHREE _ . 1992. "Private Sector Manufacturing in Poland:Background Paper 64. A Survey of Firms." IEN Pink Industry Series 66.

Regel, Omporn. 1992. "The Academic Credit System in Webster, Leila, and Eric Swanson. 1992. "Private Sec-Higher Education: Effectiveness and Relevance in tor Manufacturing in the Czech and Slovak FederalDeveloping Countries." PHREE Background Paper Republic: A Survey of Firms." IEN Pink Industry59. Series 68.

215

Appendix

Policy Research Department Dutz, Mark. 1993. "Consumer Policies: The Basics ofConsumer Policies: Principles and Enforcement Prac-

Afsah, S., P. Martin, and David Wheeler. 1993. "Promot- tices." Private Sector Development Pink Series.ing Cleaner Industrial Production." Policy Research Dutz, Mark, and James M. Silberman. 1993. "MarshallDepartment Outreach Note 12. Plan: Building Capabilities." Private Sector Develop-

Campos, Ed, and John Page. 1993. "Better Relations ment Pink Series.Between Business and Government." Policy Research Hettige, Hemamala, and William Steel. 1993. "FinancialDepartment Outreach Note 9. Deepening in Africa." Private Sector Development

Caprio, Gerard, and Ross Levine. 1992. "Finance and Pink Series.Growth: Schumpeter Might be Right." Policy Re- Hettige, Hemamala, and David Wheeler. 1993. "Indus-search Department Outreach Note 4. trial Pollution Global Indices." Private Sector Devel-

Easterly, William. 1992. "Projections of Growth Rates." opment Pink Series.Policy Research Department Outreach Note 5. Mody, Ashoka, and Jean Lanjouw. 1993. "The Environ-

Easterly, William, and Klaus Schmidt-Hebbel. 1993. "Fis- ment Industry: Does Regulation Influence Innovationcal Adjustment and Macroeconomic Performance." and Trade?" Private Sector Development Pink Series.Policy Research Department Outreach Note 10. Mody, Ashoka, Krishnan Srinivasan, and Susmita

Gomulka, S.1992. "Economic, Social and Political Prob- Dasgupta. 1993. "Determinants of FDI." Private Sec-lems in Economic Transformations: The Case of Po- tor Development Pink Series.land, 1989-1991." CECTM Research Paper Series 28. Mody, Ashoka, and Kamil Yilmaz. 1993. "Export De-

. 1992. "On the Design of Economic Policy: The mand from Newly Industrialized Economies." Pri-Challenge of Eastern Europe." CECTM Research Pa- vate Sector Development Pink Series.per Series 29. Mody, Ashoka, and Fang Yi Wang. 1993. "Industrial

Jefferson, G., T. Rawski, and Y. Zheng. 1992. "Innova- Growth in Coastal China: Economic Response." Pri-tions and Reform in Chinese Industry: A Preliminary vate Sector Development Pink Series.Analysis of Survey Data." CECTM Research Paper Parker, Ronald, William Steel, and Randall Riopelle.Series 30. 1993. "Small Enterprise Responsiveness in Liberaliz-

Kiguel, Miguel, and Gerard Caprio. 1993. "Capital In- ing African Economies." Private Sector Developmentflows-Hot or Cool?" Policy Research Department Pink Series.Outreach Note 8. Tan, Jee-Peng, and Dee-Yan Aw-Roberts. 1993. "Train-

Kikeri, Sunita, John Nellis, and Mary Shirley. 1992. ing, Technological Capability, and Firm-Level Pro-"Privatization: Eight Lessons of Experience." Policy ductivity." Private Sector Development Pink Series.Research Department Outreach Note 3. Webster, Leila. 1993. "Private Sector Manufacturing in

Levy, Brian, and Andrew Stone. 1993. "What's Holding St. Petersburg." Private Sector Development PinkFirms Back? Ask Them." Policy Research Department Series.Outreach Note 7.

Nash, J., and others. 1992. "Costa Rica: Strengthening Transportation, Water, and Urban Development DepartmentLinks to the World Economy." Country Report 9,UNDP-World Bank Trade Expansion Program. Altaf, Anjum, Haroon Jamal, and Dale Whittington.

. 1992. "Czechoslovakia: Integrating into the Glo- 1992. "Willingness to Pay for Water in Rural Punjab,bal Economy: A Transitional Strategy." Country Re- Pakistan." Water and Sanitation Report Series 4.port 8, UNDP-World Bank Trade Expansion Pro- Bartone, Carl, and Emelio Rodriguez. 1993. "Watershedgram. Protection in the S&o Paulo Metropolitan Region: A

__ . 1992. "Peru: Toward a More Open Economy." Case Study of an Issue-Specific Urban EnvironmentalCountry Report 10, UNDP-World Bank Trade Expan- Management Strategy." Infrastructure Note.sion Program. Becq, Bernard, Jukka Isotalo, and Stein Lundebye. 1993.

van de Walle, Dominique. 1992. "Whether to Target- "The Road Maintenance Initiative in Sub-Saharanand How." Policy Research Department Outreach Africa: An Overview." Infrastructure Note.Note 6. Boyle, Neil, and Albert Wright. 1992. "Policy Reform:

The Role of Informal Organizations." InfrastructurePrivate Sector Development Department Note.

Bruestle, Arthur. 1993. "China: Revolving Loan FundsAtiyas, Izak, and Mark Dutz. 1993. "Competition Policy for Industrial Pollution Control." Infrastructure Note.

in Turkey." Private Sector Development Pink Series.

216


Cairncross, Sandy. 1992. "Sanitation and Water Supply: Rebelo, Jorge. 1992. "Uzban Transport Audits." Infra-Practical Lessons from the Decade." Water and Sani- structure Note.tation Discussion Paper 9. Reynolds, John. 1992. "Handpumps: A Sustainable Tech-

Cyna, Michele. 1992. "Lane Rentals: Creating Incentives nology-Research and Development in the Waterfor Early Completion of Road Work." Infrastructure Decade." Water and Sanitation Report Series 5.Note. Salamin, Judi, and Maria Floro. 1993. "Hungary in the

Galenson, Alice, and Louis S. Thompson. 1993. "Forms 1980s: A Review of National and Urban Level Eco-of Private Sector Participation in Railways." Infra- nomic Reforms." TWURD Working Paper 2.structure Note. Scurfield, R. 1992. "International Convention for the

Isotalo,Jukka. 1992. "Community Participation in Rural Prevention of Pollution from Ships MARPOL73/78."Road Maintenance: Finnish Experience and Lessons Advisory Note 1.from Sub-Saharan Africa." Infrastructure Note. Solon, Orville, and Maria Floro. 1993. "The Philippines

.1992. "Seasonal Truck-Load Restrictions and Road in the 1980s: A Review of National and Urban LevelMaintenance in Countries with Cold Climates." Infra- Economic Reforms." TWURD Working Paper 1.structure Note. Tamm, Gordon. 1992. "InstitutionalFramework of Small

Kalinda, Beatrice, and Maria Floro. 1992. "Zambia in the Community Water Supply Systems in the United1980s: A Review of National and Urban Level Eco- States: A Review of Experiences and Lessons fornomic Reforms." INURD Working Paper 18. Developing Countries." Water and Sanitation Discus-

Katko, Tapio S. 1992. "The Development of Water Sup- sion Paper 7.ply Associations in Finland and Its Significance for Triche, Thelma. 1993. "The Institutional and RegulatoryDeveloping Countries." Water and Sanitation Discus- Framework for Water Supply and Sewerage: Publicsion Paper 8. World Bank, Washington, DC. and Private Roles." Infrastructure Note.

Langeneffer, Otto. 1992. "Groundwater Quality and Triche, Thelma, Abel Majia, and Emanuel Idelovitch.Handpump Corrosion in West Africa." Water and 1993. "Arranging Concessions for Water Supply andSanitation Report Series 6. Sewerage Services: Lessons from Buenos Aires and

Leitmann, Josef. 1992. "Satellite Remote Sensing and Caracas." Infrastructure Note.GIS Analysis for Urban Applications." Infrastructure Urban Development Division. 1992. "FY92 TransportNote. Sector Review." Infrastructure and Urban Develop-

. 1992. "A Tool for Rapid Urban Environmental ment Operational Report 13.Assessment: The Urban Environmental Profile." In- Vergara,Victor. 1992. "Sub-Municipal Managementandfrastructure Note. Decentralization in Large Cities." Infrastructure Note.

Linares, Julio. 1993. "Reforming Municipal Finance: The Water and Sanitation Division. 1993. "FY92 SectoralCase of Morroco." Infrastructure Note. Review: Water and Sanitation." Infrastructure and

Majia, Able,and AlexBakalian. 1992. "UrbanStormwater Urban Development Operational Report.Drainage in Brazil: Issues and Implications." Infra- . 1993. "Potential Private Sector Participation instructure Notes. Lima's Water Services." Water and Sanitation Utili-

McNeil, Mary. 1992. "Access to Credit for the Poor: ties Partnership Report 2.Adapting the Grameen Bank Model to Urban Areas." . 1993. "Utility Reform and Environmental Clean-Infrastructure Note. up in Formerly Socialist Countries." Water and Sani-

Moeller, Philip. 1993. "Transport Reform and Institu- tation Utilities Partnership Report 3.tional Development: Lessons from the Sub-SaharanAfrica Transport Program." Infrastructure Note.

Moser, Caroline, Alicia Herbert, and Roza Makonnen. I. Background Papers to World Development1993. "Urban Poverty in the Context of Structural Report 1993Adjustment, Recent Evidence and Policy Responses."Transportation,Water, and Urban DiscussionPaper4. Bobadilla, Jos6-Luis, Peter Cowley, Helen Saxenian,

Nayak, Sujeer. 1993. "An Environmental Checklist for and Philip Musgrove. "The Essential Package of HealthRailway Rehabilitation Projects." Infrastructure Note. Services in Developing Countries."

Pean, Leslie. 1993. "AGETIP: A New Resource to Meet Cochrane, Susan, and Thomas W. Merrick. "Improvingthe Urban Challenge." Infrastructure Note. Maternal and Child Health through Family Planning

Ravinovitch, Jonas, and Josef Leitmann. 1993. "Environ- Services."mental Innovation and Management in Curitiba, Bra- Hecht, Robert M., and Vito L. Tanzi. "The Role of NGOszil." Urban Management Program Working Paper 1. in the Delivery of Health Services in Developing

Countries."

217

Appendix

Hill, Kenneth, Dean T. Jamison, Lawrence J. Lau, Jee- Murray, Christopher, Jay Kreuser, and William Whang.Peng Tan, and Abdo Yazbeck. "The Impact of Health "Cost-Effectiveness Model for Allocating Health Sec-Status on Economic Growth." tor Resources."

Hill, Kenneth, and Abdo Yazbeck. "Trends in Child Murray, Christopher, and Alan D. Lopez. "The GlobalMortality, 1960-90: Estimates for 84 DevelopingCoun- Burden of Disease in 1990."tries." Pritchett, Lant, and Lawrence H. Summers. "Wealthier

Lau, Lawrence, Abdo Yazbeck, Kenneth Hill, Dean T. is Healthier."Jamison, and Jee-Peng Tan. "Sources of Child Health Yazbeck, Abdo, Jee-Peng Tan, and Vito L. Tanzi. "PublicGains since the 1960s: An International Comparison." Spending on Health in the 1980s: The Impact of Ad-

Michaud, Catherine, and Christopher Murray. "Aid justment Lending Programs."Flows to the Health Sector in Developing Countries."

Murray, Christopher, Ramesh Govindaraj, and G.Chellaraj. "Global Domestic Expenditures in Health."

218

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