Insights from development - WB takeaways

Some time back, the World Bank published a compilation of useful insights that have emerged from its development work over the decades.

Berk Ozler on conditional and unconditional cash transfers, 

A systematic review of CCT and UCT programs finds that the effect sizes on school participation increase as the conditions are made more explicit, monitored, and enforced... while CCT programs may be more effective than UCTs in obtaining the desired behavior change, they can also undermine the social protection dimension of cash transfer programs... While there are few long‐term studies of unconditional cash transfers, the available evidence suggests that their short‐term effects are not sustained.

Deon Filmer and Adam Wagstaff draw attention to the importance of service delivery quality,

In both education and health, poor quality of service delivery is the key reason why service coverage does not necessarily translate into better outcomes... One study found that going from having a teacher in the bottom quality decile to one in the top is equivalent to a full additional business‐as‐usual year of learning for students. Another study compared mortality in high‐income countries and mortality in low‐ and middle‐income countries (LMICs), and concluded that of the 8.6 million excess deaths in LMICs that were amenable to medical care, the bulk (5.0 million) were due to receipt of poor‐quality care rather than non‐receipt of care.

They also discuss the pros and cons of the three approaches of paying for public service delivery - fee-for-service, capitation (according to the number of characteristics of people served), and budget-salary. They argue in favour of some combination, depending on the sector and context, with a pay-for-performance element.

In this context, I recently came across a J-PAL meta-study of 17 preventive health products, including mosquito nets, deworming pills, and water-purifying chlorine tablets, which found that "offering them for free makes it far more likely that people actually get and use them, benefiting themselves and others."

Roberto Fattal, Hiau Looi Kee, and Sergio Schmukler points to the constraints faced by small firms and business formation in general.

The overall functioning of financial markets is important, the allocation of credit across firms matters for economy‐wide growth. Small firms as well as young that create novel products and technologies but that lack the financing to scale up tend to be harmed the most by misallocation of credit. In countries where credit is expensive and hard to access, firms typically are small, leading to a misallocation of credit. Large firms that are relatively less productive end up producing a significant share of the output, while smaller more productive firms are unable to grow and to contribute as much as they could.... just developing financial markets might not be enough to generate growth – ensuring that credit flows to the firms that have growth potential is as important... The regulation of entry, for instance, should consider the incentives for low‐scale entrepreneurship to become informal. Similarly tax policy should anticipate distortions to firm growth that happen when firms of different sizes face differential enforcement.

Norman Loayza and Michael Woolcock draw attention to the importance of complementary measures and state capability.

Policy implementation can fail for two broad reasons: (1) the absence of complementary measures needed to make the chosen policy effective; and (2) the inadequate capability of prevailing institutions and administrative systems... without a supporting institutional framework and capable public sector organizations to implement them, even technically sound policies and programs are likely to fail... Children do not learn if they are hungry, so educational and nutritional policies should go hand in hand. Parents do not vaccinate their children if they are struggling to survive, so immunization campaigns should target the poor and provide pecuniary benefits to families that participate. Farmers do not adopt new crops and technologies that are potentially more profitable but also riskier, so introducing new farming practices should be accompanied by improved insurance mechanisms and access to markets... Trade openness cannot promote competitiveness if domestic industries are burdened with excessive regulations, so international openness should be accompanied by streamlining regulations and improving public infrastructure.

Vijayendra Rao and Michael Woolcock write about the role of local accountability.

There is an increasing realization that better development outcomes are delivered within institutional systems where citizens and communities matter... Elections are one mechanism of accountability, but they are not enough because they are held infrequently and can be captured by elites. Elections need to be complemented by citizen bodies – institutions for collective and deliberative decision‐making where the voices of citizens can be heard and where they are able to monitor the performance of governments.

They also dwell on the importance of process legitimacy.

How difficult and contentious social outcomes (such as elections, judicial rulings, or even the extent of inequality) are reached has enormous bearing on their legitimacy and the extent to which they are accepted, especially by those who would have strongly preferred a different outcome. Political parties that lose close elections can accept this outcome if they believe that votes were cast and tallied impartially; citizens tolerate higher levels of inequality to the extent the wealthy are perceived as having gained their riches by diligence, innovation and prudence (not theft, deception or corruption)... Securing and sustaining legitimacy is likely to be deeply context‐specific, varying considerably between and within countries. Even professional ‘best practices’ (fiscal rules, meritocratic hiring) and scientifically verified ‘solutions’ (immunizations, fertilizers) must earn local legitimacy and credibility before they will be embraced, at scale. Creating public spaces within which such practices and solutions can be identified, adapted to the local context, and/or be improved is a key way in which legitimacy is acquired.

Robert Cull and David McKenzie write about the challenge of scaling programs,

Even when pilots and local development interventions have proven very successful, they have often been difficult to scale up in a cost‐effective way to achieve development impact on a large scale. Conversely, several development interventions that have managed to achieve impressive scales at relatively low costs are increasingly under scrutiny for their lack of transformative impacts on the lives of the poor... A recent meta‐analysis of more than 600 research papers covering 20 different types of development interventions found that the larger the study, the smaller the size of the effect, and that programs implemented by governments tend to have smaller effect sizes than academic or NGO‐implemented programs.

They list out a few reasons - small‐scale pilots may concentrate efforts on those who benefit most; implementation and political economy issues can arise as programs grow; general equilibrium effects can further reduce some impacts; cost issues can make scaling prohibitive.

Sergio Schmukler, Michael Toman, and Adam Wagstaff use examples from early childhood education, financial crises, and environmental degradation to highlight the cost-effectiveness of early policy interventions at scale. 

Education and health interventions in early childhood have large returns... The period over which returns accrue is therefore very long. By contrast, the costs of early childhood interventions occur over just a few years. But even after discounting to present values, the benefit‐cost ratio is large... preschool interventions... make these later investments more productive. Empirical work supports this idea that early investments enhance the productivity of (i.e., are complementary to) later investments... Recognizing that financial crises are costly, governments around the world have moved to implement measures to act early in order to prevent them... Preventive measures include financial regulation and supervision, macroprudential policies, and even capital controls. By minimizing currency and maturity mismatches, obtaining high capitalization and liquidity buffers, adopting flexible exchange rate regimes, and introducing sand‐in‐the‐wheel types of measures, the financial system can be less prone to boom‐and‐bust scenarios.

Finally, Bob Rijkers and Erhan Artuc write about international trade.

The negative distributional impacts of international trade are large, localized, and long‐lived... Workers who are adversely affected by trade liberalization face high moving costs and are often not able to leave to find better jobs in other regions. The adverse effects of trade liberalization are consequently concentrated in particular regions, while the benefits are widespread throughout the whole economy. These negative localised effects persist in the long run and the affected regions take a long time to recover, if at all.

The compilation is also a good example of how a body of knowledge can be built through long-drawn and institutionally guided research efforts. It can play an important role in changing narratives and may be a bigger and more important legacy of the World Bank than the various development programs it has financed.