37334 WORLD BANK v r- *RESEARCH -NEWS Volume 2 Number 1 Winter 1980/81 CONTENTS An Overview of World Bank Research on Urban Land Issues 3 Rachel Weaving Completed Research Land Reform in Latin America 12 New Research and Applications Development of a Social Accounting Matrix Basis for Planning and Modeling in Egypt 13 Multisector and Macroeconomic Models of Structural Adjustment in Yugoslavia 13 Research Support for the World Development Report 14 Applications of Programming in the Manufacturing Sector: Indian Fertilizer Model and A Model of the Madagascar Forest Industry 15 Application of the General Algebraic Modeling System to Agricultural Sector Models 16 Industrial Statistics 17 Food Policy Analysis for Practitioners 17 Fertility and Contraceptive Behavior in Bangladesh 18 New and Forthcoming Publications 19 I World Bank Research News will be issued three times a year. It supplements the descriptions of socioeconomic research projects in progress given in the annual World Bank Research Program: Abstracts of Current Studies, and the annual Catalog of World Bank Publications. Research News is available free of charge to institutions and individuals with a professional interest in development. To be placed on the mailing list or to receive additional copies, please send a complete address, including your title, to the Publications Unit, World Bank, 1818 H Street, N.W., Washington, D.C. 20433, U.S.A. Enquiries on particular research projects should be addressed to the individuals or departments cited. Other enquiries, comments, and suggestions for future issues will be welcomed and should be addressed to the Editor, Office of the Vice President, Development Policy, World Bank, 1818 H Street, N.W., Washington, D.C. 20433, U.S.A. XNrORI 1) BA NK No. 423. Rethinking Artisanal Fisheries Devel- Economy of Protection. E. Verreydt and J. opment: Western Concepts, Asian Experience. Waelbroek (consultants), Economic Analysis and Donald K. Emmerson (consultant), Agriculture Projections Department. October 1980. and Rural Development Department. October 1980. No. 433. Agrarian Reforms in Developing Rural Economies Characterized by Interlinked Credit No. 424. Transition Toward More Rapid and and Tenancy Markets. Avishay Braverman and Labor-Intensive Industrial Development: The T.N. Srinivasan (consultant), Development Re- Case of the Philippines. Barend A. de Vries, search Center. October 1980. Industrial Development and Finance Department. October 1980. No. 434. How Segmented is the Bogota Labor Market? Gary Fields (consultant), Development No. 425. Britain's Pattern of Specialization in Economics Department. October 1980. Manufactured Goods With Developing Coun- tries and Trade Protection. Vincent Cable and No. 435. Pirate Subdivisions and the Market for Ivonia Rebelo (consultants), Economic Analysis Residential Lots in Bogota. Alan Carroll, Devel- and Projections Department. October 1980. opment Economics Department. October 1980. No. 426. Worker Adjustment to Liberalized No. 436. Exchange Rate Adjustment under Trade: Costs and Assistance Policies. Graham Generalized Currency Floating. Romeo H. Bau- Glenday, Glenn P. Jenkins, and John C. Evans tista, Economic Analysis and Projections Depart- (consultants), Economic Analysis and Projections ment. October 1980. Department. October 1980. No. 437. The Newly Industrializing Developing No. 427. On the Political Economy of Protec- Countries after the Oil Crisis. Bela Balassa, tion in Germany. H. H. Glismann and F. D. Development Research Center. October 1980. Weiss (consultants), Economic Analysis and Pro- jections Department. October 1980. No. 438. The Process of Industrial Develop- ment and Alternative Development Strategies. No. 428. Italian Commercial Policies in the Bela Balassa, Development Research Center. Oc- 1970s. Enzo Grilli, Economic Analysis and Projec- tober 1980. tions Department. October 1980. No. 439. Monitoring Rural Development in East No. 429. Effects of Non-tariff Barriers to Trade Asia. G. Deboeck and R. Ng, Agriculture and on Prices, Employment, and Imports: The Case Rural Development Department. October 1980. of the Swedish Textile and Clothing Industry. Carl Hamilton (consultant), Economic Analysis No. 440. Higher Education in Developing and Projections Department. October 1980. Countries: A Cost-Benefit Analysis. George Psa- charopoulos (consultant), Education Department. No. 430. Output and Employment Changes in a December 1980. "Trade Sensitive" Sector: Adjustment in the U.S. Footwear Industry. John H. Mutti (consul- No. 441. Policy Interventions for Technical tant) and Malcolm D. Bale, Economic Analysis Innovation in Developing Countries. Charles and Projections Department. October 1980. Cooper (consultant), Development Economics De- partment. December 1980. No. 431. The Political Economy of Protection in Belgium. P.K.M. Tharakan (consultant), Eco- No. 442. Trade Adjustment Policies and Income nomic Analysis and Projections Department. Octo- Distribution in Three Archetype Developing ber 1980. Economies. Jaime de Melo (consultant) and Sher- man Robinson, Development Economics Depart- No. 432. European Community Protection ment. December 1980. Against Manufactured Imports from Develop- ing Countries: A Case Study in the Political WORLD BANK REPRINT SERIES Number 146. Economic Growth, Foreign Loans, and Debt Servicing Capacity of Devel- Thefollowing recent articles, arisingfrom research oping Countries. Gershon Feder. From The undertaken at or for the World Bank, have been Journal of Development Studies, vol. 16, no. 3 reprznted with permzssion: (April 1980), pp. 352-68. Copyrighted by Frank Cass and Company, Ltd., London. Number 139. Growth vs. Basic Needs: Is There r a a Trade-Off? Norman L. Hicks. From World Number 147. A New Approach to Power Development, vol. 7 (1979), pp. 985-94. System Planning. Mohan Munasinghe. From IEEE Transactions on Power Apparatus and Number 140. Alternative Opportunities and Systems, vol. PAS-99, no. 3 (May/June 1980), pp. Migration: An Exposition and Evidence from 1198-1206. Copyrighted by the Institute of Electri- Korea. Gershon Feder. From The Annals of cal and Electronics Engineers (IEEE). Regional Science, vol. 13, no. 3 (November 1979), pp. 57-67, and vol. 14, no. 1 (March 1980), pp. 1- Number 148. An Integrated Framework for l1 lEnergy Pricing in Developing Countries. Mo- han Munasinghe. From The Energy Journal, vol. Number 141. Futures Markets and the Theory 1, no. 3 (July 1980), pp. 1-30. of the Firm under Price Uncertainty. Gershon Feder, Richard E. Just, and Andrew Schmitz. Number 149. Planning for Electrical Power: From The Quarterly Journal of Economics (March Costs and Technologies. Mohan Munasinghe. 1980), pp. 317-28. Copyright 1980 by John Wiley From Modern Government/National Develop- and Sons, Inc. ment (April 1980), pp. 75-84. Copyrighted by Intercontinental Publications, Westport, CT. Number 142. Theories of Industrial Wage Structures: A Review. Deepak Lal. From Indian Number 150. Interactions between Industri- Journal of Industrial Relations, vol. 15, no. 2 alization and Exports. Hollis B. Chenery. From (October 1979), pp. 167-95. American Economic Review, vol. 70, no. 2 (May Number 143. Social Accounts and the Distribu- 1980), pp. 281-87. tion of Income: The Malaysian Economy in Number 151. The Cost of Sample Survey 1970. Ramesh Chander, S. Gnasegarah, Graham Designs. Charles P. Humphreys. From Proceed- Pyatt, and Jeffrey I. Round. From Review of ings of the Section on Survey Research Methods, Income and WVealth, vol. 26, no. 1 (March 1980). 1979 (Washington, D.C.: American Statistical Number 144. The Impact of Contractual Sav- Association, 1979), pp. 395-400. ings on Resource Mobilization and Allocation: Number 152. Different Smallholder Types and The Experience of Malaysia; Social Security Their Developmental Needs; Simulating the Funds in Singapore and the Philippines: Rami- Decision Making Process of a Nigerian Small- fications of Investment Policies; Investments of holder. Paul S. Zuckerman. From Journal of Social Security Funds in India and Sri Lanka: Agricultural Economics, vol. 28, no. 2 (1977), pp. Legislation and Experience. Parthasarathi 119-27; and Canadian Journal of Agricultural Shome and Katrine W. Sato. From The Malayan Economics, vol. 27, no. 2 (1979), pp. 17-26. Economic Review, vol. 23, no. I (April 1978), pp. 54-72; Labour and Society, vol. 5, no. I (January 1980), pp. 19-30; and The Indian Journal of Economics, vol. 60, part 3, no. 238 (January 1980), pp. 349-60. Number 145. Economics of a Unified Transpor- tation Trust Fund. Gabriel Roth. From Trans- portation Research Record, no. 731 (Washington, D.C.; National Academy of Sciences, 1979), pp. 49-54 Bogota, at least, it was found that aggregate land useful output that is forgone by using a piece of values rose at rates commensurate with increases in land for a given project). He also discusses some of population and economic activity, rather than at the practical difficulties of applying this concept, the "excessive" rates of popular imagination. (See given the frequent absence of natural and conve- also Villamizar, "Land Prices in Bogota Between nient ways of measuring the loss of useful output. 1955 and 1978: A Descriptive Analysis.") Land Tenure Gregory Ingram's paper on "Land in Perspective: Its Role in the Structure of Cities" analyzes data Tenure systems have a basic influence on urban- from Colombia (drawing upon the same data base ization. As Dunkerley notes, the system of rights to as the NMohan/Villamizar study), the Republic of own and use land in a city has important effects on Korea, and the United States to gain insights about population density and on the ability of the poor to changes in urban land values as cities expand. The find adequate shelter. The tenure system may data confirm that land values are higher, the denser make expansion of the urban area difficult and the population, and that, like population density, raise transfer costs for urban land to levels that they decline as distance from the city center exclude poorer groups from the market. And, in increases. In all size classes of city, land prices at many cities of developing countries, the complexity the periphery have been rising faster than those at of tenure systems, and a lack of clear titles to own the center during the past fifteen years; the range of and use land, raise important difficulties for the land values tends to be narrower in large cities than collection of property tax revenues and the recovery in small ones. Ingram's results confirm, though of project costs. weakly, that a city's aggregate or average land values rise in proportion to the value of its output Rights to own and use land can have a strong and the size of its population. After a discussion of influence on the distribution of wealth and income market structure and tests for the influence of and are deeply embedded in a country's social and monopoly power on land prices, Ingram applies legal structure. Efforts to change them by public precepts from the literature on natural resource intervention, and the outcome of these efforts, will economics, which suggest that rates of return on be shaped by political as much as by technical urban land should be similar to those on other factors. In his paper on "Selected Issues in Urban investments of similar riskiness. Land Tenure" (in Working Paper No. 283), William Doebele of Harvard University stresses Chapter IV of Dunkerley's "Overview" paper that the objectives of policy toward urban land discusses the evaluation of urban land costs and tenure must, thus, be viewed in the setting of more benefits in the preparation of investment projects. general policies toward urbanization. At the same He points out that the financial valuation of land to time, tenure policy can itself exert important be used for projects has important influences on influences on urbanization and the allocation of such measures as profitability, the value of assets, urban land. and the contribution of local agencies to project costs. Second, he discusses the economic valuation There has been little study of the economic and of land to be used in projects, and third, the social effects to be expected from different urban economic evaluation of project benefits, as reflected tenure arrangements. Doebele's paper, written in the values of project sites and neighboring land. with Bank operating staff and municipal authori- The theoretical difficulties and practical problems ties in mind, describes in detail various types of of measurement affect not only the calculation of tenurial arrangements and compares them against rates of return but also the appropriate intensity of broad policy objectives, of efficiency (whether land use, and hence the physical design of projects. maximum productivity, responsiveness to rapid After reviewing these problems, the author offers increases in demand for land, or responsiveness to recommendations for practitioners. major changes in urban form); equity among income groups; compatibility with other policy Walters in "The Value of Urban Land," examines instruments dealing with economic development some of the conceptual difficulties associated with and land use control; and continuity, to avoid using the opportunity cost of land in project unnecessarily abrupt breaks with existing cultural analysis (where the opportunity cost measures the and political systems. i1fl l" i X ' ', Chapter III of Dunkerley's "Overview" paper in the developing countries considered, the instru- addresses tenure issues of particular concern in ments used have often been rendered ineffectual by Bank urban operations. He notes that opportuni- inadequate assessment procedures, infrequent ree- ties to change tenure rights and clarify title are apt valuation of properties, and limited administrative to occur when infrastructure projects coincide with capacity. Public acquisition of land has faced changes in land use, as they often do. Such tenure similar difficulties at all levels of per capita income. changes often require the balancing of objectives Citing examples from a variety of developed and such as security of tenure and the maintenance of developing countries, Grimes nonetheless shows flexibility in land use as the urban area expands. that land use planning can be important in shaping Tenure arrangements are particularly crucial to urban growth. The last section of his paper the success of projects designed to stimulate the outlines some implications for project design. construction or improvement of housing by the beneficiaries; occupants must feel secure if they are Charges for access to and use of public services are to invest their labor and savings in building on a common way of retrieving a part of the surplus their plots. In major sites and services or squatter values created by such public investments as water upgrading projects, the Bank is concerned to help and electricity supply. The quantity of urban establish a program and set of institutions that will services largely depends on the revenues that can be enhance the borrowing country's ability to deal raised from charges to beneficiaries. Such charges with its housing problems-here, the advocacy of may in principle cover the costs, less than the costs, particular forms of tenure can be of far-reaching or more than the costs, of providing the services. significance. Public authorities can also capture surplus values by intervention in the market for land. Chapter V The Capture of Surplus Values of the paper by Donald Shoup, of the University of California, on "Land Taxation and Government The "surplus value" of a piece of real estate may Participation in Urban Land Markets" (in Work- be measured as the increase in its value that, after ing Paper No. 283) discusses the public acquisition allowing for general inflation, cannot be attributed of land, or rights to develop it. Aside from to the capital invested in it by its private owner purchasing land needed directly for the provision of (making a normal allowance for his holding costs, services, he explains, such intervention can be used enterprise, and the risks involved). These windfall to guide the process of urbanization in three ways: gains are one of the main ways in which the improving the land use planning of newly urban- benefits of public provision of infrastructure and ized land; generating revenue to finance public the agglomeration economies of urban growth are infrastructure (by capturing appreciation in the transformed into increased wealth. In his "Over- value of publicly owned land); and allocating the view" paper, Dunkerley notes the growing convic- serviced land to new residents, firms, and for tion that these gains should be captured for public government use. use.3 He describes three broad types of instruments for this purpose: charges for public services; public For cities experiencing rapid growth, Shoup argues participation in land development; and property for a greater use of "land readjustment" schemes. taxation.4 Discussing implementation issues, he In such schemes, a public authority assembles land stresses the need to gauge the adverse effects the for conversion from rural to urban use, installs all capture of surplus values may have on private public services, and finances the cost of the incentives, on the supply of urban land or its operation from the increase in land value caused by allocation, and on fairness between members of the the new infrastructure; the government sells same income group. 3. He cites, for example, the report and recommendations of the A paper by Orville Grimes, "Urban Land and UN Habitat Conference, Vancouver, 1976, A/CONF. 70/15. Public Policy: Social Appropriation of Better- 4. Some countries have experimented with property taxes designed ment," analyzes the economics of increases in specifically to capture surplus values but, with one exception, a urban land values and the policy instruments with general tax on land value increases has not appeared to work either in developing or industrialized countries. (See Grimes, "Urban Land which socially induced increases in these values and Public Policy," and Shoup, "Land Taxation and Government may be captured for public use. Grimes finds that Participation in Urban Land Markets.") enough of the serviced land to pay all its costs, and poor disproportionately, the system seems to nave the remaining sites are returned to the original broadened the access of low-income groups to both landowners in proportion to their initial contribu- jobs and residential building sites. The main tions of land. difficulties have arisen in the collection of charges; payment terms have been generous, and there have In "Land Policies in the Republic of Korea," been delays in enforcing a vigorous collection Doebele and Myong Chang Hwang give a detailed policy. The Colombian system aims only to recoup account of the workings of land readjustment the costs of public projects (rather than trying to schemes in Korea.' The scale of these schemes is isolate the increases in land value due to these impressive: as of 1976, they covered some 45 projects from those due to other factors). Costs are percent of all urban land in Korea classified as for generally less than the apparent benefits, and this "dwelling" purposes. The schemes have success- premise has helped to make the system generally fully opened up new land for urban uses, and have accepted. Prest, in "Land Taxation and Urban thus assisted significantly in increasing the supply Finances in Less Developed Countries," finds the of housing and in raising public funds, but most of evidence from Colombia persuasive, but suggests their direct benefits appear to have gone to middle- that "such techniques are not easily transplanted, and high-income landowners. Grimes, in "Urban and even sophisticated administration has not been Land and Public Policy: Social Appropriation of able to make them effective on a number of Betterment," and Alan Prest of the London School occasions. The most that one should be prepared to of Economics, in "Land Taxation and Urban advocate is small-scale experiments to see if they Finances in Less Developed Countries," also are a valuable technique in a particular city." comment on the Korean experience. Grimes notes that the schemes have been implemented in a Land taxes are of two main types: those applied to period of rapidly rising land prices, which may be a the value of urban land or property, in general, and vital ingredient in their success. Prest suggests that "betterment" levies, or assessments based on "South Korea ... may be an isolated example of the increases in the value of land or property judged to practicability and advisability of such schemes in be within the zone of influence of benefits from LDCs." individual public investment projects. Another way in which public improvements to Chapter IV of Shoup's paper considers the possible land can potentially be made self-financing is the objectives of a land tax policy: use of "valorization" charges. The valorization * to provide general revenue' charge is a system of taxation by which the cost of 'de general finane; public services, such as street improvements or * to provide revenue to finance expenditure on sewer extensions, is allocated to neighboring specific public services' properties in proportion to the benefits conferred * to provide incentives for the efficient allocation on them. Colombia is one of the few developing of land-for example, by lowering land prices, nations to have used valorization extensively; promoting early development of vacant land, or Bogota has used it for over 30 years. curbing land speculation; A to reduce inequities in the distribution of A paper by Doebele, Grimes, and Johannes Linn lnonrhp adicm,o eeiso on "Participation of Beneficiaries in Financing landownershep, land .come, or benefits of Urban Services; Valorization Charges in Bogota"6 land use. discusses the conceptual issues facing valorization In evaluating a wide range of possible land taxes, programs, including their fiscal and financial Shoup's paper emphasizes that land taxation is an implications and their likely effects on land use and income distribution, and then analyzes Bogota's experience, focusing particularly on the allocation 5. See also Doebele's earlier paper, "Land Policy in Seoul and and collection of valorization charges. It concludes Gwangiu, Korea." An annex to this paper (ontains a comprehensive that Bogota's system, though by no means an list of Korea's legislation on national, regional and urban planning, unqualified success has brought the city significant housing, and urban redevel(opment available in English translation. unqaliie su6. This paper draws upon an earlier analysis by Doebele and financial benefits, reducing the burden on general Grimes, "Valorization (Charges as a Method for Financing Urban municipal taxation. While probably not serving the Public Works. The Example of Bogota." instrument that ideally allows two objectives that case studies of finances in ten cities, in Colombia, frequently conflict-eflicient land use and fairness India, Indonesia, Jamaica, the Republic of Korea, in the distribution of income or other benefits from the Philippines, and Tunisia.' Experience with land-to be pursued simultaneously. property taxation is evaluated from both the revenue and the income-distributional points of Prest's paper, referred to above, appraises different view. taxes and charges on land as means of raising the revenue base of cities in developing countries. Linn's concern in "Urban Finances in Developing Drawing extensively on the literature and on Countries" is with the financial difficulties city examples from practical experience, he examines governments encounter in trying to cope with rapid the implications of the different mechanisms for urbanization at low levels of income. After a resource allocation and fairness among the urban statistical overview of the key dimensions of urban residents and landowners affected, and discusses finance systems in developing countries, he ana- problems of implementing them. Those analyzed lyzes in detail the expenditure and revenue trends include property taxes; betterment levies; site value of selected city governments, and gauges how much rating; land increment taxes (i.e., taxes on accruals fiscal autonomy they have. He finds that, though or realizations of site value, and taxes on permitted property taxes are by far the largest source of changes of use under a system of land control); revenue for most of the cities considered, city taxes on vacant land; transactions taxes- land governments are not free to set the rates of these readjustment schemes; and charges for public taxes. Betterment levies are of little importance services. except in Colombia and the Republic of Korea. Prest takes the view that the costs of abandoning a Roy Bahl's opening chapter on "The Practice of well established- even though inefficient-urban Urban Property Taxation in Developing Coun- taxation system in favor of a new system are tries," in The Iaxation of Urban Property in Less normally so high that such wholesale change is Developed Countries, describes the range of urban undesirable: improvements in the resource base are property tax practices in developing countries and better sought by making existing arrangements reviews their importance in financing urban more efficient. For most cities in developing government. Like Linn's paper just mentioned, he countries, reform efforts should give priority to the uses a comparative approach based on the case property tax, which is their single largest source of studies undertaken for the Urban Finance project. tax revenues. In his concluding chapter Prest notes some of the areas where improvements are commonly needed: land and property titles need to 7. Reports on these studies are available from the Development be clearly defined in law; there needs to be an Economics Department. Johannes F- Linn, "Urban Public Finances efficient mechanism for registering such titles; tax in Developing Countries: A Case Study of Cartagena, Colombia," nneeds to be carefully considered (and Urban and Regional Report No. 77-1 (two volumes) (January legislation 1977). Remy Prud'homme, "Urban Public Finances in Developing precisely drafted) before enactment; there should Countries: A Case Study of Metropolitan Tunis," Urban and be as few exemptions and special reliefs as possible, Regional Report No. 77-2 (January 1975). Roy W. Bahl and partly because these are difficult to withdraw once Nlichael J. Wasylenko, "Urban Public Finances in Developing provided, and partly because they appear to set Countries: A Case Study of Seoul, Korea," Urban and Regional e fReport No. 77-3 (April 1976). Roy W. Bahl, "Urban Public precedents for others; and properties should be Finances in Developing Countries: A Case Study of Metropolitan regularly reevaluated. As to collection, it is not Ahmedabad," Urban and Regional Report No. 77-4 (August 1975). advisable to permit payments to be delayed if they Francine Bougeon-Ntaasen and Johannes F. Linn, "Urban Public are under appeal; nor should titles be re-registered Finances in Developing Countries: A Case Study of Metropolitan until tax arrears have been settled. Kingston, Jamaica," Urban and Regional Report No. 77-7 (August unti 1975). Roy W. Bahl, Pamela Brigg, and Roger S. Smith, "Urban Public Finances in Developing Countries: A Case Study of Much of the other work on urban land taxation Mettopolitan Manila," Urban and Regional Report No. 77-8 sponsored by the Bank has been done under the (April 1976). Johannes F. Linn, "Public Utilities in Metropolitan aegis of a large-scale project on "Urban Public Bogota: Organization, Service Levels, and Financing," Urban and Finances in Developing Countries" (whose output Regional Report No. 78-2 (M,fay 1976). Johannes F. Linn, R.S. Smith, and H Wignjowijoto, "Urban Public Finances in Develop- on subjects other than property taxation is not ing Countries: A Case Study of Jakarta, Indonesia," Urban and considered here). That project undertook detailed Regional Report No. 80-7 (Ntay 1976). RE ptf'! L'.ARY GC?mY V\It R 19Xtl Xl Bahl finds wide variations in urban property tax impact of local fiscal policy in four areas: taxation, practices. He notes that local governments have public expenditure, public service pricing, and made considerable adjustments in their tax struc- access to public services. Methodological as well as tures to achieve particular goals, but in a piecemeal empirical problems make it difficult to draw fashion, frequently with offsetting piecemeal ad- general conclusions, but his findings suggest that justments in other areas of policy. He concludes overall the incidence of local government activity is that in assessing and projecting the economic effects progressive, due to the progressivity of public of adjusting tax bases and rates, all aspects of the expenditure and public service pricing. The litera- property tax system need to be considered. ture offers contrasting opinions about the incidence of the property tax; Linn finds that, depending on A central question raised by the comparative study which of these one subscribes to, the overall of urban property taxation is why the revenues progressivity of local government is reduced or from this source have usually grown slowly, if at increased by local taxes. all (after allowing for population increases and general inflation)-particularly since it is usually In "The Incidence of Urban Property Taxation in agreed that urban land values have been growing Colombia,"9 Linn deepens his earlier analysis and very fast. Bahl finds that the main reason appears introduces a new analytical framework designed to to be a general failure to reassess property values be widely applicable. This paper describes the frequently enough, in line with increases in value. administration and role of urban property taxation Linn takes up the same question for one city, in in Colombia, reporting on recent quantitative "Property Taxation in Bogota: An Analysis of studies, and gives an empirical evaluation of the Poor Revenue Performance." His review of the incidence of local and nationwide changes in the determinants of growth of property tax revenues Colombian system. A review of the assumptions during the 1960s and early 1970s-including the underlying the prevailing theory of property tax rate structure of the tax, assessment procedures, incidence, on which this evaluation is based, leads exemption policies, collection practices, and the him to develop a new, although preliminary, growth in the market value of real estate-suggests analytical framework. The framework gives ex- that the main cause of sluggish growth in revenue plicit consideration to the institutional structure of in Bogota was a low rate of growth in market property tax administration; to the segmentation of property values." While different conclusions as to capital, commodity, and housing markets into causes and possible remedies might be derived for formal and informal sectors; to whether the other cities, Linn's approach is designed to be property tax is nationwide or local; and to the time suitable for use elsewhere. horizon within which incidence is considered, as this has implications for factor mobility. The paper n .n concludes that for most practical purposes property In judging the desirability of property tax reform,txio ispgrsvean thtefmwic * s s * r w . X taxationI IS progressive, and that reform which the revenue potential, allocative effects, and admin- r w sleads to increased reliance on property taxation 's istrative aspects of property taxation are usually I considered, but not so the effects it may have on the ikely to have deslrable effects on income distrebu- distrbto of beeft fo m land. (I inutil tion, especially when compared with increased ditibto of beeft frmln.(nr nutil reliance on alternative sources of local government ized countries, the incidence of urban property revenue. taxation has had much more academic and popular ue. attention.) Further, it is often argued that since in Reiterating that "it is necessary to dispel the developing countries central government authori- common misconception that [the urban property ties have a comparative advantage in pursuing the tax] in its basic form-i.e., if levied at rates more equitable distribution of wealth and income, proportional to the value of real estate-is regres- concern with the distributional effects of local sive in incidence," Linn, in "Policies for Efficient government finances is inappropriate. Linn takes issue with this view in "The Distributive Effects of Local Government Finances in Colombia." Hav- 8. See also V'illamizar, "Land Prices in Bogota," and Nlohan and ing established that a very significant proportion of Villamizar, "The Evaluation of Land Values in the Context of ing stalised hata vry sgniicat popotio of Rapid Urban Growth." the public sector responsibilities in cities is borne 9. An earlier version of this paper is World Bank Staff Working by local governments, he assesses the distributive Paper No. 264. and Equitable Growth in Cities," urges city sets out some principles to guide thinking on land governments to seek their needed increases in use regulation in Third World cities. Though the revenue from property taxes rather than taxes that documentary evidence is scant, both Rivkin and bear heavily upon the poor (notably, sumptuary Courtney emphasize that land use regulations to taxes, on alcohol, tobacco and gambling, and local control private behavior have frequently failed to excise taxes). Chapter IV of this paper considers achieve their objectives. how urban fiscal policy can be designed to help alleviate poverty and, in particular, how tax policy The reasons include government failure to give can be adapted to reduce the tax burden on the sufficient priority to land use regulation, lack of poor. In common with Shoup, Linn argues that information on the matters to be regulated, man- property taxes should probably be increased in power shortages, the rapidity of urban growth and many cities in developing countries. He notes that change, a failure to adapt precepts and techniques recent experience with urban property tax reform to local conditions, and the enormous economic in Jamaica and Jakarta (Indonesia) shows that significance of investment in real estate.1 ICourtney progressive change is possible. Some of the observes that direct public participation in the administrative features of a property tax that supply and development of urban land-which is a increase both its efficiency and its progressivity are: more visible method of control and more easily higher rates of taxes on site value than on the value linked to project-oriented approaches to urban of improvements; higher than average rates on development-has generally been more successful. vacant lots; and exemption of low value or slum But since very few local authorities have the properties. resources to use this approach widely, priority should go to the reform of existing controls. Land Use Regulation The World Bank's urban operations inevitably involve land regulation issues. Urban plans, land Virtually all urban governments use controls to use restrictions, and building restrictions influence ensure that land is not used contrary to the general the design of projects, and the pattern of urban interest of the community. There are two long- development itself strongly affects the costs of standing arguments for the regulation of urban providing urban services. Conversely, projects land use. The first is to prevent incompatible uses, themselves, particularly those to provide infra- such as the installation of a chemical factory in a structure, can strongly influence the supply of residential neighborhood; the policy instruments urban land and patterns of urban development. for this purpose are designed to control private Partly drawing on the papers by Rivkin and behavior-for example, through zoning restric- Courtney, Chapter VI of Dunkerley's "Overview" tions. The second argument is to control monopoly paper in the same volume analyzes some of the power; this involves public intervention in the land regulation issues of particular significance in market-for example, through land banking. An- project planning. other argument more recently gaining currency is that since "the market is not noted for its altruism,""' controls on land use may help to References improve housing and other aspects of living standards for low-income groups. As Dunkerley Bahl, Roy W. "The Practice of Urban Property Taxation emphasizes in his "Overview," some types of land in Less Developed Countries." In Roy W. Bahl, ed., use controls need skillful planning, to avoid The Taxation of Urban Property in Less Developed Countries. Madison: The University of Wisconsin eliminating the market signals that guide the Press for the Committee on Taxation, Resources, and efficient allocation of land, or stifling private Economic Development, 1979. development initiatives. Further, certain controls can easily be subverted in the interests of politically influential groups. Papers by Malcolm Rivkin, of Rivkin Associates, Inc., and John Courtney, in 10. Rivkin, "Some Perspectives on Urban Land Use Regulation and Control." "Urban Land Policy Issues and Opportunities," 11. Rivkin notes one senior urban official as saying, "How do you describe and evaluate various types of instruments expect us to adopt control measures over land use and land for regulating land use, and Rivkin's last chapter speculation when we, the officials, are speculators ourselves?" Carroll, Alan. "Pirate Subdivisions and the Market for holds: The Case of Bogota, Colombia." Land Econom- Residential Lots in Bogota." World Bank Staff ics 52 (August 1976). Working Paper No. 435. World Bank: Development . "Employment, Land Values and the Residential Economics Department, October 1980. Choice of Low-Income Households: Reply." Land Courtney, John M. "Urban Land Use Regulation." In Economics 53 (August 1977). Dunkerley, "Urban Land Policies and Opportunities." Ingram, Gregory K. "Land in Perspective: Its Role in the Doebele, William A. "A Commentary on Urban Land Structure of Cities." Urban and Regional Report No. Policy in Sweden." World Bank: Development Econo- 80-9. World Bank: Development Economics Depart- mics Department, December 1974. ment, November 1980. ______. "Land Policy in Seoul and Gwangju, Korea With Special Reference to Land Readjustment." Linn, Johannes F. "The Distributive Effects of Local Urban and Regional Report No. 77-9 (two volumes). Government Fnancers in R Albert Berry and Ronald World Bank1 Development Economcs Department, Soligo, eds., Economic Policy and Income Distribution __ . "Land Readjustment as an Alternative to in Colombia. Boulder: Westview Press, 1980. An Taxation for the Recovery of Betterment: The Case of earlier version of this paper appeared as World Bank South Korea." Paper presented to the Conference of Staff Working Paper No. 235, March 1976. the Committee on Taxation, Resources and Economic . "The Incidence of Urban Property Taxation in Development, Cambridge, Mass. October 1976. Colombia." Chapter 3 in Roy W. Bahl, ed., The _ . "Selected Issues in Urban Land Tenure." In Taxation of Urban Property in Less Developed Dunkerley, "Urban Land Policies and Opportunities." Countries. Madison: The University of Wisconsin _ . "Valorization Charges as a Method for Financ- Press for the Committee on Taxation, Resources, and ing Public Works in Bogota, Colombia." Urban and Economic Development, 1979. This is a condensed Regional Report No. 77-10. World Bank: Development version of World Bank Staff Working Paper No. 264, Economics Department, June 1975. August 1977. . "Policies for Efficient and Equitable Growth of Doebele, William A., and Hwang, Myong Chang. "Land Cities in Developing Countries." World Bank Staff Policies in the Republic of Korea with Special Workin Developing July 1979. Reference to Decentralized Development." Urban and W . "Property Taxation in Bogota Colombia: An Regional Report No. 79-4. World Bank: Development Analysis of Poor Revenue Performance." Public Economics Department, August 1979. Finance Quarterly, Vol. 8, No. 4 (October 1980), pp. Doebele, William A.; Grimes, Orville F.; and Linn, 457-476. Johannes F. "Participation of Beneficiaries in Financ- . "Urban Finances in Developing Countries." ing Urban Services: Valorization Charges in Bogota, Urban and Regional Report No. 80-5. World Bank: Colombia." Land Economics, Vol. 55, No. 2 (February Development Economics Department, August 1980. 1979), pp. 73-92. See also Doebele, William A., and NIohan, Rakesh, and Villamizar, Rodrigo. "The Evolution Grimes, Orville F., Jr. "Valorization Charges as a of Land Values in the Context of Rapid Urban Method for Financing Urban Public Works: The Growth: A Case Study of Bogota and Cali." Urban and Example of Bogota, Colombia." World Bank Staff Regional Report No. 80-10. World Bank: Develop- Working Paper No. 254. March 1977. DukrTy Haol B. an otes "Uba LadPlce ment Economics Department, October 1980. Dunkerley, Harold B., and others. "Urban LJand Policies Paredes, Ricardo. "Colombia's Urban Legal Framework." and Opportunities." World Bank Staff Working Paper Draft Report for the World Bank's City Study. World No. 283 (two volumes). May 1978. Bank: Development Economics Department, May Grimes, 0. "Reappraising Urban Land Tax Effectiveness 1979. Against Policy Goals," in John W. Dickey and Roy W. Prest, Alan R. "Land Taxation and Urban Finances in R. NMuncey, eds., Urban Systems Research. Washing- Less Developed Countries." Paper prepared for the ton, D.C.: National Technical Information Service, World Bank and presented at the World Congress on April 1975. Land Policy Strategies and Instruments of Implemen- "tation, June 1980, Cambridge, Mass. (Draft available priation of Betterment." World Bank Staff Working from the Urban Projects Department, Central Projects Paper No. 179. May 1974. Chapter 16 in Paul B. ff.) Downing, ed., Local Service Pricing Policies and Their Staff.) Effects on L/rban Spatial Structure. Vancouver, B.C.: Rivkin, Malcolm D. "Some Perspectives on Urban Land University of British Columbia Press, 1977. Use Regulation and Control." In Dunkerley, "Urban _ . "Urban Land Taxes and Land Planning." Land Policies and Opportunities." Finance and Development 12 (March 1975):16-20. Shoup, Donald C. "Land Taxation and Government Grimes, O., and Lim, G. C. "Employment, Land Values Participation in Urban Land Markets." In Dunkerley, and the Residential Choice of Low-Income House- "Urban Land Policies and Opportunities." Villamizar, Rodrigo. "Land Prices in Bogota Between 1955 World Bank Staff Working Paper No. 275, "Land and 1978: A Descriptive Analysis." Urban and Reform in Latin America: Bolivia, Chile, Mexico, Regional Report No. 80-2. World Bank: Development Peru and Venezuela," gives an account of the Economics Depa.tment, April 1980. results. One of the principal conclusions is that the Walters, Alan A. "The Value of Urban Land." In otoeo eomdpnso hte h ido unely"Urban Land Policies and Opportunities." outcome of reform depends on whether the kind of Dunkerley, "reform adopted is appropriate to the particular circumstances and state of agricultural develop- ment. When prereform farming is carried out in small units operated by tenants, using traditional technology, a land reform which confers ownership COM PLETED RESEARCH on the former tenants is more likely to succeed than the organization of collective or state-managed Land Reform in Latin America large farming units. On the other hand, where large estates are operated by modern farming Ref No. 670-80 methods, a land reform which leads to small owner-operated units may have undesirable eco- Land reform programs have aspired to change the nomic consequences. It may be preferable to distribution of rural property and income, to give preserve such large-scale managed operations, peasants greater earning opportunities and better while conferring shares of ownership to the access to resources and markets. Land reforms in workers The findings of the study have helped in Latin American countries have been implemented the formulation of the Bank's policy toward land at a variety of stages of economic development and reform and in the design of rural development in different political, social, and economic policy rojects settings, in pursuit of goals as diverse as their projects. methods of implementation. The decision to under- For more information, contact Shlomo Reutlinger take a land reform is strongly influenced by in the Development Economics Department. political factors, as is the outcome of the measures taken. Though the Latin American experience is well documented, most of the studies available are Reports more partisan than objective. Eckstein, Shlomo. "Land Reform in Latin America: This relatively small study undertook a compara- Bolivia, Chile, Mexico, Peru and Venezuela." World tive analysis of the experience of different coun- Bank Staff Working Paper No. 275. April 1978. tries, seeking lessons for the design and implemen- _ "Group Farming in Mexico and Peru: A tationof development programs for the rural poor lMultivariate Analysis of Peasant Cooperatives." Em- tation oployment and Rural Development Division, Develop- and, in particular, on the probable consequences of ment Economics Department, 1976. Also issued as changes in land distribution and tenure reorgani- Discussion Paper No. 7620, Department of Econom- zation in different circumstances and environ- ics, Bar-Ilan University, Ramat-Gan, Israel, Decem- ments. ber 1976. It examined the contribution of land reforms to The following background studies are available from the increases in output and their impact on employ- Employment and Rural Development Division, Develop- ment and the distribution of rural incomes, and ment Economics Department, as part of the series "Studies offered judgments on how land reforms could be in Employment and Rural Development": made more effective. The principal researcher was No. 15. Cifuentes, Eduardo. "Land Reform in Chile." Shlomo Eckstein. Participating in the study were No. 16. Dorsey, Jeff. "Bolivia Country Report." the Land Tenure Center of the University of No. 17. - . "A Case Study of Ex-Hacienda To- Wisconsin, the Centro de Investigaciones Agrarias ralapa in the Tiraque Region of the Upper Cochabam (Mexico), the Centro de Estudios del Desarrollo Valley." (Venezuela), the Fundaci6n para la Capacitaci6n e No. 18. -_ ."A Case Study of the Lower Cocha- Investigaci6n Aplicada a la Reforma Agraria bamba Valley, Bolivia." (Venezuela), and the Fundaci6n para el Desarrollo No. 19. Eckstein, Shlomo. "Lessons from the Mexican Nacional (Peru). Experience in Land Reform." No. 20. - "Mexico Case Study: Comparative advise on techniques for updating the data base for Analysis of Economic Performance of Tenure Groups in the SANI, which is for 1976, and to ensure that the the Laguna Basin." Center has the capacity to maintain and improve it No. 21. Eckstein, Schlomo, and Carroll, Thomas. "Peasant in future. Beyond this assistance, the project is Cooperation in Land Reform Programs: Some Latin designed to link the improved data base and the American Experiences." . g . m No. 22. Horton, Douglas E.. "Peru Case Study Volume." Cairo-MIT general equlibrium model with an No. 23. --- ."Land Reform and Group Farming in extended version of a model developed and used by Peru." the Bank in support of its country economic analy- No. 24. - ."Land Reform and Reform Enterprises sis. The Bank model allows more detailed attention in Peru." to be paid to the energy and food sectors and to the No. 25. Stanfield, David, and others. "The Impact of effects of government fiscal policy than is possible Agrarian Reform on Chile's Large Farm Sector." on the basis of the Cairo-MIT work. No. 26. Stanfield, David, and Smith, Stephen. "Asenta- miento Management and Productivity Changes in Ultimately, it is hoped to share the modified Bank Chile's Central Valley." model with both the DRTPC and the Egyptian Planning Ministry. The model would enable users to identify potential microeconomic inconsistencies and to propose possible corrections-for example through reallocating investments, adjusting domes- NEW RESEARCH AND tic prices, or changing rationing rules. APPLICATIONS For further information, contact Wafiq Grais or Graham Pyatt in the Development Research Cen- ter, or Kemal Dervis in the Europe, Middle East, Development of a Social Accounting and North Africa Country Programs Depart- Matrix Basis for Planning and Modeling ment I. in Egypt Multisector and Macroeconomic Models Ref. No. 672-25 of Structural Adjustment in Yugoslavia This project is designed as a collaborative effort Ref No. 672-26 with the Development Research and Technological Planning Center (DRTPC) of Cairo University. This project has two components. he first, the The aim is to develop social accounting matrix construction of a computable general equilibrium (SAM) data bases as a framework for specifying (CGE) model of the Yugoslav economy, involves and calibrating planning models, and to use these the application of techniques that are already well models to analyze policy issues. Much of the known in the research literature, and in whose literature on applying the SAM approach to policy development bank research sponsorship has played analysis and planning is the result of research done an important role. The second component, to at, or sponsored by, the World Bank. The depart- extend the CGE modeling framework to cover ments responsible for the present project are the variables and phenomena typically handled only by Development Research Center and the Europe, macroeconomic models, involves new conceptual Middle East, and North Africa Country Programs work. Department I. The CGE model is being developed jointly by the The DRTPC is the Government of the Arab Development Economics Department and the Republic of Egypt's chosen institute for improving EMENA Country Programs Department I. One its planning technology. The Center and the Mas- of the researchers is also a principal author of a sachusetts Institute of Technology (MIT) have CGE model of Turkey' in use for Bank opera- jointly developed a SAM for Egypt, which is being 1. See Kemal Dervis and Sherman Robinson, The Foreign used as the basis for general equilibrium and linear Exchange Gap, C,rowth and Industrial Strategy in I urkey: 1973- programming models. This work was financed by 1983", World Bank Staff Working Paper No. 306 (November USAID. Under the present project, the Bank is to 1978). tional work and also being transferred to the and contribute to the understanding of both equi- Middle East Technical University in Ankara. Like librium and disequilibrium processes in structural the Turkey model, the CGE model of Yugoslavia change and adjustment. Though Yugoslavia's eco- will be designed to analyze issues of trade and nomic institutions are not typical for a developing industrial policy and to trace the implications for country, the underlying economic processes at different sectors of alternative adjustment strategies work and the interactions between macroeconomic over the medium term. It will be used for a review and structural variables are fundamentally similar of Yugoslavia's new Five Year Plan (1981-85) to to those characteristic of other semi-industrial take place in mid-1981. When work on its design countries. and use is completed, the model technology will be transferred to EMENA for continuing policy For information, contact Sherman Robinson in the work. The model will also permit a richer analysis Development Economics Department or Suman than hitherto of Yugoslavia's economic perfor- Bery in Europe, Middle East, North Africa Coun- mance under the present Plan (1976-80)-a period try Programs Department I. Professor Laura which- despite difficulties in external trade and Tyson of the University of California is also payments, and the stop-go macroeconomic policies expected to participate in the project. adopted in response, has nonetheless seen contin- ued economic growth and structural change. Research Support for the World Develop- Computable general equilibrium models have be- ment Report come increasingly popular2 because they are able to Ref. No. 671-66 capture the responses of decentralized decision makers to policy actions that change the structure Since 1974 the World Bank has been engaged in of incentives in product and factor markets. At modeling the world economy-originally, to ensure their present state of development, however, they that perceptions of the prospects of developing are by nature unrealistic in several crucial respects. countries were consistent with what was thought In particular, most of them analyze the structural likely to happen in the world economy, and, more effects of alternative policies over the medium term recently, as an aid to understanding the implica- and do not give an adequate account of short-term tions of alternative policy choices, both at the changes in macroeconomic performance. For ex- sectoral level within developing economies, and at ample, in the model of Turkey cited above the the international level, tracing the interdependence inflation rate was assumed to be given to the model of groups of countries through trade and capital exogenously. This lack of focus on macroeconomic flows. variables is a serious shortcoming for, in, many countries, the choice of policies to influence growth The first such efforts linked a set of models of and change in the medium term is strongly influ- individual developing economies with a simple enced by the exigencies of short-term macro- global model, SIMLINK, designed in the tradition economic management. of trade gap models but with a more detailed treatment of loan flows and debt service. Its struc- MIacroeconomic models, by contrast, emphasize ture and results were quite strongly influenced by short run adjustments, taking a more aggregate the assumption that the main constraint on the view of the economy and concentrating on changes growth of developing economies was foreign ex- introduced from the demand side. Adjustments in change, whose availability largely depended on the the structure of production on the supply side policies of industrialized countries, as markets for usually receive little or no attention. exports and sources of capital, concessional and otherwise.3 The second phase of this research project aims to break new ground by incorporating variables, poli- cies and processes that are common in macroeco- nomic modeling into the multisectoral structure of 2. For a survey, see Kemal Dervis, Jaime de Melo, and Sherman nomic mo g io te m oal s e of LRobinson, General Equzitbnum Models for Development Policy a CGE model. The research should yield valuable (Cambridge: Cambridge University Press, forthcoming). insights into the general problems of combining 3. Norman L. Hicks, et al. "A Model of Trade and Growth for macroeconomic and CGE modeling techniques, the Developing World", European Economic Review 7:239-55. The global framework that succeeded SIMLINK, that can be used to analyze the adjustment of and underpinned the analysis of international eco- developing economies to external shocks. Such nomic issues in the first three annual World Devel- adjustments are often hampered by rigidities, so opment Reports, gives more direct cognizance to that markets frequently cannot be equilibrated by the developing countries' scope for policy choices. It changes in prices. To allow for these rigidities, the consists of a set of linked linear programming model design draws on the recently developed models in which the governments of developing "fixed price" general equilibrium theory.6 Second, countries-grouped into "regions" according to it is planned to validate the aggregative model geographical proximity and per capita income- against historical data. To do this, the model will be seek the best course of development subject to run backwards from its base year by reversing the constraints on the balance of payments, savings, flow of time in the equations. In this way, the and industrial capacity. The regional models are model can also be used to examine how developing linked by modules representing international trade countries have adjusted to external shocks and in various goods and services, different types of what they might have done to ease their adjust- capital flows, and debt service payments. The ment, given the advantages of hindsight. behavior of groups of industrialized economies, centrally planned economies, and oil exporting The project is due for completion in mid-1982. For countries, enters the model separately.4 information, contact P. Miovic in the Economic Extending this work for use in the 1981 World Analysis and Projections Department. Development Report and subsequently by the Eco- nomic Analysis and Projections Department, Pro- Applications of Programming in the fessor Jean Waelbroeck and associates at the Cen- Manufacturing Sector: Indian Fertilizer ter for Econometrics and Mathematical Economics Model and a Model of the Madagascar at the Free University of Brussels are developing a Forest Industry new global model. Supplementary funding hasjust been granted for this project, which began in 1978. Re No. 672-22 Besides the modeling work, and contributing to it, f. the project also covers a study of trade and penetra- The large research project on programming in the tion of markets in industrialized countries. manufacturing sector (Ref. No. 670-24) was de- signed to formulate and evaluate methods of invest- The Waelbroeck model takes 1978 as its base year. ment analysis for industrial activities subject to It contains submodels representing nineteen devel- economies of scale. A series of manuals is being oping "regions," linked by trade equations that prepared, aimed at an analytically sophisticated give individual treatment to twenty products. The but nonspecialist audience, to promote the use of growth of industrialized economies is specified outside the model, but an effort is being made to endogenize it; the import demand of these countries is treated endogenously. The model uses the gen- eral equilibrium approach developed in earlier 4. Syamaprasad Gupta, et al, "The World Bank Model for research by the Bank and gaining increasing Global Interdependence: A Quantitative Framework for the World rDevelopment Report," journal of PolicI Modeling 1(2) (1974.). currency.' This approach allows a high degree of 5. Irma Adelman and Sherman Robinson, Incorrme Distributon price endogeneity, and is thus particularly suitable Thdtcy in the Developing Countries: A (.ase Study of Korea for examining how economic disturbances are (Stanford: Stanford University Press, and Oxford: Oxford Univer- transmitted from one region to another. A prelimi- sity Press, 1978); Victor Ginsburgh and Jean Waelbroeck, A General Equilibrium Model of Uorld 7rade, Part I: F'ull Format nary version of the model has been transferred to (.omputation of Economic Equlzhbria, Cowles Foundation Discus- the Bank and has been used in exploratory sensitiv- sion Paper No. 412 (New Haven, Conn.: Yale University, 1975); ity analyses. and Victor Ginsburgh and Jean Waeibroeck, A General Equilib- riutn Model olf Wirld 7rade, Part II: The Empirical Specification, Two aspects of the Brussels group's approach are Cowles Foundation Discussion Paper No. 413 (New Haven, innovative. First, the rise in oil prices Conn.: Yale University, 1975). particularly I6. The group are examining alternative approaches to using in mid-1979 prompted them to construct a second, fixed-price equilibrium theory for global modeling. See Jan more aggregative, world model, based on the first, Gunning's paper listed at the end of this note. Il '%5El) 5t the planning methodology by sector planners.7 The For more information, contact Ardy Stoutjesdijk in methodology has so far been applied in the fertil- the Development Economics Department or Alex- izer industry in the Arab Republic of Egypt, in ander Meeraus in the Development Research Southeast Asia, and the Andeani Common Market; Center. the forestry and forest industry sector in Turkey and Southeast Asia; and the steel industry in Application of the General Algebraic Mexico. It has also been used in an analysis of the Modeling System to Agricultural Sector world fertilizer, copper, and aluminum industries. Models Decisions were recently made to contribute funds for two further applications: the use by the Gov- Ref. No. 672-24 ernment of India of a model of the Indian fertilizer sector, and the development of a model for a The General Algebraic Modeling System forestry project and associated industrial develop- (GAMS), now being completed in the Develop- ment in Mvadagascar. ment Research Center, is designed to make mathe- matical models more generally accessible. The lack The programming model of the Indian fertilizer of a common documentation system and shared sector is the product of joint work between the conventions has meant that existing models are Industrial Projects Department and the Develop- difficult to communicate, and has been an impor- ment Research Center over the past three years. It tant barrier to their more widespread use. GAMS contains the most comprehensive data base on the uses a language comprehensible to both people and Indian fertilizer sector now existing. The Govern- machines, which stays close to the conventions of ment of India intends to use the model to assist in algebra and is easily transferable among different planning the large investments in fertilizer produc- computers. Because it permits more stages to be tion and distribution that are envisaged for the automated in the specification and solution of Sixth Plan period. To transfer the model to India, models, the system also reduces the likelihood of the Bank will train a nucleus of specialists, errors and makes modeling cheaper and less de- including a systems analyst, economist, and chemi- manding of highly specialized skills. cal engineer. GAMS has been used very successfully for the In connection with the proposed Second Mangoro design and operation of models in the area of Forestry Project in Madagascar, the Development industrial planning, but it has not yet been applied Economics Department and Development Re- to models of the agriculture sector. To demonstrate search Center are developing a model with which its use in this area, work has begun on the to evaluate alternatives for processing logs. Previ- "translation" into GAMS of two models: the model ous applications of the methodology have shown its of the Indian agriculture sector developed by the advantages over the "one-shot" type of investment International Institute for Applied Systems Analy- analysis: once the model is formulated and imple- sis in Vienna (IIASA), and the Algerian agricul- mented, the data base, assumptions, and underly- ing projections can be updated as necessary, so that the project's characteristics can be revised relatively 7. The Planning of Investment Programs, edited by Alexander rapidly if circumstances change. Teeraus and Ardy Stoutjesdijk. David Kendrick and Ardy Stoutjesdijk, Iolume 1: T'he Planning of Industrial Investment Two other applications of the methodology have Pr,)grarns 4 .Mtethodology (Baltimore and London: The Johns recently been started. The first is a study of the Hopkins University Press, 1979); Armeane NI. Choksi, Alexander forest industry in Portugal, organized by the UN Nleeraus, and Ardy Stoutjesdijk, I'olume II: 7he Planning of Food and Agriculture Organization, involving the Invsetment Programs in the Fertilizer Industr-v (Baltimore and London: The Johns Hopkins University Press' 1980). A book, same team that worked with the Bank's staff on the combining volumes I and 11, has recently been published in French forest industry in Southeast Asia. The second is a under the title, La Programmation des Investissements Industrtels, study of the petrochemical and oil refinery sector in 1ll1th,,de ct Etude de Cas (Paris: Editions Economica, 1980). The the Republic of Korea, proposed by the Korean series is currently planned to contain four more volumes, three of the Koean shich are at an advanced stage of preparation. These volumes deal Government and being funded by the Korean with investment analysis in the steel industry, the forestry petrochemical industry. industries, and with investment analysis in a multicountry context. ture sector model developed by the Bureau Na- showing, for example, the share of wages in value tional d'Etudes du Developpement et de I' Econo- added, can be reported across countries or across mie Rurale (BNEDER), which is collaborating in sectors. The data files can be updated or backdated the project. This work should render the models as more information becomes available. Part of the computationally more accessible and make their supplementary financing just granted will cover structure easier to comprehend. The experience their extension backwards to 1960. will be documented for presentation at an interna- tional Conference on Agricultural Sector Models to The main element of the project's extension covers be held by IIASA in August 1982. the creation of an integrated system which would make the data easier to use for Bank operating For information, contact Wilfred V. Candler or staff-for example, by reporting rates of growth Alexander Meeraus in the Development Research and import and export ratios. In the course of Center. 1981, EPD hopes to be able to produce virtually all the types of manufacturing information generally Industrial Statistics needed for country reports, in tables that are comparable in format and analytically. It is also Ref. No. 671-92 planned to give explanatory seminars for operating staff and to enable data users to consult with the Funds have recently been approved for an exten- andipa eabler, Prso con Withsthe sion of this project, which was started in 1979. Its principal researcher, Professor John Weeks of purpose is to compile a file of consistent and American University, on a regular basis. detailed data on manufacturing for as many coun- For further details, contact Sang Eun Lee, Eco- tries as possible. "Consistency" has several dimen- nomic Analysis and Projections Department. sions in this context: the aim is to make the data conform throughout to the categories of the new Food Policy Analysis for Practitioners United Nations Standard Industrial Classification (ISIC) and also to the definitions used by censuses Ref. .V'. 672- 18 and sample surveys. Further, different countries report manufacturing data for different minimum Since the World Food Conference of 1974, there sizes of establishment. Largely by using supple- has been increased awareness of the extent and mentary infornmation from each country covered, it nature of malnutrition in developing countries. has been possible to adjust the data to the level of This has led to calls for efforts to provide food establishments employing five or more persons. security for the populations of these countries-the Estimates have been made where data are missing. provision of reliable supplies of adequate nutrition at acceptable prices. Analyses of the dinmensions of At present the data files assembled by the project "food security" have revealed that this cannot be cover the period 1970-76. They provide, for about addressed simply as a global issue (in terms of 50 countries, the only time series at the 4-digit level trade, aid, buffer stocks, and stabilization), nor of ISIC, on establishments, employment, wages simply through government or private programs and salaries, gross output, and value added. Data (whether broad spectrum interventions such as for an additional 20 countries are available at the ration shops, or closely targeted programs provid- 3-digit manufacturing level. Data on international ing income or food supplements to deprived trade have been organized into the same categories groups). Rather, it has become obvious that a as the industrial data at the 4-digit level, allowing whole range of policy variables, frorn agricultural the two types of data to be reported together and prices, taxes, and subsidies to agricultural research compared. and development activities, from food storage and distribution systems to emergency distribution pro- The data are organized for easy access by Bank grams, needs to be adjusted at the national level if staff. Tables can be reported which give an food security is to be improved. indicator for a particular country over time at the 4-digit ISIC level; a particular 4-digit sector and Unfortunately, there is no simple prescription for particular indicator can be reported for all coun- making these policy adjustments. Many of the tries for a year; and certain analytical tables, policy instruments can have a positive effect on agricultural production, particularly in the population growth rate, which is still high at 2.8 medium and longer run, but they may adversely percent a year. Among the countries to which the affect human nutrition and food security. For Bank lends for population projects, Bangladesh has instance, raising domestic prices, to increase the received the largest IDA credit for the population incentives to farmers, could seriously reduce the sector; yet, the information base for deciding real incomes and nutritional status of poor urban program priorities in family planning and health consumers, at least in the short run. How should remains sketchy. This research application project national food policies, programs, and projects in will make it possible to begin analysis of a massive the developing countries be devised and imple- set of household data on fertility and socioeconomic mented so as to attack undernutrition in the short characteristics, and to produce a policy-oriented run and stimulate self-reliant growth in the report on the socioeconomic forces influencing the medium and longer run? fertility and contraceptive behavior of households. Consumption and production perspectives have Starting in 1976, the Bangladesh Institute of rarely been joined in the analysis of food policy at Development Studies (BIDS) initiated an ambi- the country level. Agricultural and economic plan- tious series of household surveys for a study of the ners, particularly in such areas as agricultural determinants of fertility as part of the first World pricing and technology, have frequently paid little Bank population project in the country. These heed to the effects of policies and programs on surveys were subsequently extended and combined nutrition. Nutrition planners, who often have a with a study of rural poverty. The resulting data predilection for direct interventions, have perhaps cover about 4,000 households in four contrasting missed some of the most important mechanisms for areas. The data offer detailed information on the altering nutritional status. households' economic characteristics and relation- ships, as well as their demographic characteristics, This project will seek to elaborate an analytical health and nutritional status, occupations, social base for the development of national food strategies status, and access to services. For various reasons, that reconcile production and consumption issues. including BIDS's lack of access to modern comput- In doing so, the authors, led by Professor Walter ing technology, the data have not yet been ana- Falcon, Director of the Food Policy Research lyzed. Institute at Stanford University, will draw upon their research, teaching, and advisory experiences The Bank's Development Economics Department in Asia and Africa over the past fifteen years. After is to collaborate with BIDS in processing and workshops with the Bank's operating staff and managing the data, and in developing a policy- policy makers from developing countries, a manual oriented framework for its analysis. In so doing, will be produced that will contain an operational the department will draw upon its experience in framework for policy analysis, and illustrate key studies of household fertility in Botswana, India, policy issues with case materials. and Sri Lanka, and particularly in analyzing the very large body of data collected for a population For information, contact Graham Donaldson in study of Narangwal in the Indian Punjab (research the Agriculture and Rural Development Depart- project Ref. No. 672-03). The present project will ment. produce an interim report expected to be of immediate interest to policy makers and to the Fertility and Contraceptive Behavior in Bank's operating staff, but its main objective is to Bangladesh help BIDS develop the capacity to handle and Ref. No. 6 72-23 analyze large volumes of household survey data. For information, contact Rashid Faruqee in the There is an urgent need for more information on Development Economics Department. the socioeconomic forces influencing fertility and contraceptive use in Bangladesh. The Government of Bangladesh has committed a substantial amount of resources to its population program, but recog- nizes the need for greater efforts to reduce the 4t- NEW AND FORTHCOMING also considers the nutritional consequences of the PUBLICATIONS ways agroindustrial projects are designed. The principal activities of an agroindustrial enter- prise-procurement, processing, and marketing The full range of World Bank publications is -are discussed in detail. Basic questions that an described in the Catalog of World Bank Publica- analyst needs to ask in assessing project planning tions, issued annually. The new books listed below, in these areas are summarized in an appendix which are published by outside publishers for the checklist. Another appendix illustrates typical costs World Bank, are obtainable through booksellers or of alternative food processing technologies, and a by writing to the publishers. Prices are subject to comprehensive bibliography is arranged by subject. change. The other items listed, and the Catalog, are available free of charge from: Employment Policy in Developing Countries: Publications Unit A Survey of Issues and Evidence World Bank Lyn Squire 1818 H Street, N.W. Washington, D.C. 20433, U.S.A. Oxford University Press, 1981 (forthcoming). About 208 pages. NEW BOOKS ISBN 0-19-520266-x $16.95 hardcover 0-19-520267-8 $ 7.95 An contrast to much of the existing literature, this James E. Austin study finds that the well-being of the underem- ployed will not be significantly enhanced by poli- The Johns Hopkins University Press for the cies to increase the efficiency of labor markets: Economic Development Institute of the World efforts are needed to increase labor demand and Bank, 1981. 224 pages. reduce labor supply. In support of this argument, the author shows that rates of industrial labor LC 80-550 absorption in the developing countries are similar ISBN 0-8018-2412-5 $16.50 (19.00) hardcover to those that the now-industrialized countries 0-8018-2413-3 $ 6.50 (14.00) paperback experienced at similar stages of development. The author also assesses the significance of a variety of Agroindustries contribute significantly to a devel- labor market distortions. He finds that when oping country's economic growth: they are the allowance is made for the heterogeneity of workers primary method of transforming raw agricultural and the dynamics of disequilibrium in the market, products into consumable products and, in the labor markets secure a reasonably efficient alloca- process, of adding value to the raw materials. tion of human resources. As a result, most of the Agroindustries often constitute the base of the policy discussion in the volume relates to influences manufacturing sector, and their products are fre- on the demand for labor-notably, industrial trade quently the principal exports of a country. The policy, agricultural development, and the operation food system of which they are a central part of capital markets, and on the supply of labor-no- provides nutrients required by the nation's popula- tably, family planning programs and education tion. policy. Agroindustrial projects have often been evaluated Made in Jamaica: The Development of the as either agricultural or manufacturing projects. Manufacturing Sector This book, however, presents a framework for project analysis that treats agroindustries as one Mahmood Ali Ayub component in a larger system of related stages, from seed to consumer. The proposed methodology World Bank Staff Occasional Papers, Number 31. encompasses this systems approach and the tradi- The Johns Hopkins University Press, 1981 (forth- tional tools of financial and economic analysis. It coming). About 144 pages. LC 80-27765 WORLD BANK STAFF WORKING ISBN 0-8018-2568-7 $6.50 paperback PAPERS Jamaica, a country of just over two million No. 414. Demographic Aspects of Migration in inhabitants, has a remarkably varied manufactur- West Africa - Volume I (English-speaking West ing sector. The initial impetus for industrial Africa). K. C. Zachariah, and N. K. Nair, Chike S. development came from the demands of the sugar Okoye, Eugene K. Campbell, M. L. Srivastava, and other food subsectors, but the country now Kenneth Swindell (consultants), Development Eco- produces a variety of manufactures, from garments nomics Department; Julien Conde, OECD Devel- and processed goods to machinery and electrical opment Centre, Paris. equipment. No. 415. Demographic Aspects of Migration in This book, the first detailed study of Jamaica's West Africa - Volume 2 (French-speaking West manufacturing sector, provides a comprehensive Africa). K. C. Zachariah, and N. K. Nair (consul- assessment of the important characteristics of the tant), Development Economics Department; sector and of its structure. It relates the develop- Julien Conde, OECD Development Centre, Paris. ment of the sector during the past two decades, describes the extent of protection provided to the No. 416. Economic Motivation Versus City sector in 1978, and examines the prospects for Lights: Testing Hypotheses About Inter-Chang- growth of manufactured exports during the coming wat Migration in Thailand. Fred Arnold (consul- years. Policy recommendations are made on the tant) and Susan H. Cochrane, Development Econ- basis of this analysis. omics Department. September 1980. Rigorous empirical analysis is combined with more No. 417. Poverty and Unemployment in India: informal study. Macroeconomic data from private An Analysis of Recent Evidence. Pravin Visaria, and government institutions are used, as well as Development Research Center. October 1980. disaggregated microeconomic data from a survey of about seventy-five manufacturing firms. The ex- No. 418. Approaches to Purchasing Power Par- tensive survey questionnaire, which requested both ity and Real Product Comparisons Using Short- qualitative and quantitative information, is repro- cuts and Reduced Information. Sultan Ahmad, duced as an appendix. Economic Analysis and Projections Department, 1980. National Urbanization Policy in Developing Countries No. 419. Employment Patterns and Income Growth. Joseph J. Stern (consultant) and Jeffrey Bertrand Renaud D. Lewis, Development Economics Department. Oxford University Press, 1981 (forthcoming). September 1980. About 208 pages. No. 420. The Evaluation of Human Capital in Malawi. Stephen Heyneman, Education Depart- ISBN 0-19-520264-3 $16.95 hardcover ment. October 1980. 0-19-520265-1 $ 7.95 paperback No. 421. A Conceptual Approach to the Analy- National urbanization policies in developing coun- sis of External Debt of the Developing Coun- tries often attempt, without a full understanding of tries. Robert Aliber, Economic Analysis and Proj- the forces at work, to block the growth of the ections Department. October 1980. largest cities and to induce decentralization. This book takes a critical look at such policies and their No. 422. Estimating Total Factor Productivity conceptual foundations and describes some of the Growth in a Developing Country. Anne 0. problems inherent in their implementation. Both Krueger and Baran Tuncer (consultants), Devel- global and national trends are analyzed. opment Economics Department. October 1980. AN OVERVIEW OF planning and regulation. More broadly, since patterns of landownership and use are intrinsic to WORLD BANK RESEARCH the pattern of future urban expansion and, ON URBAN LAND ISSUES frequently, to the distribution of wealth and income, land questions also require consideration Rachel Weaving, Office of the Vice President, in the design of urban lending strategies and in Development Policy' dialogues on urban development policy with governments. Understanding of urban land issues has been growing as the Bank's urban operations have expanded. The research on these issues thus far By the end of this century, nearly half the supported by the Bank ranges from studies with a population of the developing world will live in direct bearing on lending procedures-for exam- urban areas. Urban populations in developing ple, of approaches to be used for valuing land in countries have been growing at 4 percent a year for cost-benefit analysis-to empirical studies-for the last three decades, and are expected to continue example, on the incidence of urban property expanding rapidly (3.5 percent a year) in the taxation or the financing of urban services through twenty years to come.2 Many towns and cities have betterment levies-that have potential implications doubled their population in a decade. Such rapid for the design of urban fiscal systems and policies growth, particularly at low levels of income, puts to influence the distribution of income. strong pressure on urban land and the resources and institutions used to service it. The systems by This overview describes some recent studies sup- which urban land is acquired, allocated, and ported by the Bank, in four main subject areas: serviced for industrial, commercial, and residential land values; tenure; the capture of "betterment" or use, have an important influence on the character "surplus value" by various forms of land taxation; of urban growth and the quality of life of urban and land regulation, including the public acquisi- residents. Land also plays a key role in urban fiscal tion of land. All of these areas are dealt with in affairs: taxes and charges on real property contrib- "Urban Land Policy Issues and Opportunities" ute a high proportion of the revenue from which (World Bank Staff Working Paper No. 283), with municipal governments provide services. an "Overview" by Harold Dunkerley and contrib- utions by five other authors, currently being Widespread dissatisfaction with the urban forms prepared for publication; other work has been done resulting from present land use practices makes it in the context of research projects on "Urban Land important to consider whether and how these Use Policies: Taxation and Control" (Ref. No. practices might be improved. Urban governments 670-98); "Urban Public Finance and Administra- are extremely short of capital to finance infrastruc- tion" (Ref. No. 670-70), and "The City Study" ture and services, and of skilled manpower with (Ref. No. 671-47). which to conceive and implement policies, plans, and regulations. Yet present government decisions Land Values -or the lack of them-have long lasting conse- quences: once built, roads, power distribution Land values are an important underlying element networks, sewers, or office buildings have long in many types of urban policy decisions, ranging lives. from the structure and rates of property taxation to the location and design of investment projects. The World Bank's urban lending operations Urban land values in developing countries are unavoidably require decisions on land issues. Many of the projects it helps to finance have a strong influence on the supply, demand, and prices i. The author wishes to thank Orville Grimes, Gregory Ingram, of urban land. Designers of these projects must and Johannes Linn for their generous advice and very useful commonly consider policies for procuring public comments. Resionsibility for any errors of interpretation or emphasis remains with the author. land, land tenure arrangements, the structure of 2. World Bank, World Development Report, 1979. (New York: land taxation, and the systems that govern land use Oxford University Press, 1979):72. Vl $N I iR j 48 : i i often popularly perceived to have risen far more more often because of the cumbersome way in rapidly than the general level of prices, and to yield which they are implemented, also limit the supply unduly high profits. These perceptions may or may of urban land both in general and for specific not be correct. However, they are a seductive purposes. means of justifying policy measures designed to further equity among urban residents-particu- In market economies, the yields from private larly in cities where large and visible numbers of investments in land should in principle relate the poor must squat illegally on land they could not c losely to the yields obtainable from other types of afford to purchase, if they are to live close enough investment. In fact, Dunkerley observes, rising to their jobs. Not enough is known about how urban land prices can result in real returns to land urban land markets work, or the extent to which that for long periods exceed those to other land prices reflect true demand or are influenced investments of comparable risk. Among the possi- by monopoly power. But the literature increasingly ble contributory causes cited by Dunkerley are an emphasizes that, if interventions designed to underestimation by investors of the speed of urban further distributional objectives affect land prices, growth and the consequent benefits from holding they risk reducing the incentives to private urban land; reductions in effective tax rates on land developers and interfering with the efficient alloca- as a result of inflation; and overestimation of the tion of land among alternative uses, possibly with risks of forfeiture or other government interven- adverse effects for all urban residents. In this tions to reduce private benefits; monopoly power section we first note recent studies on land values may also have an influence. and the working of land markets, and then refer to The last part of a paper by Alan Walters, "The work with a bearing on the valuation of land in The of Urban Walte, also project analysis. Value of Urban Land," in the same volume, also addresses the reasons for rapid increases in urban Measuring and predicting urban land values poses land prices. Walters finds them attributable in part both conceptual and practical problems. As Dun- to administrative and financial restrictions on the kerley notes in his "Overview" (in "Urban Land supply of urban services and-assuming that the Policy Issues and Opportunities"), the extent to yields obtainable from private holdings of urban which increases in land prices can be expected to land will relate closely to those obtainable from exceed the cost of infrastructure and other develop- other types of investment-in part to the high rates mental expenses, the relative strength of the of return on risk capital. various components of demand for urban land, and the elasticity of its supply, are still subjects of In "The Evolution of Land Values in the Context controversy. The empirical basis for analysis of of Rapid Urban Growth: A Case Study of Bogota these questions, and of the influence of monopoly and Cali," Rakesh Mohan and Rodrigo Villamizar power on prices, has improved only slightly over use data from these Colombian cities to test the the past few decades. predictions of a simple model of urban land values. Their study confirms that land prices, and popula- In the opening sections of his paper, Dunkerley tion density, decline as distance from the city center reviews the influences on urban land values. increases. Looking at a city as a whole, land values Underlying the rapid increases in these values is are closely associated with population density. the rapid expansion in urban populations and real Looking at land values within radial segments (pie incomes, which raises the economic value of land slices) of a city, the same pattern of declining values already within urban boundaries or about to be is seen, apparently unaffected by contrasts between incorporated. In analyzing the failure of the supply the segments in income levels and population of urbanized land to expand in step with the rapid density. (Population density is greater toward the increase in demand, Dunkerley emphasizes the city center in high-income segments, but it is financial and institutional limitations on urban roughly uniform in low-income segments.) The governments' ability to provide services, adding authors also find that, as a city grows, land values that these limitations are often compounded by the at its periphery increase, with a jump in value use of inappropriate design standards and a failure occurring in advance of development; at the city to charge economic rates for the use of the services. center, land values may or may not increase, but Controls on land use, sometimes in themselves, but overall land values within the city will rise. In WORLD BANK COUNTRY STUDIES The Maldives: An Introductory Report. Sawar Lateef, Chief of NMission, et al. South Asia llorld Bank country studies are prepared mainly Regional Office. January 1981. f.or the Bank's ouzn use, with distribution restricted to member governments and international organi- Nepal: Development Performance and Pros- zations that deal v'ith development problem.s. pects. Yukon Huang, Chief of Mission, et al. WIlhere the issues studied have attracted a wide South Asia Regional Office. December 1979. interest, uwhere it appears that the Bank's study could contribute substantially to k,, . -,'. and Income Growth and Poverty Alleviation in understanding of these issues, and where the Thailand. John Shilling, Chief of Mission, et al. authorities of the coun1try concerned are agreeable, East Asia and Pacific Regional Office. June 1980. such reports are made available to a wider au(lience. Potentlial readers are advised that these Industrial Development Strategy in Thailand. are uzorking dlocuments, not prepared with a view) Bela Balassa, Chief of Mission, et al. East Asia and to broad dlstribution. Pacific Regional Office. June 1980. Population and Development in Kenya. Rashid Faruqee, Chief of Mission, et al. Development Policy Staff and Eastern Africa Regional Office. July 1980. Madagascar: Recent Economic Developments and Future Prospects. P.C. Joshi, Chief of Mission, et al. Eastern Africa Regional Office. November 1980. (Also available in French.) M- I World Bank lleadquarters 1818 H Street, N.W. Washington, D.C. 20433. U.S.A. Telephone: 12021 477-1234 Cable Address: INTBAFRAD WASHINGTONDC European Office: 66, avenue d'Iena 75116 Paris. France Tokyo Office: Kokusai Building 1-1, NMlarunouchi 3-chonie Chivoda-ku. Tokyo 100. Japan