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Produced by Partnerships, Capacity Building, and Outreach Policy Research Working Paper Series Abstracts Numbers 2934-3008 Index WPS # Author Working Paper Title Page Agriculture 2949 Rita Butzer, Yair Mundlak, Intersectoral Migration in Southeast Asia: and Donald F. Larson Evidence from Indonesia, Thailand, and the Philippines 6 2951 Martin Ravallion and Dominique Land Allocation in Vietnam's Agrarian Transition van de Walle 6 2976 Jock R. Anderson and Gershon Feder Rural Extension Services 14 2991 Klaus Deininger, Songqing Jin, Berhanu Tenure Security and Land-Related Investment: Adenew, Samuel Gebre-Selassie, and Evidence from Ethiopia 19 Berhanu Nega 2992 Klaus Deininger, Songqing Jin, Berhanu Market and Nonmarket Transfers of Land in Ethiopia: Adenew, Samuel Gebre-Selassie, and Implications for Efficiency, Equity, and Nonfarm Development Mulat Demeke 20 2993 Panos Varangis, Paul Siegel, Daniele Dealing with the Coffee Crisis in Central America: Giovannucci, and Bryan Lewin Impacts and Strategies 20 2995 Takamasa Akiyama, John Baffes, Commodity Market Reform in Africa: Some Recent Experience Donald F. Larson, and Panos Varangis 21 Infrastructure 2963 Philippe Auffret Catastrophe Insurance Market in the Caribbean Region: Market Failures and Recommendations for Public Sector Interventions 10 2979 Scott Wallsten Regulation and Internet Use in Developing Countries 16 2983 Luke Haggarty, Mary M. Shirley, Telecommunication Reform in Ghana and Scott Wallsten 17 2988 John S. Wilson, Catherine L. Mann, Trade Facilitation and Economic Development: and Tsunehiro Otsuki Measuring the Impact 18 3001 Antonio Estache, Martin Rodriguez An Introduction to Financial and Economic'Modeling Pardina, Jos6 Maria Rodriguez, and for Utility Regulators German Sember 23 3002 Uwe Deichmann, Somik V. Lall, Information-Based Instruments for Improved Urban Ajay Suri, and Pragya Rajoria Management 23 3007 Antonio M. Bento, Maureen L. Cropper, The Impact of Urban Spatial Structure on Travel Ahmed Mushfiq Mobarak, and Katja Vinha Demand in the United States 24 Domestic finance 2948 Gregorio Impavido, Alberto R. Musalem The Impact of Contractual Savings Institutions and Thierry Tressel on Securities Markets 5 2980 Augusto de la Torre, eduardo Levy Yeyati, Living and Dying with-Hard Pegs: The Rise and Fall and Sergio L. Schmukler of Argentina's Currency Board 16 ii Index WPS # Author Working Paper Title Page 2984 George Clarke, Lixin Colin Xu, Finance and Income Inequality: and Heng-fu Zou Test of Alternative Theories 17 2986 Stin Claessens, Daniela Klingebiel, Government Bonds in Domestic and Foreign Currency: and Sergio Schmukler The Role of Macroeconomic and Institutional Factors 18 2996 Thorsten Beck, Ash Demirgig-Kunt, Bank Competition, Financing Obstacles, and Vojislav Maksimovic and Access to Credit 21 2997 Thorsten Beck, Ash Demirgiq-Kunt, Financial and Legal Institutions and Firm Size and Vojislav Maksimovic 21 3000 Franck Lecocq and Renaud Crassous International Climate Regime beyond 2012: Are Quota Allocation Rules Robust to Uncertainty? 22 Environment 2936 Hua Wang and Yanhong Jin Industrial Ownership and Environmental Performance: Evidence from China 1 2937 Hua Wang and Wenhua Di The Determinants of Government Environmental Performance: An Empirical Analysis of Chinese Townships 2 2960 Susmita Dasgupta, Uwe Deichmann, The Poverty/Environment Nexus in Cambodia and Lao Craig Meisner, and David Wheeler People's Democratic Republic 9 3007 Antonio M. Bdnto, Maureen L. Cropper, The Impact of Urban Spatial Structure on Travel Ahmed Mushfiq Mobarak, and Katja Vinha Demand in the United States 24 Industry 2936 Hua Wang and Yanhong Jin Industrial Ownership and Environmental Performance: Evidence from China 1 2937 Hua Wang and Wenhua Di The Determinants of Government Environmental Performance: An Empirical Analysis of Chinese Townships 2 2944 Giuseppe Nicoletti and Stefano Scarpetta Regulation, Productivity, and Growth: OECD Evidence 4 2957 Hong Tan and Gladys Lopez-Acevedo Mexico: In-Firm Training for the Knowledge Economy 8 2987 Ho-Chul Lee and Mary P. McNulty East Asia's Dynamic Development Model and the Republic of Korea's Experiences 18 3003 Mary Hallward-Driemeier, Scott Wallsten, The Investment Climate and the Firm: and Lixin Colin Xu Firm-Level Evidence from China 23 Private sector development 2936 Hua Wang and Yanhong Jin Industrial Ownership and Environmental Performance: Evidence from China 1 2944 Giuseppe Nicoletti and Stefano Scarpetta Regulation, Productivity, and Growth: OECD Evidence 4 2957 Hong Tan and Gladys Lopez-Acevedo Mexico: In-Firm Training for the Knowledge Economy 8 Index iii WPS # Author Working Paper Title Page 2959 Michael M. Lokshin and Branko Wage Differentials and State-Private Sector Employment Jovanovic Choice in Yugoslavia 9 2974 Alfred Watkins From Knowledge to Wealth: Transforming Russian Science and Technology for a Modem Knowledge Economy 14 2979 Scott Wallsten Regulation and Internet Use in Developing Countries 16 2983 Luke Haggarty, Mary M. Shirley, Telecommunication Reform in Ghana and Scott Wallsten 17 2984 George Clarke, Lixin Colin Xu, Finance and Income Inequality: Test of Alternative Theories and Heng-fu Zou 17 2990 Michael Klein Ways Out of Poverty: Diffusing Best Practices and Creating Capabilities-Perspectives on Policies for Poverty Reduction 19 2991 Klaus Deininger, Songqing Jin, Berhanu Tenure Security and Land-Related Investment: Adenew, Samuel Gebre-Selassie, Evidence from Ethiopia and Berhanu Nega - 19 2992 Klaus Deininger, Songqing Jin, Berhanu Market and Nonmarket Transfers of Land in Ethiopia: Adenew, Samuel Gebre-Selassie, Implications for Efficiency, Equity, and Nonfarm Development and Mulat Demeke 20 2994 Miguel Palacios Options for Financing Lifelong Learning 20 3001 Antonio Estache, Martin Rodriguez An Introduction to Financial and Economic Modeling Pardina, Jos6 Maria Rodriguez, for Utility Regulators and GermAn Sember 23 3003 Mary Hallward-Driemeier, Scott Wal1sten, The Investment Climate and the Firm: and Lixin Colin Xu Firm-Level Evidence from China 23 Governance 2936 Hua Wang and Yanhong Jin Industrial Ownership and Environmental Performance: Evidence from China 1 2937 Hua Wang and Wenhua Di The Determinants of Government Environmental Performance: An Empirical Analysis of Chinese Townships 2 2942 Monica Das Gupta, Jiang Zhenghua, Why is Son Preference so Persistent in East and South Asia? Li Bohua, Xie Zhenming, Woojin Chung, A Cross-Country Study of China, India, and the and Bae Hwa-Ok Republic of Korea 3 2969 Monica Das Gupta, Helene Fostering Community-Driven Development: Grandvoinnet, and Mattia Romani What Role for the State? 12 2970 Vijayendra Rao and Ana Maria Ibiez The Social Impact of Social Funds in Jamaica: A Mixed- Methods Analysis of Participation, Targeting, and Collective Action in Community-Driven Development 12 2979 Scott Wallsten Regulation and Internet Use in Developing Countries 16 iv Index WPS # Author Working Paper Title Page 2981 Vivi Alatas, Lant Pritchett, Voice Lessons: Local Government Organizations, and Anna Wetterberg Social Organizations, and the Quality of Local Governance 16 2983 Luke Haggarty, Mary M. Shirley, Telecommunication Reform in Ghana and Scott Wallsten 17 2989 Peyvand Khaleghian Decentralization and Public Services: The Case of Immunization 19 2995 Takamasa Akiyama, John Baffes, Commodity Market Reform in Africa: Some Recent Experience Donald F. Larson, and Panos Varangis 21 3003 Mary Hallward-Driemeier, Scott Wallsten, The Investment Climate and the Firm: and Lixin Colin Xu Firm-Level Evidence from China 23 3004 David Dollar and Aart Kraay Institutions, Trade, and Growth: Revisiting the Evidence 24 3005 Varun Gauri and Ayesha Vawda Vouchers for Basic Education in Developing Countries: A Principal-Agent Perspective 24 Urban development 2970 Vijayendra Rao and Ana Maria Ibdfiez The Social Impact of Social Funds in Jamaica: A Mixed- Methods Analysis of Participation, Targeting, and Collective Action in Community-Driven Development 12 2971 Jishnu Das and Carolina SAnchez-PAramo Short but not Sweet: New Evidence on Short Duration Morbidities from India 13 3002 Uwe Deichmann, Somik V. Lall, Information-Based Instruments for Improved Ajay Suri, and Pragya Rajoria Urban Management 23 3007 Antonio M. Bento, Maureen L. Cropper, The Impact of Urban Spatial Structure on Travel Ahmed Mushfiq Mobarak, and Katja Vinha Demand in the United States 24 Transition 2934 Karla Hoff and Joseph E. Stiglitz After the Big Bang? Obstacles to the Emergence of the Rule of Law in Post-Communist Societies 1 2936 Hua Wang and Yanhong Jin Industrial Ownership and Environmental Performance: Evidence from China 1 2937 Hua Wang and Wenhua Di The Determinants of Government Environmental Performance: An Empirical Analysis of Chinese Townships 2 2946 Jan Rutkowski Rapid Labor Reallocation with a Stagnant Unemployment Pool: The Puzzle of the Labor Market in Lithuania 5 2947 Pradeep Mitra and Nicholas Stern Tax Systems in Transition 5 2950 Dominique van de Walle and Is the Emerging Nonfarm Market Economy the Route Dorothyjean Cratty Out of Poverty in Vietnam? 6 2951 Martin Ravallion and Dominique Land Allocation in Vietnam's Agrarian Transition van de Walle 6 Index v WPS # Author Working Paper Title Page 2952 Nazmul Chaudhury, Jeffrey Hammer, The Effects of a Fee-Waiver Program on Health Care and Edmundo Murrugarra Utilization among the Poor: Evidence from Armenia 6 2954 Bartlomiej Kaminski Never Too Late to Get Together Again: Turning the Czech and Beata Smarzynska and Slovak Customs Union into a Stepping Stone to EU Integration 7 Poverty 2939 Gladys L6pez-Acevedo School Attendance and Child Labor in Ecuador 2 2945 Shahidur R. Khandker Micro-Finance and Poverty: Evidence Using Panel Data from Bangladesh 4 2950 Dominique van de Walle Is the Emerging Nonfarm Market Economy the Route and Dorothyjean Cratty Out of Poverty in Vietnam? 6 2951 Martin Ravallion and Dominique Land Allocation in Vietnam's Agrarian Transition van de Walle 6 2952 Nazmul Chaudhury, Jeffrey Hammer, The Effects of a Fee-Waiver Program on Health Care and Edmundo Murrugarra Utilization among the Poor: Evidence from Armenia 6 2956 Johan A. Mistiaen and Martin Ravallion Survey Compliance and-the Distribution of Income 8 2960 Susmita Dasgupta, Uwe Deichmann, The Poverty/Environment Nexus in Cambodia and Lao Craig Meisner, and David Wheeler People's Democratic Republic 9 2961 Rob Swinkels and Carrie Turk Strategic Planning for Poverty Reduction in Vietnam: Progress and Challenges for Meeting the Localized Millennium Development Goals 9 2962 Philippe Auffret High Consumption Volatility: The Impact of Natural Disasters? 10 2963 Philippe Auffret Catastrophe Insurance Market in the Caribbean Region: Market Failures and Recommendations for Public Sector Interventions 10 2965 William F. Maloney Informality Revisited 11 2966 Michele Gragnolati and Alessandra Marini Health and Poverty in Guatemala 11 2967 Alessandra Marini and Michele Gragnolati Malnutrition and Poverty in Guatemala 11 2968 Edwin Shanks and Carrie Turk Refining Policy with the Poor: Local Consultations on the Draft Comprehensive Poverty Reduction and Growth Strategy in Vietnam 11 2969 Monica Das Gupta, Helene Fostering Community-Driven Development: Grandvoinnet, and Mattia Romani What Role for the State? 12 2971 Jishnu Das and Carolina SAnchez-PAramo Short but not Sweet: New Evidence on Short Duration Morbidities from India - 13 2972 Richard H. Adams, Jr. Economic Growth, Inequality, and Poverty: Findings from a New Data Set 13 vi Index WPS # Author Working Paper Title Page 2975 Francisco H. G. Ferreira Policy Options for Meeting the Millennium Development and Phillippe G. Leite Goals in Brazil: Can Micro-Simulations Help? 14 2985 Vivi Alatas and Lisa Cameron The Impact of Minimum Wages on Employment in a Low Income Country: An Evaluation Using the Difference-in- Differences Approach 17 2990 Michael Klein Ways Out of Poverty: Diffusing Best Practices and Creating Capabilities-Perspectives on Policies for Poverty Reduction 19 2991 Klaus Deininger, Songqing Jin, Berhanu Tenure Security and Land-Related Investment: Adenew, Samuel Gebre-Selassie, Evidence from Ethiopia and Berhanu Nega 19 2992 Klaus Deininger, Songqing Jin, Berhanu Market and Nonmarket Transfers of Land in Ethiopia: Adenew, Samuel Gebre-Selassie, Implications for Efficiency, Equity, and Nonfarm Development and Mulat Demeke 20 2998 Mark M. Pitt, Shahidur R. Khandker Does Micro-Credit Empower Women? and Jennifer Cartwright Evidence from Bangladesh 22 Rural development 2942 Monica Das Gupta, Jiang Zhenghua, Why is Son Preference so Persistent in East and South Asia? Li Bohua, Xie Zhenming, Woojin Chung, A Cross-Country Study of China, India, and the and Bae Hwa-Ok Republic of Korea 3 2949 Rita Butzer, Yair Mundlak, Intersectoral Migration in Southeast Asia: Evidence from and Donald F. Larson Indonesia, Thailand, and the Philippines 6 2950 Dominique van de Walle and Is the Emerging Nonfarm Market Economy the Route Dorothyjean Cratty Out of Poverty in Vietnam? 6 2951 Martin Ravallion and Dominique Land Allocation in Vietnam's Agrarian Transition van de Walle 6 2963 Philippe Auffret Catastrophe Insurance Market in the Caribbean Region: Market Failures and Recommendations for Public Sector Interventions 10 2969 Monica Das Gupta, Helene Fostering Community-Driven Development: Grandvoinnet, and Mattia Romani What Role for the State? 12 2970 Vijayendra Rao and Ana Maria IbAftez The Social Impact of Social Funds in Jamaica: A Mixed- Methods Analysis of Participation, Targeting, and Collective Action in Community-Driven Development 12 2981 Vivi Alatas, Lant Pritchett, Voice Lessons: Local Government Organizations, and Anna Wetterberg Social Organizations, and the Quality of Local Governance 16 2991 Klaus Deininger, Songqing Jin, Berhanu Tenure Security and Land-Related Investment: Adenew, Samuel Gebre-Selassie, Evidence from Ethiopia and Berhanu Nega 19 2992 Klaus Deininger, Songqing Jin, Berhanu Market and Nonmarket Transfers of Land in Ethiopia: Adenew, Samuel Gebre-Selassie, Implications for Efficiency, Equity, and Nonfarm Development and Mulat Demeke 20 Index vii WPS # Author Working Paper Title Page 2993 Panos Varangis, Paul Siegel, Daniele Dealing with the Coffee Crisis in Central America: Giovannucci, and Bryan Lewin Impacts and Strategies 20 2995 Takamasa Akiyama, John Baffes, Commodity Market Reform in Africa: Donald F. Larson, and Panos Varangis Some Recent Experience 21 International economics 2943 Norbert Fiess Capital Flows, Country Risk, and Contagion 4 2954 Bartlomiej Kaminski Never Too Late to Get Together Again: Turning the Czech and Beata Smarzynska and Slovak Customs Union into a Stepping Stone to EU Integration 7 2955 Qaglar Ozden and Eric Reinhardt The Perversity of Preferences: The Generalized System of Preferences and Developing Country Trade Policies, 1976-2000 7 2962 Philippe Auffret High Consumption Volatility: The Impact ofNatural Disasters? 10 2963 Philippe Auffret Catastrophe Insurance Market in the Caribbean Region: Market Failures and Recommendations for Public Sector Interventions 10 2973 Guifang Yang and Keith E. Maskus Intellectual Property Rights, Licensing, and Innovation 13 2980 Augusto de la Torre, eduardo Levy Yeyati, Living and Dying with Hard Pegs: The Rise and Fall and Sergio L. Schmukler of Argentina's Currency Board 16 2986 Stijn Claessens, Daniela Klingebiel, Government Bonds in Domestic and Foreign Currency: and Sergio Schmukler The Role of Macroeconomic and Institutional Factors 18 2988 John S. Wilson, Catherine L. Mann, Trade Facilitation and Economic Development: and Tsunehiro Otsuki Measuring the Impact 18 2995 Takamasa Akiyama, John Baffes, Commodity Market Reform in Africa: Some Recent Experience Donald F. Larson, and Panos Varangis 21 2999 Philipp Harms, Aaditya Mattoo, Explaining Liberalization Commitments and Ludger Schuknecht in Financial Services Trade 22 3004 David Dollar and Aart Kraay Institutions, Trade, and Growth: Revisiting the Evidence 24 Social development 2942 Monica Das Gupta, Jiang Zhenghua, Why is Son Preference so Persistent in East and South Asia? Li Bohua, Xie Zhenming, Woojin Chung, A Cross-Country Study of China, India, and the and Bae Hwa-Ok Republic of Korea 3 2953 Magnus Lindelbw and Adam Wagstaff Health Facility Surveys: An Introduction 7 2969 Monica Das Gupta, Helene Fostering Community-Driven Development: Grandvoinnet, and Mattia Romani What Role for the State? 12 viii Index WPS # Author Working Paper Title Page 2970 Vijayendra Rao and Ana Maria IbAez The Social Impact of Social Funds in Jamaica: A Mixed- Methods Analysis of Participation, Targeting, and Collective Action in Community-Driven Development 12 2975 Francisco H. G. Ferreira Policy Options for Meeting the Millennium Development and Phillippe G. Leite Goals in Brazil: Can Micro-Simulations Help? 14 2981 Vivi Alatas, Lant Pritchett, Voice Lessons: Local Government Organizations, and Anna Wetterberg Social Organizations, and the Quality of Local Governance 16 2994 Miguel Palacios Options for Financing Lifelong Learning 20 2998 Mark M. Pitt, Shahidur R. Khandker Does Micro-Credit Empower Women? and Jennifer Cartwright Evidence from Bangladesh 22 3006 Varun Gauri Social Rights and Economics: Claims to Health Care and Education in Developing Countries 24 Labor and employment 2939 Gladys L6pez-Acevedo School Attendance and Child Labor in Ecuador 2 2946 Jan Rutkowski Rapid Labor Reallocation with a Stagnant Unemployment Pool: The Puzzle of the Labor Market in Lithuania 5 2949 Rita Butzer, Yair Mundlak, Intersectoral Migration in Southeast Asia: Evidence from and Donald F. Larson Indonesia, Thailand, and the Philippines 6 2957 Hong Tan and Gladys Lopez-Acevedo Mexico: In-Firm Training for the Knowledge Economy 8 2958 Martin Rama Globalization and Workers in Developing Countries 8 2959 Michael M. Lokshin and Branko Wage Differentials and State-Private Sector Employment Jovanovic Choice in Yugoslavia 9 2964 Gladys L6pez-Acevedo Wages and Productivity in Mexican Manufacturing 10 2965 William F. Maloney Informality Revisited 11 2982 Nina Pavcnik, Andreas Blom, Pinelopi Trade Liberalization and Labor Market Adjustment Goldberg, and Norbert Schady in Brazil 17 2985 Vivi Alatas and Lisa Cameron The Impact of Minimum Wages on Employment in a Low Income Country: An Evaluation Using the Difference-in- Differences Approach 17 2994 Miguel Palacios Options for Financing Lifelong Learning 20 3003 Mary Hallward-Driemeier, Scott Wallsten, The Investment Climate and the Firm: and Lixin Colin Xu Firm-Level Evidence from China 23 3008 Chris N. Sakellariou and Harry A. Patrinos Technology, Computers, and Wages: Evidence from aDeveloping Economy 25 Index ix WPS # Author Working Paper Title Page Macroeconomics and growth 2935 William F. Maloney Missed Opportunities: Innovation and Resource-Based Growth in Latin America 1 2941 Branko Milanovic Income Convergence during the Disintegration of the World Economy, 1919-39 3 2944 Giuseppe Nicoletti and Stefano Scarpetta Regulation, Productivity, and Growth: OECD Evidence 4 2948 Gregorio Impavido, Alberto R. Musalem The Impact of Contractual Savings Institutions and Thierry Tressel on Securities Markets 5 2962 Philippe Auffret High Consumption Volatility: The Impact of Natural Digasters? 10 2963 Philippe Auffret Catastrophe Insurance Market in the Caribbean Region: Market Failures and Recommendations for Public Sector Interventions 10 2972 Richard H. Adams, Jr. Economic Growth, Inequality, and Poverty: Findings from a New Data Set 13 2980 Augusto de la Torre, eduardo Levy Yeyati, Living and Dying with Hard Pegs: The Rise and Fall and Sergio L. Schmukler of Argentina's Currency Board 16 2984 George Clarke, Lixin Colin Xu, Finance and Income Inequality: Test of Alternative Theories and Heng-fu Zou 17 2986 Stijn Claessens, Daniela Klingebiel, Government Bonds in Domestic and Foreign Currency: and Sergio Schmukler The Role of Macroeconomic and Institutional Factors 18 2987 Ho-Chul Lee and Mary P. McNulty East Asia's Dynamic Development Model and the Republic of Korea's Experiences 18 3004 David Dollar and Aart Kraay Institutions, Trade, and Growth: Revisiting the Evidence 24 Education 2939 Gladys L6pez-Acevedo School Attendance and Child Labor in Ecuador 2 2964 Gladys L6pez-Acevedo Wages and Productivity in Mexican Manufacturing 10 2994 Miguel Palacios Options for Financing Lifelong Learning 20 3005 Varun Gauri and Ayesha Vawda Vouchers for Basic Education in Developing Countries: A Principal-Agent Perspective 24 3006 Varun Gauri Social Rights and Economics: Claims to Health Care and Education in Developing Countries 24 3008 Chris N. Sakellariou and Harry A. Patrinos Technology, Computers, and Wages: Evidence from a Developing Economy 25 x Index WPS # Author Working Paper Title Page Health and population 2940 Hillegonda Maria Dutilh Novaes, Expedito The Potential Demand for an HIV/AIDS Vaccine in Brazil J. A. Luna, Mois6s Goldbaum, Samuel Kilsztajn, Anaclaudia Rossbach, and Jos6 de la Rocha Carvalheiro 3 2942 Monica Das Gupta, Jiang Zhenghua, Why is Son Preference so Persistent in East and South Asia? Li Bohua, Xie Zhenming, Woojin Chung, A Cross-Country Study of China, India, and the and Bae Hwa-Ok Republic of Korea 3 2952 Nazmul Chaudhury, Jeffrey Hammer, The Effects of a Fee-Waiver Program on Health Care and Edmundo Murrugarra Utilization among the Poor: Evidence from Armenia 6 2953 Magnus Lindeldw and Adam Wagstaff Health Facility Surveys: An Introduction 7 2966 Michele Gragnolati and Alessandra Marini Health and Poverty in Guatemala 11 2967 Alessandra Marini and Michele Gragnolati Malnutrition and Poverty in Guatemala 11 2969 Monica Das Gupta, Helene Fostering Community-Driven Development: Grandvoinnet, and Mattia Romani What Role for the State? 12 2971 Jishnu Das and Carolina Sdnchez-Pdramo Short but not Sweet: New Evidence on Short Duration Morbidities from India 13 2977 Christopher Desmond and Robert Greener The Strategic Use and Potential Demand for an HIV Vaccine in Southern Africa * 15 2978 Nico J. D. Nagelkerke and Sake J. De Vlas The Epidemiological Impact of an HIV Vaccine on the HIV/AIDS Epidemic in Southern India 15 2989 Peyvand Khaleghian Decentralization and Public Services: The Case of Immunization 19 3006 Varun Gauri Social Rights and Economics: Claims to Health Care and Education in Developing Countries 24 Public sector management 2938 Ron Hood, David Husband, and Fei Yu Recurrent Expenditure Requirements of Capital Projects: Estimation for Budget Purposes 2 2947 Pradeep Mitra and Nicholas Stern Tax Systems in Transition 5 2959 Michael M. Lokshin and Branko Wage Differentials and State-Private Sector Jovanovic Employment Choice in Yugoslavia 9 2963 Philippe Auffret Catastrophe Insurance Market in the Caribbean Region: Market Failures and Recommendations for Public Sector Interventions 10 2969 Monica Das Gupta, Helene Fostering Community-Driven Development: Grandvoinnet, and Mattia Romani What Role for the State? 12 2974 Alfred Watkins From Knowledge to Wealth: Transforming Russian Science and Technology for a Modern Knowledge Economy 14 Index xi WPS # Author Working Paper Title Page 2989 Peyvand Khaleghian Decentralization and Public Services: The Case of Immunization 19 3001 Antonio Estache, Martin Rodriguez An Introduction to Financial and Economic Modeling Pardina, Jos6 Maria Rodriguez, and for Utility Regulators Germdn Sember 23 3002 Uwe Deichmann, Somik V. Lall, Information-Based Instruments for Improved Urban Ajay Suri, and Pragya Rajoria Management 23 3003 Mary Hallward-Driemeier, Scott Wallsten, The Investment Climate and the Firm: and Lixin Colin Xu - Firm-Level Evidence from China 23 3005 Varun Gauri and Ayesha Vawda Vouchers for Basic Education in Developing Countries: A Principal-Agent Perspective 24 Policy Research Working Paper Series 2934. After the Big Bang? abstracting from the obvious problem that 2935. Missed Opportunities: Obstacles to the Emergence strippers who obtain great wealth can buy Innovation and Resource-Based of the Rule of Law in Post- special favored treatment from the state, Growth in Latin America Communist Societies the model highlights two less obvious flaws in the optimistic view about the Big William F. Maloney Karla Hoff and Joseph E. Stiglitz Bang: First, that the asset-strippers can (December 2002) (December 2002) remove the assets from exposure to fur- ther stealing, and in that case they do not Latin America missed opportunities for With the collapse of communism in care about public protection for their rapid resource-based growth that simi- Eastern Europe and the Soviet Union in gains. And second, that the perceivedjus- larly endowed countries-Australia, 1989-91, many economic reformers sup- tice.of a system is important to gaining the Canada, Scandinavia-were able to take ported "Big Bang" privatization-the cooperation of those involved in the pro- advantage of. Fundamental to this poor rapid transfer of state-owned enterprises cess of producing the rule of law (judges, performance was deficient technological to private individuals. It was hoped that regulators, jurors, potential -offenders). adoption driven by two factors. First, de- Big Bang privatization would create the Accordingly, state protection of. asset ficient national "learning"or"innovative" conditions for a demand-led evolution of strippers may be infeasible, even under an capacity, arising from low investment in legal institutions. But there was no theory ostensible rule oflaw. Knowing this, strip- human capital and scientific infrastruc- to explain how this process of institutional pers will be less supportive of the rule of ture, led to weak ability to innovate or evolution, including a legal framework law. even take advantage of technological ad- for the protection of investors, would The model makes one further point: vances abroad. Second, the period of in- occur and, in fact, it has not yet occurred what is at issue is how fast the rule of ward-looking industrialization discour- in Russia, in other former Soviet Union law will emerge. The presumption of the aged innovation and created a sector countries, in the Czech Republic, and Big Bang strategy was that the faster whose growth depended on artificial mo- elsewhere. A central reason for that, state property was turned over to private nopoly rents rather than the quasi-rents according to many scholars, is the weak- hands, the faster a true market economy, arising from technological adoption, and ness of the political demand for the rule including the rule of law, would be estab- at the same time undermined resource- of law. lished. The analysis shows that, even if intensive sectors that had the potential for To shed light on this puzzle, Hoff and eventually a rule of law is established, dynamic growth. Stiglitz consider a model where the con- the Big Bang may put into play forces that This paper-a product of the Office of ditions for the emergence ofthe rule oflaw delay the establishment of the rule of the Chief Economist, Latin America and might be interpreted as highly favorable. law. The tortoise once again may beat the the Caribbean Region-was prepared as Individuals with control rights over priva- hare! a background paper for the region's flag- tized assets can collectively bring about Finally, Hoff and Stiglitz analyze the ship report, From Natural Resources to the the rule of law simply by voting for it. impact of certain policies, such as the Knowledge Economy (2001). Copies of the These individuals are concerned with the particular structure of privatization and paper are available free from the World wealth they can obtain from the privatized monetary policy. Policies that enhance the Bank, 1818 H Street NW, Washington, DC assets, and have two alternative strate- returns to investment and wealth creation 20433. Please contact Patricia Soto, room gies: building value and stripping assets. rather than asset stripping not only serve 18-018, telephone 202-473-7892, fax 202- Building valub under the rule of law yields to strengthen the economy in the short 522-7528, email address psoto higher benefits to a majority than strip- run, but enhance political support for the @worldbank.org. Policy Research Work- ping assets under no rule of law. But un- rule of law and thus put it in a.position ing Papers are also posted on the Web at certainty about when the rule of law will for stronger long-term growth. http://econ.worldbank.org. The author be established may lead some individuals This paper-a product of the Invest- may be contacted at wmaloney to choose an economic strategy-stripping ment Climate Team, Development - Re- @worldbank.org. (40 pages) assets, including converting corporate search Group-is part of a larger effort in assets to private use-that gives them an the group to understand the evolution of interest in postponing the establishment property rights institutions. Copies of the 2936. Industrial Ownership of the rule of law. And therefore in the paper are available free from the World and Environmental Performance: succeeding period, the rule of law may Bank, 1818 H Street NW, Washington, DC Evidence from China again not be in place, and so again indi- 20433. Please contact Anna - Bonfield,- viduals may strip assets. If they do, some room MC3-354, telephone 202-473-1248,- Hua Wang and Yanhong Jin of them may again have an interest in fax 202-522-3518, email address abonfield (December 2002) postponing the establishment of the rule @worldbank.org. Policy Research Work- of law. And so a weak demand for the rule ing Papers are also posted on the Web at Wang and Jin explore the differences in of law can persist. http://econ.worldbank.org. The authors pollution control performance of indus- The contribution ofthe paper is to show may be contacted at khofl@worldbank.org tries with different types of ownership in that the view that once stripping has oc- orjes322@columbia.edu. December 2002. China-state-owned (SOE), collectively- curred, the strippers will say "enough" and (44 pages) or community-owned (COE), privately by supporting the rule of law seek public owned (POE), companies with foreign di- protection of their gains, is flawed. By rect investment (FDI), andjoint ventures. 2 Policy Research Working Paper Series About 1,000 industrial firms in three prov- efforts of enforcing government environ- worldbank.org. Hua Wang may be con- inces of China were surveyed, and detailed mental regulations and of providing envi- tacted at hwangl@worldbank.org. (24 1999 firm-level information was obtained. ronmental services to polluting enter- pages) The authors analyzed the differences prises. The performance determinants between firms in receiving and reacting identified include environmental perfor- to environmental regulatory enforcement, mance of upper-level governments, local 2938. Recurrent Expenditure community pressure, environmental ser- development status, industrial employ- Requirements of Capital Projects: vices, as well as in the firm's internal en- ment, income of workers in polluting en- Estimation for Budget Purposes vironmental management among the dif- terprises, local environmental quality, ferent types of ownership. The authors and public pressure for environmental Ron Hood, David Husband, and Fei Yu also conducted econometric analyses on quality improvement. A survey of 85 town- (December 2002) the determinants of pollution discharge ships and interviews of 151 township gov- performance. ernment leaders were conducted in three This paper examines the issue of estimat- The results show that foreign direct provinces of China. The statistical results ing recurrent costs associated with capi- investment and collectively-owned enter- show that: tal projects in the investment budget. It prises have better environmental perfor- o The environmental performance of is intended to help overcome budget plan- mances in terms of water pollution dis- upper-level governments in China ning problems which give rise to the charge intensity, while state-owned enter- strongly and positively influences the chronic underfumding of maintenance and prises and privately owned enterprises in environmental efforts of the township operating costs typical in some developing China are the worst performers. The re- governments. economies. The objective is to provide sults also suggest that collectively-owned o Public pressure has created incen- guidance in the preparation of budget enterprises in China do internalize envi- tives for the township governments to submissions so that information on the ronmental externalities. improve their efforts in both enforcing future recurrent cost .implications of This paper-a product of Infrastructure environmental regulations and providing today's capital spending is quantified in a and Environment, Development Research environmental services, while the envi- way that supports the authorities in mak- Group-is part of a larger effort in the ronmental quality did not show significant ing project selection and budget decisions. group to study environmental regulation impacts. The paper is in three parts. The first in developing countries. The study was o Higher employment in industries part outlines some concepts and defini- partially funded by the Bank's Research tends to have a negative influence on the tions involved in measuring recurrent Support Budget under the research regulatory enforcement, but a positive costs. The second part provides stylized project "Understanding and Improving influence on environmental service examples of individual projects. And the Environmental Performance of China's provision. third part presents some rough empirical Township and Village Industrial Enter- o A higher enforcement effort and a guidance drawn from a sample of actual prises." Copies of the paper are available lower service provision are associated with investment projects. free from the World Bank, 1818 H Street higher wages the workers received from This paper-a product of the Poverty NW, Washington, DC 20433. Please con- industries. This implies that the indus- Reduction and Economic Management tact Yasmin D'Souza, room MC2-622, tele- tries offering higher wages to the workers Sector Unit, Europe and Central Asia phone 202-473-1449, fax 202-522-3230, are subject to more stringent environmen- Region-is part of a larger effort in the email address ydsouza@worldbank.org. tal enforcement but receive less environ- Bank to improve the management of pub- Policy Research Working Papers are also mental services. lic finances. Copies of the paper are avail- posted on the Web at http://econ. o Richer townships tend to have less able free from the World Bank, 1818 H worldbank.org. Hua Wang may be con- regulatory enforcement but better envi- Street NW, Washington, DC 20433. tacted at hwangl@worldbank.org. (28 ronmental services. Please contact Mickey Galatis, room H4- pages) This paper-a product of Infrastructure 312, telephone 202-473-1177, fax 202-614- and Environment, Development Research 1499, email address mgalatis@worldbank. Group-is part of a larger effort in the org. Policy Research Working Papers are 2937. The Determinants of group to study environmental regulation also posted on the Web at httpJ/econ. Government Environmental in developing countries. The study was worldbank.org. Ron Hood may be con- Performance: An Empirical partially funded by the Bank's Research tacted at rhood@worldbank.org. (13 Analysis of Chinese Townships Support Budget under the research pages) project "Understanding and Improving Hua Wang and Wenhua Di Environmental Performance of China's (December 2002) Township and Village Industrial Enter- 2939. School Attendance prises." Copies of the paper are available and Child Labor in Ecuador This paper explores the determinants of free from the World Bank, 1818 H Street government environmental performance NW, Washington, DC 20433. Please con- Gladys L6pez-Acevedo at the local level. Chinese township gov- tact Yasmin D'Souza, room MC2-622, tele- (December 2002) ernments, the lowest level in the hierar- phone 202-473-1449, fax 202-522-3230, chical government structure, were se- email address ydsouza@worldbank.org. L6pez-Acevedo uses the Ecuador Living lected for this exercise. The performance Policy Research Working Papers are also Standards and Measurement Surveys indicators used in the analyses include the posted on the Web at http//econ. (LSMS 1998 and 1999) to analyze the Policy Research Working Paper Series 3 characteristics and determinants of child miology of AIDS and Brazil's experience with divergence ofincomes among the rich labor and schooling. She shows how inter- with immunization coverage with other countries is wrong. On the contrary, in- ventions at the level of adults affect child vaccines are used to assess the number of come convergence continued and even labor and school enrollment. For example, vaccines, delivery strategies, and possible accelerated. Since the mid-19th century, an employment policy encouraging em- costs of an HIV/AIDS immunization pro- incomes of rich countries tended to con- ployment in the formal modern sector re- gram in Brazil, assuming the availability verge in peacetime regardless of whether duces child labor and increases schooling. of a 100 percent effective AIDS vaccine their economies were more or less inte- In rural areas, a wage policy (increase in that lasts a lifetime under different pric- grated. This, in turn, implies that it may the wage of the household head) has posi- ing and dosing assumptions. not be trade and capital and labor flows tive implications for the children, while it A low-cost, highly effective vaccine that matter for income convergence is less effective in urban areas. would likely be affordable to an upper- but some other, less easily observable, This paper-a product of the Economic middle-income country like Brazil and forces like diffusion of information and Policy Sector Unit, Latin Aaerica and the yield large benefits from a policy of uni- technology. Caribbean Region-is part of a larger ef- versal, publicly subsidized immunization. This paper-a product of the Poverty fort in the region to reduce poverty and But if prices are higher and the impact less Team, Development Research Group-is inequality through human capital invest- favorable, the costs and effects would have part of a larger effort in the group to study ment. Copies of the paper are available to be compared with other AIDS preven- global inequality. Copies of the paper are free from the World Bank, 1818 H Street tion programs or other health interven- available free from the World Bank, 1818 NW, Washington, DC 20433. Please con- tions. Both political and economic consid- H Street NW, Washington, DC 20433. tact Michael Geller, room 14-046, tele- erations will likely figure into public policy Please contact Patricia Sader, room MC3- phone 202-458-5155, email address on HIV/AIDS vaccination, when such a 556, telephone 202-473-3902, fax 202-522- mgeller@worldbank.org. Policy Research vaccine is developed. 1153, email address psader@worldbank. Working Papers are also posted on the This paper-a product of Public Ser- org. Policy Research Working Papers are Web at http//econ.worldbank.org. The vices, Development Research Group-is also posted on the Web - at http/ author may be contacted at gacevedo part of the research project on "The Eco- econ.worldbank.org. The author may be @worldbank.org. (25 pages) nomics of an HIV/AIDS Vaccine in Devel- contacted at bmilanovic@worldbank.org. oping Countries: Potential Impact, Cost- (35 pages) Effectiveness and Willingness to Pay," 2940. The Potential Demand sponsored by the European Commission for an HIV/AIDS Vaccine in Brazil and the Development Research Group of 2942. Why Is Son Preference so the World Bank. The project was launched Persistent in East and South Asia? Hillegonda Maria Dutilh Novaes, in response to recommendations of the A Cross-Country Study of-China, Expedito J. A. Luna, Mois6s Goldbaum,_ World Bank's AIDS Vaccine Task Force. India, and the Republic of Korea Samuel Kilsztajn, Anaclaudia Rossbaci, Copies of this paper are available free from and Jos6 de la Rocha Carvalheiro the World Bank, 1818 H Street NW, Monica Das Gupta, Jiang Zhenghua, (December 2002) Washington, DC 20433. Please contact Li Bohua, Xie Zhenming, Woojin Chung, Hedy Sladovich, room MC3-607, tele- and Bae Hwa-Ok This study assesses the potential demand phone 202-473-7698, fax 202-522-1154, (January 2003) by the public sector for a preventive HIV/ email address hsladovich@worldbank.org. AIDS vaccine in Brazil and the costs of Policy Research Working Papers are also Son preference has persisted in the face alternative strategies for a vaccination posted on the Web at -http://econ. of sweeping economic and social changes program. Brazil has a mature AIDS epi- worldbank.org. Hillegonda Maria Dutilh in China, India, and the Republic of Ko- demic: the percent of the population liv- Novaes may be contacted at hidutilh rea. The authors attribute this to their ing with HIV or AIDS (about 0.6 percent @usp.br. (30 pages) similar family systems, which generate ofadults) is not as high as in other severely strong disincentives to raise daughters affected developing countries, but infec- ;hile valuing adult women's contribu- tion rates in specific risk groups in-the 2941. Income Convergence ions to the household. Urbanization, fe- population are very high and HIV has during the Disintegration of nale education, and employment can only spread beyond these groups into the gen- the World Economy, 1919-39 slowly change these incentives without eral population of low-risk individuals. more direct efforts by the state and civil Preventive HIV/AIDS vaccines are still Branko Milanovic society to increase the flexibility of the in the testing stage. The characteristics of (January 2003) kinship system such that daughters and the first vaccines developed, in terms of sons can be perceived as being more their efficacy, duration of effectiveness, Some economists have argued that the equally valuable. Much can be done to this ease ofadministration, and price, are still process of disintegration of the world end through social movements, legisla- unknown. But the potential benefits of economy between the two world wars led tion, and the mass media. such a vaccine in Brazil would be high. The' to income divergence between the coun- This paper-a product of Public Ser- study reviews the cost and impact of HIV/ tries. This is in keeping with the vie* that vices and Rural Development, Develop- AIDS in Brazil, in terms of disease and economic integration leads to income con- ment Research Group-is part of a larger economic burden, as a proxy for the ben- vergence. The paper shows that the view effort in the group to study social institu- efits of an HIV/AIDS vaccine. The epide- that the period 1919-39 was associated tions and development outcomes. Copies 4 Policy Research Working Paper Series of the paper are available free from the 2944. Regulation, Productivity, and strict regulatory settings that curb World Bank, 1818 H Street NW, Washing- and Growth: OECD Evidence incentives to adopt new technologies. ton, DC 20433. Please contact Monica Das This paper-a product of the Social Pro- Gupta, room MC3-633, telephone 202- Giuseppe Nicoletti and Stefano Scarpetta tection Team, Human Development Net- 473-1983, fax 202-522-1153, email ad- (January 2003) work-is part of a larger effort in the net- dress mdasgupta@worldbank.org. Policy work to understand what drives produc- Research Working Papers are also posted Nicoletti and Scarpetta look at differences tivity growth. Copies of the paper are on the Web at http://econ.worldbank.org. in the scope and depth of pro-competitive available free from the World Bank, 1818 (36 pages) regulatory reforms and privatization poli- H Street NW, Washington, DC 20433. cies as a possible source of cross-country Please contact the Social Protection Ad- dispersion in growth outcomes. They sug- visory Service, room G8-138, telephone 2943. Capital Flows, Country gest that, despite extensive liberalization 202-458-5267, fax 202-614-0471, email Risk, and Contagion and privatization in the OECD area, the address socialprotection@worldbank.org. cross-country variation of regulatory set- Policy Research Working Papers are also Norbert Fiess tings has increased in recent years, lining posted on the Web at http://econ. (January 2003) up with the increasing dispersion in worldbank.org. Stefano Scarpetta maybe growth. The authors then investigate contacted at sscarpetta@worldbank.org. It has been widely recognized that both empirically the regulation-growth link (60 pages) country-specific and global factors matter using data that cover a large set of manu- in explaining capital flows. Fiess presents facturing and service industries in OECD an empirical framework that disentangles countries over the past two decades and 2945. Micro-Finance and Poverty: the relative weight of country-specific and focusing on multifactor productivity Evidence Using Panel Data from global factors in determining capital flows. (MFP), which plays a crucial role in GDP Bangladesh In essence, his approach first separates growth and accounts for a significant the common component of emerging coun- share of its cross-country variance. Re- Shahidur R. Khandker try spreads from their country-specific gressing MFP on both economywide indi- (January 2003) component. The pure country risk and cators ofregulation and privatization and global risk components are then used as industry-level indicators of entry liberal- Micro-finance supports mainly informal explanatory variables to account for the ization, the authors find evidence that activities that often have low market de- observed pattern of capital flows using reforms promoting private governance mand. It may be thus hypothesized that multivariate cointegration analyses. The and competition (where these are viable) the aggregate poverty impact of micro-fi- author is able to identify the relative tend to boost productivity. In manufactur- nance in an economy with low economic weight of global and country-specific fac- ing the gains to be expected from lower growth is modest or nonexistent. The ob- tors in explaining capital flows to Argen- entry barriers are greater the further a served borrower-level poverty impact is tina, Brazil, Mexico, and Venezuela in the given country is from the technology then a result of income redistribution or 1990s. When further decomposing coun- leader. So, regulation limiting entry may short-run income generation. try risk into its determinants, the author hinder the adoption of existing technolo- Khandker addresses these questions finds that within a small system it is pos- gies, possibly by reducing competitive using household level panel data from sible to jointly identify the determinants pressures, technology spillovers, or the Bangladesh. The findings confirm that of capital flows and sovereign bond entry ofnew high-technology firms. At the micro-finance benefits the poorest and has spreads. We find that capital flows are same time, both privatization and entry sustained impact in reducing poverty driven by country risk and global factors liberalization are estimated to have a posi- among program participants. It also has ("contagion" and U.S. long-term interest tive impact on productivity in all sectors. positive spillover impact, reducing poverty rates), while country risk is determined by These results offer an interpretation to at the village level. But the effect is more the primary balance-to-GDP ratio (-) and the observed recent differences in growth pronounced in reducing extreme rather the ratio of public debt to GDP (+). patterns across OECD countries, in par- than moderate poverty. This paper-a product of the Office of ticular between large continental Euro- This paper-a product of Rural Devel- the Chief Economist, Latin America and pean economies and the United States. opment, Development Research Group- the Caribbean Region-is part of a larger Strict product market regulations-and is part of a larger effort in the group to effort in the region to understand inter- lack of regulatory reforms-are likely to analyze the impact of targeted programs national capital flows. Copies of the paper underlie the relatively poorer productiv- on the poor. Copies of the paper are avail- are available free from the World Bank, ity performance of some European coun- able free from the World Bank, 1818 H 1818 H Street NW, Washington, DC tries, especially in those industries where Street NW, Washington, DC 20433. 20433. Please contact Ruth Izquierdo, Europe has accumulated a technology gap Please contact Dulce Afzal, room J4-284, room 18-012, telephone 202-458-4161, fax (such as information and communication telephone 202-473-6335, fax 202-676- 202-522-7528, email address rizquierdo technology-related industries). These re- 9810, email address dafzal@worldbank. @worldbank.org. Policy Research Work- sults also offer useful insights for non- org. Policy Research Working Papers are ing Papers are also posted on the Web at OECD countries. In particular, they point also posted on the Web at http://econ. http://econ.worldbank.org. The author to the potential benefits of regulatory re- worldbank.org. The author may be con- may be contacted at nfiess@worldbank. forms and privatization, especially in tacted at skhandkerCaworldbank.org. (31 org. (28 pages) those countries with large technology gaps pages) Policy Research Working Paper Series 5. 2946. Rapid Labor Reallocation This paper-a product of the-Human percent, comprising value-added tax (6 to with a Stagnant Unemployment Development Sector Unit, Europe and 7 percent), excises (2 to 3 percent), income Pool: The Puzzle of the Labor Central Asia Region-is part of a larger ta;: (6 to 9 percent), social security contri- Market in Lithuania effort in the region to examine labor mar- bution together with payroll tax (6 to 10 ket performance and its contribution to- percent), and other taxes such as on trade Jan Rutkowski economic growth and poverty reduction. and,on property (2 percent). (January 2003) Copies of the paper are available free from The authors' analysis also sheds light the World Bank, 1818 H Street NW, on the links between tax policy, tax admin- Lithuania is a transition economy under- Washington, DC 20433. Please contact istration, and the investment climate-in going rapid enterprise restructuring asso- Jan Rutkowski, room H7-170,.telephone transition countries. ciated with substantial job turnover. At 202-458-4569, fax 202-477-3387, email This paper-a joint product of the Of- the same time, unemployment in address jrutkowski@worldbank.org. fice ofthe Regional Vice President, Europe Lithuania is high and of long duration. Policy Research Working Papers are also and Central Asia Region and the Office of This presents a puzzle: high job turnover. posted on the Web at http://econ. the Senior Vice President and Chief epitomizes labor market flexibility, while worldbank.org. (82 pages) Economist, Development Economics-is high unemployment indicates labor mar- part of a larger effort in the Bank on the ket rigidities. What are the reasons behind subject of transition meets development. this paradox? Why do the unemployed not 2947. Tax Systems In Transition Copies of the paper are available free from. benefit from job opportunities dreated by the World Bank, 1818 H Street -NW, highjob turnover, which entails high rates Pradeep Mitra and Nicholas Stern Washington, DC 20433. Please contact of job creation and hiring? _ (January 2003) Sossena Tassew, room H12-220, telephone To answer this question, Rutkowski 202-458-8212, fax 202-522-2758, email looks at three perspectives on labor mar- How have tax systems, whose primary address stassew@worldbank.org. Policy ket flexibility: role is to raise resources to finance public Research Working Papers are also posted * The macroeconomic perspective-A expenditures, evolved in the transition on the Web at http://econ.worldbank.org. flexible labor market is one that facilitates countries of Eastern Europe and the - The authors may be contacted at pmitra full use and efficient allocation of labor former Soviet Union? Mitra and Stern find @worldbank.org or nstern@worldbank., resources. that: (1) the ratio of tax revenue-to-GDP org. (53 pages) * The worker perspective-A flexible decreased largely due to a fall in revenue labor market means ease in finding a job from corporate income tax; (2) the fall in paying a wage adequate to the worker's revenue from the corporate income tax led- 2948. The Impact of Contractual effort and skills. to a decline in the importance of income Savings Institutions on Securities * The employer perspective-A flexible taxes, notwithstanding a rise in the share - Markets labor market does not unduly constrain the of individual income tax; (3) social secu- employer's ability to adjust enployment rity- contributions together with payroll Gregorio Impavido, Alberto R. Musalem, and wages to changing market conditions. taxes became less important in the Com- and Thierry Tressel Rutkowski looks at all three dimensions monwealth of Independent States; and (4) (January 2003) of labor market flexibility by analyzingjob domestic indirect taxes gained in impor- reallocation, worker transitions across- tance in overall tax revenues. Impavido, Musalem, and Tressel assess. labor force states, wage distribution, and Apart from the increased role of per- empirically the impact of contractual say- regulatory constraints faced by employers. sonal income taxation, these develop- ings institutions portfolios (pension funds He focuses on the issue ofjob creation and ments go in a,direction opposite to those and life insurance companies) on securi- job destruction, using micro level data on observed in poor countries, as,they- get ties markets, for example, depth and li- all registered firms. He finds that flexibil-. richer. They show a key- aspect of transi- quidity in the domestic stock market, and ity in one dimension can concur with ri- tion, namely a movement from asystem depth in the domestic bond market. They gidities in the other. Specifically, employ- where the government exerciseda preemi- discuss how. the institutionalization of ers in Lithuania have a substantial degree nent claim on output and income-before savings can modify financial markets offlexibilitywithemploymentadjustment citizens had access to the remain der,-to through the lengthening of securities' coupled with limited flexibility to wage one with a greatly diminished role for the maturities. adjustment due to a high statutory.mini- public sector, as reflected in a lower ratio The results are the following: mum wage. The relatively rigid, wage of public expenditure to GDP, whre the * An increase in assets of contractual structure locks low productivity workers government needs to collect revenue' in savings institutions relative to domestic who are preponderant among the unem- order to spend. financial assets has a positive impact on ployed. The low-skilled long-term unem- Can expected levels of public-expendi- the depth of stock and bond markets on ployed have become marginalized and ture be financed by the basic instruments average. unable to successfully compete for avail- of a modern tax system without creating * The impact on stock market depth able jobs, while the high job turnover is significant distortions in the private sec- and liquidity is nonlinear: it is stronger in accounted for largely byjob-to-job transi- tor? The authors suggest that transition countries where corporate information is tions. As a result, a dynamic labor mar- countries, depending on their stage of more transparent. ket coincides with a stagnant unemploy- development, should aim for a tax rev- * There is evidence of a significant het- ment pool. enue-to-GDP ratio in the range of 22 to 31 erogeneity among countries: contractual 6 Policy Research Working Paper Series savings have a stronger impact on securi- is part of a larger effort in the group to 2951. Land Allocation in Vietnam's ties markets in countries where the finan- assess the role of the rural sector in eco- Agrarian Transition cial system is market based, pension fund nomic growth. The study was partially contributions are mandatory, and interna- funded by the Research Support Budget Martin Ravallion and Dominique tional transactions in securities are lower. under the research project "Dynamism of van de Walle a The authors do not find that the im- Rural Sector Growth"(RPO 683-06). Cop- (January 2003) pact of contractual savings institutions on ies of this paper are available free from the securities markets is explained by the over- World Bank, 1818 H Street NW, Washing- While liberalizing key factor markets is a all level of development, education, demo- ton, DC 20433. Please contact Pauline crucial step in the transition from a social- graphic structure or the legal environment. Kokila, room MC3-604, telephone 202- ist control-economy to a market economy, This paper-a product of the Financial 473-3716, fax 202-522-1151, email address the process can be stalled by imperfect Sector Operations and Policy Depart- pkokila@worldbank.org. Policy Research information, high transaction costs, and ment-is part of a larger effort in the de- Working Papers are also posted on the Web covert resistance from entrenched inter- partment to study the effects of contrac- at httpJ/econ.worldbank.org. The authors ests. Ravallion and van de Walle study tual savings on financial markets. Copies may be contacted at rbutzer land-market adjustment in the wake of of the paper are available free from the @fas.harvard.edu , mundlak@agri.huji. Vietnam's reforms aiming to establish a World Bank, 1818 H Street NW, Washing- ac.il, or dlarson@worldbank.org. (20 pages) free market in land-use rights following ton, DC 20433. Please contact Patricia de-collectivization. Inefficiencies in the Braxton, room MC9-904, telephone 202- initial administrative allocation are mea- 473-2720, fax 202-522-7105, email ad- 2950. Is the Emerging Nonfarm sured against an explicit counterfactual dress pbraxton@worldbank.org. Policy Re- Market Economy the Route Out market solution. The authors' tests using search Working Papers are also posted on of Poverty in Vietnam? a farm-household panel data set spanning the Web at http//econ.worldbank.org. The the reforms suggest that land allocation authors may be contacted at Dominique van de Walle responded positively but slowly to the in- gimpavido@worldbank.org, amusalem and Dorothyjean Cratty efficiencies of the administrative alloca- @worldbank.org, or ttressel@imf.org. (27 (January 2003) tion. They find no sign that the transition pages) favored the land rich or that it was Are the household characteristics that are thwarted by the continuing power over good for transition to a more diversified land held by local officials. 2949. Intersectoral Migration market-oriented development process in This paper-a joint product of the Pov- in Southeast Asia: Evidence Vietnam also important for reducing pov- erty Team and the Public Services Team, from Indonesia, Thailand, erty? Or are there tradeoffs? The determi- Development Research Group-is part of and the Philippines nants of both poverty incidence and par- a larger effort in the group to understand ticipation in rural off-farm activities are the welfare impacts of major policy re- Rita Butzer, Yair Mundlak modeled as functions of household and forms. Copies of the paper are available and Donald F. Larson community characteristics using compre- free from the World Bank, 1818 H Street (January 2003) hensive national household surveys for NW, Washington, DC 20433. Please con- 1993 and 1998. Despite some common tact Hedy Sladovich, room MC3-607, tele- Using time series data spanning three de- causative factors, such as education and phone 202-473-7698, fax 202-522-1154, cades, Butzer, Mundlak, and Larson exam- region of residence, the processes deter- email address hsladovich@worldbank.org. ine the determinants of sectoral migration mining poverty and inhibiting diversifica- Policy Research Working Papers are also in Indonesia, Thailand and the Philippines. tion are clearly not the same. Participa- posted on the Web at http://econ. They employ a principal components algo- tion in the emerging rural nonfarm mar- worldbank.org. The authors may be con- rithm to address problems associated with ket economy will be the route out of pov- tacted at mravallion@worldbank.org or trended and intercorrelated explanatory erty for some, but certainly not all, of dvandewalle@worldbank.org. January variables. Migration rates in the three Vietnam's poor. 2003. (23 pages) countries are low relative to other develop- This paper-a product of Public Ser- ing countries with the consequence of per- vices, Development Research Group-is sistent intersectoral income differentials. part of a larger effort in the group to un- 2952. The Effects of a Fee-Waiver Even so, the rate of migration has been re- derstand how to reduce poverty. Copies of Program on Health Care Utilization sponsive to income ratios in each country. the paper are available free from the among the Poor: Evidence from The migration rates were also affected by World Bank, 1818 H Street NW, Washing- Armenia the absorbing capacity of nonagriculture, ton, DC 20433. Please contact Hedy as indicated by several measures. In con- Sladovich, room MC3-607, telephone 202- Nazmul Chaudhury, Jeffrey Hammer, trast to other studies, policy variables con- 473-7698, fax 202-522-1154, email ad- and Edmundo Murrugarra sisting ofindicators ofphysical and human dress hsladovich@worldbank.org. Policy (January 2003) capital had little impact on the migration Research Working Papers are also posted rate separate from that captured by rela- on the Web at httpJ/econ.worldbank.org. This study examines the impact of a fee- tive incomes. The authors may be contacted at waiver program for basic medical services This paper-a product of Rural Devel- dvandewalle@worldbank.org or deratty on health care utilization in Armenia. opment, Development Research Group- @worldbank.org. (29 pages) Because of the reduction in public financ- Policy Research Working Paper Series 7 ing ofhealth services and decentralization 2953. Health Facility Surveys: ary 1993, differs from regular regional and increased privatization ofhealth care An Introduction trading arrangements as its goal was to provision, private out-of-pocket contribu- minimize the economic cost of a decline in tions are increasingly becoming a signifi- Magnus Lindeltw and Adam Wagstaff economic ties between its members rather cant component of health costs in Arme- (January 2003) than to set in motion the mechanism of nia. To help poor families cope with this integration. The creation of the CSCU constraint, the Armenian government Health facility surveys come in various ensured a smooth and conflict-free break provided a free-of-charge basic package guises. One dimension in which they vary up of Czechoslovakia and resulted in di- service to eligible individuals in vulner- is their motivation. Some seek to under- vergence in regulatory regimes of the two able groups, such as the disabled and chil- stand better links between households rep,ublics. This study argues that the pro- dren from single parent households. and providers. Others seek to understand cess of mutual adjustment triggered by Drawing on the 1996 and 1998-99 Arme- better provider behavior and performance. the emergence of national borders is over nia Integrated Survey ofLiving Standards Still others seek to understand the inter- and that integration within the CSCU, (AISLS), which allows the identification relationships between providers, while yet similar in depth and scope to that exist- ofeligible individuals under this program, others seek to shed light on the linkages ing within the European Union (EU), the authors estimate the impact of the fee- between government and providers. would be a desirable policy objective. By waiver program on utilization of health Health facility surveys differ too in the deepening integration, both the Czech and services, particularly among the poor. data they collect, in part due to the differ- Slovak Republics would be better pre- Across the two survey rounds utilization ent motivations. Surveys also vary in the pared to handle challenges associated rates have indeed declined despite com- way they collect data, some relying on with the EU accession. Such a regulatory parable levels of income, and this decline direct observation, some on record review, realignment would also lower border costs has occurred among both the poorand the and some on interview. Some quality data and behind-the-border barriers to trade rich, with average utilization falling by 12 are collected through clinical vignettes. and result in a more attractive investment percent between the two surveys. But Facility data have been put to a variety of environment in both countries. families with four or more children, the uses, including planning and budgeting; This paper-a product of Trade, Devel- largest beneficiary group under the "vul- monitoring, evaluation, and promoting opment Research Group-is part of a nerable population" program, have de- accountability; and research. Lindel6w larger effort in the group to study the ef- creased their use of health care services and Wagstaff review some ofthe literature fects of regional trading arrangements. in a disproportionate manner-21 percent under each heading and offer some con- Copies of the paper are available free from reduction in use between the two survey clusions regarding the current state of the World Bank, 1818 H Street NW, rounds. This precipitous drop in health health facility surveys. Washington, DC 20433. Please contact care use by this vulnerable group, despite This paper-a product of Public Ser- Paulina Flewitt, room MC3-333, tele- being eligible for free medical services, vices, Development Research Group-is a phone 202-473-2724, fax 202-522-1159, suggests that the program was inadequate background paper prepared for the World email address pflewitt@worldbank.org. in stemming the decline in the use- of Bank workshop on Health Facility Sur- Policy Research Working Papers are also health services. The authors further veys, December 2001. Copies ofthis paper posted on the Web at http://econ. present evidence to suggest that the free- are available free from the World Bank, worldbank.org. The authors may be con- of-charge eligibility program acts more 1818 H Street NW, Washington, DC tacted at bkaminski@gvpt.umd.edu or like an income transfer mechanism, par- 20433. Please contact Hedy Sladovich, bsmarzynska@worldbank.orL. (19 Dares) ticularly to disabled individuals. - room MC3-607, telephone 202-473-7698, This paper-a joint product of Public fax 202-522-1154, email - address Services, Development Research Group, hsladovich@worldbank.org. Policy Re- 2955. The Perversity of and the Human Development Sector Unit, search Working Papers are also posted on Preferences: The Generalized Europe and Central Asia Region-is part the Web at httpl//econ.worldbank.org. The System of Preferences of a larger effort in the Bank to understand authors may be contacted at mlifidelow- and Developing Country Trade the impact of health sector reform on @worldbank.org or awagstafl@worldbank. Policies, 1976-2000 health care utilization and poverty. Cop- org. (47 pages) ies of the paper are available free from the Qaglar Ozden and Eric Reinhardt World Bank, 1818 H Street NW, Washing- (January 2003) ton, DC 20433. Please contact Nazmul 2954. Never Too Late to Get Chaudhury, room MC3-576, telephone, Together Again: Turning the Industrial countries maintain special tar- 202-458-4230, fax 202-523-0308, email Czech and Slovak Customs iff preferences, namely the Generalized address nchaudhury@worldbank.org. Union into a Stepping Stone System of Preferences (GSP), for imports Policy Research Working Papers are also to EU Integration from developing countries. Critics have posted on the Web at - http:// highlighted the underachieving nature of econ.worldbank.org. The other authors Bartlomiej Kaminski and Beata such preferences, but developing countries may be contacted at jhammer Smarzynska continue to place the GSP at the heart of @worldbank.org or emurrugarra (January 2003) their agenda in multilateral negotiations. @worldbank.org. (34 pages) What effect do such preferences have on The Czech and Slovak Customs Union a recipient's own trade policies? Ozden (CSCU), which came into effect in Janu- and Reinhardt develop and test a simple 8 - Policy Research Working Paper Series theoretical model of a small country's Washington, DC 20433. Please contact Institute, and the Economic Policy Sector trade policy choice, using a dataset Patricia Sader, room MC3-556, telephone Unit, Latin America and the Caribbean of 154 developing countries from 1976 202-473-3902, fax 202-522-1151, email Region-was prepared as a background through 2000. They find that countries address psader@worldbank.org. Policy paper for the 2002 Latin America and the removed from the GSP adopt more liberal Research Working Papers are also posted Caribbean region's flagship report Knowl- trade policies than those remaining eli- on the Web at http://econ.worldbank.org. edge in Latin America and the Caribbean: gible. The results, corrected for The authors may be contacted at Reconsidering Education, Training and endogeneity and robust to numerous jmistiaen@worldbank.org or mravallion Technology Policies. Copies of the paper alternative measures of trade policy, sug- @worldbank.org. (31 pages) are available free from the World Bank, gest that developing countries may be 1818 H Street NW, Washington, DC best served by full integration into the 20433. Please contact Hong Tan, room J3- reciprocity-based world trade regime 2957. Mexico: In-Firm Training 093, telephone 202-473-3206, fax 202-676- rather than continued GSP-style special for the Knowledge Economy 0961, email address htan@worldbank.org. preferences. Policy Research Working Papers are also This paper-a product of Trade, Devel- Hong Tan and Gladys Lopez-Acevedo posted on the Web at http://econ. opment Research Group-is part of a (January 2003) worldbank.org. Gladys Lopez-Acevedo larger effort in the group to study global maybe contacted at gacevedo@worldbank. trade regimes. Copies of the paper are Tan and Lopez-Acevedo use panel firm- org. (33 pages) available free from the World Bank, 1818 level data to study in-firm training in H Street NW, Washington, DC 20433. Mexican manufacturing in the 1990s, its Please contact Paulina Flewitt, room determinants, and effects on productivity 2958. Globalization and Workers MC3-333, telephone 202-473-2724, fax and wages. Over this decade, not only did In Developing Countries 202-522-1159, email address pflewitt the incidence of employer-provided train- @worldbank.org. Policy Research Work- ing become more widespread among Martin Rama ing Papers are also posted on the Web at manufacturing enterprises, but a higher (January 2003) http*//econ.worldbank.org. The authors proportion of the workforce received train- may be contacted at cozden@worldbank. ing within firms. Technological change, as Stories on the positive and negative effects org or erein@emory.edu. (33 pages) proxied by research and development of globalization on workers in developing (R&D), was an important driver of these countries abound. But a comprehensive training trends. It contributed to in- picture is missing and many of the stories 2956. Survey Compliance creased training over time through a ris- are ideologically charged. This paper re- and the Distribution of Income ing share of firms doing R&D, but more views the academic literature on the sub- important, through a greater propensity ject, including several studies currently Johan A. Mistiaen and Martin Ravalhon over time to train conditional on conduct- under way, and derives the implications (January 2003) ing R&D. for public policy. First, it deals with the The authors investigate the productiv- effects of openness to trade, foreign direct While it is improbable that households ity and wage effects of training in several investment, and financial crises on aver- with different incomes are equally likely ways: age wages. Second, it discusses the impact to participate in sample surveys, the lack o Estimating the wage and productiv- of exposure to world markets on the of data for nonrespondents has hindered ity effects of training treated as endog- dispersion of wages by occupation, efforts to correct for the bias in measures enous. skill, and gender. Third, it describes the of poverty and inequality. Mistiaen and o Using training event histories to ex- pattern ofjob destruction and job creation Ravallion demonstrate how the latent amine the impact of changing training associated with globalization. Because income effect on survey compliance can be status over time. these two processes are not synchronized, estimated using readily available data on a Looking at how training (and technol- the fourth issue addressed is the impact response rates across geographic areas. ogy) practices changed where firms were on unemployment rates. Fifth, the paper An application using the Current Popula- located in productivity and wage distribu- reviews the labor market policies that can tion Survey for the United States indicates tions over the 1990s. be used to offset the adverse effects of that compliance falls as income rises. Together, these cross-sectional and globalization on employment and labor Correcting for selective compliance appre- panel analyses found evidence that train- earnings. Finally, it discusses how the ciably increases mean income and in- ing had large and statistically significant international community could encourage equality, but has only a small impact on wage and productivity outcomes, that developing countries to adopt sound poverty incidence up to commonly used joint training and R&D yielded larger re- labor market policies in the context of poverty lines in the United States. turns than investments in just one or the globalization. This paper-a product of the Poverty other, and that both training and technol- This paper-a product of Public Ser- Team, Development Research Group-is ogy investments enabled firms to improve vices, Development Research Group-is part of a larger effort in the group to de- their relative position in the wage and part of a larger effort in the group to as- velop better methods of measuring pov- productivity distribution between 1993 sess the impact of labor market policies erty and inequality from survey data. and 1999. andinstitutionsoneconomicperformance. Copies of the paper are available free from This paper-a joint product of the Hu- Copies of the paper are available free from the World Bank, 1818 H Street NW, man Development Division, World Bank the World Bank, 1818 H Street NW, Policy Research Working Paper Series 9 Washington, DC 20433. Please contact 2960. The Poverty/Environment cific work, but not a general formula for Hedy Sladovich, room MC3-607, tele- Nexus in Cambodia and Lao program deiign. phone 202-473-7698, fax 202-522-1153, People's Democratic Republic This paper-a product of Infrastructure email address hsladovich@worldbank.org. and Environment, Development Research Policy Research Working Papers are also Group-is part of a -larger effort in the posted on the Web at http//econ. Susmita Dasgupta, Uwe Deichmann, group to understand poverty/environment worldbank.org. The author may be con-- Craig Meisner, and David Wheeler links in different contexts. Copies of the tacted at mrama@worldbank.org. (38 (January 2003) paper are available free from the World pages) Bank, 1818 H Street NW, Washington, DC Environmental degradation can inflict 20433. Please contact Yasmin D'Souza, serious damage on poor people because room MC2-622, telephone 202-473-1449, 2959. Wage Differentials -and their livelihoods often depend on natural fax 202-522-3230, email address ydsouza State-Private Sector Employment resource use and their living conditions @worldbank.org. Policy Research Work- Choice in Yugoslavia may offer little protection fron air, water, ing Papers are also posted on the Web at and soil pollution. At the same time, pov- http://econ.worldbank.org. The authors Michael M. Lokshin and Branko erty-constrained options may induce the may be contacted at sdasgupta Jovanovic poor to deplete resources and degrade the @worldbank.org, udeichmann@worldbank. (January 2003) environment at rates that are incompat- org, cmeisner@worldbank.org, or ible with long-term sustainability. In such dwheeler@worldbank.org. (40 pages) Lokshin and Jovanovic use the newly cases, degraded resources may pi'ecipitate available Yugoslavian Labor Force Survey a downward spiral, by further reducing the data to investigate wage differentials and income and livelihoods of the poor. This 2961. Strategic Planning for employment decisions in the state and "povertj/environment nexus" has becoie Poverty Reduction in Vietnam: private sectors in Yugoslavia. For the a major issue in the recent literatur6 on Progress and Challenges for analysis the authors use three empirical sustainable development. In regions where Meeting the Localized Millennium models that rely on different statistical the nexus is significant, jointly addressing Development Goals assumptions. They extend the standard problems of poverty and environmental switching regression model to allow non- degradation may be more costieffective Rob Swinkels and Carrie Turk normality in the joint distribution of the - than addressing them separately. (January 2003) error terms. After correcting for the sec- - Empirical evidence on the prevalence tor selection bias and controlliig for work- and importance of the poverty/environ- This paper discusses the progress that ers' characteristics the authors find a pri- ment nexus is sparse becausd the requi-- Vietnam has made toward meeting a core vate sector wage advantage. The wage site data are often-difficult to obtain in set of developmentgoals that the govern- premium is largest for workers with low developing countries. The authors use ment recently adopted as part of its Com- education levels and declining for work- newly available spatial and'survey data prehensive Poverty , Reduction and ers with higher educational levels. Given to investigate the spatial dimension of the Growth Strategy (CPRGS). These the regulatory and tax' policies that nexus in Cambodia, and Lao People's goals are strongly related to the pushed the private sector into the infor- Democratic Republic. The data enable the Millennium Development Goals (MDGs), mal sphere of the economy during the authors to quantify several environmen- but -are adapted and expanded to reflect period covered by our data; the authors' tal problems at the district and provincial Vietnam's national challenges and the argue that the state-private wage gapis level. In a parallel exercise, they map the government's ambitious development likely to grow in the future. This will make provincial distribution of poor hoiiseholds. plans. For each Vietnam Development it increasiigly difficiilt for the state sec- Merging the geographic inforintion on Goal, the authors describe recent trends tor to attract and retain highly skilled poverty and the environment, the authors in relation to the trajectories implied by employees. search for the nexus using geo-referenced the MDGs, outline the intermediate This paper-a product of the Poverty indicator maps and statistiit analysis. targets identified by the government, and Team, Development Research Gi-oup--is The results suggest that the nexus is couii) discuss the challenges involved in meeting part of a larger effort in the group to uA- try-specific: geographical, liistorical, and these. derstand labor issues in public sector re- institutional factors may all play impor- Relative to other countries of similar per form. Copies of the paper are available free - tant roles in determining the relative capita expenditures, Vietnam has made from the World Bank, 1818 H StreetNW, importance of poverty and exiviroriiient rapid progress in a number of key areas. Washington, DC 20433. -Please contact links in different contexts. Joirif imple- Poverty has halved over the 1990s, enroll- Patricia Sader, room MC3-556, telephone mentation of poverty and envirohmeint' ment rates in primary education have 202-473-3902, fax 202-522-1153, email strategies may be cost-effectiVe for -some risen to 91 percent (although there is a address psader@worldbank.org. Policy environmental problems; but imdependent quality problem), indicators of gender Research Working Papers are also posted implementation may be -preferable in equity have been strengthened, child on the Web at http://econ.worldbank.org. many cases as well. Since the search has mortality has been reduced, maternal The authors may be contacted at not revealed a common nexus, the>authors health has improved, and real progress mlokshin@worldbank.org or jovanovicb' conclude on a caitionary note. The evi- has been made in combating malaria and @capecon.com. (33 pages) dence suggests that the nexus concept caiti other communicable diseases. In contrast, provide a useful catalyst for country-spe- Vietnam scores worse than other compa- 10 Policy Research Working Paper Series rable countries in the areas of child mal- able inferences that help explain con- Auffret develops a conceptual frame- nutrition, access to clean water, and com- sumption volatility. The author develops work for risk management and shows that bating HIV/AIDS. a conceptual framework for analyzing the the insurance market for catastrophic risk A number of important crosscutting is- effects ofcatastrophic events on household in the Caribbean region remains a "thin" sues emerge from this analysis that need and aggregate welfare. According to this market characterized by "high" prices and to be addressed. One such challenge is framework, the volatility of consumption "low" transfer of risk. He analyzes the improving equity, both in terms of ensur- comes from production shocks that are possible market failures which could ex- ing that the benefits of growth are distrib- transformed into consumption shocks plain the lack of development of the catas- uted evenly across the population and in mostly because of underdeveloped or inef- trophe insurance market. Finally he out- terms of access to public services. This will fective risk-management mechanisms. lines a set of recommendations for public involve addressing the affordability of Auffret conducts an empirical analysis of sector interventions. education and curative health care for the impact of catastrophic events on 16 This paper-a product of the Economic poor households. Improvements in public countries (6 from the Caribbean region and Policy Sector Unit, Latin America and the expenditure planning are needed to align 10 from Latin America) from 1970-99 and Caribbean Region-is part of a larger ef-. resources better to stated desired out- shows that catastrophic events lead to: fort in the region to assess the impacts of comes and to link nationally-defined tar- o A substantial decline in the growth catastrophic events on welfare. Copies of gets to subnational planning and budget- of output. the paper are available free from the ing processes. There is also a need to ad- o. A substantial decline in the growth World Bank, 1818 H Street NW, Washing- dress capacity and data gaps which will of investment. ton, DC 20433. Please contact Kevin be crucial for effective monitoring. o A more moderate decline in consump- Tomlinson, room 14-403, telephone 202- This paper-a product of the Poverty tion growth (most of the decline is in pri- 473-9763, fax 202-676-1494, email ad- Reduction and Economic Management vate consumption, while public consump- dress ktomlinson@worldbank.org. Policy Sector Unit, East Asia and Pacific Re- tion declines moderately). Research Working Papers are also posted gion-is part of a larger effort in the re- o A worsening ofthe current account of on the Web at http:/econ.worldbank.org. gion to help governments move toward the balance of payments. The author may be contacted at pauffret outcome-based planning for poverty re- This paper-a product of the Economic @worldbank.org. (31 pages) duction. Copies of the paper are available Policy Sector Unit, Latin America and the free from the World Bank, 1818 H Street Caribbean Region-is part of a larger ef- NW, Washington, DC 20433. Please con- fort in the region to assess the impact of 2964. Wages and Productivity tact Nga Vinh Dao Lopez, room MC9-234, catastrophic events on welfare. Copies of in Mexican Manufacturing telephone 202-458-8032, fax 202-522- the paper are available free from the 1671, email address nlopez@worldbank. World Bank, 1818 H Street NW, Washing- Gladys Lopez Acevedo org. Policy Research Working Papers are ton, DC 20433. Please contact Kevin (January 2003) also posted on the Web at httpi/econ. Tomlinson, room 14-403, telephone 202- worldbank.org. The authors may be con- 473-9763, fax 202-676-1494, email ad- Acevedo identifies the determinants of tacted at rswinkels@worldbank.org or dress ktomlinson@worldbank.org. Policy wages and productivity in Mexico over cturk@worldbank.org. (46 pages) Research Working Papers are also posted time using national representative linked on the Web at http//econ.worldbank.org. employer-employee databases from the The author may be contacted at manufacturing sector. She shows that 2962. High Consumption Volatility: pauffret@worldbank.org. (33 pages) both employers and employees are benefit- The Impact of Natural Disasters? ing from investments in education, train- ing, work experience, foreign research and Philippe Auffret 2963. Catastrophe Insurance development, and openness after the (January 2003) Market In the Caribbean Region: North American Free Trade Agreement Market Failures and (NAFTA). Additional years of schooling Ahistory ofrepeated external and domes- Recommendations for Public have a higher impact on wages and pro- tic shocks has made economic insecurity Sector Interventions ductivity after NAFTA than before. En- a major concern across the Caribbean re- dogenous training effects are larger for gion. Of particular concern to all house- Philippe Auffret productivity than for wages, suggesting holds, especially the poorest segments of (January 2003) that the employers share the costs and the population, is the exposure to shocks returns to training. The author also finds that are generated by catastrophic events The Caribbean region suffers from a high that investment in human capital magni- or natural disasters. degree of economic volatility. A history of fies technology-driven productivity gains. Auffret shows that despite high con- repeated external and domestic shocks By comparing four regions of Mexico- sumption growth, the Caribbean region has made economic insecurity a major north, center, south, and Mexico City- suffers from a high volatility of consump- concern across the region. Of particular regional wage and productivity gaps are tion that decreases household welfare. concern to all households, especially the found to have increased over time. After presenting some empirical evidence poorest segments of the population, is This paper-a product of the Economic that consumption volatility is higher in the exposure to shocks that are generated Policy Sector Unit, Latin America and the the Caribbean region than in the rest of by catastrophic events or natural Caribbean Region-is a background paper the world, he makes some empirically test- disasters. for the region's 2002 Flagship Report Policy Research Working Paper Series 11 "Knowledge in Latin America and the infant mortality rates and one of the low- tions of the most important findings for Caribbean: Reconsidering Education, est life expectancies at birth. Major causes nutritional policy. Training, and Technology Policies." Cop- of death in Guatemala still include treat- The prevalence of chronic malnutrition ies of this paper are available free from the able and communicable diseases, such as among Guatemalan children in 2000 was World Bank, 1818 H Street NW, Washing- diarrhea, pneumonia, cholera, malnutri- the highest in Latin America and among ton, DC 20433. Please contact Michael tion, and tuberculosis. A significant share the highest in the world. The data show Geller, room 14-046, telephone 202-458- of Guatemalans lack access to health care very strong socioeconomic and geographic 5155, fax 202-522-2112, email address services. A combination of both supply- inequality. The econometric analysis re- mgeller@worldbank.org. Policy Research and demand-side constraints limit the veals a strong impact of income and of Working Papers are also posted on the ability of households to seek health care intergenerational effects. Education of Web at http://econ.worldbank.org. The services in Guatemala, with supply-side adults in the household and the availabil- author may be contacted at gacevedo constraints playing a more dominant role ity of infrastructure are other important @worldbank.org. (36 pages) in rural areas than urban. Some progress determinants of children's growth attain- has been made in reforming the health ment. Finally, even controlling for income sector. Important steps have been taken and other household and community char- 2965. Informality Revisited on the institutional side, with health be- acteristics, ethnicity remains an impor- ing one ofthe pilot ministries to decentral- tant determinant of child nutritional sta- William F. Maloney ize financial management under the In- tus. The study also reveals an increasing (January 2003) tegrated System for Health Care (SIAS prevalence of excess weights and obesity program). Public spending has shifted among children and adults. Overnutrition Maloney develops a view of the informal toward preventive care, which is essential tends to be higher among individuals liv- sector in developing countries primarily for treating the health problems faced by ing in urban areas and among non-poor as an unregulated micro-entrepreneurial the poor. Despite these efforts, spending and non-indigenous households. sector and not as a disadvantaged residual and health outcomes has not improved This paper-a product of the Human of segmented labor markets. Drawing on significantly. In addition, public spending Development Sector Unit, Latin America recent work from Latin America, he offers on health is not well targeted. Overall and the Caribbean Region-is part of a alternative explanations for many of the public health spending benefits the high- larger effort in the region to study poverty characteristics of the informal sector cus- est quintiles disproportionately. By type and human development processes. Cop- tomarily regarded as evidence of its of facility, public spending on hospitals is ies of the paper are available free from the inferiority. - by far the most regressive. World Bank, 1818 H Street NW, Washing- This paper-a product of the Office of This paper-a product of the -Human ton, DC 20433. Please contact Michele the Regional Chief Economist, Latin Development Sector Unit, Latin America Gragnolati, room MC11-234, telephone America and the Caribbean Region-is and the Caribbean Region-is part of a 202-458-5287, fax 202-522-2955, email part of a larger effort in the region to un- larger effort in the region to study poverty address mgragnolati@worldbank.org. derstand the impact of macroeconomic and human development processes. Cop- Policy Research Working Papers are also crises. Copies of the paper are available ies ofthe paper are available free from the posted on the Web at http-//econ. free from the World Bank, 1818 H Street World Bank, 1818 H Street NW, Washing- worldbank.org. Alessandra Marinimay be NW, Washington, DC 20433. Please con- ton, DC 20433. Please contact Michele contacted at amarini@worldbank.org. (54 tact Patricia Soto, room 18-018, telephone Gragnolati, room MC11-234, telephone pages) 202-473-7892, fax 202-522-7528, email 202-458-5287, fax 202-522-2955, email address psoto@worldbank.org. Policy Re- address mgragnolati@worldbank.org. search Working Papers are also posted on Policy Research Working Papers are also 2968. Refining Policy with the Poor: the Web at http://econ.worldbank.oig. The- posted on the Web at http://econ. Local Consultations on the Draft author may be contacted at wmaloney worldbank.org. Alessandra Marini maybe Comprehensive Poverty Reduction @worldbank.org. (23 pages) contacted at amarini@worldbank.org. (65 and Growth Strategy in Vietnam pages) Edwin Shanks and Carrie Turk 2966. Health and Poverty (January 2003) in Guatemala 2967. Malnutrition and Poverty In Guatemala In March 2001 the Government of Viet- Michele Gragnolati and Alessandra Marini nam produced an Interim Poverty Reduc- (January 2003) Alessandra Marini and Michele Gragnolati - tion Strategy Paper (IPRSP) and an- (January 2003) nounced its intention to develop a Com- Unlike many other countries in Latin prehensive Poverty Reduction Strategy America, Guatemala is only at the begin- The objective of this paper is to document Paper (CPRGS) by the end of April 2002. ning ofthe demographic and epidemiologi- the extent and distribution of child and In the IPRSP, the Government outlined cal transition. The population is young, is adult malnutrition in Guatemala; to ana- its commitment to involve a broad range growing rapidly, and is still primarily lyze the relationship between selected of stakeholders-including poor commu- rural. Guatemala is among the worst per- child, maternal, household and commu- nities, local government authorities, and formers in terms of health outcomes in nity characteristics and children's nutri- the enterprise sector-in drafting the Latin America, with one of the highest tional.status; and to outline the implica- CPRGS. The Ministry of Planning and 12 Policy Research Working Paper Series Investment, who was assigned by the Gov- from Asia and Latin America, Das Gupta, dence with quantitative survey data ernment of Vietnam to lead the CPRGS Granvoinnet, and Romani show how: analyzed with propensity score methods draftingprocess, askedtheWorldBankand o State efforts to bring about land re- on matched samples to study the impact a group of international nongovernmental form, tenancy reform, and expanding non- of a participatory community-driven social organizations to support them in carrying crop sources of income can broaden the fund on preference targeting, collective out the local consultations. The consulta- distribution of power in rural communi- action, and community decisionmaking. tions took place in six rural and urban lo- ties, laying the basis for more effective The data come from a case study of cations across Vietnam selected to repre- community-driven collective action; and five pairs of communities in Jamaica sent a range of poverty situations. About o Higher levels of government can form where one community in the pair has re- 1,800 people participated in the research. alliances with communities, putting pres- ceived funds from the Jamaica social in- This report, which is the first of three sure on local authorities from above and vestment fund (JSIF) while the other has volumes documenting the local consulta- below to improve development outcomes not-but has been picked to match the tions, provides an account and reflection at the local level. These alliances can also funded community in its social and eco- on the approach and methodology used in be very effective in catalyzing collective nomic characteristics. The qualitative the consultations. It is intended this may action at community level, and reducing data reveal that the social fund process is give useful practical experience for future "local capture" by vested interests. elite-driven and decisionmaking tends to monitoring of the CPRGS as well as for There are several encouraging points be dominated by a small group of moti- people who are planning to carry out simi- that emerge from these case studies. First, vated individuals. But by the end of the lar exercises in other countries. The report these powerful institutional changes do project there was broad-based satisfaction outlines the process that was followed not necessarily take long to generate. Sec- with the outcome. The quantitative data from the point of developing a research ond, they can be achieved in a diversity of from 500 households mirror these findings outline from the IPRSP, through the field- settings: tightly knit or loose-knit commu- by showing that ex-ante the social fund work exercises, data compilation, and nities; war-ravaged or relatively stable; does not address the expressed needs of analysis, leading on to identification ofthe democratic or authoritarian; with land the majority of individuals in the major- main policy messages made by the partici- reform or (if carefully managed) even ity of communities. By the end of the con- pants. It also describes how the findings without. Third, there are strong political struction process, however, 80 percent of were used to influence the final version of payoffs in terms of legitimacy and popu- the community expressed satisfaction the CPRGS. lar support for those who support such with the outcome. An analysis of the de- This paper-a product of the Poverty developmental action. terminants of participation shows that Reduction and Economic Management This paper-a joint product of Public better educated and better networked in- Sector Unit, East Asia and Pacific Re- Services and Rural Development, Devel- dividuals dominate the process. Propen- gion-is part of a larger effort in the re- opment Research Group, and Poverty Re- sity score analysis reveals that the JSIF gion to improve participatory processes in duction and Economic Management, Af- has had a causal impact on improvements the formulation of policies for poverty re- rica Technical Families-is part of a larger in trust and the capacity for collective duction. Copies of the paper are available effort in the Bank to understand how to action, but these gains are greater for free from the World Bank, 1818 H Street foster effective community-driven devel- elites within the community. Both JSIF NW, Washington, DC 20433. Please con- opment. Copies of the paper are available and non-JSIF communities are more tact Nga Vinh Dao Lopez, room MC9-242, free from the World Bank, 1818 H Street likely now to make decisions that affect telephone 202-458-8032, fax 202-522- NW, Washington, DC 20433. Please con- their lives which indicates a broad-based 1671, email address nlopez@worldbank. tact Monica Das Gupta, room MC3-633, effort to promote participatory develop- org. Policy Research Working Papers are telephone 202-473-1983, fax 202-522- ment in the country, but JSIF communi- also posted on the Web at http//econ. 1153, email address mdasgupta ties do not show higher levels of commu- worldbank.org. The authors may be con- @worldbank.org. Policy Research Work- nity-driven decisions than non-JSIF com- tacted at edwin@fpt.vn or cturk ing Papers are also posted on the Web at munities. The authors shed light on the @worldbank.org. (56 pages) httpI/econ.worldbank.org. The other au- complex ways in which community-driven thors may be contacted at hgrandvoinnet development works inside communities- @worldbank.org or mromani@worldbank. a process that is deeply imbedded within 2969. Fostering Community-Driven org. (29 pages) Jamaica's sociocultural and political Development: What Role for the context. State? This paper-a product of the Poverty 2970. The Social Impact of Social Team, Development Research Group-is Monica Das Gupta, Helene Grandvoinnet, Funds in Jamaica: A Mixed- part ofa larger effort in the group to evalu- and Mattia Romani Methods Analysis of Participation, ate community-driven development. Cop- (January 2003) Targeting, and Collective Action ies of the paper are available free from the In Community-Driven Development World Bank, 1818 H Street NW, Washing- States can do much to tap community- ton, DC 20433. Please contact Patricia level energies and resources for develop- Vijayendra Rao and Ana Marfa IbAfiez Sader, room MC3-556, telephone 202-473- ment if they seek to interact more syner- (February 2003) 3902, fax 202-522-1153, email address gistically with local communities. The psader@worldbank.org. Policy Research broader spin-offis creating a developmen- Rao and IbAfhez develop an evaluation Working Papers are also posted on the tal society and polity. Using case studies method that combines qualitative evi- Web at http:/econ.worldbank.org. Policy Research Working Paper Series 13 Vijayendra Rao may be contacted at ton, DC 20433. Please contact Hedy Working Papers are also posted on the vrao@worldbank.org. (56 pages) Sladovich, room MC3-311, telephone 202- Web at http://econ.worldbank.org. The 473-7698, fax 202-522-1154, email ad- author may be contacted at dress hsladovich@worldbank.org. Policy radams@worldbank.org. (42 pages) 2971. Short but not Sweet: New Research Working Papers are also posted Evidence on Short Duration on the Web at http://econ.worldbank.org. Morbidities from India The authors may be contacted at 2973. Intellectual Property Rights, jdasl@worldbank.org or csanchezparamo Licensing, and Innovation Jishnu Das and Carolina Sbnchez- @worldbank.org. (44 pages) Pdramo Guifang Yang and Keith E. Maskus (February 2003) (February 2003) 2972. Economic Growth, India spends 6 percent of its GDP on inequality, and Poverty: Findings There is considerable debate in econom- health-three times the amount spent by from a New Data Set ics literature on whether a decision by Indonesia and twice that of China-and developing countries to strengthen their spending on non-chronic morbidities is Richard H. Adams, Jr. protection of intellectual property rights three times that of chronic illnesses. It is (February 2003) (IPRs) will increase or reduce their access normally assumed that the high spending to modern technologies invented by indus- on non-chronic illnesses reflects the preva- Adams uses new data from 50 developing trial countries. This access can be lence of morbidities with high case-fatal- countries and 101 intervals to examine the achieved through technology transfer of ity or case-disability ratios. But there is impact of economic growth on poverty and various kinds, including foreign direct little data that can be used to separate inequality. He finds that growth repre- investment and licensing. Licensing is the out spending by type of illness. Das sents an important means for reducing focus of this paper. and SAnchez-Ptramo address this poverty in the developing world. When To the extent that inventing firms issue with a unique dataset where 1,621 economic growth is measured by survey choose to act more monopolistically and individuals in Delhi were observed for mean income (consumption), there is a offer fewer technologies on the market, 16 weeks through detailed weekly inter- strong, statistical link between growth stronger IPRs could reduce international views on morbidity and health-seeking and poverty reduction. When economic technology flows. However, to the extent behavior. growth is measured by GDP per capita, that IPRs raise the returns to innovation The authors' findings are surprising the statistical relationship between and licensing, these flows would expand. and contrary to the normal view of health growth and poverty reduction is still In theory, the outcome depends on how spending. They define a new class of ill- present, albeit not quite as strong. IPRs affect several variables-the costs of, nesses as "short duration morbidities" if Economic growth reduces poverty be- and returns to, international licensing; the they are classified as non-chronic in the cause growth has little impact on income wage advantage of workers in poor coun- international classification of disease and inequality. In the data set income inequal- tries; the innovation process in industrial are medically expected to last less than ity rises on average less than 1.0 percent countries; and the amount of labor avail- two weeks. The authors show that short a year. Since income distributions are able for innovation and production. duration morbidities are important in relatively stable over time, economic Yang and Maskus develop a theoretical terms of prevalence, practitioner visits, growth tends to raise incomes for all mem- model in which firms in the North (indus- and household health expenditure: Indi- bers of society, including the poor. When trial countries) innovate products of viduals report a short duration morbidity growth is measured by survey mean in- higher quality levels and decide whether in one out of every five weeks. Moreover, come (consumption), the elasticity of poy- to produce in the North or transfer pro- one out of every three weeks reported with erty with respect to growth is -2.59. In duction rights to the South (developing a short duration morbidity results in a other words, on averagei a 10 percentage countries) through licensing. Different doctor visit, and each week sick with such point increase in economic growth (mea- quality levels of each product are sold in a morbidity increases health expenditure sured by survey mean-income) will pro- equilibrium because of differences in con- by 25 percent. Further, the absolute -duce a 25.9 percent decrease in the pro- sumers' willingness-to-pay for quality spending on short duration morbidities portion of people living in poverty ($la improvements. Contracting problems ex- is similar across poor and rich income person a day). ist because the inventors in the North households. The authors discuss the im- This paper-a product of the Poverty must indicate to licensees in the South plications of these findings in understand- Reduction Group, Poverty Reduction and whether their product is ofhigher or lower ing household health behavior in an Economic Management Network-is part quality and also prevent the licensees from urban context, with special emphasis on of a larger effort in the network to better copying the technology. So, constraints in the role of information in health-seeking inform policy debates about- economic the model ensure that the equilibrium behavior. growth, poverty, and inequality. Copies of flow of licensing higher-quality goods This paper-a product of Public Ser- the paper are available free from the meets these objectives. When the South vices, Development Research Group-is World Bank, 1818 H Street NW, Washing- strengthens its patent rights, copying by part of a larger effort in the group to un- ton, DC 20433. Please contact Nelly Obias, licensees is made costlier but the returns derstand health expenditures. Copies of room MC4-834, telephone 202-473-1986, to licensing are increased. This change the paper are available free from the fax 202-522-3283, email address affects the dynamic decisions regarding World Bank, 1818 H Street NW, Washing- nobias@worldbank.org. Policy Research innovation and technology transfer, which 14 Policy Research Working Paper Series could rise or fall depending on market sities) which, even today, is a world leader 2975. Policy Options for Meeting parameters, including the labor available in many fields. Despite this world class the Millennium Development Goals for research and production. basic research capacity, Russia's exports in Brazil: Can Micro-Simulations Results from the model show that the are primarily raw materials. At a time Help? net effects depend on the balance between when wealth depends to an increasing profits made by the Northern licensor and degree on knowledge, Russia does not Francisco H. G. Ferreira and lower labor costs in the South. If the size have an effective system for converting its Phillippe G. Leite of the labor force used in Northern inno- scientific capacity into wealth. (February 2003) vation compared with that used in produc- Russia's S&T resources are isolated ing goods in both the North and South is bureaucratically (they are deployed in the Ferreira and Leite investigate whether sufficiently small (a condition that accords rigid hierarchical system devised in the micro-simulation techniques can shed with reality), stronger IPRs in the South 1920s to mobilize resources for rapid state- light on the types of policies that should would lead to more licensing and innova- planned industrial development and na- be adopted by countries wishing to meet tion. This change would also increase the tional defense), functionally (there are few their Millennium Development Goals. Southern wage relative to the Northern links between the supply of S&T output They compare two families of micro-simu- wage. So, in this model a decision by de- by research institutes and the demand for lations. The first family of micro-simula- veloping countries to increase their patent S&T by Russian or foreign enterprises), tions decomposes required poverty rights would expand global innovation and geographically (many assets are lo- changes into a change in the mean and a and increase technology transfer. This cated in formerly closed cities or isolated reduction in inequality. Although it high- result is consistent with recent empirical sciencelatomic cities). Overcoming these lights the importance ofinequality reduc- evidence. inefficiencies and adjusting the S&T sys- tion, it appears to be too general to be of It should be noted that while the results tem to the demands of a market economy much use for policymaking. The second suggest that international agreements to will require a major program of institu- family of micro-simulations is based on a strengthen IPRs should expand global in- tional and sectoral reform. richer model of behavior in the labor mar- novation and technology transfer through Part I of this paper describes the am- kets. It points to the importance of com- licensing, the model cannot be used for biguous legacy of the Soviet S&T system bining different policy options, such as welfare analysis. Thus, while the develop- and the status of the Russian S&T sector educational expansion and targeted con- ing countries enjoy more inward licensing, after 10 years of transition. Part II de- ditional redistribution schemes, to ensure the cost per license could be higher, and scribes the evolution of the Russian sys- that the poorest people in society are suc- prices could also rise, with an unclear tem of intellectual property rights protec- cessfully reached. But the absence of overall effect on economic well-being. tion from Soviet times to the present and market equilibria in these statistical This paper-a product of Trade, Devel- argues that Russia will never develop a models, as well as the strong stability opment Research Group--is part of a successful commercialization program assumptions which are implicit in their larger effort in the group to assess the until it clarifies the ownership of the large use, argue for extreme caution in their impact of intellectual property rights on stock of intellectual property funded with interpretation. economic development. Copies of the pa- federal budget resources. Part III outlines This paper-a product of the Poverty per are available free from the World a comprehensive 10-point sectoral reform Team, Development Research Group-is Bank, 1818 H Street NW, Washington, DC program to improve the efficiency of gov- part of a larger effort in the group to un- 20433. Please contact Paulina Flewitt, ernment research and development derstand pro-poor policies. Copies of the room MC3-333, telephone 202-473-2724, spending and link the Russian S&T sys- paper are available free from the World fax 202-522-1159, email address tem with market forces. Bank, 1818 H Street NW, Washington, DC pflewitt@worldbank.org. Policy Research This paper-a product of the Private 20433. Please contact Patricia Sader, Working Papers are also posted on the and Financial Sectors Development Unit, room MC3-556, telephone 202-473-3902, Web at http/econ.worldbank.org. The Europe and Central Asia Region-is part fax 202-522-1153, email address psader authors may be contacted at of a larger effort in the region to foster @worldbank.org. Policy Research Work- keith.maskus@colorado.edu or lynn.yang understanding of technology commercial- ing Papers are also posted on the Web at @worldnet.att.net. (34 pages) ization issues. Copies of the paper are http//econ.worldbank.org. The authors available free from the World Bank, 1818 may be contacted at fferreira H Street NW, Washington, DC 20433. @worldbank.orgorpleite@worldbank.org. 2974. From Knowledge to Wealth: Please contact Alfred Watkins, room H12- (39 pages) Transforming Russian Science 115, telephone 202-473-7277, fax 202-522- and Technology for a Modern 3687, email address awatkins Knowlege Economy @worldbank.org. Policy Research Work- 2976. Rural Extension Services ing Papers are also posted on the Web at Alfred Watkins http/econ.worldbank.org. (57 pages) Jock R. Anderson and Gershon Feder (February 2003) (February 2003) Russia possesses a sophisticated science Anderson and Feder analyze the consid- and technology (S&T) infrastructure (re- erations that lead policymakers to under- search capability, technically trained take extension investments as a key pub- workforce, and technical research univer- lic responsibility, as well as the complex Policy Research Working Paper Series 15 set of factors and intra-agency incentives behind the pace of the epidemic; but pro- tiveness, and Willingness to Pay" spon- that explain why different extension sys- grams are now beginning to focus on a sored by the European Commission and tems' performance vary. The authors pro- broad range of interventions to combat its the World Bank. The project was launched vide a conceptual framework outlining further spread and to mitigate its impact. in response to recommendations of the farmers' demand for information, the Desmond and Greener investigate the World Bank's AIDS Vaccine Task Force. welfare economic characterizations of ex- issues around the targeting of an eventual Copies of this paper are available free from tension services, and the organizational HIV vaccine. There is at present no vac- the World Bank, 1818 H Street NW, and political attributes that govern the cine against HIV. Although several can- Washington, DC 20433. Please contact performance of extension systems. They didates are in the trial stage, it is not likely Hedy Sladovich, mail stop MC3-311, tele- use the conceptual framework to examine that a vaccine effective against the sub- phone 202-473-7698, fax 202-522-1154, several extension modalities and to ana- type of the virus prevalent in Southern email address hsladovich@worldbank.org. lyze their likely and actual effectiveness. Africa will be available for 10-15 years. Policy Research Working Papers are also Specifically, the modalities reviewed in- When it is, it may be expensive, only par- posted on the Web at httpJ/econ. clude "training and visit" extension, de- tially effective, and confer immunity for a worldbank.org. The authors may be con- centralized systems, "fee-for-service" and limited period only. Vaccination programs tacted at desmondcl@nu.ac.za or rgreener privatized extension, and farmer-field- will need to make the best use of the vac- @bidpa.bw. (47 pages) schools. The authors also discuss method- cine that is available and effective target- ological issues pertaining to the assess- ing will be essential. ment of extension outcomes and review The authors identify potential target 2978. The Epidemiological Impact the empirical literature on extension im- groups for a vaccine, and estimate how of an HIV Vaccine on the HIVIAIDS pact. They emphasize the efficiency gains many individuals would be in need of vac- Epidemic in Southern India that can come from locally decentralized cination. They develop a method for esti- delivery systems with incentive structures mating how many cases of HIV infection Nico J. D. Nagelkerke and Sake J. De Vlas based largely on private provision that in are likely to be avoided for each vaccinated (February 2003) most poorer countries is still publicly- individual. The cases avoided are of two funded. In wealthier countries, and for kinds: primary-the individual case that The potential epidemiological impact of particular higher income farmer groups, might have occurred in people who are preventive HIV vaccines on the HIV epi- extension systems will likely evolve into vaccinated, and secondary-the number demic in Southern India is examined us- fee-for-service organizations. of people that the vaccinated individual ing a mathematical deterministic dynamic This paper-a joint product of the Ag- would otherwise have caused to become compartmental model. Various assump- riculture and Rural Development Depart- infected. Both ofthese depend on assump- tions about the degree ofprotection offered ment and Rural Development, Develop- tions about the efficacy and duration of by such a vaccine, the extent of immuno- ment Research Group-is part of a larger vaccine protection and the extent and logical response of those vaccinated, and effort in the Bank to study the opportuni- nature of sexual risk behavior in the popu- the duration of protection afforded are ex- ties and challenges facing agricultural lation groups. The authors distinguish plored. Alternative targeting strategies extension. Copies of the paper are avail- between the HIV cases averted per vacci- for HIV vaccination are simulated and able free from the World Bank, 1818 H nation and the cases averted per 100 re- compared with the impact of conventional Street NW, Washington, DC 20433. cruits into a vaccination program. prevention interventions in high-risk Please contact Pauline Kokila, room MC3- The cases averted per 100 recruits is groups and the general population. The 510, telephone 202-473-3716, fax 202-522- used to develop a priority ranking of the impact of disinhibition (increased risk 1153, email address pkokila identified population groups for vaccina- behavior due to the presence of a vaccine) @worldbank.org. Policy Research Work- tion. The authors discuss the issue of ease is also considered. ing Papers are also posted on the Web at of access to those groups and how the dif- Vaccines that convey a high degree of http1/econ.worldbank.org. The authors ferential costs would affect the vaccination protection in a share of or all of those may be contacted at janderson strategy. They conclude that an expensive immunized and that convey lifelong im- @worldbank.org or gfeder@worldbank. vaccine should be administered to com- munity are the most effective in curbing org. (33 pages) mercial sex workers first, while an inex- the HIV epidemic. Vaccines that convey pensive vaccine would be better adminis- less than complete protection may also - tered first to general population groups, have substantial public health impact, but 2977. The Strategic Use and in particular, schoolchildren. disinhibition can easily undo their effects Potential Demand for an HIV Desmond and Greener conclude with a and they should be used combined with Vaccine in Southern Africa discussion of current levels of public and conventional prevention efforts. Conven- private expenditure on HIV prevention tional interventions that target commer- Christopher Desmond and Robert Greener and treatment, and the implications for an cial sex workers and their clients to in- (February 2003) assessment of the willingness to pay for crease condom use can also be highly ef- an eventual HIV vaccine. fective and can be implemented immedi- HIV prevalence in Southern Africa is the This paper-a product of Public Ser- ately, before the arrival of vaccines. highest in the world and the impact ofHIV/ vices,. Development Research Group-is This paper-a product of Public Ser- AIDS in the region are devastating at all part of the research project "The Econom- vices, Development Research Group-is levels of society, including the wider ics of an HIV/AIDS Vaccine in Developing part of a research project "The Economics economy. Government response has lagged Countries: Potential Impact, Cost-Effec- of an HIV/AIDS Vaccine in Developing 16 Policy Research Working Paper Series Countries: Potential Impact, Cost-Effec- is part of a larger effort in the group to 2981. Voice Lessons: Local tiveness, and Willingness to Pay" spon- understand regulatory and infrastructure Government Organizations, Social sored by the European Commission and sector reforms. Copies of the paper are Organizations, and the Quality of the World Bank. The projectwas launched available free from the World Bank, 1818 Local Governance in response to recommendations of the H Street NW, Washington, DC 20433. World Bank's AIDS Vaccine Task Force. Please contact Paulina Sintim-Aboagye, Vivi Alatas, Lant Pritchett, Copies of this paper are available free from room MC3-422, telephone 202-473-7644, and Anna Wetterberg the World Bank, 1818 H Street NW, fax 202-522-1155, email address (March 2003) Washington, DC 20433. Please contact psintimaboagye@worldbank.org. Policy Hedy Sladovich, mail stop MC3-311, tele- Research Working Papers are also posted As part the Local Level Institutions study phone 202-473-7698, fax 202-522-1154, on the Web at http://econ.worldbank.org. of local life in villages in rural Indonesia email address hsladovich@worldbank.org. The author maybe contacted at swallsten information was gathered on sampled Policy Research Working Papers are also @worldbank.org. (24 pages) household's participation in social activi- posted on the Web at http//econ. ties. We classified the reported activities worldbank.org. The authors may be con- into four distinct types of social activity: tacted at nico.nagelkerke@rivm.nl or 2980. Living and Dying with Hard sociability, networks, social organizations, devlas@mgz.fgg.eur.nl. (27 pages) Pegs: The Rise and Fall of and village government organizations. Argentina's Currency Board Respondents were also asked about ques- tions about their village government: 2979. Regulation and Internet Use Augusto de la Torre, Eduardo Levy Yeyati, whether they were informed about village In Developing Countries and Sergio L. Schmukler funds and projects, if they participated in (March 2003) village decisions, if they expressed voice Scott Wallsten about village problems, and if they (March 2003) The rise and fall of Argentina's currency thought the village government was re- board shows the extent to which the ad- sponsive to local problems. Several find- Policymakers are simultaneously con- vantages of hard pegs have been over- ings emerge regarding the relationship cerned about the consequences of a wors- stated. The currency board did provide between the social variables and the gov- ening "digital divide" between rich and nominal stability and boosted financial ernance activities. Not surprisingly, an poor countries and hopeful that informa- intermediation, at the cost of endogenous individual household's involvement with tion and computing technologies could financial dollarization, but did not foster the village government organizations increase economic growth in developing monetary or fiscal discipline. The failure to tends to increase their own reports ofposi- countries. But very little research has adequately address the currency-growth- tive voice, participation, and information. explored the reasons for the digital divide debt trap into which Argentina fell at the In contrast, the data suggest a negative beyond noting that it is strongly correlated end of the 1990s precipitated a run on the spillover on other households. There is a with standard development indicators, currency and the banks, followed by the strong "chilling" effect of one household's and no empirical research has explored abandonment of the currency board and a participation in village government orga- the role of regulation. sovereign debt default. The crisis can be nizations on the voice, participation, and Wallsten uses data from a unique new best interpreted as a bad outcome ofa high- information of other households in the survey of telecommunications regulators stakes strategy to overcome a weak cur- same village. The net effect of engagement and other sources to measure the effects rency problem. To increase the credibility in village government organizations is of regulation in Internet development. He of the hard peg, the government raised its generally negative, while the net effect of finds regulation strongly correlated with exit costs, which deepened the crisis once membership in social organizations is lower Internet penetration and higher exit could no longer be avoided. But some more often associated with good gover- Internet access charges. More specifically, alternative exit strategies would have been nance outcomes. These findings indicate controlling for factors such as income, less destructive than the one adopted. that existing social organizations have a development of the telecommunications This paper-a product ofMacroeconom- potentially important role to play in en- infrastructure, ubiquity of personal com- ics and Growth, Development Research hancing the performance of government puters, and time trends, countries that Group-is part of a larger effort in the institutions in Indonesia and in the evo- require formal regulatory approval for group to understand how currency re- lution ofgood governance more generally. Internet service providers (ISPs) to begin gimes work. Copies of the paper are avail- This paper-a product of the Environ- operations have fewer Internet users and able free from the World Bank, 1818 H ment and Social Development Sector Unit, Internet hosts than countries that do not Street NW, Washington, DC 20433. East Asia and Pacific Region-is part of a require such approval. Moreover, coun- Please contact Emily Khine, room MC3- larger effort in the region to study local tries that regulate ISP final-user prices 347, telephone 202-473-7471, fax 202-522- level institutions. Copies of the paper are have higher Internet access prices than 3518, email address kkhine@worldbank. available free from the World Bank, 1818 countries that do not have such regula- org. Policy Research Working Papers are H Street NW, Washington, DC 20433. tions. These results suggest that develop- also posted on the Web at http/ Please contact Anju Sachdeva, room MC8- ing countries' own regulatory policies can econ.worldbank.org. The authors may be 112, telephone 202-458-2717, fax 202-522- have large impacts on the digital divide. contacted at adelatorre@worldbank.org, 1666, email address asachdeva This paper-a product of Investment ely@utdt.edu, or sschmukler@worldbank. @worldbank.org. Policy Research Work- Climate, Development Research Group- org. (54 pages) ing Papers are also posted on the Web at Policy Research Working PaperSeries 17 http//econ.worldbank.org. The authors percent of Ghana Telecom to Telekom 91 countries for the period 1960-95. Their may be contacted at valatas@worldbank. Malaysia, licensing a second network op- results provide evidence that inequality org, lant_pritchett@ksg.harvard.edu, or erator, and allowing multiple mobile firms decreases as economies develop their fi- anna_w@uclink.berkeley.edu. (49 pages) to enter the market. The reforms yielded nancial intermediaries, consistent with mixed, results. Landline telephone pen- the theoretical models in Galor and Zeira etration increased dramatically while the (1993) and Banerjee and Newman (1993). 2982. Trade Liberalization and - number of mobile subscribers surpassed Moreover, consistent with the insight of Labor Market Adjustment in Brazil even this higher level of fixed line sub- Kuznets, the relation between the Gini scribers. On the other hand, the network coefficient and financial intermediary Nina Pavenik, Andreas Blom, did not reach the levels the government development appears to depend on the Pinelopi Goldberg, and Norbert Schady hoped, the second network operator never sectoral structure of the economy: a larger really got off the ground, and the regula- modern sector is associated with a smaller The authors study the impact of the 1988- tor remained weak and relatively ineffec- drop in the Gini coefficient for the same 94 trade liberalization in Brazil on wage tive. The sustainability of competition is level of financial intermediary develop- distribution. They explore three main unclear. The government ended Telekon ment. But there is no evidence of an in- channels through which trade liberaliza- Malaysia's management of Ghana verted-U-shaped relation between finan- tion could have affected wage distribution: Telecom and has invited Norway's Telenor cial sector development and income in- (1) increasing returns to skilled workers as a strategic partner. What this means equality, as suggested by Greenwood and because of Hecksher-Ohlin adjustments to in practice remains unclear, and the pro- Jovanovic (1990). The results are robust trade policy; (2) trade-induced skill-biased cess for selecting Telenor lacked any to controlling for biases introduced by si- technological change; and (3) changes in transparency. Meanwhile, some of the multaneity. industry wage premiums. - mobile firms are in precarious financial This paper-a product of Investment The results suggest that trade reform positions. Competition is still- relatively Climate, Development Research Group- in Brazil did contribute to the growing strong, but its sustainability will depend is part of a larger effort in the group to skill premium through skill-biased tech- on the government's future commitment understand the link between economic nological change, which was partially in- to ensuring it. development and financial sector perfor- stigated by increased foreign competition. This paper-a product of Investment mance. Copies of the paper are available The authors also find that sector-specific Climate, Development Research Group- free from the World Bank, 1818 H Street returns to skill increased more in sectors is part of a larger effort in the group to NW, Washington, DC 20433. Please con- with bigger tariff reductions. But they find understand telecommunications reforms tact Paulina Sintim-Aboagye, room MC3- little support for Hecksher-Ohlin type in Africa. Copies of the paper are available 300, telephone 202-473-7644, fax 202-522- adjustments to trade reform. Overall, the free from the World Bank, 1818 H Street 1155, email address psintimaboagye effects of trade reform on wage inequality NW, Washington, DC 20433. Please con- @worldbank.org. Policy Research Work- seem relatively small. tact Paulina Sintim-Aboagye, room MC3- ing Papers are also posted on the Web at This paper-a product of the Poverty 422, telephone 202-473-7644, fax 202-522- http//econ.worldbank.org. The authors Sector Unit, Latin America and the Car- 1155, email address psintimaboagye may be contacted at gclarke@worldbank. ibbean Region-is part of a larger effort @worldbank.org. Policy Research Work- org, 1xu@worldbank.org, or hzou in the region to understand the effects of ing Papers are also posted on the Web at @worldbank.org. (24 pages) globalization on inequality in developing http//econ.worldbank.org. The authors countries. Copies of the paper are avail- may be contacted at lhaggarty able free from the World Bank, 1818 H @worldbank.org, or swallsten 2985. The Impact of Minimum Street NW, Washington, DC 20433. Please @worldbank.org. (40 pages) Wages on Employment in a Low contactAnne Pillay, room 18-095, telephone Income Country: An Evaluation 202-458-8046, fax 202-522-0054, email Using the Difference-in-Differences address apillay@worldbank.org. Policy 2984. Finance and Income Approach Research Working Papers are also-posted Inequality: Test of Alternative on the Web at http//econ.worldbank.org. Theories Vivi Alatas and Lisa Cameron The authors may be contacted at nina. (March 2003) pavcnikCadartmouth.edu, ablom@worldbank. George Clarke, Lixin Colin Xu, org, or nschady@worldbank.org. (46 pages) and Heng-fu Zou Unlike the well-developed literature on (March 2003) the employment impact of the minimum wage in industrial nations, very little is 2983. Telecommunication Although theoretical models make dis- known about minimum wage effects in low Reform in Ghana tinct predictions about the relationship income countries. Minimum wages in- between financial sector development and creased sharply in Indonesia between Luke Haggarty, Mary M. Shirley, income inequality, little empirical re- 1990 and 1996 and by more in some prov- and Scott Wallsten search has been conducted to compare inces than in others. Following Card and (March 2003) their relative explanatory power. Clarke, Krueger (1994) the authors exploit the Xu, and Zou examine the relation between large geographic variation in the rate of In 1996 Ghana privatized its incumbent financial intermediary development and increase and compare changes in employ- telecommunications firm by selling 30 income inequality in a panel data set- of ment in the clothing, textile, footwear, and 18 Policy Research Working Paper Series leather industries on either side of the This paper-a product ofMacroeconom- failure to maintain a harmonious balance Jakarta-West Java border. They use ics and Growth, Development Research between cooperatism and collectivism household level labor market data to es- Group-is part of a larger effort in the (Yang) and individualism (Yin) led to tablish compliance with the legislation. group to understand how capital markets major weaknesses in labor and financial They obtain matched difference-in-differ- work. Copies of the paper are available markets that contributed significantly to ence estimates of the employment impact free from the World Bank, 1818 H Street the financial crisis in 1997. As Korea ar- using a census of all large and medium- NW, Washington, DC 20433. Please con- rived at a new balance by instituting re- size firms in the clothing, textile, leather, tact Emily Khine, room MC3-347, tele- form programs, the venture-oriented in- and footwear industries. Alatas and phone 202-473-7471, fax 202-522-3518, formation and communication technology Cameron find some evidence of a negative email address kkhine@worldbank.org. (ICT) industry blossomed and led to a employment impact for small, domestic Policy Research Working Papers are also rapid economic recovery. Since 2000, do- firms but no employment impact for large posted on the Web at http//econ. mestic financial scandals and political firms, foreign or domestic. worldbank.org. The authors may be con- corruption have emerged as new social This paper-a product of the Environ- tacted at stijn@fee.uva.nl, dklingebiel issues. Korea's next challenge is to find a ment and Social Development Sector Unit, @worldbank.org, or sschmukler new harmonization between moralism East Asia and the Pacific Region-is part @worldbank.org. (39 pages) (Yang) and legalism (Yin). of a larger effort in the region to assess the This paper-a product of the Office of poverty situation and related issues. Cop- the Senior Vice President and Chief ies of the paper are available free from the 2987. East Asia's Dynamic Economist, Development Economics-is WorldBank, 1818 HStreet NW, Washing- Development Model and the part of a larger effort in the Bank to ex- ton, DC 20433. Please contact Taranaki Republic of Korea's Experiences amine institutional and cultural founda- Mailei, room MC8-808, telephone 202- tions of development across regions and 458-7347, fax 202-522-1560, email Ho-Chul Lee and Mary P. McNulty countries. Copies of the paper are avail- address tmailei@worldbank.org. Policy (March 2003) able free from the World Bank, 1818 H Research Working Papers are also posted Street NW, Washington, DC 20433. on the Web at http://econ.worldbank. No region has been more dynamic in re- Please contact Lorraine James, room org. The authors may be contacted at cent years than East Asia. Despite its MC4-347, telephone 202-473-5621, fax valatas@worldbank.org or 1cameron successful economic development, evalu- 202-522-1158, email address 1james @unimelb.edu.au. (42 pages) ations of the East Asian development @worldbank.org. Policy Research Work- model have often been capricious, shifting ing Papers are also posted on the Web at from "miracle" to "cronyism." How can we http://econ.worldbank.org. The authors 2986. Government Bonds explain East Asia's ups and downs consis- may be contacted at hcleel@mofe.go.kr or in Domestic and Foreign tently? To respond to this challenge, it is mcnultym@gwu.edu. (58 pages) Currency: The Role of necessary to study the progress of East Macroeconomic and Asian development and to trace the influ- Institutional Factors ence of Asian cultural values. This study 2988. Trade Facilitation and mainly focuses on cultural aspects of eco- Economic Development: Stin Claessens, Daniela Klingebiel, nomic progress and analyzes East Asia's Measuring the Impact and Sergio Schmukler philosophical and historical backgrounds (March 2003) to explain the dynamic process. John S. Wilson, Catherine L. Mann, East Asians believe that balance be- and Tsunehiro Otsuki The development of government bond tween opposite but complementary forces, (March 2003) markets and, in particular, their currency Yin and Yang, will ensure social stability composition have recently received much and progress. Through repeated rebalanc- Wilson, Mann, and Otsuki analyze the interest, partly because of their relation ing to maintain harmony, the society relationship between trade facilitation, with financial crises. The authors study comes to maturity. In traditional East trade flows, and GDP per capita in the the determinants of the size and currency Asian societies, a balance was maintained Asia-Pacific region for the goods sector. composition of government bond markets between Confucianism (Yang) and Tao- They define and measure trade facilita- for a panel of industrial and developing ism, Buddhism, and other philosophies tion using four broad indicators. These are countries. They find that countries with (Yin). In modern societies, the challenge constructed using country-specific data for larger economies, greater domestic inves- is to balance traditional systems (Yang) port efficiency, customs environment, tor bases, and more flexible exchange rate and Western style capitalism (Yin). regulatory environment, and electronic- regimes have larger domestic currency This East Asian development model business usage. They estimate the rela- bond markets, while smaller economies explains the Republic of Korea's rise, fall, tionship between these indicators and rely more on foreign currency bonds. Bet- and recovery. Korea was a poor country trade flows using a gravity model. The ter institutional frameworks and macro- until the early 1960s, during the time model includes tariffs and other standard economic fundamentals enhance both when spiritualism (Yang) dominated. variables. domestic currency bond markets and in- From the 1960s through the 1980s, Korea The authors find that enhanced port crease countries' ability to issue foreign achieved rapid growth by finding a new efficiency has a large and positive effect currency bonds, while they raise the share balance and moving toward materialism on trade. Regulatory barriers deter trade. of foreign exchange bonds. (Yin) from spiritualism (Yang). But the The results also suggest that improve- Policy Research Working Paper Series 19 ments in customs and greater electronic- centralized countries have lower coverage puzzle is what helps spread such "best business use significantly expands trade, rates than centralized ones, with an av- practices." Saving, investment, education, but to a lesser degree than the effect of erage difference of 5.2 percent for the same resources, and new technology are all ports or regulations. The authors then vaccines. Both results are significant at needed-and fairly easy to obtain. What estimate the benefits of specific trade fa- the 99 percent level. Modifiers of the de- is hard to obtain are the institutions that cilitation efforts by quantifying differen- centralization-immunization relationship allow these factors of production to be tial improvement by members of the Asia also differ in the two groups. In the low- combined and translated into productive Pacific Economic Cooperation (APEC) in income group, development assistance job creation. Firms are the,key vehicles these four areas. Based on a scenario in reduces the gains from decentralization. that spread best practices and productive which APEC members below average In the middle-income group, democratic jobs to areas where poor people live. Be- improve capacity halfway to the average government mitigates the negative effects cause we can never be sure which firm will for all members, the authors find that of decentralization, and decentralization be successful, it is necessary that new intra-APEC trade could increase by $254 reverses the negative effects ofethnic ten- firms can enter markets, that substan- billion. This represents approximately a sion and ethno-linguistic fractionaliza- dard firms are allowed to fail, and that 21 percent increase in intra-APEC trade tion, but institutional quality and literacy good firms face few barriers to growth. flows, about half coming from improved rates have no interactive effect either way. This is the definition of competition, and port efficiencies in the region. Using Dol- Similar results are obtained whether de- competition is what selects good firms and lar and Kraay's estimate of the effect of centralization is measured with a dichoto- thus drives the spread ofbest practice and trade on per capita GDP, these improve- mous categorical variable or with more productive jobs. Governments need to ments in trade facilitation suggest an in- specific measures of fiscal decentraliza- provide the framework in which capable crease in APEC average per capita GDP tion. The study confirms predictions in the firms can emerge. Yet, the right mix of of 4.3 percent. theoretical literature about the negative state activity and how it best interacts This paper-a product of Trade, Devel- impact of local political control on services with firms are not fully understood. Some opment Research Group-is part of a that have public goods characteristics and selection mechanism, which allows for larger effort in the group to explore the inter-jurisdictional externalities. The policy experiments and selects successful link between trade and development. Cop- author discusses reasons for the difference ones, is valuable for national, provincial, ies of the paper are available free from the between low- and middle-income and local governments. Thus competition World Bank, 1818 H Street NW, Washiig- countries. among jurisdictions and firms is an inte- ton, DC 20433. Please contact Paulina This paper-a product of Public Ser- gral part of dynamic social systems that Flewitt, room MC3-333, telephone 202- vices, Development Research Group-is hold promise for creating wealth and end- 473-2724, fax 202-522-1159, email ad- part of a larger effort in the group to study ing poverty. dress pflewitt@worldbank.org. Policy Re- the delivery of essential health services. This paper-a product of the Private search Working Papers are also posted on Copies of the paper are available free from Sector Advisory Services Department-is the Web athttp://econ.worldbank.org. The the World Bank, 1818 H Street NW, part of a larger effort in the department authors may be contacted at jswilson Washington, DC 20433. Please contact to study private sector development and @worldbank.org, clmann@iie.com, or Hedy Sladovich, room MC3-607, tele- growth processes. Copies of the paper are totsuki@worldbank.org. (43 pages) phone 202-473-7698, fax 202-522-1154, available free from the World Bank, 1818 email address hsladovich@worldbank.org. H Street NW, Washington, DC 20433. Policy Research Working Papers are also Please contact Fatima Shah, room 19-334, 2989. Decentralization and Public: posted on the Web at http://econ. telephone 202-458-4846, fax 202-522- Services: The Case of worldbank.org. The author may be con- 3480, email address fshah@worldbank. Immunization tacted at pkhaleghian@worldbank.org. org. Policy Research Working Papers are (43 pages) also posted on the Web at http:// Peyvand Khaleghian econ.worldbank.org. The author may be (March 2003) contacted at mklein@worldbank.org. (39 2990. Ways Out of Poverty: pages) Khaleghian studies the impact of politi- Diffusing Best Practices and cal decentralization on childhood imumu- Creating Capabilities- nization, an essential public service pro- Perspectives on Policies for 2991. Tenure Security and Land- vided in almost all countries. He examines Poverty Reduction Related Investment: Evidence from the relationship empirically using a time- Ethiopia series data set of 140 low- and middle-in- Michael Klein come countries from 1980 to 1997. The (March 2003) Klaus Deininger, Songqmg Jin, author finds that decentralization has Berhanu Adenew, Samuel Gebre-Selassie, different effects in low- and middle-income Fundamentally, poverty reduction is and Berhanu Nega countries. In the low-income group, decen- about bringing growth processes to poor (March 2003) tralized countries have higher coverage areas. Because poor areas can benefit from rates than centralized ones, with an av- technical and organizational innovations The authors use a large data set from erage difference of 8.5 percent for measles made elsewhere in the world, it is possible Ethiopia that differentiates tenure secu- and DTP3 vaccines. In the middle-income today to create productive jobs faster and rity and transferability to explore deter- group, the reverse-effect is observed: de- in greater quantity than ever before. The minants of different types of land-related 20 Policy Research Working Paper Series investment and its possible impact on assess the impact of land policies on eq- ness and diversification in the context of productivity. While they find some sup- uity and productive development. Copies broad-based sustainable rural economic port for endogeneity of investment in of the paper are available free from the development. trees, this is not the case for terraces. World Bank, 1818 H Street NW, Washing- This paper-a product of Rural Devel- Transfer rights are unambiguously in- ton, DC 20433. Please contact Maria opment, Development Research Group- vestment-enhancing. The large productiv- Fernandez, room MC3-542, telephone is part of a larger effort in the group to ity effect of terracing implies that, even 202-473-3766, fax 202-522-1151, email analyze instruments for protecting farm- where households undertake investments address mfernandez2@worldbank.org. ers against risks. Copies of the paper are to increase their tenure security, this may Policy Research Working Papers are also available free from the World Bank, 1818 not be socially efficient. In Ethiopia, gov- posted on the Web at http/ H Street NW, Washington, DC 20433. ernment action to increase tenure security econ.worldbankorg. Klaus Deininger may Please contact Panos Varangis, room and transferability of land rights can sig- be contacted at kdeininger@worldbank. MC5-785, telephone 202-473-3852, fax nificantly enhance rural investment and org. (29 pages) 202-522-1142, email address pvarangis productivity. @worldbank.org. Policy Research Work- This paper-a product of Rural Devel- ing Papers are also posted on the Web at opment, Development Research Group- 2993. Dealing with the Coffee http//econ.worldbank.org. (76 pages) is part of a larger effort in the group to Crisis In Central America: Impacts assess the impact of land policy on equity and Strategies and productive development. Copies ofthe 2994. Options for Financing paper are available free from the World Panos Varangis, Paul Siegel, Lifelong Learning Bank, 1818 H Street NW, Washington, DC Daniele Giovannucci, and Bryan Lewin 20433. Please contact Maria Fernandez, (March 2003) Miguel Palacios room MC3-542, telephone 202-473-3766, (March 2003) fax 202-522-1151, email address Current coffee prices are at record lows mfernandez2@worldbank.org. Policy Re- and below the cost of production for many How should lifelong learning be financed? search Working Papers are also posted on producers in Central America. Moreover, Palacios attempts to answer the question the Web at http/econ.worldbank.org. the coffee crisis is structural, and changes by creating a framework for analyzing Klaus Deininger may be contacted at in supply and demand do not indicate a different education financing mechanisms kdeininger@worldbank.org. (28 pages) quick recovery of prices. So, coffee produc- in light of particular characteristics of life- ers in Central America are facing new long learning. The framework compares challenges-as are coffee laborers, coffee the different financing alternatives on 2992. Market and Nonmarket exporters, and others linked to the coffee four dimensions: (1) who ultimately pays Transfers of Land In Ethiopia: sector. Coffee plays a major economic role for the education, (2) who finances its Implications for Efficiency, Equity, in Costa Rica, El Salvador, Guatemala, immediate costs, (3) how payments are and Nonfarm Development Honduras, and Nicaragua. The coffee made, and (4) who collects the payments. crisis is actually part of a broader rural The author uses specific characteristics of Klaus Deininger, Songqing Jin, crisis caused by weather shocks (such as lifelong learning to determine which Berhanu Adenew, Samuel Gebre- Hurricane Mitch and droughts), low inter- among the financing alternatives are most Selassie, and Mulat Demeke national agricultural commodity prices, useful. The characteristics are that the (March 2003) and the global recession. These challenges individual should decide what and where call for new strategies for Central Ameri- to study, carry a significant part of the The authors use data from Ethiopia to can countries aimed at broad-based financial burden, and be encouraged to empirically assess determinants of par- sustainable development of their rural continue learning through all life stages. ticipation in land rental markets, compare economies. Palacios analyzes the financing alterna- these to those of administrative land re- The authors deal with the impact of the tives according to who ultimately pays for allocation, and make inferences on the coffee crisis and strategies to deal with it. the education. Hence, the alternatives are likely impact of households' expectations They include an analysis of the interna- classified either as cost-recovery or cost- regarding future redistribution. Results tional coffee situation and country-specific subsidization alternatives. Cost-recovery indicate that rental markets outperform analyses. The authors explore options and alternatives include traditional loans, a administrative reallocation in terms of constraints for increased competitiveness graduate tax, human capital contracts, efficiency and poverty. Households who and diversification, and discuss social, and income-contingent loans. Subsidiza- have part-time jobs in the off-farm sector environmental, and institutional dimen- tion alternatives are those in which the are significantly more likely to expect land sions of the crisis. state directly subsidizes institutions or in to be taken away from them through ad- The authors conclude that there are which the state gives vouchers to students. ministrative means. Eliminating the specific solutions that can be pursued for The author concludes that combining in- scope for administrative land reallocation the coffee sector. Some are already being come-contingent loans and human capital may thus be a precondition for more vig- applied, but more can be done in a more contracts with vouchers is the most effi- orous development of the off-farm sector. systematic way. Also, there is a need for cient and equitable method for financing This paper-a product of Rural Devel- safety nets to deal with the short-term lifelong learning. opment, Development Research Group- impact ofthe crisis. Longer-term solutions The author discusses the role ofgovern- is part of a larger effort in the group to are to be found in increased competitive- ments and multilateral organizations in Policy Research Working Paper Series 21 improving the financing of lifelong learn- that the key consequences of reform have concentration and financing obstacles is ing. He assesses shifting toward cost-re- been significant changes in or emergence dampened in countries with well developed covery alternatives, focusing on collection ofmarketing institutions and a significant institutions, higher levels of economic and of payments, and aiming for the involve- shift of political and economic power fromh financial development, and a larger share ment of private capital as key issues that the public to the private sector. In cases of foreign-owned banks. The effect is exac- should be addressed to ensure that lifelong - where interventions were greatest and erbated by more restrictions on banks' ac- learning will be available for all equita- reforms most complete, producers have tivities, more government interference in bly and efficiently. - benefited from receiving a larger share of the banking sector, and a larger share of This paper-a product of the Education export prices. Additionally, the authors government-owned banks. Finally, it is Team, Human Development Network-is conclude that the adjustment costs of re- possible to alleviate the negative impact of part of a larger effort in the network to form can be reduced in most cases by bet- bank concentration on access to finance by support the analytic work in lifelong learn- ter understanding the detailed and idiosyn- reducing activity restrictions. ing in the global knowledge economy. Cop- cratic relationships between the commod- This paper-a product of Finance, De- ies of the paper are available free from the ity subsector, private markets, and public velopment Research Group-is part of a World Bank, 1818 H Street NW, Washing- services. Finally, while there are significant larger effort in the group to understand ton, DC 20433. Please contact Energy costs to market-dependent reforms, expe- the effects of bank competition. Copies of James, room G8-104, telephone 202-473- riences suggest that they are a necessary the paper are available free from the 1756, fax 202-522-3233, email address step toward a dynamic commodity sector World Bank, 1818 H Street NW, Washing- ejames2@worldbank.org. Policy Research based on private initiative. This is particu- ton, DC 20433. Please contact Kari Labrie, Working Papers are also posted on the Web larly true in countries and sectors where room MC3-456, telephone 202-473-1001, at http://econ.worldbank.org. The author interventions were greatest and market- fax 202-522-1155, email address klabrie may be contacted at palaciosmOl supporting institutions the weakest. @worldbank.org. Policy Research Work- @darden.virginia.edu. (30 pages) This paper-a product of Rural Devel- ing Papers are also posted on the Web at opment, Development Research Group- http-//econ.worldbank.org. The authors is part of a larger effort in the group to may be contacted at tbeck@worldbank.org 2995. Commodity Market Reform in examine the consequences of agricultural or ademirguckunt@worldbank.org. (50 Africa: Some Recent Experience policies. Copies of the paper are available pages) free from the World Bank, 1818 H Street Takamasa Akiyama, John Baffes, Donald F. NW, Washington, DC 20433. Please con- Larson, and Panos Varangis tact Pauline Kokila, room MC3-604, tele- 2997. Financial and Legal (March 2003) phone 202-473-3716, fax 202-522-1151, Institutions and Firm Size email address pkokila@worldbank.org. Since the early 1980s, dramatic changes Policy Research Working Papers are also Thorsten Beck, Ash Demirguq-Kunt, in export commodity markets, shocks as- posted on the Web at http://econ. and Vojislav Maksimovic sociated with resulting price declines, and worldbank.org. The authors may be,con- (March 2003) changing views on the role of the state tacted atjbaffes@worldbank.org, dlarson have ushered in widespread reforms to @worldbank.org, or pvarangis Beck, Demirgdi-Kunt, and Maksimovic agricultural commodity markets in Africa. @worldbank.org. (48 pages) investigate how a country's financial in- The reforms significantly reduced govern- stitutions and the quality of its legal sys- ment participation m the marketing and tem explain the size attained by its larg- pricing of commodities. Akiyama, Baffes, 2996. Bank Competition, Financing est industrial firms in a sample of44 coun- Larson, and Varangis examine the back- Obstacles, and Access to Credit tries. Firm size is positively related to the ground, causes, process, and consequences size of the banking system and the effi- of these reforms and derive lessons for Thorsten Beck, Ash Demirgilq-Kunt, ciency of the legal system. Thus, the au- successful reforms from experiences in and Vojislav Maksimovic thors find no evidence that firms are larger markets for four commodities important (March 2003) in order to internalize the functions of the to Africa--cocoa, coffee, cotton, and sugar. banking system or to compensate for the The authors' commodity focus highlights Theory makes ambiguous predictions general inefficiency of the legal system. the special features associated with these about the effects of bank concentration on But they do find evidence that externally markets that affect the reform process. - access to external finance. Using a unique financed firms are smaller in countries They complement the current literature data base for 74 countries of financing that have strong creditor rights and effi- on market reforms in Africa, where grain- obstacles and financing patterns for firms cient legal systems. This suggests that market studies are more common.- The of small, medium, and large size, Beck, firms in countries with weak creditor pro- authors suggest that the types of market Demirg(ig-Kunt, and Maksimovic assess tections are larger in order to internalize interventions prior to reform are more the effects ofbanking market structure on - the protection of capital investment. easily classified by crop than by country. financing obstacles and the access offirms This paper-a product of Finance, De- Consequently, there are significant com- to bank finance. The authors find that velopment Research Group-is part of a modity-specific differences in the initial bank concentration increases financing larger effort in the group to understand conditions and in the outcomes of reforms obstacles and decreases the likelihood of the determinants offirm size. Copies ofthe related to these markets. But there are receiving bank finance, with the impact paper are available free from the World general lessons as well. The authors find decreasing in size. The relation of bank Bank, 1818 H Street NW, Washington, DC 22 Policy Research Working Paper Series 20433. Please contact Kari Labrie, room Khandker may be contacted at skhandker greenhouse gas emissions will be the key MC3-456, telephone 202-473-1001, fax 202- @worldbank.org. (54 pages) challenge for the international climate re- 522-1155, email address klabrie gime beyond the Kyoto Protocol. But in the @worldbank.org. Policy Research Working current quantity-based coordination, Papers are also posted on the Web at httpi 2999. Explaining Liberalization large uncertainties surrounding future /econ.worldbank.org. The authors may be Commitments in Financial emissions and future abatement opportu- contacted at tbeck@worldbank.org or Services Trade nities make the costs of any commitment ademirguckunt@worldbank.org. (46 pages) very difficult to assess ex ante, hence a Phihpp Harms, Aaditya Mattoo, strong risk that the negotiation will be and Ludger Schuknecht stalled. 2998. Does Micro-Credit Empower (March 2003) Lecocq and Crassous use a partial equi- Women? Evidence from librium model of the international allow- Bangladesh Harms, Mattoo, and Schuknecht examine ance market to quantify the economic con- the determinants of market access com- sequences of the main post-Kyoto quota Mark M. Pitt, Shahidur R. Khandker, mitments in international financial ser- allocation rules proposed in the literature and Jennifer Cartwright vices trade in the General Agreement on and to assess how robust these conse- (March 2003) Trade in Services (GATS). Based on a quences are to uncertainty on future popu- theoretical model, they investigate empiri- lation, economic, and emissions growth. This paper examines the effects of men's cally the role of domestic political economy They confirm that, regardless of the rule and women's participation in group-based forces, international bargaining consider- selected, the prices of allowances and the micro-credit programs on a large set of ations, and the state of complementary net costs of climate mitigation for all par- qualitative responses to questions that policy. ties are very sensitive to uncertainty, and characterize women's autonomy and gen- The empirical results confirm the rel- in some scenarios very large. This consti- der relations within the household. The evance of the authors' model in explain- tutes a strong barrier against adopting data come from a special survey carried ing banking and (to a somewhat lesser any of these schemes if no additional out in rural Bangladesh in 1998-99. The degree) securities services liberalization mechanism is introduced to limit the un- results are consistent with the view that commitments. The findings imply that certainty on costs. women's participation in micro-credit pro- those who seek greater access to develop- On the other hand, parties' preferred grams helps to increase women's empow- ing country markets for financial services (least-cost) rules are essentially robust to erment. Credit program participation must do more to counter protectionism at uncertainty. And although these prefer- leads to women taking a greater role in home in areas of export interest for devel- ences differ across countries, the authors' household decisionmaking, having oping countries. analysis suggest some bargaining is greater access to financial and economic This paper-a product of Trade, Devel- possible if developing countries make a resources, having greater social networks, opment Research Group-is part of a commitment and join the allowance having greater bargaining power com- larger effort in the group to assess the market earlier in exchange for tighter pared with their husbands, and having implications of liberalizing trade in ser- quotas in the North. This underscores the greater freedom of mobility. Female credit vices. This research was supported in part importance of the rules governing the also tended to increase spousal communi- by the U.K Department for International entry of new parties into the coordination. cation in general about family planning Development. Copies of this paper are But the magnitude of the win-win poten- and parenting concerns. The effects of available free from the World Bank, 1818 tial strongly depends on how different male credit on women's empowerment H Street NW, Washington, DC 20433. abatement costs are assumed to be were, at best, neutral, and at worse, de- Please contact Paulina Flewitt, room between industrial and developing coun- cidedly negative. Male credit had a nega- MC3-333, telephone 202-473-2724, fax tries, and on how long that gap is assumed tive effect on several arenas of women's 202-522-1159, email address pflewitt to persist. empowerment, including physical mobil- @worldbank.org. Policy Research Work- This paper-a product of Infrastructure ity, access to savings and economic re- ing Papers are also posted on the Web at and Environment, Development Research sources, and power to manage some http://econ.worldbank.org. The authors Group-is part of a larger effort in the household transactions. may be contacted at philipp.harms@uni- group to assess policies for mitigating cli- This paper-a product of Rural Devel- konstanz.de, amattoo@worldbank.org, or mate change. Copies of the paper are opment, Development Research Group- ludger.schuknecht@ecb.int. (39 pages) available free from the World Bank, 1818 is part of a larger effort in the group to H Street NW, Washington, DC 20433. understand how the micro-credit program Please contact Viktor Soukhanov, room helps empower women. Copies of the pa- 3000. International Climate Regime MC2-205, telephone 202-473-5721, fax per are available free from the World beyond 2012: Are Quota Allocation 202-522-3230, email address vsoukhanov Bank, 1818 H Street NW, Washington, DC Rules Robust to Uncertainty? @worldbank.org. Policy Research Work- 20433. Please contact Pauline Kokila, ing Papers are also posted on the Web at room MC3-604, telephone 202-473-3716, Franck Lecocq and Renaud Crassous http//econ.worldbank.org. The authors fax 202-522-1153, email address pkokila (March 2003) may be contacted at flecocq@worldbank. @worldbank.org. Policy Research Work- org or crassous@centre-cired.fr. (39 ing Papers are also posted on the Web at Bringing the United States and major pages) http-//econ.worldbank.org. Shahidur developing countries to control their Policy Research Working Paper Series 23 3001. An Introduction to Financial policy factors including access and available free from the World Bank, 1818 and Economic Modeling for Utility affordability concerns for various types of H Street NW, Washington, DC 20433. Regulators consumers. They generally account for the Please contact Yasmin D'Souza, room sensitivity of operators and users to vari- MC2-622, telephone 202-473-1449, fax Antonio Estache, Martin Rodriguez ous regulatory design options. 202-522-3230, email address ydsouza Pardina, Josd Maria Rodriguez,'- This paper-a joint product of the @worldbank.org. Policy Research Work- and GermAn Sember Finance and Private Sector Development ing Papers are also posted on the Web at (March 2003) Division, World Bank Institute, and the http://econ.worldbankorg. The authors Office of the Vice President, Private may be contacted at udeichmann The most effective regulators in develop- Sector Development and Infrastructure @worldbank.org, slall@worldbank.org, or ing countries are following remarkably Vice Presidency-is part of a larger sds@nda.vsnl.net.in. (32 pages) similar approaches. The main common effort in the Bank to increase understand- element across "best practice" countries is ing of infrastructure regulation. Copies the use of relatively simple quantitative of the paper are available free from 3003. The Investment Climate models of operators' behavior and the World Bank, 1818 H Street NW, and the Firm: Firm-Level constraints to measure the impact of Washington, DC 20433. Please contact Evidence from China 'regulatory decisions on some key financial Gabriela Chenet-Smith, room J3-304, and economic indicators of concern to telephone 202-473-6370, fax 202-676- Mary Hallward-Driemeier, Scott the operators, the users, and the govern- 9874, email address gchenet@worldbank. Wal1sten, and Lixin Colin Xu ment. The authors provide an introduction org. Policy Research Working Papers are (March 2003) to the design and use of these models. also posted on the Web at http:l They draw on lessons from international econ.worldbank.org. Antonio Estache may The importance of a country's "investment experience in industrial and developing be contacted at aestache@worldbank.org. climate" for economic growth has recently countries in ordinary or extraordinary (26 pages) received much attention. Hallward- revisions and in the context of contract Driemeier, Wallsten, and Xu address the renegotiations. general lack of appropriate data for mea- Simplifying somewhat, these models 3002. Information-Based suring the investment climate and its ef- force regulators to recognize that, in the Instruments for Improved fects. The authors use a new survey of long run, private operators need to at least Urban Management 1,500 Chinese enterprises in five cities to cover their opportunity cost of capital, more precisely define and measure com- including the various types of risks spe- Uwe Deichmann, Somik V. Lall, Ajay Suri, ponents of the investment climate, high- cific to the country, the sector, or the and Pragya Rajoria light the importance of firm-level data for projects with which they are involved. (March 2003) rigorous analysis of the investment cli- Because these variables change over time, mate, and investigate empirically the ef- scheduled revisions are needed to allow for The task of urban managers is to ensure fects of this comprehensive set of mea- adjustments in the key determinants of the provision ofbasic urban services, such sures on firm performance in China. Over- the rate of return of the operator. as water, waste removal, security, trans- all, their firm-level analysis reveals that These revisions are a recognition of port, and an environment conducive to the main determinants of firm perfor- the fact that all these determinants-tar- economic activity, while maintaining fis- mance in China are international integra- iffs, subsidies, quality, investments, and cal sustainability of city operations. City tion, entry and exit, labor market issues, other service obligations-are interre- managers in developing countries face - technology use, and access to external lated and jointly determine the rate of increasing pressure in achieving these finance. return. At every revision, the rules of the goals because of rapid urbanization, the This paper-a product of Investment game for the regulator are exactly the larger responsibilities following decen- Climate, Development Research Group- same: to figure out the changes in the cost tralization, and the economic challenges is part of a larger effort in the group to of capital and to adjust the variables driv- of globalization. Based on experience -in understand the investment climate using ing the rate of return to ensure that it Bangalore, India, the authors argue that firm-level datasets. Copies of the paper continues to be consistent with the cost of effective, forward-looking urban manage- are available free from the World Bank, capital. ment requires a much better information 1818 H Street NW, Washington, DC If they can draw on reasonable data, infrastructure than is currently available 20433. Please contact Paulina Sintim- these models do everything any financial in most cities. - Aboagye, room MC3-422, telephone 202- model would do for the day-to-day man- This paper-a product ofInfrastructure 473-7644, fax 202-522-1155, email ad- agement of a company but take a longer and Environment, Development Research dress psintimaboagye@worldbank.org. term view and include an explicit identi- Group-is part of a larger program to Policy Research Working Papers are also fication of the key regulatory instruments. improve urban management through the posted on the Web at httpi/econ. They can monitor the consistency between collection, use, and public disclosure of worldbank.org. The authors may be con- cash flow generated by the business on the spatially detailed information and ana- tacted at mhallward@worldbank.org, one hand and debt service and operational lytic methods. The study was jointly swallsten@worldbank.org, or lxul expense needs on the other to address the funded by the World Bank and the U.K. @worldbank.org. (49 pages) main concerns of the operators. They can DFID's Urban Knowledge Generation and also account for a large number of key Toolkits Program. Copies of the paper are 24 Policy Research Working Paper Series 3004. Institutions, Trade, and ing are found relevant for an analysis of vision of health and education services, Growth: Revisiting the Evidence vouchers. An assessment of findings on and that further intrasectoral reforms in voucher programs in industrial countries, governance, particularly those that David Dollar and Aart Kraay as well as a review of voucher or quasi- strengthen the hand of service recipients, (March 2003) voucher experiences in Bangladesh, Chile, are needed. There remain differences be- Colombia, C6te d'Ivoire, and the Czech tween the two approaches. Whether pro- Several recent papers have attempted to Republic support the usefulness of the cedures for service delivery are ends in identify the partial effects of trade inte- analytic framework. Gauri and Vawda themselves, the degree of disaggregation gration and institutional quality on long- conclude that vouchers for basic education at which outcomes should be assessed, the run growth using the geographical deter- in developing countries can enhance out- consequences of long-term deprivation, minants of trade and the historical deter- comes when they are limited to modest metrics used for making tradeoffs, and the minants of institutions as instruments, numbers of poor students in urban set- behavioral distortions that result from Dollar and Kraay show that many of the tings, particularly in conjunction with subsidies are all areas where the ap- specifications in these papers are weakly existing private schools with surplus ca- proaches diverge. Even here, however, the identified despite the apparently good pacity. The success of more ambitious differences are not irreconcilable, and performance of the instruments in first- voucher programs depends on an institu- advocates of the approaches need not re- stage regressions. Consequently, they tional infrastructure challenging to indus- gard each other as antagonists. argue that the cross-country variation in trial and developing countries alike. This paper-a product of Public Ser- institutions, trade, and their geographi- This paper-a joint product of Public vices, Development Research Group-is a cal and historical determinants is not very Services, Development Research Group, background paper for the 2004 World informative about the partial effects of and the Education Team, Human Devel- Development Report. Copies of this paper these variables on long-run growth. opment Network-is a background paper are available free from the World Bank, This paper-a product of Investment for the 2004 World Development Report. 1818 H Street NW, Washington, DC Climate, Development Research Group- Copies of this paper are available free from 20433. Please contact Hedy Sladovich, is part of a larger effort in the group to the World Bank, 1818 H Street NW, room MC3-607, telephone 202-473-7698, study institutions and development. Cop- Washington, DC 20433. Please contact fax 202-522-1154, email address ies of the paper are available free from the Hedy Sladovich, room MC3-607, tele- hsladovich@worldbank.org. Policy Re- World Bank, 1818 H Street NW, Washing- phone 202-473-7698, fax 202-522-1154, search Working Papers are also posted on ton, DC 20433. Please contact Anna email address hsladovich@worldbank.org. the Web at http//econ.worldbank.org. The Bonfield, room MC3-354, telephone 202- Policy Research Working Papers are also author may be contacted at vgauri 473-1248, fax 202-522-3518, email ad- posted on the Web at http//econ. @worldbank.org. (19 pages) dress abonfield@worldbank.org. Policy worldbank.org. The authors may be con- Research Working Papers are also posted tacted at vgauri@worldbank.org or on the Web at http://econ.worldbank.org. avawda@worldbank.org. (23 pages) 3007. The Impact of Urban Spatial The authors may be contacted at ddollar Structure on Travel Demand in the @worldbank.org or akraay@worldbank. United States org. (29 pages) 3006. Social Rights and Economics: Claims to Health Care Antonio M. Bento, Maureen L. Cropper, and Education in Developing Ahmed Mushfiq Mobarak, and Katja Vinha 3005. Vouchers for Basic Countries (March 2003) Education In Developing Countries: A Principal-Agent Varun Gauri Bento, Cropper, Mobarak, and Vinha com- Perspective (March 2003) bine measures of urban form and public transit supply for 114 urbanized areas Varun Gauri and Ayesha Vawda Gauri. analyzes contemporary rights- with the 1990 Nationwide Personal Trans- (March 2003) based and economic approaches to health portation Survey to address two questions: care and education in developing coun- (1) How do measures of urban form, in- Voucher programs consist of three simul- tries. He assesses the foundations and cluding city shape, road density, the spa- taneous reforms: (1) allowing parents to uses of social rights in development, out- tial distribution of population, and jobs- choose schools, (2) creating intense incen- lines an economic approach to improving housing balance affect the annual miles tives for schools to increase enrollment, health and education services, and then driven and commute mode choices of U.S. and (3) granting schools management highlights the differences, similarities, households? (2) How does the supply of autonomy to respond to demand. As a re- and the hard questions that the economic public transportation (annual route miles sult, voucher advocates and critics tend to critique poses for rights. The author ar- supplied and availability of transit stops) talk past each other. A principal-agent gues that the policy consequences ofrights affect miles driven and commute mode framework clarifies the argument for edu- overlap considerably with a modern eco- choice? cation vouchers. Central findings from the nomic approach. Both the rights-based The authors find that jobs-housing bal- literature, including issues related to vari- and the economic approaches are skepti- ance, population centrality, and rail miles ance in the performance measure, risk cal that electoral politics and de facto supplied significantly reduce the probabil- aversion, the productivity of more effort, market rules provide sufficient account- ity of driving to work in cities with some multiple tasks, and the value of monitor- ability for the effective and equitable pro- rail transit. Population centrality and Policy Research Working Paper Series 25 jobs-housing balance have a significant per may be contacted at mcropper The results support the unobserved het- impact on annual household vehicle miles @worldbank.org. (54 pages) erogeneity explanation for computer wage traveled (VMT), as do city shape, road premiums. They suggest that computers density, and (in rail cities) annual rail may make the productive workers even route miles supplied. The elasticity .of 3008. Technology, Computers, more productive. However, given the scar- VMT with respect to each variable, is and Wages: Evidence from a city of computers in low-income countries, small, on the order of 0.10-0.20.in abso- Developing Economy an operational strategy ofincreasing com- lute value. However, changing several puter availability and skills would seem measures of form simultaneously can re- Chris N. Sakellariou and Harry A. Patrinos -to offer considerable hope for increasing duce annual VMT significantly. Moving (March 2003) the incomes of the poor. the sample households from a city with the This paper-a product of the Education characteristics ofAtlanta to a city with the Increasing returns to schooling and rising Sector Unit, Latin America and the Car- characteristics of Boston reduces annual inequality are well documented for indus- ibbean Region-is part of a larger effort VMT by 25 percent. trial countries and for some developing in the region to document the determi- This paper-a product of Infrastructure countries. The growing demand for skills nants of earnings. Copies of the paper are and Environment, Development Research is associated with recent technological available free from the World Bank, 1818 Group-is part of a larger effort in the developments. Sakellariou and Patrinos H Street NW, Washington, DC 20433. group to examine factors affecting travel argue that computers in the workplace Please contact Nelly Vergara, room 17- behavior. Copies of the paper are available represent one manifestation of these 004, telephone 202-473-0432, fax 202-522- free from the World Bank, 1818 H Street changes. Research in the United States 3135, email address nvergara NW, Washington, DC 20433. Please con- and industrial countries documents a pre- @worldbank.org. Policy Research Work- tact Viktor Soukhanov, room-MC2-521, mium for computer use. But there is re-- ing Papers are also posted on the Web at telephone 202-473-5721, fax 202-522- cent evidence suggesting that computer http:/econ.worldbank.org. The authors 3230, email address vsoukhanov skills by themselves do not command a may be contacted at aesake@ntu.edu.sg or @worldbank.org. Policy Research Work- wage premium. The authors review the hpatrinos@worldbank.org. (23 pages) ing Papers are also posted on the Web at literature and use data from a survey of http//econ.worldbank.org. Maureen Crop- higher education graduates in Vietnam.