37337 WORLD BANK RESEARCH NEWS Volume 3 Number 1 Winter 1981/1982 CONTENTS Planning Investments in Electric Power in Indonesia . . . 27 Tax and Contractual Arrangements for World Bank Research on the Hunger Exploiting Natural Resources .... ..... 28 Dimension of the Food Problem 3 Public Policies in Agriculture: Republic of Shlomo Reutlinger Korea and Thailand ... 30 Economic Consequences of the Coffee Boom Completed Research .................... 10 in East Africa .................... 31 Rural Development in China .............. 10 National Accounts Statistics of Centrally Marketing Manufactured Exports: Planned Economies .. . 33 Clothing from Colombia .... ........... 13 Indian Urban Development ... .. 33 Management and Organization of Industrial Location Policies for Urban Irrigation Projects ............ 16 Deconcentration: Republic of Korea 34 International Trade Policy for the Income Formation and Expenditures of Development of Bangladesh ... 18 Poor Urban Households . . 35 Labor Migration from Pakistan and Participant-Observer Evaluation of Urban Bangladesh to the M iddle East .......... 20 Projects . . ... . ...................... 36 Incomes and Welfare in Colombia, Research and Development: Handpumps for 1964-1978 .... ...... . . . . ...... 24 Rural W ater Supply 37 Determinants of Fertility in Rural New Research Bangladesh ...... . . 37 Adjustment in Oil-Importing Countries ...... 25 Demand for and Willingness to Pay for A Model of Energy Demand in Developing Services in Rural Mali 38 Countries ..... 26 The Welfare Implications of Alternative New and Forthcoming Publications 39 Energy Pricing Policies in Indonesia 27 World Bank Research News is issued three times a year. It supplements the descriptions of socioeconomic research projects in progress given in the annual World Bank Research Program: Abstracts of Current Studies, and the annual Catalog of World Bank Publications. Research News is available free of charge to institutions and individuals with a professional interest in development. To be placed on the mailing list or to receive additional copies, please send a complete address, including your title, to the Publications Distribution Unit, World Bank, 1818 H Street, N.W., Washington, D.C. 20433, U.S.A. Enquiries on particular research projects should be addressed to the individuals or departments cited. Other enquiries, comments, and suggestions for future issues will be welcomed and should be addressed to the Editor, Office of the Vice President, Development Policy, World Bank, 1818 H Street, N.W., Washington, D.C. 20433, U.S.A. WORLD BANK RESEARCH the prevalence of hunger. This is not to deny the important contribution food production has made ON THE HUNGER and will continue to make toward reducing DIMENSION OF THE hunger-without the "Green Revolution" the problem of hunger would be much worse than it is FOOD PROBLEM today. But while the World Bank has an extensive research portfolio on issues related to food supply, Shlomo Reutlinger* research about the impact on hunger of projects Development Economics Department and policies designed to promote food production has hardly begun. Accelerated food production will alleviate hunger only to the extent that the scarce Over the last decade, dramatic changes have resources used in the process yield a larger occurred in perceptions about the nature and reduction in poverty and/or food prices than they magnitude of the food problem in developing would if used in other ways. countries. Almost exclusive preoccupation with trends and fluctuations in aggregate food demand, Hunger in developing countries has essentially two production, and imports has been augmented with major dimensions: chronically low levels of food a new concern for inadequate food consumption by consumption among major segments of the popula- large numbers of people here and now. This tion and periodic reductions in food consumption evolution in perceptions about the food problem on a national or regional scale caused by failing closely parallels the new realization that the harvests, abnormally high prices of imported food, preoccupation with economic growth ought to be or reduced ability to pay for food imports. complemented with an explicit concern for the Chronic Hunger poverty persisting among large segments of the g population. How many people are chronically short of food? By how much? Who are they? How does it affect Thls new perception of the nature of the food them? How much additional income would the problem, while widely shared, has not been hungry need, to afford the food they require? How uniformly interpreted, however, in its implications are their food shortages affected by the aggregate for policy and research. Fo e Winoi food supply and the price they pay for food? These Brandt, in a recent article in the Economist are some of the questions that need to be addressed reviewing the Cancun summit conference, states i an smeaift ulsans cost-eeti pe aresto the widely held view that increased food production Ievole. is the key requirement (for eliminating world evolve. hunger) and that food aid (presumably also food What is the aggregate dimension of chronic food imports), while valuable, should be used only for shortages? temporary and emergency support.' The first requirement for assessing the numbers of Research in the World Bank on hunger issues is people short of food in any country is knowledge predicated on the basic premise that the extent of about how food consumption is distributed. The hunger cannot be inferred from data on aggregate food production and that to alleviate hunger, This review is, by necessity, only about research at the World accelerated food production and the stabilization of Bank. My intellectual debt to the wider research community and, food supplies through buffer stocks are neither equally, to the dedicated practitioners in the field is enormous and sufficient nor necessary. A second premise is that gratefully acknowledged. This is essentially a very personal the most important direct determinants of hunger overview of the topic and how I see the pieces fitting together- Only are usually peoples' levels of income and the prices what I regard to be some of the most important issues have been reviewed. Hunger is, of course, a symptom of a much broader they must pay for food. malaise in societies. One reason for having selected the particular subjects I did is that they are not already treated in the much Research reviewed in this paper on the hunger broader context of the literature on agricultural and general dimension of the food problem has primarily development, income distribution, and so forth. focused on the effects of poverty and food prices on 1. Economist. November 28. 1981. 4 RL.StAR' IWN[' S WINTER 1981/82 second requirement is an agreed standard of food people with clinical symptoms of health problems adequacy. Here it has been pointed out rightly that related to undernutrition. Though the subject of different people require different amounts of food; much controversy, this discrepancy should not be hence, it would be inappropriate simply to count surprising. The standards of energy sufficiency, people whose intake of food is below an average developed for a range of representative individuals standard of food adequacy and to assume that they by FAO/WHO and used in conjunction with the are underfed. Ideally, one would need to know the Reutlinger-Selowsky methodology, are meant to food requirement and intake of each individual to represent the requirements for food energy of draw meaningful conclusions about the extent of people engaging in moderate activity and having food shortages. But it is unrealistic to expect that unimpaired access to food. They go beyond data of this kind could ever be compiled on a scale ensuring the food energy required to maintain large enough for the national prevalence of immediate physical health. The obvious implica- undernutrition to be assessed. tion is that lower standards of food adequacy should be used when the objective is to measure In Malnutrition and Poverty,2 Reutlinger and whether food shortages are impairing health. Selowsky developed a methodology whereby the However, further research is required to determine per capita food consumption of different income whether and in what context food intake below the groups is estimated by the use of data on the per FAO/WHO standards inhibits peoples' activity. It capita food consumption of a country's total is not known whether, for instance, people in population, income distribution data, and knowl- poverty exert less energy than might be expected, edge about the relationship between income and due to lack of opportunity and social custom, or food consumption. By comparing actual per capita whether their limited food intake forces them to food consumption with an average standard of adopt a less active lifestyle. It should also be borne requirement for each income group, it is possible to in mind that the FAO/WHO standards may infer which income group consumes less per capita underestimate the potential efficiency of energy than its requirement. It seems reasonable to conversion since they are based on studies of people assume further that among people whose incomes whose means permit them to waste food. These and are similar, variations in consumption are closely similar issues are discussed by Srinivasan.5 correlated with requirements. On this assumption, all people within an income group whose average The studies by Reutlinger and others, as well as consumption is a certain percentage below require- subsequent analyses of chronic food deficits derived ments are underfed by the same percentage. from survey data on household expenditure and food consumption in several countries (India, In a similar study of the prevalence of undernutri- Pakistan, Bangladesh, Brazil, Morocco, and Co- tion among children, Selowsky shows how the lombia) reported in papers by Knudsen and association between food consumption and poverty leads to a higher incidence of undernutrition among children than adults when the association between income and family size-poor families being larger than the average-is taken into account.3 2. Shlomo Reutlinger and Marcelo Selowsky, Malnutrition and Poverty: Magnitude and Policy Options. World Bank Staff The sensitivity of estimates of the number of Occasional Papers No. 23 (Baltimore and London: The Johns "underachieving food consumers" to different Hopkins University Press, 1976). 3. Marcelo Selowsky, "The Economic Dimensions of Malnutri- assumptions about variations in food intake and tion in Young Children." World Bank Staff Working Paper No. requirements among individuals within income 294, October 1978. groups has been explored in a recent paper by 4. Shlomo Reutlinger and Harold Alderman, "The Prevalence Reutlinger and Alderman.4 of Calorie-Deficient Diets in Developing Countries." World Bank Staff Working Paper No. 374, March 1980. Reprinted in World These studies suggest that the numbers of people Development 8 (5/6) (May/June 1980), pp. 399-411. 5. T.N. Srinivasan, "Malnutrition: Some Measurement and consuming too little food are much larger than Policy Issues." World Bank Staff Working Paper No. 373, those suggested by independent observations of February 1980. ''i t)R .L) BANK Scandizzo,6 Berg,7 Austin,8 and Mohan and oth- the nature and magnitude of the problem is neither ers,9 clearly highlight several basic propositions in pessimistic nor optimistic. Inasfar as the amount of connection with the hunger dimension of the food food required to close the gap between current problem: consumption and nutritionally adequate consump- * In most countries, the prevailing distribution of tion is small, the world's capacity to produce more food consumption indicates that large numbers food is not likely to be a major constraint. Even so, of households are consuming less than fully the task of defining and implementing policies adequate amounts of food (by FAO/ WHO which would make it possible for hundreds of standards) and a smaller but still very large millions of people to augment their meager diets, number are getting less food than required for albeit by small amounts, is a major challenge. The normal health and child development. central thrust of research in this regard should be, therefore, to identify policies which cost effectively * In future, the proportion, though not the prvd y ' n o provide "hungry" people with more income to absolute number, of people consuming less purchase more food at existing prices (or to than adequate amounts of food is likely to show a m t d e u r r i as consume more of the food they produce, if they are a moes dcieuer relsi asupin farmers) and/or make food available to them at about growth rates of per capita income and lower prices. food supplies if the distribution of income remains unchanged. In Malnutrition and Poverty, Reutlinger and * The total food deficit implied by this "chronic Selowsky compared the cost effectiveness of income hunger" is only a small percentage of the food maintenance, food stamps, and general subsidies on supply currently available in most countries food prices in augmenting the food consumption of and amounts to no more than 2 percent-4 the undernourished."1 They defined cost effective- percent of global food supplies. ness in terms of the fiscal cost per additional unit of food consumed by the undernourished population. A recent study by Knudsen and Scandizzo,'1 based The conclusions are quite stark, but not surprising. on household survey data on consumption, ana- General food-price subsidies are extremely cost lyzes the determinants of caloric intakes in ineffective if only a small proportion of the developing countries to reach three broad conclu- population is undernourished and the elasticity of sions. First, both income and price elasticities of demand for the subsidized food by those who do not demand for calories are below unity, so that quite need it is fairly high. If, as is often the case, only large increases in income or reductions in prices the imported portion of the available food is are needed before people will consume more subsidized, the fiscal cost effectiveness is improved, calories. These elasticities tend to cluster around but only because the costs to the economy are 0.50 for the poorer consumers; they are much lower for higher-income groups. Second, even a moderate increase in calorie prices implies a large nutritional sacrifice for the poor if present trends in 6. Odin K. Knudsen and Pasquale L. Scandizzo, "Nutrition and the growth and distribution of income continue. Food Needs in Developing Countries." World Bank Staff Working Third, with policies to re e i- . Paper No. 328, May 1979. Third, with policies to redistribute Income moder- 7. Alan Berg, "Malnourished People-a policy view." Poverty ately so that the poor can better afford to buy food, and Basic Needs Series, World Bank, June 1981. malnutrition could be substantially reduced even 8. James E. Austin, Confronting Urban Malnutrition: The with relatively little economic growth and increas- Design of Nutrztion Programs. World Bank Staff Occasional food prices. Papers No. 28 (Baltimore and London: The Johns Hopkins ing IUniversity Press, 1980). 9. Rakesh Mohan, Wilhelm Wagner, and Jorge Garcia, Research on policy options "Measuring Urban Malnutrition and Poverty: A Case Study of Bogota and Cali, Colombia." World Bank Staff Working Paper These findings on the nature and magnitude of No. 447, April 1981. chronic hunger have important implications for the 10. Odin K. Knudsen and Pasquale L. Scandizzo, "The kind of research needed in support of policies Demand for Calories in Developing Countries." The American Journal of Agricultural Economics, vol. 64, no. I (February 1982) which could substantially reduce hunger. The (forthcoming). prognosis from the World Bank's research about 11. Shlomo Reutlinger and Marcelo Selowsky, ibid. 'IN IF.R 1981 /82 shifted, in part, to domestic producers. This kind of government, rather than by domestic producers, subsidy reduces efficiency, increases dependence on appear to be the more efficient distributors of low- imports and, possibly, increases hunger among priced calories. poor farmers and laborers to the extent that subsidized imports depress production. In general, In a recent analysis of commodities used in US policies that target benefits to the undernour- food-aid programs for distribution to selected ished-food-price subsidies, food-stamp programs, target groups, Reutlinger developed criteria for or straight income transfers-are shown to be measuring the cost effectiveness of alternative much more cost effective. commodities and program modalities. Preliminary data indicate large variations in cost effectiveness.18 Separate studies by Selowsky"7 and Knudsen13 For cases in which interventions cannot be targeted show that it is even more difficult to design cost- to the poor, the work of Timmer,"9 particularly in effective, subsidized food-distribution programs reference to Indonesia, has shown that subsidizing when the target population is more narrowly the distribution of the "inferior" foods consumed in defined, so as to consist only of children. Selowsky relatively large quantities by the poor can be much concludes that it is difficult to do better than more cost effective in reducing chronic hunger than through an equivalent income transfer. Knudsen subsidizing foods in high demand by the whole suggests that eflectiveness can be reasonably population. assured only if supplementary feeding is restricted to the most needy cases, is carried on for a limited In principle, it would be nice to know not only the period, and if the ration size is close to the full cost of inducing a given increase in food consump- nutritional requirements of the child. tion by a target population, but also the conse- quences of doing so. For instance, if the conse- Applications of cost effectiveness and cost-benefit quences could be expressed in terms of the criteria to the evaluation of projects and policies contribution to national income, one couldcompare designed to raise the food consumption of the the benefits from a supplementary food program undernourished population are discussed in studies with those of a transport project. Or, if the of a supplementary feeding project for children in consequences for health could be predicted and Tamil Nadu (India)'4 and the ration shop program quantified, one could compare the cost effectiveness in India.' In a study of the milk-distribution program in Chile,'" Harbert and Scandizzo ana- 12. Marcelo Selowsky, "Target Group Oriented Food Pro- lyzed the extent to which the food given to the grams. Cost Effectiveness Comparisons." World Bank Reprint household is actually used by the intended benefici- Series: Number 127. Reprinted from American Journal of aries (children and pregnant women) and ques- .Agr2cul!ural Economrcs, vol. 61, no. 5 (December 1979):pp. 988- tioned whether the program's economic and dietary 13. Odin K. Knudsen, "Economics of Supplemental Feeding of benefts ensured a lasting Improvement In nutri- NMalnourished Children: Leakages, Costs, and Benefits." World tion. They found that, while some of the benefits go Bank Staif Working Paper No. 451, April 1981. to other family members, a substantial amount still 14. Odin K. Knudsen, ibid. reaches the target group. Among the target group, 15. Pasquale L. Scandizzo and Gurushri Swamy, "Benefits and Costs of Food Distribution Policies: The India Case." World Bank, calorie and protein consu'ption rose significantly, Agriculture and Rural Development Department, September while weight and height increased. 1981. 16. Lloyd Harbert and Pasquale L. Scandizzo, "Food Distribu- Scandizzo and Graves'7 analyzed both fiscal and tion and Nutrition Intervention-The Case of Chile." World economic costs of policies for broad-based food Bank, Agriculture and Rural Development Department, Working distributon in sev e s ountries. Their Paper No. 27, February 1980. distribution in several Asian countries. Their 7. Pasquale L. Scandizzo and J. Graves, "The Alleviation of results show that such policies tend to be more cost Nfalnutrition. Impact and Cost Effectiveness of Official Pro- effective in countries with higher food deficits per grams." World Bank, Agriculture and Rural Development capita and where a larger share of the population is Department, Working Paper No. 19, January 1981. in deficit and increases its consumption signifi- 18. Shlomo Reutlinger, "Analysis of the Nutritional Cost- cantly in response to small reductions in food Effectiveness of Commodities." World Bank: Development Eco- nomics Department, September 1981. prices. Further, countries in which a larger portion 19. C. Timmer, "Toward a Nutrition Oriented Food Policy: of the distribution cost is sustained by the The Case of Indonesia." World Bank (mimeo). of supplementary food programs with that of other Periodic Countrywide Food Scarcities health-promoting investments. Periodic poor harvests, high prices of imported World Bank researchers have investigated two foods, and reduced foreign-exchange earnings can kinds of relationships between nutrition and sharply reduce the food available to a nation. The productivity: the effect of early nutritional depriva- effects may be severe for the poor but hardly tion on children's mental development and educa- noticeable for the well-to-do. When aggregate tional achievement, with its consequences for supplies decline and prices rise, the well-to-do can lifetime earnings, and the effects of adult malnutri- continue to eat the same amounts of food simply by tion on workers' performance. Studies by Selowsky buying cheaper foods or by reducing their nonfood and Taylor2" on the former and by Basta and consumption. The poor do not have this option; Churchill21 on the latter show that nutritional they must sharply reduce their total consumption deprivation can significantly impair productivity, of food when the price rises. As a consequence, the but that this impairment is difficult to separate chronically underfed have even less food than from the effects of other factors in the environment. usual, and people who normally "get by" become Such a concept of the benefits from improved underfed periodically, too. Worst hit when harvests nutrition is made even more difficult to use as a fail are poor farmers and the landless, who derive criterion in project selection because any assess- their income largely from food production. ment of the social, as distinct from the private, gains requires additional assumptions about the When the World Bank first began its research on social value of the current and future marginal instability in food supplies, neither the many product of labor and mental abilities both in the causes of observed variations in food supply and present and many years into the future. consumption nor their implications for the inci- dence of hunger was explicitly recognized. The An alternative approach to the evaluation of main objective of the first study23 was to estimate benefits from additional food consumption is the benefits and costs of a national buffer stock presented in a paper by Scandizzo and Knudsen.22 under conditions that would be most favorable to They derive criteria for estimating social demand its economic justification: the case of a country functions, which measure the value society places unable or unwilling to vary food imports or exports on various amounts of food consumed by each of its in response to variations in its domestic food members. The extent to which social demand production. A simulation model was used to exceeds private demand is used to measure the transform the probability distribution of produc- gains from enabling poor people to consume more tion into a probability distribution of price and food than they otherwise would. consumption associated with buffer stocks of Given the state of present knowledge and the cost of learning more about the functional and economic significance of undernutrition, it is doubtful that 20. Marcelo Selowsky and Lance Taylor, "The Economics of projects or policies designed to reduce hunger could Malnourished Children: An Example of Disinvestment in Human or should be evaluated using cost/benefit analysis. Capital." Economzc Development and Cultural Change, vol. 22, In any case, the cost of human suffering cannot be no. 1 (Octoher 1973): pp. 17-30. 21. Samir S. Basta and Anthony Churchill, "Iron Deficiency assessed in any objective manner. Besides, different Anemia and the Productivity of Adult Males in Indonesia." World degrees of compassion and political considerations Bank Staff Working Paper No. 175, April 1974, and "The play an important role in determining the kind and Relationship of Nutrition and Health to Worker Productivity in extent of measures adopted in a particular country. Kenya." Study of the Substitution of Labor and Equipment in In this context, research on the chronic hunger Civil Construction, Technical Memorandum No. 26, World Bank, May 1977. dimension of the food problem can be most relevant 22. Pasquale L. Scandizzo and Odin K. Knudsen, "The when it focuses primarily on identifying which Evaluation of the Benefits of Basic Needs Policies." American segments of the population are denied access to Journal of Agricultural Economics, vol. 62, no. t (February 1980): food by any reasonable standard and on evaluating pp 46-57. 23. Shlomo Reutlinger, "A Simulation Model for Evaluating which are the most cost-effective measures to Buffer Stock Programs," in Symposium on Food Grain Marketing reduce these deprivations. in Asia," Asian Productivity Organization, Tokyo, 1971. various sizes. Probability distributions of the costs so, a stabilizing-trade policy in grains would and benefits of the buffer stock operations were reduce supply instability at the cost of greatly calculated on the basis of a large sample of 30-year destabilizing the foreign exchange and fiscal sequences of production selected at random from accounts. Domestic buffer stock operations could the probability distribution of production. For a be justified, but only to the extent that they are less range of plausible parameters, it was illustrated costly than financial measures to cope with that the cost of a buffer stock, relative to its effect unstable food trade accounts.25 on stabilizing price and consumption, increases rapidly with the size of the stock and that for a Another study specifically compared the cost reasonable level of stabilization the costs would far effectiveness of buffer stocks, trade policies, and exceed the gains in consumer surplus associated internal food pricing policies for preventing short- with the stabilization of prices. falls in the consumption of food by low-income consumers. This research illustrated that through This basic framework of analysis was retained in the redistribution of existing food supplies within subsequent studies undertaken over more than a the country, periodic hunger could be prevented at decade, but the model was expanded in many new a reasonable cost without either large buffer stocks directions. Additional factors contributing to the or the excessive demands on foreign exchange instability of food consumption were explicitly which a countrywide supply-stabilization trade considered and studies increasingly emphasized the policy entails.26 hunger dimension of food supply and consumption instability. Applying this research to the case of India, it has been shown that buffer stocks of the magnitude In a study of global instability in the supply of India has held in recent years effectively stabilize wheat,'4 the original model was modified in order supply, but at a very high cost. Equally effective to investigate the effectiveness of buffer stocks in stabilization could be assured through trade and reducing the likelihood of extreme shortfalls in less stocks, particularly if stocks are replenished supply. It was illustrated that this purpose would when world prices are favorable.27 require a very large and costly buffer stock if the stock were operated by rules which provide for the reduction of general price instability. A much less costly stock of moderate size, however, was shown 24. , "A Simulation Model for Evaluating World-Wide to be adequate to the task if rules were adopted Buffer Stocks of Wheat." World Bank Reprint Series: Number 34. providing for the release of stocks only in the event Reprinted from American Journal of Agricultural Economics , vol. of extreme shortfalls in supply. 58, no. 1, (February 1976):pp. 1-2. 25. Shlomo Reutlinger, D. Eaton, and D. Bigman, "Should Further studies of countrywide instability in the Developing Nations Carry Grain Reserves?" in Eaton and Steele, consmpton f fodgrinsinvstigted effctseds., Analysis of Grain Reserves. United States Department of consumption of foodgrains investigated the effects Agriculture: ERS-634, pp. 12-38. August 1976. D. Bigman and of instability both in domestic production and in Shlomo Reutlinger, "Food Price Stabilization: National Buffer world market prices under alternative buffer-stock Stocks and Trade Policies." American Journal of Agricultural and food-trade policy scenarios. It was shown that Economics, vol. 61, no. 4 (November 1979): pp. 657-667, under a free-trade regime, with imports filling the "National and International Policies Towards Food Security and Price Stabilization." American Economic Review, vol. 69, no. 2 gap between food consumption and production at (1979): pp. 159-163. Shlomo Reutlinger and K. Knapp, "Food existing world market prices, much of the supply Security in Food Deficit Countries: A Brief Historical Review and instability caused by fluctuations in domestic Probabilistic Simulation of the Effect of Trade and Stock Policies," production could disappear. The remaining insta- in Yaron and Tapiers (eds.) Operations Research in Agriculture and Water Resources: Proceedings (Amsterdam: North Holland bility would be the result of instability in import Publishing Company, 1980). prices and the response of consumers to price 26. Shlomo Reutlinger and D. Bigman, "Policy Options in fluctuations. This source of instability could be Attaining Food Security: Feasibility, Effectiveness and Costs," in eliminated under a stabilizing trade policy, A. Valdes, (ed.), Food Securt}yfor Developing Countries (Boulder: whereby all or some consumers would be insulated Westview Press, 1981). 27. Shlomo Reutlinger, "The Level of Stability of India's from fluctuations in international prices. It was Foodgrain Consumption." World Bank Staff Working Paper No. shown, however, that a free-trade policy and, more 279. November 1979. In recent years, research in the World Bank on the includes what is so far the most complete analysis stabilization of food grain supply has focused of the sources of instability in a country's food increasingly on the international environment and consumption: as well as variations in domestic initiatives. In the wake of the food crisis in the production and import prices, these include varia- early 1970s and its visible consequences in tions in export earnings.29 developing countries, the media and international fora issued pleas for new and large investments in Summary national and international buffer stocks. Research in the Bank has demonstrated effectively that such The focus on the hunger dimension of the food supply-oriented solutions are extremely costly and problem has led researchers in the World Bank to could ill be afforded. Moreover, on the level look increasingly at the link between hunger and contemplated, they would be too small to solve the poverty. In this regard, there is a clear symnetry hunger problem of poor people and poor countries. hetween the problem of chronically underfed people withion countries and periodic threats to In a paper published in 1978, Reutlinger demon- aggregate food consumption in poor countries. In strated that if countries are short of foreign both cases, the aggregate amount of food-the exchange or are unwilling to allocate enough country's food supply or the worldwide food foreign exchange to food imports, their food supply, respectively- plays a role. However, by supplies will continue to be unstable, irrespective far the more decisive determinant of whether of the level of supply stabilization in the interna- people and countries obtain enough food is their tional market. Perhaps as often as four out of five ability to pay for it. For the chronically hungry, times, a food shortage in a country will be caused what matters is their income and the prices they by poor harvests uncompensated by imports. These must pay for food. Producing more food, if it occurrences would not be remedied by interna- doesn't generate a sufficiently large wage bill and if tional supply stabilization through international it doesn't reduce the price of food faced by those in buffer stocks. (Otherwise, what is the explanation hunger, will do little to prevent hunger. The food of the repeated supply shortfalls in many countries produced might end up in excessive stocks or in during a long period preceding 1973 when the exports, or depress prices to farmers and thereby world price of food grains was very stable?) "kill the goose that laid the golden egg." Similarly, Domestically held buffer stocks in each country the supply of food in poor countries is more likely would be a solution, but a very costly one. The to be stabilized by providing them with the obvious alternative is to seek a solution to the financial assistance they need for imports than by financial constraints that prevent countries from stabilizing global supplies of food. offsetting losses in their own production of food by Future research on hunger issues in the World imports. Research showed that an international Bank and elsewhere might well concentrate more financing facility could insure countries against n f t excessive food import bills at low cost, even if the on identilfyg those hunger conditions whfch are credit were extended on very favorable terms.2- primarily caused by poverty as distinct from those primarily caused by supply constraints. In either The most significant policy initiative traceable to case, it might be easier to become knowledgeable research on food security is the recent modification about the causes than about appropriate and cost- of the International Monetary Fund's Compensa- effective remedies. Yet without cost-effective reme- tory Financing Facility (CFF) to compensate dies little is likely to change in a world which has countries for shortfalls in export earnings as well very limited resources and is preoccupied with as excessive cereal import bills. A current study is much else besides hunger. analyzing the possible impact on food security (i.e., the prevention of a precipitous decline in food 28. Shlomo Reutlinger, "Food Insecurity: Magnitude and consumption) of countries availing themselves of Remedies." World Bank Reprint Series: Number 71. Reprinted credit from the CFF. It also considers how from World Development vol. 6, no. 9/10 (September-October domestic pricing and foreign exchange-allocation 1978): pp. 797-811. 29. B. Huddleston, D. Gale Johnson, Shiomo Reutlinger, A. policies affect the food security of countries with Valdes. Financial Arrangements for Food Security. World Bank, and without access to the new facility. The study Development Economics Department, 1981.) COMPLETED RESEARCH the rural sector's dependence on industrialization and the growth of cities. This isolation of the rural All reports cited in this section may be obtained sector was largely the result of measures whose from Philip Mitchell, World Bank Research purposes were unrelated to rural development, but Documentation Center, Room I 8-203. it can nonetheless be seen as a test of the efficacy of self-contained rural development. The strategy Rural Development in China employed by the Chinese can also be seen as one of the world's most ambitious attempts to improve the Ref. No. 671-90 welfare of the poor or, more broadly, to develop human resources in the absence of industrialization This study, undertaken for the Bank's Policy and urbanization. Planning and Program Review Department (PPR) by Dwight Perkins of Harvard University After demonstrating how limited were the ties of and Shahid Yusuf of the Bank's staff, is a synthesis the rural economy to the urban industrial sector of the available material on rural development in since the mid 1950s, the study looks in Chapter II China. China has gone a long way toward meeting at the performance of agricultural production. the minimal needs of its rural population. Except Cereal output is judged to have grown by about 2 perhaps in very remote areas, severe malnutrition percent a year, and agricultural value added by is absent, and most people have access to modern about 2.6 percent a year, between 1955-57 and health care for life-threatening diseases. Almost all 1975-79. Though not especially rapid by interna- of China's youth get some education and, tional standards, these are respectable growth rates increasingly, the better students, even in rural since, it is argued, China faces peculiar difficulties areas, have access to higher levels of the education in raising agricultural output. First, the rapid system. agricultural growth achieved by several other countries has been based on cash crops with a high Not everyone is equally well off. Substantial value of output per hectare, with the gap between differences in income remain, and Chinese leaders domestic consumption and production of cereals have spoken of 100 million people who are not being filled by imports. In China, any major shift adequately fed. Average per capita caloric intake is in emphasis away from grains to cash crops could around 2100 calories per day, a level no higher quickly lead to a dependence on imports too large than that of many other developing countries. But to be sustained. (A level of grain imports the number of people at semi-starvation lev- comparable to that of the Republic of Korea or els-around 1500 calories a day-must be much Japan, for example, would mean annual foreign smaller as a percentage of population than in most purchases of over 100 million tons. Even were nations with a similar average. China able to afford such purchases at present Outsiders who have tried to encapsulate China's prices, such a large addition to demand would send rural development strategy have emphasized world grain prices up dramatically.) Second, when different aspects of that strategy. For some, the China's rice yields are compared with those of main issue has been the role that should be played other countries, taking examples from where local by material incentives for work. For others, the production conditions are similar, they appear to bymainissue concernsthemeans I of raising poduc-s tbe very high. China has already tried many of the main issue concerns the means of raising produc- known methods of raising rice yields;] further tion: Does rural development depend mainly on the . . . . r reorganization of rural society and the mobilization increases will depend on techniques as yet untried of surplus labor, or mainly on a technological or unidentified. solution (improved seeds, chemical fertilizer, Agricultural growth rates have kept ahead of assured supplies of water)? A third approach taken growth in population since the mid 1960s, but the in this study, is to view China's rural development per capita agricultural product is only slightly in the context of the nation's overall development strategy. In this light, China's policies can be seen I. For example, China had developed dwarf high-yielding as an attempt to solve the problems of rural poverty varieties of rice by the early 1960s, well before the International and sluggish agricultural growth while minimizing Rice Research Institute was established. above subsistence level. The issue has never been Could a nation with different traditions, or one whether to put a major effort into raising lacking an organization like the Chinese Commu- agricultural product, but rather of how to go about nist Party, carry out a comparable transformation this. The study looks in Chapter III at the means of of rural society? An answer to this question would raising agricultural output from two interrelated obviously require a detailed analysis of conditions perspectives. The first concerns the direct inputs in the particular country. But, as the authors note, (such as chemical fertilizers) that are most efficient in part, the problem is one of distinguishing that in improving yields; the second concerns the most which can only be done in a system of collectivized efficient way of organizing rural society so as to agriculture from the measures that are not tied so provide incentives for hard work. Both these issues intimately to this form of organization. China's have long been the subject of controversy in China. extension service, for example, is particularly The study reviews the policy decisions taken and effective because it has closed the gap between the their effects, detailing the experience with mobiliz- decision maker at the farm level and the extension ing labor for public works and the provision of worker, by including the extension worker in the inputs other than labor. It emphasizes that team's or commune's decision-making process. agricultural production did not begin its sustained Under the commune system, such integration is rise until there was a rapid increase in the flow of easy to accomplish because decisions are made by a inputs from modern industry. leadership group, and the commune or team can easily pooi its resources and send one of its The degree of China's reliance on organizational members for the necessary training. Analogous changes as a means of achieving rural development arrangements within a market economy are is what sets the country apart from most others. In possible, but the commune closes the gap more Chapter IV, the study analyzes institutional easily than most other extension systems. change, discussing, first, the specific reforms pushed and then the reasons for promoting them. It It can be argued persuasively that a government is not much of an oversimplification to say that with the political will and administrative capacity rural institutions were reformed primarily for to follow China's path of radical reform and direct political reasons-to consolidate the Chinese action can accomplish more for the poor in a short Communist Party's control of the countryside-but time than decades of "trickle down" from rapid also with high hopes that production would be economic growth. Recalling how much the growth stimulated. When the initial impact on production of China's agriculture appeared to depend on the proved to be disappointing, the Chinese leadership flow of inputs from modern industry, Chapter V of discovered new ways of using the existing structure the study asks whether meeting the basic needs of to help alleviate the problems of rural poverty the rural poor was equally dependent on the rapid through the direct provision of services, growth of industry. Possessing both the will and the capacity to implement social change, was Even a brief recital of the kinds of reforms China able to eliminate the worst forms of rural undertaken in China after 1949 makes clear the poverty by methods that did not depend on the remarkable ability of the Chinese Communist growth of the modern, urban sector? Agricultural Party to bring about fundamental changes in rural output just kept pace with the growth of society. The discussion of organizational change population. Average rural income grew only seeks some answers to the question of where this modestly, mainly as a result of changes in the remarkable implementation capacity came from. It rural-urban terms of trade. A key feature of many, points out the relationships between China's though not all, of China's programs to eliminate reforms and its historical and revolutionary rural poverty was indeed the mobilization and experience-not least a long Confucian heritage redistribution of resources already in rural areas. and a revolution that put the poorest elements of The income of the poorest peasants was raised less Chinese society in command of that society, and by massive investments in rural infrastructure than which also systematically destroyed those institu- by redistributing landlord income. Public health tions, such as the extended family, that would was promoted by "barefoot" doctors with a few interfere with the ability of the Party to carry out months' training, rather than by "urban" doctors its programs. with many years of training. But though the achievements are impressive, the experience sug- poorest areas were those most remote from large gests some of the limits of a self-contained rural cities, in particular, communes in the northwest strategy against poverty-and, in particular, the whose remoteness was combined with a shortage of limits to continued progress under such a strategy water. Communes near cities benefited doubly: where growth is relatively slow. Not only could they concentrate on growing crops, such as vegetables, with a high value per hectare, Though the extent of poverty was dramatically but their members could take higher-payingjobs in reduced between the 1930s and the 1950s, the the urban sector, because they could commute to poverty that remained has proved remarkably work and hence did not have to apply for resistant. Chapter V of the study shows that permission to live in the city. (Urban employment China's land reform had a clear-cut effect on the has grown much faster than urban population.) distribution of income: Confiscation of landlord land was thorough, covering roughly 45 percent of The authors suggest that recent policies relaxing the total; a major and largely successful effort was controls on rural-urban migration may help to made to ensure that poor peasants and landless reduce inequality of incomes. Higher farm-gate laborers received this land, for which landlords prices, however, may favor the richer areas since were not compensated. Income of the bottom 20 less is marketed from remote mountainous regions percent of the population rose by 88 percent and than from regions near cities and good transport that of the bottom 40 percent by 37 percent. Much systems. abject poverty was eliminated. The recent shifts in policy toward education, which It is commonly believed that the formation of is the subject of Chapter VII, may also reinforce cooperatives and, then, of communes took the present trends toward greater inequality. Chinese redistribution of income a giant step further. There society had long supported an indigenous educa- was indeed some redistribution of income within tional system which produced, among other things, communes, particularly since property incomes a highly educated elite. This historical foundation were, in effect, eliminated. But the distribution of provided the base for a rapid expansion in income in rural China in the late 1970s differed education after 1949. The educational system was little from that in the early 1950s, following land a central -target of Mao's attack on urban elitism reform. The isolation of the rural sector played an that began with the Great Leap Forward and was important role here. Some poor areas became rich, pushed with particular vigor during the Cultural but most backward areas remained so. Poor Revolution. Had this effort been pushed by more production teams could catch up with the income moderate means, the results might have been level of richer teams if they invested more different. As it was, the school system, at least at (unlikely), had better leadership, tried harder higher levels, was closed down entirely for several because they were poorer, or because more of their years, and internal school discipline was continu- people left for the city, leaving fewer at home to ously undermined after schools reopened. Little share incomes from land. The final alternative was technical education or research took place, even in for the state to invest more in the poorer rural agricultural subjects. Technical education with a areas. Differential rates of migration were not strong elitist flavor was restored after 1977. At the possible, because, in general, migration to the cities same time, primary education is approaching was prohibited. Directing state investments toward universality, and an effort is under way to achieve the poorer farmers was not very effective: State the same goal for middle schools. How the new funds for this purpose were not very large, but they educational policies will affect agricultural produc- were also mainly directed toward projects with the tivity and the distribution of rural income will greatest potential impact on productivity, given the depend, to a large extent, on whether those now already slow growth rate of agriculture. Such being educated migrate to the cities as industri- projects only occasionally were in the more alization proceeds. backward areas. Perhaps China's greatest success in meeting the By the late 1 970s, the biggest differences in income needs of its rural people is in the area of health levels were not between, but within, provinces. The care. A crude death rate of 7-8 per thousand is one indication that the worst problems have been labor. And extension workers, just like health conquered. Chapter VI of the study synthesizes the workers, could be sent for training and guaranteed vast literature on the development of China's rural a place on their return. Whether because of the health-care system and appraises the system's communes or in spite of them, Chinese agricultural effectiveness. This chapter also reviews China's production grew at a respectable rate. population policies of the last three decades and the possible causes of the sharp drop in the crude birth The study finds that though China's achievements rate, from 30 per thousand in the early 1970s to 20 against poverty are impressive, the country's per thousand in 1978. experience over the past three decades suggests that there are severe limits to what can be accomplished Beginning in the late 1950s, the government took by a rural development effort that is self contained. steps, largely successful, to eradicate those diseases In the future, except in the unlikely event of a that could be prevented by inoculation. The fact major and sustained rise in the rate of agricultural that food was quite equitably distributed (more so growth above the levels of the 1960s and 1970s, than income) must have played an important role China's farmers will become rich only if there are in improving health. The Chinese also began to fewer of them to share the fruits of the land and, build a curative system that reached down to the for that to happen, there must be more urban jobs. brigade and team level. China's experience with If agricultural growth is to be accelerated, that, too, rural health care provides mixed support and will require an increased effort outside the rural criticism for both sides of the debate over whether sector: Only a first-class education system at the 'mass campaign versus technical expertise," or university level can provide China with the "red versus expert" should provide the impetus for necessary scientists; only large investments by the development. Without China's large-scale politi- state can solve the water problems of the north. cally inspired efforts to reorient the work of the urban technical bureaucracy toward the rural A section of the study identifies some of the gaps in areas, the health system would not have become so what is known about the Chinese economy and its highly developed. Once the system was in place, workings and notes some of the analytical however, its effective use depended on the techniques developed in the West that are not now technicians who ran it. Further major advances in in use in China but that might be of value to its public health seem likely to depend on the technical economic planners. and research expertise that is available, par- ticularly in epidemiology. Report In concluding the study, the authors argue that Perkins, Dwight H. and Yusuf, Shahid. "Rural Develop- though many basic needs could no doubt have been ment in China." World Bank, Policy Planning and met without the commune form of organization, Program Review Department, January 1981. the commune system made the task easier in several ways. The commune could maintain a Marketing Manufactured Exports: welfare fund to meet the needs of its most destitute Clothing from Colombia members; it could afford to maintain individuals while they acquired training in health; and it could Ref. No. 671-56 guarantee them a position on their return. Mobilized labor was just as useful in killing snails In 1977, when this project was started, research carrying liver flukes as it was in building irrigation was beginning to throw light on how the systems. manufactured exports of developing countries were affected by trade regimes and export incentives, but In promoting agricultural production, the structure in sharp contrast, little was known about the of communes, brigades, and teams was less institutional and nonprice aspects of marketing effective than in meeting basic needs. Even here, manufactured exports. This research was designed hovever, it had advantages that offset its limita- to begin to fill that gap. tions. Where rural public works were needed, the commune was effective in mobilizing the necessary In order to export, firms presumably must identify a market, obtain specific orders, design products to Colombia concerned with these exports, including meet buyers' needs, bring together all the resources foreign buying offices, private business associa- and inputs required, and establish suitable tions, and government agencies. In March, 1979, operations for such tasks as quality control, executives from 14 of the US enterprises that had packaging, fulfillment of government require- bought clothing from firms in the sample, along ments, and delivery of the product at an agreed with officials of an international consulting firm time and place. Firms and countries trying to specializing in the industry, were interviewed in export were believed to be encountering major New York. Researchers at Fedesarrollo, the difficulties in some of these areas, but relevant Colombian research organization, undertook literature and advice were practically nonexistent. quantitative analysis of real and effective exchange rates and export incentives for clothing. The study analyzed the recent experience with clothing exports from Colombia, a country For exports to succeed, many demanding condi- considered to be relatively typical of Latin America tions must be met simultaneously. Suitably low in economic characteristics, size, performance in prices are essential, together with precision in the export of manufactures, and the timing and meeting design and size specifications, reliable nature of its policy changes in the 1960s and 1970s. quality control, and punctual delivery. Buyers also The clothing industry is similar to others in which expect the right materials, colors, accessories, developing countries have achieved success in labels, packing, and documentation. Whether an exports, in that average wages are low, the share of enterprise in a developing country undertakes all wages in value added is high, and economies of the necessary tasks, learns what is needed, and scale are unimportant. Perhaps the most important succeeds in filling all these requirements depends difference between apparel and other industries is largely on whether the surrounding policy environ- that clothing is one of the few in which developing ment makes it profitable and possible to do so. The countries face quota restrictions in major markets. single most important reason for the rise and So far, however, the existence of quotas has not had decline in Colombia's exports of clothing to the US a major influence on trends in exports of and Europe lies with the country's exchange-rate Colombian clothing. and export-incentive policies. The introduction, in 1967, of a crawling peg exchange rate and export- The country's clothing exports to the United States incentive policies made exports profitable for a and Europe rose rapidly in the early 1970s, but, time, but from roughly 1973 onwards, as a since 1975, have fallen in real value, as Colombian consequence of changes in the exchange rate and firms were forced out of these competitive markets. for other reasons (including the inflationary side This drop was offset, at least in part, by an effects of high export prices for coffee and of illegal increase in exports to more easily penetrable exports) exporting clothing again became decidedly markets in Venezuela and the Caribbean. By 1978, less attractive than producing for the domestic Colombia's share of the US market had fallen to market. As an example, a firm manufacturing 0.6 percent-60 percent lower than it had been clothes from domestic fabric in 1978 received three years earlier. After assessing the reasons for effective protection from the tariff and export these trends, the study asks why Colombia was so subsidy system of 30 percent to 100 percent when it much less successful at exporting garments than sold garments in Colombia, but of -32 percent to Hong Kong, the Republic of Korea, and Taiwan, -62 percent when it exported them. China, and whether this helps to explain why Latin America has been less successful than East Comparisons reveal that Colombia's performance Asia at exporting most types of manufactured was less successful than East Asia's in spite of its goods. lower wage levels and a considerable potential to compete. Hong Kong, the Republic of Korea, and The research was based primarily on in-depth field Taiwan, China, have a combined population only interviews, conducted in 1978, with managers or 2.5 times that of Colombia, yet their exports of export managers of 30 Colombian firms that garments to all markets in 1976 were 150 times exported or had exported clothing and with greater in value than Colombia's. Colombian officials in over a dozen other organizations in exporters generally cited cheap labor, heavy government subsidization, or cheap transport costs to export have tended to show up most clearly in as reasons for East Asian supremacy, but on all Colombia in failures and troubles in the nonprice three counts they were wrong. Wage rates in the aspects of export performance. garment industry in East Asia are higher than in Colombia or are roughly similar; government Among the nonprice reasons for Colombia's export subsidies are nonexistent in Hong Kong and inability to compete with East Asia, differences in hardly greater in Korea and Taiwan, China, than quality control and punctuality of delivery seem in Colombia; as to transport costs, Colombians can most important. Though the best Colombian land goods in New York for the same costs as East clothing firms are as good as those anywhere, a Asians, while saving up to four weeks in transit number of others have given the country's exports a time. Nor do US import quotas explain the bad name. The fact that Colombian producers have difference. been sheltered from the competition of imports in the domestic market may have contributed to this; The main price-related differences appear to be in so may the unreliability of domestic suppliers of labor productivity and fabric prices. Output per textiles (in the quality and timing of deliveries) and garment worker appears to be 30 percent to 50 delays in importing inputs. Making garments for percent greater in East Asia than in Colombia, so export is also riskier in Colombia than in East that at least in Korea and Taiwan, China, the Asia, since few foreign buyers maintain full-time wages paid per garment are much lower. contact there. Differences in the ability of management seem to be the most important reason for this difference in Some of the interconnections between policy and productivity, but cultural and social factors may the determinants of export potential can only be also play a role. In East Asia, garment exporters guessed at. How much effect the policy environ- are assured of fabrics of top quality at world prices. ment has, as against other long-term influences, is Fabrics produced in Colombia are priced at 50 unknown in such areas as work habits, cultural percent to 100 percent above world levels, even attitudes, management know-how, technical profi- though they are exported at the world price. Most ciency, or local tastes and patterns of demand, all of exporters to the US and Europe import fabrics and which tend to affect export performance. To some reclaim the duty paid, under the provisions of the extent, modifications could be made- for example, Plan Vallejo. However, the long, often unpredict- through well-aimed education and training-with- able, delays in processing import requests and in out changing the policy mix. Though the study clearing imports through customs are often does not neglect these subjects, it does not provide crippling, since the season in the clothing business definitive answers. is short and punctual delivery essential. The export-processing zones established to avoid such The study suggests measures that would help problems do not do so. Colombia's garment exporters to become more competitive with East Asia's. They include, first, Perhaps the central finding of the study is that raising the real effective exchange rate for clothing nonprice considerations strongly reinforce the case exports to a level that exporters can feel confident for the liberal trade policies and policy changes will be maintained for at least five to ten years. toward a more open economy that are usually (Long-term policy commitments are more difficult recommended today by economists. The policies to make in Colombia than in East Asia, however, that matter most are: those that affect real since a bi-party agreement would probably be exchange rates and financial inducements to required.) Second, to assure exporters access, with export; protection and the resulting relative minimal delays, to duty-free fabrics of top quality profitability of the domestic market; access to at world prices, tariffs on imported textiles might imported inputs; the costs and availability of locally be lowered and import licenses for textiles made inputs; operating procedures of customs abolished. Suggestions are made for adjustments in officials; the ease of making necessary international the Plan Vallejo, in export subsidies, and on the transactions; and the stability and costs of management of free zones for export processing. manufacturing generally. Negative influences in Third, various strategies might be tried to improve the policy environment and deteriorating incentives the country's management. As New York buyers repeatedly stressed, price, quality, and punctuality small farms grew, the World Bank, in 1975, are all necessary; the absence of any of these commissioned a study with three broad objectives: elements disqualifies a would-be clothing exporter to obtain information on the management, organi- from serious consideration. Price may be the most zation, and operation of irrigation projects; to important factor, however, since if exporting were analyze and evaluate the effectiveness of the made more profitable, entrepreneurs and foreign management and organization of these projects; buyers would have a strong incentive to overcome and to develop, on the basis of case studies, a the other problems on their own. framework for monitoring and evaluating the use of resources in the management and operation of Some of the conclusions of the study may also irrigation projects. The study sought, in particular, pertain to other Colombian manufacturing indus- to identify the restraints (institutional, social, tries. The country's exports of manufactured goods political, legal, economic, technical, and physical) have followed a pattern similar to those of clothing that might limit the effectiveness of irrigation to all destinations-a rapid rise through 1974-75 organizations and the ability of small farmers to followed by very little real increase. The study obtain water when and where needed. suggests that the most important problems that have restricted Colombia's clothing exports af- The study was undertaken by the Overseas fected other industries there, as well. More Development Institute (London, England). As well important, many of the problems outlined may as reviewing the English-language literature on the occur in manufacturing for export in other Latin subject, the project undertook field studies in India, American countries. Indonesia, Pakistan, and Taiwan, China. The findings are summarized in "Comparative Study of Report the Management and Organization of Irrigation Morawetz, David. Why the Emperor's Neu, Clothes Are Projects" by Anthony Bottrall. Not Made in Colombia (New York: Oxford University The study concentrated on the management of Press, 1981). water distribution and the ancillary functions of system maintenance, mainly because there was Management and Organization of perceived to be an immense potential for improving Irrigation Projects current practices in water distribution. Several studies suggested that water distribution within the RefJ No. 671-34 publicly operated part of the canal (or canal and tubewell) system may be the area of greatest Irrigation projects, however well planned and weakness in large irrigation schemes. In many constructed, will not perform at their best unless projects, the distribution of water strongly favors the systems are well organized and managed. What farmers near the head of the distribution system. It good organization and management comprise, seems likely that making distribution systems more however, is still largely a matter of subjective efficient would both raise overall agricultural judgment, since in irrigation there is no consensus production and bring particular benefits to the as to the criteria for efficiency. Studies on poorest producers-especially small farmers in organizational frameworks, procedures for opera- tail-reach areas. tion and maintenance, and principles and costs, do not provide all the information needed for valid The study confirms that the reform of management comparisons among projects. Further, though the holds immense potential for improvements in the relationships and allocation of responsibilities performance of irrigation projects. It was not among the overall organization of a project, other possible to quantify how far deficient management public agencies, and farmer groups, have impor- of water distribution may contribute to poor tant influences on project performance, they have performance. However, the International Rice often been neglected in project planning and Research Institute found that, in a project in the analysis. Philippines, quite modest changes in water distribution procedures, combined with minor As its lending for irrigation and the development of technical improvements, were associated with a 97 percent increase in production overall, and a 149 The study emphasizes the importance of the source percent increase in production at the tail end of the of recurrent finance for motivating staff and system, over a two-year period.2 A case has been making the project work efficiently. What was recorded in Sri Lanka in which the introduction of perhaps the best managed of the four projects strict managerial procedures enabled 50 percent studied in detail was atypical, in that it relied more rice to be produced within a single season heavily on users' fees. If managers and staff had than would have been possible under normal failed to provide good service, fees would be more operating conditions.' Rough calculations for difficult to recover, revenue would have declined, Pakistan suggest that with better management of and salaries and numbers of staff might have had to water distribution, together with some modest be cut. Good service seems to have encouraged high physical improvements, the water saved would fee recoveries. The other three projects are amount to 20 percent of that available for financed by the governments concerned irrespective productive use.4 of their performance either in increasing agricul- tural production or in recovering funds; the In South and Southeast Asia, at least, better performance of staff was noticeably poorer than in distribution of water is the key to overall the first-mentioned project. Further, since proceeds improvement in the management of projects. Only from these three projects go into general revenue if the main distribution system is well operated can with no direct link to local investments, farmers other important objectives be achieved (for exam- have no incentive to pay water charges. ple, improved management of the watercourse and of water at the farm level, or higher water charges), The study also examines the division of responsi- and only then can high returns be obtained from a bility for planning and maintenance among the system of agricultural extension and the use of project management, farmers' groups, and inde- complementary inputs. pendent technical agencies. Bottrall does not recommend giving farmers responsibility for The management of water distribution has two management at the project level in developing main dimensions, each with a different set of countries. Farmers' groups should, nonetheless, be problems and associated remedies: a technical responsible for management below each water- dimension that relates to the appropriateness of course outlet, participate in developing each water distribution methods and their capacity to season's water allocation plan, and monitor the balance supply and demand; and a sociopolitical irrigation agency's day-to-day performance. Far- dimension that concerns the ability and inclination mers' groups set up to manage watercourses are of officials to ration water equitably, despite sometimes difficult to establish and sustain; the pressures to do otherwise. Taking these perspec- study discusses the conditions under which farmers tives in turn, Bottrall's study reviews performance appear best able to organize themselves for this and ways of improving it. He argues the need to purpose. take a much more comprehensive approach to evaluating irrigation projects than has been The paper offers guidelines (in Annex A) to help customary. Conventional evaluations of irrigation evaluators identify the causes of weak performance projects generally restrict themselves to the results as a basis for proposing improvements. During the achieved by management, not on the management past decade, awareness has increased that improve- process that has largely caused those results. It is essential to try to understand the causes of performance in evaluating and appraising projects o2. A. Valera and T. Wickham, "Management of Traditional whose principal purpose is to assist poor producers. and Improved Irrigation Systems: Some Findings from the Such projects cannot be well designed without an Philippines." UN Food and Agriculture Organization Farm intimate understanding of the social and political Nlanagement Notes, 5 January 1979. contexts in which they are to be implemented and 3. K. Shanmugarajah and S.C. Atukorale, "Ranjengane Scheme: f e av ad ia m Lessons from the 1976 Yala Cultivation." Paper presented to of the administrative and Institutional measures C:ommonwealth Workshop on Irrigation Management, Hydera- that are likely to be most appropriate in those bad, India, October 1978. contexts. 4. By World Bank staff (in 1976) for a special agricultural sector review. ments are needed, not only in the physical reform in Bangladesh's policies toward trade and infrastructure of many irrigation projects, but also industry. in their organization and management. Neverthe- less, programs for improvement still tend to When the government of Bangladesh requested the emphasize new physical investment at the expense Bank to undertake the study, the country's of reforms in the use of administrative resources. balance-of-payments situation was highly delicate, The proposed approach to evaluation is designed to export earnings paid for less than half the country's identify clearly and objectively the opportunities import requirements, and more than two-thirds of for such administrative reforms. The author export earnings came from jute and jute prod- advises giving priority to measures requiring ucts-one of the highest concentrations of trade of relatively few major decisions and relatively little any nonoil exporting developing country, and in a capital outlay: for example, undertaking (1) product for which the long-term demand prospects reforms in management procedures, training, and are not good. Removing the foreign-exchange incentives, before planning (2) major changes in constraint was seen as the central prerequisite for a organizational structure or before proposing (3) viable economy. major capital investments. The research was designed to provide a better Bottrall suggests that reforms in water distribution empirical and analytical basis for evaluating are likely to have their greatest impact if they are policies affecting industrial development and trade introduced through "action research," carried out and/or analyzing new investment projects. It on selected sections of larger irrigation schemes. assessed the relative efficiency and comparative The principal objectives of such research would be: advantage of economic activities, mainly in indus- to identify the procedures and institutional try, but also including jute and rice production. arrangements most likely to succeed in similar Comparative advantage was assessed in terms of environments; to demonstrate to politicians, ad- the domestic resource cost of foreign exchange. The ministrators, and farmers the precise benefits and study assessed the effects on profitability of the costs of these measures; and to test hypotheses. The existing incentive system and calculated a set of action research should form part of a wider- shadow prices that measured the "true" scarcity of ranging action program. Such a program would resources. The research also sought to provide an almost certainly include investments in training in analytical framework in which measures of domes- water distribution, improved agricultural exten- tic policy, for example interest rates, tax exemp- sion, and, in many cases, a substantial program of tions, or preferential government purchases, can be physical improvement to complement the improve- harmonized with Bangladesh's international eco- ments in management. nomic policy so as to stimulate production in accordance with comparative advantage. Report The research was carried out for the South Asia Bottrall, Anthony. "Comparative Study of the Manage- Country Programs Department by Gustav Papa- ment and Organization of Irrigation Projects." World nek and Daniel Schydlowsky and associates at the Bank Staff Working Paper No. 458, May 1981. Boston University Center for Asian Development Studies, in collaboration with the government of Bangladesh, three of whose officials worked full- International Trade Policy for the time on the project at Boston University. The Development of Bangladesh research was designed as a cooperative venture so RefJ No. 671-75 This project is another in the family of studies on industrial incentives and comparative advantage 5. See, for example, Bela Balassa and associates, 7he Structure of that has been undertaken by the Bank for a wide Protection in Developing Countries (1971) and Development range of countries over the last ten years.5 Its staligsg in Semi-Injustrial ('ountri,e (1982, forthcoming), rangepublished by The Johns Hopkins Ufniversity Press- Some of the results, which became available in 1980, have Bank's studies irn this area are noted in Re search News vol. 2, no. 3, helped to provide the basis for a new program of pp. 11-14. that the ability to replicate and extend the analysis Industrial Policy Reform, for which the research would exist in Bangladesh when the study was results provided the genesis. Managed by the completed. Bangladesh Planning Commission and supported by the World Bank, it is to be executed by various The analysis of effective rates of protection was branches of the government and the Bangladesh based on a survey of 146 firms. It is noteworthy Bank. It includes the following elements: that the executives of most of the firms did not know the world price of their products, or of the imved pnningufor pubicgand private inputs they used. For the study, world prices were ment of analytical toors for macroplanning in estimated on the basis of domestic prices and tariff mndtro analtia tovol of macolaing in data. Since estimates of domestic resource costs and .ind strant proision ofpguidllintesf effective rates of protection tend to be very sensitive mu'icr sent d sl to the valuation of inputs and outputs, particularly p s in sectors where domestic value added is a small * rationalization of overall protection for indus- proportion of gross output, in retrospect it would try, translating the results of detailed studies of have been desirable to have devoted more of the effective protection into the basis for a program project's resources to collecting accurate informa- to restructure tariffs, and development of an tion on world prices. institutional framework for giving continuing advice to government on tariff setting; The results of the study confirmed that Bangladesh * a detailed study of actual and desirable has a very inefficient industrial structure: Only 32 investment incentives; of the 69 activities analyzed were found to have a analysis of the criteria used in the allocation of comparative advantage in the short run, and only 23 had a comparative advantage in the long import entitlement certificates and determina- run-that is, taking account of capital costs. As is tion of appropriate entitlement levels in the the case in many developing countries that have light of studies of effective protection; espoused inward-looking policies for some time, improvement of Bangladesh's industrial statis- the present policy framework appears to foster tics; and promotional activities for private industries with a comparative disadvantage and to investment, including preinvestment counsel- penalize those with a comparative advantage; to ing, prefeasibility studies, and a range of inflate the cost of labor, relative to that of capital services to firms; (for example, for unskilled workers, the shadow * encouragement of new exports, including pre- price of labor was found to be only 15 percent to 30 paring investment packages, identifying spon- percent of the market wage); and strongly to sors, whether foreign or domestic, and organiz- discourage the growth of export industries. Tariffs ing finance. and quantitative restrictions allow the government The reform program will support other measures to maintain a highly overvalued exchange rate. The r e gogrnm ent, suchort other tmeas Several of these actual effects are at variance with to be taken by the government, such as adjustments the objectives of the policies, in exchange rates. Detailed knowledge of the net effect of the existing policy framework should On the basis of these results, the Bangladesh enable the government to change incentives so as to government identified a need for corrective actions increase efficiency. Alternatively, if the government in export policies, tariffs, and fiscal and other wishes to implement policies based on other incentives, as well as in the planning of industrial criteria, the analysis being carried out under the development and the promotion of private invest- program will make it possible to quantify the cost ment. With the recent deterioration in the terms of of such policies to the economy. trade for Bangladesh and the poor aid climate, Reports measures to diversify and expand exports and to encourage investment in efficient industries have Farashuddin, Mohammed, et al. "Shadow Prices for taken on even more urgency. Bangladesh: A Country-Specific Second Best General Disequilibrium Approach." Center for Asian Studies, Work recently started on a program of Trade and Boston University, June 1980. Farid, Shah NI., e at. "Bangladesh Trade Policy." Center were largely spent on imported luxury items or for Asian Studies, Boston University, NMay 1980. domestic real estate, thereby fueling inflation and doing little to help the growth of domestic Islam, L., Azizul, A.B.M., et al. "The Industrial Compara- production. tive Advantage of Bangladesh." Center for Asian Studies, Boston University, June 1980. With the concurrence of the two governments, the Koss, Esther. "Estimation of Input-Output Coefficients of World Bank helped to fund and organize research - ron these questions by national institutions, starting Currently Nonexistent Industries: An Application of a on thes. qests by tin instittos startin Mi, iI,lJ.l,.,.. , to Explain Choice of Techniques of i 1978. Reports from the project have recently Production." Center for Asian Studies, Boston Univer- been issued. Its aims were to assess the private and sity, June 1980. social benefits and costs of migration of different types of workers; to analyze how remittances were Papanek, Gustav F., and Schydiowsky, Daniel M. being used, and what their use meant for the home "Shadow Prices, Comparative Advantage and Trade economies; to provide an empirical and analytical Policv for Bangladesh Inductry: Executive Summary." basis for planning policies and programs (par- Center for Asian Studies, Boston University, August ticularly in education and training, but also to 31, 1980. influence the recruitment of workers and the investment of remittances) designed to maximize Ramirez, Luis. "Benefit-Cost Methodologies: Untangling thesbent of migration; and to eabishza Their Equivalences and Discrepancies." Center for the benefits of migration; and to establish a Asian Studies, Boston University, April 1980. framework for forecasting the implications of future changes in flows of remittances. It turned out to be difficult to accomplish these objectives Labor Migration from Pakistan and fully, because data were limited and because Bangladesh to the Middle East temporary outflows of workers have so many ramifications. Nonetheless, the reports from the Ref. No. 671-83 study offer many valuable insights. Since the mid-1970s, rapidly increasing numbers In both countries, data were gathered from of workers from Pakistan and Bangladesh have departing migrant workers or official records and migrated to take part in the economic transforma- from a household survey of a subsample of their tion of the oil-exporting countries of the Middle families. Cost-benefit analysis was attempted to East. By 1978, workers' remittances to Pakistan, measure the gains and losses to the sending mainly from the Middle East, were much higher countries. The project drew on the results than the country's total net receipts of foreign aid. emerging from a concurrent study of Labor Bangladesh has a much smaller proportion of its Migration and Manpower in the Middle East and workers abroad, but by 1977 remittances to this North Africa (Ref. No. 671-63, see note in country from the Middle East had reached about Research News vol. 2, no. 1). In Bangladesh, the US$80 million-an amount greater than earnings researchers took into account the shadow prices from any commodity export except jute. that were being calculated as part of a study on trade and industrial policy (see Ref. No. 671-75 For the sending countries, these remittances had a above). very welcome effect on the balance of payments. Other effects of migration on the economy were less Turning to the findings of the study, estimates of clear. In these countries, where a high proportion the number of Pakistanis employed in the Middle of the unskilled cannot find enough productive East range from 500,000 (Bureau of Emigration work, where development is held back by a and Overseas Employment)6 to well over 1 million shortage of professionals in many disciplines, but (Pakistan Institute of Public Opinion). For the where certain other professionals appear to be too numerous, more information was needed about who was leaving for the spiddle dast and for how 6. The Bureau's figures record only migrants who have gone long. And while remittances supplied badly needed through government channels or through licensed recruiting foreign exchange, there was speculation that they agents. project, a survey was taken of about 15,000 that 85 percent of Pakistan's workers in the migrant workers at the three international airports, Middle East remit their earnings through banks. and a subsample of their families was traced to 250 This high percentage indicates that banking villages and 50 towns and cities. services are generally satisfactory. Out of an annual average cash remittance of Rs 28,000, Rs Roughly 84 percent of the Pakistani migrants are 7,500 are brought on home visits. (Additional production workers, with 43 percent unskilled and remittances in kind are estimated at under 10 41 percent skilled; professional, clerical, and percent of those in cash.) Roughly 25 percent of the service categories constitute a minority. The estimated savings are not remitted; the proportion unskilled workers are mostly general laborers, but varies between occupational groups, the highest 12 percent are reported to come from the agricul- being for the business category and the lowest for tural sector. Among skilled labor, the prominent professionals. occupations are construction workers, drivers, tailors, mechanics, and machine operators. Engi- Analysis of the expenditure pattern of migrants' neers are the largest group of migrants in the households indicates that consumption is not as professional category; accountants, teachers, and lavish, and the amounts invested not as insignifi- nurses are next in number, though the proportion cant, as is widely alleged. The migrant and his is much smaller. Cooks and security guards are the household consume 62 percent of remittances, most numerous migrants in the service sector. invest 22 percent in real estate (of which 14 percent is in housing), and devote another 13 percent to The typical Pakistani migrant leaves his wife and other forms of investment and savings. family behind and works overseas for two to four years, visiting home once a year. It is not clear As the experienced and skilled workers leave whether migrants tend to renew their contracts Pakistan for jobs abroad, they have tended to be beyond this period. Most of the skilled migrants replaced by relatively inexperienced and less have little or no formal vocational training but have skilled labor who render lower-quality service at years of experience on the job. They come largely higher unit costs. The withdrawal of technical and from lower-income groups, though not from the managerial talent has also disrupted production, poorest of them, and originate from all four lowering productivity further. If one assumes that provinces; both the costs and the benefits of the labor force of Pakistan is about 23 million and migration are thus likely to be felt throughout the migration over I million, roughly 5 percent of the country. On an average income in Pakistan before labor force is working in the Middle East. The migration of Rs 9,000 a year, migrants typically drain of labor in the construction sector has been spend Rs 7,000 to arrange their overseas employ- particularly noticeable. Wages of skilled and ment. Their average annual earnings in the unskilled labor in Pakistan have risen substantially Middle East are Rs 58,000. in recent years. Though there are not enough data to be certain, it seems likely that migration has The individual endures the hardships of migration significantly contributed to this rise. While the in return for the short-term, and possibly longer- expansion of the supply of domestic manual labor term, benefits from remittances. The household has been moderated by migration, the growth in survey suggests that on average, a Pakistani domestic demand for labor has been buoyant due to migrant remits Rs 28,000 (about US$2,800) in growth in gross domestic product of 5 percent to 6 cash annually for two to four years. Official percent since fiscal 1978; rising purchasing power, balance-of-payments data indicate that total remit- fueled by remittances, has itself contributed signifi- tances from Pakistanis working overseas-pre- cantly to this increase. dominantly those in the Middle East-increased from US$339 million in fiscal 1976 to over US$2 It would appear that, so far, migration has on billion in fiscal 1981. These substantial transfers balance been beneficial to Pakistan and that the enable workers and their families to purchase main direct and indirect benefits have gone to assets and dramatically increase their consumption. relatively low-income households. As to the future, evidence of rising wages and production costs The survey of migrant households also indicates suggests that Pakistan is paying a substantial price for the benefits deriving from lucrative overseas encouraging migration have more nationals work- employment. As foreign demand shifts in favor of ing in the Middle East than does Bangladesh. skilled and professional labor-a trend docu- Nonetheless, the remittances from Bangladeshi mented in the Middle East migration study workers are of substantial importance to the referred to earlier-this price is likely to rise. country's economy as a source of foreign exchange. Conservative estimates place the gap between Bangladeshi migrant workers may be the cheapest Pakistan's demand and supply of skilled and semi- source of labor for Middle Eastern employers. It is skilled workers at 50,000 a year until 1985. estimated that, in the late 1970s, about 72 percent Recognizing the need to expand vocational training of Bangladesh's workers were in construction to narrow this gap, the government has launched (much the largest category), transport, and produc- various training programs, but finance and person- tion, with about 30 percent skilled and almost 60 nel to manage them are scarce. Typically, voca- percent semi-skilled or unskilled. Eighty-two per- tional training helps to replace skilled by semi- cent had less than a secondary education. Like skilled workers who, after sufficient work experi- Pakistani migrants, most are between 20 and 35 ence, also tend to migrate. Estimated costs of years old. Before migrating, just under 30 percent vocational training incurred before migration of the workers were unemployed or were students; amount, on the average, to Rs 23,000, while (as another 31 percent were in unskilled jobs. already noted) remittances average Rs 28,000 annually for up to four years. On preliminary Contracts tend to be short: two-thirds of the calculations, therefore, the social return seems workers are engaged for only a year, and fewer positive, while the private return is significant. than one-fourth of them stay more than two years. Greater private participation in vocational training Nearly a third of the migrants go to the United should be encouraged. Arab Emirates; most of the others go to Kuwait, Libya, Oman, Qatar, and Saudi Arabia. Further, although a large share of remittances already flows through official channels and al- Home remittances from Bangladeshi workers in though a significant proportion of remittances is the Middle East, as distinct from those in other invested, scope remains for improvement in both countries, are difficult to determine, because a areas. One possibility is to establish investment substantial proportion is routed through Western advisory centers (where there are large concentra- financial markets. The best estimate is that, during tions of Pakistanis) to provide information about the first half of 1979, remittances originating in the investment opportunities in Pakistan. Middle East averaged about TK 37,000 (US$2,400) annually per migrant. The amounts In Bangladesh, a sample was taken of 10 percent of remitted by Bangladeshis vary greatly among the workers who migrated in 1977 and 1978 under countries of employment; in some countries, the auspices of the Bureau of Manpower, Employ- notably Bahrain and Oman, Bangladeshis appear ment, and Training (BMET), which is estimated to have accepted very low-paying jobs. Arrange- to have handled about a third of the 58,000 ments for remittance payments are inadequate. registered migrants from Bangladesh to the Middle Banks are used relatively little and fraudulent East in 1976-79. Ten percent of the migrants practices have been frequent. selected had their families interviewed under the project. The survey of migrants' households reveals that, even more than in Pakistan, remittances are used Workers from Bangladesh make up a maximum of for investments rather than for lavish consumption. 2 percent of the migrant labor force in the Middle Migrants' families appear to save 60 percent-70 East. From 6,000 in 1976, the documented flow of percent of their receipts from the Middle East and Bangladeshi workers on fixed-term contracts in the to save more of their income than other households Middle East had risen to 23,000 in 1978 and an in the home country. Over a five-year period, half estimated 24,500 in 1979. This is a relatively small of the remittances received in Bangladesh appear to proportion of a domestic labor force of 30 million, have been used to purchase land and housing, and indeed, almost all other Asian countries though another substantial part was used to repay RESEARCM tTPA'Y CIPY old debts. Very little was invested in agriculture, the Republic of Korea, the Philippines, and industry, or business. The use of these funds for Taiwan, China, which have proved their productive purposes has been limited by the small ability to undertake turnkey projects with their size of the amounts remitted per worker and a lack own capital, technology, and manpower, re- of money market instruments to provide higher lieving the employer of the troublesome tasks yields than those in real estate. of recruiting and managing expatriate work- ers. Among South Asian countries, India has Very few migrants come from the poorest families developed this capability, both in the private in Bangladesh. Estimates were made of how and public sector, and Pakistan has begun to do remittances affect income for the families remain- so. ing in Bangladesh of migrants in various types of * Bangladesh, with acute shortages of foreign jobs. For the families of migrant professionals, exchange and a low technology base, is not subprofessionals, and technicians, income rose six- likely to be in a position to secure such turnkey fold to sevenfold; for those of skilled workers, about projects, though it may be successful in fourfold, and for those of semi-skilled and unskilled securing subcontracts from firms securing these workers, fivefold to sixfold. projects. Bangladesh loses little from the migration of its unskilled and semiskilled nationals, who lack The study recommends the adoption of a merit- unsuiciednt employm en d have cos lt t based recruitment process by recruiting agencies in sufficient employment and have cost little toII I educate and train. When skilled workers, techni- the public and private sector; the expansion of air cians, and professionals migrate, and do so in communications, banking, postal, and telecom- r t munications facilities between Bangladesh and the numbers that make up 30 percent of the migrant Middle East; efforts by the government and the flow, the economy loses significantly in terms both ' of the output forgone and the cost of their training money market to offer adequate investment oppor- tunities to small investors from amongst those and on-the-job experence. The export of profes- working abroad and efforts by the banking system sionals has had particularly deleterious effects in and support.... to attract deposits from nationals working abroad; medicine, public utilities, engineering, and changes in education and training to produce or agriculure. workers with the necessary skills for both the The outcome of the study is to recommend ways of Middle East and the domestic labor market. increasing migration, which is one of the Bangla- The research was managed for the Bank by desh government's policy goals, and of mitigating Marinus van der Mel in the South Asia Regional the problems caused by a rapid outflow of workers. Office. In Pakistan, the research was directed by The last chapter of the report, "Policy Recommen- j G o b dations and Implications for Promoting Manpower Develo nt Eonomics; the Gaistiner Ro Export from Bangladesh," argues that Bangladesh Goodman, and Nermin Abadau-Unat also partici- must try to evolve from a supplier of cheap labor to G a competitor for construction and other projects, to pated, and UNICEF contributed financially and .Look- otherwise. Bangladeshi institutions participating in be managed and executed by Bangladeshis. the research included BMET, the Bangladesh g aBank, the Planning Commission, the National * Close to half of the additional demand for Foundation for Research on Human Resource expatriate workers in the Middle East is likely Development, and the Institute of Statistical to be in Saudi Arabia, with another one-fourth Research and Training of Dacca University; the in Iraq and Libya. project was coordinated locally by a steering group * Additional vacancies will be created by the initially chaired by A.M.A.H. Siddiqui, then policy of the manpower-importing countries to Director-General of the BMET, and later by diversify their sources of supply. Taherul Islam of Dacca University; A.K. Md * Many of these additional vacancies, including Habibullah was Project Director. those arising out of the replacement of workers returning home, will be filled by workers from 4iX Reports part, though not totally, because additional family members were able to secure employment. There Ali, Syed Ashraf, et al. "Labor Migration from Bangladesh was a relative decline in the real incomes of the to the Middle East." World Bank Staff Working Paper middle class. The incomes of the richest 5 percent No. 454, April 1981. of families apparently did not increase as much as Gilani, Ijaz; Khan, M. Fahim; and lqbal, Munawar. commonly believed, although these families do not Clappear toaz Khan, los inm the Iqbal, ofnationa "Labor Migration from Pakistan to the Middle East appear to have lost in their share of national and its Impact on the Domestic Economy" (three income. With regard to poverty, the study indicates parts). Pakistan Institute of Development Economics some increase in the proportion of families in Research Reports 126, 127, and 128, June 1981. absolute poverty during the first half of the 1970s and a substantial decline in this proportion during the second half of the decade. It is significant that Incomes and Welfare in Colombia, this reduction in absolute poverty in the latter part 1964-78 of the 1970s occurred during a period in which government policies and programs were increas- Ref No. 672-05 ingly being directed toward the poorer segments of Colombian society. This study by the Fundacion para la Educacion Superior y del Desarrollo, (Fedesarrollo), the The analysis of the Cali survey provides some Colombian research institute, was undertaken for interesting insights into changes in conditions over the World Bank's Latin American and the Carib- time. In general, the trends in income distribution bean Regional Office. It measured the extent to and poverty noted above are confirmed by this which different socioeconomic groups among the survey. The survey further shows that the increase poorest in Colombia benefited during the 1964-78 in the participation rate in the 1970s was greater period of rapid growth with high inflation, and for lower-income families than for others, account- assessed the relative success of the principal ing in large part for this group's relative income government programs and policies designed to gains. This increase in participation rate was alleviate poverty. mainly the result of women entering the labor force in larger proportions. Moreover, the gap in wages The study assembled and analyzed data from between women and men in lower-income groups various sources on the employment and incomes of fell. Poor families obtained relatively greater access different occupational and income groupings. This to public services and better housing and increased task included a comparative assessment of the their per capita consumption of food and durable quality and coverage of the various available goods. Lower-income workers changed their occu- household survevs and the 1970 census. A special pations very rarely, and the great majority of those household survey taken in Cali in 1970 and who were heads of households had no permanent repeated in 1974, 1976, and 1980, covering the employment connections. This suggests that during same families, provided information on changes the decade, workers improved their income more over time in income levels, nutrition, education, rapidly when they sacrificed the stability in quality of housing, and other socioeconomic indica- employment offered by the formal sector of the tors. economy. The study shows that, contrary to previous As to the determinants of the changes in income indications based on superficial reviews of wage during the 1970s, the drying up of excess labor in and salary data and to generally held beliefs, the countryside, combined with structural changes income distribution in Colombia did not worsen favorable to employment creation, appears to have during the high-growth/high-inflation period of been important. These structural changes include a the 1970s and the proportion of the population shift in production toward labor-intensive export living in poverty declined significantly. Real industries; technological changes in the coffee incomes of the poorer segments of the population industry that increased the demand for labor; and increased substantially during the decade, in the more intensive use of capital in the early 1970s, absolute and in relative terms. This was in large occasioned by periodic foreign exchange crises that disrupted imports of capital goods. The opening up adjustment has been effected. It will identify the of the economy during the latter part of the period broad features of adjustment through cross-country probably favored employment, also. An increase in comparative analysis, isolate the key relationships the supply of educated manpower and inflation are that must underlie models of macroeconomic cited as probable reasons for the slower growth in adjustment, and assemble policy-focused case stud- middle-level incomes, as are institutional arrange- ies of archetypal countries distinguished by the ments in the organized labor market, which were structure of production and trade. The project is not well-adapted to cope with accelerated inflation. intended to contribute towards the formal incorpo- In the traditional sector, where wage contracts do ration of adjustment analysis in the Bank's country not exist or are made only for short periods, wages economic work. were better able to adjust to inflation. The disappearance of dualism in the labor market, the The World Development Report 1981 uses a impact of fiscal policy, and an increase in illegal common analytical framework to impose order on activities, which were concentrated in a few hands, the diversity of country experience and to interpret are also thought to have contributed to income the process of adjustment in selected countries.' trends during this period. The methodology compares the actual performance of import and export prices and quantities against The study brings out the following policy implica- counterfactual trends. The deviations from trend tions: that rapid growth in a relatively open are then decomposed into those effects arising from economy can lead to a healthy growth of employ- changes in exogenous variables and those due to ment in spite of accelerating inflation; that only changes in a nation's economic performance. This when excess labor in agriculture is significantly leads to a "patterns of adjustment" analysis reduced can a dent be made in absolute poverty covering a large number of countries, in which the levels; and that directing public expenditures relative reliance on different modes of adjust- toward the poor can have an important effect on ment-trade adjustment (export expansion, import welfare. substitution), financial adjustment (additional ex- ternal financing), and slower growth-may be Report related to production and trade characteristics, the iColombia's development strategy pursued, and the magnitude Urrutia, Miguel. "Winners and Losers in Coobas of external shocks. Recent Growth Experience." Bogota: Fedesarrollo, July 1981. This research complements and extends the above methodology. It will develop two decomposition methods for the purpose. These methods will exploit the observation that adjustment requires raising private and public national saving in NEW RESEARCH relation to investment or, alternatively, that it requires driving a wedge between gross domestic Adjustment in Oil-Importing Countries product and domestic absorption of resources. This leads to a description of adjustment in terms of Ref. No. 672-74 categories such as the mobilization of public and Oil-importing developing countries were signifi- cantly affected, in the 1970s, by the twin external shocks of deteriorating terms of trade and a I The anialytical framework was developed tby Bela Balassa, in reduction in the growth of export volumes arising "The Newly Industrializing Developing Clountries After the Oil Crisis," lt',.llwi'rtv haf/tiches .Archzt', 1981 (Band 117), and World from the recession in the industrial market Bank Staff Working Paper No. 437, October 1980: "The Policy economies. These effects called for both national Experience of Twelve Less Developed (Countries,i.973-78," World and international adjustment-that is, the transfer Bank Staff Working Paper No. 449, April 1981; and "Adjustment of either real resources or claims on future to External Shocks in Developing Economies," World Bank Staff Working Paper No- 472, July 1981. For a statement of the version resources to oil-exporting countries. This research used in the 1wrld Det'e/lopmoerit Report 1981, see pp. 121-123 of studies the different ways in which national that report. private resources, changing efficiency of invest- Development Research Center. The project will ment, and increased public current expenditures. It take two years. Reports on the cross-country can also allow an exploration of the distributional analysis will be available in late 1982. consequences of adjustment in countries for which the requisite data are available. The two "inter- nal" decomposition exercises will be made consis- A Model of Energy Demand in tent with the earlier trade decomposition. TDeveloping CountrieS 2 gether, the three approaches, especially when supplemented by information on movements in Ref No. 672-63 major policy instruments, can yield a rounded picture of the adjustment process in a country and The future growth of demand for energy in indicate areas to which models or case studies developing countries has implications not only for should pay particular attention. These methods the economic prospects of these countries, but also and their variants will be applied to about thirty for conditions in the world energy market, of which developing counties and perhaps two oil-importing they constitute a growing share, and hence for developed countries. conditions in the world economy at large. Up to now, the projections of this demand made by the The exercises described above will produce about World Bank's Economic Analysis and Projections thirtv brief studies of country adjustment inter- Department (EPD) have been based on data preted in the light of the framework developed available from the United Nations and those above. These studies will be used for two purposes: collected in the course of the Bank's operational (1) to assemble "stylized facts" about adjustment work. For individual developing countries, demand and (2) to put together detailed case studies for for energy is calculated as a function of energy perhaps four countries that are representative of prices and the rate of economic growth, and the sub-groups of oil-importing developing countries: a demand for the main individual fuels is projected semi-industrial country, an agriculture-based pri- on the basis of past trends in their shares of total mary producer, a mineral-based primary producer, energy demand. and a least-developed country. The four country studies will concentrate on modeling certain key Since 1973/74, knowledge about the use of energy relationships uncovered by the cross-country anal- in developing countries has increased enormously. ysis and aim to focus on the interaction between A study sponsored by EPD will draw together new structure and policy. It is planned to formulate and information from a large number of sources to estimate two-gap models as disequilibrium models improve this forecasting framework. In the first for perhaps two of these archetypal countries. stage of the project, econometric models of energy demand will be developed for four countries-Bra- The accounting-for-adjustment methodology de- zil, India, Kenya, and Malaysia. Demand for veloped bv Balassa for trade-related variables and energy will be analyzed and projected separately to be extended in this project to study the internal for the main fuels used and the main economic sector of an economy has been used to interpret sectors of each country. Based on these country- historical developments. The methodology could specific models, a minimum standard model of potentially be used for country projections. The energy demand will be constructed that can be research seeks to show that differences between applied, without complicated adjustments, to a alternative future scenarios may be decomposed large number of developing countries. This is the into the effects of exogenous factors and national approach behind the Minimum Standard macro- economic performance, using the language and economic model used by the Bank in its country categories of adjustment analysis. The approach, economic work. therefore, has the potential of being formally integrated with the Revised Minimum Standard The study will be able to draw, to some extent, on Model used by the Bank for country economic methods developed to analyze energy demand in projections. The principal researcher is Pradeep Mitra in the 2. Excluding the capital-surpltis oil-exporting countries. industrialized countries. These methods are un- on the transport sector. (The industrial, transport, likely to be adequate, however, for considering and household sectors together account for over 90 such questions as noncommercial energy use, the percent of Indonesia's energy consumption.) The efficiency of energy use, and substitution of one basic measure of welfare to be used is the net kind of fuel for another. Formal modeling of "compensating variation." This is the minimum supply will not be attempted; experiments in amount of additional expenditure needed, for a industrialized countries have shown that far more group of consumers in a given district, to enable the data are needed for this than are yet available in group to maintain its original level of utility after developing countries. the policy change. The net compensating variation is calculated taking into account the needs and The new forecasting framework will not only tastes of different groups of consumers and the improve the Bank's global energy projections, and adjustments they make in response to changes in hence its global economic projections; it should also prices, incomes, limitations on supplies, and other deepen understanding of the interactions between government policies. energy use and economic growth and change and, in particular, of the effects of higher energy prices The compensating variations to be calculated on the various economic activities in developing specific to each group will also be used collectively countries. The project is being undertaken by Lutz to assess the distribution of welfare gains and losses Hoffmann and associates at the University of and to identify the groups of households that would Regensburg in the Federal Republic of Germany, be most adversely affected by particular policy in collaboration with researchers at Sao Paulo changes. Simulations will be made of alternative University in Brazil, Penang University in Malay- policy measures-in particular, different price sia, and the Indian Council of Applied Economic levels for energy and time paths for the elimination Research. The project is managed for the World of subsidies-to determine their effects on particu- Bank by Peter K. Pollak in EPD. lar groups of consumers. Information from this part of the analysis could be used to design energy conservation efforts so as to minimize reductions in The Welfare Implications of Alternative the consumption of particular groups. Policies may Energy Pricing Policies in Indonesia be simulated by the model at the regional as well as the national level. The model can also project the Ref. No. 672-70 quantity of aggregate energy consumption that is associated with particular energy prices, incomes, The government of Indonesia is concerned about and distributions of household income among the implications for the welfare of various income groups with different attributes. groups of making adjustments in domestic energy prices. With the analytical tools available in The nine-month project will be undertaken by one Indonesia at present, it is difficult to predict the of the authors of the methodology, Lawrence Lau, effects that such adjustments would have. A in conjunction with Armeane Choksi of the Bank's research project just starting will supply informa- East Asia and Pacific Country Programs Depart- tion on how the welfare of different groups of ment. consumers would be affected. Groups will be distinguished by income level, region, household Planning Investments in Electric Power size, and other characteristics that affect the in Indonesia demand for energy. Ref. No. 672-54 The project will extend a methodology developed by Jorgenson, Lau, and Stoker to analyze the oil Only 6 percent-7 percent of Indonesia's people price decontrol program in the United States.) It have access to electricity. Sales of the national will concentrate on the household sector, which accounts for 30 percent of the energy used in 3. D. W. Jorgenson, L. J. Lau, and T. M. Stoker. "Welfare Indonesia, but will also draw on the insights Comparison under Exact Aggregation," Arnerican Economrni provided by a study on industry and a planned one Reveww, vol. 70. no. 2 (May 1980), pp. 262-272. power utility, PLN, have been growing at over 20 optimal, for example, to satisfy such goals as percent a year since 1978, and there are long subsidizing electricity consumption by the poor or waiting lists for supply. Large investments are to promote interregional equity. The model will needed in facilities for power generation, transmis- make it possible to quantify the costs to the sion, and distribution. The World Bank has made economy associated with decisions of this sort. 11 loans to Indonesia for power generation and distribution, a 12th is in preparation, and further Staff of the Bank's East Asia and Pacific Country loans are envisaged. Programs Department (AEA) and the Develop- ment Research Center (DRC) will collaborate This application of research is to develop an with PLN in developing the model and installing it analytical framework with which PLN and the in Indonesia. For further details, contact Alexan- Bank can plaD Indonesia's future investments in der Meeraus in the DRC or Armeane Choksi or power generation, transmission, and distribution. Michael Walton in AEA. The project will apply the analytical techniques developed in previous research on Programming in the Manufacturing Sector (Ref. No. 670-24) 4and Tax and Contractual Arrangements for the computational facilities of the General Alge- Exploiting Natural Resources braic Mlodeling System (Ref. No. 671-58). These techniques have been used successfully to analyze Ref. No. 672-71 investment options in sectors that exhibit strong interdependencies and economies of scale, notably The long-term rise in oil prices and the need to fertilizer, steel, and petroleum (see Research News adjust to it has stimulated interest in three broad vol. 2, no. 1). areas of research in the World Bank: domestic and external macroeconomic issues, energy demand, The model to be developed will make it possible to and energy supply. Several projects on macroeco- define an optimal investment program that takes nomic issues have recently been started. Among account of issues posed by the scale of facilities, them are studies of Egypt (Ref. No. 672-25), their location, the timing of investments, choices Thailand (Ref. No. 672-47), Yugoslavia (Ref. No. among technologies, and the reliability of facilities 672-26), development options in oil-exporting once they have been installed. The model will be countries (Ref. No. 672-49), and adjustment in oil- used to select projects and programs, and also as a importing countries (Ref'. No. 672-74-see above). simulation device to evaluate the costs and benefits In the demand area, the Economic Analysis and of alternative policies and government proposals. Projections Department is starting work on a minimum standard model of energy demand (Ref. Indonesia is endowed not only with oil and natural No. 672-63, see above). The present project gas but also with coal, hydro and geothermal resources, and uranium. The model will examine alternative ways of meeting the demand for electricity efficientlv, taking account of how alter- native investment programs could be financed. 4. The Planning of Investment Programs, a series edited by Vorld market prices, the availability and prices of Alexander Nleeraus and Ardy Stoutjesdijk. David Kendrick and Ardy Stoutiesdilk, Volumne I: The Planning of Industrial Invest- domestic energy resources, and demand for elec- ment Program i: A Methodology (Baltimore and London: The tricity will be specified exogenously. Running the Johns Hopkins Uniiversity Press, 1979); Armeane M. Choksi, model under different assumptions about these Alexander NMeeraus, and Ardy Stouitiesdijk, V'olume I1 The factors will help to indicate how investment Plarning of Investment Programs in the Fertilizer Industry (Baltimore and London: The Johns Hopkins University Press, planning should respond to uncertainty: for exam- 1980). A book, combining volumes I and 11, has recently been ple, whether a particular technology or source of published in French under the title, La Programmation des energy should be used regardless of whether, say, In:'estissementv Induistriel, Methode et Etude de Cas (Paris: prices change, or whether, say, a slight change in Editions Economica, 1980). The series is currently planned to international prices would give one a different set contain four more volumes, three of which are at an advanced stage of preparation. These volumes deal with investment analysis in the of priorities. Government may wish to depart from steel and forestry industries, and with investment analysis in a the power investment program that is economically multicountrv context. ;4- % .T addresses microeconomic issues related to oil contract terms can be designed to minimize such supply. Its findings will also be relevant for other risks and consequently increase the (ex ante) nonrenewable natural resources. expected benefits to both parties. Also to be taken into account are imperfections in the markets for A vast majority of developing countries depend on natural resources and in the knowledge available to imported oil. Among these are 64 countries, contracting parties. including some of the poorest, that depend on imports for more than 75 percent of their The research builds on two major bodies of work. commercial supplies. It is vitally important for One relates to the analysis and simulation of these countries to attract foreign companies to different forms of contract and bidding procedures explore for oil. But it is not enough merely to in the context of uncertainty about the amount and attract these companies, for if no oil passes to the value of the resource stock; most of this work has government or no government revenues are gener- been done in the context of US offshore leasing ated, the problem is not alleviated at all. It is (Outer Continental Shelf). The other is concerned important for these countries to provide adequate with the effect of the various taxes on the extraction incentives to foreign companies, in a way that of a fixed stock of a natural resource, and the ensures that as much benefit (or rent) accrues to simulation of the development expenditures and the government as possible. production profiles that firms adopt under different conditions. Again, much of this analysis refers to As was stated in 1979, "Very many of the conditions in the developed countries. developing countries need advice in framing or amending legislation relating to the energy sector, The first phase of the research, taking about nine or in adapting policies and procedures that would months, will concentrate on simulating the forms of improve the prospects of cooperation with foreign taxation and contracts that are currently recom- prospecting and production organizations."5 In the mended, using available simulation models, includ- area of natural resources generally, the Bank has ing that in use by Bank Energy Department staff. long been interested in issues related to explora- The results from this analysis will be used, in the tion, extraction, and processing, especially in many second phase, to develop a more efficient frame- African and other small economies where mining is work for analysis that would be usable by Projects the dominant sector and the main source of export staff charged with advising on taxes and contracts. earnings and budgetary revenues. In the course of the research, a typology of countries will be constructed, classified by charac- The ultimate objective of a new research project in teristics such as the energy balance, the degree of the Development Economics Department is to riskiness versus possible returns as seen by design policies for taxes and contracts that will extraction firms, and the degree and success of past provide sufficient incentives to attract foreign firms exploration activity. Particular attention will be to explore for and produce exhaustible natural given to countries (many of them in sub-Saharan resources in developing countries, while maintain- Africa) with little past exploration or production ing as much of the rent for the producing country activity. as possible. This search for optimal policies will also take account of the risks borne by the For further details, contact Arvind Virmani in the contracting parties. Inherent in the process of Development Economics Department. exploration for a natural resource in a given tract of land is the possibility of a change in the value that the firm and the government assign to the tract before and after exploration. This raises the possibility that one of the parties may want to change the terms of the contract once exploration is completed if the penalties for doing so are small. Such possible changes include expropriation by the government, as well as the firm abandoning the 5. A Program for Accelerated Development of Petroleum enterprise after some initial exploration. Tax and ResAources World Bank, 1979. Public Policies in Agriculture: Studies instruments for different predetermined levels of of Selected Market Interventions in the public expenditure and to compare the perfor- c f Kre a T mance of these instruments in meeting various public objectives. The studies will draw on two Ref. Nos. 672-61 and 671-62 bodies of previous research. The first of these is the considerable amount of empirical work sponsored These two projects address a subject-public by the Bank on the responses (of households, intervention in agriculture-whose pervasiveness agricultural producers, and prices) to interventions in the developing world has stimulated much in agriculture.6 The second source is the literature research. Theoretical advances have greatly in- on applied welfare economics, including both the creased understanding of the likely consequences of traditional approach based on consumer and agricultural policies, but the analytical approaches producer surplus and the more recently developed used in research have been difficult to duplicate in public-finance methodologies in which desirable practical work. In predicting the effects of inter- policy interventions are identified by seeking the ventions, policy makers and their advisers have had maximum increase in aggregate welfare while to rely largely on their personal experience and meeting the public budget constraint and other judgment. The broad goal of the present studies-- exogenously specified requirements.7 to adapt and apply up-to-date analytical tech- Th niques to typical kinds of policy problems on which e technques will be used to analyze selected the Bank's regional economists are asked to policies in the Republic of Korea and Thailand, advise-is one being pursued increasingly in the countries that exemplify two contrasting forms of Bank's research program as it comes of age. intervention in agriculture. In the first, the public Examples include the work on industrial incentives sector influences private sector activity by means of and comparative advantage (see Research News taxes, subsidies, or controls. Producers and con- vol. 2, no. 1), new research on policies to influence sumers face a new configuration of prices, but mineral exploitation (Ref. No. 672-71, see above), production is still governed by the principles of and collaborative research with the Cyprus govern- private profit maximization. In the second, the ment in preparation for the 1982-86 Five-Year public sector influences private sector activity by Plan (Ref. No. 672-38-see Research News vol. 2, itself producing goods or services. Production, or at no. 2) least that part of it under public control, need not be consistent with profit maximization and, de- Since agriculture is so important to their econo- pending on the public sector's approach to cost mies, in most developing countries public interven- recovery, market prices may or may not change. tion in agriculture can result in large changes in Korea provides a typical example of price interven- both the allocation of resources and the distribution of income. Such interventions serve a variety of tion. Relative to international prices, domestic possible goals, including correcting market failures, production of fertilizer is subsidized. The subsidy raising revenue, redistributing income, improving is partly financed by selling fertilizer to farmers at nutrition, or achieving national self-sufficiency in prices above the cost of im portin but below the particular commodities. They include measures to cost of production, and partly by general revenue. influence input or product prices, quantitative controls, and public provision of goods and services. The creation of wedges between rural and urban 6. See, for example, Howard N. Barnum and Lyn Squire, A prices is a conspicuous and common policy; so is (Baltimore and London: The Johns Hopkins University Press, the subsidization or taxation of agricultural com- 1980) and C. Ahn, 1. J. Singh, and L. Squire, "A Model of An modities. The public expenditure occasioned by Agricultural Household In a Multi Crop Economy: The Case of these policies has often become burdensome, Korea," Re-tseu' of Economics and Statistics. vol. LXIII, no. 4 especially in resource-poor countries. (November 1981), pp. 520-525. 7. See Arnold C. Harberger, Taxation and Welfare (Boston: Little, Brown, 1974) and A. Atkinson and J. E. Stiglitz, Lectures These studies seek to provide a framework that can on Public Econormics (NIaidenhead, United Kingdom: McGraw- be used to evaluate the effects of the various policy Hill, 1980), Chapters 12, 14, and 15. This policy causes an excessive allocation of industry that is largely in private hands, and price resources to the production of fertilizer, a subopti- intervention in the markets for sugar cane and mal use of fertilizer by farmers, and transfers of sugar. Policies toward both rubber and sugar are income from farmers and the general taxpayer to currently being reviewed by the Thai government the producers of fertilizer. Domestic production of and the Bank. rice is also subsidized, relative to international prices. Moreover, whereas rural consumers and It is hoped that the projects will produce a producers pay the same price for rice, urban rice relatively simple, replicable approach to giving consumers receive a further subsidy. Among the more soundly based advice on agricultural policies. implications of this policy are an excessive alloca- Since the two studies will allow an assessment of tion of resources to rice production and a transfer the reliability and applicability of both the of income from the public sector to the private traditional and more recent approaches to applied sector that favors those with large farms relative to welfare economics, it is hoped that the research will those with small farms and favors urban consumers provide guidance for thc Bank's operational staff relative to rural ones. While these policies were on the most appropriate mode of analysis. It is also motivated, at least in part, by a desire for self- hoped that the framework to be developed will be sufficiency, their obvious costs, as revealed by a found attractive by policy researchers in member large budget deficit, have led the government to countries. reappraise its approach. The Korean study will The projects are sponsored by the Development therefore compare different price-tax instruments Economics Department (DED) and the East Asia that would reduce the existing deficits and study and Pacific Country Programs Department. For their impact on output, marketed surplus, and on indoPatificontry Prograverman For the distribution of income, as measured by their information, contact Avishay Braverman (for the effects on different groups in the rural and urban Korea study) or Lyn Squire (for the Thailand sectors. study) in DED. Price intervention is also important in Thai Economic Consequences of the Coffee agricultural policy but the latter also provides for Boom in East Africa the public production of goods and services.8 Much of the recent expansion of rubber replanting, for Ref. No. 672-65 example, has been supported by public provision of budwood, budded stumps, and free fertilizer to The years 1976-78 saw a fourfold, though tempo- participating farmers. Among other things, the rary, increase in the world price of coffee. For those study will investigate whether the replanting developing countries in which coffee is a major program was a response to an observed market source of foreign exchange and domestic income, failure or whether the heavily subsidized public this increase led to a large, temporary shift in rela- provision of replanting materials retarded the tive prices and a large injection of income from development of private sources of supply. The abroad. The consequences of the coffee boom dif- rubber cess and the heavy taxation of rubber fered among countries, depending on the underly- exports used to finance the program will also ing structure of their economies, the types of poli- receive attention. In particular, the study will cies being followed, and the policy responses to the compare the present system with one in which change in coffee prices. rubber taxes are reduced and farmers are charged full costs for all replanting materials. The implica- This study will explore the consequences of the tions of these alternatives for the allocation of coffee boom in Kenya and Tanzania, two countries resources and the distribution of income will be examined, as will the consequences for the development of private sources of replanting 8. Government policy has been especially influential in the materials. The Thai study will also investigate markets for rice, rubber, and sugar. Since extensive research has mateial. Th Thi sudy illals invstiatebeen done on the econo,mics of rice prodiuction, and since the issues similar issues in the sugar market, in particular, of concern in this study arise more sharply in the rubber and sugar the role of public sugar mills in a sugar-processing markets, the study deals only with the latter markets. in which coffee is a major smallholder crop and a gregated into familiar macroeconomic terms of sav- significant source of foreign exchange. The struc- ings/investment, balance of payments, and growth. ture of the two economies is quite similar: Both are However, the grounding in microeconomic analysis low-income, predominantly agricultural nations is likely to have the advantages of a detailed assess- with populations of around 15 million, quite heav- ment of the consequences for income distribution of ily involved in external trade, and dependent on export-price instability and alternative policy re- agricultural exports and external assistance for gimes and responses and hence, a more detailed most of their foreign exchange receipts. But there and compelling set of results on the domestic poli- are marked differences in the policy regimes of the cies to be preferred in coping with such instability. two countries, especially in regard to smallholder agriculture, the principal source of livelihood in Whether the lot of the rural poor can be bettered both nations. In particular, government policy in more effectively through increasing producer prices response to the coffee boom differed radicallv in the for smallholder cash crops or by expanding public- two countries. In Tanzania, some 60 percent of the expenditure programs to improve well-being and incremental coffee income was paid to the govern- enhance productive capacity is a central policy ment in taxes to support a level of public expendi- issue that has spawned much debate. In the East ture higher than would otherwise have been feasi- African context, empirical research is needed ble, while in Kenya 95 percent of the incremental before the debate can be resolved. With this in income was retained by smallholder coffee grow- mind, the project will devote a major effort to ers. modeling smallholder agriculture. Here, the model of farm-household behavior developed by Squire The project will investigate the experience of the and Barnum, in which decisions about production two countries to shed light on a number of issues of and consumption are treated together in the same macro and micro policy. It is hoped that the results analytical framework," will be extended to incorpo- will be directly relevant to the design of govern- rate the asset behavior of farm households and the ment tax and expenditure policies, agricultural role that remittances from urban family members pricing, projects and programs in agriculture, and play in facilitating agricultural modernization. the form of external assistance. The country models will trace the links between (and within) the smallholder sector and the rest of Most studies of the economic consequences of price the economy through product markets, labor instability for major agricultural exports have demand and migration, urban-rural flows of concerned themselves only with macroeconomic remittances, and the incidence of taxes and changes. The approach in the present study will be subsidies. Efforts will be made to specify, in some unusual in tracing these consequences to the micro- detail, how government tax and expenditure level. Computable general equilibrium (CGE) policies affect and are affected by production, models will be developed to: incomes, and consumption in a smallholder econ- * evaluate alternative types of policies for allevi- omy. Constructing this fiscal module will be an ating poverty, giving particular emphasis to the innovative step in CGE modeling. Here, the relative efficacy of export-crop pricing policies researchers will draw on the work of Meerman for versus public expenditure policies; Malaysia and Selowsky for Colombia.10 * draw lessons as to the best response of domestic The project will take, as a starting point, existing policy to sharp fluctuations in agricultural ex- economywide models of Kenya and Tanzania and port prices, looking at both the temporary and will build on a substantial body of research on the lasting economic consequences of such fluc- tuations; * augment the quantitative analytical bases for 9. Howard N Barnuim and Lyn Sqsiire, A Alodel of an evaluating economic structures and policies in Agricultural Ilolnuh,hld Theo,rv and Ezvdence (Baltimore and Kenya and Tanzania. London: The Johns Hopkins tJniversity Press, 1980). 10. Jacob Nleerman, Pihclz Expenditure in Malaays,a: Who Bernefits ar0(1 thsv, and Mlarcelo Selowsky, W'ho Benefits from The general equilibrium framework will assure GovCernrrni Exwenidldrec? A Caose Study of Colsomnbia (both New that the microeconomic consequences will be ag- York: Oxford tlniversity Press, 1979). these economies done in the course of the Bank's accounting concepts being used in CPEs Žnd has, country economic work. It will make use of the therefore, had to use a fairly rough and mechanical large amount of micro-survey data that has become methodology for translating the statistics based on available for the two countries over the past five them into concepts comparable with Standard years. The models will be documented so that they National Accounts. Though the statistical offices of can be used after the study has been completed. several centrally planned economies have carried out and published illustrative computations of The two-and-a-half year project will be supervised GNP, there is no systematic effort among CPEs, or by David Greene and Robert Liebenthal in the between CPEs and any international organization, East Africa Country Programs Department I and to produce a consistent set of GNP figures in by Shankar Acharya in the Office of the Vice dollars for these countries. President, Development Policy. The Institute of Development Studies, Nairobi, and the Depart- Funds were approved recently for research to ment of Economics, University of Dar es Salaam, identify the best methods for computing the levels will participate. and growth rates of GNP of selected centrally planned economies. The study will concentrate on eight countries-Bulgaria, Cuba, Czechoslovakia, National Accounts Statistics of Centrally the German Democratic Republic, Hungary, Planned Economies Poland, Romania, and the tJSSR. Ref. No. 672-73 Comprehensive and internationally comparable data will be produced on the size of GNP, on the Centrally planned economies (CPEs) account for appropriate factors for converting income figures about a third of the world's population and a fifth in national currencies into US dollars, and on of its output. In view of their importance in the growth rates. The findings and methodology world economy, they need to be included in should be readily adaptable to most non-European international comparative studies. The World CPEs, including present and potential members of Bank also includes them in several documents with the Bank. The project should substantially advance universal coverage-particularly the World Bank understanding of the national accounts, develop- Atlas and the World Development Indicators . The ment history. and development plans of CPEs. Bank's Atlas is the only source of regular estimates of income per capita in US dollars for nearly all For further information, contact Sang Eun Lee in countries of the world; these estimates are widely the Economic Analysis and Projections Depart- used and, for most countries, are widely regarded ment. Results are expected early in 1983. as authoritative. Further, several CPEs are mem- bers of the Bank (China, Laos, Romania, Viet Indian Urban Development Nam, and Yugoslavia). In order to analyze their economies, Bank staff need to understand their Ref. No. 672-64 macroeconomic accounting frameworks and price systems. Work began recently on the first phase of a collaborative research program on Indian urban The CPEs' national accounts are based on the development and urban problems. Nearly 80 concept of net material product, which differs from percent of India's population still lives in rural the concept of the gross national product used in areas. Yet the country's present urban population, market economies. Prices in CPEs are generally set of about 135 million, is among the largest of any administratively and, to a considerable extent, are country. Even at present income levels and independent of the scarcity of goods and services. population densities, living conditions for the For all the aspects of Bank's work mentioned majority of urban residents are deplorable, and the above, it is necessary to derive GNP levels and problems faced by city managers are immense. growth rates from country data that are based on the concept of net material product. At present, the The first phase of the research is concentrating on Bank lacks sufficient understanding of the national national and state issues. It will consist partly of historical and partial analyses of urbanization tion of economic activities. Some have the stated trends, using regional and international compari- objective of decentralizing large congested capitals, sons. This analysis will be supplemented by studies or closing the gap between rich and poor regions. of relationships between urban and agricultural But experience with such policies has emphasized development and of rural-urban migration. The the lack of conceptual and empirical work to study will also examine trends in the sizes of urban provide principles for their formulation. areas and the causes of these trends. A simulation model of Indian urban development to be con- The Development Economics Department began a structed under the project will be used to assess the program of research on National Spatial Policies in effects of various government policies on urban 1980 (Ref. No. 672-13, see Research News vol. 1, areas and their growth and to make forecasts of no. 2). This program has three main aims: to urbanization. develop an analytical framework that will begin to identify the determinants of urban concentration; The project will test various hypotheses that have to analyze the determinants of individual firms' implications for the design of policies. For exam- choice of location; and to trace the effects on spatial ple, there has been much alarm that India's largest development of different types of government cities, those with at least I million people, may policy. To further the third aim, a study recently have been growing faster than total urban popula- began of the experience with spatial policies in the tion, but the available evidence from India, and the Republic of Korea. experience of other developing countries, suggests that this is unlikely to be the case. Second, though a The present study is expected to yield methods for high proportion of new urban residents rely for quantitatively evaluating the efficiency of spatial employment on a bloated services sector, it seems policies and for assessing losses in welfare that unlikelv that India's urban growth rate will these policies may cause. The analysis will accelerate unless there is an acceleration in the concentrate on the location of manufacturing growth of industrial employment. Third, looking industry, which plays the leading role in the at the relationships between agricultural and process of urbanization, and which is characteristi- urban change, it seems likely that investments in cally the main focus of spatial policies in middle- technologies that are labor saving, such as mechan- income countries. ization, stimulate more migration to cities than do investments which are land saving, such as Korea's experience is of particular significance, as irrigation. few other countries have pursued spatial policies so persistently or used such a diverse range of For further information, contact Douglas Keare in instruments to affect the location patterns of the Development Economics Department or Vinod development. The broad aims of Korea's spatial Thonmas in the South Asia Country Programs policies have been to deconcentrate population and Department. Working relationships are being economic activity within the Seoul region (which, developed with several Indian institutions, includ- in 1978, accounted for 40 percent of the country's ing the Ministry of Works and Construction, the manufacturing employment); to decentralize eco- Planning Commission, the Institute of Economic nomic activity away from the Seoul region; and to Growth, the Sardar Patel Institute, the Indian reduce regional imbalances by providing incentives Institute of Public Administration, and the Indian for the development of lagging regions. These Institute of Management (Bangalore). policy objectives were reflected in the establishment of a greenbelt around Seoul and a ten-year plan, introduced in 1977, for redistributing population Industrial Location Policies for Urban away from Seoul, largely made up of provisions Deconcentration: Republic of Korea affecting the pattern of industrial location. Ref No. 672-58 The first phase of the study, which addresses issues of urban deconcentration in the capital region, will The development policies of a number of countries document changes in the location patterns of give explicit consideration to the spatial distribu- employment in the Seoul region, verify the extent of policy influences on such changes, and establish recipient households would otherwise lack suffi- a methodological framework to be used for cient resources to meet their basic needs or respond empirical analyses. Results of this phase should be to new investment opportunities. Results from El available by June 1982. Actual empirical work and Salvador suggest that poor families headed by policy studies are expected to be carried out in women and/or with women who are not working fiscal 1983. are most likely to receive transfer income. The project manager is Kyu Sik Lee in the In studies of household expenditure behavior, it Development Economics Department. has been customary to use the level of total income as one of the main explanatory variables. The Income Formation and Expenditures of possibility that the composition of income may affect expenditure behavior-with receipts from Poor Urban Households different sources earmarked for different types of expenditure-has largely been overlooked. So has Ref. No. 672-57 the possibility that a household's income may rise s p c in response to specific opportunities for expendi- This project is designed to yield more definitive ture or investments. The background work for the information on the real resources at the command presentestudy tsh The structure of ic e of urban families, and thus on the ability of these does affect the pattern of expenditures. A signifi- families to afford shelter and other essentials. A cant proportion of transfer income ap ears to be long tradition of sociological literature has been cn prpp based on the assumption that urban households earmarked to meet basic needs (food, health care, beaveas autoneomous units, ureceiving mostofheir education, and shelter). The results from El behave as autonomous units, receiving most of their Salvador suggest that a poor household receiving income from the labor earnings of permanent or suggest th e for of reeill members of the household. It has been argued that most of its income in the form of transfers will one of the effects of urbanization has been to break spend 75 percent of its income on basic needs, 10 the ties of the urban household with the extended percent on other expenditures, and save the famiy grup nd t eliinae may oftheremaining 15 percent.'12 An equally poor household family group and to eliminate many of the that derives most of its income from earnings will supportive functions that are carried out by family devote only 62 percent to basic needs. networks in rural areas. Based on these assump- tions, the designers of urban development projects Furthermore, other things being equal, a house- have tended to see the potential participant hold directly affected by an urban development household as a discrete entity and its earnings as project will receive more transfer income than a the indicator of what it could afford to pay for comparable household that is not so affected. If services. In projects that must cover their recurrent households with the prospect of benefiting from a costs, it has not been uncommon to exclude the project can elicit additional income, there are poorest families from the target population, on the important implications for project planning. grounds that with their low earnings they could not afford to pay for the services to be introduced. The present study is examining the sources of income and types of expenditure of urban house- Background work done by the Development holds. It will use both anthropological and econo- Economics Department in El Salvador and the metric methods, concentrating on the household's Philippines has shown that an important part of economic interactions with other families. It seeks a the total income of many poor families comes from better understanding of the determinants of income other households. For instance, 58 percent of the households in the lowest-earnings decile in the city of Santa Ana, El Salvador, receive income trans- fers. For recipient households in that decile, II Results from Manila, Philippines, show transfers to be even transfers make up a third of total income. In the more significant. Although comparable detail is not available, there second-lowest earnings decile, nearly half of the is corroborating evidence on the general importance of transfers from Indonesia, Senegal, and Zambia. households receive transfers, which contribute one 12. This representative poor household is located around the fourth of their total incomes.i" It appears that the 20th percentile in the distribution of urban income. transfers, the motivation for these transfers, and Given the lead time required to build up a the rights and obligations associated with them. It significant program and the additional time needed is hoped that the study will yield important insights for the detailed preparation and construction of into the capacity to pay for housing and related individual projects, it is only recently that a large services and into the appropriate criteria for number of Bank-financed urban projects have selecting project beneficiaries. begun to benefit the poor. More extensive evalua- tion of urban projects is needed if the Bank is to The results are likely to shed light on a number of continue "learning by doing." allocative and distributive issues. For example, by studying the interactions among the family net- Some aspects of such projects' actual effects on work, it should be possible to assess how inter- their thousands of intended beneficiaries are likely household exchanges affect the overall distribution not to be adequately discovered by project agencies of welfare among the urban poor. Second, investi- using statistical overview rmethods. How effectively gating the sources of and motivations for trans- are the intended beneficiaries of a project being ferred incomes, their reliability, and the uses to involved in project planning, for example? How which thcy arc put by recipients, will improve does the power structure of a neighborhood kInowledge of the role of the family network as a influence the distribution of the benefits when a substitute for imperfect formal capital markets. large slum is upgraded? It seems likely that such questions could be more fully answered by a The research will be undertaken in an area of trained observer living in a project area than by a Cartagena, Colombia, where an urban develop- team of interviewers and outside observers. "Par- ment project is being supported by the Bank.13 ticipant-observer" evaluation of a project in Nai- Existing data sets on the area will be supplemented robi, Kenya, suggests that this method is poten- by household surveys to be carried out by the tially useful in supplementing statistical methods of Instituto SER de Investigacion, which is collabo- evaluating "new-style" urban projects. This ap- rating with the Bank in the study. proach needs to be field tested, and a more precise analytical framework developed, before its wide- The study is managed jointly by the Latin America spread use is considered. and the Caribbean Projects Department and the Development Economics Department (DED). For A studv is just beginning under which an observer more information, contact Michael Bamberger in will live in poor parts of Guayaquil, Ecuador, and DED. La Paz, Bolivia, that are being improved under Bank-assisted urban development projects. He will observe his neighbors and participate with them in Participant-Observer Evaluation of activities under the projects, for example, by taking Urban Projects out a loan for slum upgrading and using it to upgrade his residence. His work will supplement Ref. No. 672-59 the customary statistical evaluation work being Since 1972, the World Bank has pioneered the undertaken by project authorities. development of several types of poverty-oriented The study will seek to clarify which types of urban investment, most notably sites-and-services information are better obtained by direct observa- projects, slum upgrading, and credit schemes for tion than by survey methods, and which questions small-scale enterprises. The concepts on which the can only be reliably answered by survey methods. Bank's urban projects have been based are now The findings will be used to make recommenda- being widely applied by authorities in developing tions on project design and management, as well as countries and bilateral aid agencies. Exceptional on evaluation methods. The approach being used is efforts were made to evaluate some of the first urban projects, involving relatively expensive sta- tistical overview methods. Partly as a result of those evaluations, major changes in design were 13. The findings of the study will make no difference to the made for more recent projects. contractual undertakings relating to recovery of the project's costs. ;~ i ,(W p s \t,\ also likely to yield hypotheses that can be tested be installed and monitored by the project staff and definitively by other means. the local project participants. Detailed data will be collected, analyzed, and disseminated. The study is expected to take about two years. It will be managed by David Beckmann in the Latin One of the main concerns of project research and America and the Caribbean Projects Department development will be Village Level Operation and with some contributions from the Development Maintenance Pumps (VLOMP) that can be Economics Department in the design of the manufactured in developing countries and repaired research. by trained village operators. Unlike conventional pumps, these light, simple pumps can be repaired without incurring the delay and expense of Research and Development: Handpumps employing heavily equipped, highly skilled mobile for Rural Water Supply maintenance units. Ref. NVo. GLO07910101IN7'811026 The project is expected to make significant contributions to programs for low-cost water Well over a billion people in the rural areas of the supply in developing countries. The project will developing world have no adequate supplies of safe develop a standard method for testing handpumps water and no adequate facilities for sanitation. The so as to identify quickly the principal faults and UN has declared the 1980s to be the International select the models that are most effective. It will Drinking Water Supply and Sanitation Decade. provide local training and technical assistance to The program for the decade puts special emphasis district-level teams in operating, maintaining, and on the installation of handpumps. In areas where monitoring the effectiveness of handpumps. Manu- groundwater is easily available, installing these als will be prepared to assist in the selection, pumps in wells is one of the simplest and cheapest installation, and maintenance of pumps. The ways of supplying rural people with safe water. project may also promote and assist in the Meeting the goals of the decade would require the development and local manufacture of appropri- manufacture and installation of some 5 million-7 ately designed handpumps. million handpumps. It is anticipated that the project will enable The United Nations Development Programme governments to obtain greater benefits from funds (UNDP) and the World Bank are undertaking a available for rural water supply. Moreover, by joint four-year project for laboratory testing, field improving the effectiveness of handpumps, the trials, and technological development of hand- project is also expected to encourage increased pumps. Previous research and development have investment in rural water supply during the decade not solved a number of serious technical problems and thereafter. with handpumps, manifested in unsatisfactory performance, short working life, and frequent Initial contacts with governments interested in breakdowns. The performance of these pumps is participating in field trials are under way. For what ultimately determines the success or failure of more information, contact Saul Arlosoroff, UNDP large investments-of both human effort and Projects Manager, in the Transportation, Water, finance-in engineering hydrology, bore-hole and Telecommunications Department of the World drilling, well digging, and pump installation. Bank. The first phase of the project, to be concluded in 1982, provides for laboratory testing to evaluate Determinants of Fertility in Rural established and innovative designs made in devel- Bangladesh oping and industrialized countries. The second phase, started in 1981, provides for field trials in Ref. No. 672-60 15 to 20 developing countries. Twenty-five to 50 specimens of each of three or four different types of Funds were recently approved for the Bank to pump will be tested at each site. Handpumps will collaborate with the Bangladesh Institute of Devel- opment Studies (BIDS) in the analysis of a large Demand for and Willingness to Pay for body of data on the fertility and socioeconomic Services in Rural Mali characteristics of households in Bangladesh. The study builds on several activities already supported Ref. No. 672-72 by the Bank. The data were collected by BIDS under the IDA-supported First Population Project How do households respond to policy interventions credit to the country, and Bank research funds have that change the availability of public services? been used to help process and assemble them into a There is growing agreement that to predict the manageable form during the past year (see demand for public services, data from household Research News vol. 2, no. 1). surveys need to be supplemented by information on the availability of services in the community and by The data cover about 4,000 households in four regional data on the labor market so as to discover contrasting areas. They have been collected in the "prices" households face for public services, as several rounds, starting in 1976; some subrounds well as for their own labor time. were completed in 1981. They will be used to extend previous analysis by the Development The difficulty of specifying demand for public Economics Department of fertility questions and services is a particularly important one in sub- family planning in Bangladesh.14 Saharan Africa, where levels of health and education lag behind those elsewhere in the world, Broadly, the study will be concerned with the and where the fiscal burden of improving and relationship in rural areas between poverty and extending public services is very large. Services as fertility. Multivariate analysis will be used to they are now constituted and financed would be examine the influences of household characteristics impossibly expensive to extend to the whole on fertility, giving particular attention to earnings population. To choose among other options-for from different sources, expenditures and savings, example, to increase efficiency for the same level of women's participation in the labor force, and spending or to introduce user charges to recover expenditures on child education and health (expen- some of the costs-it is necessary to know about the ditures that may reflect a conscious choice between determinants and structure of demand. With having many children, poorly educated and in poor regard to user charges, for example, an important health, and fewer, more priviieged children). question is whether their introduction would Interrelationships between fertility and child mor- constrain demand among the lower-income groups tality will be studied in detail; so, too, will the that may need the services most. effects of access to various services, notably health care, family planning, education, and agricultural This small project will study household demand for credit. The results will help in predicting the a range of services in rural Mali, particularly for effects on fertility of maternal and child health health (traditional and modern medical care and services and of schooling (assuming that if existing drugs), schooling, and clean water supply. It will children have a better chance of surviving and use household expenditure data collected in 1981 being educated, parents may plan fewer additions in preparation for a Bank investment project in to the family). They are also likely to point to the water supply and health. The study should yield socioeconomic circumstances (including, for exam- some insight about the usefulness of household ple, the family's access to non-farm jobs, and the survey data analysis for the design of public equality of land distribution in the village) in programs in health, education, and water supply in which families are most prone to limit their poor rural areas of Africa. fertility. For information, contact Rashid Faruqee in the Development Economics Department or David de 14. R. Amin and R. Faruqee, "Fertility and its Regulation in Ferranti in the Population, Health, and Nutrition Bangladesh," World Bank Staff Working Paper No. 383, April Department. 1980. d: N- I t R ",<; X . The analysis will have three parts. The first, in NEW BOOKS which the demand for services is to be quantified, will use standard methods of consumer demand The Agricultural Economy analysis, taking into account local prices. The of Northeast Brazil second will be a detailed study, in about 20 villages, of the services actually available and trends in Gary P. Kutcher and Pasquale L. Scandizzo income and its sources; its main purpose is to establish whether demand exceeds supply. The The Johns Hopkins University Press, January third part will compare households' professed 1982. 304 pages. willingness to pay for services with their effective demand for them, as measured by expenditures. LC 81-47615 The project manager is Nancy Birdsall in the ISBN 0-8018-2581-4. $25.00 hardcover. Development Economics Department. Staff of the The rural northeast of Brazil contains the largest Societe Nationale d'Etudes pour le Developpement (Bamakou) and the University of Dijon will pocket of poverty in the Western Hemisphere. participate. A report will be available at the end of Most of its 18 million residents depend on 1982. agriculture and exist at or near subsistence levels in a country that has vast economic resources and an otherwise impressive record of development. Sev- eral large governmental and internationally sup- ported programs have failed, largely because of improper focus and inadequate information. This study is based on an agricultural survey of 8,000 farms by the Superintendency for the Development of the Northeast (SUDENE) and the World Bank. It reveals that incomes from agricul- ture and farm productivity are lower than previ- ously believed and traces the root cause of rural poverty to the suboptimal performance of large farms and the general inability of the poorest agricultural households to gain entrepreneurial access to land. NEW AND Econometric analyses of the region's problems are FORTHCOMIING supplemented by simulations of policy and project PUBLICATIONS options from a large-scale mathematical program- ming model of the agricultural economy. The The full range of World Bank publications is results suggest that traditional interventions involv- described in the World Bank Catalog of Publica- ing subsidized wages, technical progress, and tions, issued annually. The new books listed below, market expansion would have only a minimal which are published by outside publishers for the effect and that the region's poverty could be World Bank, are obtainable through booksellers or significantly alleviated only by a courageous land by writing to the publishers. Prices are subject to reform. This conclusion is supported by the survey change. The other items listed, as well as the findings that 50 percent of the agricultural land is Catalog, are available from: owned by only 4 percent of the farmers, that upward of 15 million hectares of agricultural land Publications Distribution Unit are potentially productive but unused, that small World Bank farms apply twenty-five times the labor per hectare 1818 H Street, N.W. of large farms, and that 75 percent of the poorest Washington, D.C. 20433, U.S.A. households own no land at all. Aspects of Development Bank performance. Though the economies studied are at Management similar levels of average income, they have pursued very different incentive policies; as a consequence, William Diamond and V. S. Raghavan, editors there are marked differences in the character of their industrial development and trade. EDI Series in Economic Development The study carries further the lines of enquiry and The Johns Hopkins University Press, April 1982. analytical methods that were developed in an About 320 pages. earlier volume, The Structure of Protection in Developing Countries, by the same principal LC 81-48174 author. The concept of effective protection intro- duced in that volume is extended here to derive the ISBN 0-8018-2571-7. $29.95 hardcover. effective rate of subsidy-that is, the ratio of the 0-8018-2572-5. $12.95 paperback. combined value of credit, tax, expenditure, and protective instruments to the value added in This volume brings together papers prepared for a processing. The relative incentives given to exports two-week seminar on Development Bank Manage- and to import substitution provide a basis for ment conducted by the Economic Development classifying development strategies as outward Institute of the World Bank. At the seminar, top oriented or inward oriented. Other characteristics executives of development banks discussed the of alternative development strategies and their principal problems they face in managing their economic effects are also examined. institutions and the roles they play as managers. The volume contains individual case studies of six The papers reflect diverse experiences and view- semvolum economs as well as stes on poins, ut te poblms aalyed all ntothesemi-industrial economies, as well as chapters on points, but the problems analyzed fall into the cocpuladmaueen sus rs-onr following broad categories: the functions of top conceptual and measurement issues, cross-country maaeetestablishing long-range corporate comparative analysis, and recommendations for an management; "ideal" system of incentives and how such a system objectives and policies; investment-selection crite- might be achieved. ria; monitoring investments; mobilizing resources; planning and internal controls; personnel develop- ment and organization; financial policy; and First Things First: Meeting Basic evaluation of corporate policy. Human Needs in the Developing Countries Development Strategies in Semi- Paul Streeten, with Shahid Javed Burki, Mahbub industrial Economies ul Haq, Norman Hicks, and Frances Stewart Bela Balassa and Associates Oxford University Press, 1981. 224 pages (includ- The Johns Hopkins University Press, April 1982. ing appendix, bibliography, index). 416 pages. LC 81-16836 LC 81-15558 ISBN 0-19-520-36B-2. $18.95 hardcover. ISBN 0-8018-2569-5. $32.50 hardcover. 0-19-520-369-0. $7.95 paperback. This volume provides an analysis of development The basic needs approach to economic develop- strategies in developing economies that have ment is one way of helping the poor emerge from already established an industrial base. The investi- their poverty. It enables them to earn or obtain the gation analyzes the systems of incentives that necessities for life-nutrition, housing, water and governments apply to influence production and sanitation, education, and health-and thus to trade and how these incentives affect economic increase their productivity. VI N Ik I l j I1<,t This book answers the critics of the basic needs Quantity and price comparisons are given also for approach, views this approach as a logical step in personal consumption, capital formation, and the evolution of economic analysis and develop- public consumption. These new estimates consider- ment policy, and presents a clearsighted interpreta- ably expand the sets presented in the earlier tion of the issues. Based on the actual experience of volumes. various countries-their successes and fail- ures-the book is a distillation of World Bank Because the benchmark studies provide estimates studies of the operational implications of meeting of detailed components of GDP, they afford basic needs. It also discusses the presumed conflict insights into comparative economic structure. For between economic growth and basic needs, the example, they show the extent of country-to- relation between the "New International Eco- country price differences in investment goods and nomic Order" and basic needs, and the relation other components of GDP, thus making possible a between human rights and basic needs. comparison of the shares of investment goods and other components of GDP in real (price-corrected) terms. A variety of structural relationships involv- ing both quantities and prices are explored. Some The International Comparison applications to demand analysis of the results are Project-Phase III. World Product and presented in the last chapter. Income: International Comparisons of Estimates are also provided of real GDP per capita Real GDP for the 34 countries for selected years between 1950 and 1979. In addition, the 1975 distribution of Irving Kravis, Alan Heston, and Robert Summers world product by region and per capita income The Johns Hopkins University Press, April 1982. class is estimated. The results for 1975 confirm About 304 pages. relations between both quantities and prices and per capita income found in the earlier volumes. LC 81-15569 ISBN 0-8018-2359-5. $30.00 hardcover. Poverty and Human Development 0-8018-2360-9. $12.95 paperback. Paul Isenman and Associates This volume reports on the third phase of the United Nations International Comparison Project. Oxford University Press, March 1982. 96 pages The ICP was established at the end of the 1960s to (including statistical appendix, bibliography). fill an important gap in the world's statistical LC-82 2153 system. For lack of a common currency, the gross domestic product (GDP) and other national- ISBN 0-19-520389. $7.95 paperback. accounts estimates of different countries could not be compared directly. Use of exchange rates for The text of this book is reprinted from the World such comparisons was known to yield estimates Bank's 1980 World Development Report, of which that misrepresented the actual purchasing power of it formed Part II. The volume contains a new currencies. introduction and concluding section. The volume relates and extends the methodology Human development-education and training, set out in the first two volumes. Like the first two, better health and nutrition, and fertility reduc- it combines a report on methodological work with tion-is shown to be important not only in actual comparisons. Particular attention is given to alleviating poverty directly, but also in increasing the problem of comparing services and to the the incomes of the poor and GNP growth. conflicting demands of regional and global esti- mates. The main results provide comparisons of The laudable objectives of human development, real GDP per capita for 34 countries in 1975. though, are far from easy to achieve. Nor are they j. P AO without cost. The volume draws on World Bank Economics Department. October 1981. 135 pages experience-in the analysis of projects, sectors, and (including 2 appendixes, bibliography). Stock No. national economies, and in research-to examine WP-0498. $5.00. the causes and effects of progress in human development and what it takes to implement No. 499. A Simultaneous Equation Model of successful programs in this area. Price and Quantity Adjustments in World Primary Commodity Markets. Erh-Cheng Hwa, Economic Analysis and Projections Department. October 1981. 48 pages (including references, WORLD BANK STAFF WORKING appendix). Stock No. WP-0499. $3.00. PAPERS No. 500. India: Papers on Demand and Supply No. 490. Sociocultural Aspects of Developing Prospects. J. Harrison, South Asia Programs Small-Scale Fisheries: Delivering Services to Department, Jon A. Hitchings, Treasurer's De- the Poor. Richard B. Pollnac. October 1981. iii + partment, and John Wall, South Asia Programs 61 pages (including references). Stock No. WP- Department. October 1981. 133 pages (including 5 0490. $5.00. appendixes, references, annex). Stock No. WP- 0500. $5.00. No. 491. The Functional Use of Mass Media. Shigenai Fut metial., Education Department. No. 501. Pollution Control in Sao Paulo, Brazil. Shigenari Futagami,eta.EdcioDprmn. Vinod Thomas, South Asia Country Programs October 1981. v + 124 pages (includng bibliogra- Ideparment Novme 1981 127 Pageanu phy).Department. November 1981. 127 pages (includ- ing annex, references). Stock No. WP-0501. $5.00. No. 492. The Political Market for Protection in Industrial Countries: Empirical Evidence. Kym Andersen and Robert E. Baldwin (consultants), Economic Analysis and Projections Department. WORLD BANK REPRINT SERIES October 1981. 27 pages (including references). Stock No. WP-0492. $3.00. The following recent articles, arising from research undertaken at or for the World Bank, have been No. 493. On Protectionism in the Netherlands. reprinted with permission and are available free of K.A. Koekkoek, J. Kol, and- L.B.M. Mennes charge. (consultants), Economic Analysis and Projections Department. October 1981. ii+68 pages (includ- No. 177. Perspectives and Problems of Devel- ing 3 annexes, references). Stock No. WP-0493. opment in Sub-Saharan Africa. Shankar $3.00. Acharya. From World Development, vol. 9 (1981), No. 494. Patterns of Barriers to Trade in pp. 109-47. Sweden: A Study in the Theory of Protection. No. 178. Malnutrition: Some Measurement and Lars Lundberg (consultant), Economic Analysis Policy Issues. T.N. Srinivasan. From Journal of and Projections Department. October 1981. 24 Development Economics, vol. 8 (1981), pp. 3-19. pages (including references). Stock No. WP-0494. $3.00. No. 179. Attitudes Toward Risk: Experimental Measurement in Rural India. Hans Binswanger. No. 497. Labor Productivity: Un Tour d'Hori- From American Journal of Agricultural Econom- zon. Susan Horton (consultant) and Timothy ics, vol. 62, no. 3 (August 1980), pp. 395-407. King, Development Economics Department. Octo- ber 1981. ii + 70 pages (including bibliography). No. 180. Trade in Manufactured Goods: Pat- Stock No. WP-0497. $5.00. terns of Change. Bela Balassa. From World No. 498. The Determinants of Labor Earnings Development, vol. 9, no. 3 (1981), pp. 263-75. in Developing Metropoli: Estimates from Bo- No. 181. Growth Policies and the Exchange gota, Colombia. Rakesh Mohan, Development Rate in Turkey. Bela Balassa. From The Role of Exchange Rate Policy in Achieving the Outward The Case of the Tobacco-Curing Industry in Orientation of the Turkish Economy, papers from a Thailand. Gunter Schramm and Mohan Muha- conference in Istanbul, July 20-211 1979 (Istanbul: singhe. From Energ, Systems and Policy, vol. 5, Meban Securities Brokerage and Finance Corpo- no. 2 (1981), pp. 117-39. ration, 1981), pp. 15-59. No. 188. Prospects for Export Growth in an No. 182. Fungibility and the Design and African Economy: The Kenya Case. Tigani E. Evaluation of Agricultural Credit Projects. J.D. Ibrahim. From 1liertfljahresberichte: Probleme der Von Pischke and Dale W. Adams. From American F, k.' ', : ,lander, no. 80 (June 1980), pp. 121- Journal of Agricultural Economics, vol. 62, no. 4 38. (November 1980), pp. 719-26; Towards an Oper- ational Approach to Savings for Rural Develo- No. 189. Market Equilibrium Computations in pers. J.D. Von Pischke. From Savings and Activity Analysis Models. Roger D. Norton and Development, vol. 2, no. 1 (1978), pp. 43-55; and Pasquale L. Scandizzo. From Operations Re- Rural Credit Project Design, Implementation, search, vol. 29, no. 2 (March-April 1981), pp. 243- and Loan Collection Performance. J.D. Von 62. Pischke. From ( .. -. and Development, vol. 4, No. 191. Agricultural Policies and Develop- ment. A Socioeconomic Investigation Applied No. 183. Resource Allocation to Housing In- to Sri Lanka. M9Iartha H. de Melo. From 7he vestment: Comments and Further Results. Ber- Journal of Policy Modeling, vol. 1, no. 2 (Mlay trand M. Renaud. From Economic Development 1979), pp. 217-34. and Cultural Change, vol. 28, no. 2, (January 1980). pp. 189-99, copyrighted by the University of Chicago, The Demand for Housing in Devel- oping Countries: The Case of Korea, Bertrand Renaud, James Follain, and Gill-Chin Lim, from WORLD BANK COUNTRY STUDIES Journal of Urban Economics, vol. 7 (1980), pp. 315-36; and Determinants of Home Ownership World Bank country studies are prepared mainly in a Developing Economy: The Case of Korea, for the Bank's own use with distribution restricted Bertrand Renaud, Gill-Chin Lim, and James to member governments and international organi- Follain, from Urban Studies, vol. 17 (1980), pp zations that deal with development problems. 13-23. Where the issues studied have attracted a wide interest, where it appears that the Bank's study No. 184. Project Evaluation in Risky Markets. could contribute substantially to knowledge and Pasquale L. Scandizzo. From Operatzons Research understanding of these issues, and where the in Agriculture and Water Resources. Edited by authorities of the country concerned are agreeable, Dan Yaron and Charles S. Tapiero, Proceedings of such reports are made available to a wider the ORAGWA International Conference in Jeru- audience. Potential readers are advised that these salem, November 25-29, 1979 (Amsterdam: North are working documents, not prepared with a view Holland, 1980), pp. 161-178. to broad distribution. No. 185. Principles of Modern Electricity Peru: Major Development Policy Issues and Pricing. Mohan Mlunasinghe. From Proceedings Recommendations. Ulrich Thumm, chief of mis- of the IEEE, vol. 69, no. 3 (March 1981), pp. 332- sion, and others. June 1981. vii + 220 pages 48. (including 3 annexes, statistical annex). English and Spanish. Stock Nos. RC-8102-E, RC-8102-S. No. 186. Rural Africa: Modernization, Equity, $20.00 paperback. and Long-term Development. Uma J. Lele. From Science, vol. 211, no. 6 (February 1981), pp. Brazil: Integrated Development of the North- 547-53. west Frontier. Denis J. Mahar, chief of mission, and others. June 1981. vi + 101 pages (including No. 187. Interrelationships in Energy Planning: annex). Stock No. RC-8101. $20.00 paperback. i