ABSTRACTS Policy Research To obtain copies of individual working papers, please call, W orking Paper Series email, or write to the contact person listed in the last Numbers 3469-3539 paragraph of each abstract The working papers may also be downfoaded from the DEC Research Website: http://econ.worldbank.org The World Bank Research Support Team Development Economics January-March 2005 ABSTRACTS JANUARY-MARCH2005 Policy Research Working Paper Series: Instructions for Submission 1. Prepare a 250 word abstract. The abstract should set out the main questions addressed in the paper and the key findings, putting them (if appropriate) in the context of the relevant literature. For empirical papers, briefly describe the data, including such details as the period covered, the countries or country groups included, the size of the sample, and the type of survey, as appropriate. The abstract will be published as submitted. 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Questions regarding the Policy Research Working Paper Series can be directed to Evelyn Alfaro-Bloch (ext. 33984). The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the view of the World Bank, its Executive Directors, or the countries they represent. Produced by the Research Support Team Policy Research Working Paper Series Abstracts Numbers 3469-3539 iv Index WPS # Author Working Paper Title Page 3525 William Blomquist, Ken S. Calbick, Institutional and Policy Analysis of River Basin Management: and Ariel Dinar The Fraser River Basin, Canada 18 3526 William Blomquist, Consuelo Giansante, Institutional and Policy Analysis of River Basin Management: Anjali Bhat, and Karin Kemper The Guadalquivir River Basin, Spain 18 3527 William Blomquist, Brian Haisman, Institutional and Policy Analysis of River Basin Management: Ariel Dinar, and Anjali Bhat, The Murray Darling River Basin, Australia 19 3528 William Blomquist, Andrzej Tonderski, Institutional and Policy Analysis of River Basin Management: and Ariel Dinar The Warta River Basin, Poland 19 3535 John Cubbin and Jon Stern Regulatory Effectiveness and the Empirical Impact of Variations in Regulatory Governance: Electricity Industry Capacity and Efficiency in Developing Countries 21 3536 Jon Stern and John Cubbin Regulatory Effectiveness: The Impact of Regulation and Regulatory Governance Arrangements on Electricity Industry Outcomes 21 Urban development 3477 Uwe Deichmann, Kai Kaiser, Agglomeration, Transport, and Regional Development Somik V. Lall, and Zmarak Shalizi in Indonesia 3 3507 Kuniko Fujita and Richard Child Hill Innovative Tokyo 12 3509 Weiping Wu Dynamic Cities and Creative Clusters 13 3529 David le Blanc Economic Evaluation of Housing Subsidy Systems: A Methodology with Application to Morocco 19 Transition 3504 Mihails Hazans Unemployment and the Earnings Structure in Latvia 11 Poverty 3473 Thomas Rutherford, David Tarr, Poverty Effects of Russia's WTO Accession: Modeling "Real" and Oleksandr Shepotylo Households and Endogenous Productivity Effects 2 3475 Paul B. Siegel Using an Asset-Based Approach to Identify Drivers of Sustainable Rural Growth and Poverty Reduction in Central America: A Conceptual Framework 2 3478 Dominique van de Walle Do Services and Transfers Reach Morocco's Poor? Evidence from Poverty and Spending Maps 4 3479 Kathleen Beegle, Rajeev Dehejia, Why Should We Care about Child Labor? The Education, and Roberta Gatti Labor Market, and Health Consequences of Child Labor 4 3487 Rosangela Bando, Luis F. Lopez-Calva, Child Labor, School Attendance, and Indigenous Households: and Harry Anthony Patrinos Evidence from Mexico 6 Index v WPS # Author Working Paper Title Page 3488 Kaspar Richter Well-Being during a Time of Change: Timor-Leste on the Path to Independence 6 3491 Signe-IV[ary McKernan, Mark M. Pitt, Use of the Formal and Informal Financial Sectors: Does and David Moskowitz Gender Matter? Empirical Evidence from Rural Bangladesh 7 3492 Agnes R. Quisumbing and Yisehac How Fair is Workfare? Gender, Public Works, Yohannes and Employment in Rural Ethiopia 7 3496 Dorte Verner What Factors Influence World Literacy? Is Africa Different? 9 3499 Claudia Bravo-Ortega and Agriculture and National Welfare Around the World: Daniel Lederman Causality and International Heterogeneity since 1960 10 3503 Martin Ravallion and Michael Lokshin Lasting Local Impacts of an Economywide Crisis 11 3510 Ruth Aisop and Nina Heinsohn Measuring Empowerment in Practice: Structuring Analysis and Framing Indicators 13 3516 Ajai Nair Sustainability of Microfinance Self Help Groups in India: Would Federating Help? 15 3521 Tahir Andrabi, Jishnu Das, Asim Ijaz Religious School Enrollement in Pakistan: Khwaja, and Tristan Zajonc A Look at the Data 16 3529 David le Blanc Economic Evaluation of Housing Subsidy Systems: A Methodology with Application to Morocco 19 3532 Richard H. Adams, Jr. Remittances, Household Expenditure, and Investment in Guatemala 20 Rural development 3475 Paul B. Siegel Using an Asset-Based Approach to Identify Drivers of Sustainable Rural Growth and Poverty Reduction in Central America: A Conceptual Framework 2 3479 Kathleen Beegle, Rajeev Dehejia, Why Should We Care about Child Labor? The Education, and Roberta Gatti Labor Market, and Health Consequences of Child Labor 4 3489 Patricia Silva Environmental Factors and Children's Malnutrition in Ethiopia 6 3492 Agnes R. Quisumbing and Yisehac How Fair is Workfare? Gender, Public Works, Yohannes and Employment in Rural Ethiopia 7 3494 Lire Ersado Small-Scale Irrigation Dams, Agricultural Production, and Health: Theory and Evidence from Ethiopia 8 3499 Claudio Bravo-Ortega and Agriculture and National Welfare Around the World: Daniel Lederman Causality and International Heterogeneity since 1960 10 3502 Xavier Gine Access to Capital in Rural Thailand: An Estimated Model of Formal versus Informal Credit 11 3510 Ruth Alsop and Nina Heinsohn Measuring Empowerment in Practice: Structuring Analysis and Framing Indicators 13 vi Index WPS # Author Working Paper Title Page 3516 Ajai Nair Sustainability of Microfinance Self Help Groups in India: Would Federating Help? 15 International economics 3471 George R. G. Clarke Do Government Policies that Promote Competition Encourage or Discourage New Product and Process Development in Low and Middle-Income Countries? 1 3473 Thomas Rutherford, David Tarr, Poverty Effects of Russia's WTO Accession: Modeling "Real" and Oleksandr Shepotylo Households and Endogenous Productivity Effects 2 3474 Joseph Frangois, Will Martin, Choosing Formulas for Market Access Negotiation: and V1ad Manole Efficiency and Market Access Considerations 2 3481 Stijn Claessens and Luc Laeven Financial Dependence, Banking Sector Competition, and Economic Growth 4 3482 Will Martin Outgrowing Resource Dependence: Theory and Some Recent Developments 5 3493 Baybars Karacaofali and Nuno Limao The Clash of Liberalizations: Preferential versus Multilateral Trade Liberalization in the European Union 8 3497 Nihal Pitigala What Does Regional Trade in South Asia Reveal about Future Trade Integration? Some Empirical Evidence 9 3498 Elena lanchovichina Duty Drawbacks, Competitiveness, and Growth: Are Duty Drawbacks Worth the Hassle? 9 3500 Ali Zafar Revenue and the Fiscal Impact of Trade Liberalization: The Case of Niger 10 3501 Jesper Jensen, Thomas Rutherford, Telecommunications Reform within Russia's Accession and David Tarr to the World Trade Organization 10 3505 Judith M. Dean, Mary E. Lovely, Are Foreign Investors Attracted to Weak Environmental and Hua Wang Regulations? Evaluating the Evidence from China 12 3513 Daniel Benitez and Antonio Estache How Concentrated are Global Infrastructure Markets? 14 3517 Matias Braun and Claudio Raddatz Trade Liberalization and the Politics of Financial Development 15 3518 Peri Silva The Role of Importers and Exporters in the Determination of the U.S. Tariff Preferences Granted to Latin America 16 3519 Gal Raballand and Enrique Aldaz-Carroll How Do Differing Standards Increase Trade Costs? 16 3524 David Dollar and Victoria Levin Sowing and Reaping: Institutional Quality and Project Outcomes in Developing Countries: The Case of Pallets 17 3530 George Allayannis, Gregory W. Brown, Legal Effectiveness and External Capital: and Leora F. Klapper The Role of Foreign Debt 20 3531 Daniel Lederman and Qaglar Ozden Geopolitical Interests and Preferential Access to U.S. Markets 20 3533 John Baffes and Harry de Gorter Disciplining Agricultural Support through Decoupling 21 Index vii WPS # Author Working Paper Title Page 3534 John Baffes and Gaston Gohou The Co-Movement between Cotton and Polyester Prices 21 3538 Reena Aggarwal, Sandeep Dahiya, American Depositary Receipt (ADR) Holdings and Leora Klapper of U.S.-Based Emerging Market Funds 22 Social development 3475 Paul B. Siegel Using an Asset-Based Approach to Identify Drivers of Sustainable Rural Growth and Poverty Reduction in Central America: A Conceptual Framework 2 3488 Kaspar Richter Well-Being during a Time of Change: Timor-Leste on the Path to Independence 6 3491 Signe-Mary McKernan, Mark M. Pitt, Use of the Formal and Informal Financial Sectors: Does and David Moskowitz Gender Matter? Empirical Evidence from Rural Bangladesh 7 3492 Agnes R. Quisumbing and Yisehac How Fair is Workfare? Gender, Public Works, Yohannes and Employment in Rural Ethiopia 7 3495 Claudio Bravo-Ortega Does Asymmetric Information Cause the Home Equity Bias? 8 3496 Dorte Verner What Factors Influence World Literacy? Is Africa Different? 9 3510 Ruth Alsop and Nina Heinsohn Measuring Empowerment in Practice: Structuring Analysis and Framing Indicators 13 3516 Ajai Nair Sustainability of Microfinance Self Help Groups in India: Would Federating Help? 15 3521 Tahir Andrabi, Jishnu Das, Asim Ijaz Religious School Enrollement in Pakistan: Khwaja, and Tristan Zajonc A Look at the Data 16 Labor and employment 3469 Norman V. Loayza, Ana Maria Oviedo, Regulation and Macroeconomic Performance and Luis Serv6n 1 3479 Kathleen Beegle, Rajeev Dehejia, Why Should We Care about Child Labor? The Education, and Roberta Gatti Labor Market, and Health Consequences of Child Labor 4 3487 Rosangela Bando, Luis F. Lopez-Calva, Child Labor, School Attendance, and Indigenous Households: and Harry Anthony Patrinos Evidence from Mexico 6 3492 Agnes R. Quisumbing and Yisehac How Fair is Workfare? Gender, Public Works, Yohannes and Employment in Rural Ethiopia 7 3494 Lire Ersado Small-Scale Irrigation Dams, Agricultural Production, and Health: Theory and Evidence from Ethiopia 8 3504 Mihails Hazans Unemployment and the Earnings Structure in Latvia 11 3522 Douglas Zhihua Zeng China's Employment Challenges and Strategies after the WTO Accession 17 3532 Richard H. Adams, Jr. Remittances, Household Expenditure, and Investment in Guatemala 20 viii Index WPS # Author Working Paper Title Page Macroeconomics and growth 3469 Norman V. Loayza, Ana Maria Oviedo, Regulation and Macroeconomic Performance and Luis Serv6n 1 3472 Philip Keefer and Razvan Vlaicu Democracy, Credibility, and Clientelism 2 3480 Kirk Hamilton, Giovanni Ruta, Capital Accumulation and Resource Depletion: and Liaila Tajibaeva A Hartwick Rule Counterfactual 4 3484 Claudio Bravo-Ortega and Jos6 The Relative Richness of the Poor? Natural Resources, De Gregorio Human Capital, and Economic Growth 5 3485 Thorsten Beck, Asl1 Demirgtig-Kunt, Finance, Firm Size, and Growth Luc Laeven, and Ross Levine 5 3490 Pierre-Richard Ag6nor, Nihal Bayraktar, Roads Out of Poverty? Assessing the Links between Aid, and Karim El Aynaoui Public Investment, Growth, and Poverty Reduction 7 3499 Claudio Bravo-Ortega and Agriculture and National Welfare Around the World: Daniel Lederman Causality and International Heterogeneity since 1960 10 3500 Ali Zafar Revenue and the Fiscal Impact of Trade Liberalization: The Case of Niger 10 3503 Martin Ravallion and Michael Lokshin Lasting Local Impacts of an Economywide Crisis 11 3506 Emmanuel Pinto Moreira and A Macroeconomic Framework for Quantifying Growth Nihal Bayraktar and Poverty Reduction Strategies in Niger 12 3512 Santiago Herrera Policy Mix, Public Debt Management, and Fiscal Rules: Lessons from the 2002 Brazilian Crisis 14 3517 Matias Braun and Claudio Raddatz Trade Liberalization and the Politics of Financial Development 15 3522 Douglas Zhihua Zeng China's Employment Challenges and Strategies after the WTO Accession 17 3539 Derek H. C. Chen and Hiau Looi Kee A Model on Knowledge and Endogenous Growth 22 Education 3478 Dominique van de Walle Do Services and Transfers Reach Morocco's Poor? Evidence from Poverty and Spending Maps 4 3479 Kathleen Beegle, Rajeev Dehejia, Why Should We Care about Child Labor? The Education, and Roberta Gatti Labor Market, and Health Consequences of Child Labor 4 3483 Damien de Walque Parental Education and Children's Schooling Outcomes: Is the Effect Nature, Nurture, or Both? Evidence from Recomposed Families in Rwanda 5 3484 Claudio Bravo-Ortega and Jos6 The Relative Richness of the Poor? Natural Resources, De Gregorio Human Capital, and Economic Growth 5 3487 Rosangela Bando, Luis F. Lopez-Calva, Child Labor, School Attendance, and Indigenous Households: and Harry Anthony Patrinos Evidence from Mexico 6 ix Index WPS # Author Working Paper Title Page 3496 Dorte Verner What Factors Influence World Literacy? Is Africa Different? 9 3509 Weiping Wu Dynamic Cities and Creative Clusters 13 3521 Tahir Andrabi, Jishnu Das, Asim Ijaz Religious School Enrollement in Pakistan: KhwaJa, and Tristan Zajonc A Look at the Data 16 3523 Christel Vermeersch and Michael Kremer School Meals, Educational Achievement, and School Competition: Evidence from a Randomized Evaluation 17 3537 Ludger Woessmann and Thomas Fuchs Families, Schools, and Primary School Learning: Evidence for Argentina and Colombia in an International Perspective 22 3538 Reena. Aggarwal, Sandeep Dahiya, American Depositary Receipt (ADR) Holdings and Leora Klapper of U.S.-Based Emerging Market Funds 22 3539 Derek H. C. Chen and Hiau Looi Kee A Model on Knowledge and Endogenous Growth 22 Health and population 3489 Patricia Silva Environmental Factors and Children's Malnutrition in Ethiopia 6 3494 Lire Ersado Small-Scale Irrigation Dams, Agricultural Production, and Health: Theory and Evidence from Ethiopia 8 3508 Ahmed Mushfiq Mobarak, Andrew Sunil The Political Economy of Health Services Provision Rajkumar, and Maureen Cropper and Access in Brazil 12 3523 Christel Vermeersch and Michael Kremer School Meals, Educational Achievement, and School Competition: Evidence from a Randomized Evaluation 17 Public sector management 3472 Philip Keefer and Razvan Vlaicu Democracy, Credibility, and Clientelism 2 3494 Lire Ersado Small-Scale Irrigation Dams, Agricultural Production, and Health: Theory and Evidence from Ethiopia 8 3508 Ahmed Mushfiq Mobarak, Andrew Sunil The Political Economy of Health Services Provision Rajkumar, and Maureen Cropper and Access in Brazil 12 3513 Daniel Benitez and Antonio Estache How Concentrated are Global Infrastructure Markets? 14 3514 Antonio Estache, Sergio Perelman, Infrastructure Performance and Reform in Developing and Lourdes Trujillo and Transition Economies: Evidence from a Survey of Productivity Measures 14 3515 Maria Manuela GonzAlez Serrano and Reforms and Infrastructure Efficiency in Spain's Lourdes Trujillo Container Ports 15 Policy Research Working Paper Series 1 3469. Regulation and 3470. PPI Partnerships versus PPI 3471. Do Government Policies that Macroeconomic Divorces in Developing Countries Promote Competition Encourage Performance (Or are We Switching from PPPI to or Discourage New Product and PPDI?) Process Development in Low and Norman V. Loayza, Ana Maria Oviedo, Middle-Income Countries? and Luis Serv6n Antonio Estache (January 2005) (January 2005) George R. G. Clarke (January 2005) Regulation is purportedly enacted to serve Thirty years ago, in 1974, Chile launched specific social purposes. In reality, how- the first large-scale privatization in a de- Previous work has shown that firms in low ever, it follows a more complex political veloping country. About 15 years later, and middle-income countries in Eastern economy process, where legitimate social Argentina provided a new model of global Europe and Central Asia that feel greater goals are mixed with the objectives of infrastructure management. Since then a pressure to innovate from their competi- particular interest groups. Whatever its variety of public-private partnerships in tors are more likely to introduce new prod- justification and objectives, regulation can infrastructure have been adopted ucts and services than firms that do not have potentially significant macroeco- throughout the developing and transition feel pressure (Carlin and others 2001; nomic consequences by helping or ham- world. These experiences add up to a large World Bank 2004). However, competition pering the dynamics of economic restruc- and heterogeneous enough sample of ex- also appears to affect innovation in other turing and resource reallocation that un- periences from which some fairly robust ways. In particular, firms in these coun- derlie the growth process. Loayza, Oviedo, conclusions on who benefited from the tries that face greater price competition and Serv6n provide an empirical analysis reforms and who did not. Because many appear to be less likely to innovate than of the macroeconomic impact of regula- of these experiences are also turning sour other firms (Carlin and others 2001). tion. They first characterize the stylized and the "privatization" fad of the 1990s Clarke assesses how competition and facts on regulation across the world using seems to be turning into an trade policy affect these different aspects a set of newly constructed, comprehensive "antiprivatization" fad, it seems impor- of competition and, consequently, assesses indicators of regulation in a large number tant to separate facts from emotions. their net impact on innovation. He finds of countries in the 1990s. Using these in- Estache argues that the wide differences that reducing tariffs and enacting and dicators, the authors study the effects of in interpretations of the facts can be ex- enforcing competition laws modestly in- regulation on economic growth and mac- plained by wide differences in the assess- creases both the pressure that firms feel roeconomic volatility using cross-country ment criteria used by analysts, including regarding innovation and the level of price regression analysis. In particular, they the definition of the baseline data chosen competition in the domestic economy. The consider whether the effects of regulation to assess the incremental effect of reforms. net impact that lower tariffs have on new are affected by the country's level of insti- It is also driven by the sectors, the regions, product and process development appears tutional development. Finally, their and probably most important, the actors to be negative but small-for the most part analysis controls for the likely on which the analysis tends to focus. Once the opposing effects cancel out. In con- endogeneity of regulation with respect to all these factors have been considered, a trast, stricter competition laws and bet- macroeconomic performance. The authors relatively fair and quantitative assess- ter enforcement of those laws appear to conclude that a heavier regulatory burden ment of the prospects of the public-private increase the likelihood of new product and reduces growth and increases volatility, relationship in infrastructure is possible. process development, especially when although these effects are smaller the This paper-a product of the Office of competition is treated as endogenous to higher the quality of the overall institu- the Vice President, Infrastructure Net- innovation. tional framework. work-is part of a larger effort in the net- This paper-a product of the Growth This paper-a product of the Growth work to stimulate a debate on the effec- and Investment Team, Development Re- and Investment Team, Development Re- tiveness of infrastructure reforms. Copies search Group-is part of a larger effort in search Group-is part of a larger effort in of the paper are available free from the the group to understand the determinants the group to understand the process of World Bank, 1818 H Street NW, Washing- of competition. Copies of the paper are economic reform. Copies of the paper are ton, DC 20433. Please contact Antonio available free from the World Bank, 1818 available free from the World Bank, 1818 Estache, room H3-145, telephone 202-458- H Street NW, Washington, DC 20433. H Street NW, Washington, DC 20433. 1442, fax 202-522-2461, email address Please contact Paulina Sintim-Aboagye, Please contact Tourya Tourougui, mail aestache@worldbank.org. Policy Research mail stop MC3-300, telephone 202-473- stop MC3-301, telephone 202-458-7431, Working Papers are also posted on the 7644, fax 202-522-1155, email address fax 202-522-3518, email address Web at http://econ.worldbank.org. (20 psintimaboagye@worldbank.org. Policy ttourougui@worldbank.org. Policy Re- pages) Research Working Papers are also posted search Working Papers are also posted on on the Web at http://econ.worldbank.org. the Web at http://econ.worldbank.org. The The author may be contacted at authors may be contacted at nloayza@ gclarke@worldbank.org. (41 pages) worldbank.org or 1serven@worldbank.org. (44 pages) 2 Policy Research Working Paper Series 3472. Democracy, Credibility, 3473. Poverty Effects of Russia's search Working Papers are also posted on and Clientelism WTO Accession: Modeling "Real" the Web at http://econ.worldbank.org. The Households and Endogenous authors may be contacted at rutherford@ Philip Keefer and Razvan Vlaicu Productivity Effects colorado.edu, dtarr@worldbank.org, or (January 2005) oshepotylo@worldbank.org. (64 pages) Thomas Rutherford, David Tarr, Keefer and Vlaicu demonstrate that and Oleksandr Shepotylo sharply different policy choices across (January 2005) 3474. Choosing Formulas for democracies can be explained as a conse- Market Access Negotiation: quence of differences in the ability of po- Rutherford, Tarr, and Shepotylo use a Efficiency and Market Access litical competitors to make credible pre- computable general equilibrium compara- Considerations electoral commitments to voters. Politi- tive static model of the Russian economy cians can overcome their credibility defi- to assess the impact of accession to the Joseph Franqois, Will Martin, and Vlad Manole cit in two ways. First, they can build repu- World Trade Organization (WTO) on in- (January 2005) tations. This requires that they fulfill pre- come distribution and the poor. Their conditions that in practice are costly- model is innovative in that they incorpo- An important issue in multilateral trade informing voters of their promises, track- rate all 55,000 households from the Rus- negotiations is the approach taken to irg those promises, and ensuring that sian Household Budget Survey as "real" reduce tariffs. Franqois, Martin, and voters turn out on election day. Alterna- households in the model. This is accom- Manole believe that there are important tively, they can rely on intermediaries- plished because they develop a new algo- advantages in formula approaches and patrons-who are already able to make rithm for solving general equilibrium survey a range of options between the credible commitments to their clients. models with a large number of agents. In sharply top-down Swiss formula and pro- Endogenizing credibility in this way, the addition, they include foreign direct in- portional cuts in tariffs. Over the range authors find that targeted transfers and vestment and Dixit-Stiglitz endogenous the authors consider, they find that the corruption are higher and public good productivity effects in their trade and economic efficiency impacts for the im- provision lower than in democracies in poverty analysis. In the medium term, the porter are not greatly influenced by the which political competitors can make cred- authors find that virtually all households extent to which higher tariffs face bigger ible pre-electoral promises. They also ar- gain from Russian WTO accession, with cuts. However, top-down approaches ap- gue that in the absence of political cred- 99.9 percent of the estimated gains falling pear to be more effective in reducing tar- ibility, political reliance on patrons en- within a range between 2 and 25 percent iff escalation, and provide greater market hances welfare in the short run, in con- increases in household income. They show access gains to poor countries. trast to the traditional view that that their estimates are decisively affected This paper-a product of the Trade clientelism in politics is a source of signifi- by liberalization of barriers against foreign Team, Development Research Group-is cant policy distortion. However, in the direct investment in business services sec- part of a larger effort in the group to un- long run reliance on patrons may under- tors and endogenous productivity effects in derstand the impact of trade policies on mine the emergence of credible political business services and goods. The authors trade performance and development op- parties. The model helps to explain sev- use their integrated model to assess the portunities. Copies of the paper are avail- eral puzzles. For example, public invest- error associatedwitha"top down"approach able free from the World Bank, 1818 H ment and corruption are higher in young to micro-simulation. They find that ap- Street NW, Washington, DC 20433. democracies than old; and democratizing proximation errors introduced by failing to Please contact Paulina Flewitt, room reforms succeeded remarkably in Victo- account for income effects in the conven- MC3-333, telephone 202-473-2724, fax rian England, in contrast to the more tional sequential approach are very small. 202-522-1159, email address pflewitt@ difficult experiences of many democratiz- However, data reconciliation between the worldbank.org. Policy Research Working ing countries, such as the Dominican national accounts and the household bud- Papers are also posted on the Web at Republic. get survey is important to the results. De- http://econ.worldbank.org. The authors This paper-a product of the Growth spite the estimated gains for virtually all may be contacted at francois@few.eur.nl, and Investment Team, Development Re- households in the medium term, many wmartinl@worldbank.org, or vmanole@ search Group-is part of a larger effort in households may lose in the short term be- worldbank.org. (30 pages) the group to investigate the political cause of the costs of transition. So, safety economy of development. Copies of the nets are crucial for the poorest members of paper are available free from the World society during the transition. 3475. Using an Asset-Based Bank, 1818 H Street NW, Washington, DC This paper-a product of the Trade Approach to Identify Drivers of 20433. Please contact Paulina Sintim- Team, Development Research Group-is Sustainable Rural Growth and Aboagye, room MC3-422, telephone 202- part of a larger effort in the group to as- Poverty Reduction in Central 473-7644, fax 202-522-1155, email ad- sess the impact of trade on poverty. Cop- America: A Conceptual Framework dress psintimaboagye@worldbank.org. ies of the paper are available free from the Policy Research Working Papers are also World Bank, 1818 H Street NW, Washing- Paul B. Siegel posted on the Web at http://econ. ton, DC 20433. Please contact Paulina (January 2005) worldbank.org. Philip Keefer may be con- Flewitt, room MC3-333, telephone 202- tacted at pkeeferCworldbank.org. (45 473-7274, fax 202-522-1159, email ad- The asset-based approach considers links pages) dress pflewitt@worldbank.org. Policy Re- between households' productive, social, Policy Research Working Paper Series 3 and locational assets; the policy, institu- particular, the role of bank financing in formal manufacturing concentration in tional, and risk context; household behav- (short-term and long-term), trade credit, a developing economy? Deichmann, Kai- ior as expressed in livelihood strategies; intra-business group borrowing, and for- ser, Lall, and Shalizi examine the aggre- and well-being outcomes. For sustainable eign financing. The authors examine fi- gate and sectoral geographic concentra- poverty reducing growth, it is critical to nancing patterns over time and explore tion of manufacturing industries for Indo- examine household asset portfolios and differences across firms by sector, age, nesia, and estimate the impact of factors understand how assets interact with the ownership type, export orientation, and, influencing location choice at the firm context to influence the selection of liveli- in particular, size. In terms of trends, they level. They distinguish between natural hood strategies, which in turn determine find that while debt to asset ratios have advantage, including infrastructure en- well-being. been relatively stable, nominal debt dowments, wage rates, and natural re- Policy reforms can change the context growth has slowed down in recent years. source endowments, and production exter- and income-generating potential of assets. At the same time, firms' repayment capac- nalities, arising from the co-location of Investments can add new assets or in- ity, as measured by the interest coverage firms in the same or complementary in- crease the efficiency of existing household ratio, has exhibited a U-shaped pattern dustries. The methodology pays special assets, and also improve households' risk falling during 1997-99 and recovering in attention to empirically distinguishing the management capacity to protect assets. recent years. Throughout the period of impact of measured production externali- After all is said and done, a household's study, bank financing as a share of total ties from unobserved local characteristics. asset portfolio will determine whether debt has increased, while borrowing from Depending on the sector, the authors find growth and poverty reduction can be nonbank financial institutions fell that a mix of both forms of regional advan- achieved and sustained over time. sharply. In terms of differences across tage explains the geographic distribution The asset-based framework is amend- firms, the most robust finding is that debt of firms. Based on the estimated location able to different analytical techniques. levels increase with firm size. Smaller choice model, they illustrate the potential Siegel suggests combining quantitative firms have especially less debt relative to impacts of policy interventions on manu- and qualitative spatial and household larger firms if they are young (below 10 facturing distribution by simulating the level analyses (and linked spatial and years since incorporation), if they are in effectiveness of transport improvements household level analyses) to deepen un- the manufacturing sector, and if they are on relocation of firms. The findings sug- derstanding of the complex relationships located in Southern India. Furthermore, gest that improvements in transport in- between assets, context, livelihood strat- while the ratio of debt to assets has been frastructure may only have limited effects egies, and well-being outcomes. relatively stable for large firms, the au- in attracting industry to secondary indus- This paper-a joint product of the En- thors observe a significant decline for trial centers outside of Java, especially in vironmentally and Socially Sustainable smaller firms. Overall, the findings pre- sectors already established in leading re- Development Vice Presidency and the sented provide suggestive (but not defi- gions. The findings underscore the chal- Rural Development. Family, Latin nite) evidence of stronger credit con- lenges for addressing the industrial for- America and the Caribbean Region-is straints for smaller firms. tunes of lagging regions, either through part of a larger effort in the Bank to This paper-a product of the Finance local decentralized policy interventions or strengthen analyses and strategies for Team, Development Research Group-is national policies focused on infrastructure rural development, and address policy part of a larger effort in the department development. issues and investment priorities. Copies to study access to finance. Copies of the This paper-a product of the Infrastruc- of the paper are available free from the paper are available free from the World ture and Environment Team, Development World Bank, 1818 H Street NW, Washing- Bank, 1818 H Street NW, Washington, DC Research Group-is part of a larger effort ton, DC 20433. Please contact Diana 20433. Please contact Agnes Yaptenco, in the group to examine the impacts of spa- Rebolledo, room 16-024, telephone 202- room MC3-439, telephone 202-473-1823, tialpolicyinterventionsonthelocationand 473-9205, email address drebolledo@ fax 202-522-3518, email address performance of economic activity. Copies of worldbank.org. Policy Research Working ayaptenco@worldbank.org. Policy Re- the paper are available free from the World Papers are also posted on the Web at search Working Papers are also posted on Bank, 1818 H Street NW, Washington, DC http://econ.worldbank.org. The author the Web at http'//econ.worldbank.org. The 20433. Please contact Viktor Soukhanov, may be contacted at psiegel@worldbank. authors may be contacted at ilove@ room MC2-523, telephone 202-473-5721, org. (29 pages) worldbank.org or mmartinezperia@ fax 202-522-3230, email address worldbank.org. (67 pages) vsoukhanov@worldbank.org. Policy Re- search Working Papers are also posted on 3476. Firm Financing in India: the Web at http//econ.worldbank.org. Recent Trends and Patterns 3477. Agglomeration, Transport, Somik Lall may be contacted at and Regional Development in slalll@worldbank.org. (39 pages) Inessa Love and Maria Soledad Martinez Peria Indonesia (January 2005) Uwe Deichmann, Kai Kaiser. Somik V. Lall, Using balance sheet information for and Zmarak Shalizi nearly 6,000 firms between 1994-2003, (January 2005) Love and Martinez Peria investigate re- cent firm financing patterns in India. They How effective are public interventions in document the overall use of debt and, in addressing significant regional disparities 6 Policy Research Working Paper Series part of a larger effort in the group to un- 202-473-5818, fax 202-676-9810, email experience differential adjustments in derstand the growth finance link. Copies address dbillups@worldbank.org. Policy material well-being and empowerment. of the paper are available free from the Research Working Papers are also posted Richter evaluates self-rated welfare and World Bank, 1818 H Street NW, Washing- on the Web at http://econ.worldbank.org. power changes in Timor-Leste covering ton, DC 20433. Please contact Mani Anwar Shah may be contacted at the period prior to the 1999 referendum Jandu, room MC3-456, telephone 202- ashah@worldbank.org. (34 pages) on independence from Indonesia to the eve 473-3103, fax 202-522-1155, email of independence in end 2001. Drawing on address mjandu@worldbank.org. Policy the first nationally representative house- Research Working Papers are also posted 3487. Child Labor, School hold survey and village census, he shows on the Web at http://econ.worldbank.org. Attendance, and Indigenous how subjective, objet-tive, and recall infor- The authors may be contacted at tbeck@ Households: Evidence from Mexico mation can be combined to provide a rich worldbank.org, ademirguckunt@ profile oftrends in well-being from the pre- worldbank.org, or llaeven@worldbank. Rosangela Bando, Luis F. Lopez-Calva, to post-conflict stage. The author's analy- org. (37 pages) and Harry Anthony Patrinos sis shows that changes in self-rated wel- (January 2005) fare and power broadly corresponded to changes recorded by objective indicators. 3486. Localization and Corruption: The authors use panel data for Mexico for While economic well-being improved little, Panacea or Pandora's Box? 1997 to 1999 to test several assumptions empowerment increased dramatically. regarding the impact of a conditional cash The changes were not uniform across the Tugrul Gurgur and Anwar Shah transfer program on child labor, empha- population but some groups benefited (January 2005) sizing the differential impact on indig- more than others. The evidence for Timor- enous households. Using data from the Leste is consistent with these hypotheses: An extensive literature on the relationship conditional cash transfer program in * Economic resources increase welfare, between decentralization (or localization) Mexico-PROGRESA (OPORTUNI- and more than power. and corruption has developed in recent DADES)-they investigate the interaction * Social resources increase power, and years. While some authors argue that between child labor and indigenous house- more than welfare. there is a positive relationship between holds. While indigenous children had a * Welfare winners have low initial decentralization and corruption, others greater probability ofworking in 1997, this economic resources. claim that decentralization in fact leads probability is reversed after treatment in * Power winners have high social to a reduction in the level of corruption. the program. Indigenous children also had resources. This important policy question has not yet lower school attainment compared with * Economic shocks reduce welfare and been laid to rest since previous empirical Spanish-speaking or bilingual children. power, but welfare more than power, work simply uses eclectic regressions and After the program, school attainment This paper-a product of the Poverty lacks a conceptual framework to discover among indigenous children increased, re- Reduction and Economic Management the root causes of corruption. Gurgur and ducing the gap. Sector Unit, East Asia and Pacific Re- Shah attempt to fill this void by present- This paper-a product of the Education gion-is part of a larger effort in the re- ing a framework in identifying the driv- Sector Unit, Latin America and the Car- gion to promote economic research on ers of corruption both conceptually and ibbean Region-is part of a larger effort small countries. Copies of the paper are empirically to isolate the role of central- in the region to evaluate human develop- available free from the World Bank, 1818 ized decisionmaking on corruption. The ment programs. Copies of the paper are H Street NW, Washington, DC 20433. following results emerge: available free from the World Bank, 1818 Please contact Tara Mailei, room MC8- * For a sample of 30 countries (devel- H Street NW, Washington, DC 20433. 128, telephone 202-458-7347, fax 202-522- oping and industrial), corruption is caused Please contact Maria Colchao, room 17- 1560, email address tmailei@worldbank. by a lack of service orientation in the pub- 162, telephone 202-473-8048, fax 202-522- org. Policy Research Working Papers are lic sector, weak democratic institutions, 3135, email address mcolchao@ also posted on the Web at http:// economic isolation (closed economy), colo- worldbank.org. Policy Research Working econ.worldbank.org. The author may be nial past, internal bureaucratic controls, Papers are also posted on the Web at contacted atkrichter@worldbank.org. (37 and centralized decisionmaking. httpi/econ.worldbank.org. Harry Patrinos pages) * Decentralization is found to have a may be contacted at hpatrinos@ negative impact on corruption, with the worldbank.org. (44 pages) effect being stronger in unitary than in 3489. Environmental Factors and federal countries. Children's Malnutrition in Ethiopia This paper-a product of the Poverty 3488. Well-Being during a Time of Reduction and Economic Management Change: Timor-Leste on the Path Patricia Silva Division, World Bank Institute-is part of to Independence (January 2005) a larger effort in the institute to exchange ideas on the reform of public sector gover- Kaspar Richter Ethiopia has one of the highest child mal- nance. Copies of the paper are available (January 2005) nutrition rates in the world. A consider- free from the World Bank, 1818 H Street able effort to monitor child malnutrition NW, Washington, DC 20433. Please con- Countries undergoing fundamental eco- rates over the past two decades shows tact Diane Billups, room J4-259, telephone nomic and political transformations might that, despite some improvements, ap- Policy Research Working Paper Series 7 proximately halfof the children under five captures links between aid, public invest- * How important are the formal and are still malnourished. Much of the bur- ment, growth, and poverty. Public invest- informal financial sectors? den of deaths resulting from malnutrition, ment is disaggregated into education, in- * What are the primary sources of gifts estimated to be over half of childhood frastructure, and health, and affects both and loans within those sectors? deaths in developing countries, can be aggregate supply and demand. Dutch dis- * Do men and women rely on different attributed to mild or moderate malnutri- ease effects are captured by accounting for sources for finances (for example, formal tion. Several biological and social eco- changes in the relative price of domestic versus informal) or different types of fi- nomic factors contribute to malnutrition. goods. The authors assess the impact of nances (for example, transfers versus Using the 2000 Ethiopia Demographic policy shocks on poverty by linking the loans)? and Health Survey data, Silva examines model to a household survey. They cali- * How have the financial sectors the impact of access to basic environmen- brate the model for Ethiopia and simulate evolved during the 1990s? tal services, such as water and sanitation, the changes in the allocation of aid and * What is the relationship between the on the probability children are stunted public investment. The authors also cal- formal and informal sectors? and underweight. She focuses on the im- culate the amount by which foreign aid This paper-a product of the Gender pact ofexternalities associated with access should increase to reach the poverty tar- Division, Poverty Reduction and Eco- to these services. The author finds that gets of the Millennium Development nomic Management Network-is part of biological factors (such as child's age and Goals. a larger effort in the network to integrate mother's height) and social economic fac- This paper-a product of Poverty Re- gender into economic policy work. Copies tors (such as household wealth and duction and Economic Management 2, of the paper are available free from the mother's education) are important deter- Africa Technical Families-is part of a World Bank, 1818 H Street NW, Washing- minants of a child's nutritional status. larger effort in the region to formulate ton, DC 20433. Please contact Dawn This is consistent with the findings of most country-specific growth strategies. Copies Ballantyne, room MC4-432, telephone studies in the literature. With respect to of the paper are available free from the 202-458-7198, fax 202-522-3237, email the environmental Factors, the author finds World Bank, 1818 H Street NW, Washing- address dballantyne@worldbank.org. that there are indeed significant externali- ton, DC 20433. Please contact Dora Har- Policy Research Working Papers are also ties associated with access to water and ris, room J10-274, telephone 202-473- posted on the Web at http://econ. sanitation at the community level. The 4846, fax 202-614-0759, email address worldbank.org. Signe-Mary McKernan external impacts at the community level of daharris@worldbank.org. Policy Research may be contacted at smckerna@ui.urban. access to these services are an important Working Papers are also posted on the org. (65 pages) determinant of the probability a child is Web at http://econ.worldbank.org. The underweight. The results also show that authors may be contacted at pagenor@ the external impact of access to water is worldbank.org, nbayraktar@worldbank. 3492. How Fair is Workfare? larger for children living in rural areas. org, or kelaynaoui@worldbank.org. (75 Gender, Public Works, and This paper-a product of the Environ- pages) Employment in Rural Ethiopia ment Department-is part of a larger ef- fort in the department to understand the Agnes R. Quisumbing and Yisehac Yohannes linkages between poverty and the environ- 3491. Use of the Formal and (January 2005) ment. Copies of the paper are available Informal Financial Sectors: free from the World Bank, 1818 H Street Does Gender Matter? Empirical Quisumbing and Yohannes use the Ethio- NW, Washington, DC 20433. Please con- Evidence from Rural Bangladesh pian Rural Household Survey to examine tact Alexandra Sears, room MC5-206, tele- the gender dimensions of public works. phone 202-458-2819, fax 202-522-1735, Signe-Mary McKernan, Mark M. Pitt, They use three rounds of a panel con- email address Esears@worldbank.org. and David Moskowitz ducted in 1994-95 to explore the determi- Policy Research Working Papers are also (January 2005) nants of participation in, days worked, posted on the Web at http://econ. wages, and earnings from wage labor, worldbank.org. The author may be con- Access to transfers and credit, whether food-for-work (FFW), and self-employ- tacted at psilva@worldbank.org. (33 cash or in-kind, is a major source of pov- ment. Then they analyze public works pages) erty alleviation and income generation in data collected in 1997, together with pro- many developing countries around the gram data collected in 2003. world. Women may especially benefit from FFW operates in a similar fashion with 3490. Roads Out of Poverty? transfers and credit in countries such as other labor markets in Ethiopia where Assessing the Links between Aid, Bangladesh, where they often have few female participation is low. Gender dif- Public Investment, Growth, and work alternatives. In this paper, the au- ferences are important in the participa- Poverty Reduction thors descriptively examine the formal tion decision, but operate differently in and informal financial sectors of rural different types of labor markets. Better- Pierre-Richard Ag6nor, Nihal Bayraktar, Bangladesh, placing special emphasis on educated women are more likely to par- and Karim El Aynaoui differences between men and women. ticipate in the wage labor market, while (January 2005) Their analysis uses unique data on the higher livestock holdings diminish partici- credit and transfer behaviors of 1,800 pation more for women. Females with Ag6nor, Bayrakta:r, and El Aynaoui de- households in rural Bangladesh. The au- more schooling are also more likely to velop a macroeconomic framework that thors focus on five important questions: participate in FFW. Men's and women's 10 Policy Research Working Paper Series paper are available free from the World worldbank.org. Policy Research Working ment costs would be significant, particu- Bank, 1818 H Street NW, Washington, DC Papers are also posted on the Web at larly in the machinery and transport sec- 20433. Please contact Sarah Lipscomb, http://econ.worldbank.org. Daniel tors. Third, there are asymmetric gains room MC4-424, telephone 202-473-3718, Lederman may be contacted at and losses from regional integration and fax 202-522-2530, email address dlederman@worldbank.org. (50 pages) tariff changes, and a 10 percent uniform economicpolicy@worldbank.org. Policy Re- tariff would have the greatest impact on search Working Papers are also posted on Benin and Senegal and some impact on the Web at http://econ.worldbank.org. The 3500. Revenue and the Fiscal Niger and Togo. In sum, further trade lib- author may be contacted at Impact of Trade Liberalization: eralization in Niger will have significant eianchovichina@worldbank.org. (56 pages) The Case of Niger fiscal costs, partially offset by trade cre- ation through increased imports. Ali Zafar This paper-a product of Poverty Re- 3499. Agriculture and National (February 2005) duction and Economic Management 3, Welfare Around the World: Africa Technical Families-is part of a Causality and International Using data collected during several mis- larger effort in the region to understand Heterogeneity since 1960 sions, Zafar finds that the principal rea- the reasons for low resource mobilization. sons for low revenue mobilization are (1) Copies of the paper are available free from Claudio Bravo-Ortega and Daniel Lederman the adverse fiscal impact of trade liberal- the World Bank, 1818 H Street NW, (February 2005) ization, (2) the defiscalization of agricul- Washington, DC 20433. Please contact ture in the 1970s, (3) the collapse of the Josiane Luchmun, room J7-276, telephone Calculations of marginal welfare effects uranium boom in the 1980s, and (4) the 202-473-7530, fax 202-473-8466, email suggest that agricultural development has poor record of the VAT in mobilizing rev- address jluchmun@worldbank.org. Policy had important positive effects on national enue. The large reduction in tariffs during Research Working Papers are also posted welfare, especially in developing coun- the 1980s and 1990s in the context of struc- on the Web at http://econ.worldbank.org. tries. Latin American and Caribbean tural adjustment programs and West Afri- The author may be contacted at countries have also benefited from agri- can regional integration initiatives had azafar@worldbank.org. (27 pages) cultural growth, but nonagricultural pro- adverse effects on trade tax revenue dur- duction has had marginal welfare effects ing the period 1980-2003. But higher im- that are greater in magnitude than those portlevels after 1994succeeded in partially 3501. Telecommunications Reform provided by agricultural activities. In con- mitigating the revenue losses. The experi- within Russia's Accession to the trast, the industrialized, high-income ence ofNiger shows that without accompa- World Trade Organization countries experienced marginal welfare nying macroeconomic policies, parallel gains from nonagricultural activities that improvements in tax and customs admin- Jesper Jensen, Thomas Rutherford, are much greater than those derived from istration, and success in mobilizing domes- and David Tarr agriculture, whose impact is actually tic taxes, most notably the VAT, trade re- (February 2005) negative. These calculations of marginal form can have adverse fiscal consequences. welfare effects across regions depend on Using a SMART model partial equilib- In World Trade Organization (WTO) ac- econometric estimates of elasticities link- rium analysis developed by UNCTAD for cession negotiations, telecommunications ing agricultural and nonagricultural eco- researchers and negotiators at multilat- is always a sector that receives close scru- nomic activities to four elements in a na- eral trade rounds, the author simulated tiny by the WTO Working Party, and the tional welfare function: national GDP per three different tariff shocks to test the fis- extent of market access and nondiscrimi- capita, average income of the poorest cal and trade implications of additional natory treatment of multinational tele- households within countries, environmen- trade liberalization in Niger. First, the communications companies in Russia has tal outcomes concerning air and water preferred tariff regime in terms of overall been a significant issue in Russia's acces- pollution and deforestation, and macro- fiscal and job creation impact was the sion negotiations. Jensen, Rutherford, and economic volatility. The econometric harmonized Swiss formula in contrast to Tarr use a computable general equilib- analyses are motivated by theoretical a 10 and 15 percent uniform tariff. Sec- rium model of the Russian economy to treatments of key issues. The empirical ond, a possible Regional Economic Part- assess the role of telecommunications in models are estimated with various econo- nership Agreement (REPA) between the the discussions regarding Russian acces- metric techniques that deal with issues of European Union and l'Union Economique sion to the WTO. The results show that causality and international heterogeneity. et Mondtaire Ouest-Africaine (UEMOA) by reduction of barriers to foreign direct in- This paper-a product of the Office of 2015 that would abolish duties on EU vestment in telecommunications will the Chief Economist, Latin America and imports to the UEMOA countries would bring substantial gains to the Russian the Caribbean Region-is part of a larger have negative fiscal effects on Niger of economy, including an increase in the effort in the region to study the rural con- more than 1 percent of GDP, positive ef- productivity of Russian labor and capital. tribution to development. Copies of the fects on trade creation of about 1.5 percent Despite the fact that multinationals use paper are available free from the World of GDP, and ambiguous effects on local Russian labor less intensively than Rus- Bank, 1818 H Street NW, Washington, DC industry. While there will be some welfare sian firms, demand for Russian labor 20433. Please contact Patricia Soto, room gains for consumers and importers from employed in telecommunications should 18-081, telephone 202-473-7892, fax 202- lower import tariffs and the possibility of increase, following reductions in barriers 522-7528, email address psoto@ trade creation, the fiscal losses and adjust- to foreign direct investment that are in- Policy Research Working Paper Series 11 cluded in the context of WTO accession. 20433. Please contact Mani Jandu, mail ployment rates, despite gradual decrease, This is because the overall demand for stop MC3-456, telephone 202-473-3103, have remained high. Hazans explores the telecommunication services should in- fax 202-522-1155, email address mysteries of unemployment in Latvia. crease due to the growth effects of the lib- mjandu@worldbank.org. Policy Research He analyzes labor flows between eralization of barriers against foreign di- Working Papers are also posted on the employment, unemployment, and rect investment generally and the reduc- Web at http://econ.worldbank.org. The nonparticipation and finds the following tion in tariffs. Russian capital owners in author may be contacted at xgine@ results: telecommunications will likely be sought worldbank.org. (41 pages) * The type of education and the region as joint venture partners and can restruc- of residence appear to be the most impor- ture and obtain gains as partners with tant determinants of success in finding foreign firms. Wholly owned Russian 3503. Lasting Local Impacts jobs by the unemployed. firms are likely to experience losses. of an Economywide Crisis * The unemployed from ethnic minori- This paper-a product of the Trade ties have lower chances to find ajob within Team, Development Research Group-is Martin Ravallion and Michael Lokshin a year, other things equal, while the dif- part of a larger effort in the group to as- (February 2005) ference between genders is not significant. sess the consequences of liberalization of However, neither ethnicity nor gender barriers against foreign direct investment The immediate welfare costs of an seems to matter as far as the transition in services. Copies of the paper are avail- economywide crisis can be high, but are from employment to unemployment is able free from the World Bank, 1818 H there also lasting impacts? And are they concerned. Street NW, Washington, DC 20433. greater in some geographic areas than * Regional disparities in job destruc- Please contact Paulina Flewitt room MC3- others? Ravallion and Lokshin study tion seem to be less sizable than dispari- 333, telephone 202-473-2724, fax 202-522- Indonesia's severe financial crisis of 1998. ties in job creation. 1159, email address pflewitt@worldbank. They use 10 national surveys spanning * The analysis ofjob search methods by org. Policy Research Working Papers are 1993-2002, each covering 200,000 ran- the unemployed indicates that two target also posted on the Web at http:// domly sampled households, to estimate groups of state employment policy (young econ.worldbank.org. David Tarr may be the impacts on mean consumption and the unemployed and long-term unemployed) contacted at dtarr@worldbank.org. (37 incidence of poverty across each of 260 appear to make relatively little use of the pages) districts. Counterfactual analyses indi- public employment service. cate geographically diverse impacts years The author also looks at the impact of after the crisis. Proportionate impacts on education, age, gender, ethnicity, and re- 3502. Access to Capital in Rural the poverty rate were greater in initially gional factors on individual earnings. The Thailand: An Estimated Model of better off and less unequal areas. In the relative position of youth and women in Formal versus Informal Credit aggregate, a large share-possibly the Latvian labor market, compared with majority-of those Indonesians who were prime-age men, is less unfavorable than Xavier Gine still poor in 2002 would not have been so in many other countries. Yet the gender (February 2005) without the 1998 crisis. wage gap has increased recently, and the This paper-a product of the Poverty same is true for regional disparities. Ben- The aim of this paper is to understand the Team, Development Research Group-is eficiaries of the so-called "new" education mechanism underlying access to credit. part of a larger effort in the group to as- system have a relatively high market Gine focuses on two important aspects of sess the social impacts of economywide value, especially with graduates from rural credit markets in Thailand. First, crises. Copies of the paper are available universities and general secondary moneylenders and other informal lenders free from the World Bank, 1818 H Street schools. Finally, returns to experience coexist with formal lending institutions NW, Washington, DC 20433. Please con- seem to be nonexistent for many adult such as government or commercial banks, tact Patricia Sader, room MC3-556, tele- workers without higher education. and more recently, micro-lending institu- phone 202-473-3902, fax 202-522-1151, This paper-a product of the Poverty tions. Second, potential borrowers pre- email address psader@worldbank.org. Reduction and Economic Management sumably face sizable transaction costs Policy Research Working Papers are also Division, Europe and Central Asia Re- obtaining external credit. The author de- posted on the Web at http://econ. gion-is part of a larger effort in the re- velops and estimates a model based on worldbank.org. The authors may be con- gion to understand labor market dynam- limited enforcement and transaction costs tacted at mravallion@worldbank.org or ics. Copies of the paper are available free that provides a unified view of those facts. mlokshin@worldbank.org. (35 pages) from the World Bank, 1818 H Street NW, The results show that the limited ability Washington, DC 20433. Please contact of banks to enforce contracts, more than Mismake Galatis, room H4-312, telephone transactioncosts,iscrucialinunderstand- 3504. Unemployment and the 202-473-1177, fax 202-522-2751, email ing the observed diversity of lenders. Earnings Structure in Latvia address mgalatis@worldbank.org. Policy This paper-a product of the Finance Research Working Papers are also posted Team, Development Research Group-is Mihails Hazans on the Web at http://econ.worldbank.org. part of a larger effort in the group to un- (February 2005) The author may be contacted at derstand access to credit. Copies of the mihazan@lanet.lv. (86 pages) paper are available free from the World Latvia has recorded sustained GDP and Bank, 1818 H Street NW, Washington, DC productivity growth since 1997. Yet unem- 14 Policy Research Working Paper Series may be contacted at ralsop@worldbank. be ignored, Herrera identifies other the same operators tend to be present in org. (122 pages) sources ofuncertainty emanating from the most of the privatized operations. The policymaking framework: fiscal policy was main purpose of this paper is to provide a not responsive to the shocks, public debt first set of quantitative assessments of the 3511. Bank Privatization and instruments were used with several objec- degree of concentration in infrastructure Performance: Empirical Evidence tives (to stabilize the currency and to at the global and the regional levels. Con- from Nigeria lengthen maturity) and there was inad- centration issues were identified in only equate supervision of agents holding pub- about 20 percent of the cases studied, and Thorsten Beck' Robert Cull, lic debt. Most of the flaws have been fixed a presumption of concentration was found and Afeikhena Jerome following the crisis: in another 30 percent of the cases. Benitez (February 2005) * The primary fiscal balance has been and Estache find no correlation between increased, sending the signal that it is a the degree of concentration and the degree Beck, Cull, and Jerome assess the effect flexible instrument that will be used to of reform adopted by a region or a sector. of privatization on performance in a panel ensure commitment of the sovereign to In more general terms, they find no scope of Nigerian banks for the period 1990- honor its obligations. for simple encompassing regional or 2001. They find evidence of performance * The central bank formally trans- sectoral statements because issues are improvement in nine banks that were ferred to the Treasury the remaining debt- region- and sector-specific. The authors privatized, which is remarkable given the issuance functions, facilitating a more conclude by arguing that there are a few inhospitable environment for true finan- adequate balancing of different risks in- cases and regions in which it would make cial intermediation. Their results also volved in debt management. sense for a supranational competition or suggest negative effects of the continuing * Mutual funds' public debt holdings regulation agency to ensure that the in- minority government ownership on the are better regulated, ensuring that end- terests of the users are protected more performance ofmany Nigerian banks. The investors have the proper information to effectively against the risks of collusion authors' results complement aggregate assess the risk of the institutions in which and other types of anti-competitive behav- indications of decreasing financial inter- they invest. iors local regulators would not be equipped mediation over the 1990s. Banks that fo- This paper-a product of the Economic to address. cused on investment in government bonds Policy Division, Poverty Reduction and This paper-a product of the Office of and non-lending activities enjoyed a rela- Economic Management Network-is part the Vice President, Infrastructure Net- tively higher performance. ofa larger effort in the network todissemi- work-is part of a larger effort in the net- This paper-a product of the Finance nate country experiences in the design of work to document the state of the sector. Team, Development Research Group-is policymaking frameworks that facilitate Copies of the paper are available free from part of a larger effort in the group to study adjustment of the economy to external the World Bank, 1818 H Street NW, the effects of bank privatization in devel- shocks. Copies of the paper are available Washington, DC 20433. Please contact oping countries. Copies of the paper are free from the World Bank, 1818 H Street Antonio Estache, room H3-145, telephone available free from the World Bank, 1818 NW, Washington, DC 20433. Please con- 202-458-1442, fax 202-522-2961, email H Street NW, Washington, DC 20433. tact Sarah Lipscomb, room MC4-424, tele- address aestache@worldbank.org. Policy Please contact Agnes Yaptenco, mail stop phone 202-473-3718, email address Research Working Papers are also posted MC3-300, telephone 202-473-1823, fax slipscomb@worldbank.org. Policy Re- on the Web at http://econ.worldbank.org. 202-522-1155, email address ayaptenco@ search Working Papers are also posted on Daniel Benitez may be contacted at worldbank.org. Policy Research Working the Web at http://econ.worldbank.org. The daniel.benitez@univ-tlse1.fr. (25 pages) Papers are also posted on the Web at author may be contacted at sherrera@ http://econ.worldbank.org. The authors worldbank.org. (31 pages) may be contacted at tbeck@worldbank.org 3514. Infrastructure Performance or rcull@worldbank.org. (37 pages) and Reform in Developing and 3513. How Concentrated are Global Transition Economies: Evidence Infrastructure Markets? from a Survey of Productivity 3512. Policy Mix, Public Debt Measures Management, and Fiscal Rules: Daniel Benitez and Antonio Estache Lessons from the 2002 Brazilian (February 2005) Antonio Estache, Sergio Perelman, Crisis and Lourdes Trujillo In infrastructure, the possibility of a posi- (February 2005) Santiago Herrera tive relationship between operators' prof- (February 2005) itability and the degree of concentration Estache, Perelman, and Trujillo review is a major political issue in view ofthe wide about 80 studies on electricity and gas, Despite significant progress in economic diversity of feelings about the potential water and sanitation, and rail and ports reform throughout the 1990s and an ex- role of the private sector. This is particu- (with a footnote on telecommunications) emplary development ofthe policymaking larly important because of (1) the large in developing countries. The main policy framework in the second part of the de- residual degree of monopolies, (2) the pro- lesson is that there is a difference in the cade, Brazil suffered a major public debt tection they are granted through exclusiv- relevance of ownership for efficiency be- and currency crisis in 2002. Though the ity clauses built in service delivery con- tween utilities and transport in develop- political origin of the uncertainty cannot tracts, and (3) the widespread sense that ing countries. In transport, private opera- Policy Research Working Paper Series 15 tors have tended to perform better than within ports over time as a result of these vide the economies of scale that reduce public operators. For utilities, ownership reforms. transaction costs and make the provision often does not matter as much as some- This paper-a product of the Office of of these services viable. But their times argued. Most cross-country studies the Vice President, Infrastructure Net- sustainability is constrained by several find no statistically significant difference work-is part of a larger effort in the net- factors-both internal, related to the fed- in efficiency scores between public and work to document the impact of regulatory erations themselves, and external, related private providers. As for the country-spe- reform. Copies of the paper are available to the other stakeholders. The author con- cific studies, some do find differences in free from the World Bank, 1818 H Street cludes by recommending some actions to performance over time but these differ- NW, Washington, DC 20433. Please con- address these constraints. ences tend to matter much less than a tact Antonio Estache, room H3-145, tele- This paper-a product of the Finance large number of other variables. Across phone 202-458-1442, fax 202-522-2961, and Private Sector Development Unit, sectors, private operators functioning in email address aestache@worldbank.org. South Asia Region-is part of a larger a competitive environment or regulated Policy Research Working Papers are also effort in the region to study access to fi- under price caps or hybrid regulatory re- posted on the Web at http://econ. nance in India. Copies of the paper are gimes tend to catch up best practice faster worldbank.org. Maria Manuela GonzAlez available free from the World Bank, 1818 than public operators. There is a very Serrano may be contacted at H Street NW, Washington, DC 20433. strong case to push regulators in develop- mmgonzalez@daea.ulpgc.es. (21 pages) Please contact Marjorie Espiritu, room ing and transition economies toward a MC10-122, telephone 202-458-7755, fax more systematic reliance on yardstick 202-522-1145, email address mespiritu@ competition in a sector in which residual 3516. Sustainability of worldbank.org. Policy Research Working monopoly powers tend to be common. Microfinance Self Help Groups Papers are also posted on the Web at This paper-a product of the Office of in India: Would Federating Help? http://econ.worldbank.org. The author the Vice President, Infrastructure Net- may be contacted at anair@worldbank. work-is part of a larger effort in the net- Ajai Nair org. (45 pages) work to document the state of the sector. (February 2005) Copies of the paper are available free from the World Bank, 1818 H Street NW, The major form of microfinance in India 3517. Trade Liberalization and the Washington, DC 20433. Please contact is that based on women's Self Help Groups Politics of Financial Development Antonio Estache, room H3-145, telephone (SHGs), which are small groups of 10-20 202-458-1442, fax 202-522-2961, email members. These groups collect savings Matfas Braun and Claudio Raddatz address aestache@worldbank.org. Policy from their members and provide loans to (February 2005) Research Working Papers are also posted them. However, unlike most accumulat- on the Web at http://econ.worldbank.org. ing savings and credit associations A well developed financial system en- (27 pages) (ASCAs) found in several countries, these hances competition in the industrial sec- groups also obtain loans from banks and tor by allowing easier entry. The impact on-lend them to their members. By 2003, varies across industries, however. For 3515. Reforms and Infrastructure over 700,000 groups had obtained over some, small changes in financial develop- Efficiency in Spain's Container Rs.20 billion (US$425 million) in loans ment quickly induce entry and dissipate Ports from banks benefiting more than 10 mil- incumbents' rents, generating strong in- lion people. Delinquencies on these loans centives to oppose improvement of the fi- Maria Manuela GonzAlez Serrano and are reported to be less than 5 percent. nancial system. In other sectors incum- Lourdes Trujillo Savings in these groups is estimated to be bents may even benefit from increased (February 2005) at least Rs.8 billion (US$170 million). availability of external funds. The relative Despite these considerable achievements, strength of promoters and opponents de- Serrano and Trujillo quantify the evolu- sustainability of the SHGs has been sus- termines the political equilibrium level of tion of technical efficiency in port infra- pect because several essential services financial system development. This may structure service provision in the major required by the SHGs are provided free or be perturbed by the effect of trade liberal- Spanish port authorities involved in con- at a significantly subsidized cost by orga- ization in the strength of each group. Us- tainer traffic. They also analyze the extent nizations that have developed these ing a sample of41 trade liberalizers Braun to which port reforms that took place in groups. A few promoter organizations and Raddatz conduct an event study and the 1990s had an impact on the efficiency have, however, developed federations of show that the change in the strength of of the Spanish container ports. Because of SHGs that provide these services and oth- promoters vis-A-vis opponents is a very the multi-output nature of port activities, ers that SHG members need, but which good predictor of subsequent financial the authors have estimated a distance SHGs cannot feasibly provide. Using a development. The result is not driven by function, which is a novel methodology in case study approach, Nair explores the changes in demand for external funds, or the study of the port industry. Their re- merits and constraints of federating. by the success of the trade policy. The sults show that the reforms resulted in Three SHG federations that provide a relationship is mediated by policy reforms, significant improvements in technological wide range of services are studied. The the kind that induces competition in the change, but that technical efficiency has findings suggest that federations could financial sector, in particular. Real effects in fact changed little on average. But there help SHGs become institutionally and fi- follow not so much from capital deepen- is a significant movement of the efficiency nancially sustainable because they pro- ing but mainly through improved alloca- 16 Policy Research Working Paper Series tion. The effect is stronger in countries Bank, 1818 H Street NW, Washington, DC email address Itabada@worldbank.org. with high levels of governance, suggest- 20433. Please contact Paulina Flewitt, Policy Research Working Papers are also ing that incumbents resort to this costly room MC3-333, telephone 202-473-2724, posted on the Web at http://econ. but more subtle way of restricting entry fax 202-522-1159, email address pflewitt@ worldbank.org. The authors may be con- where it is difficult to obtain more blatant worldbank.org. Policy Research Working tacted at graballand@worldbank.org or forms of anti-competitive measures from Papers are also posted on the Web at ealdazcarroll@worldbank.org. (20 pages) politicians. http://econ.worldbank.org. The author This paper-a product of the Invest- may be contacted at pasilva@uiuc.edu. (48 ment and Growth Team, Development pages) 3520. Environment as Cultural Research Group-is part of a larger effort Heritage: The Armenian Diaspora's in the group to understand the relation Willingness-to-Pay to Protect between finance and the macroeconomy. 3519. How Do Differing Standards Armenia's Lake Sevan Copies of the paper are available free from Increase Trade Costs? The Case the World Bank, 1818 H Street NW, of Pallets Benoit Laplante, Craig Meisner, Washington, DC 20433. Please contact and Hua Wang Paulina Sintim-Aboagye, room MC3-422, Ga6l Raballand and Enrique Aldaz-Carroll (February 2005) telephone 202-473-7644, email address (February 2005) psintimaboagye@worldbank.org. Policy Laplante, Meisner, and Wang present a Research Working Papers are also posted The pallet is a platform used for storing, study of willingness-to-pay of the Arme- on the Web at http://econ.worldbank.org. handling, and transporting products. nian Diaspora in the United States to Claudio Raddatz may be contacted at There are hundreds of different pallet protect Armenia's Lake Sevan, a unique craddatz@worldbank.org. (46 pages) sizes around the world. Raballand and and precious symbol of the Armenian cul- Aldaz-Carroll examine the case of pallets tural heritage. Dichotomous choice contin- to illustrate the impact of multiplicity of gent valuation questions were asked in 3518. The Role of Importers and standards on trade costs. They select this mail surveys to elicit respondents'willing- Exporters in the Determination case because pallets are used all around ness to pay for the protection of Lake of the U.S. Tariff Preferences the world, pallet standards are not too Sevan. The results show that on average, Granted to Latin America sophisticated, and data on the impact of each household of the Armenian Diaspora pallet standards are to some extent avail- in the United States would be willing to Peri Silva able. The authors examine why there are provide a onetime donation of approxi- (February 2005) so many different pallet sizes, the associ- mately US$80 to prevent a further degra- ated trade costs, and the reasons why dation of Lake Sevan, and approximately Silva investigates the role played by do- countries have not harmonized pallet sizes US$280 to restore the quality of the lake mestic importers and foreign exporters in to eliminate such costs. They then present by increasing its water level by three improving preferential access to the do- options for exporters to mitigate the ad- meters. mestic market. To this end, the framework verse effects of standards multiplicity This paper-a product of the Infrastruc- he uses extends the protection for sale while complying with destination mar- ture and Environment Team, Develop- analysis to explicitly model the role of kets' standard requirements. The range of ment Research Group-is part of a larger domestic importers and foreign exporters options is limited in the case of exporters effort in the group to understand environ- in determining preferential trade treat- from less developed countries because of mental economics. Copies of the paper are ment. The author tests the predictions of the lack of rental and exchange pallet available free from the World Bank, 1818 the model using data on preferential trade markets. To mitigate the costs of this H Street NW, Washington, DC 20433. between the United States and Latin multiplicity of standards, the World Please contact Yasmin D'Souza, room American countries. The results suggest Bank's strategy should be divided in two MC2-622, telephone 202-473-1449, fax that Latin American exporters and U.S. directions: to develop awareness of costs 202-522-3230, email address ydsouza@ importers' lobbying efforts have a signifi- related to the multiplicity of standards worldbank.org. Policy Research Working cant and important role in determining and to support actively harmonization at Papers are also posted on the Web at the extent of preferential access granted the global level (within International Or- http://econ.worldbank.org. Hua Wang by the United States. More interestingly, ganization for Standardization) and at the may be contacted at hwangl@worldbank. these findings also show that U.S. import- regional level (within regional cooperation org. (35 pages) ers capture a substantial share of the rents agreements). generated by tariff preferences. These This paper-a product of the Interna- results therefore shed a pessimistic view tionalTradeDepartment,Poverty Reduc- 3521. Religious School Enrollment on preferential trade schemes as a reliable tion and Economic Management Net- in Pakistan: A Look at the Data source of gains for developing countries. work-is part of a larger effort in the net- This paper-a product of the Trade work to analyze the impact of standards Tahir Andrabi, Jishnu Das, Team, Development Research Group-is on trade. Copies of the paper are available Asim Ijaz Khwaja, and Tristan Zajonc part of a larger effort in the group to un- free from the World Bank, 1818 H Street (February 2005) derstand the political economy determi- NW, Washington, DC 20433. Please con- nants of preferential trade. Copies of the tact Lili Tabada, room MC2-410, tele- Bold assertions have been made in policy paper are available free from the World phone 202-473-6896, fax 202-522-7551, reports and popular articles on the high Policy Research Working Paper Series 17 and increasing enrollment in Pakistani many daunting challenges while trans- than in the comparison group. The meals religious schools, commonly known as forming toward a knowledge and service- program led to higher curriculum test madrassas. Given the importance placed based economy and further opening up to scores, but only in schools where the on the subject by policymakers in Pakistan international competition after its WTO teacher was relatively experienced prior and those internationally, it is troubling accession in the context ofknowledge revo- to the program. The school meals dis- that none of the reports and articles re- lution. One of the biggest challenges is placed teaching time and led to larger viewed based their analysis on publicly how to create 100-300 million new jobs in class sizes. Despite improved incentives, available data or established statistical the coming decade to absorb the millions teacher absenteeism remained at a high methodologies. The authors of this paper of laid-offs, rural emigrants, and newly level of 30 percent. Treatment schools use published data sources and a census added labor force. China has been success- raised their fees, and comparison schools of schooling choice to show that existing ful in building high-technology parks and close to treatment schools decreased their estimates are inflated by an order of mag- information and communications technol- fees. Some of the price effects are caused nitude. Madrassas account for less than ogy (ICT) industries, but they are limited by a combination of capacity constraints 1 percent of all enrollment in the country in terms of employment generation, while and pupil transfers that would not hap- and there is no evidence of a dramatic most of the traditional labor-intensive pen if the school meals were ordered in all increase in recent years. The educational industries are losing competitiveness due schools. The intention-to-treat estimator landscape in Pakistan has changed sub- to low productivity. To combat the unprec- of the effect of the randomized program stantially in the past decade, but this is due edented employment challenge, China incorporates those price effects, and there- to an explosion of private schools, an im- must implement a systemic and sustained fore it should be considered a lower bound portant fact that has been left out of the strategy, which may consist of the follow- on the effect of generalized school meals. debate on Pakistani education. Moreover, ing policy thrusts: encouraging the private This insight on price effects generalizes to when the authors look at school choice, they sector; promoting small and medium en- other randomized program evaluations. find that no one explanation fits the data. terprises; expanding the service sector; This paper-a product of the Poverty While most existing theories of madrassa reforming the state-owned enterprises; Reduction and Economic Management 2, enrollment are based on household at- strengthening the social security system; Africa Technical Families-is part of a tributes (for instance, a preference for reli- improving labor market flexibility; and larger effort in the region to increase our gious schooling or the household's access to establishing mass retraining programs. understanding of the impact of programs other schooling options), the data show that This paper-a product of the Knowledge aimed at reaching the Millennium Devel- among households with at least one child for Development Division, World Bank opment Goals. Copies of the paper are avail- enrolled in a madrassa, 75 percent send Institute-is part of a larger effort in the able free from the World Bank, 1818 H their second (and/or third) child to a public institute to provide country-focused Street NW, Washington, DC 20433. Please or private school or both. Widely promoted knowledge services for client countries, contact Marjorie Kingston, room J10-280, theories simply do not explain this substan- Copies of the paper are available free from telephone 202-473-4558, fax 202-473-8262, tial variation within households. the World Bank, 1818 H Street NW, email address mkingston@worldbank.org. This paper-a product of the Public Washington, DC 20433. Please contact Policy Research Working Papers are also Services Team, Development Research Faythe Calandra, room J2-267, telephone posted on the Web at http://econ. Group-is part of a larger effort in the 202-473-6440, fax 202-522-1492, email worldbank.org. The authors may be con- group to examine issues relating to edu- address fealandra@worldbank.org. Policy tacted atvermeersch@post.harvard.edu or cational outcomes. Copies of the paper are Research Working Papers are also posted mkremer@fas.harvard.edu. (51 pages) available free from the World Bank, 1818 on the Web at http://econ.worldbank.org. H Street NW, Washington, DC 20433. The author may be contacted at zzeng@ Please contact Hedy Sladovich, mail stop worldbank.org. (34 pages) 3524. Sowing and Reaping: MC3-311, telephone 202-473-7698, fax Institutional Quality and Project 202-522-1154, email address hsladovich@ Outcomes in Developing Countries worldbank.org. Policy Research Working 3523. School Meals, Educational Papers are also posted on the Web at Achievement, and School David Dollar and Victoria Levin http://econ.worldbarnk.org. The authors Competition: Evidence from a (February 2005) may be contacted at tandrabi@pomona. Randomized Evaluation edu orjdasl@worldbank.org. (41 pages) Much of the academic debate on the effec- Christel Vermeersch and Michael Kremer tiveness of foreign aid is centered on the (February 2005) relationship between aid and growth. Dif- 3522. China's Employment ferent aid-growth studies find conflicting Challenges and Strategies after Vermeersch and Kremer examine the ef- results: aid promotes growth everywhere; the WTO Accession fects of subsidized school meals on school aid has a zero or negative impact on participation, educational achievement, growth everywhere; or the effect of aid on Douglas Zhihua Zeng and school finance in a developing coun- growth depends on recipient-specific char- (February 2005) try setting. They use data from a program acteristics, such as the quality of institu- that was implemented in 25 randomly tions and policies. Although these studies Although China has made impressive chosen preschools in a pool of 50. fuel an interesting debate, cross-sectional progress in economic development and Children's school participation was 30 macroeconomic studies cannot be the last improving social well-being, it is facing percent higher in the treatment group word on the topic of aid effectiveness. In 18 Policy Research Working Paper Series this paper, Dollar and Levin introduce protection, and emerging scarcity con- River Basin in Spain. The Guadalquivir microeconomic evidence on factors condu- cerns in portions of the basin. The Fraser river flows westerly across southern cive to the success of aid-funded projects Basin Council (FBC) is a locally-initiated Spain, with nearly all of its 57,017 km2 in developing countries. The authors use nongovernmental organization (NGO) drainage area within the region of the success rate of World Bank-financed with representation from public and pri- Andalusia. Water management issues in projects in the 1990s, as determined by the vate stakeholders. Since evolving in the this semiarid, heavily agricultural, but Operations Evaluation Department, as 1990s from earlier programs and projects rapidly urbanizing region include drought their dependent variable. Using instru- in the basin, FBC has pursued several exposure, water allocation, water quality, mental variables estimation, the authors objectives related to a broad concept of and in some areas, groundwater overdraft. find that existence of high-quality insti- basin "sustainability" incorporating so- A river basin agency (Confederacion tutions in a recipient country raises the cial, economic, and environmental as- Hidrografica del Guadalquivir, or CH probability that aid will be used effec- pects. The NGO approach has allowed Guadalquivir) has existed within the ba- tively. There is also some evidence that FBC to match the boundaries of the en- sin since 1927, but its responsibilities have geography matters, but location in Sub- tire basin, avoid some intergovernmental changed substantially over its history. For Saharan Africa is a more robust indicator turf battles, and involve First Nations much of its life, CH Guadalquivir's mis- of lower project success rate than tropical communities and private stakeholders in sion was water supply augmentation climate. The authors proceed to disaggre- ways governmental approaches some- through construction and operation of gate the success rate of World Bank times find difficult. While its NGO status reservoirs, primarily to support irrigation, projects by lending instrument type and means that FBC cannot implement many under central government direction with by investment sector, finding that different of the plans it agrees on and must con- little provision for water user participa- institutions are more important for differ- stantly work to maintain diverse yet tion. Following the Spanish political ent types ofprojects. The finding of a strong stable funding, FBC holds substantial system's transformation and Spain's ac- relationship between institutional quality esteem among basin stakeholders for its cession to the European Union, water law and project success serves to provide fur- reputation for objectivity, its utility as an and policy changes greatly expanded CH ther support to the hypothesis that aid ef- information sharing forum, and its success Guadalquivir's responsibilities and re- fectiveness is conditional on institutions in fostering an awareness of interdepen- structured it to incorporate representation and policies of the recipient country. dency within the basin. of some basin stakeholders. Although the This paper-a product of Development This paper-a product of the Agricul- basin agency's accomplishments in reser- Policy, Development Economics Senior tural and Rural Development Depart- voir construction have been prodigious, its Vice Presidency-is part of a larger effort ment-is part of a larger effort in the de- record of performance with respect to its in the Bank to examine aid effectiveness. partment to approach water policy issues newer responsibilities has been mixed, as Copies of the paper are available free from in an integrated way. The study was funded have perceptions of its openness and re- the World Bank, 1818 H Street NW, by the Bank's Research Support Budget sponsiveness to basin interests other than Washington, DC 20433. Please contact under the research project "Integrated irrigators. Victoria Levin, room H4-412, telephone River Basin Management and the Principle This paper-a product of the Agricul- 202-473-6368, fax 202-614-7776, email of Managing Water Resources at the Low- ture and Rural Development Depart- address vlevin@worldbank.org. Policy est Appropriate Level: When and Why Does ment-is part of a larger effort in the de- Research Working Papers are also posted It (Not) Work in Practice?" Copies of this partment to approach water policy issues on the Web at http://econ.worldbank.org. paper are available free from the World in an integrated way. The study was David Dollar may be contacted at Bank, 1818 H Street NW, Washington, DC funded by the Bank's Research Support ddollar@worldbank.org. (24 pages) 20433. Please contact Melissa Williams, Budget under the research project "Inte- room MC5-724, telephone 202-458-7297, grated River Basin Management and the fax 202-614-0034, email address Principle of Managing Water Resources at 3525. Institutional and Policy mwilliams4@worldbank.org. Policy Re- the Lowest Appropriate Level: When and Analysis of River Basin search Working Papers are also posted on Why Does It (Not) Work in Practice?" Management: The Fraser River the Web athttp//econ.worldbank.org. Ariel Copies of this paper are available free from Basin, Canada Dinar may be contacted at adinar@ the World Bank, 1818 H Street NW, worldbank.org. (34 pages) Washington, DC 20433. Please contact William Blomquist, Ken S. Calbick, Melissa Williams, room MC5-724, tele- and Ariel Dinar phone 202-458-7297, fax 202-614-0034, (February 2005) 3526. Institutional and Policy email address mwilliams4Cworldbank. Analysis of River Basin org. Policy Research Working Papers are The authors describe and analyze a non- Management: The Guadalquivir also posted on the Web at http:// governmental, multi-stakeholder, consen- River Basin, Spain econ.worldbank.org. Karin Kemper may sus-based approach to river basin man- be contacted at kkemper@worldbank.org. agement in the Fraser River basin in William Blomquist, Consuelo Giansante, (40 pages) Canada. The Fraser River drains 238,000 Anjali Bhat, and Karin Kemper km2 of British Columbia, supporting (February 2005) nearly 3 million residents and a diverse economy. Water management issues in- The authors describe and analyze river clude water quality and allocation, flood basin management in the Guadalquivir Policy Research Working Paper Series 19 3527. Institutional and Policy email address mwilliams4@worldbank. Principle ofManaging Water Resources at Analysis of River Basin org. Policy Research Working Papers are the Lowest Appropriate Level: When and Management: The Murray Darling also posted on the Web at http:// Why Does It (Not) Work in Practice?" River Basin, Australia econ.worldbank.org. Ariel Dinar may be Copies of this paper are available free from contacted at adinaraworldbank.org. (37 the World Bank, 1818 H Street NW, William Blomquist, Brian Haisman, pages) Washington, DC 20433. Please contact Ariel Dinar, and Anjali Bhat Melissa Williams, room MC5-724, tele- (February 2005) phone 202-458-7297, fax 202-614-0036, 3528. Institutional and Policy email address mwilliams4@worldbank. The authors describe and analyze man- Analysis of River Basin org. Policy Research Working Papers are agement in the Murray-Darling basin of Management: The Warta River also posted on the Web at http:// Australia, long regarded as a model for Basin, Poland econ.worldbank.org. Ariel Dinar may be integrated river basin management. This contacted at adinar@worldbank.org. (37 interior basin of over 1 million km2 in William Blomquist, Andrzej Tonderski, pages) semiarid southeastern Australia is de- and Ariel Dinar fined by the catchment areas of the (February 2005) Murray and Darling Rivers and their 3529. Economic Evaluation of tributaries. Water management issues The authors describe and analyze the Housing Subsidy Systems: include allocation, quality, and dryland emergence of river basin management in A Methodology with Application salinity. Because of Australia's federal the Warta River Basin of Poland. The to Morocco governmental structure, institutional de- Warta basin's 55,193 km cover approxi- velopment has been more a matter of in- mately one-sixth of Poland, and the Warta David le Blanc tegrating state and local endeavors than is a principal tributary to the Oder. Wa- (February 2005) decentralization of national authority. ter management issues include pollution The Australian national government has of the Warta and its main tributaries, Most countries do not use one single type little constitutional power over water re- prompting cities to rely on groundwater of housing subsidy but combine many of sources. The five states in the basin make supplies that are beginning to show signs them. Le Blanc provides operational cri- policy regarding water rights, discharge of overdraft, and growing problems of teria that allow evaluation of systems of permits, fees, and the construction and water allocation and scarcity as the basin housing subsidies, both at the individual operation of physical structures. River urbanizes and industrializes. Since the program level and at the aggregate (coun- management began on the Murray River end of the 1980s, the Polish government try) level. He examines the public finance in the 1920s under the terms of a tri-state has been promoting decentralization, con- assessment criteria used by different au- agreement. As the scope of management structing a federal system that includes thors to analyze subsidy programs and widened to the entire basin, more states provinces, counties, and municipalities confront them systematically. Le Blanc were added and the national government with authority over land use, water use ends up with a "map" of criteria, which supported the creation of new arrange- permits, and environmental protection. covers the range of topics interesting to ments for integrated water resource man- Polish authorities have also established policymakers. For each criterion, he tries agement, with some provision for stake- river basin management authorities cor- to provide empirical measures that can be holder participation. The dynamics of responding to basin boundaries through- retrieved from existing programs. He then state-national authority over water policy, out the nation, including one for the Warta provides an aggregation method allowing and the emergence in recent years of nu- basin. The efforts toward decentralization a synthesis of diagnoses about the "qual- merous local-level catchment organiza- and integrated water resource manage- ity" of the housing subsidies system at the tion, contribute to some uncertainty about ment in Poland have been earnest, but the country level. The aggregation technique the future course of basin management in dispersion of water policy authority across offers a simple way to visualize the main this internationally renowned site. several levels of government, the estab- features of a subsidy system, as well as the This paper-a product of the Agricul- lishment of basin authorities lacking effects on the system of reforms or im- ture and Rural Development Depart- power and funding to implement resource provements of particular programs. ment-is part of a larger effort in the de- management programs, few arrange- The author applies the methodology to partment to approach water policy issues ments for stakeholder participation, and the system prevailing in Morocco in 1995 in an integrated way. The study was delays in Polish water law reform have and 2004. The analysis shows that the funded by the Bank's Research Support complicated the development and imple- most visible subsidies might not have been Budget under the research project "Inte- mentation of integrated management at the most inefficient, nor the most resource grated River Basin Management and the the basin level. consuming for the state. Examination of Principle ofManaging Water Resources at This paper-a product of the Agricul- policy changes since 1995 shows that the Lowest Appropriate Level: When and ture and Rural Development Depart- while the most visible subsidies received Why Does It (Not) Work in Practice?" ment-is part of a larger effort in the de- nearly all the government's attention, Copies of this paper are available free from partment to approach water policy issues large invisible subsidies remain at the the World Bank, 1818 H Street NW, in an integrated way. The study was heart of Morocco's housing policy. The Washington, DC 20433. Please contact funded by the Bank's Research Support framework used here is very general and Melissa Williams, room MC5-724, tele- Budget under the research project "Inte- can be used to compare the Moroccan sys- phone 202-458-7297, fax 202-614-0034, grated River Basin Management and the tem with those of similar countries. 20 Policy Research Working Paper Series This paper-a product of the Urban 3531. Geopolitical Interests 3532. Remittances, Household Unit, Transport and Urban Development and Preferential Access Expenditure, and Investment Department-is part of a larger effort in the to U.S. Markets in Guatemala department to provide evaluation frame- works to better understand housing mar- Daniel Lederman and Qaglar Ozden Richard H. Adams, Jr. kets in developing countries. Copies of the (March 2005) (March 2005) paper are available free from the World Bank, 1818 H Street NW, Washington, DC The United States imports around 25 per- Adams uses a large household data set 20433. Please contact David le Blanc, room cent of its merchandise under some form from Guatemala to analyze how the re- H9-231, telephone 202-458-0990, fax 202- of preferential trade regime. Lederman ceipt of internal remittances (from Gua- 477-1993, email address dleblanc@ and Ozden examine both the origins and temala) and international remittances worldbank.org. Policy Research Working consequences of U.S. trade preferences in (from the United States) affects the mar- Papers are also posted on the Web at the context of the gravity model of inter- ginal spending behavior of households on httpf//econ.worldbank.org. (56 pages) national trade. First, they provide esti- various consumption and investment mates of the impact of preferential trade goods. Contrary to other studies, the au- regimes in terms of access to U.S. markets thor finds that households receiving re- 3530. Legal Effectiveness and while controlling for geostrategic interests mittances actually spend less at the mar- External Capital: The Role of that determine the countries that are gin on consumption-food and consumer Foreign Debt offered commercial preferences. Second, goods and durables-than do households the authors consider not only country receiving no remittances. Instead of George Allayannis, Gregory W. Brown, eligibility but also the extent of utilization spending on consumption, households and Leora F. Klapper of these programs. Third, they provide receiving remittances tend to spend more (March 2005) new estimates of the impact of transport on investment goods, like education, and transactions costs beyond distance. health, and housing. The analysis shows Previous research has documented weak, In the standard gravity estimation, the that a large amount of remittance money and sometimes conflicting, effects of legal authors find that beneficiaries of these goes into education. At the margin, house- quality on measures of firm debt. Using preferences, except GSP, export 2-3 times holds receiving internal and international WorldScope data for 1,689 firms, as well more than the excluded countries, after remittances spend 45 and 58 percent as more detailed proprietary data for 315 controlling for country and product char- more, respectively, on education, than do firms across nine East Asian countries, acteristics. Nonetheless, the estimated households with no remittances. These Allayannis, Brown, and Klapper find that effects of these programs are lower increased expenditures on education rep- access to foreign financing appears to when controlling for utilization ratios and resent investment in human capital. Like loosen borrowing constraints associated selection biases due to the correlation be- other studies, the author finds that remit- with poor legal systems. This helps resolve tween geopolitical interests and the stan- tance-receiving households spend more at inconsistencies in prior findings and ex- dard explanatory variables used in the the margin on housing. These increased plains how legal protection is important gravity model of trade, such as countries' expenditures on housing represent a type for borrowing by firms. In particular, they geographic distance from the United of investment for the migrant, as well as find that legal effectiveness is important States. a means for boosting local economic devel- for determining the amount, maturity, This paper-a product of the Office of opment by creating new income and em- and currency denomination of debt. The the Chief Economist, Latin America and ployment opportunities for skilled and authors discuss several mechanisms by the Caribbean Region-is part of a larger unskilled workers. which firms can avoid the costs of poor effort in the region to study the effects of This paper-a product of the Trade legal systems with foreign borrowing. The trade agreements. Copies of the paper are Team, Development Research Group-is paper contributes to the policy debate available free from the World Bank, 1818 part of a larger effort in the group to un- surrounding the importance of creditor H Street NW, Washington, DC 20433. derstand the impact of international mi- rights for domestic lending. Please contact Patricia Soto, room 18-0 18, gration and remittances on poverty and This paper-a product of the Finance telephone 202-473-7892, fax 202-522- development. Copies of the paper are Team, Development Research Group-is 7528, email address psoto@ available free from the World Bank, 1818 part of a larger effort in the group to study worldbank.org. Policy Research Working H Street NW, Washington, DC 20433. access to financing. Copies of the paper are Papers are also posted on the Web at Please contact Paulina Flewitt, room available free from the World Bank, 1818 http://econ.worldbank.org. The authors MC3-333, telephone 202-473-2724, fax H Street NW, Washington, DC 20433. may be contacted at dlederman@ 202-522-1159, email address pflewitt@ Please contact Mani Jandu, room MC3- worldbank.org or cozden@worldbank.org. worldbank.org. Policy Research Working 456, telephone 202-473-3103, fax 202-522- (28 pages) Papers are also posted on the Web at 1155, email address mjandu@worldbank. http://econ.worldbank.org. The author org. Policy Research Working Papers are may be contacted at radams@ also posted on the Web at http:// worldbank.org. (34 pages) econ.worldbank.org. The authors may be contacted at allayannisy@darden. virginia.edu, gregwbrown@unc.edu, or lklapper@worldbank.org. (29 pages) Policy Research Working Paper Series 21 3533. Disciplining Agricultural 3534. The Co-Movement between sis concludes that a regulatory law and Support through Decoupling Cotton and Polyester Prices higher quality governance are positively and significantly associated with higher John Baffes and Harry de Gorter John Baffes and Gaston Gohou per capita generation capacity levels. In (March 2005) (March 2005) addition, this positive impact continues to increase for at least three years and prob- Agricultural protection, particularly in Baffes and Gohou examine the price link- ably for over 10 years as experience devel- high income countries, have induced over- ages among polyester (the dominant ops and regulatory reputation grows. The production, thereby depressing world chemical fiber), cotton (the dominant results are robust to alternative dynamic commodity prices and reducing export natural fiber), and crude oil (the dominant specifications and show no sign of any sig- shares of countries which do not support energy commodity) based on monthly data nificant endogeneity biases. agriculture. One-and perhaps the only- between 1980 and 2002. The modeling This paper-a product of the Invest- effective way to bring a socially acceptable framework incorporates several aspects of ment and Growth Team, Development and politically feasible reform is to replace the unit root econometrics literature. They Research Group-is part of a larger effort payments linked to current production find that: in the group to analyze the structure, con- levels, input use, and prices by payments * There is strong co-movement be- duct, and performance of the infrastruc- which are decoupled from these measures. tween cotton and polyester prices, well ture sectors in transition and developing Overall, the experience with decoupling above the co-movement observed between economies, and to identify public policies agricultural support has been mixed while these two prices and prices of other pri- designed to improve their performance. the switch to less distortive support has mary commodities. Copies of the paper are available free from been uneven across commodities and * Crude oil prices have a stronger ef- the World Bank, 1818 H Street NW, countries. Rules have changed with new fect on polyester prices compared with Washington, DC 20433. Please contact decoupling programs added so expecta- cotton prices. Paulina Sintim-Aboagye, room MC3-422, tions about future policies affect current * Price shocks originating in the poly- telephone 202-473-8526, fax 202-522- production decisions. Time limits were not ester market are transmitted at much 1155, email address psintimaboagye@ implemented and if so, were overruled. higher speed to the cotton market than worldbank.org. Policy Research Working Ideally, compensation programs would be vice-versa. Papers are also posted on the Web at universal (open to all sectors in the This paper-a product of the Develop- http://econ.worldbank.org. The authors economy, not just agriculture) or at least ment Prospects Group-is part of a larger may be contacted atjstern@london.edu or nonsector-specific within agriculture. A effort in the group to gain a better under- j.s.cubbin@city.ac.uk. (45 pages) simple and minimally distorting scheme standing of the nature of primary com- would be a onetime unconditional pay- modity markets. Copies of the paper are ment to everyone engaged in farming or available free from the World Bank, 1818 3536. Regulatory Effectiveness: deemed in need of compensation that is H Street NW, Washington, DC 20433. The Impact of Regulation and nontransferable, along the lines of one- Please contact John Baffes, room MC2- Regulatory Governance time buyouts without remaining subsi- 200, telephone 202-458-1880, fax202-522- Arrangements on Electricity dies. To maintain government credibility 3564, email address jbaffes@worldbank. Industry Outcomes and reduce uncertainty, eligibility rules org. Policy Research Working Papers are need to be clearly defined and not allowed also posted on the Web at http:// Jon Stern and John Cubbin to change. The time period on which pay- econ.worldbank.org. (29 pages) (March 2005) ments are based, the level of payments, and the sectors covered should all remain Stem and Cubbin review a number of fixed. Support to specific sectors within 3535. Regulatory Effectiveness and studies on the effectiveness ofutilityregu- agriculture should be in the form of tax- the Empirical Impact of Variations latory agency and governance arrange- payer-funded payments. There should be in Regulatory Governance: ments for the electricity industry, particu- no requirement ofproduction. Land, labor, Electricity Industry Capacity and larly for developing countries. They dis- and any other input should not have to be Efficiency in Developing Countries cuss governance criteria and their mea- in "agricultural use." surement, both legal frameworks and sur- This paper-a product of the Develop- John Cubbin and Jon Stern veys of regulatory practice. They also dis- ment Prospects Group-is part of a larger (March 2005) cuss the results from econometric studies effort in the group to examine the impact of effectiveness for regulatory agencies in of agricultural trade reforms on global Cubbin and Stern assess for 28 develop- the electricity and telecommunications commodity markets. Copies of the paper ing countries over the period 1980-2001 industries and compare these with the are available free from the World Bank, whether the existence of a regulatory law results from econometric studies of inde- 1818 H Street NW, Washington, DC and higher quality regulatory governance pendent central banks and their gover- 20433. Please contact John Baffes, room are significantly associated with superior nance. The authors conclude with a dis- MC2-200, telephone 202-458-1880, fax electricity outcomes. Their analysis draws cussion of policy implications and of pri- 202-522-3564, email address jbaffes@ on theoretical and empirical work on the orities for information collection to im- worldbank.org. Policy Research Working impact of independent central banks and prove understanding of these issues. Papers are also posted on the Web at ofdeveloping country telecommunications This paper-a product of the Invest- http://econ.worldbarnk.org. (70 pages) regulators. The authors' empirical analy- ment and Growth Team, Development 22 Policy Research Working Paper Series Research Group-is part of a larger effort students perform better in schools with a affect the funds' relative holding of the in the group to analyze the structure, con- centralized curriculum and ability-based ADR versus the underlying stock. Consis- duct, and performance of the infrastruc- class formation. tent with this "ease of transaction" hy- ture sectors in transition and developing This paper-a product of the Human pothesis the authors find that if an issuer economies, and to identify public policies Development Department, Latin America is based in a country with a relatively designed to improve their performance. and the Caribbean Region-is part of a small stock market, low level of trading Copies of the paper are available free from larger effort in the region to better under- volume, and high transaction costs, funds the World Bank, 1818 H Street NW, stand the determinants of school quality. tend to hold a larger proportion of their Washington, DC 20433. Please contact Copies of the paper are available free from investments in the ADR. Furthermore, Paulina Sintim-Aboagye, room MC3-422, the World Bank, 1818 H Street NW, funds hold a larger fraction of their invest- telephone 202-473-8526, fax 202-522- Washington, DC 20433. Please contact ment in the ADR if the ADR trading vol- 1155, email address psintimaboagye@ Martha Vargas, room 17-162, telephone ume is high relative to its domestic secu- worldbank.org. Policy Research Working 202-458-4837, fax 202-522-0050, email rity trading volume. The results also sug- Papers are also posted on the Web at address mvargasl@worldbank.org. Policy gest that ADR listings of local firms might http://econ.worldbank.org. The authors Research Working Papers are also posted not negatively affect local markets if the may be contacted atjstern@london.edu or on the Web at http://econ.worldbank.org. investment climate is good. j.s.cubbin@city.ac.uk. (59 pages) Ludger W6l3mann may be contacted at This paper-a product of the Finance woessmann@ifo.de. (38 pages) Team, Development Research Group-is part of a larger effort in the group to study 3537. Families, Schools, and access to finance. Copies of the paper are Primary School Learning: 3538. American Depositary Receipt available free from the World Bank, 1818 Evidence for Argentina and (ADR) Holdings of U.S.-Based H Street NW, Washington, DC 20433. Colombia in an International Emerging Market Funds Please contact Mani Jandu, room MC3- Perspective 456, telephone 202-473-3103, fax 202-522- Reena Aggarwal, Sandeep Dahiya, 1155, email address mjandu@worldbank. Ludger W63mann and Thomas Fuchs and Leora Klapper org. Policy Research Working Papers are (March 2005) (March 2005) also posted on the Web at http://econ. worldbank.org. The authors may be con- This paper estimates the relationship For a foreign "issuer," the benefits of cross- tacted at aggarwal@georgetown.edu, sd@ between family background, school char- listing in the United States are exten- georgetown.edu, or lklapperCworldbank. acteristics, and student achievement in sively documented in the literature. How- org. (49 pages) primary school in two Latin American ever it is not clear what motivates "inves- countries, Argentina and Colombia, as tors" to hold American Depositary Re- well as several comparison countries. The ceipts (ADRs) rather than the underlying 3539. A Model on Knowledge and database used is the student-level inter- stock of these issuers. Aggarwal, Dahiya, Endogenous Growth national achievement data of the Progress and Klapper address the investors' choice in International Reading Literacy Study to purchase local shares versus investing Derek H. C. Chen and Hiau Looi Kee (PIRLS), which tested the reading perfor- in ADRs. Specifically, they analyze the (March 2005) mance of fourth-grade students in 2001. investment allocation decision of mutual The nationally representative samples fund managers to invest in emerging Chen and Kee present a model of endog- have 3,300 students in Argentina and market firms that are listed in their do- enous growth in which the main engine of 5,131 students in Colombia. The emerg- mestic markets and have also issued economic development is knowledge. Us- ing general pattern of results is that edu- ADRs in the United States. Although le- ing a two-sector closed economy model cational performance is strongly related gal provisions (governance/investor pro- that comprises of a conventional goods- to students'family background, weakly to tection) are typically assumed to affect producing sector and a research and de- some institutional school features, and ADRs and their underlying domestic velopment sector, their model incorpo- hardly to schools' resource endowments. shares equally, investors holding ADRs rates two key aspects of knowledge: tech- In an international perspective, estimated may have a higher level of legal protection nology and human capital. Steady-state family background effects are relatively as these securities are issued and traded equilibrium conditions show that the large in Argentina, and relatively small in in the United States. The authors' results growth rate of per capita income hinges Colombia. A specific Argentine feature is are consistent with this "better legal pro- on the growth rate of human capital. the lack of performance differences be- tection" hypothesis as they find that funds While the growth rate of human capital tween rural and urban areas. A specific prefer to hold ADRs rather than the un- has been previously shown to affect the Colombian feature is the lack of signifi- derlying shares if the issuer is from a coun- growth of the economy in transition be- cant differences between gender perfor- try with weak investor protection laws. tween steady states or balanced growth mance. Nonnative students and students Also, theoretical models of multiple trad- paths, the authors are the first to link the not speaking Spanish at home have par- ing exchanges predict that trading should growth rate of human capital to the ticularly weak performance in both coun- tend to aggregate in the market with the steady-state growth rate of productivity tries. But there are no differences by pa- lowest transaction costs. Similarly, the and output per worker. Furthermore, this rental occupation and no positive effects relative liquidity of an ADR compared to result does not exhibit scale effects or ofkindergarten attendance. In Argentina, that of its underlying stock should also policy invariance, both ofwhich have been Policy Research Working Paper Series 23 longstanding concerns with the predic- tions of endogenous growth models devel- oped in the 1990s. This paper-a product of the Knowledge for Development Program, World Bank Institute-is part of a larger effort in the institute to assess the effects of knowledge on economic development. Copies of the paper are available free from the World Bank, 1818 H Street NW, Washington, DC 20433. Please contact Faythe Calandra, room J2-267, telephone 202-473-6440, fax 202-522-1492, email address fealandra@ worldbank.org. Policy Research Working Papers are also posted on the Web at http://econ.worldbank.org. The authors may be contacted at dchen2@ worldbank.org or h.kee@worldbank.org. (24 pages)