Many households in developing countries lack formal financial histories, making it difficult for firms to extend credit, and for potential borrowers to receive it.
... See More + However, many of these households have mobile phones, which generate rich data about behavior. This article shows that behavioral signatures in mobile phone data predict default, using call records matched to repayment outcomes for credit extended by a South American telecom. On a sample of individuals with (thin) financial histories, our method actually outperforms models using credit bureau information, both within time and when tested on a different time period. But our method also attains similar performance on those without financial histories, who cannot be scored using traditional methods. Individuals in the highest quintile of risk by our measure are 2.8 times more likely to default than those in the lowest quintile. The method forms the basis for new forms of credit that reach the unbanked.
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Policy Research Working Paper WPS9074 DEC 06, 2019
This paper provides evidence that commercial lenders in Peru free ride off their peers' screening efforts. Leveraging a discontinuity in the loan approval process of a large bank, the study finds that competing lenders responded to additional loan approvals by issuing approvals of their own.
... See More + Competing lenders captured almost three-quarters of the new loans to previously financially excluded borrowers, greatly diminishing the profits accruing to the initiating bank. Lenders may therefore underinvest in screening new borrowers and expanding financial inclusion, as their competitors reap some of the benefit. The results highlight that information spillovers between lenders may operate outside credit registries.
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Policy Research Working Paper WPS9072 DEC 03, 2019
Using firm-level survey data on registered private firms collected by the World Bank's Enterprise Surveys, this paper compares the level of labor productivity in 22 upper-middle-income countries and 11 high-income countries for which comparable data are available.
... See More + The results show that labor productivity in the upper-middle-income countries is about 57.5 percent lower than in the high-income countries. The productivity difference is robust and holds for firms of different sizes and industries. The analysis uses the Oaxaca-Blinder decomposition to identify the sources of the productivity gap. It finds that the endowment effect and the structural effect contribute roughly equally to the productivity gap. Several firm- and country-level variables determine the productivity gap. The biggest contributors via the endowment effect include tertiary education attainment, law and order, and quality management proxied by international quality certification. Factors that contribute most via the structural effect include market size, secondary education attainment, and law and order. Thus, the results underline the importance of human capital, institutions, and market size for closing the productivity gap between the upper-middle-income and high-income countries.
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Policy Research Working Paper WPS9073 DEC 03, 2019
How do trade reforms impact households in different parts of the income distribution? This paper presents a new database, the Household Impacts of Tariffs data set, which contains harmonized household survey and tariff data for 54 low- and lower-middle income countries.
... See More + The data cover highly disaggregated information on household budget and income shares for 53 agricultural products, wage labor income, nonfarm enterprise sales and transfers, as well as spending on manufacturing and services. Using a stylized model of the first-order impacts of import tariffs on household real income, this paper quantifies the welfare implications of agricultural trade protection. On average, unilateral elimination of agricultural tariffs would increase household incomes by 2.50 percentage points. Import tariffs have highly heterogeneous effects across countries and within countries across households, consumers, and income earners; the average standard deviation of the gains from trade within a country is 1.01 percentage points.
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Policy Research Working Paper WPS9045 DEC 03, 2019
This paper examines the effect of Basel III implementation on the access to finance of small and medium-size enterprises in 32 emerging markets and developing economies.
... See More + Analyzing rich, repeated cross-sectional data and a panel of matched firm-bank data in a difference-in-differences setting with sample selection adjustment, the authors find a short-term, moderately negative effect of Basel III on small and medium-size enterprises' access to financing. The results suggest that firms with access to bank credit prior to Basel III implementation could have been affected less than firms that were initially on the fringes of financial inclusion—firms with only a bank account. The paper fails to find any additional heterogeneous effects across firm size or age, bank capitalization or liquidity, or across countries that transitioned to Basel III from Basel II versus Basel 2.5. Overall, the initial conditions of the banking system as well as of complementary business and financial regulation can co-determine the size of short-term costs from the newly implemented global financial regulation in emerging markets and developing economies.
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Policy Research Working Paper WPS9069 DEC 02, 2019
The Paris Agreement introduced a bottom-up approach for addressing climate change by enabling countries to pledge individual commitments through nationally determined contributions (NDCs).
... See More + Furthermore, Article 6 of the Paris Agreement recognizes that Parties may engage in bilateral cooperative approaches, including through the use of internationally transferred mitigation outcomes (ITMOs), to achieve their NDCs. Heterogeneous climate markets may have different governance systems and technological approaches. Information about mitigation outcomes (MOs) or emission reductions is currently collected in a variety of repositories, including spreadsheets and registries, with different levels of information. The differences in these processes may constrain market integration and add to the complexity of tracking and recording transactions. Against this backdrop, there is a need to create a new architecture to support transparency and enhance the tradability of climate assets across jurisdictions while ensuring the integrity of trades. The Kyoto Protocol utilized an International Transaction Log (ITL), operated by the United Nations Framework Convention on Climate Change (UNFCCC), to facilitate communication between registries and maintain a transaction log to ensure accurate accounting and verification of transactions proposed by connected registries. However, under the Paris Agreement, which may rely on a decentralized approach to markets under Article 6.2, climate negotiators are still determining whether a centralized infrastructure should continue, the functions it could perform, and to which market mechanisms or transactions it would apply. Consistent with the bottom-up ethos of the Paris Agreement, there is value in demonstrating an approach to link registry systems in a peer-to-peer arrangement.
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A new paradigm for power sector reform emerged during the 1990s, under the influence of the Washington Consensus, and began to spread across the developing world.
... See More + This approach advocated restructuring of national power utilities to create scope for competition, while delegating responsibilities to the private sector under a clear regulatory framework. After 25 years, few developing countries have managed to adopt the model in its entirety, while many others encountered political and economic challenges along the way. This book provides a comprehensive evaluation of developing country power sector reform, sifting the evidence of whether reforms have contributed to improved sector outcomes. It also examines to what extent the reform paradigm remains relevant to the new social and environmental policy agenda of the twenty-first century, and is capable of adaptation to emerging technological disruption.
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Corruption is the abuse of entrusted power for private gain. Corruption holds back economic development, prevents a free market from operating for businesses and consumers, and further exploits already marginalized groups.
... See More + Economist Daniel Kaufmann has estimated that 2 percent of global GDP is lost to bribery alone every year. But these corrupt proceeds may not be gone forever—nations can use asset recovery to fight corruption, restoring stolen funds to the people for sustainable development and deterring further corruption. The international framework governing such cooperation is laid down in the 2003 United Nations Convention Against Corruption (UNCAC), which went into force in 2005. Despite the great advances in international efforts to recover assets from corrupt officials since the UNCAC went into effect, there is still much work to do. These challenges can impede justice in many corruption cases. This book offers a rarely used way to recover the proceeds of corruption insolvency proceedings—thus contributing to the development of an additional tool for the realization of the UNCAC’s principle on asset recovery.
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