Policy Research at the World Bank

Jean-Jacques Dethier,

Research Manager, Development Economics The World Bank

National Science Foundation International Workshop in STEM Graduate Education to Develop a Research Agenda,

Holiday Inn, Arlington VA, February 6-7, 2011

The World Bank’s Comparative Advantage

Given its experience in all developing countries (and access to governments), the World Bank produces

* knowledge in many areas of development policy such as macroeconomic policy; health; education; social policy; poverty alleviation; infrastructure; environment; etc

* high quality, rigorous empirical research

* development data

* surveys and analytical tools

The Bank also acts as a catalyst for new ideas, advocates certain ideas on development and influence development debates because of the quality, diversity and relevance of its knowledge.

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Changing Landscape for Knowledge

• In fiscal year 2010 the World Bank Group (IBRD, IDA, IFC and MIGA) had lending commitments of $72 billion, and in 2009, 59 billion.

• But decline in lending, especially in emerging economies like Brazil, Southern cone of Latin Am, Eastern Europe and South East Asia

• Increasingly our clients ask for (and sometimes pay for) knowledge or

what World Bank staff call “non-lending services”. • The changing nature of the market for development knowledge poses a

challenge if the World Bank wants to maintain its technical and competitive edge

• Competitors: private sector (McKinsey); public sector (OECD); NGOs (Oxfam); donors (Gates Foundation) and academia

• General knowledge on global issues can be covered cheaply and faster – i.e. internet, Google, etc

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MAKE winners and the World Bank — Are we loosing our technical edge…..?

• World Bank (6 times winner)

• 2000, ranked 10th – first

public sector organization to win the award

• 2001, ranked 4th

• 2002 -8th

• 2003, 9th

• 2004, 19th

• 2005, 42nd

• Not on the list since…

Other Winners (frequency)

• Accenture (13) • Apple (5) • Ernst & Young (13) • Fluor (5) • General Electric (11) • Google (6) • HP (10) • IBM (12) • Infosys Technologies (7) • McKinsey & Co. (10) • Microsoft (13) • MindTree (1) • PcW (9) • Royal Dutch Shell (9); Samsung (7) • Schlumberger (4) • Siemens (9) • Tata Group (4) • Telefonica (1) • Wipro Technologies (4)

MAKE stands for Most Admired Knowledge Enterprise 2010 data

The World Bank spent US$ 614 million on knowledge products in 2010

• not including knowledge embedded in (or generated through) our lending.

• Knowledge for clients gets the largest share of spending: • 70% of spending on economic reports, sector analyses, impact evaluations, etc for

client countries

• 17% on internal knowledge products (conferences, etc) and

• 13% on public goods (research, forecasts, global reports)

• A greater share of core knowledge services goes to Africa (15%), followed by East Asia (12%), and Europe/Central Asia (9%)

• Policy Research (public goods) • DEC produces the greatest share of public goods (85% in FY10)

• 4 Networks produce internal knowledge products (environment & sustainable development; poverty reduction and economics; human development; finance & private sector development)

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Spending on knowledge products increased between 2008 and 2010

• Spending on knowledge products increased 20% between 2008 and 2010

– Knowledge for clients increased 23%

– Knowledge as public good increased 21%

– Knowledge for internal use increased 8%

• Regional spending on core knowledge products increased most for East Asia (27%), South Asia (25%) and Africa (23%)

• Spending on knowledge by “networks” increased most

- for Human Development (26%),

- for Environment and Sustainable Development (24%)

- for Economic Policy (24%)

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What our clients want from us

From client satisfaction surveys, we know that they want

Dialogue on policy and institutional issues, based on informed experiences and best practices from across the world, led by seasoned professionals

Just-in-time advice on policy reforms and their implementation ( how-to) customizing solutions to specific country / context

Ready access to knowledge and sharing experiences on key topics under debate from across the globe

Connections to policy reformers, development practitioners, and researchers with in-depth familiarity on the topic

Operational advice by teams with continuous field presence on the implementation of agreed programs

Economic or institutional analysis in various sectors

Up-to-date cross-country data and policy briefings on global issues to inform their own policy debates

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Leader in research on development

• Ranked as the leading institution on development economics by SSRN (based on publications and citations)

• Many individual researchers are stars in their field globally

• Report on progress against poverty was most downloaded article in 2009

• Policy Research Working Papers viewed 80,000 times each month

• Development data now available on Google

• 24 million registered users for World Development Indicators Online, and 16 million for Global Development Finance Online

• Our forecasts have readership of more than 700,000.

External Evaluation of World Bank Research 1998-2005

Independent Evaluation by a Panel chaired by Angus Deaton, Chair (Princeton), Abhijit Banerjee (MIT) & Ken Rogoff (Harvard) Assisted by D. Acemoglu (MIT), F. Caselli (LSE), T. Besley (LSE), S. Edwards (UCLA), G. Hanson (UC San Diego), N. Pavcnik (Dartmouth), E. Duflo (MIT), M. Leibbrandt (U of Cape Town), N. Birdsall (CGD), J. Angrist (MIT), S. Galiani (San Andrés, Argentina), J. Morduch (NYU), M. Bertrand (Chicago), Justin Lin (Beijing U.), C. Udry (Yale), M. Fafchamps (Oxford), Ed Glaeser (Harvard), M. Kremer (Harvard), A. Foster (Brown U.), G. Heal (Columbia U.), P. Diamond (MIT), A. Schoar (MIT) and J. Svejnar (U. of Michigan). Evaluators read a random sample of 420 journal articles, reports, and books talked to senior managers inside the Bank, and to external policymakers and users of Bank research

Strengths of World Bank research

a) World leader in a number of important areas. Bank is the leading intellectual institution in development

b) First rate work includes : social service delivery, impact evaluation, measurement of development outcomes, debate on aid effectiveness, on globalization, …

c) Data generation, from the Living Standard Measurement Surveys, to the Doing Business and Investment Climate surveys, to the International Price Comparison Project

Bank’s data provision is key to almost all academic and policy debate on development (the ‘knowledge Bank’)

Issues with World Bank research

a) Data collection and dissemination needs to be more systematic

b) The borderline between advocacy and research needs to be more carefully respected

• Examples: work on Pension reform, aid effectiveness

c) Inherent tension between policy relevance and academic distinction

• Too much undistinguished "academic style" work

• Better monitoring of ongoing research, more external advice, more external evaluation

World Bank is not an academic institution. Its research must ultimately be judged by its

impact on development, including responding to new challenges

The relevance test: does research lead to better policies?

not every piece of research needs to pass the test of immediate policy relevance (strategic “blue sky” research)

Recognizing context; diverse settings; "one size does not fits all"

need to discuss policy implication based on country groups

strengthen partnership with research institutions in developing countries since local economists know best what opportunities and constraints their country faces

World Bank should also use its convening power to connect knowledge generated by different countries

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Research Partnerships

World Bank has a role as connector and disseminator of research produced in developing and developed countries

The World Bank has a unique vantage point: with partners in

government and civil society, it can - identify key gaps in knowledge, - generate awareness of emerging issues, - test new ideas and tools.

Outside experts and centers of excellence are also key. Their role has increased the diversity of sources or advice to which

developing countries can turn.

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Solid Basis for Continuing Collaboration

Many collaborations with developing country researchers Global Development Network (GDN) African Economic Research Consortium (AERC), the New Economic

School (NES) in Moscow, the Economic Research Forum (ERF) in Cairo Important institutional partnership with the Consultative Group on

International Agricultural Research (CGIAR) Collaboration at level of specific projects (in 70+ countries)

Bank researchers work with consultants from some 90 countries During 1998-2005, outside researchers who co-authored Bank research

came from 66 developing and 25 developed countries

Bank research supported by a number of development partners (major donors like DfID; Sweden, Canada, etc) — providing further

opportunities for intellectual exchange

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Conclusion: We can and should do more

• Bank’s Knowledge Strategy should focus more on high-quality research relevant for policy – only 1% of the administrative budget is devoted to the base budget of the

Bank’s Research Group – less than 6% of spending on Knowledge Products is devoted to research

• More interactions with developing country policymakers • View from the South: The Bank needs to give greater weight to the

views of its partners on priority areas for research • Collaboration with partners assessing what works and what doesn’t

– Expanding role in impact evaluations; – Emphasis on filling strategic knowledge gaps rather than methodological

preferences (randomization is just one tool);

• Exchanges with developing country researchers – Visiting Research Fellow Program – Exchanges with developing country researchers

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ANNEXES

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DEC FY07-FY11 allocated budget ($ million)

FY07

FY08 FY09

Est.

FY10

Plan

FY11 % change

FY07-10

Allocated Bank Budget /1 49.3 50.4 50.2 50.1 50.1

in constant FY07$ 47.9 46.9 45.6 45.4 45.4 -5%

Allocation for Research (includes RSB) 23.5 23.8 22.8 22.3 22.3 -5%

in constant FY07$ 23.5 23.1 21.5 21.0 21.0 -11%

DEC's allocated budget as share of Bank /2 3% 2.9% 2.7% 2.6% 2.6%

/1 Excludes cross support, externally-funded outputs (EFOs), reimbursables, and external funds; FY11 is in FY10$

/2 In constant FY07$

Source: CFR budget allocation tables.

Trust Funds help but they are not the solution

• Declining base budget => greater reliance on Trust Funds

• However, TFs are less predictable/sustainable and cannot be used for hiring technical experts to work on long-term research programs

• Limited substitution possibilities between BB and TF without loss of quality

• The availability of core research staff (financed by BB) is now largely determining output response to demands for research

and data (Gates example).

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Worrying loss of competitiveness

• Bank’s salary and benefits are no longer competitive with the IMF and top universities for recruiting top researchers

• Example: We identified a perfect post-doctoral candidate in late 2010:

– Our offer: $85K net on 2-year contract.

– The competition offers $145K, tenure-track + $180K guaranteed research support

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Main References

World Bank DEC staff, "Research for Development", Policy Research Working Paper 5437, October 2010

http://ideas.repec.org/p/wbk/wbrwps/5437.html

Robert Zoellick, “Democratizing Development Economics,” Speech at Georgetown University, October 20, 2010

http://go.worldbank.org/EY8V84BR10

Evaluation of World Bank research, 1998 – 2005

http://econ.worldbank.org

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Examples of research informing policy (1) Structural Transformation

Client and problem Analysis and policy recommendations

Client: Poor farmers receiving low prices for

soybeans in India

Problem: Are farmers fairly compensated or do

they pay low prices due to imperfect

information, low quality or other reasons?

Analysis: Give farmers cell phones or install

internet kiosks with price information.

Policy Recommendations: Provide farmers with

knowledge of market prices (through internet

kiosks provided by the private sector company

that acts as a middleman)

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Examples of research informing policy (2) Broadening Opportunities

Client and problem Analysis and policy recommendations

Client: HIV/AIDS patients and their households in

Kenya

Research problem: what are the best courses of

action for AIDS treatment of individuals and

their households?

Analysis: difference in differences

Policy Recommendations: antiretroviral therapy

has a range of benefits beyond the medical

effects on the person treated -- the patients get

back to work quickly and their (uninfected)

children show marked improvements in school

attendance and nutrition

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Client and problem Analysis and policy recommendations Client: informal firms and informal sector

workers

Research Problem: Should employment be

encouraged through additional support for

formal sector expansion or through expanding

credit to informal enterprises?

Analysis: Randomized trials in Sri Lanka and

Mexico

Policy Recommendations: Micro-enterprises

invest in viable projects and are capable of

paying high interest rates. Barriers to growth in

this sector should be reduced, credit extended,

rather than solely focusing on creation of formal

sector jobs.

Examples of research informing policy (3) New Global Challenges

Client and problem Analysis and policy recommendations

Client: Fragile States

Research Problem: What can be done to prevent

recurrence of conflict?

Analysis: Research and Consultations launched

with WDR 2011

Policy Recommendations: framework using

expectations, stresses and capabilities that

suggests building confidence and state

legitimacy, through inter-related actions on

security, economic development, governance,

and the provision of justice.

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Client and problem Analysis and policy recommendations Client: Middle Income Countries using carbon-

intensive technologies to produce manufactured

products

Research Problem: Should industrial countries

tax the carbon-content of imports from

developing countries based on the carbon

content of imports or industrial country

domestic production?

Analysis: Modeling that identifies impact on

developed and developing country production

and exports

Policy Recommendations: Carbon taxes on

imports will lead to large reductions in

developing country exports. Negative effects

could be mitigated but not eliminated by basing

taxes on carbon content of industrial country

production.

Examples of research informing policy (4) Aid Effectiveness

Client and problem Analysis and policy recommendations

Client: Donors and Aid Recipients

Research Problem: Should countries diversity

donor sources or is donor fragmentation likely to

dampen aid effectiveness?

Analysis: Cross-country statistical exercise

Policy Recommendations: Too many donors and

increasing aid fragmentation weaken aid

effectiveness . A single donor with a large share

of aid projects has an interest in maintaining the

quality of government administration and is less

likely to drain the few high-quality managers

away from the public sector.

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