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Research Highlights January 2014

Research Highlights January 2014

Research Highlights January 2014

The world’s poorest countries would benefit from having more economists poking around

Research output on a given country increases with the country’s population and wealth, yielding a strong correlation between per-capita research output and per capita GDP: a 10 percent increase in a country’s per-capita GDP translates into a 3.2 percent increase in the number published economic research papers. The large number of papers on the U.S. is almost entirely explained by the fact that the U.S. is both large and rich. Looking at where research is being published, papers written about the U.S. are 2.5 percentage-points more likely to be published in the top five economics journals after accounting for authors’ institutional affiliations and the field of study. This is a large effect because only 1.5 percent of all papers written about countries other than the U.S. are published in first-tier journals. These results raise questions about incentives to researchers in terms of their focus in publishing in academic journals, and highlight the role of development institutions such as the World Bank in ensuring that poorest countries are not left out of the knowledge generating process.

Jishnu Das, Quy-Toan Do,, Karen Shaines, and Sowmya Srikant. 2013. “U.S. and Them: The Geography of Academic Research.Journal of Development Economics 105 (November): 112–30. | Economist Article, January 4, 2014.

Global income distribution and its regional composition have undergone profound change since 1988

Changes in individual real per-capita incomes between 1988 and 2008, as reflected in the global Gini index, brought its value down from 72 to about 70.5 points. However, when adjusted for likely under-reporting of top incomes in national household surveys the estimate for the global Gini was nearly 76 percent. With that adjustment, the downward trend in the Gini almost disappears. The evolution of the country-deciles (in every country, the income distribution is split into 10 groups—deciles—and every person is assigned the average income of his or her income decile) shows the underlying elements driving changes in the global distribution. For example, China has graduated from the bottom ranks, modifying the overall shape of the global income distribution so that instead of two peaks it now has only one, and creating an important global “median” class. The “winners”, with their real incomes almost doubling, were country-deciles that in 1988 were around the median of the global income distribution, 90 percent of whom are in Asia. The “losers”, with real income gains of only 20 percent over 20 years, were the country-deciles that in 1988 were around the 85th percentile of the global income distribution, almost 90 percent of whom are from developed countries.

Christoph Lakner and Branko Milanovic. 2013. “Global Income Distribution: From the fall of the Berlin Wall to the Great Recession.” World Bank Policy Research Working Paper 6719, December. | Story | Blog

Economic agglomeration is an important factor in job growth

The business environment and economic agglomeration affect job creation, but which is more important? Holding constant conventional determinants of firm growth in a worldwide firm survey, such as firm ownership, size, and age, the analysis finds that economic agglomeration is most important, especially modern telecommunications, access to export markets, concentration of economic activity in large cities, and capacity agglomeration (the concentration of large firms in a city). Although the business environment affects job growth less than agglomeration does, aspects of the business environment that matter include labor flexibility, unionization, local skill levels, as well as firm size and age.

George Clarke, Yue Li, and Lixin Colin Xu. 2013. “Business Environment, Economic Agglomeration and Job Creation around the World.” World Bank Policy Research Working Paper 6706, November.

Vote-buying: bad for society, but good for the disenfranchised

Vote-buying is pervasive, but not everywhere. What explains the variations across countries in the greater use of pre-electoral transfers to mobilize voters relative to the use of pre-electoral promises of post-electoral transfers? This model shows the trade-offs politicians incur when they decide between mobilizing support with vote-buying or with promises of post-electoral benefits. Politicians rely more on vote-buying when they are less credible, target vote-buying to those who do not believe their political promises, and only buy votes from those who would have received post-electoral transfers in a world of full political credibility. The enforcement of a prohibition on vote-buying reduces the welfare of those targeted with vote-buying, but improves the welfare of all other groups in society.

Marek Hanusch and Philip Keefer. 2013. “Promises, Promises: Vote-Buying and the Electoral Mobilization Strategies of Non-Credible Politicians.” World Bank Policy Research Working Paper 6653, October.

Why energy intensity has declined in four Chinese industries

Four of China’s most energy-intensive industries—pulp and paper, cement, iron and steel, and aluminum—all have experienced significant declines in energy intensity (the amount of energy used per unit of output). While technological change within an industry can influence energy intensity, so can industry-specific policies and market factors. Unique firm-level data from China’s most energy-intensive large and medium-size industrial enterprises in each of these industries between 1999 to 2004 are used to examine how China’s energy-saving programs are affected by prices, industrial development policies, liberalization of domestic markets, openness to the world economy, and other policies. Rising energy cost was a significant contributor to the decline in energy intensity, but China’s industrial policies targeting scale economies—for example, “grasping the large, letting go of the small”—also contributed to reductions in energy intensity in these four industries. Other factors such as trade openness had less uniform impacts on energy intensities in these industries; however, subsidiaries of foreign firms tended to have lower energy intensities than state-owned firms. The results suggest that even if future energy prices rise, there will still be a need for continued industrial restructuring in order to achieve further reductions in energy intensities.

Karen Fisher-Vanden, Yong Hu, Gary Jefferson, Michael Rock, and Michael Toman. 2013. “Factors Influencing Energy Intensity in Four Chinese Industries.” World Bank Policy Research Working Paper 6551, July.

Affordable solar panels are gaining traction in Bangladesh—and bring many benefits

The Government of Bangladesh, with help from the World Bank and other donors, has provided aid to a local agency called Infrastructure Development Company Limited and its partner organizations to devise a credit scheme for marketing solar home system units and making these an affordable alternative to grid electricity for poor people in remote areas. Household survey data are used to examine the financing scheme behind the dissemination of these solar home systems, in particular the role of the subsidy; the factors that determine the adoption of the systems in rural Bangladesh; and the welfare impacts of such adoption. As the subsidy declined, the demand for solar home systems rose, mostly because of technological developments that reduced the price to an affordable level. Price still has a statistically significant effect on adoption—a 10-percent decline in the price of the system increases the overall demand for a solar panel by 2 percent. Once adopted, a solar home system increases children’s evening study time, lowers kerosene consumption, and improves health for household members, especially women, whose decision-making ability in certain household affairs also improves. Finally, the adoption of solar energy systems increases household consumption expenditure by a small amount.

Hussain A. Samad, Shahidur R. Khandker, M. Asaduzzaman, and Mohammad Yunus. 2013. “The Benefits of Solar Home Systems: An Analysis from Bangladesh.” World Bank Policy Research Working Paper 6724, December.

Turkey implemented new trade barriers under the various flexibilities at its disposal

Trade policy commitments to lower import tariffs and to maintain tariffs at low levels entail short and long-run political-economic tradeoffs. Empirical work examining the relationship between such commitments and the exercise of trade policy flexibilities is still relatively nascent, especially for emerging economies. This empirically based assessment looks at ways that Turkey exercised trade policy flexibilities during the global economic crisis of 2008-11. First, and despite multilateral and customs union commitments that might limit changes to applied tariffs, Turkey made changes to both its applied Most Favored Nation and preferential tariffs that cumulatively affect nearly 9 percent of manufacturing imports and 10 percent of import product lines. Second, Turkey’s cumulative application of temporary trade barrier (TTB) policies—antidumping, safeguards and countervailing duties—are estimated to impact an additional 4 percent of imports and 6 percent of product lines by 2011. Other surprising results on Turkey’s use of flexibilities include extending the duration of previously imposed antidumping and safeguards beyond expected removal dates, removing one TTB policy over a set of products and immediately reapplying a different TTB policy, covering lengthy upstream and downstream segments of important industries, and deepening discriminatory preference margins already inherent in existing preferential trade agreements.

Chad P. Bown. 2013. “Trade Policy Flexibilities and Turkey: Tariffs, Antidumping, Safeguards, and WTO Dispute Settlement.” World Bank Policy Research Working Paper 6322, January.


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