rafmacalaba/data-use-mentions-extended huggingface dataset:
WPS3378

# **Pro-growth, pro-poor: Is there a tradeoff?**

J. Humberto Lopez<sup>*</sup> The World Bank (PRMPR)

## **Abstract**

Is a pro-growth strategy always the best pro-poor strategy? To address this issue, this paper provides an empirical evaluation of the impact of a series of pro-growth policies on inequality and headcount poverty. We rely on a large macroeconomic data set and estimate dynamic panel models that allow us to differentiate between the short- and longrun impacts of the policies under consideration on growth, inequality and poverty. Our findings indicate that regardless of their impact on inequality, all the pro-growth policies we consider lead to lower poverty levels in the long run. However, we also find evidence indicating that some of these policies may lead to higher inequality and, under plausible assumptions for the distribution of income, to higher poverty levels in the short run. These findings would justify the adoption of a pro-growth policy package as the center of any poverty reduction strategy together with pro-poor measures that complement such a package by offsetting potential short-run increases in poverty.

## World Bank Policy Research Working Paper 3378, August 2004

_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. Policy Research Working Papers are available online at http://econ.worldbank.org._

* This paper has been prepared in the context of the "Pro-poor Growth" program sponsored by the World Bank's PREM Poverty Group. I would like to thank Oya Celasum, Aart Kraay, Ugo Paniza
Policy Research Working Paper 9156

# **Abstract**

Several new statistical tools and analytical frameworks have been developed recently to measure countries’ and sectors’ involvement in global value chains. Such wealth of methodologies reflects that different empirical questions call for distinct accounting methods, along with different levels of aggregation of trade flows. This paper is a companion to the conceptual framework presented in <u>Borin and Mancini (2019). The paper describes a new Stata module, icio, that</u> allows the user to construct the most appropriate measure for given empirical questions on trade in value-added and participation in global value chains of countries and sectors. By exploiting inter-country input-output tables, icio provides decompositions of aggregate, bilateral, and sectoral exports and imports according to the source and destination of their value-added content. As different measures are suited to address distinct economic questions, icio is designed to be flexible also in this respect.

This paper is a product of the World Bank’s _World Development Report 2020_ Team, Development Economics. It is part of a larger effort by the World Bank to provide open access to its research and make a contribution to development policy discussions around the world. Policy Research Working Papers are also posted on the Web at http://www.worldbank. org/prwp. The authors may be contacted at federico.belotti@uniroma2.it, alessandro.borin@bancaditalia.it and michele.mancini@bancaditalia.it.

_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 views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the
454)|
|International market|3.991|-6.101|1.691|-2.143|
|dummy|||||
||(3.942)|(7.897)|(4.999)|(4.544)|
|Constant|-22.878*|-40.982|67.940**|74.194***|
||(12.041)|(29.101)|(23.510)|(9.539)|
|R<sup>2</sup>|0.049|0.101|0.060|0.229|
|Number of observations|3,507|3,546|3,546|3,247|

_Sources_ : Enterprise Surveys COVID-19 Follow-up Surveys and Enterprise Surveys. _Notes_ : All regressions are ordinary least squares and include sector and country fixed effects. Standard errors are clustered at the country level. *** p < 0.01, ** p < 0.05, * p < 0.1.

17
of the child feeding scheme, if any, are unlikely to be large.

# **6 Conclusion**

This paper provides empirical evidence to support the notion that political participation and political views are responsive to targeted transfers. The issue is increasingly attracting the attention of policy makers and researchers particularly in a context where identifying policy instruments to balance the trade-offs of the direct and indirect effects of CCTs - including mobilizing people to participate in political processes as voters and electoral accountability- has become important.

Using a unique Census dataset with individual level voter registration data, we show that beneficiaries of FA are around 2.5 percentage points more likely than comparable non-beneficiaries to vote. Increasing voter turnout is often considered a desirable outcome since it increases representation, a basic element that underpins a democracy. This argument is even stronger for countries like Colombia where voting is not compulsory and turnout rates are around 45 percent, lower than those observed in comparable democratic systems.<sup>19</sup> The increase in intent-to-vote and actual turnout is explained by larger political participation among beneficiary women. In many democracies women are less likely to participate in the political sphere, either as voters or as candidates running for public office. Suffrage was extended to women in many countries during the last century, yet women have traditionally voted less than men. Explanations to understand the gender gap in voter turnout range from cultural norms to limited decision power within the household, personal security concerns, mobility constraints, and access to fewer and poorer sources of information to understand the benefits of voting. Although CCTs are not conceived to directly overcome these obstacles, analyses have found that they improve the status of women in the form of exerting larger control over family

> 19Authors’ calculation based on information from `http://www.idea.int/vt/countryview.cfm?CountryCode= CO` .

20
It is worth noting that a sizeable proportion of people in some countries do not have internet access, which might limit the ability of some predictors—e.g., Google search trends—to track the crisis. We address this concern in two ways. First, we link the absolute values of the OLS residuals to the data on the internet users per capita to see whether the accuracy of our prediction depends upon the internet penetration.<sup>9</sup> As shown in Figure 13, our regressions with LASSO-selected features perform better in high-income countries with high internet penetration—as manifested by the negative relationship between the absolute values of the OLS residuals and the internet users per capita. However, we cannot say that LASSO-selected features have a greater capability to track the Stringency Index in countries with higher shares of internet users—if anything, the actual values of the index in question have smaller deviations from their predicted counterparts in countries with lower internet penetration.

Second, we look at the within-country dynamics of the economic performance in a panel of states with comparable levels of income that mainly consists of OECD members. To get a sense of the temporal heterogeneity of economic growth across quarters in 2020, Figure 14 plots quarter-overquarter, seasonally adjusted GDP growth rates for the 41 countries for which we have data. There are two striking patterns. First, every country recorded a lower growth rate in the second quarter than in the first, consistent with the peak of stringency measures shown earlier in Figure 1. Second, every country recorded a higher growth rate in the third quarter than in the second, though the overall pattern is negative growth across the second half of the year.

Table 4 presents the regression results for the quarterly-level data. Column one presents results with all variables and quarter dummies, but without country fixed effects. Column two includes country dummies to ascertain whether these features can predict changes within countries during the crisis. The first mobility factor seems to be the only consistent predictor of GDP growth according to the
Observations|512|512|512|512|
|Mean Dep. Var.|3,500|2,019|527|1,278|
|SD Dep. Var.|3,001|1,716|621|1,071|

_Note:_ This table reports OLS estimates; the unit of observation is bank level and bank and bank _×_ quarter fixed effects are included. Standard errors are Davidson and McKinnon (1993). Total deposits is a variable aggregating demand, saving, and time deposits at bank level; it is continuous and measured in million birr. Private lending embodies lending to the private (no financial sector, no public sector, regions, cooperatives) at bank level; it is continuous and measured in million birr. NBE bills is the amount of bills issued by the NBE at bank level; it is continuous and measured in million birr. All safe assets is the amount of liquid assets held by banks in cash, bank-to-bank deposits, and reserves at the NBE and NBE bills; it is continuous and measured in million birr. The variables are made intertemporally comparable using the core inflation figures from National Bank of Ethiopia (2012, 2013, 2014) and all figures are in real million birr, constant at 2010 prices. The means and standard deviations of these variables are reported in the last tow rows of the table. All of these variables are regressed over 13 quarter dummy variables, which span all the months in our data. The policy change occurs in Quarter 5 (April, May, and June 2011). These regressions measure the quarterly evolution, and an interaction of these dummies with the big bank dummy, to verify whether bigger banks are differentially affected more by the policy, as Proposition 2 states. The reported coefficients are only for the interaction between the big bank dummy and the period dummy; it can be seen that before the policy change, the null hypothesis of parallel trends cannot be rejected, while it is rejected afterward
from US universities in the 1970s in the ...elds of Science and Engineering returned to Taiwan (Kwok and Leland, 1982) or Korea, a proportion that rose to about one half to two-thirds in the course of the 1990s, after two decades of impressive growth in these countries. Is it due to the economic boom at origin or to changes in the immigration policy at destination? Recent evidence is quite mitigated.

On the one hand, the ...gures for Chinese and Indian PhDs graduating from US universities in the same ...elds during the period 1990-99 are fairly identical to what they were for Taiwan or Korea 20 years ago (stay rates of 87% and 82%, respectively) (OECD, 2002). This would seem to be con...rmed by a recent survey which shows that in the Hsinchu Science Park in Taipei, a large fraction of companies have been started by returnees from the USA (Luo and Wang, 2001). In the case of India, Saxeenian (2001) shows that despite the quick rise of the Indian software industry, only a fraction of Indian engineers in Bangalore are returnees. According to these papers, return skilled migration appears relatively limited, however, and is often more a consequence than a trigger of growth.

On the other hand, a more recent and comprehensive survey of India’s software industry was more optimistic and con...rmed the presence of network e¤ects and the importance of temporary mobility (strong evidence of a brain exchange or a brain circulation), with 30-40% of the higher-level employees having relevant work experience in a developed country (Commander et al., 2004). In their survey on medical doctors working in the UK, Kangasmieni et al (2004) found that ”many” intend to return after completing their training.

# 3.4 Uncertainty

Before 1965, the US immigration policy was based on country-speci...c quotas. This quota system was abolished but various types
that PSM does not solve the selection problem in the program studied by Lalonde.<sup>35</sup>

Similar attempts to test PSM against randomized evaluations have shown mixed results. Agodini and Dynarski (2004) find no consistent evidence that PSM can replicate experimental results from evaluations of school dropout programs in the US. Using the _PROGRESA_ data base, Diaz and Handa (2004) find that PSM performs well as long as the same survey instrument is used for measuring outcomes for the treatment and comparison groups. The importance of using the same survey instrument in PSM is also emphasized by Heckman et al. (1997a, 1998) in the context of their evaluation of a US training program. The latter study also points to the importance of both participants and non-participants coming from the same local labor markets,

> 35 Dehejia (2005) replies to Smith and Todd (2005a), who offer a rejoinder in Smith and Todd (2005b).  Also see Smith and Todd (2001).

26
**Do Psychosocial Stimulation, Parental Distress and Early Childhood Education Enrollment Show Different Associations with Early Childhood Development Outcomes for Boys and Girls? Findings from a Phone Survey in Pakistan**<sup>♠</sup>

**Emily Franchett* Amer Hasan* Elizabeth Hentschel Mahreen Tahir-Chowdhry* Heather Tomlinson* Aisha Yousafzai**<sup>♦</sup> **Mina Zamand**<sup>*****</sup>

**Key words:** early child development, gender, psychosocial stimulation, parental distress, early childhood education, Pakistan

**JEL codes: I21, I24**

> ♠ Authors are listed alphabetically.

> ♦ Harvard T.H. Chan School of Public Health

> * Education Global Practice, World Bank
information on educational enrolment by public versus private institutions, we identify children going to public schools based on household expenditures on tuition, and assign a lower public benefit to those households based on the standard subsidy amount per student in private institution (75 percent for those in private kindergartens, and 50 percent in other school types). For university students we calculate the share of public university subsidy per stationary student and assign this amount to students assumed to be attending public universities based on HBS data.

Finally, for health we use the cost of insurance approach and assign a per capita benefit to all individuals. However, some households opt out of public service and pay for private insurance to cover primary care, dental services, outpatient care, and rehabilitation, as identified in the HBS. For these households, we reduce the public benefit amount accordingly.

There are some important caveats about what the fiscal incidence analysis applied here does not address. First, it does not take into account behavioral, lifecycle or general equilibrium effects and focuses on average incidence rather than incidence at the margin. Our tax shifting and labor supply responses assumptions are strong because they imply that that consumers have perfectly inelastic

> 10 Note that we do not apply statutory VAT or excise rates to expenditures related to farming activities as we treat those as intermediate products.

14
, Philippines, Vietnam 2009; Cambodia 2007)_ Looking beyond the national level, it becomes apparent that a significant proportion of foreign firms, as well as medium and large firms, report being constrained by shortage of skills in the labor force. It is important to look beyond the national level, as certain types of firms are more likely than others to be constrained by skills shortages. These results show that firms that tend to use more advanced technologies, and therefore are in need of more skilled workers, are facing greater constraints in terms of the availability of skills. This tends to be true in most Asian comparator countries, except the Philippines (Table 6). Compared with the other countries, the Philippines has an English-speaking workforce, and has had a policy of training its labor force to meet international demand

> 3 These numbers are obtained from World Bank Employer Surveys. An Enterprise Survey is a firm-level survey of a representative sample of an economy’s private sector. The surveys cover a broad range of business environment topics including access to finance, corruption, infrastructure, crime, competition, and performance measures.

11
Measuring True Sales and Underreporting with Matched Firm-Level Survey and Tax office Data been shown to affect both firm performance and tax reporting behavior of firms (Pommerehne and Weck-Hannemann 1996, Johnson, et al. 2000, Dollar, HallwardDriemeier and Mengistae 2005).<sup>27</sup> For this paper no suitable proxy for tax burden is available but we include a dummy for _corruption_ with a value one (zero) implying that a firm has (not) paid bribes or provided informal gifts in 2003. Also a dummy variable _credit_ is included equal to one if a firm faces a constraint to formal credit such as bank loans and overdraft. We also considered a list of variables approximating for the burden of regulation, such as the number of visits by agency inspectors, the time spent dealing with regulations by management, but they were insignificant in the empirical analysis and were omitted.

We are aware of the possible endogeneity problem with the IC variables _._ Firms may pay bribes to get away with underreporting and firms with larger official sales may have more access to finance than firms with smaller official sales. Dollar _et al._ (2005) have proposed taking the city-industry average of the IC variables to reduce the possible endogeneity.<sup>28</sup> We have used the same strategy, but found inflated estimates for the coefficients of the size and industry dummies due to severe multicollinearity problems. On the other hand, including the IC dummies directly in the regression does not affect the estimated parameters of the other variables much. This suggests that possible endogeneity bias, if any, is limited to the estimated coefficients of the IC dummies.

27 The quality of government institutions or legal systems has been shown to also affect informality (Pommerehne and Weck-Hannemann 1996, Loayza 1996, Johnson, et al. 2000, Dabla-Norris, Gradstein and Inchuauste 2008).

> 28 However as Dollar _et al_ . (2005) also point out that even the city-sector averages won’t be exogenous if more efficient firms self-select
(Baqaee and Farhi, 2019).<sup>11</sup> Finally, given the presence of complementarity across suppliers of the same product, we address previously unanswered questions on the importance of firms’ overall connectivity within a production network for the amplification of shocks. We leverage computational innovations in big data to compute the second-order effects of productivity shocks using the entire matrix of production linkages between firms and industries. This innovation helps quantify the non-linear effects of productivity shocks _directly_ using the network without relying on approximations using final sales.<sup>12</sup> Our paper is also related to research on trade collapses during adverse shocks (Behrens et al., 2013; Giovanni and Levchenko, 2009; Bricongne et al., 2012), and shock transmission through GVCs during the Covid-19 pandemic via disruptions to imports, exports, or aggregate production (Bonadio et al., 2021; Baqaee and Farhi, 2020; Cakmakli et al., 2021; Demir and Javorcik, 2020; Gerschel et al., 2020; Heise, 2020; Lafrogne-Joussier et al., 2022; Bas et al., 2023; Chakrabati et al., 2021; Khanna et al., 2022; Miranda-Pinto et al., 2022). In contrast, we analyze how domestic transactions were affected during Covid-19 lockdowns in a large developing country. Our policy motivation stems from the observation that policymakers worldwide are interested in quantifying the trade-off between strict lockdowns that affect GDP through complex buyer-seller networks and more lenient measures that increase production and trade. More importantly, even beyond the Covid-19 crisis, our estimates of how substitutable suppliers are within a product category will help policymakers quantify the economy-wide effects of any disruptive events (e.g., natural disasters or sanctions) on trade and production that are expected to be reasonably short lived.<sup>13</sup>

# 2 DATA AND CONTEXT

**Firm-to-firm trade.** Our primary data source is daily establishment-level transactions with distinct information on establishment locations.<
samples from high resolution satellite imagery to estimate slum populations in Dar‐es‐Salaam, Tanzania. Afzal et al (2015) incorporated satellite data into poverty prediction modeling for Pakistan and Sri Lanka, and concluded that its inclusion can lead to substantial improvements in modeled estimates of poverty.

Specifically related to sampling, the literature is more limited and mainly found in the public health literature. Dreiling et al (2009) tested the use of satellite images for household selection in rural counties of South Dakota, and found, while less time consuming, the method did a poor job of identifying the inhabited dwellings. Grais et al (2007) used a random point selection methodology in their study of vaccination rates in urban Niger, and compared the results to a random walk. They do not find statistically significant differences between the methods, though the sample size was limited, but conclude that interviewers found the random point selection methods more straightforward to implement than the random walk. Lowther et al (2009) used satellite imagery to map more than 16,000 households in urban Zambia to select young children for a measles prevalence survey. They find the method easy to implement, but do not do a formal comparison with alternatives. Kondo et al (2014) use a point selection mechanism in the city of Sanitiago Atitlán similar to our proposed Qibla method, but assume the method to be equal probability. A similar method was used by Kumar (2007), in which satellite maps overlaid with remote sensing data were used to create stratification for an air pollution study in India, and then selected random points. Kolbe and Hutson (2006) use a similar method to select households in Port‐au‐Prince, Haiti. Their study incorporates the probability of selection for randomly selecting from nearby structures when the selected points do not fall on the roof of a dwelling, but these probabilities would be distorted if the household density were unevenly distributed or for households close to the boundary. Other public health studies, such as the World Health Organization