rafmacalaba/data-use-mentions-extended huggingface dataset:
- e) Whether transactions against extra-budgetary funds are processed through the FMIS;

- f) Whether transactions against internally generated funds are processed through the FMIS;

- g) The extent to which transactions related to donor funds are processed through the system.

For a set of 22 countries, the coverage of the FMIS has been estimated by trying to determine which payments and receipt transactions are routed through the FMIS and which bank accounts are covered by the FMIS. This was used by a quantitative study to assess whether FMIS systems have an effect on fiscal discipline and found a negative correlation between FMIS budget coverage and the deviation of planned to actual deficit targets, as well as a positive correlation between budget coverage and relevant PEFA scores. The authors stress that results only hold if budget coverage means budget subjected to FMIS internal budgetary controls, as expenditure controls may otherwise not be applied. [14] In Ghana and Zambia for example, wages and salaries were not managed through the FMIS and thus not subject to FMIS internal controls. The executive was therefore able to increase salaries substantially mid-year without legislative approval and adequate checks and balances. This put excessive strain on the budget and would not have been possible had these items been subjected to FMIS internal controls. [15-17] FMIS coverage and utilization also matters for the reliability of expenditure reports. Partial budget coverage in the FMIS means that any reporting from the system will also be partial, and therefore any resulting analytical work potentially biased or misleading. [10] Transactions can also be posted to the ledger without going through the FMIS to complement, but this process does not go through the same rigor and verifying the integrity of these is more difficult. Some of these transactions may be accurate, others may not be, and other transactions may not be posted at all, as was found during an assessment of the Malawi FMIS. [10, 18] Posting transactions into the system after they have occurred only gives the illusion of comprehensiveness and control, while integrity cannot be ensured, and controls
syndrome among both lower middle and upper middle-income countries, it is particularly extreme in the case of Morocco.” (Foa, Liverani and Chau↵our 2017). It is noteworthy that these patterns of interpersonal trust appear to be a characteristic shared with other MENA countries.

As shown in Table 7, there is a strong correlation between social and institutional trust. Among individuals who strongly believe that Moroccans tend to trust each other, 66.5 percent also report trusting political institutions, compared to 41.0 percent of those who believe that Moroccans do not trust each other at all – a gap of over 25 percentagepoint. One explanation for that correlation is that interpersonal trust beyond in-group ties creates an environment conducive to the establishment of the rule of law and thus the building of trust in political institutions.

Table 7: Social and institutional trust (ordered logit model)

||(1)|(2)|
|---|---|---|
||Institutional|Institutional|
||trust|trust|
|Interpersonal trust|0.383***|0.375***|
||(0.0483)|(0.0495)|
|Region||X|
|Urban/rural||X|
|Gender||X|
|Income||X|
|Marital status||X|
|No. of HH members||X|
|Income||X|
|Education||X|
|Employment status||X|
|Constant|-0.793***|-0.233|
||(0.156)|(0.426)|
|Observations|5,916|5,913|

Robust standard errors in parentheses *** p _<_ 0.01, ** p _<_ 0.05, * p _<_ 0.1 Data source: World Bank survey on trust (2021) Socio-demographics also matter for
average public sector wage premiums in developing countries are positive and larger than those in developed economies.

The rest of this paper is structured as follows: Section 2 provides background on the economic situation in Bhutan. Section 3 contains a description of the Bhutan Labour Force Survey (BLFS) 2014, the data set used henceforth. The same section also introduces the analytical strategy and describes the econometric model underlying the three-step procedure. The main empirical analysis follows in Section 4. The section consists of four parts: First, a compilation of descriptive statistics on wages, fringe benefits and other variables. Second, an analysis of self-selection into labor force participation and public or private sector as well as of the determinants of wages in either sector and a decomposition of the selection-adjusted difference in average wages between public and private sector into characteristics and coefficients effects. Third, an appraisal of whether results are robust to variations in the empirical setup. Fourth, similar decompositions for different quantiles of the wage distribution. Finally, Section 5 discusses possible implications for research and policy and concludes.

# **2. Background**

Bhutan is a landlocked country in South Asia bordering China to the North and India to the West, South and East. According to NSB (2014), Bhutan’s population in 2014 was around 745,000 and its land area covers 38,394 square kilometers. Thus, Bhutan has a population in the same order of magnitude as the Comoros or Guyana and covers a land area similar to that of the Netherlands or Switzerland. Bhutan’s official currency is the _ngultrum_ or _Nu_ . The _Nu_ is pegged to the Indian _rupee_ at par; in late 2014 one US dollar was worth about _Nu_ 63.5. Administratively, Bhutan’s territory is divided into 20 _dzongkhags_ (administrative districts). The 20 _dzongkhags_ are further divided into 205 _gewogs_ (groups of villages).

Bhutan is maybe most famous for introducing and popularizing the concept of Gross National Happiness (GNH), now enshrined as a principle of state
Accuracy Assessment_ , Boca Raton, FL: CRC Press, pp. 281–292.

- Elvidge, Christopher D., Daniel Ziskin, Kimberly E. Baugh, Benjamin T. Tuttle, Tilottama Ghosh, Dee W. Pack, Edward H. Erwin, and Mikhail Zhizhin (2009) “A Fifteen Year Record of Global Natural Gas Flaring Derived from Satellite Data,” _Energies_ , Vol. 2, No. 3, pp. 595–622.

- Fay, Marianne and Charlotte Opal (2000) “Urbanization without growth: a not-souncommon phenomenon,” Policy Research Working Paper Series 2412, The World Bank.

25
link these losses to the pandemic. Instead, it is possible to explore whether pandemic-induced jobs and income losses are associated with worsening food security, which would suggest that the pandemic has affected food security via its economic impacts on households (Bundervoet et al., 2021).

Regressions controlling for demographic characteristics and country dummies show that respondents who had lost their job or suffered some income losses were significantly more likely to report that an adult in their household had gone a whole day without eating due to lack of resources in the last 30 days (see Annex, Figure A-2). One cannot rule out, however, that rather than food insecurity being associated with job or income losses, pre-pandemic food security was already lower among households who were more likely to experience income or job losses. This does not appear to have been the case for two countries (Ethiopia and Nigeria) where information on households’ pre-pandemic food security status is available (Bundervoet et al., 2021). This does not necessarily address the concern for all countries in the sample but lends support to the view that widespread food insecurity seen in (mostly) low-income countries in the early months of the pandemic was at least in part attributable to economic distress caused by the crisis.

# 4.3. Unequal impact on education of children

At the peak of the pandemic, temporary school closures in more than 180 countries kept nearly 1.6 billion students out of school (Azevedo et al, 2020). As classroom education was increasingly replaced by remote learning, children in poorer households, including most children in low-income countries, had minimal access to internet, computers, or even television or radios at home. The digital gaps, combined with the uneven quality of online instruction in many developing countries, are likely to have widened pre-existing

> 13 This can be seen from the World Bank’s <u>COVID-19 High Frequency Monitoring Dashboard, which uses</u> harmonized data from HFPS.

13
4 sector. Analogous to Harrigan (1997), the differences in export variety across countries play the role of “price differences” in the GDP function, and therefore influence the shares of value added devoted to each sector. An empirical specification based on the translog GDP function is developed in section 5. The export variety indexes are regressors in the share equations, which are estimated along with a productivity equation for each country. The estimates are then used to construct country productivity based on data for 34 countries from 1982 to 1997.

In section 6, we report estimates of the system of the share equations and the productivity equation. Export variety is treated as an endogenous variable, and the instrumental variables used to determine export variety are those suggested by the work of Eaton and Kortum (2002) and Melitz (2003): tariffs, transport costs and distance. There is also an important _exclusion restriction_ suggested by these models: tariffs and transport costs should not have an impact on aggregate productivity _except through_ export (and import) variety. This exclusion restriction amounts to a test for overidentification in our system, as we describe. We formally test this overidentifying restriction in section 7, as well as hypothesis tests based on other restrictions imposed on the system of equations. Most importantly, the over-identifying restriction test is not rejected and confirms the importance of export variety as the _mechanism_ (Hallak and Levinsohn, 2004) by which trade affects productivity.

We discuss the empirical importance of tariffs, transport costs, and distance on export variety in section 8. The results also show that a 10 percentage point increase in U.S. tariffs would lead to a 2% fall in exporting countries’ productivity, which indicates that tariffs are statistically and economically important in affecting productivity via export variety. Increases in distance and transport costs are also significant in reducing export variety of the industries. In section 9, we decompose productivity differences across countries into that part explained by
Figure 20. Average monthly labor income of women and men (15+) by migration status and unconditional gains from internal migration <!-- Start of picture text --> Percent difference Migrants Non-migrants<br>14,000 100.0<br>13,186 90.0<br>12,000 12,039<br>80.0<br>10,000 10,323 70.0<br>9,060<br>60.0<br>8,000<br>39.2 50.0<br>6,000 33.5 40.0<br>27.0<br>4,000 17.1 30.0<br>20.0<br>2,000<br>10.0<br>0 0.0<br>Men Women Men Women<br>All migrants vs Non-migrants Migrants who moved for economic<br>reasons vs. non-migrants<br>Source: Own estimates based on Population and Housing Census 2020.<br>Unconditional gains from internal migration are higher for women and men who migrated from states<br>with weak labor markets. Indeed, the unconditional labor income gap for women who did and did not<br>migrate significantly varies across states of origin. Earnings gains from internal migration are higher for<br>women who emigrated from Oaxaca, Chiapas, Yucatán, and Puebla (see Figure 21). Similarly, earnings<br>gains from internal migration are higher for men who emigrated from Chiapas, Tlaxcala, Yucatán, and<br>Nayarit (Figure 22).<br>Figure 21. Average monthly labor income of women 15+ by state of origin<br>Women who migrated Women who did not migrate Percent difference<br>14,000 120<br>94.9 100<br>12,000<br>80<br>10,000<br>
. 2014. “Saving for a (Not So) Rainy Day: A Randomized Evaluation of Savings Groups in Mali.” National Bureau of Economic Research Working Paper N. 20600.

- Blumenstock, Joshua, Michael Callen, and Tarek Ghani. 2018. “Why Do Defaults Affect Behavior? Experimental Evidence from Afghanistan.” _American Economic Review_ 108 (10): 2868–901.

- Blumenstock, Joshua E., Michael Callen, Tarek Ghani, and Lucas Koepke., 2015. “Promises and Pitfalls of Mobile Money in Afghanistan: Evidence from a Randomized Control Trial.” ICTD '15: Proceedings of the Seventh International Conference on Information and Communication Technologies and Development. Article No.: 15. Pages 1–10. https://doi.org/10.1145/2737856.2738031

- Breza, Emily, Martin Kanz, and Leora Klapper. 2020. “Learning to Navigate a New Financial Technology: Evidence from Payroll Accounts.” NBER Working Paper 28249, National Bureau of Economic Research, Cambridge, MA.

27
7 support estimates reported in OECD (2010). For developing countries, the updated estimates make use of FAO and World Bank data sources for producer and border prices, respectively.<sup>3</sup> The key indicator used for present purposes is the national nominal rate of assistance to agricultural producers (NRA). This is the extent to which the domestic producer price exceeds the border price, and hence is negative if farmers receive less than the price at the country’s border for a similar product. That is the appropriate indicator in times of international price downturns when governments seek to provide more assistance to farmers; but it turns out to be very highly correlated with the appropriate indicator in times of upward international food price spikes when governments seek to provide more protection to consumers, which is the consumer tax equivalent (CTE).<sup>4</sup> The high correlation reflects the fact that most interventions in national food markets occur at the border, rather than in the form of domestic food consumer or producer subsidies or taxes.

# **How much do governments insulate their domestic agricultural markets?**

Needless to say, governments do not limit their interventions in markets for farm products to periods of extreme prices. In the past developing countries have tended to set NRAs below zero, especially if they are food-surplus, while high-income countries have tended to assist their farmers (NRAs above zero), especially if they are food-deficit. That is, NRAs tend to be higher the higher a country’s income per capita and the weaker the country’s agricultural comparative advantage. This is evident from the first 3 columns of Table 1, which reports regressions of product NRAs in the panel dataset for six key crop products. Those highly significant regression coefficients suggest NRAs tend to rise over time as a country’s per capita income rises, and more so the more that growth is accompanied by a decline in agricultural comparative advantage.
which will be discussed in the context of industrial clustering as a development strategy, it also carries with it a concentration of risk should the industry experience a downturn. By diversifying a regional economy, the region would be diversifying the risk of employment downturn in the same way as an investor guards against heavy losses by diversifying her stock portfolio. Diversification, then, would be expected to contribute to employment stability.

Despite the more recent emphasis on potential economies of industrial clusters and implications for more rapid growth, industrial diversity remains an important indicator of economic structure. Whereas the LQ and related concentration measures focus on individual industries, there is another set of measures that are used to quantify the degree of specialization or diversity of industry structure for all industries in a region. Among the most common regional industrial diversity indices are the National Average Index, the Herfindahl Index, and the Entropy Index. Each of these metrics provides a summary measure of the difference between a given region and its national economy in terms of industrial distributions. The implication is that the national economy itself is in some sense optimally diversified, hence these indices become normative. Of course, it would be possible to substitute any alternative industrial distribution for the national economy if there were rational economic reasons for doing so. These measures are also usually based on income or employment statistics, largely because these data are typically more readily available and reliable than estimates of output. However, any of these measures could be used.

# **_Common Diversity Indices_**

Each of the industrial diversity indices rests on a normative assumption concerning the ideal regional industrial economic structure. Because the normative ideal can be expressed in a variety of ways, the measures differ accordingly. The national average index is among the earliest and simplest measures of regional industrial diversity. It emerged in the context of highly developed economies, where the national economy could be assumed to be diverse, and its structure taken as the norm. A perfectly diverse regional industrial structure would therefore mirror the national industrial structure, and departures
institutional data that we have used up to this point, because the surveys were conducted by an independent firm. To the extent that data coming from the program itself may contain accounting irregularities (ghost projects, efforts to cover up the misuse of funds, etc.), our own data collection allows us to independently verify the nature of targeting performance under this component of TASAF II.

> 13 Vulnerable Groups projects provide grants of 6-10 thousand dollars to groups of roughly 10 individuals from vulnerable households in order to finance an entrepreneurial activity. Typical activities for these groups are animal husbandry, beekeeping, tailoring, or the operation of milling machines. These projects thus generate an unusually private form of benefit relative to typical CDD programs.

15
CPBA; this is nearly equivalent to the proportion of children attending a CPBA in treatment communities, as very few children in control communities attended a CPBA or playgroup. Approximately 21 percent of 3- and 4-year-olds in treatment communities attended CPBAs. Finally, the school readiness intervention had a positive effect on preschool participation for boys of mothers without high-school education but had a negative effect on those of mothers with high-school education.

# _Cost effectiveness_

The annual recurrent cost of the intervention was US$ 67,802.75. This included visits by the intervention team to support community leaders in setting up and running CPBAs as well as training and mentoring of volunteer facilitators. This cost excludes the opportunity cost of the facilitators’ time as well as any donations, either in-kind or monetary, provided by community members. Effect sizes of the school readiness intervention are per child, regardless of whether they attended a CPBA. All children in treatment communities aged 0 to 5 are potential beneficiaries. The number of children aged 0 to 5 in treatment communities was estimated to be 5,373 based on the 2017 TEHCI. The subsequent annual recurrent cost per child was US$ 12.62.

A common measure of cost effectiveness in the impact evaluation literature is standard deviations per US$100 (e.g.: Abdul Latif Poverty Action Lab 2014). Table 5 presents the effect sizes of the intervention in terms of a standard deviation per US$100 per child; this is equivalent to the effects presented in Table 4 divided by the cost per child in 100s of US$. 3- and 4-yearolds sampled in the 2017 TEHCI would have been exposed to the school readiness intervention for approximately two years. The cost per child of two years’ exposure was US$ 25.24. Positive effects were found on overall school readiness among girls of mothers with no high-school education and on the average of the literacy domains for both girls and boys of mothers with no high-school education. The effect size per 100 US$ for these sub-populations was 0
regressing water technologies with sustainability, the highest association was found with a _gravity system with a spring water source_ . A likely reason might be because the relatively simple technology requires less maintenance effort. _Dug wells_ were twice as _less likely_ to be associated with a sustainable village than other forms of technology, however, primarily because the water might be more prone to infrastructure problems such as pipe blockages. _Boreholes_ , despite the higher costs and maintenance requirements, _did not show any significant relationship_ with functionality. Thus, taking the presence of dug wells—as a proxy of water stress—into account in the model, we found that it did not affect the relationship between participation and sustainability which still came out to be positively associated.

> 15 For example, geographic conditions of water quality and availability or village socioeconomic conditions and financial capacity.

> 16 Built in PAMSIMAS 2008–2012 and recorded as fully functional every year 2014–2018, generating more than O&M costs and in places with presence of water pollution as per PODES data.

9
If the equilibrium changed from “Not use CC—Not report” to “Use CC—Report” with TIETP, except for expensive transactions with collusion between business and end‐consumers, TIETP might contribute to reducing the shadow economy. According to Jang’s survey (1997), conducted before TIETP’s introduction, while only 8.9 percent of survey respondents definitely obtained receipts in retail stores, approximately 90 percent<sup>39</sup> answered that they would pay with a credit card if the government introduced tax deductions for credit card payments. Another survey’s results showed that 75.8 percent of respondents would use credit cards more frequently if tax incentives for their use were introduced.<sup>40</sup>

# 5. TIETP Incentive Structures

In 1999, the MOFE designed TIETP to encourage people to use credit cards but at the same time to limit the fiscal impact of the policy. TIETP offered tax deductions only from taxable labor income. It did not allow tax deductions from business income, real‐estate rent income, or forest income, since expenses related to those incomes were already tax deductible under the Income Tax Law. The credit card tax deduction was limited at both ends by a minimum threshold and a maximum ceiling, and it also included a sunset clause. Until 2002, eligible income deductions (EID) were allowed at the 10 percent (deduction rate) of electronically traceable payments (ETP), including credit card or debit card payments exceeding 10 percent of total labor income (TLI) in a taxable year, within the ceiling set at the lesser of three million won (approximately US$2,600) or 10 percent of TLI.<sup>41</sup> To avoid double deductions, insurance premiums paid to public insurance funds, including National Health Insurance, National Employment Insurance, and National Pension Fund, and for commercial indemnity insurance, as well as tuition and entrance fees paid to public and private regular educational institutions, were
# **CPI Bias and Its Implications for Poverty Reduction in Africa***

Andrew Dabalen, Isis Gaddis, Nga Thi Viet Nguyen**

## **JEL classification** : **E30, E31, I32, O12, C82**

**Keywords** : inflation, CPI bias, Africa, poverty, Engel curve

* We thank Kathleen Beegle, Jennifer Cisse, Luc Christiaensen, Jed Friedman, John Gibson, as well as participants at the March 2016 African Development Conference, Centre for the Study of African Economies, Oxford University and the May 2016 Inspirational Breakfast Meeting of the World Bank’s Poverty and Equity Global Practice Africa team for comments. We are also grateful to the national statistical offices of the countries used in this study for sharing the price data. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. Of course, all errors are our own.

** The authors are with the World Bank. Corresponding author: Nga Thi Viet Nguyen (nnguyen3@worldbank.org).