rafmacalaba/datause-encoder-data huggingface dataset:
parents, and no non-migrants had migrant parents. We will then adjust upwards the schooling of all migrants with less than 12 years of education by either 1.3 years (2SLS) or 1.8 years (COP) and then reestimate the instrumented version of equation (7).

Columns 5 and 6 of Table 4 present the new coefficient estimates using the 2SLS adjustment, and columns 7 and 8 using the COP adjustment. Doing this adjustment does not change the sign or significance of any of the variables in our model, but does lead to sizeable changes in magnitudes of the coefficients. In particular, the interaction between years of education and community migration prevalence becomes larger in absolute value, showing a stronger negative interaction effect. Figure 4 plots the predicted probability of migration against education years, comparing the unadjusted predictions from column 2 of Table 4 to the adjusted predictions in column 6. The shape of selection changes towards more positive selection in low and medium-network communities. Intuitively, those who migrate would have had more education in the absence of the prospect of migration or the migration of their parents. However, the pattern is still strongly one of negative selection in high network communities. The unadjusted results showed migration to peak at very low levels of education, so adjusting upwards these low levels results in a peak at 2 to 5 years, still a very low level. Thus while adjusting for endogenous education formation increases the degree of positive selectivity, our main results remain robust to this adjustment.

# **7. Conclusion**

We find that in communities with small migration networks, the probability of migration is increasing in education up to reasonably high levels of schooling, resulting in positive selection of migrants. This is consistent with high costs of migration being the determining factor of who migrates in these communities. In contrast, in communities with large networks, where migration costs are lower, we find migration propensities to be decreasing in education, consistent with lower returns to schooling in the U.S. than in Mexico. These results are found to be robust to accounting for the undercount of some migrants in Mexican data, and for the possibility of endogenous formation of education with respect to migration.

Our results help in part to reconcile conflicting accounts of the direction of educationselection amongst migrants from Mexico found in the existing literature. Since the 18
Processing was also treated separately in the study of sugar and sugarcane. In this industry, the cane is processed by mills in the growing areas, and is not traded either nationally or internationally. The original commodity study and the background paper start by estimating the nominal protection of sugar and its by-product molasses, and work back to the nominal protection of sugarcane growing by the use of two different hypotheses regarding the level of processing charges in the mills.

# _By-products_

Apart from those just mentioned, most of the other crops also have by-products. Relative to the total return to farmers, fodder generated in harvesting maize and sorghum (jowar) is the most important, and the incentive estimates for these crops reported in the background papers make allowance for it. In doing so, we assumed that fodder is mainly consumed by animals in the farming areas in which it is produced, and in any case is not traded or tradeable internationally. On this ground we assumed that its selling price would be the same under free trade as in the observed situation.<sup>1 1</sup> Hence the nominal protection coefficient for maize and cotton is (PD +F )/ (PR +F), where F is the value of the fodder corresponding to the unit in which the price is expressed, say per quintal of maize. Fodder is also generated in harvesting other crops, but its value relative to the selling prices of the crops was too low to be worth allowing for in estimating nominal protection or the other incentive indicators. For the same reason, we did not adjust for other by products e.g. rice bran derived from rice milling and used to produce rice bran oil, and groundnut shells used in cattle feed. We implicitly took account of bagasse (the residue of sugar cane milling) insofar as it is used as the principal fuel in sugar mills, but its sale value for other uses -in particular as a raw material for paper mills-was not sufficient to warrant any special adjustments.

# _Aggregation_

The background papers report the estimated NPCs of the individual crops in each of the states studied for that crop. From these we have calculated weighted averages of the state NPCs which have used to represent the average all-India NPCs. As the focus of the study is the level of incentives for farmers ( rather than, for example, the extent to which consumers are taxed or subsidized), the weights are the production of each state valued at the estimated reference price in the state. Symbolically,

# NPC = Ss NPCs as

where, as = pRs Qs / PspRS Qs E as= 1 pRs = Reference price for the state Qs = Crop production of the state NPCs = Nominal protection coefficient of the state for the crop NPC = Weighted average nominal protection coefficient for the crop s = The states included in the study of the particular crop 11 Under free trade prices of non-tradeables such as fodder would in fact change. Apart from the difficulty of devising rules of thumb that might indicate wha **t** hese changes would be, we decided not to make any adjustment because doing so would have in any case made only very minor differences to the NPC estimates for maize and sorghum.

xx
As Table 3.5 shows, India is an outlier with respect to cost recovery in water. While subsidies are very widespread around the world, India’s subsidies are exceptionally deep, even in comparison to democratic countries of similar per capita income like the Philippines. Is spite of deep subsidization, India has achieved a respectable degree of access for urban water supply. This most likely reflects availability of grant funds for capital investments and the long life of water assets rather than financial viability of water operations in India. The very low level of reliability and quality of service, where India and the rest of SAR are outliers, attest to this. A few conclusions and recommendations follow:

- 1) Full cost recover y in the WSS sector will not be achieved in the medium term. It is likely to take years to achieve basic recovery of O&M costs. Exhortations to do so may simply distract from the painstaking task at hand, improving service quality sufficiently to gain the credibility amongst rate payers needed to permit gradual tariff hikes. Pilots in three secondary cities in Karnataka for supplying water 24X7 are encouraging, as they have allowed for gradual tariff increases and proven that much higher quality services can be sustained. Much improved operational performance, achieved in these particular cases through a management contract with a private operator, has underpinned this success.

- 2) Fostering an environment where users pay a reasonable share of operating costs means that comparable service improvements must be expanded. Therefore operators of urban WSS services will need a substantial, reliable source of recurrent funding other than user charges. Identifying and securing these should be the top priority for ensuring delivery of this vital urban service, quite apart from obtaining funds for new investments.

- 3) Funding for these operational improvements must come from public resources.

- 4) Placing O&M for water systems on a sounder financial footing will expand the ‘carrying capacity’ of water systems and thus the scope for delivery of services to the poor. This will reduce the regressivity of water subsidies as they exist today in India, much as they do in many other places around the world.

# **Urban Transportation**<sup>**12**</sup>

Setting a suitable policy for cost recovery for urban transportation is greatly complicated by the multiplicity of transportation modes operating in a city. Pricing policy not only seeks to recover the costs of building and operating public transport services and the urban road network. It also seeks to avoid congestion, and optimize the cost effectiveness of usage of different modalities of public transportation,

> 12 This section draws heavily on an excellent summary of the issues for pricing urban transport, provided in Gwilliam (2002)

21
**Table 2: Trends in Equity-Based** **_Sukuk_ Issuances**

|**Equity based****_sukuk_**<br>**(****_Musharakah_ &****_Mudarabah_)**|**2001-2008**|**2009-2012**|
|---|---|---|
|Domestic: Value (US$ billions)|37|39.5|
|Percentage of Total|47%|14%|
|International: Value (US$ billions)|13.5|2.6|
|Percentage of Total|36%|6%|

Source: IIFM (2013) The smaller size of equity-based securities is not a problem for the Islamic financial industry alone, but is indicative of a larger trend. McKinsey Global Institute projects that the share of the publicly-traded equities in global financial assets will fall from 28% to 22%, creating a equity gap of $12.3 trillion by 2020 (Roxburgh et. al 2011). In the MENA region, the household sector (which holds close to 43% of total assets) invests 65% of their US$ 2.7 trillion wealth in cash and deposits and only 18% in equities (Roxburgh et. al. 2011). Increasing the role of equity-based capital markets would, therefore, require providing appropriate products and instruments that satisfy the risk-return preferences of households. Although the number of Islamic funds has increased significantly, to 1,065, with a total valuation of US$ 56 billion at the end of September 2013 (TR 2014), only 34% of the fund assets are equity based (IFSB 2014). As the funds industry is still a small fraction (4.7%) of global Islamic assets, there is a potential for further growth in this sector in general and for increasing the equity component of Shari’ah compliant mutual funds in particular.

The public sector can also play a part in increasing the equity capital markets by moving away from traditional debt based financing, for example by using risk-sharing capital market instruments, such as GDP-linked securities, to finance developmental projects. Though there have been some attempts to issue GDP-linked bonds, the risks arising from slow growth periods and accuracy in reporting of growth figures need to be managed to attract investors (Geddie 2014). Diaw et. al. (2104) propose a GDP-linked _sukuk_ that can be used to raise funds in a Shari’ah compliant way to finance government expenditure. They suggest using a forward lease ( _ijarah_ ) contract to structure the sukuk and link the rent paid to the investors to the GDP growth rate.

# **2. Inclusive Finance**

With the exception of a few countries in the Middle East and Southeast Asia, Muslim countries have some of the highest poverty rates in the world (Obaidullah and Khan 2008). Ensuring that the poor have access to a variety of financial services is critical to poverty reduction (ADB 2000: 1, United Nations 2006: 4). A large segment of the poor population, however, do not benefit from 17
# **China: West or East Wind**

# **Getting the Incentives Right**<sup>**1**</sup>

Yanqin Song and Noureddine Berrah Key words: wind power concentration, increasing subsidy burden, VAT reform impact, cost and effectiveness JEL Codes: C18 H23 Q48

> 1 This paper was prepared by Mr. Yanqin Song (ysong3@worldbank.org ), World Bank, and Mr. Noureddine Berrah (nberrah1@gmail.com), consultant. It is based on a study carried out by Energy Research Institute which is sponsored by ESMAP. The authors thank the peer reviewers. The findings, interpretations, and conclusions expressed herein do not necessarily reflect the views of the Board of Executive Directors of the World Bank or the governments they represent. World Bank and ESMAP do not guarantee the accuracy of the data included in this publication and accept no responsibility whatsoever for any consequence of their use. The boundaries, colors, denominations, and other information shown on any map in this volume do not imply on the part of the World Bank Group any judgment on the legal status of any territory or the endorsement of acceptance of such boundaries.

1
# **Economic Valuation of Development Projects: A Case Study**

# **of a Non-Motorized Transport Project in India**

**Hua Wang**<sup>**1**</sup>

**Ke Fang**

**Yuyan Shi**

> 1 Authors are Sr. Economist, Sr. Transport Specialist and Consultant of the World Bank respectively. Views expressed in this paper are solely of those authors and do not necessarily represent those of the World Bank, its Board of Executive Directors or the countries they represent. Special thanks go to Ms. Shabari Shetty and her team for helping conduct the household survey in Pune, India. Corresponding email address:  hwang1@worldbank.org.
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Galal & Naurnyal 8

# **HI.** ASSESSMENT **OF REGULATION: COMPARATIVE CASE STUDIES**

How closely did each of our sample countries emulate the solutions recommended in the previous section to reduce the firm's information advantage, provide efficiency enhancing pricing schemes, and offer credible commitment? Before attempting to answer this question, we first place our sample in the context of the wider phenomenon of increased private sector participation in monopoly sectors in developing countries.

# **H1I.1 Recent trends and sample countries**

Many developing countries are increasingly replacing public by private monopolies. Table I displays the magnitude and sectoral distribution of the proceeds from divesting utilities in these countries over the period 1988-92. The magnitude of privatization has been increasing steadily, totalling nearly $20 billion in sale revenue in just five years. This trend can be interpreted as a pragmatic response to the inability of governments to meet pending demand because of fiscal constraints. It can also be interpreted as a reaction to the increasing recognition of the perceived (and increasingly documented) efficiency differential of private over public management of assets. Finally, it can be interpreted as a graduation of countries to a higher level of economic development, in which the private sector is now able to mobilize large savings to undertake lumpy projects.

**Table 1. Value of recent infrastructure privatization in developing countries**

|Subsector|1988|Millions<br>1989|of U.S.<br>1990|Dollars<br>1991|<br>1992|Total|Percent<br>of Total|
|---|---|---|---|---|---|---|---|
|Telecommunications|325|212|4036|5743|1504|11821|<br>59.70|
|Power|106|2100|20|346|2726|5299|26.70|
|Gas Distribution|0|0|0|0|1906|1906|9.60|
|Railroads|0|0|0|110|217|327|1.60|
|Roads|0|0|250|0|0|250|1.20|
|Ports|0|0|0|0|7|7|0.03|
|Water|0|0|0|0|175|175|0.80|
|Total|431|2312|4307|6200|6535|19785|<br>100|
|Telecom & power (% of total)|100|100|94.1|98.2|64.7|86.5||

Source: Sader (1993) as cited in World Development Report, 1994.
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Unfortunately, because of a quirk in the program, the total calculated length is a true geodesic distance, while distances by paving status are projected distances. However, this never causes a discrepancy of more than a few percent, and because the same projection is used for the whole continent, these errors are highly correlated within countries.

Of 485 populated lights, 464 (96 percent) received plausible routes. Of the remaining 21, 6 were in exclaves or islands, and 2 had centroids more than 5 km from the nearest domestic road. Three received no routes because they were on road segments disconnected from the primate by a gap of at least 100 meters. The remaining ten received implausible routes (because of suspicious gaps of longer than 100 meters in the road network) and were removed. To the extent that these cities are in fact less connected than others, or that government officials have not mapped their roads correctly or at all, they are more likely to be excluded from traditional data sources like censuses and surveys as well.

# **A.5 Pixel-level data-generating process**

The pixel-level data-generating process can be modeled as follows: where _j_ indexes pixels, which nest in cities, _s_ indexes satellite-years within a year, _yjist_ is measured pixel-level light, and _yjist_<sup>_∗_is true(latent) pixel-level light.Twononlinearities</sup> appear here, in addition to rounding to the nearest integer. Processing by NOAA converts to zero nearly all (1) individual pixel values of 1 or 2 and (2) clusters of less than 4 nonzero pixels. In both cases, NOAA’s algorithm interprets these patterns as random noise.

The relationship of interest is at the city level, as are all of the regressors, but the lights data are generated nonlinearly at the pixel level. Rather than estimate Equation (14) via maximum likelihood with approximately 5.6 million pixel-satelliteyears, I instead simply sum lights across pixels and satellites within a city: where _St_ is the number of active satellites (always 1 or 2), and run a tobit regression 50
costs and closer proximity (both physical and social) to typically underserved market segments, agents hold the promise of reaching poorer customers living further from formal bank branches, and thus could more cost-effectively expand financial inclusion than traditional banking and microfinance approaches.

We rely on data on the number and volume of transactions from the agents of FINCA DRC, a microfinance institution that has achieved rapid growth in the number of clients that it serves within a short time span despite facing a challenging context in which to deliver financial services. In general, agents are small-scale business owners who offer FINCA banking services in addition to operating an already established retail business.<sup>6</sup> At an agent, a FINCA client can make transfers to other FINCA accounts, receive a loan payout or do other withdrawals, repay loans or make deposits into an account. While there is no fee for cash-in transactions, there is a fee for withdrawals. Still, customers use the service for withdrawals since agents are often located closer to their own businesses and queues are generally shorter than at bank branches.<sup>7</sup> During the first 3 months of their activity as agents, FINCA agents receive a monthly subsistence stipend of $100. From inception onwards, agents are compensated in relation to the number and value of transactions they facilitate and receive coaching on how to increase foot traffic in their locations. In total, it costs FINCA between $2,500 and $3,000 to set up an agent, of which the largest expense ($1,200) is for the Point of Sale (POS) device.

In our regressions, we assume that variables describing local market characteristics (average income levels, level of commercial development) are exogenous in that they are not likely to be affected by agent activities. There is, of course, some nonrandom selection into being an

> 6 FINCA agents cannot also be agents of banks or other microfinance institutions but can be agents for providers of mobile money services such as Tigo, Airtel, and Orange.

> 7 Other financial services providers also charge fees on transactions.

3
Within just nine years after unification, tax morale values strongly converged, due in particular to a significant change in the level of tax morale in the East. Interestingly, older individuals in the East who were exposed for a longer time to the old regime, were less likely to change their social norms. As Kasper and Streit (1999) argue, the East Germans had to unlearn the old institutions and learn new ones, which requires some time and practice.

Looking at social interactions, one can argue that the behavior of other taxpayers is of great importance in understanding taxpayers‘ compliance. Individuals pay their taxes conditionally _,_ depending on the pro-social behavior of other taxpayers. They are more willing to pay their taxes if they perceive others to be honest. The extent to which others also contribute, triggers more or less cooperation and systematically influences the willingness to contribute. Relying on surveys from 30 European countries (EVS 1999/2000), Frey and Torgler (2007) show that if taxpayers believe tax evasion to be common, their tax morale decreases. In contrast, if they believe others to be honest, their tax morale increases. This result is consistent with the literature on conditional cooperation (see, e.g., Rabin, 1998; Falk and Fehr, 2002; Tyran and Feld, 2006). Lewis (1982, p. 144) argues for the possible existence of a ―tax subculture, with its own set of unwritten rules and regulations. Thus I am more likely to evade not only because I have friends who, I know, have got away with it (so why shouldn‘t I?) but also because evasion is ethically acceptable among my friends ... Furthermore, ̳no friends of mine can be criminals‘ ... ̳What‘s good enough for fine, upstanding citizens like Fred Bloggs, John Doe, Donald Campbell, Herman Schmitt and Hans Anderson is good enough for me‘‖.

Frey and Torgler (2007) use a non-linear ordered probit model (due to ranking information of the scaled dependent variable), and control for a large set of factors. They employ the following question to investigate the impact of conditional cooperation: _“According to you, how many of your compatriots do the following: Cheat on taxes if they get the chance?” (4=almost all, 1=almost none)_ . Consistent with the social interaction and conditional cooperation literature, the estimation results indicate that the higher is the perceived tax evasion of other individuals, the lower is the respondent‘s tax morale. The size of the effect is substantial; if perceived tax evasion rises by one unit, the percentage of persons reporting high tax morale falls by 7.4 percentage points. _Table A4_ 32