disaggregated effect on social policy “sub-sectors” – gender, equity of public resource use, human resources, social protection and environment – reveals considerable heterogeneity. Conditions related to the equity of public resource use and building human resources do not seem to influence the quality of policies in those areas. On the other hand, we find tentative evidence that conditions related to social protection and environmental management positively affect the policy quality in those areas. In general, these findings are corroborated by lagging the variable of interest.

The remainder of the paper is structured as follows. In the next section we elaborate on the data and method used, while section 3 presents the main findings. Finally, section 4 concludes.

# **2. Data and method**

## 2.1 Dependent variable and variable of interest

In this study we analyze the association of World Bank development policy lending with the quality of the client governments’ social policies, as measured by the Bank’s Country Policy and Institutional Assessment (CPIA) ratings. The CPIA assessments are expert ratings of 16 policy indicators, grouped into four “clusters”, assessed and updated annually by respective World Bank technical staff working on each member country (see Appendix A for a detailed description). Most indicators rely on quantitative data and unambiguous metrics to capture changes (positive or negative) in policies and institutions. Possible scores on each indicator range from one (weakest policies) to six (strongest policies), including half-point increments.<sup>6</sup> In our analysis, the main dependent variable is the CPIA “Cluster C” score, which measures more specifically the quality of policies and institutions for social inclusion and equity. This rating consists of five sub-components: gender equality, equity of public resource use, building human resources, social protection and labor and environmental sustainability. Countries are rated each year on each of these five dimensions, on a one to six scale. The resulting cluster score is the simple arithmetic mean of the five components.

6 The CPIA is arguably the most appropriate policy measure available at the Bank, because its content reflects the views of World Bank management and staff regarding what policies are most conducive to poverty reduction and the effective use of aid resources. Second, it is the most relevant available cross-country indicator of the policies World Bank country teams are attempting to improve when they design policy loans. Third, CPIA ratings have also been used in empirical analyses in academic literature outside the World Bank (see, e.g., Collier and Hoeffler, 2004).

Nevertheless, we also searched for alternative measures of social policy quality (not social development outcomes), but failed to find useful indicators with the same level of granularity and consistency and availability of data. Stockholm University’s Social Policy Indicators (SPIN) project gathers time-series data of social policy legislation. Unfortunately, that data set is limited to (mostly) high-income countries. Likewise, the OECD collects a wide variety of social indicators, but again mostly for its member states.

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