rafmacalaba/datause-encoder-data huggingface dataset:
Policy Research Working Paper 5346

# **Abstract**

Investment climate Surveys are valuable instruments that improve our understanding of the economic, social, political, and institutional factors determining economic growth, particularly in emerging and transition economies. However, at the same time, they have to overcome some difficult issues related to the quality of the information provided; measurement errors, outlier observations, and missing data that are frequently found in these datasets. This paper discusses the applicability of recent procedures to deal with missing observations in investment climate surveys. In particular, it presents a simple replacement mechanism—for application in models with a large number of explanatory variables— which in turn is a proxy of two methods: multiple imputations and an export-import algorithm. The performance of this method in the context of total factor productivity estimation in extended production functions is evaluated using investment climate surveys from four countries: India, South Africa, Tanzania, and Turkey. It is shown that the method is very robust and performs reasonably well even under different assumptions on the nature of the mechanism generating missing data.

This paper—a product of the Finance & Private Sector, Poverty Reduction and Economic Management, Latin America and the Caribbean Region—is part of a larger effort in the department to asses the determinants of productivity. Policy Research Working Papers are also posted on the Web at http://econ.worldbank.org. The author may be contacted at jguasch@worldbank.org.

_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 Executive Directors of the World Bank or the governments they represent._ Produced by the Research Support Team
# **Was Weber Right?  The Effects of Pay for Ability and Pay for Performance on Pro-Social Motivation, Ability and Effort in the Public Sector**

## **Sheheryar Banuri (World Bank) Philip Keefer (Inter-American Development Bank)**

Banuri: Development Economics Research Group, World Bank, 1818 H St NW, MC 3-356, Washington, DC, 20433 (e-mail: sbanuri@gmail.com); Keefer: Inter-American Development Bank, 1300 New York Avenue, N.W., Washington, DC 20577 (e-mail: <u>pkeefer@iadb.org).</u>

**JEL Codes** : C91; H83; J45

**Keywords** :  public sector reform, civil service, intrinsic motivation, extrinsic motivation, performance

**Sector Board** :  Public Sector Governance (PSM)
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Policy Research Working Paper 9442

# **Abstract**

Several studies have documented a positive and causal relationship product or process innovation—and labor productivity. Given the links between labor productivity and wages, a likely implication of this positive relationship is that innovation is associated with higher wages of more productive firms. This paper explores the relationship between innovation and wages using Brazil’s employer-employee census and a novel measure of innovation derived from the share of technical and scientific occupations of workers in the firm. The results show a robust and positive wage premium associated with innovative firms. The decomposition of this innovation-related wage premium suggests a series of important stylized facts: (i) the innovation wage premium is larger for manufacturing but also positive and significant for agriculture and services; (ii) it is larger for large firms, but also positive and significant for all firm size categories including micro firms; and (iii) it is larger for medium- and low-skill occupations, although this depends on the use of firm fixed effects. More importantly, the paper explores the causality between innovation and wages and finds empirical support for the ideas that “self-selection”—firms that innovate already pay higher wages before becoming innovators—and increases in wages associated with starting innovation activity, which are persistent for three years after firms start innovating.

This paper is a product of the Finance, Competitiveness and Innovation Global Practice. 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 xcirera@worldbank.org.

_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 Executive Directors of the World Bank or the governments they represent._ Produced by the Research Support Team
that they voluntarily reported their new income at a local social assistance office.

Administrative data showed that under the 2019 system, the vast majority of exits from BF occurred because families’ per capita income rose above the eligibility threshold. The so-called _Averigua ̧c ̃ao e Revis ̃ao Cadastral_ – inquiry and registration review – of existing beneficiaries cross-checked administrative records (such as those on formal employment) against beneficiaries’ self-reported data in CadUnico. This process was carried out centrally in Bras ́ılia and operated independently of municipalities’ economic conditions (Ministerio da Cidadania, 2013). BF beneficiaries were aware of the implications of taking up formal employment for eligibility, as it often led to either program exit or a transition into the permanence rule. Once family income exceeded the threshold, households were removed from the program. While some families left voluntarily, exclusion through the inquiry and registration review could also be considered voluntary since people aimed for higher income despite being aware of the consequences – namely, exclusion from the program (Ministerio da Cidadania, 2008).

BF’s design and its interaction with the broader tax-benefit system created an incentivecompatible framework that should not have discouraged individuals from pursuing formal employment. The program had low marginal tax rates on acquired labor income compared to most social assistance programs (Fietz _et al._ , 2021). This was because the value of the BF benefit remained relatively low, fluctuating between a fourth and a fifth of the MW during the observation period. Additionally, Brazil extended automatic benefits to low-wage workers with children ( _Sal ́ario Fam ́ılia_ ), which partially offset reductions in BF payments and social insurance contributions. Furthermore, personal income tax exemptions applied to workers at entry wage levels. Lastly, BF’s permanence rule, _Regra de Permanencia_ , acted as a temporary income disregard. Figure 1 visually illustrates the design of the BF program as it operated in 2019, including the implications of its permanence rule for a family in which an individual transitioned into fulltime formal employment. Thus, even though eligibility was primarily determined by a family income test, nearly all family types experienced an increase in disposable income as wages rose, with minimal discontinuities. Given these factors, we hypothesize that beneficiaries might have favored formal employment over continued program participation if such an opportunity had arisen.

Since 2019, the BF program has undergone multiple changes. In 2021, it was replaced by _Aux ́ılio Brasil_ , which introduced modifications to benefit structures and eligibility rules. In 2023, BF was reinstated with further adjustments, including an increase in benefit levels. While the 7
affecting the child’s current health status via Ht-1. Therefore, the coefficient cannot be signed a priori since it reflects the net effect of two opposite effects: the income and the disease environment effects. To the extent that the positive income effects are greater than the short-lived negative effects of the disease environment, it is expected that In addition, we include the square of past rainfall deviation to examine how rainfall variability may affect weight-for-height. While higher rainfall should have a positive effect on income, we expect that excessive rainfall may both be harmful to crops and increase diseases.

For children surveyed during the rainy season, we also examine the impact of the current rainfall deviation on weight-for-height Z-scores, summarized by the coefficient . It is expected that since higher than normal rainfall is likely to increase the incidence of water-borne diseases and the benefit from the current higher rainfall on crop yields and income has yet to be realized.

# Figure 7

Figure 7 illustrates the way in which rainfall shocks are constructed. For the past season we compute the deviation of total rainfall from the normal. A contemporaneous shock is constructed based on the cumulative rainfall from the beginning of the growing season up to the month of interview (for both the realization in that particular year and the normal). However, for children interviewed during the dry season we set the normal rainfall and its deviation to 0. Recall from the previous section that the length of the growing season varies geographically, with a gradually shorter season in the more northern areas of the country. Depending of the date a household was surveyed, this also affects which calendar year we used to compute the past and current shocks. Figure 8 shows the distribution of rainfall shocks as percentage deviations from normal for the last completed rainy season and the current season shock (in this last case only for those children born during the rainy season).

# Figure 8

# **Height-for-Age**

We also use the pooled child-level DHS sample to examine the effect of weather shocks on height-for-age; an indicator of long-term health status. In contrast to weight-for-height, there are two differences in the relationship between rainfall shocks and height-for-age. First, there is no point to correlating contemporaneous rainfall shocks with current height for age, as child height-for age is only 19
ICS, we also assess cooking time, user satisfaction and the effects of randomized contract terms (i.e. behavioral treatments) on outcomes. We believe these aspects are important contributions that move the literature forward.

We draw inferences from two rounds of CCT data and find that while the fuelwood savings are not as much as advertised, they are substantial and statistically significant. Because improved stove use has typically been such a barrier to success of improved cookstove programs, we also use a satisfaction survey to evaluate whether the _Mirt_ stove is likely to actually be used.

Our CCT results suggest that _Mirt_ cookstoves reduce fuelwood use by 22% to 31% compared to traditional _three-stone_ stoves, which is similar to other results in the literature. Using the pooled data, the average 26% reduction implies savings of about 0.3 kg of fuel per kilogram of food cooked. This estimate only considers _injera,_ though _Mirt_ stove users also use the chimney side of the stove to cook other foods. We do not consider this in our analysis as these secondary benefits are not part of our CCT protocol.

We acknowledge that taking these estimates as the net benefit of using the _Mirt_ stove to cook a meal supposes limited leakage in which households do not fully substitute the ICS for the traditional technology. That said, three features of the Mirt stove mitigate leakage. First, the Mirt stove is highly specialized for _injera_ baking, which makes it very unlikely that it will be shifted to other uses. As shown in Figures 1 and 2, for example, the cooking area is very large and is not designed for use with small pots. Waste gases can be utilized to cook stews and coffee, but the stove is designed for this to be done in conjunction with _injera_ baking.

Second, we find that the Mirt stove is on average used 2-3 times per week, which is a very traditional and extremely typical interval for _injera_ baking in areas without refrigeration. It is therefore very likely that on average most if not all _injera_ baking (but perhaps not all cooking) is done on the Mirt stove.

Finally, it is very unlikely that any increase in real income due to Mirt stove adoption would be realized as significant increased cooking. Our study areas do not have refrigeration, so households that cook _injera_ must eat them within one to three days to avoid possible bacterial infection. It is, of course, possible that as real income increases, households over time are able to add extra coffee or stews (typically eaten with _injera_ ) to 18 | P a g e
# _b. Timing of Adoption and Lifting of CCMs_

**We use the Probit models to create benchmarks that allow us to investigate if CCMs were put in place at the right time and/or whether they were lifted ahead of time.** Using the estimated models, we predict the day when countries should have adopted or lifted each CCM. If the model-predicted probability is above 50%, we conclude that the country ought to have implemented the CCM.<sup>5</sup> If the probability is less than 50%, we conclude that the CCM should have been lifted, conditional on it being in place in the first place. We then compare whether, according to our models, the country was late in adopting such CCM or early in removing it. The results are presented in Figures 7 and 8 at the global level.

**Before discussing the results, it is worth mentioning that countries reacted relatively fast to the pandemic and started implementing CCMs in early March of 2020.** By March, the number of cases in the world had not reached 100,000 and the number of deaths did not exceed 10,000 (the majority of them in China). Only one country has not imposed any CCM at the time of writing (Nicaragua). And only two countries –Sweden and Japan—have only implemented Border Closures but not restrictions on mobility or activities for its inhabitants. Among those economies that have implemented CCMs, the most popular are School and Work Closures, enacted in virtually all countries in the world by April 1, 2020.

**As can be seen in Figure 7 there are wide disparities in the timing of adoption of the different types of CCMs.** It seems that CCMs affecting activities have been timelier adopted than CCMs affecting individual liberties. Around 70% of countries closed Schools and Public Transportation at the time the models predicted such measures ought to have been implemented. Figures increase significantly if we consider those countries adopting the CCM within one week from the predicted data to be “roughly in time” (to 91% and 78% respectively). Less timely was the adoption of Border Closures and Banning Public Events, but still with a high rate of “In time or roughly in time” decisions (over 75%). On the contrary, countries have lagged significantly behind in the adoption of restrictions to civil liberties in the form of lockdowns (stay at home), banning meetings, and restricting internal mobility. Around one-half of the countries were late by more than one week in adopting lockdown measures and banning meetings. While seven days may not seem a long period of time, consider that during the first two weeks of March 2020 – when CCMs were absent in most countries—the ratio of new daily cases to total cases in the world was around 30%. By the last week of March, when CCMs were being rapidly implemented, it has reduced to around 11%.

> 5 The 50% mark is, of course, arbitrary. Nevertheless, qualitative results are not affected if the benchmark is made slightly stricter or more lax.

15
**Table O.1** Structural change starts to take on a bigger role for Nigeria in the mid-2000s

|Compone<br>|nts of labor produc<br>|tivity change,<br>Time<br>|1996–2009<br>periods<br><br>||
|---|---|---|---|---|
|Growth decomposition|1996–1999|1999–2005|2005–2009|1996–2009|
|**Panel A: Excluding oil and gas **|||||
|% annual productivity growth|0.8|4.8|7.0|4.5|
|_of which:_|||||
|% within-sector productivity|−2.0|9.4|2.6|3.5|
|% structural change|2.8|-4.6|4.4|1.0|
|**Panel B: Including oil and gas**|||||
|% annual productivity growth|−0.8|4.4|4.1|2.9|
|_of which:_|||||
|% within-sector productivity|−7.1|6.2|−1.6|0.7|
|% structural change|6.3|−1.8|5.7|2.2|

Source: Adeyinka, Salau, and Vollrath, Chapter 5 in this book.

may have to do with Nigeria’s low levels of fundamentals (such as infrastructure and human capital). However, to explain negative productivity growth, these conditions would have had to deteriorate. In addition, large productivity gains were made in wholesale and retail trade, transportation and communications, agriculture, and general services. This is puzzling, because it is not obvious why fundamentals would matter more for manufacturing than for other sectors. That said, Nigeria’s record on this front is inexcusable. In 2010, only half of Nigeria’s population was literate, life expectancy was 51 years, only 15 percent of the roads were paved, electric power consumption was only 135 kilowatt-hours per capita, and investment stood at only 17 percent of GDP.

As for Zambia—a country that reclaimed its “middle-income” status in the 2000s thanks to rapid growth—the story is one of extremely uneven structural change. In Chapter 6, Resnick and Thurlow find that structural change was an overall drag on economic growth in Zambia between 1991 and 2010, as labor productivity grew by only 0.31 percent. But if that period is divided into two subperiods, a more nuanced picture emerges. Between 1991 and 2001, there was a mass exodus out of urban areas as copper mines and other parastatals shut down during a phase of privatization, with the share of employment in agriculture (the sector with the lowest productivity) actually increasing (Table O.2).

23
|Establishment has checking or savings<br>account Y/N|0.019|0.019|0.020|0.019|0.020|0.021|0.019|
|---|---|---|---|---|---|---|---|
||(0.022)|(0.022)|(0.022)|(0.022)|(0.022)|(0.022)|(0.022)|
|Establishment has a line of credit or loan<br>Y/N|0.027***|0.027***|0.027***|0.027***|0.028***|0.027***|0.027***|
||(0.009)|(0.009)|(0.009)|(0.009)|(0.009)|(0.009)|(0.009)|
|ISO Certification Ownership Y/N|0.054***|0.054***|0.054***|0.054***|0.054***|0.054***|0.054***|
||(0.011)|(0.011)|(0.011)|(0.011)|(0.011)|(0.011)|(0.011)|
|Firm identifying labor regulations as a<br>major or severe constraint Y/N|-0.006|-0.006|-0.006|-0.006|-0.007|-0.006|-0.006|
||(0.015)|(0.015)|(0.015)|(0.015)|(0.015)|(0.015)|(0.015)|
|Manufacturing Sector Y/N|-0.008|-0.008|-0.008|-0.008|-0.009|-0.013|-0.008|
||(0.009)|(0.009)|(0.009)|(0.009)|(0.009)|(0.010)|(0.009)|
|Constant|0.296***|0.295***|0.295***|0.295***|0.274***|0.296***|0.295***|
||(0.044)|(0.046)|(0.044)|(0.044)|(0.043)|(0.044)|(0.044)|
|Country Fixed effects|YES|YES|YES|YES|YES|YES|YES|
|Number of observations|9,015|9,015|9,015|9,015|9,015|9,015|9,015|
|Adjusted R2|0.228|0.228|0.228|0.228|0.230|0.228|0.228|

note: *** p<0.01, ** p<0.05, * p<0.1, Standard errors clustered at the strata level. Survey weights are employed.

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