# 5. Designing Good Policies Is One Thing, Implementing Them Is Another

## _<mark>Norman Loayza and Michael Woolcock</mark>_

Forging and adopting technically sound policies is necessary for successful development, but it is not enough: any policy is only as good as its implementation. Policy implementation can fail for two broad reasons: (1) the absence of complementary measures needed to make the chosen policy effective; and (2) the inadequate capability of prevailing institutions and administrative systems.<sup>50</sup> The development community has long championed individual policies and programs as the solution to development problems: building schools and making schooling mandatory to improve education, lowering barriers to entry for enterprises to reduce informality, increasing the number of policemen to fight crime, pegging the exchange rate to lower inflation, and so on. But without a supporting institutional framework and capable public sector organizations to implement them, even technically sound policies and programs are likely to fail. This realization can explain the wide variety of outcomes of specific interventions and policies, as well as broad developmental approaches. It can also explain the frustrating performance of foreign aid in driving development outcomes – providing money to countries without competent institutions and accountable leaders may only result in waste and corruption.<sup>51</sup>

## **The need for complementary policies and institutions**

Complementary policies can make reforms successful.<sup>52</sup> Children do not learn if they are hungry, so educational and nutritional policies should go hand in hand.<sup>53</sup> Parents do not vaccinate their children if they are struggling to survive, so immunization campaigns should target the poor and provide pecuniary benefits to families that participate.<sup>54</sup> Farmers do not adopt new crops and technologies that are potentially more profitable but also riskier, so introducing new farming practices should be accompanied by improved insurance mechanisms and access to markets.<sup>55</sup> This principle of complementarity also applies to macroeconomic policies. Trade openness cannot promote

> 50 See Matt Andrews, Lant Pritchett, and Michael Woolcock (2017). _Building State Capability: Evidence, Analysis, Action._ New York: Oxford University Press.

> 51 See David Dollar and Lant Pritchett (1998). _Assessing Aid: What Works, What Doesn’t, and Why._ Washington, DC: World Bank). For a more recent work, see Dan Honig (2018). _Navigation by Judgment: Why and When Top Down Administration of Foreign Aid Doesn’t Work._ New York: Oxford University Press.

> 52 See Raphael Bergoeing, Norman Loayza, and Facundo Piguillem (2016). “The Whole is Greater than the Sum of Its Parts: Complementary Reforms to Address Microeconomic Distortions.” _World Bank Economic Review_ 30 (2): 268 – 305.

> 53 See Abhijit V. Banerjee and Esther Duflo (2007). “The Economic Lives of the Poor.” _Journal of Economic Perspectives_

21 (1): 141 – 68.

54 See, for instance, Abhijit Banerjee, Esther Duflo, Rachel Glennerster, and Dhruva Kothari (2010). “Improving Immunisation Coverage in Rural India: Clustered Randomised Controlled Evaluation of Immunisation Campaigns with and without Incentives.” _British Medical Journal_ 340 (May 17): c2220.

55 See, for example, Dean Karlan, Robert Osei, Isaac Osei‐Akoto, and Christopher Udry (2014). “Agricultural Decisions after Relaxing Credit and Risk Constraints.” _Quarterly Journal of Economics_ 129 (2): 597–652.

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