In the first two sections of the paper, we use the term ’intervention’ to generalize across interventions in all of the dimensions we are interested in. It is only when we get down to the specific case studies that we distinguish between interventions in various dimensions.

# **2.1 How to identify large interventions?**

Understanding the impact of interventions on outcomes such as levels of income or corruption is a difficult and yet important task. The first step in fulfilling such a task accurately is the specification of variables that identify interventions on a large scale. This is no trivial task, as most measures used in the literature fail to make the distinction between intervention inputs and intervention outputs.

When a government launches an anti-corruption drive, or changes its exchange rate management strategy, these are intervention inputs. These intervention inputs are then mapped onto intervention outputs, which are, for example, the levels of corruption after the launch of the anti-corruption drive. This mapping depends not only on the choice of the right input, but also on random shocks that can map bad intervention inputs into great outputs, or vice versa. This is the central reason why the measurement of intervention inputs is so critical to understand the effect of interventions on outcomes such as income levels and growth.

On a separate note, the identification and measurement of intervention, however, needs to also avoid looking at de jure codification of laws on policy and institutional matters. A law that codifies bribery as illegal is not enough to suggest that the government has implemented an anticorruption program. Ratings that meet these criteria should not be measuring legal statutes that do not hold.

We believe that the Country Policy and Institutional Assessment (CPIA) ratings provided by the World Bank for the IDA borrower countries meets both the criteria described earlier. Hence, we use it to identify national-level reforms and thus understand the links between large scale interventions and development outcomes. We note that this restricts our sample to International Development Association (IDA) countries only.

# **2.2 CPIA History and Methodology**

Each year, the World Bank undertakes an assessment of a country’s policies and institutions, also referred to as the Country Policy and Institutional Assessment (CPIA). The CPIA assesses the quality of a country’s present policy and institutional framework. "Quality" refers to how conducive that framework is to fostering poverty reduction, sustainable growth, and the effective use of development assistance.

The Bank initiated country assessments in the late 1970s to help guide the allocation of IDA lending resources. The CPIA consists of a set of criteria representing the different policy and institutional dimensions of an effective poverty reduction and growth strategy. The criteria have evolved over time, reflecting lessons learned and mirroring the evolution of the development paradigm. In 1998, the criteria were substantially revised: coverage was expanded to include governance and social policies, the number of criteria was set at 20 (where it remained until 2004), and the ratings scale was changed from a 5 to a 6 point scale. In the context of the Board deliberations on CPIA disclosure, in early 2004, the Bank assembled an external Panel to review the ratings and methodology. This Panel concluded that the CPIA criteria focus on the right set of issues and produce robust results, but it also found unnecessary overlap in some of the criteria and outlined steps to address some methodological and process issues. This Panel broadly supported the CPIA practice of rating implemented rather than intended policy actions, and it strongly favored disclosure of the ratings for IDA-eligible countries.

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