Timing and Duration of Exposure in Evaluations of Social Programs

Impact evaluations aim to measure the outcomes that can be attributedto a specific policy or intervention. While there have beenexcellent reviews of the different methods for estimating impact,insufficient attention has been paid to questions related totiming: How long after a program has begun should it be evaluated?For how long should treatment groups be exposed to a programbefore they benefit from it? Are there time patterns in a program'simpact? This paper examines the evaluation issues related totiming, and discusses the sources of variation in the durationof exposure within programs and their implications for impactestimates. It reviews the evidence from careful evaluationsof programs (with a focus on developing countries) on the waysthat duration affects impacts.      

CREDIT POLICIES: LESSONS FROM JAPAN AND KOREA

The success of policy-based credit programs in Japan and theRepublic of Korea suggests that credit policy can be an effectiveinstrument for economic development. Why, then, have creditpolicies failed in so many countries, and what factors explaintheir relative success in Japan and Korea? Both economic and institutional factors appear to be importantin the success or failure of credit policies. Essential economicfactors include a reliance on the private sector, a bias towardindustrialization, an orientation toward export production,the encouragement of domestic competition, and a commitmentto price stability. Crucial institutional factors include extensiveand frequent consultation between government and the privatesector, effective monitoring systems, and, most important, aclear and credible plan for economic development. Although severalcountries have included one or more of these factors in theirprograms, the experience of Japan and Korea suggests that acomprehensive network combining all or most of these factorsmay be necessary for the successful implementation of creditpolicies.      

PREFERENTIAL CREDIT AND INSURANCE AS MEANS TO PROMOTE EXPORTS

Rationales for preferential export credit and export creditinsurance are reviewed and several countries' programs are examinedto determine if these preferential programs are appropriateexport promotion instruments for developing countries. Marketfailure is the most compelling rationale for their introductionbut these arguments have not been well articulated and thereis no systematic analysis of the costs of alternative governmentresponses. Industrial countries' programs have histories ofsubsidy while developing countries' preferential programs havenot been significant factors in stimulating exports.      

The Evolution of the World Bank's Land Policy: Principles, Experience, and Future Challenges

This article examines the evolution of policy recommendationsconcerning rural land issues since the formulation of the WorldBank's "Land Reform Policy Paper" in 1975. That paper set outthree guiding principles: the desirability of owner-operatedfamily farms; the need for markets to permit land to be transferredto more productive users; and the importance of an egalitarianasset distribution. In the 25 years since that paper was published,these guiding principles have remained the same, but it is nowrecognized that communal tenure systems can be more cost-effectivethan formal title, that titling programs should be judged ontheir equity as well as their efficiency, that the potentialof land rental markets has often been severely underestimated,that land-sale markets enhance efficiency only if they are integratedinto a broader effort at developing rural factor markets, andthat land reform is more likely to result in a reduction ofpoverty if it harnesses (rather than undermines) the operationof land markets and is implemented in a decentralized fashion.Achieving land policies that incorporate these elements requiresa coherent legal and institutional framework together with greaterreliance on pilot programs to examine the applicability of interventionsunder local conditions.      

Oil, Macroeconomics, and Forests: Assessing the Linkages

How does an oil boom affect the forest cover of tropical oil-exportingcountries? What macroeconomic linkages and policies are decisive?A comparison of research findings on long-run land-use changesin eight tropical developing economies reveals that the directphysical impacts of the oil industry on forests are unquestionablyless than its derived macroeconomic impact. In most cases oilwealth indirectly but significantly protects tropical forests.The core mechanism is that oil rents cause macroeconomic "Dutchdisease" decreasing the price competitiveness of agricultureand logging, strongly diminishing pressures for forest degradationand deforestation. But domestic policy responses to oil wealthare also vital determinants of the forest outcome. When governmentsuse oil wealth for urban spending sprees, this reinforces thecore effect by pulling more labor out of land-using and forest-degradingactivities. When oil revenues finance road construction or frontiercolonization, however, the core forest-protective effect canbe reversed. Repeated currency devaluation and import protectionof land-using domestic sectors also increase pressures on forests.Other international capital transfers, like bilateral credits,aid, or debt relief, can have impacts similar to those of oilwealth, either alleviating pressures on forests or aggravatingspecific forest-detrimental policies. These insights point toforest-friendly safeguards that can realistically be made inthe design of structural adjustment programs, considering theimportant tradeoffs between development and conservation objectives.      

Evaluating Retraining Programs in OECD Countries: Lessons Learned

Are retraining programs for the unemployed more effective thanjob search assistance? Governments of the member countries ofthe Organisation for Economic Co-operation and Development haveconsiderable experience with retraining programs in a varietyof industrial settings. Evaluations of these programs show thatthe results are disappointing, however. This article discussesthe factors associated with retraining programs for two typesof workers: those laid off en masse and the long-term unemployed.Evaluations indicate poor results for both groups: retrainingprograms are generally no more effective than job search assistancein increasing either reemployment probabilities or postinterventionearnings, and they are between two and four times more expensivethan job search assistance.      

REFORM OF TRADE POLICY: Recent Evidence from Theory and Practice

In the 1980s many developing countries began to recognize thatrestrictive trade policies can constrain growth. To facilitatetrade and integration into the world economy, many countrieshave embarked on reform programs. This survey synthesizes theconclusions of the literature on trade policy reform with thoseof a recent study by the World Bank analyzing reforms in developingcountries, particularly those supported by adjustment lendingprograms. Its objective is to shed light on some of the questionsabout these programs to guide policymakers in the future. Thearticle reviews conditions in these countries before trade policyreforms were implemented and examines how much reform actuallytook place. It also examines the effects of the reforms on economicperformance and reviews the factors that constrained the reformprocess. The survey considers the most important issues in designingand implementing trade policy reforms and concludes that althoughpast reforms have had a positive impact, future programs shouldemphasize three elements: reducing the level of protection,maintaining macroeconomic stability, and accounting for theconflicts and complementarities with other policies.      

Is There a Case for Industrial Policy? A Critical Survey

What are the underlying rationales for industrial policy? Doesempirical evidence support the use of industrial policy forcorrecting market failures that plague the process of industrialization?This article addresses these questions through a critical surveyof the analytical literature on industrial policy. It also reviewssome recent industry successes and argues that public interventionshave played only a limited role. Moreover, the recent ascendanceand dominance of international production networks in the sectorsin which developing countries once had considerable successimplies a further limitation on the potential role of industrialpolicies as traditionally understood. Overall, there appearsto be little empirical support for an activist government policyeven though market failures exist that can, in principle, justifythe use of industrial policy.      

MACROECONOMIC ADJUSTMENT TO CAPITAL INFLOWS: LESSONS FROM RECENT LATIN AMERICAN AND EAST ASIAN EXPERIENCE

Capital inflows to some developing countries have increasedsharply in recent years. Impelled by better economic prospectsin those countries, lower international interest rates, anda slowdown of economic activity in the capital-exporting countries,the inflows have furnished financing much needed to increasethe use of existing capacity and to stimulate investment. Butcapital inflows can bring with them their own problems. Typicalmacroeconomic repercussions have been appreciation of the realexchange rate, expansion of nontradables at the expense of tradables,larger trade deficits, and, in regimes with a fixed exchangerate, higher inflation and an accumulation of foreign reserves. Should government intervene to limit some of these side effects—andif so, how? The question is especially pressing in the wakeof the Mexican crisis of December 1994. This article looks foranswers in the experience of four Latin American and five EastAsian countries between 1986 and 1993, examining the effectsof the capital inflows on the economy and comparing the differentways in which these countries responded to the problem of "toomuch" capital.      

Appraising Workfare

Workfare programs aim to reduce poverty by providing low-wagework to those who need it. They are often turned to in a crisis.This article offers some simple analytical tools that can beused to rapidly appraise the cost-effectiveness of an existingworkfare operation as a basis for deciding whether the programshould be expanded. For pedagogic purposes, two stylized versionsof a range of programs found in practice are analyzed: one fora middle-income country, the other for a low-income country.The cost of a given gain to the poor is about the same for bothprograms, although the components of that cost are very different,with implications for the timing of benefits. The author pointsto program design changes that could enhance the impact on poverty.      

EVALUATING SOCIAL POLICIES: PRINCIPLES AND U.S. EXPERIENCE

Invariably, studies, proposals, and plans for social programscontain a strong recommendation for evaluation and monitoring.Reliable information about what works and why is clearly vitalfor improving existing programs or designing future ones. Makingsuch assessments requires effective methods of evaluation. Policymakerswho use these evaluations need to know about the methods—the pitfalls to watch for and the relative advantages and disadvantagesof different techniques in different situations. This articledescribes these evaluation methods and the experience accumulatedin the United States in applying them in practice.      

WHEN DO HETERODOX STABILIZATION PROGRAMS WORK?: Lessons from Experience

What advantages and disadvantages does the heterodox strategyoffer to stabilization programs in countries with chronic highinflation? Heterodox stabilization programs, in our definition,are those that support orthodox policies— that is, tightfiscal policy and a fixed exchange rate—with the initial,temporary use of incomes policies— that is, price andwage controls. This evaluation, based on several heterodox programs,successful and unsuccessful, from the 1960s and 1980s in LatinAmerican countries and Israel, affords four principal lessons: * The rapid reduction in inflation at the beginning of heterodoxprograms (which usually comes about at small cost) is the easypart; the problem is to maintain price stability over time. * Incomes policies in heterodox stabilization programs are justifiedonly in countries with high chronic inflation, where persistentinflation is more pervasive and problematic. * There is a case for a bigger fiscal adjustment in heterodoxthan in orthodox programs because of the risk that a programwith price controls may be misperceived as a populist devicefor achieving price stability without adjusting. * The failure of a heterodox program is more likely to destabilizeinflation than is the failure of an orthodox program.      

Vouchers for Basic Education in Developing Economies: An Accountability Perspective

Advocates argue that voucher programs can correct the incentiveproblems of education systems in developing economies. An accountabilityperspective, based on a principal-agent framework, was developedto clarify the arguments for and against education vouchers.An assessment of findings on voucher programs in industrialcountries and a review of voucher or quasi-voucher experiencesin Bangladesh, Chile, Colombia, Côte d'Ivoire, and theCzech Republic support the usefulness of the analytic framework.The assessment concludes that the policy relevance of voucherprograms for developing economies remains uncertain. Major voucherinitiatives have been attempted only in countries with a well-developedinstitutional infrastructure. Some studies find favorable benefitsfor at least some population groups, but others find limitedeffects and evidence of increasing social stratification inschools. Whether vouchers lead to better outcomes or greaterstratification appears related to specific contexts, institutionalvariables, and program designs.      

STUDENT LOANS: AN EFFECTIVE INSTRUMENT FOR COST RECOVERY IN HIGHER EDUCATION?

Governments and universities have trouble reconciling the goalof keeping higher education widely accessible with the needto retrieve some of its costs from students. Student loans offera plausible solution to the problem. But loan programs turnout in practice to have been a disappointing instrument of costrecovery: analysis of twenty-three programs found that studentsrepay only a small portion of the value of the original loan.Subsidies, high default rates, and high administrative costshave eroded the value of repayments. Sometimes loan programshave proved as expensive as outright grants. This article argues that most loan programs could be reformedto improve financial effectiveness—through targeting,charging positive real interest rates, designing repayment plansto take account of the likely pattern of graduate earnings,and ensuring that the oversight institutions can and will collect.Or governments could explore alternative devices for cost recovery,such as a graduate tax. This approach levies a higher incometax rate on beneficiaries of government-subsidized higher educationand thus preserves the idea, implicit in loan programs, of payingfor education with future earnings. As part of an effectivetax system, a graduate tax could bring in significantly morerevenue than traditional loan programs.      

Trade, Foreign Direct Investment, and International Technology Transfer: A Survey

What role does trade play in international technology transfer?Do technologies introduced by multinational firms diffuse tolocal firms? What kinds of policies have proved successful inencouraging technology absorption from abroad and why? Usingthese questions as motivation, this article surveys the recenttrade literature on international technology transfer, payingparticular attention to the role of foreign direct investment.The literature argues that trade necessarily encourages growthonly if knowledge spillovers are international in scope. Empiricalevidence on the scope of knowledge spillovers (national versusinternational) is ambiguous. Several recent empirical plant-levelstudies have questioned earlier studies that argued that foreigndirect investment has a positive impact on the productivityof local firms. Yet at the aggregate level, evidence supportsthe view that foreign direct investment has a positive effecton economic growth in the host country.      

Reassessing Conditional Cash Transfer Programs

During the past decade, the use of conditional cash transferprograms to increase investment in human capital has generatedconsiderable excitement in both research and policy forums.This article surveys the existing literature, which suggeststhat most conditional cash transfer programs are used for essentiallyone of two purposes: restoring efficiency when externalitiesexist or improving equity by targeting resources to poor households.The programs often meet their stated objectives, but in someinstances there is tension between the efficiency and equityobjectives. The overall impact of a program depends on the gainsand losses associated with each objective.      

Foreign Bank Entry: Experience, Implications for Developing Economies, and Agenda for Further Research

In recent years foreign banks have expanded their presence significantlyin several developing economies. In Argentina and Chile in LatinAmerica and in the Czech Republic, Hungary, and Poland in EasternEurope, foreign-controlled banks now hold more than half oftotal banking assets. In other regions the trend is similar,though foreign bank entry has been slower. Despite the growingnumber of countries embracing foreign bank entry, importantquestions are still being debated: What draws foreign banksto a country? Which banks expand abroad? What do foreign banksdo once they arrive? How do foreign banks' mode of entry andorganizational form affect their behavior? This article summarizescurrent knowledge on these issues. Because the existing literaturefocuses heavily on developed economies, it also puts forth anagenda for further study of the causes and effects of foreignbank entry in developing economies.      

THE COSTS AND BENEFITS OF AGROFORESTRY TO FARMERS

Deforestation, growing scarcity of tree products, and environmentaldegradation have created serious problems for rural land usein many developing countries. Agroforestry, a system in whichwoody perennials are grown on the same land as agriculturalcrops or livestock, has been increasingly enlisted in the campaignto meet these threats to the rural economy. Case studies of twenty-one agroforestry projects in six CentralAmerican and two Caribbean countries formed the empricial basisfor the study described in this article. A focal point of analysiswas the profitability of agroforestry for farmers as a crucialincentive to adoption. The findings indicate that many agroforestry practices are profitableunder a broad range of conditions and are therefore likely tobe widely applicable. Successful projects have worked with localcommunities, responding to local needs and preferences and offeringfarmers a broad basket of species and systems from which tochoose. Demonstration plots and the use of paratechnicians havebeen low-cost and effective means of technology transfer, andapplied research has been important in identifying techniquesand practices suited to the region. Other findings have identifiedgovernment regulation of tree harvesting and insecurity of tenure—thoughnot lack of title in itself—as disincentives to adoption.      

USING RANDOMIZED CONTROL DESIGNS IN EVALUATING SOCIAL SECTOR PROGRAMS IN DEVELOPING COUNTRIES

Seven case studies—from Bolivia, Colombia, Indonesia,Mexico, Nicaragua, Taiwan (China), and Turkey—demonstratethe feasibility of conducting rigorous impact evaluations indeveloping countries using randomized control designs. Thisexperience, covering a wide variety of settings and social programs,offers lessons for task managers and policymakers interestedin evaluating social sector investments. The main conclusions are: first, policymakers interested inassessing the effectiveness of a project ought to consider arandomized control design because such evaluations not onlyare feasible but also yield the most robust results. Second,the acute resource constraints common in developing countriesthat often make program rationing unavoidable also present opportunitiesfor adopting randomized control designs. Policymakers and programmanagers need to be alert to the opportunities for buildingrandomized control designs into development programs right fromthe start of the project cycle because they, more than academicresearchers or evaluation experts, are in the best positionto ensure that opportunities for rigorous evaluations are exploited.