After a decade of adjustment a new set of concerns is shaping the Bank's research strategy: reviving long-run growth, alleviating poverty, and protecting the environment.
The overarching goal of the Bank's research and operations is to reduce poverty. To move toward this goal, the Bank is directing its research and policy work to understanding more about what is needed to reduce sickness, improve nutrition, raise life expectancy, and increase the access to education---and more about what is needed to boost the rate of economic growth and ensure that developmental policies and practices are socially, politically, and environmentally sustainable.
The previous Policy Research Bulletin described the way the Bank sets priorities for research. This issue spells out how the Bank's research program will be changing at the margin over the next few years---how new research priorities will augment today's priorities in the 1990s. We begin with the new priorities for the Policy and Research Complex and move on to those for the four regions in the Operations Complex.
Our research strategy for agriculture and rural development takes as its starting point the recognition that many of the most pressing issues go beyond economics---they are at the nexus of several disciplines, particularly those related to technology. One major thrust is therefore in influencing technological change. Our staff will continue to conduct research on economic issues, where we know the problems and where we know how to bring our findings to the policy table. But we will also do more in technology assessments---to draw lessons about the process of technological change, to bolster the technical packages in investment projects, and to strengthen the policy dialogue with national authorities. In addition, we will continue to be a catalyst in influencing the global research agenda. An example is our contribution to establishing a mechanism for technical research by the International Program for Research on Irrigation and Drainage. (Irrigation and drainage techniques have changed little since the early 20th century, except for drip irrigation, which has vastly different factor proportions.) In addition to this catalytic role, we will continue to conduct research on issues that are central to keeping staff at the forefront of agricultural technology.
For many issues knowledge from social sciences other than economics must also be integrated in the analysis. The multidisciplinary side of the Bank's research on agriculture and natural resources is newer, more complicated, and less tractable than subsectoral work. In several key development areas, the Bank is the principal player rather than a catalyst---for example, in land, water, and fisheries resource management. We have begun to tackle these areas, especially the difficult issue of designing a research strategy comprehensive enough to give solid guidance to staff in Bank operations and to policymakers and practitioners in developing countries. The issues go far beyond engineering aspects---and into public sector management and the larger issue of governance.
The research strategy for energy, like that for natural resources, is moving beyond engineering issues to questions of governance. What happens when governments no longer manage the enterprises that run utilities and large manufacturing operations? Do these enterprises face the right incentives and the right regulatory framework? What should the new rules be, and what are the best ways of putting the new rules in place? It is on these issues---issues of revising the social contract among governments, enterprises, and consumers---that we are directing our efforts. Part of this involves reviewing the situation today---to show how things are not working. And part involves providing guidelines for putting in place mechanisms for making tough decisions and for ensuring public accountability. At the core, however, is the need to develop capital markets that will allow private ownership of public utilities when and where such ownership is seen as the key to establishing a competitive environment to promote efficiency.
The research strategy for industry embraces the issues of privatization, capital market development, and competition policy, but it extends to the overriding question of competing in the global marketplace. Globalization is a fact of life in manufacturing today. The pace of technical change is accelerating, and the international division of labor is changing rapidly. To help countries compete in this environment, we will address the importance of foreign private investment in the transfer of technology, the development of domestic capital markets to accommodate the needs of firms for working capital and foreign exchange, and the transport and communications infrastructure to move goods to markets and speed transactions.
The research strategy for infrastructure is driven by the assessment that government responses to the increasing demand for infrastructure services have been inadequate---and that these inadequacies seriously constrain productivity growth, not only in the low-income countries of Africa but in Latin America and the fast-growing Asian countries. Deteriorating services, inefficient public enterprises and institutions, and overregulated markets for water, housing, transport, and waste disposal dictate three priority areas for our analytical work. The first is on the fiscal, financial, and real sector links between the urban economy and macroeconomic performance. The second is on the political, institutional, regulatory, and financial constraints to productivity. The third is on what individual policy changes mean for the productivity of firms and households, for the welfare of the poor, and for the environment.
There is also a need to understand the functioning of large cities as the interactions among different agents (households, firms, and public agencies) become more complex and the probable impacts of policy interventions more difficult to predict. Research will focus on the internal efficiencies of cities on a variety of levels, such as the functioning of urban markets, and on regulatory and institutional constraints, and on the impact of public infrastructure and private investments on urban growth patterns and residential and employment location.
The research strategy for population and human resources in the 1990s has three main thrusts. The first concerns the assessment of poverty and the impact of policy on household consumption and human resource investments. The second is on human resources and economic productivity, with special attention to women's economic productivity and to the formation and use of skills. The third is on the management of human resource development---especially economic management but also tech- nical and institutional management.
The first concentration relies on the analysis of household data to gauge the effects of economic policies on the poor. Understanding the causes and consequences of poverty is key to formulating strategies for poverty reduction, especially as they concern effects on demand for social services. We will examine household behavior changes in human resource consumption and investment in response to economic policy changes. This knowledge will permit the design and validation of policies that benefit the poor, and the introduction of these into the policy dialogue of structural adjustment programs. Our focus will be on enabling more countries to use the Living Standards Measurement Survey (LSMS) methods to assess and predict the effects of policies on the poor.
Poverty alleviation depends not only on the development of human resources but also on their productive use in an increasingly complex and competitive world economy. This requires better understanding of how labor markets function in using human resources, and more efficient investments in education and training. We will also increase our attention to the contributions of higher education to economic and social development, to training labor for technology-intensive in- vestments, and to building applied research and policy analysis capabilities. While efforts are under way to ensure good primary education and health for ever-larger portions of the population, attention must also be given to the role of secondary and tertiary investments in increasing human productivity. Toward these ends, we will emphasize research on improving instruction in science and technology---and the quality of higher education.
To improve women's economic productivity, we are launching a research program with three components. The first is on the consequences of improvements in women's productivity for economic efficiency, family welfare, and population trends---the household economic model with broader macroeconomic and environmental implications. The second is on the determinants of women's productivity in the wage labor force, as farmers, as entrepreneurs, and in the informal sector. The third is on how to improve women's access to the "determinants"---to education, health, nutrition, family planning, agricultural extension, credit, and labor markets. We are also planning more research on the influences on women's labor force participation and earnings, what influences poor women entrepreneurs' earnings, and how to educate girls in difficult environments.
We will support new analysis on the effects of high fertility on household income and expenditures, probing whether reductions in fertility are directly related to improvements in family income and well-being. We plan work also on the environmental consequences of rapid population growth.
Improving the technical, economic, and organizational management of human resources is the principal means of ensuring that resources for human capital development are used effectively, efficiently, and equitably. Better economic management of human resources hinges on the ability to mobilize and allocate resources and to manage economic incentives that affect the supply of, and demand for, social services. We need to understand better the impact of prices and other factors on demand and the influence of demand on the quality of services provided, and vice-versa. Better technical and organizational management is linked to capacity to improve the quality of service delivery. This implies greater internal efficiency---more cost-effective mixes of resources to improve health, education, nutrition, and contraceptive practice, for example---and the organizational capacity for managing it.
Good management must increasingly concern accountability, through the better tracking of outcomes---and equity, by reducing the constraints on demand by females and the poor.
Expanding the evidence on interactions across the social sectors will enable more informed decisions about spending on human capital. Studying the human resource sectors together also permits attention to the aggregate effects of the ability to pay for services and the effects of service quality on demand. Moreover, an integrated framework for research will prompt interaction among sectors and result in a more cohesive foundation for policy dialogue.
The overriding priority for the Bank's work on the environment is to encourage the integration of environmental strategy into our activities---and to strengthen research on the underlying causes of environmental degradation and the feasibility of appropriate policy interventions. Because of the need for quick action in supporting operational work, we have focused on highly relevant applied research in five areas: destruction of natural habitats, land degradation, degradation and depletion of fresh water resources, urban, industrial and agricultural pollution, and the degradation of the global commons.
The emphasis has been on the application of basic economic principles to operations. With operational work increasingly on track, we are refining our thinking and deepening our research, mainly on public policy issues. This will include refining cost-benefit methodology to better address environmental concerns, analyzing global externalities, and investigating the links among poverty, population, and the environment.
The Bank's research on country economics addresses macroeconomic and cross-sectoral issues rather than specific sectoral issues. It also covers such cross-cutting issues as poverty, private sector development, environmental protection, and political economy. The research covers all developing economies, with special attention given to Sub-Saharan Africa. Our strategy for country economics in the 1990s is embodied in the changes being set in motion this year:
Our research on international economics takes a global perspective---on the long-term prospects for developing countries, on the management of debt, and on the likely developments in major commodities markets. The major coordinating vehicle for research on international prospects is the ongoing work on the long-term outlook, which will provide a focus for deepening the research content of our forecasting.
One major area for research on international economics, like that on country economics, concerns the determinants of long-run productivity and economic growth---to find out more about why some countries have not shared in the buoyant world economy and about how investments in human and physical capital affect long-term growth. A second priority area will be the development of the next generation of global models needed to analyze the interactions and links among developed and developing countries, with refinements that will incorporate Eastern Europe's joining the world market economy. Exchange rate and interest rate linkages to debt, growth, and the balance of payments will be a focus of this model, which will also be useful for research planned on agricultural trade. And with the Uruguay Round coming to a close, we will continue to evaluate the multilateral trade agreements for their effect on developing economies. A third priority area will be to assess the effects of global commodity shocks, like the 1990 oil shock, on individual economies---and to evaluate the policy responses to those shocks.
Finally, international economics research will explore the contribution of external finance to growth. The work will analyze why some countries are able to support much higher relative levels of indebtedness than others and the causes of private capital outflows and reflows. It will attempt to isolate the impact of foreign savings, using techniques from the emerging liter- ature on exogenous growth. The research will also address the attri- butes of alternative forms of exter- nal development finance, including foreign direct investment, bond financing, collateralized instruments and leasing, and management of the risks associated with external finance. Much of the existing literature ignores sovereign risk and has yet to take into account potentially useful research findings from the corporate finance literature.
We will also investigate how strategies to control greenhouse emissions will affect the international prices for energy. Because roughly 60 percent of the future increase in hydrocarbon consumption will be in developing countries, we will also investigate how strategies to control greenhouse emissions will affect the international prices for energy, the trade in energy-intensive commodities, and the growth of the global economy. Planned research will assess the likely benefits and costs of improving the efficiency of energy production, transformation, and use in the developing countries. It will also evaluate the effectiveness of various international funding mechanisms in preserving the environment and influencing the substitution of alternative fuels.
For the Bank's Africa region, the long-term perspective study---Sub-Saharan Africa: From Crisis to Sustainable Growth (Washington, DC: The World Bank, 1989)---defines the research agenda for the foreseeable future. For some of the issues identified by that three-year study, work is already under way and will be strengthened. In population, we are studying the determinants of fertility to find out why it remains so high in Africa. We are also devoting more effort to the nexus of population, agriculture, and environment---to understand better how to reverse the vicious circle of rapid population growth, slow agricultural growth, and deteriorating natural resources. And on the social dimensions of adjustment, we are moving from conceptual development to putting systems in place---for more comprehensive statistical data bases, for stronger policy analysis, and for better design and followup for the social policies and poverty alleviation programs that will be a part of future structural adjustment operations. Work on the government's role in promoting the informal sector's development is also being launched.
Although Sub-Saharan Africa has the highest fertility rates of any major region, there are a few cases (Kenya and Zimbabwe) where fertility has begun to decline, and their lessons about fertility decline are proving useful for Africa as a whole. A major question about the Zimbabwean situation is how much the family planning program has stimulated declining fertility and how much of the decline has resulted from favorable socioeconomic preconditions. This issue is being addressed by examining the current constraints on expanded contraceptive use and fertility decline and the extent to which the relative importance of these constraints differs among socioeconomic groups and across regions.
Under the Bank's Africa research initiative---a collaborative effort of the Africa region and the Policy, Research, and External Affairs complex---work is continuing on foreign exchange markets, adjustments to external shocks, the pace of reform, and the impact of wage and nonwage costs on manufacturing exports. New work is being launched on the experience with trade reform (for which there is startlingly little quantitative documentation for Africa), on what regional integration means for trade strategies, on the mobility of labor under adjustment, and on policies for export development. These efforts will help inform the program of regional studies on a range of sectors and themes---such as population, financial sector reform, the opportunities from regional integration, efficient management of external finance, and alternatives for dealing with debt difficulties.
The focus of research for the Asia region has moved beyond the problems of measuring poverty---for these are now well documented---to identifying the prac- tical policy levers for improving the access of the poor to public services, especially for education and health. Exploratory work is under way in the Philippines to find out what governments can do to reduce school dropout rates and improve learning outcomes. These efforts will serve as prototypes for similar work in India, where the problem is enormous---only 60 percent of urban boys are still in school after five years of primary education, and only 16 percent of rural girls. The region will also study the determinants of demand for health services---and the links among epidemiological patterns, the financing of health services, and the equity of access to these services. The program of research in this priority area will emerge from and complement the region's sector work.
The region will also conduct a major study of the links between poverty and population, analyzing how governments can best intervene. Also planned is an in-depth analysis of data on public services for health, education, and family planning. And because the region has a mix of poor and middle-income countries, research will delve into the policies for higher education---before these policies become ossified. Finally, as part of the Bankwide forestry initiative, the region will support a major effort to consolidate thinking on environmental issues. As part of this effort, a visiting research fellow started work in January 1991 to set out the research agenda for the first years of the decade.
The immediate research concern is not only the transformation of centrally planned economies but their changing links with the Soviet Union. Interest in this topic goes beyond Eastern Europe to such countries as Iran and Algeria, which have had long relationships with the Soviet Union and are in the first stages of reform. The big research issues concern the transformation of enterprises---efforts to make public firms private, to restructure policies and institutions, and above all to introduce competition. Also of considerable importance are questions about the evolving trading relationships---with the European Community, with the Soviet Union, and with the other countries of the region and world---and the extent to which existing external debt will affect potential investors' attitudes toward foreign direct investment and other capital inflows.
Another broad area of continuing inquiry is the environment, an issue that deeply affects welfare throughout the region. Acknowledging that much of the work on the environment is applying what we already know, we see that our greatest concern in research may be finding the right mix of incentives and regulations to abate urban, industrial, and agricultural pollution. And as part of the rising conflict between resource use and sustainable development, we are giving priority to water and its management. Much of the region is desert, and put simply, the arid countries are running out of water. The research will explore approaches for pricing and regulation that will translate theory into practical application.
Latin America's massive structural reforms and reassessments of the public sector are influencing the areas of inquiry for research in the region. Comparative analysis of the size of governments, reform in civil services, and fiscal decentralization will be important areas of work. The region is also drawing lessons from private sector responses to reform programs during the last years, particularly those for trade. The possibility of a free trade agreement between the United States and Mexico and other Latin American countries is driving research on how best to make the transition to a free trade area.
The use of social investment funds associated with adjustment operations has raised questions about the appropriate design of safety nets and the relative merits of employment programs and of targeted interventions in the provision of social services. Studies of these questions will improve the design of such projects by drawing lessons from experience. In the women in development area, a study will assess the human capital characteristics and the labor market constraints that inhibit women from realizing their full productive potential.
For research on the environment, the region will be evaluating policies that reduce pollution through changes in relative prices and policies that regulate pollution through administrative controls. Work is starting on global environment issues in Latin America and the proper allocation of the costs of interventions between the country and the international community, work to be carried out in cooperation with the research program on the economics of global environment sponsored by the Country Economics Department.