Policy Research Working Paper series publication roundup for November 16-November 30, 2021

This blog is a biweekly feature highlighting recent working papers from around the World Bank Group that were published in the World Bank’s Policy Research Working Paper Series. This entry introduces six papers published from November 16 to November 30 on various topics, including COVID-19, the impact of nature on economic activity and tax compliance.

The first three papers we introduce are very timely as they explore topics related to COVID-19. In Competition and Firm Recovery Post-COVID-19, Miriam Bruhn and coauthors examine the impact of the COVID-19 crisis on the reallocation of economic activity across firms, and whether this reallocation depends on the competition environment. In Inequality under COVID-19 : Taking Stock of High-Frequency Data for East Asia and the Pacific, Lydia Kim and coauthors use pre-pandemic household welfare data and high-frequency household phone survey data from seven middle-income countries in East Asia and the Pacific, spanning May 2020 to May 2021, to analyze the distributional impacts of the pandemic and their implications for equitable recovery. In What Has Been the Impact of COVID-19 on Debt Turning a Wave into a Tsunami,  Ayhan Kose and coauthors present a comprehensive analysis of the impact of COVID-19 on debt and put recent debt developments and prospects in a historical context.

• Competition and Firm Recovery Post-COVID-19 uses the World Bank’s Enterprise Surveys COVID-19 Follow-up Surveys for about 8,000 firms in 23 emerging and developing countries in Europe and Central Asia, matched with 2019 Enterprise Surveys data. It finds that during the COVID-19 crisis, economic activity was reallocated toward firms with higher pre-crisis labor productivity. Countries with a strong competition environment experienced more reallocation from less productive to more productive firms than countries with a weak competition environment. The evidence also suggests that reallocation from low- to high-productivity firms during the COVID-19 crisis was stronger compared with pre-crisis times. Finally, the analysis shows that government support measures implemented in response to the crisis may have adverse effects on competition and productivity growth since support went to less productive and larger firms, regardless of their pre-crisis innovation.
• Inequality under COVID-19 : Taking Stock of High-Frequency Data for East Asia and the Pacific shows that employment impacts at the extensive margin have been large and widespread across the welfare distribution during times of stringent mobility restrictions (low mobility). When mobility restrictions have been relaxed, however, employment impacts have been larger among poorer workers who have found it more difficult to return to employment. Data on the loss of labor income also suggests that the pandemic has exacerbated existing inequalities. In addition to being more susceptible to employment and income shocks, poorer households in East Asia and the Pacific are at higher risk of experiencing long-term scarring from the pandemic – due to rising food insecurity, increased debt, distress sale of assets, and fewer distance/interactive learning opportunities for their children. The findings therefore suggest that inequality has worsened during the pandemic.
• What Has Been the Impact of COVID-19 on Debt Turning a Wave into a Tsunami shows three main findings. First, the authors demonstrate that even before the pandemic, a rapid buildup of debt in emerging markets and developing economies—dubbed the “fourth wave” of debt—had been underway. Because of the sharp increase in debt during the pandemic-induced global recession of 2020, the fourth wave of debt has turned into a tsunami. Second, five years after past global recessions, global government debt continued to increase. As a result of this historical record and given large financing gaps and significant investment needs in many countries, debt levels will likely continue to rise in the near future. Third, debt resolution has become more complicated because of a highly fragmented creditor base, a lack of transparency in debt reporting, and a legacy stock of government debt without collective action clauses.

For the fourth and fifth papers we introduce this week we delve into topics related to nature  and economic activity. In Mangroves as Coastal Protection for Local Economic Activities from Hurricanes in the Caribbean, Juan Jose Miranda and coauthors quantify the effects of hurricane windstorms on economic activity in the Caribbean using nightlight as a proxy at the highest spatial resolution data available. In Estimating the Impact of Weather on Agriculture, Talip Kilic and coauthors quantify the significance and magnitude of the effect of measurement error in remote sensing weather data in the analysis of smallholder agricultural productivity.

• Mangroves as Coastal Protection for Local Economic Activities from Hurricanes in the Caribbean measures levels of mangrove natural protection against the impact of hurricanes and studies the broader socioeconomic and environmental effects of this protection. The results suggest that while major hurricanes reduce nightlight by approximately 2 percent and up to 16 percent in storm surge prone areas, the presence of mangroves on the coast mitigates the impact of hurricanes, reducing nightlight by 1–6 percent.
• Estimating the Impact of Weather on Agriculture provides systematic evidence on measurement error introduced by different methods used to obfuscate the exact GPS coordinates of households, different metrics used to quantify precipitation and temperature, and different remote sensing measurement technologies. The paper finds no discernible effect of measurement error introduced by different obfuscation methods. Second, it finds that simple weather metrics, such as total seasonal rainfall and mean daily temperature, outperform more complex metrics, such as deviations in rainfall from the long-run average or growing degree days, in a broad range of settings. Finally, the analysis finds substantial amounts of measurement error based on remote sensing products.

Finally, the last paper we introduce relates to tax compliance. In Becoming Legible to the State : The Role of Detection and Enforcement Capacity in Tax Compliance, Oyebola Okunogbe examines two dimensions of low state capacity that hinder tax collection: the inability to ascertain the tax base (detection capacity) and the inability to enforce unpaid liabilities (enforcement capacity).

In Becoming Legible to the State : The Role of Detection and Enforcement Capacity in Tax Compliance, through a randomized experiment with property owners in Liberia, the author finds that using identifying information from a newly developed property database to alert property owners that their noncompliance has been detected quadruples the tax payment rate, but only when the notice includes details on the penalties for noncompliance. A second experiment finds a further increase in compliance from signaling greater enforcement probability to delinquent property owners.

Figure 2. Experiment One: Impact of Detection and Penalty Notices on Registration, Payment and Amount Paid

The following are other interesting papers published in the second half of November. Please make sure to read them as well.

1. Infrastructure and Structural Change in the Horn of Africa (Herrera Dappe,Matias,Lebrand,Mathilde Sylvie Maria)
2. In Someone Else’s Shoes : Promoting Prosocial Behavior Through Perspective Taking (Chatruc,Marisol Rodríguez,Rozo Villarraga,Sandra Viviana)
3. Getting Real The Uneven Burden of Inflation across Households in Turkey (Baez Ramirez,Javier Eduardo,Inan,Osman Kaan,Nebiler,Metin)
4. Forced Displacement, Gender, and Livelihoods : Refugees in Ethiopia (Bogale,Yeshwas Admasu)
5. Urban Agglomeration and Firm Innovation: Evidence from Developing Asia (Chen,Liming,Hasan,Rana,Jiang,Yi)
6. Nowcasting Global Poverty (Mahler,Daniel Gerszon,Castaneda Aguilar,Raul Andres,Newhouse,David Locke)
7. Profiling Living Conditions of the DRC Urban Population : Access to Housing and Services in Kinshasa Province (Batana,Yele Maweki,Jarotschkin,Alexandra,Konou,Akakpo Domefa,Masaki,Takaaki,Nakamura,Shohei,Viboudoulou Vilpoux,Mervy Ever)
8. Corridors without Borders in West Africa  (Lebrand,Mathilde Sylvie Maria)
9. Demographic and Spatial Disparities in Labor Market Outcomes within the Kinshasa Urban Landscape  (Batana,Yele Maweki,Jarotschkin,Alexandra,Konou,Akakpo Domefa,Masaki,Takaaki,Nakamura,Shohei,Viboudoulou Vilpoux,Mervy Ever)
10. Estimating Poverty in Kinshasa by Dealing with Sampling and Comparability Issues (Batana,Yele Maweki,Masaki,Takaaki,Nakamura,Shohei,Viboudoulou Vilpoux,Mervy Ever)
11. The Impact of Digital Infrastructure on African Development (Calderon,Cesar,Cantu,Catalina)
12. The Macroeconomy After Tariffs (Furceri,Davide,Hannan,Swarnali A.,Ostry,Jonathan D.,ROSE,ANDREW K.)
13. Helping Families Help Themselves Heterogeneous Effects of a Digital Parenting Program (Monteiro Amaral,Sofia Fernando,Dinarte Diaz,Lelys Ileana,Dominguez,Patricio,Perez-Vincent,Santiago M.)
14. Does Race and Gender Inequality Impact Income Growth (Marrero,Gustavo Alberto,Rodríguez,Juan Gabriel,Van Der Weide,Roy)
15. Does Competition from Informal Firms Impact R&D by Formal SMEs Evidence Using Firm-Level Survey Data (Amin,Mohammad)
16. Measuring Systemic Banking Resilience : A Simple Reverse Stress Testing Approach (Feyen,Erik H.B.,Mare,Davide Salvatore)