Policy Research Working Paper Series publication roundup for the weeks of April 26 and May 3

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 during the weeks of April 26 and May 3 on various topics, including papers related to the impact of COVID-19 on Sub-Saharan African firms, retirement patterns in China, the public sector and corruption, and others. Here are the highlights of select findings.

First, we introduce a paper, COVID-19 and African Firms by Gemechu Aga and Hibret Maemir, which provides the first detailed analysis of the impact on Sub-Saharan African firms during the COVID-19 pandemic. Using COVID-19 follow-up enterprise surveys from 38 countries, eight of which are in Sub-Saharan Africa (SSA), the paper documents the impact of COVID-19 and firms’ coping strategies in SSA, benchmarking with other regions.

• COVID-19 and African Firms: The negative impact on sales and employment is significantly higher in SSA compared with other regions. In addition, firms in the region are more likely to experience liquidity and cashflow shortages than those in other regions. Surprisingly, businesses in SSA are more likely to adjust their operations, products, or services to adapt to the shock than those in other regions. Among the firms in SSA countries, 53% have made such adjustments, which is higher than in other regions. However, firms in the region lag in leveraging technology, particularly on the use of e-commerce and remote work arrangements. Only 20% of firms in SSA have started or increased delivery or online business activities in response to the pandemic. 

There are two papers providing insights on public policy discussions, the mandatory retirement age in China, and public wage bills and corruption. The rapidly aging population is a pressing challenge in China. One Country, Two Systems by John Giles and coauthors documents the retirement patterns in rural and urban China and the institutions that shape these patterns, using a nationally representative survey. Based on the results, the authors discuss the types of policy that could promote longer working lives in China. The next paper, Effects of Public Sector Wages on Corruption by Asli Demirgüç-Kunt, Michael Lokshin, and Vladimir Kolchin, examines the effect of public sector wages on corruption using a new country-level, panel data set from the Worldwide Bureaucracy Indicators database. According to a commonly perceived notion, corruption is caused by low wages in the public sector; but the evidence to support this statement is mixed. This paper adds new evidence in this discussion.  

• One Country, Two Systems: The paper documents stark difference in retirement age between urban and rural residents in China. Figure 1 shows that the retirement rates differ sharply by urban-rural designation. For the 65-69 year-old cohort, the urban-rural retirement gap for men and women peaks at 46.2 percentage points. Analysis on older workers' employment patterns highlights the roles of pension receipt, spouse work status, family care requirements, and health status in retirement decisions. Based on the results, the authors provide discussions on policy options to facilitate longer working lives, including the pension system, mandatory retirement ages, and providing childcare.

Figure 1: Retirement Rate by Age, Hukou and Gender (Adopted by Giles et al. 2021)

• Effects of Public Sector Wages on Corruption: The authors find that higher wages can reduce corruption in countries with relatively compressed wages in the public sector. In contrast, increases in the wages of public servants can encourage corruption if public sector wages are highly unequal. The results suggest that the distribution of wages in the public sector could be an important determinant of the effectiveness of anti-corruption policies.

Next, we introduce two papers on topics related to schooling. Teacher incentive programs are a promising policy tools to improve student learning outcomes in developing countries. With randomized interventions in primary schools in Guinea, Heterogenous Teacher Effects of Two Incentive Schemes by Felipe Barrera-Osorio and coauthors examines two types of incentive schemes, in-kind rewards and recognition rewards. The Long Shadow of Short-Term Schooling Disruption by Simon Bilo and coauthors estimates the long-term impacts of schooling disruptions during the Gulf War (1990-91) on private returns to schooling in Kuwait. The paper could provide useful implications to assess the costs of disrupted schooling during the COVID-19 pandemic.

• Heterogenous Teacher Effects of Two Incentive Schemes: Both incentive approaches, in-kind rewards and recognition rewards, led to improvements in student learning outcomes after one year of program implementation — with in-kind rewards having impacts that are roughly twice as large as those of recognition rewards. After two years of the program, the impacts are substantially muted and no longer statistically significant. This reduction may be due to the onset of an Ebola outbreak. Additionally, in the paper, authors examine the impact of two incentive schemes on teaching preparation and practice.
• The Long Shadow of Short-Term Schooling Disruption: The authors find that (i) people who were of school age during the Gulf War tend to have lower educational attainment than people who were of school age after the Gulf War; (ii) men who were of schooling age at the time of the Gulf War earn on average 5.6 percent less for each year of schooling lost, and women earn correspondingly 6.8 percent less for each year of schooling lost; (iii) students who were in lower grades during the Gulf War tend to suffer a higher percentage of wage loss for each year of lost schooling.

Finally, we introduce a methodological paper on a new indicator of Contracting with the Government. In 2019, the World Bank published a new indicator, Contracting with the Government, to measure public procurement regulations. This indicator covers 191 economies and is updated yearly. A paper, Measuring Public Procurement Rules and Practices by Antoni Albert Nogues Comas and Nuno Filipe Mendes dos Santos, presents the full technical background on the methodology and describes the findings of the indicator using cross-country data for 2020.

• The indicator consists of four dimensions: (1) the steps to complete the procurement process, (2) the time associated with completing the steps, (3) the availability and sophistication of e-procurement platforms, and (4) the regulatory framework applicable to such contracts. The overall score is computed by transforming scores in the four measured dimensions to a 0-100 scale. A higher score indicates a more effective government, a higher quality of roads, and less perception of corruption.
• The average global score is 45.4. Broadly speaking, high income OECD and European and Central Asian economies score above the global average, at around 58 points each, implying a large performance gap between these regions and the rest of the world. The paper further analyses the patterns of scores for each of the four dimensions.

The following are other interesting papers published during the past few weeks. Please check out these articles as well!

• Economic Governance Improvements and Sovereign Financing Costs in Developing Countries (Abate et al.)
• Enhancing Human Capital at Scale  (Agostinelli, Avitabile, and Bobba)
• Does Gender Equality in Labor Participation Bring Real Equality? Evidence from Developed and Developing Countries  (Alfani et al.)
• Using Poverty Maps to Improve the Design of Household Surveys: The Evidence from Tunisia (Betti, Molini, and Pavelesku)
• How Does Trade Respond to Anticipated Tariff Changes? Evidence from NAFTA (Khan and Khederlarian)
• Understanding FDI Spillovers in the presence of GVCs (Mercer-Blackman, Xiang, and  Khan)
• Effects of Recognition of Prior Learning on Job Market Outcomes: Impact Evaluation in Bangladesh  (Nakata et al.)
• Regime-Dependent Environmental Tax Multipliers: Evidence from 75 Countries  (Schoder)

The Policy Research Working Paper Series encourages the exchange of ideas on development and quickly disseminates the findings of research that is in progress.