Policy Research Working Paper series publication roundup for the weeks of January 18 and 25

This blog is a biweekly feature that highlights 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 eight papers published during the weeks of January 18 and 25 on various topics including gender and the COVID-19 pandemic crisis. Here are the highlights of select findings.

In advance of International Women’s Day next month, we first introduce two papers related to gender issues, female land rights and women’s jobs. The first paper, Investment Impacts of Gendered Land Rights in Customary Tenure Systems, investigates how gender-specific land rights in customary systems affects investment and productivity. While most of Africa’s rural land is still managed under customary tenure, in view of increasing land scarcity, the gradual erosion of women’s land rights is becoming an important policy issue. The second paper, Exports and Women Workers in Formal Firms, examines whether the exporting activity of firms benefits women’s employment using firm-level survey data across 91 developing economies. 

• Investment Impacts of Gendered Land Rights in Customary Tenure Systems focuses on the case of Malawi, where the land tenure system is the co-existence of matrilineal and patrilineal inheritance systems. The analysis shows that the gender of land-rights holders matters on its own and in interaction with local norms. Female bequest and sales rights affect investment in soil fertility, whereas male bequest rights increase the level of cash crop adoption. 
• Exports and Women Workers in Formal Firms confirms the large, positive impact of higher exports on the share of women workers. A conservative estimate indicates that the share of female workers in a firm is higher by about 16 percentage points for firms that export all their output compared to firms that do not export at all. This is a large difference given that the mean share of female workers is about 29 percent. The paper also shows that this positive impact is larger in industries that rely more on women workers, in countries with higher competitive pressure in international markets, when social attitudes and labor laws are more favorable toward women’s work, and when the law-and-order situation is more business friendly. 

Regarding COVID-19-related research, two papers have added new evidence on trade-policy response as well as firm resiliency under the COVID-19 shock. In the beginning of the COVID-19 pandemic outbreak, many governments adopted trade restricting and liberalizing measures to increase domestic availability of protective equipment and medical supplies. COVID-19, Public Procurement Regimes, and Trade Policy assesses the relationship between public procurement regimes and the trade-policy behavior of countries, as public procurement regimes may facilitate or constrain a government’s rapid response to medical supplies. The spread of COVID-19 has disrupted firms’ operations on a global scale, but the damage varies widely across firms. Coping with COVID-19 offers insights into the mechanisms through which firms become more resilient against the pandemic shocks focusing on the role of management practices.

• With cross-country data on the use of trade policy instruments during the first seven months of the COVID-19 pandemic (January-July 2020), COVID-19, Public Procurement Regimes, and Trade Policy suggests that the use of export restrictions targeting medical products is strongly, positively correlated with the total number of steps and the time required to complete procurement processes in the pre-crisis period. At the same time, membership in trade agreements encompassing public procurement disciplines is associated with actions to facilitate trade in medical products. 
• Using a comprehensive data set that observes over 3,000 firms in 16 countries, Coping with COVID-19 presents modest evidence that better-managed firms are more resilient to the disruption caused by the COVID-19 pandemic, and especially so in manufacturing. The paper also shows that, in both manufacturing and services, management practices strongly correlate with firms’ abilities to adjust or convert their product mix and shift to online work arrangements.

For research related to firm behavior, two papers focus on the role of informal firms. While the informal sector is a main source of livelihoods and jobs for most people in developing countries, there is a view that the informal sector may undermine job creation in the formal sector. Does Competition from Informal Firms Hurt Job Creation by Formal Firms? provides the first systematic evidence on the impact of informal competition on the employment growth of formal firms. The second paper, The Unintended Consequences of Deportations, examines the impact of repatriation inflow from the United States and Mexico on firm behavior in El Salvador. Given that deportees are more likely to join the informal sector, formal firms could be indirectly affected though increased unfair competition from their informal peers.

• Using firm-level survey data for manufacturing small and medium-size enterprises in 109 mostly developing countries, Does Competition from Informal Firms Hurt Job Creation by Formal Firms? presents evidence that higher informal competition significantly lowers employment growth among formal firms. The decline is much larger in countries where the cost of operating formally is higher and benefits lower as captured by higher corruption, more burdensome regulations, higher profit tax rates, and weaker rule of law.
• Using rich longitudinal data covering all formal firms in El Salvador and individual-level data on all registered repatriations from 2010 to 2017, The Unintended Consequences of Deportations confirms that repatriation inflows from the United States and Mexico have large negative effects on the average wages of formal workers in El Salvador. An inflow of repatriations equivalent to one standard deviation reduces the average monthly salary of formal firms by approximately 9.4 percent. This impact corresponds to a reduction of about US$31.4 from the average monthly salary paid by the average firm. This reduction in average wage is mainly driven by formal firms in sectors that face more intense competition from the informal sector, such as agriculture, construction, wholesale and retail, and restaurants, which deportees are more likely to join.

Lastly, we introduce two papers: Macroeconomic Expectations and Credit Card Spending investigates a causal effect of macroeconomic expectations on consumer behavior, and The Impact of Language of Instruction in Schools on Student Achievement analyzes the impact of a language policy in schools.

• How do macroeconomic expectations affect consumer decisions? Although this is a typical underlying assumption in macroeconomic models, little causal evidence exists. Macroeconomic Expectations and Credit Card Spending examines how shocks to inflation and exchange rate expectations affect households’ consumption decisions. The authors conducted an information-provision experiment with 2,872 credit card customers. The analysis shows that the information about expert forecasts of inflation and the exchange rate provided to participants strongly affected their subjective macroeconomic expectations. However, no significant effects were found on actual consumer behavior or self-reported consumption plans. 
• Language policies often cause policy debates in many former colonial countries. The Impact of Language of Instruction in Schools on Student Achievement exploits a language policy change in Malaysia to study the effects of using a nonnative language for instruction in schools on students’ learning. The authors used the synthetic control method and data from the Trends in International Mathematics and Science Studies (TIMSS) to construct a counterfactual sample, which projected what Malaysian students would have achieved in the absence of the language policy change. The results indicate that the switch in the language of instruction from the national language to English negatively influenced eighth graders’ achievement in mathematics and science. Average test scores fell by 8.6% in mathematics and 8.4% in science (see red line in Figure 1). In addition, using a non-native language throughout a student’s schooling may have a greater negative impact on the student’s learning than does switching the language of instruction in the middle of the student’s schooling. The average test scores for students who always learned in English was lower than the counterfactual ones by 18.6% in mathematics and 20.6% in science (see blue line in Figure 1). 

Figure 1: The impact of switching instruction language from the national language to English on students’ mathematics and science test scores (adapted from Soh, Del Carpio, and Wang (2021)) 

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