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Policy Research Working Paper series publication roundup for the weeks of June 7 and 14

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Panumas Yanuthai/ Panumas Yanuthai/

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 seven papers published during the weeks of June 7 and 18 on various topics including the economic impacts of the COVID pandemic, cross-border electricity trade in Latin America, conservation of communal forests in Burkina Faso and others. Here are the highlights of select findings.  

First, we introduce three papers that add new evidence to the research on the economic impacts of the COVID-19 pandemic. The COVID-19 pandemic crisis has led to a severe liquidity crunch among private firms. But there is little data on how the pandemic has affected businesses. Does Better Access to Finance Help Firms Deal with the COVID-19 Pandemic? by Mohammad Amin and Domenico Viganola shows a firm’s financial condition prior to the pandemic crisis affected its ability to withstand the pandemic.  Using high-frequency phone surveys from 40 countries, How Did the COVID-19 Crisis Affect Different Types of Workers in the Developing World? by Maurice Kugler and coauthors investigates the impacts of shocks from the COVID-19 pandemic on the employment of different types of workers. Lives versus Livelihoods during the COVID-19 Pandemic by Ergys Islamaj, Duong Trung Le, and Aaditya Mattoo revisits the early COVID-19 discussions of trade-off between lives and livelihoods. Using panel data from 174 countries, the authors evaluate the impact of government containment measures, such as mobility restrictions and testing, on infection rates and economic growth.

  • Does Better Access to Finance Help Firms Deal with the COVID-19 Pandemic? Analyzing firm-level survey data across 35 countries, the authors show that declines in sales during the pandemic were less common among firms that had relatively better access to finance prior to the pandemic. Better access to finance helps firms retain more skilled workers, use fewer female relatives of male workers, and keep a more diffused network of intermediate inputs suppliers.
  • How Did the COVID-19 Crisis Affect Different Types of Workers in the Developing World? Results confirm the increased vulnerability of female and less educated workers in the COVID-19 crisis. Women were 8 percentage points more likely than men to stop working in the initial phase of the crisis, and gender disparities were larger than those by age, education, and locality (Figrue1). Gender differences in work stoppage were mostly due to within-sector differences rather than differential employment patterns across sectors.

Figure 1 Male and female work stoppage and pre-pandemic sector of employment by country and groups (Adapted from Kugler et al., 2021)

Male and female work stoppage and pre-pandemic sector of employment by country and groups

Notes: Each circle/triangle represents the work stoppage rate and pre-pandemic average share of workers in each economic sector for a given country.

  • Lives versus Livelihoods during the COVID-19 Pandemic: Results indicate that the trade-off between lives and livelihoods was associated with the use of lockdowns as the primary instrument of containment. Early transition from lockdowns to testing-tracing-isolation-based containment strategies softened this trade-off within countries. Testing had both indirect and direct positive effects on growth. By allowing countries to relax shutdowns without compromising on containment, testing may have indirectly contributed to a boost in growth of about 0.6 percentage points. Testing may also have contributed to a greater sense of confidence among people, increasing their willingness go out and re-engage in economic activity, which may have added another 0.6 percentage points to growth.

Relative to climate change and global warming challenges, the next two papers examine energy policies and deforestation issues. Despite the economic and environmental benefits, cross-border electricity trade in Latin America is limited. How Much Does Latin America Gain from Enhanced Cross-Border Electricity Trade in the Short Run? by Govinda Timilsina, Ilka Deluque Curiel, and Deb Chattopadhyay simulates gains made from the regional electricity trade in Latin America. Results could serve as additional justification for promoting cross-border electricity trade in the region. Incentivizing Conservation of de facto Community-Owned Forests by Daan van Soest, Guigonan Serge Adjognon, and Eline van der Heijden tests the effectiveness of PES for forest conservation in commonly-owned forests in Burkina Faso. The results offer insights that can inform PES policy development for forest conservation in other Sub-Saharan African countries where majority of forest lands are held under common ownership.

  • How Much Does Latin America Gain from Enhanced Cross-Border Electricity Trade in the Short Run? This study demonstrates the significant benefits offered by the regional cross-border electricity trade. In terms of trade value, the region as a whole would gain US$1.5 billion annually under the sub-regional trade scenario presented and almost US$2 billion under the full regional trade scenario presented. In addition, more than half of this gain would be realized by the Andean subregion under both scenarios.
  • Incentivizing Conservation of de facto Community-Owned Forests: The authors conducted a field experiment in Burkina Faso and incorporated two different designs of PES schemes: a linear group payment scheme (payments increase linearly with the conservation outcome) and a threshold group payment scheme (payments are made only when the conservation outcome exceeds a specific threshold). Results show that threshold group payment scheme increases coordination activities among group members. However, in contrast to the theoretical prediction, the linear group payment scheme leads to the survival of more trees at the end survey. This result might reflect Burkina Faso’s harsh climatic conditions, where trees survival rates are highly uncertain.

Lastly, we highlight two other papers.

  • Climate-Related and Environmental Risks for the Banking Sector in Latin America and the Caribbean by Pietro Calice and Faruk Miguel provides preliminary evidence on the extent of banks’ credit risk exposure to climate-related and environmental risks (especially physical and transition risks) in Latin America and the Caribbean countries. Results show that, in terms of physical risks, exposure to floods represents the most important source of credit risk for the banking sector. Large-scale natural disasters could trigger an increase of up to 1.4 percentage points in banks’ nonperforming loans in affected provinces. In terms of transition risks, banks located in the countries that are the largest emitters of greenhouse gases have credit portfolios tilted toward transition-sensitive sectors—Argentina, Uruguay, Paraguay, and Bolivia. 
  • Does Title Increase Large Farm Productivity? by Daniel Ayalew Ali and Klaus Deininger explores the impacts of institutional arrangements on large farm performance in Zambia. Zambia prioritizes large farm development to attract domestic and foreign investors. However, data shows that most owned land remains uncultivated, with at most 26% of the province’s agricultural area estimated to be owned by large and medium farms. This study explores the constraints on promoting large farms in Zambia by analyzing census data and administrative land records. Regression analysis suggests that title has no impact on investment or overall productivity, with little difference between titled parcels that were previously communal or state land. Higher land values are unconnected to productive performance, and rents may reflect the fact that access to title is rationed or arise from speculative land acquisition. This suggests that, without well-functioning markets for land, efforts to promote large farms will at best be ineffectual and will lead to a return to informality.

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

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

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