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A User's Guide to Poverty and Social Impact Analysis

1. What does it tell you It can provide a good estimation of the impact that changes in a given policy or exogenous shocks have on a particular variable of interest a model containing the policy variable and the variable of interest has been estimated reduced form models can be used to simulate the impact of policy alternatives Complementary tools Reduced form estimation can be useful to understand the macroeconomic impact of a policy intervention on a selected variable of interest There is often a need to complement the analysis by the use of household surveys to map these impacts into distributional changes Stakeholder analysis can be useful to identify different groups of interest for the analysis Key Elements Reduced form estimation assumes an underlying system of demand and supply equations but the model itself does not fully specify the whole array of economic and social interactions Rather the model is solved to derive a single estimating equation an econometric model that relates the outcome and the policy variables or shock of interest This can be done on the basis of two observations separated over time by a policy change When using a single cross sectional dataset there must be significant variation across the sample population to estimate the equation Analysis on aggregate units such as cross country regressions should ideally be conducted on panels of cross sectional and time series data Requirements Data inf
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3. Salmen 2002 Salmen and Amelga 1998 For summaries of specific country application of both BA and PPAs see http www worldbank org participation beneficiaryassesment beneficiary assessment pdf 52 Annex Economic and Social Tools for Poverty and Social Impact Analysis Tool Name Participatory Poverty Assessment What is it An instrument for including the poor directly in discussions and debates on policies and priorities and that relies primarily on qualitative visual participatory rural appraisal techniques Uses data collection techniques similar to BA though with a greater focus on consultation of the poor and on a broader set of policy issues affecting the poor What can it be used for Can be adapted to the analysis or monitoring of many policy reforms Has been used extensively in public expenditure reforms that require priority setting or better understanding the reasons for accountability or low service use or for institutionally complex reforms such as land reform liberalization of markets labor market reforms or for better targeting safety nets Could also be used to monitor the local impact of macroeconomic policies such as devaluation What does it tell you In depth analysis of the views of the poor and their political social and institutional context policy priorities of the poor multi dimensional dynamic of poverty and of coping mechanisms identification of constraints that could be overcome through p
4. Complementary tools Normally conducted after Stakeholder Analysis and Institutional Analysis as a complement to impact analysis Provides crucial insights for Scenario Analysis and M amp E systems Key Elements 1 Identification of risks 2 Assessment of the likelihood of occurrence and importance of each risk to the reform and 3 Elaboration of adequate risk management strategies Risks are identified from assumptions about transmission channels and likely impacts This should cover country risks e g conflict and violence political instability ethnic or religious tension institutional risks e g weak governance or capacity design complexity political economy risks e g capture of benefits opposition or distortion by influential stakeholders and exogenous risks e g terms of trade climate effects Information about risks is gathered from i secondary literature ii discussions with Bank staff and other partners iii existing agencies that assess country risks and iv questionnaires in depth interviews or focus groups with key informants from government agencies non government organizations and firms This information is validated through triangulation and crosschecking among information obtained from these different sources Requirements Data information Secondary material including objective risk indicators and risk assessments available from country databases international risk rating agencies e g EIU risk r
5. E ee A User s Guide to Poverty and Social Impact Analysis The World Bank Poverty Reduction Group PRMPR and Social Development Department SDV 2003 The International Bank for Reconstruction and Development The World Bank 1818 H Street N W Washington D C 20433 USA The findings interpretations and conclusions expressed in this document are entirely those of the authors and should not be attributed in any manner to the World Bank to its affiliated organizations or to members of its Board of Executive Directors or the countries they represent For electronic copies of this document in English French Russian and Spanish please visit the PSIA website at www worldbank org psia Contents Acknowledgments Acronyms Purpose of the User s Guide 1 2 Introduction A Conceptual Framework for Understanding Poverty and Social Impacts Impact of what What is being analyzed Impact on what What is the welfare measure being assessed Impact on whom Whose welfare is being analyzed Impact how How are impacts channeled Impact how How do institutions affect outcomes Impact when When do impacts materialize Impact if What are the risks of an unexpected outcome Elements of Good Poverty and Social Impact Analysis Element 1 Asking the right questions Element 2 Identifying stakeholders Element 3 Understanding transmission channels Element 4 Assessing institutions Element 5 Gathering data and informat
6. Economic Journal 105 1415 34 Levinsohn J S Berry and J Friedman 1999 Impacts of the Indonesian Economic Crisis Price Changes and the Poor Working Paper 7194 National Bureau of Economic Research Cambridge Mass Lindel w M R Reinikka and J Svensson 2003 Health Care on the Frontline Survey Evidence on Public and Private Providers in Uganda Human Development Working Paper Series World Bank Africa Region Washington D C Forthcoming Lockhart C 2001 Institutional Analysis Russia Coal Case Study World Bank Social Development Department Washington D C Processed Lofgren H R Harris and S Robinson with assistance from M Thomas and M El Said 2002 A Stan dard Computable General Equilibrium CGE Model in GAMS Microcomputers in Policy Research Vol 5 International Food Policy Research Institute Washington D C 86 Lofgren H S Robinson and M El Said 2003 Poverty and Inequality Analysis in a General Equilibrium Framework The Representative Household Approach In F Bourguignon and L A Pereira da Silva eds Evaluating the Poverty and Distributional Impact of Economic Policies Tech niques and Tools Washington D C World Bank Lopez R 1986 Structural Models of the Farm Household that Allow for Interdependent Utility and Profit Maximization Decisions In I Singh L Squire and J Strauss eds Agricultural House hold Models Extensions Applicat
7. Third policymakers can rethink the policy decision or the sequencing and pace of reform One option is to postpone the policy decision until adequate data can be collected and appropriate analysis conducted If this course is taken the costs of delaying reform a policy decision in itself will need to be considered Other possibilities are to pilot or phase the reform so that progress can be monitored before a final decision is made to implement a national program In the end a tactical judgment will have to be made as to how to proceed based on these consider A User s Guide to Poverty and Social Impact Analysis ations This judgment will be influenced by the time and resources at one s disposal which in turn will depend critically on political and economic pressure for action In most cases decisionmakers will not want to embark on a major policy change without a sound understanding of the poverty and social implications of a policy action particularly if such action is aimed at reducing poverty In some instances however political or economic impera tives as in a crisis situation may lead policymakers to take quick action Where this happens it will be important to undertake PSIA as soon as feasible and to consider measures to protect the poor from adverse impacts and vulnerability to significant risks see section on compensatory measures below Addressing PSIA data limitations today so that they do not limit futu
8. Do the Poor Benefit World Bank Research Observer Cernea M and A Kudat eds 1997 Social Assessments for Better Development Case Studies in Russia and Central Asia ESSD Studies and Monograph Series no 16 World Bank Washington DC Chaudhury N and J Hammer 2003 Ghost Doctors Absenteeism in Bangladeshi Health Facilities World Bank Processed Chen D J Matovu and R Reinikka 2001 A quest for revenue and tax incidence In R Reinikka and P Collier eds Uganda s Recovery The Role of Farms Firms and Government Washington D C World Bank Bibliography Christensen L R D W Jorgensen and L J Lau 1975 Transcendental Logarithmic Utility Functions American Economic Review 65 367 83 Coady D and R Harris 2001 A Regional General Equilibrium Analysis of the Welfare Impact of Cash Transfers An Analysis of Progresa in Mex ico Trade and Macroeconomics Division Discus sion Paper 76 International Food Policy Research Institute Washington D C Cornia A Jolly and Stewart 1987 Adjustment with a Human Face Oxford Clarendon Press Cox D and E Jimenez 1995 Private Transfers and the Effectiveness of Public Income Redistribution in the Philippines In D Van de Walle and K Nead eds Public Spending and the Poor Theory and Evidence Baltimore Johns Hopkins Univer sity Press for the World Bank Davidson R and J Duclos 2000 Statist
9. P Lanjouw J A Mistiaen and B zler 2002 Producing an A User s Guide to Poverty and Social Impact Analysis Improved Geographic Profile of Poverty Method ology and Evidence from Three Developing Countries Discussion Paper 2002 39 WIDER Helsinki Dervis K J de Melo and S Robinson 1982 General Equilibrium Models for Development Policy New York Cambridge University Press Devarajan S and D S Go 2003 The 123PRSP Model In Bourguignon and L A Pereira da Silva eds Evaluating the Poverty and Distribu tional Impact of Economic Policies Techniques and Tools Washington D C World Bank Devarajan S and Go with Charlier A Dabalen W Easterly Fofack A Izquierdo and L Koryukin 2001 A Macroeconomic Framework for Poverty Reduction Strategy Papers with an Application to Zambia World Bank Washington D C Processed Devarajan S W Easterly H Fofack D Go A Izquierdo C Petersen L Pizzati C Scott and L Serven 2000 A Macroeconomic Framework for Poverty Reduction Strategies World Bank Wash ington D C Processed Devarajan S H Ghanem and K Thierfelder 1999 Labor Market Regulations Trade Liberalization and the Distribution of Income in Bangladesh Journal of Policy Reform 3 1 1 28 Devarajan S and S Hossain 1998 The Combined Incidence of Taxes and Public Expenditures in the Philippines World Development
10. Skilled and experienced facilitators who are able to listen and record information in as unbiased a manner as possible and to manage expectations from the PPA at the community level Supporting software N A From USS15 000 to US 200 000 depending on scale Limitations Not statistically representative May raise expectations for follow up or service improvements at the community level that local actors and or the research team may not be able to provide References and applications Robb 2002 Norton et al 2001 Salmen 1995 For summaries of specific country application of both BA and PPAs http www worldbank org participation beneficiaryassesment beneficiary assessment pdf 53 A User s Guide to Poverty and Social Impact Analysis Tool Name Social Capital Assessment Tool SOCAT What is it A set of integrated quantitative and qualitative measurement tools to investigate institutions networks and norms that enable collective action Has to be adapted to a specific research issue Can be implemented in conjunction with other tools What can it be used for Primarily useful for reforms with low medium indirect impacts Agricultural reforms changing subsidies taxes liberalizing markets financial reforms changing access to credit labor market reforms active labor market programs utility reforms access to services decentralization social safety net programs changing public private transfers What does it te
11. Supporting software All software used in micro economettics Stata SAS etc Financial cost Depends on the question being asked and the need for new data If data is available the cost can vary from US 10 000 to US 30 000 Limitations The estimation of behavioral models that fit the policy to be evaluated or designed can be difficult but can rely on simpler assumptions accounting micro simulation Second the approach relies on a structural model which requires a set of assumptions References and applications For an overview of the technique see Bourguignon and Ferriera 2003 Chapter 6 of the Toolkit for Evaluating the Poverty and Distributional Impact of Economic Policies Atkinson and Bourguignon 1991 on tax benefit models Attanasio Meghir and Santiago 2002 on education choices in Mexico Bourguignon Ferreira and Leite 2002 on conditional cash transfers in education in Brazil Blundell et al 2000 on tax credit in the U K Younger 2002 on marginal benefit incidence and education in Peru 60 Annex Economic and Social Tools for Poverty and Social Impact Analysis Name What is it What can it be used for What does it tell you Complementary tools Key Elements Requirements Data information Time Skills Supporting software Financial cost Limitations References and applications Ex post impact evaluation methods for assigned programs Methods for asse
12. and experience with analyzing large scale household survey data sets Experience with related statistical software packages SPSS SAS STATA Supporting software SPSS SAS STATA Financial cost Costs of developing and using the tool can vary enormously depending on whether a household survey already exists If it does the analysis can be done for around US 10 000 Limitations Benefit incidence analysis does not take behavior into account i e the likely change in demand from households that would result from policy changes For methods which handle this see Tables on Ex post behavioral marginal incidence analysis of public spending and social programs and Social Impact Analysis References and applications For an overview of the technique see Demery 2003 Chapter 2 of the Toolkit for Evaluating the Poverty and Distributional Impact of Economic Policies Demery 2000 and van der Walle 1998 on the overall technique Castro Leal Dayton and Demery 1997 on a group of African countries Castro Leal 1996 on South Africa Demery et al 1995 on Ghana Devarajan and Hossain 1998 on benefit and tax incidence analysis in the Philippines Van der Walle 1992 and Lanjouw et al 2001 on Indonesia Van der Walle 2002c on incidence of public transfers in Yemen 56 Annex Economic and Social Tools for Poverty and Social Impact Analysis Tool Name Tax Incidence Analysis gt lt What is it Tax inciden
13. as shown in table 2 with poverty mapping by far the most demanding Incidence analysis estimates the distributional inci dence of a component of income or expenditure at the household level The analysis is an appropriate starting point where quantitative data are available the low medium cell in table 2 A useful first step is to exam ine key descriptive statistics for the country to see which households are exposed to the policy change The most common application is in relation to tax and expenditure reform the technique has been used for instance to estimate the incidence of education expenditure in Malawi It can also be used for reforms that affect prices and consequently household incomes such as utility or agricultural reform Appli cations of this type include access to utility services in Guatemala Foster and Araujo 2001 There are two main types of incidence analysis relevant to the direct impact analysis simple incidence analysis and marginal incidence analysis The first measures the incidence of average expenditure or tax that is it considers all expenditure or taxes The second focuses on the distri butional incidence of the last or next unit of expendi ture or tax see box 6 5 Poverty maps are geographical profiles that show the spatial distribution of poverty within a country and suggest where policies might have the greatest impact on poverty reduction Poverty maps can be used to illustrate o
14. for example RMSM X 123 to project GDP national accounts the national budget the balance of payments price levels etc in aggregate consistent accounts ii a labor market model breaking down labor categories by skill level and economic sectors whose production total is consistent with that of the macro framework Individuals from the household surveys are grouped in representative groups of households defined by the labor category of the head of the household For each labor category labor demand depends on sectoral output and real wages Wage income levels by economic sector and labor category can thus be determined In addition different income tox rates and different levels of budgetary transfers across labor categories can be added to wage income and iii a model that uses the labor model results for each labor category to simulate the income growth for each individual inside its own group assumed to be the average of its group After projecting individual incomes PAMS calculates the incidence of poverty and the inter group inequality Requirements Data information The model requires national accounts with a breakdown by sector and household survey data with income expenditure data by unit and a wage and employment breakdown by sectors Time With a macro model the time needed to build a PAMS would be about three months i One month to select extract categories of households from the household survey and match the economic se
15. pez and others 1995 construct a model showing that own wealth affects both the level of output and the ability to respond to price changes They test this model against a large baseline dataset from 1991 and a smaller selected survey from 1993 Using the baseline data they find that farmers with fewer pro ductive capital assets the poor grew fewer crops on average Source L pez Nash and Stanton 1995 had less access to and more problems with credit and were less likely to use purchased inputs such as seeds fertilizer pesti cides or to use a tractor for soil preparation Their land was of lower quality on average and their educational level lower than those with greater productive assets This analysis predicted that poor farmers would benefit less from liberalization However the results of the smaller panel study suggest that conditions had improved both on average and for the poorer farm households in the sample Cropping patterns are more diverse landholdings have increased as has the use of pur chased inputs and asset ownership has also improved mod estly They also find that among the poor educational attainment and off farm income have declined Although L pez et al 1995 do not speculate this may be due to the greater returns to on farm labor brought about by liberaliza tion which reduce relatively the returns to off farm income and the educational investments necessary to enter the of
16. s Guide are more focused on non income dimensions of poverty such as stakeholder interests social capital and vulnerability 4 The World Bank s Social Development Depart ment has developed a new tool that provides data on these indicators from Bank and non Bank sources for country level applications 5 To the extent that increasing access is viewed as a reduction in transport and transaction costs it is effectively reducing the price of the good or service in question 6 Sometimes an increase in access may come at the cost of a higher price or where there was previously no access at all access may be granted at a price that is prohibitive for the poor In urban Peru liberalization of telephone services led to greater access for the poor as well as lower prices On the other hand liberaliza tion of electricity has led to greater access and reliabil ity but higher prices and lower overall consumption Torero and Pasc Font 2001 7 Organizations are purposive entities such as public agencies or firms that have a formal structure and seek to achieve certain objectives within the opportunities and constraints afforded by the institu tional framework of society North 1990 8 Formal changes in organizational structure are relatively easy to make but may take much longer to be institutionalized In such cases it is important to pay attention to the capacity and accountability of the concerned agencies as well as
17. Analysis Name What is it What can it be used for What does it tell you Complementary tools Key Elements Requirements Data information Skills Supporting software N A Financial cost References and applications Limitations Scenario Analysis Scenario analysis is a participatory exercise based on a facilitated process of brainstorming rigorous data gathering to explore the issues raised in brainstorming and the creation of three to four plausible future situations scenarios in which a reform will play out These scenarios are differentiated by plausible discontinuities such as a change in government a currency devaluation or a major shift in commodity or input prices but take into account significant predictable factors such as demographic trends Scenario analysis is forward looking and is generally used to analyze lumpy investments or major changes in strategic direction The process is particularly adapted to bringing the perspectives of different stakeholders together around contentious decisions Civic scenarios have been used to bring leaders from different political groups together to lie out alternative paths during government transition in South Africa and the transition away from violence in Colombia and Guatemala Scenarios have also been used to bring community leaders environmentalists politicians and transport specialists together to make long term strategic plans f
18. Empirical Study Cambridge MIT Press Beck C G Clarke A Groff P Keefer and P Walsh 2002 New Tools and New Tests in Comparative Political Economy The Database of Political Insti tutions World Bank Washington DC Becker 1965 A Theory of the Allocation of Time Economic Journal 75 493 517 Becker H 1997 Social Impact Assessment London University College Press Benjamin D 1992 Household Composition Labor Markets and Labor Demand Testing for Separa tion in Agricultural Household Models Econo metrica 60 287 322 Bianchi R and S Kossoudji 2001 Interest Groups and Organizations as Stakeholders Social Devel opment Paper 35 World Bank Washington D C Binswanger H and J Quizon 1984 Distributional Consequences of Alternative Food Policies in India Discussion Paper 20 World Bank Agriculture and Rural Development Department Washington D C Binswanger H and J Quizon 1986 Modeling the Impact of Agricultural Growth and Government Policy on Income Distribution in India World Bank Economic Review 1 103 48 Blundell R A Duncan J McCrae and C Meghir 2000 Evaluating In Work Benefit Reforms the Working Families Tax Credit in the UK Discus sion Paper Institute for Fiscal Studies London Bolt R and M Fujimura 2002 Policy based Lend ing and Poverty Reduction An Overview of Processes Assessment and Options Worki
19. Name Augmented CGE Model with Representative Household Approach What is it This technique is based on a computable general equilibrium model with representative households that are linked to a household module What can it be used for Representative Household Models can be used to analyze the impact of macroeconomic policy and external shocks on income distribution employment and poverty What does it tell you Representative household models allow for a forecast of welfare measures and poverty outcomes consistent with a set of macroeconomic policies in the context of a general equilibrium model Complementary tools Key Elements The key features of the Representative Household Approach are i a Computable General Equilibrium CGE model that incorporates markets for factors and commodities and their links to the rest of the economy which generates equilibrium values for employment wages and commodity prices as well as its extended functional distribution i e labor differentiated by skill education gender region and sector of employment and ii a mapping from the extended functional distribution into the size distribution the distribution of income across different households In this approach the Representative Households that appear in the CGE corresponding to aggregates or averages of groups of households play a crucial role the size distribution is generated by feeding data on the simulated outcomes for the Represe
20. PETS What is it A technique to survey service provides to assess the efficiency of public spending and the quality and quantity of services What can it be used for PETS can be used for the analysis of public expenditure management reforms reforms to improve the efficiency of public expenditure cross cutting public sector reforms anti corruption and service delivery reforms What does it tell you A PETS tracks the flow of resources through the various layers of government bureaucracy down to the service facilities in order to determine how much of the originally allocated resources reach each level and how long they take to get there It can help identify the location and extent of impediments to resource flows financial staff equipment It can therefore evaluates the mechanisms and incentives responsible for public expenditure leakages capture and deployment impediments A PETS focuses on service provider behavior incentives and relationship between providers policy makers and users Complementary tools PETS can be cross validated by a Quantitative Service Delivery Survey QSDS which assesses the efficiency of public spending at the level of service provider e PETS analysis can be linked upstream to public administration surveys and downstream to household surveys Linking a PETS with household surveys would allow to include the demand for services or outcomes Benefit incidence analysis can be enhanced by using filter coeff
21. addition to skills in qualitative research sociologist anthropologist Good knowledge of sector structure is essential Supporting software N A For fieldwork from USS40 000 up to over US 100 000 excluding supervision of consultants Limitations Requires skill in triangulating information to provide assessment of client response to changes in tariff levels and to distinguish potential biases in information provided Also effective qualitative work requires skilled facilitators Willingness to pay questions can raise expectations of service improvements and need therefore to be carefully linked to sector constraints and likely scenarios References and applications Lampietti et al 2001 on utility pricing in Armenia Sechaba Consultants 2002 on the water sector 55 A User s Guide to Poverty and Social Impact Analysis Tool Name Benefit Incidence Analysis Average and Marginal What is it Benefit incidence analysis estimates the impact of public transfers taxes subsidies or policy changes that affect prices BIA measures the distributional incidence of benefits for different groups of interest for instance households at different income levels or in different regions Average or simple BIA measures the incidence of all benefits i e of the aggregate benefit Marginal BIA estimates the incidence of the last or the next unit of benefit See also Table on Tax Incidence Analysis What can it be used for Benefi
22. affected by reform constraints to implementation of reform how people institutions are likely to respond to reform including whether assumptions on how they will react or be affected by the reform are correct Also provides insight into coping mechanisms and social risks suggestion from stakeholders on most appropriate means to mitigate negative impact of reform and potential effectiveness in local context Complementary tools Used in conjunction with stakeholder analysis Other fools such as institutional analysis and risk analysis complement and draw heavily on SIA SIA can feed into assumptions for economic modeling Key Elements Characterized by use of mixed methods and direct consultation of those potentially affected that can include a wide range of data collection techniques open ended community discussion key informant interviews focus groups quantitative survey observation ethnographic field research PRA Proper structuring of qualitative methods and interpretation of both qualitative and quantitative research requires sufficient knowledge of local customs and cultures and thus normally requires partnership with local consulting NGO or research firms Typically SIA uses purposive surveys to collect quantitative information from a sample representative of a particular region or population groups relevant to a particular reform This is particularly useful in situations when national household data do not exist or do not contain the spec
23. analysis presented above with econometric estimates of household behavior It can be used to explain distri butional changes arising from a policy change and thereby addresses one of the shortcomings of inci dence analysis Applications have included analysis of the role of government policy in relation to the pri vate sector in expanding access to education in Malaysia Hammer Nabi and Cercone 1995 exami nation of the disincentive effects of food stamps on labor supply in Sri Lanka Sahn and Alderman 1995 and study of the crowding out of private transfers by public funds in the Philippines Cox and Jimenez 1995 and South Africa Jensen 1998 The Annex present details on techniques for the ex post behavioral 23 marginal incidence analysis the ex ante behavioral marginal evaluation of policy reforms and the ex post evaluation of assigned programs Demand and supply analyses estimate the responses of consumers and producers respectively to price changes Demand analysis can assess the willingness of consumers at different income levels to pay for public services like water and electricity It has been used to assess the impact of higher electricity tariff rates in Armenia box 7 and is being applied to the same issue in the Kyrgyz Republic It has also been used to evaluate preferences and likely responses of water con sumers to tariffs and institutional reform such as pri vatization in several African countries Mozamb
24. analysis is always useful in ascertaining the competitiveness of a market and of market structure Analysis of implementing agencies In judging the likely poverty impacts of reforms that involve a change in government responsibility or cooper ation among government agencies or other implementing agencies the flow of decisionmaking information and resources within and among organizations needs to be considered see box 4 Two options for collecting this kind of information are organizational mapping and the institutional assessment tool Organizational mapping is a method that enhances understanding of the internal behavior of organiza tions by creating an inventory of the actors carrying out reforms and explicitly revealing relationships among them Organizational mapping has two com ponents static mapping and process mapping Static mapping identifies ex ante the specific public actions associated with a policy reform and the organizations which may be outside government responsible for implementing them It maps out the relations among the implementing agencies and identifies those expected to support or obstruct the reform The exer cise is informed by earlier stakeholder analysis see the section above on identifying stakeholders of govern ment and other organized actors Process mapping draws on work carried out to improve efficiency in the public and private sectors in industrialized countries Hunt 1996 It identifies c
25. and did not contained domestic taxes or public expenditure Skills Experienced modelers with substantial prior exposure to Computable General Equilibrium models are required Supporting software Excel Eviews Gauss Financial cost US 25 75 000 depending on existing data Limitations The results of CGE simulations depend at least partly on the assumptions made in the model such as the closure rules These ensure that macroeconomic accounts fiscal trade savings investment balance Whether they are fixed exogenously or allowed to balance endogenously and how they balance can have a significant impact on the outcomes In addition the production accounts specified in most available CGEs are too aggregated to identify the impact of policy changes in one component of one account Many CGEs have at most two agricultural activities one each for tradable and non tradable crops or food crops and cash crops References and applications e Dervis et al 1982 and Shoven and Whalley 1992 for summaries of CGE models use lanchovichina Nicita and Soloaga 2001 GTAP models at http www gtap agecon purdue edu 68 Annex Economic and Social Tools for Poverty and Social Impact Analysis Tool Name PovStat What is it An Excel based software program which simulates the changes in poverty and inequality over time resulting from changes in output and employment growth What can it be used for PovStat may be used to simulate the
26. any of those reviewed above is solved to derive the main equilibrium parameters such as prices wages fiscal deficit and so forth these parameters are then fed into a micro model There are several micro approaches that can be used to derive poverty and dis tributional outcomes based on the parameters derived from the macroeconomic framework model The approaches presented below can be applied to a wide variety of reforms However they are data and skill intensive and are located in the high high cell in table 2 22 The following specific techniques are described in more detail in the annex Linking macro framework to a reduced form estimation is a minimalist approach that simulates poverty impacts on the basis of various macroeconomic variables Tools have also been developed to examine how changes in certain macro variables most particularly growth rates affect poverty based on a country specific distribution SimSIP and PovStat are tools of this 2 Linking macro framework to behavioral analysis esti mated for representative households has been done in the 1 2 3 PRSP model which links the 1 2 3 model to a behavioral analysis of representative households Devarajan and others 2001 and PAMS which joins a labor poverty module to a macro consistency model such as the Bank s RMSM X The technique can be used to simulate a wide range of policies from labor and wage policies to taxation prices and the allo
27. be needed to select the sample frame Time The process itself requires only a few sometimes a single community gatherings However the groundwork and orientation for collecting supply side input expenditure data preparing the providers and community for the scorecard and for the interface meeting as well as the secondary data analysis may require in the region of 3 6 weeks Skills The community scorecard process requires expert facilitation and so experience with participatory methods and a history of involvement with the community are usually pre requisites for the process to run smoothly Supporting software N A Financial cost Financial costs of conducting the process in a single community are quite low limited mainly to the time of the facilitating staff If however done on a large scale with many communities involved the costs would be higher Overall cost ranges from USS30 000 to USS40 000 comparable to a beneficiary assessment Limitations The limitations of the community scorecard process include a it depends a great deal on quality of facilitation b input tracking dependent on availability of supply side data c the interface meeting can get confrontational d greater standardization of indicators needed when scaling up e small sample size during gathering can bias results f scoring not always applicable References and applications e Republic of Gambia 2002 e Information can be found at http www
28. by Lanjouw and others 2001 to assess how education and health expenditures affect different income groups in Indonesia Sta tic benefit incidence analysis entailed dividing groups into expenditure quintiles and computing rates of utilization of the facilities for each group For primary education total govern ment outlays in 1998 amounted to nearly 8 000 billion rupiah covering both routine and development expenditures In that year there were just over 25 million students enrolled in public primary schools Assuming uniform transfers the government thus transferred some 307 000 rupiah per public primary stu dent per year The table below gives the incidence of government primary education spending for each expenditure quintile As can be seen from the table government expenditure has a pro poor distribution with an average per capita transfer of around 47 900 rupiah for the lowest quintile and 25 300 for the high est quintile With practically universal enrollment the pro poor bias is largely driven by the fact that poorer households tend to have more young children than other households 6 2 million primary school students in the lowest quintile versus 3 3 in the highest quintile A similar exercise was carried out for junior and senior sec ondary education and indicated that benefits of public spend ing for higher education levels become increasingly regressive In health per capita transfers on primary health care were fou
29. capacity and transaction costs of delivering the subsidy 29 It is worth noting that such exemptions may introduce undesirable distortions into the tax and incentive scheme and not only from an efficiency standpoint To the extent that they allow non poor producers to avoid taxes legally or facilitate tax eva sion exemptions that appear patently progressive can limit progressive budgets that address social programs for the poor 30 The opportunity cost calculation is complicated to the extent that the reform package as a whole might be conditional on the compensation mechanism 31 This discussion deals with risk analysis only as it relates to PSIA It is not intended as a comprehensive treatment of the issue For further treatment of risks see the Social Analysis Sourcebook World Bank 2002c 32 This is being done for example in Madagascar where three different modeling approaches are being used to assess the impact of a rice tariff on distribu tion 33 For an operational discussion with examples see Maack 2001 For in depth case studies of applied sce 38 nario analysis see www gbn org public gbnstory downloads gbn_mont_fleur pdf South Africa 34 This discussion deals with monitoring and eval uation only as they relate to PSIA It is not intended as a comprehensive treatment of the issue 35 Building capacity in this context includes not only the development of technical skills but also changes in incentives a
30. context and past experience with programs targeted at the poor See also Table on Demand Analysis Estimating Demand Functions What can it be used for Has been used in energy sector reforms and water sector reforms including privatization but can also be applied to changes in cost recovery in other sectors such as health education or transport What does it tell you To shed light on how price increases affect different groups of consumers including the poor specifically taking into account institutional factors that affect the transmission of these prices Also Consumer Assessment CA helps to project more realistic revenue cost recovery levels incorporate client perspectives and levels of satisfaction and rank the service in question in terms of overall development priorities of different groups of clients In its application in Africa CA has also outlined the viability of various options for reaching the poor given existing institutional and market constraints and given their preferences Complementary tools e an be used in conjunction with stakeholder analysis and institutional analysis Elements of SOCAT can be integrated into CA Can also complement nationally representative household surveys e Feedback from CA can inform assumptions on elasticity or welfare impact on different groups in other economic models In ECA CA has been used to build standard demand models as well Key Elements Requires 1 quantitative household surveys
31. however since programs tend to be purposively targeted to certain groups In such cases methods exist to estimate counterfactuals Examples include propensity score matching and difference in difference methods Data on relevant outcome indicators for those units who participate versus those who do not Survey or census data covering participants and non participants are essential The data must include relevant outcome indicators and depending on the identification strategy other relevant covariates for either participation or outcomes Evaluation design should ideally begin even before the policy program begins it is often hard to do a good evaluation if one starts late Off the shelf data are sometimes feasible but it is more often the case that special purpose data collection is needed and this needs advance planning Sufficient knowledge of statistics econometrics and quantitative data skills Knowledge of microeconomics often helps Good knowledge of the program and its setting is important Standard statistical econometric packages such as STATA are often sufficient A number of special purpose STATA routines are available for evaluation Varies enormously mainly depending on current data availability The marginal cost of the evaluation can be low in data rich settings and high in data poor settings where a lot of primary data collection is called for Even in data rich settings supplementary data collection i
32. improvement in revenue One policy implication is that future tariff rises are more closely aligned with likely con sumer responses Another is the need for action to mitigate poverty and environmental impacts The results of the water analysis suggest that consumers are reluctant to pay significantly more for a service they deem unreliable The authors suggest that reform should therefore proceed in two stages first enforcing payment from house holds with reliable service and then raising tariffs incremen tally to balance cost recovery with the need to maintain access of poor users Elements of Good Poverty and Social Impact Analysis Box 8 Impact of Liberalization in Mexico Supply Side Analysis Simple supply side estimation can be used to examine the dif ferential impacts of policy change on welfare Lopez Nash and Stanton 1995 use a household survey from Mexico to estimate the relationship between household assets and agricultural sup ply response At the time the Mexican economy was becoming increasingly open markets for inputs outputs and credit were being liberalized The study had two related goals The first was to monitor the condition of Mexican farmers especially the poor and see how they had been affected by changes in policy and environment The second goal is to understand the con straints facing the ability of poor households to adjust to the new regime and take advantage of new opportunities L
33. in E Aryeetey J Harrigan and M Nissanke eds Economic Reforms in Ghana Miracle or Mirage Oxford James Currey Press Powers John 2003 The World Bank and Poverty and Social Impact Analysis Considering a Transaction Cost Analysis Approach World Bank Social Development Department Washington D C Forthcoming 87 Papanek G 1994 The Social Impact of Program Lend ing Manila Asian Development Bank Pruitt B 2000 UNDP Civic Scenario Civic Dialogue Workshop Antigua Guatemala Nov 8 10 2000 New York UNDP Public Affairs Center 2002 The State of Karnataka s Public Services Benchmarks for the New Millen nium Bangalore India State of Karnataka Pyatt G and J Round eds 1985 Social Accounting Matrices A Basis for Planning Washington D C World Bank Quah D and S Durlauf 1999 The New Empirics of Economic Growth In John Taylor and Michael Woodford ed The Handbook of Macroeconomics Amsterdam Elsevier Science Publishers Radulescu S and M Larionescu 1999 Social Assess ment of Mining Restructuring in Romania World Bank Washington D C Processed Rama M 2001 The Gender Implications of Public Sector Downsizing The Reform Program of Viet nam Policy Research Working Paper 2573 World Bank Washington D C Republished in World Bank Research Observer 17 2 167 89 Ramadas K D van der Mensbrugghe and Q Wodon 2002 SimSip Poverty Poverty and Ineq
34. input use and transport Further work involves a quasi comparison group for different types of farmers those who produce cot ton and those who do not or who have abandoned cotton in order to analyze the likely impact of the reforms on different groups and get a sense of the welfare impact on farmers who abandon cotton production The different scenarios for partial and complete privatization and the ex ante qualitative and quantitative work will be dis cussed during a stakeholder forum This public discussion is meant to increase the transparency of the reform and build ownership by fostering policy debate In addition there will be an ex post impact evaluation of the reform The ex ante analysis will define key indicators to be monitored for policy feedback in ex post analysis The ex post analysis will employ quantitative methods of impact evalua tion which attempt as far as possible to assess impact based on what would have happened in the absence of reforms This ex post quantitative analysis will be applied to a panel data set to estimate the impact on producer welfare OO Y 43 suorssmosip Aod puoyou uo poy sis pup eu soy podu DUM Ayuno 19 Syst 0 5 spoys snouaboxy 2 0 apnyuBow pajedx7 pooujexr ysu jo ainjou adAy pnyuow papedxe pooyyay ein ou Jo podur eu pjnon Jou Syst 81D DYM 9 G
35. internationally Incomes in the rural areas are derived from agricultural prof its The model also includes an explicit government account which taxes provides subsidies and intervenes directly in the markets for selected outputs Elasticities for supply and demand were taken from published sources and modified to satisfy theoretical restrictions and to conform to base data Sensitivity analysis confirmed that the model was robust to large changes in these and other assumptions The model simulates the impact of changes in government pol icy concerning direct intervention subsidies and support prices and tariffs The results indicate that reducing export taxes leads to a broad based increase in supply and exports and that the incidence of subsidies to fertilizer and feed grains is suf ficiently skewed that they could be cut without damage to farm incomes or export earnings Also import duties on milk prod ucts are regressive Imposing border prices removing import tariffs and restrictions leads to improved government finance and foreign exchange earnings It also improves the incomes of middle and wealthy farm households but at the risk of harming consumers especially the poor through higher prices and input output models and computable general equilibrium models Social accounting matrices SAM and input output IO models can be used for simple policy simulations by selecting some accounts as exogenous and leaving the o
36. of Economic Policies e Datt and Walker 2002 Software available at http www worldbank org psia section on Tools and Methods 69 A User s Guide to Poverty and Social Impact Analysis Tool Name SimSIP Poverty What is it SimSIP Poverty is a generic Excel based simulator which allows to estimate the changes in poverty and inequality over time resulting from changes in output and employment growth What can it be used for This tool may be used simulate the poverty and inequality impact of policies affecting sector level output and employment growth What does it tell you It simulates poverty and inequality measures nationally and within sectors urban and rural agriculture manufacturing and services It may simulate the impact of various sectoral patterns of growth and population shifts between sectors on future poverty and inequality Complementary tools Other tools for poverty forecasts include PovStat see Table on PovStat and DAD a software for distributive analysis Social impact analysis and institutional analysis could complement this analysis by identifying constraints to market participation by certain groups which can affect poverty and inequality estimates Key Elements On the basis of existing information on group level household survey data typically by deciles or quintiles the software translates differential output and employment growth across sectors into differential growth in per capita income or cons
37. of the policy debate in the development arena has now broadened beyond macroeconomic stabilization and associated measures to also include specific structural and public expenditure reforms This broader view is also implicit in the poverty strategies of developing countries In fact a review of fifteen Poverty Reduction Strategy Papers PRSP shows that poverty strategies com monly focus on enhanced expenditure programs especially in health education water and sanitation and roads and infrastructure institutional reforms to improve governance such as decentralization civil service reform and tax reform and structural reforms including trade reform privatization finan cial sector reform and agriculture sector reform Tools for PSIA therefore must be able to address not just major macroeconomic reforms but also the key structural and sectoral policy changes with which countries are currently contending This shift from broad based stabilization and adjustment suggests that PSIA should be undertaken on a reform specific basis Such an approach also makes the task of analyzing the impact of several reforms more manageable While it would be concep tually preferable to assess the combined effect of a series of policy changes in a single analytical frame work few tools can accomplish this and those that can tend to be complex and data intensive Therefore it is often more practical to disaggregate expected overall im
38. or that all the steps will be feasible in every country This chapter provides a broad overview of specific meth ods and tools that can be used to address each of these elements pointing to the annex for further details and references those methods and tools discussed in the annex are presented in bold in the text Building country capacity is presented in chapter 4 as one of the overarch ing principles for operationalizing PSIA rather than in this chapter as a discrete element of PSIA Element 1 Asking the right questions The first step in the analysis of poverty and social impacts is to identify the reforms that will be subject to analysis This requires identification of the set of reforms included in the government s agenda that are likely to have an impact on the distribution of income or assets Ideally if time and resources permit PSIA should be carried out for each of these reforms In practice analyzing all the reforms in a development plan may not be realistic so it will be necessary to fur ther narrow down the reforms selected for analysis to a manageable number This selection process will inevitably be a matter of judgment at the country level and will likely depend on factors such as The expected size and direction of the poverty and social impacts B The prominence of the issue in the government s policy agenda The timing and urgency of the underlying policy or reform and E The level of national debate
39. other similar software SS60 100 000 plus desig Limitations Results suffer from data limitations i e where service provision is not well recorded or is in kind Respondents may have incentives to misreport information References and applications Foran overview see Dehn Reinikka and Svensson 2003 Chapter 9 of the Toolkit for Evaluating the Poverty and Distributional Impact of Economic Policies Chaudhury and Hammer 2003 on Bangladesh Lindelow et al 2003 on Uganda See www publicspending org and http econ worldbank org programs public_services topic tools for some of the tools available and their applications 78 Annex Economic and Social Tools for Poverty and Social Impact Analysis Tool Name What is it W at can it be used for W at does it tell you Complementary tools Key Elements Requirements Data information Time Skills Supporting software Financial cost Limitations References and applications Citizen Report Card A participatory survey that solicits client feedback on the performance of public services It combines qualitative and quantitative methods to collect useful demand side data that can help improve the performance of public services Extensive media coverage and civil society advocacy allows the tool to be used for public accountability Citizen Report Cards are used in situations where demand side data such as user perceptions on quality a
40. output supply and input factor demand Supply analysis can be used to determine the impact of changes in product and factor prices in technology and in access on factor demands including labor production marketed output aggregate supply and incomes For instance it could be used to estimate the change in agricultural household production that could result from the liberalization of some markets inputs credit outputs More generally can be used to analyze the impact on production of the removal of barriers to access or other changes in markets Supply analysis is central to policy decisions in that it helps us understand the impact that alternative policy packages may have on the producers themselves Through the changes it induces in commodity supply and in factor demand the analysis of production response is an essential component of models that seek to explain market prices wages and employment external trade and government fiscal revenues Supply analysis can be combined with demand analysis to build household models Institutional analysis and stakeholder analysis can help inform assumptions about constraints to changes in supplier behavior and the incentive structures within a market PPA BA techniques help understand inter household relationships and how households are likely to respond In studying supply response it is important to distinguish between specific goods and broad sector aggregates and between short run and lon
41. outside organizations as appropriate become involved both in selecting tools for analysis and in applying them This engagement can be the basis for domestic capacity building so that over time local analysts rather than international specialists conduct a larger share of the analysis Table 2 presents an indicative typology of how an analyst may want to select an approach It lays out a choice of tools based on the importance of indirect impacts for the reform in question taking into consid eration constraints of data time and capacity This table is only indicative and the reality will vary depending on the country circumstances and the Elements of Good Poverty and Social Impact Analysis Table 2 Considerations in Choosing Impact Analysis Approaches Data Time Local Capacity Availability Low Medium High Low Beneficiary assessment Social impact assessment Poverty mapping Participatory poverty assessment Benefit incidence analysis Social capital assessment fool S Demand supply analysis E Household models E Social impact assessment e Multimarket analysis e Social accounting matrices e Collect more data Reduced form nput output models High Use tools in adjacent cells in Computable general equilibrium conjunction with assumptions Note The tools presented along the dimension of Macro model micro simulation Data Time Capacity Availability are additive a
42. overall tax burden For expenditures the authors focused on health education and infrastructure spending Nationwide incidence patterns were derived from regional patterns of expenditures along with information on income distribution To derive benefit incidence the authors inferred the implicit subsidy on health education and infrastructure for each income decile Overall incidence of public expenditures in health education and infrastructure was calculated as the weighted average of the regional incidence with the weights being the regional alloca tions of these expenditures Total incidence of public expendi tures was calculated as benefits as a share of gross income The results indicate that tax incidence is fairly neutral Expen diture incidence is strongly progressive as is the combined incidence tion and levels of government spending Applications include the linking of a simple CGE model with a demand system for food to examine the impact of macroeconomic policy changes on food consumption and nutritional status in the Philippines Orbeta and Alba 1998 26 A third technique is linking macro framework to micro simulation A more disaggregated variant of the repre sentative household method above is to simulate behavior at the level of the individual household Robillard Bourguignon and Robinson 2001 use this approach to analyze the poverty impact of the Indone sian financial crisis see box 11 Their household
43. reforms to which they are best applied It first presents tools for social analysis which can be used in conjunction with A User s Guide to Poverty and Social Impact Analysis Box 5 Illustrative Categorization of Selected Reforms according to Scale of Indirect Impacts This categorization is indicative only actual indirect impacts of a given reform will ultimately be driven by country circumstances including the scale and complexity of the policy adjustment Reforms with typically higher indirect impacts Macroeconomic and fiscal reform monetary policy reforms affecting inflation and interest rates broad exter nal policy affecting balance of payments and reserves and broad fiscal policy affecting fiscal deficits Trade and exchange rate reform reform of tariff and non tariff barriers exchange rate adjustments Agricultural reform elimination of administered prices changes in domestic subsidies and taxes abolition of mar keting boards Financial sector reform liberalization of interest rates alloca tion of credit lowering barriers to entry regulatory reform Reforms with typically lower indirect impacts Public finance reform changes in allocation and level of public expenditures changes in level and composition of revenues improvements in tax administration cost recov ery Land reform distribution to landless changes in legal rights to own exchange and inherit land Utility reform restructu
44. small farm ers and the self employed price changes will affect both consumption and resource allocation decisions On the consumption side policies that cause an increase in the prices of goods consumed by the poor will have a direct negative effect on household welfare These can include import tariffs on traded staples or increased utility tariff rates Consumer prices may be indirectly affected as well for example through expan sionary monetary policy that leads to general price inflation Producers will also be affected by policies that cause relative price changes particularly changes to the prices of their outputs or inputs Producer incomes are further affected by the difference between farmgate and market prices often conditioned by transport costs and the degree to which private mar kets are efficient and competitive rather than monop sonistic Wage changes will affect net buyers and sellers of labor differently and policies that change relative prices will induce shifts in both demand and supply Access Well being will be affected by access to goods and ser vices whether through access to markets and service outlets or through improvements in the quality and responsiveness of public or private service providers Policy can affect access directly by enhancing provi sion of the infrastructure or services in question or indirectly by removing constraints to access by partic ular households or groups For example impro
45. social capital assessment tool The choice among methods depends on the particular policy and the time available for research Social impact assessment SIA is used to assess how the costs and benefits of reforms are distributed among different stakeholders and over time It is par ticularly useful in understanding how the assets phys Elements of Good Poverty and Social Impact Analysis ical financial capabilities human organizational economic and social relations e g gender exclusion of stakeholders and the institutional mechanisms through which policy actions are transmitted affect policy outcomes Stakeholder analysis is a prerequisite for SIA When reasonable national survey data exist SIA uses a range of qualitative data collection tools focus groups semi structured key informant inter views ethnographic field research stakeholder work shops to determine impacts stakeholder preferences and priorities and constraints on implementation In the absence of adequate quantitative data SIA supple ments qualitative sociological impact analysis with purposive surveys that capture direct impacts and behavioral responses to reform or specific dimensions such as time use patterns that affect reform out comes the low low cell in table 2 SIA can be used to examine the impacts of structural reforms such as privatization of state owned enterprises agricultural reform reform of basic services utility reform ci
46. software and cost 4 the limitations of the tool method and 5 references and country applications Note that some of the tools presented in this annex belong to more than one category For instance bene ficiary assessment or participatory poverty assessment can also be used as monitoring tools while public expenditure tracking or quantitative service delivery surveys can also be used to analyze stakeholders and impacts Also note that some of the tools to analyze impacts categorized under social or economic actually use a mix of methods as is the case for demand analysis Moreover some of the techniques presented can be used in carrying out more than one type of analysis For instance demand and supply analyses are components of partial equilibrium analy sis presented under Multi market models and both IMMPA and the Augmented CGE model with repre sentative household approach also fall within the gen eral equilibrium models category Note 1 These are available at http www worldbank org psia and http www worldbank org socialanalysis sourcebook respectively A User s Guide to Poverty and Social Impact Analysis The tools and methods presented in the annex include the following l Identifying Stakeholders Stakeholder analysis Il Assessing Institutions Institutional analysis Ill Analyzing Impacts Social Tools Social impact analysis Beneficiary assessment Pa
47. surrounding the reform After selecting the reforms that will be subject to PSIA the second step is to formulate key questions for analysis This requires an understanding of the under lying problems that the reform is intended to address see box 1 A focus on overly narrow questions or exclusively on short term effects may obscure issues A User s Guide to Poverty and Social Impact Analysis that could prove critical to the achievement of a par ticular policy objective or to informing policymakers and stakeholders of the tradeoffs inherent in a certain policy A useful device is to conduct a problem diag nosis by organizing the chain of cause effect relation ships from policy objectives and policy actions to impacts in the form of a hierarchical problem tree in order to formulate relevant research hypotheses Identifying policy constraints is a key component of the analytical process and can often prevent subse quent missteps Policy reforms are often implemented to remove constraints that stand in the way of achiev ing certain development goals For instance a country may be unable to balance its budget because of unsus tainable losses by state owned enterprises The prob lem in this case will be to improve the overall fiscal balance as well as the performance of individual agen cies For some objectives there may be multiple con straints some being more important than others In such cases it may be necessary to pu
48. that include but are not limited to willingness and ability to pay indicators of vulnerability of poverty income social capital and or 2 can use existing LSMS or other household surveys and data from other utility or service providers on types of consumers and consumption or service levels and 3 traditional focus group discussions or focus group discussions using variety of PRA SARAR visual aids In some cases CA has also included 4 key informant interviews and 5 observation to triangulate information obtained from the various sources In Africa CA has also been integrated into utilities financial models to project realistic cost recovery rates and tariffs Requirements Data information Data on sources and services for different groups of consumers coverage levels consumption levels and tariffs over time if available from either utility data or direct research or existing surveys and income distribution data by service type or customer grouping though this is often collected during the research Most effective as a decision tool if actual and projected costs of service provision under different scenarios are used in willingness to pay questions Time For CA generally six to eight months with field work of two to three months total though more disaggregated demand analysis within peri urban areas of a city has taken longer Skills Requires quantitative skills economist social economist or sector economist in
49. the power relations within them Understanding these issues allows for the mobilization of existing capacity and for the tailoring of interventions to the institutional and organizational contexts in which they will be implemented 9 Forecasting or simulating likely impacts of policy by definition presupposes a view of likely causality and behavior Depending on the analyst s information base these can be empirically estimated based on the past derived on the basis of theory or assessed on the basis of knowledge of the country context and discussions with key stakeholders and experts 3 Elements of Good Poverty and Social Impact Analysis Although there is no methodological template for ana lyzing the poverty and social impacts of policy it is possible to identify a number of elements that make for good practice PSIA This chapter outlines 10 key elements that those attempting to undertake or advise on PSIA will need to address Asking the right questions Identifying stakeholders Understanding transmission channels Assessing institutions Gathering data and information Analyzing impacts WN Contemplating enhancement and compensation measures Assessing risks Monitoring and evaluating impacts 10 Fostering policy debate and feeding back into pol icy choice While there is a logical sequence to these elements this does not imply that they need to be undertaken in strict order
50. to Commodity Taxation American Economic Review 81 3 480 96 Younger S 1993 Estimating Tax Incidence in Ghana An Exercise using Household Data Cornell Food and Nutrition Policy Program Working Paper 48 Ithaca Processed Younger S D E Sahn S Haggblade and P A Dorosh 1999 Tax Incidence in Madagascar An Analysis Using Household Data World Bank Economic Review 13 303 331 Younger S 2002 Benefits on the Margin Observa tions on Marginal Benefit Incidence Food and Nutrition Policy Program Cornell University Ithaca NY Processed
51. to consider several options outlined below First they can adapt the analytical approach to data currently available If the urgency of policy action severely limits the time available to gather further data expeditious analysis using the limited available data may be required Some tools and approaches to poverty and social impact analysis are far less data intensive than others Adapting the analytical approach to the available data such as using time use data or focus group data to construct a simple house hold model might be the best course of action While any analysis entails making assumptions taking short cuts generally means making more assumptions in order to proceed The analysis should be honest and transparent in stating these assumptions Qualitative techniques such as individual community or focus group interviews can be used to validate assumptions and inform the design of quantitative surveys A second option is to collect more data If critical data gaps have been identified it may be useful to gather the data needed whether administrative or 17 survey data In the interest of building national capac ity and enhancing ownership of the data and analysis where possible these data collection efforts should be undertaken through national institutions such as the statistical agency ministries universities or other research organizations A national household survey is a large undertaking it can take months
52. to plan and implement such a survey and analyze the resulting data Where possible it is useful to identify planned household surveys that are to be fielded imminently and to add key questions relevant to the policy issue at hand These questions can leverage a wealth of analyt ical possibilities in the context of a full fledged house hold survey Alternatively there are now several off the shelf survey instruments that can be used to quickly collect enter and analyze data for example the Core Welfare Indicator Questionnaire or CWIQ survey Social impact assessment surveys based on purposive sam pling can often be turned around in a shorter time than a representative national household survey Like wise depending on the reform issue at hand quantita tive surveys can be employed using a purposive sample for example among workers of a firm that is to be downsized When possible use of mixed methods combining qualitative and quantitative analytical approaches to triangulate results helps to generate richer and more robust findings The use of data from a non representative sample to estimate parameters may sometimes be required and the borrowing of parameters from other countries may also be needed Again clearly stating assumptions for example that these elasticities apply to the population at hand will be important in these instances Care should be taken when generalizing from such a purposive sample
53. with Stakeholder Analysis or adapted to SIA USS 25 000 but can be more costly if done more in depth USS 50 000 Care should be taken in generalizing findings across different units of analysis and across regions with dissimilar informal institutions even within a country e g panchayat institutions will vary enormously across different states within India Resource and time requirements vary by the depth of analysis incl scope of geographical fieldwork done at local provincial and or national level and reform complexity which may necessitate continuing the analysis during implementation Brinkerhoff and Crosby 2002 Hunt 1996 North 1990 Tymons and Jacobs 1997 50 Annex Economic and Social Tools for Poverty and Social Impact Analysis Tool Name Social Impact Analysis What is it An analytical framework to identify the range of social impacts and responses to reform by people and institutions including those that are vulnerable or poor Often undertaken in an iterative manner and includes relatively detailed information on social context for reform What can it be used for Can be used for many types of policy reforms Has been used extensively for mining sector restructuring parastatal privatization and agricultural reforms giving rise to significant social impacts What does it tell you Social political context for reform who is affected by the reform at what point in time preferences and priorities of those
54. worldbank org participation spaccount htm 80 Bibliography Note The word processed describes informally repro duced works that may not be commonly available through libraries Ag nor P 2002 Macroeconomic Adjustment and the Poor Analytical Issues and Cross Country Evi dence Staff Working Paper 2788 World Bank Washington D C Ag nor P and J Aizenman 1999 Macroeconomic Adjustment with Segmented Labor Markets Journal of Development Economics 58 2 277 96 Ag nor P A Izquierdo and H Fofack 2003 IMMPA A Quantitative Macroeconomic Frame work for the Analysis of Poverty Reduction Strate gies World Bank Washington D C Processed Ahmad E and N Stern 1984 The theory of reform and Indian indirect taxes Journal of Public Eco nomics 25 3 259 98 Ahmad E and N Stern 1987 Alternative sources of government revenue Illustrations from India 1979 80 In Newbery David and Nicholas Stern eds The Theory of Taxation for Developing Coun tries Oxford Oxford University Press Ahmad E and N Stern 1990 Tax reform and shadow prices for Pakistan Oxford Economic Papers 42 1 135 59 Ahmad E and N Stern 1991 The Theory and Practice of lax Reform in Developing Countries Cam bridge Cambridge University Press 81 Alderman H and C del Ninno 1999 Poverty issues for zero rating VAT in South Africa Journal of African Economies 8 2
55. 14460 Demombynes et al 2002 on poverty in Ecuador Madagascar and South Africa Elbers Lanjouw Mistiaen Ozler and Simler 2002 on inequality in Ecuador Madagascar and Mozambique Elbers Lanjouw Lanjouw and Leite 2002 on Brazil Mistiaen 2002 on the analysis of the impact of rice price changes in Madagascar Mistiaen et al 2002 on health spending in Madagascar 58 Annex Economic and Social Tools for Poverty and Social Impact Analysis Tool Name What is it What can it be used for What does it tell you Complementary tools Key Elements Requirements Data information Skills Supporting software Financial cost Limitations References and applications Ex post behavioral marginal incidence analysis of public spending and programs This type of analysis combines the analysis of the marginal incidence of benefits with the econometric modeling of household behavior The analysis is ex post since it focuses on past interventions drawing lessons for future ones The methods allow to take the behavior of both the recipients of public spending or participants in the programs and of the agents implementing them Finally the analysis is marginal since it focuses on the impact of increases or cuts in public spending and programs It can be used to explain distributional impacts of public finance or policy reform on individuals and households allowing for behavioral responses This applies to public
56. 182 208 Alwang J P Siegel and S Jorgensen 1996 Seeking Guidelines for Poverty Reduction in Rural Zam bia World Development 24 11 1711 23 Angrist J E Bettinger E Bloom E King and M Kre mer 2001 Vouchers for Private Schooling in Colombia Evidence from a Randomized Natural Experiment NBER Working Paper 8343 Arulpragasam J and P Conway 2003 Partial Equi librium Multi Market Analysis In F Bour guignon and L A Pereira da Silva eds Evaluating the Poverty and Distributional Impact of Economic Policies Techniques and Tools Washington D C World Bank Atkinson A and F Bourguignon 1991 Tax Benefit Models for Developing Countries Lessons from Developed Countries in J Khalilzadeh Shirazi and A Shah eds Tax Policy in Developing Coun tries The World Bank Washington DC Attanasio O C Meghir and A Santiago 2002 Edu cation Choices in Mexico Using a Structural Model and a Randomized Experiment to Evaluate Progresa University College London processed Baker J 2000 Evaluating the Impact of Development Projects on Poverty A Handbook for Practitioners Washington D C World Bank A User s Guide to Poverty and Social Impact Analysis Barnum H and L Squire 1979 A Model of an Agri cultural Household Theory and Evidence Balti more Johns Hopkins University Press for the World Bank Barro R 1997 Determinants of Economic Growth A Cross Country
57. 26 963 77 Dollar D and A Kraay 2002 Growth Is Good for the Poor Journal of Economic Growth Vol 7 Number 3 195 225 Dorosh P C del Ninno and D Sahn 1995 Poverty Alleviation in Mozambique a multi market analysis of the role of food aid Agicultural Eco nomics 13 89 99 Dulamdary E M Shah and R Mearns with B Enkhbat and L Ganzaya 2001 Mongolia Partic ipatory Living Standards Assessment National Statistics Office of Mongolia and The World Bank Washington D C 84 Easterly W 1999 The Ghost of Financing Gap Test ing the Growth Model Used in the International Financial Institutions Journal of Development Economics 60 423 38 Egamberdi N P Gordon A Ikhamov D Kandiyoti and J Shoerberlein Engel 2000 Uzbekistan Agriculture Enterprise Restructuring and Devel opment Program In A Kudat C Keyder and S Peabody eds Social Assessment and Agricultural Reform in Central Asia and Turkey Washington D C World Bank Elbers C J O Lanjouw and P Lanjouw 2002 Wel fare in Villages and Towns Micro level Estimation of Poverty and Inequality Policy Research Work ing Paper 2911 World Bank Washington D C Elbers C J O Lanjouw Lanjouw and Leite 2002 Poverty and Inequality in Brazil New Esti mates from Combined PPV PNAD Data World Bank Washington D C Processed Elbers C P Lanjouw J A Mistiaen B Ozler an
58. Costs of developing and using the tool can vary depending on whether household surveys exist already If they do the analysis can be done for around US 10 000 Behavioral benefit incidence analysis typically has more onerous data requirements than simple benefit incidence analysis to allow for behavioral modeling For an overview of the technique see van de Walle 2003 Chapter 3 of the Toolkit for Evaluating the Poverty and Distributional Impact of Economic Policies Lanjouw amp Ravallion 1999 van de Walle 1994 on Indonesia van de Walle 20020 on rural roads van de Walle 2002b on Viet Nam Ravallion 1999 59 A User s Guide to Poverty and Social Impact Analysis Tool Name Ex ante behavioral marginal evaluation of policy reforms What is it The techniques allow to estimate the situation that would result from changes in policies The techniques allow for the analysis ex ante i e before a reform is implemented of the distributional impacts of the reform This analysis is marginal because it aims at capturing changes from the existing situation e g new policy expansion reduction of existing public actions The analysis is also behavioral sin the behaviors of various stakeholders are taken into account when defining the counterfactuals a What can it be used for This type of analysis can be applied to types of transfer programs with expected impact on some dimension of household behavior e g occupation
59. Impact of Economic Policies and the Social Analysis Sourcebook which provide more detailed information Additional guidance is cur rently under preparation on selected social and eco nomic tools The World Bank is also developing guidance on issues challenges and tools that may be of particular relevance in analyzing specific reforms A summary matrix and reform specific notes will be posted on an ongoing basis on the PSIA website This annex highlights some of the key tools for such analysis but does not aim to be comprehensive in its coverage updates on additional tools and methods will be posted on an ongoing basis on the PSIA web site http www worldbank org psia These tools are organized following the User s Guide elements including stakeholder analysis institutional assess ment impact analysis risk assessment and monitor ing In practice the analysis of poverty and social impacts of reforms requires the combination of a vari ety of complementary tools both within and across categories In addition some tools have evolved to comprise the integrated application of both social and economic methods Each tool or method is presented within a sum mary table The table contains five components 1 what the tool method is what policy reforms it can evaluate what types of questions it can answer and its complementarity with other tools methods 2 its key elements 3 the requirements in terms of data time skills
60. Invariably as discussed throughout this paper a sensible approach to PSIA is going to be country and context specific dependent upon available data and capacity as well as the reform issue in question Box 14 provides an example of this describing the PSIA approach cur rently being used in Chad to address an ongoing reform issue in that country The User s Guide recognizes that the tools and tech niques used for PSIA are likely to vary greatly across countries and reforms However regardless of the cho sen methodology there are some key components that should be addressed in this kind of analysis Table 4 presents an example of a summary matrix that captures and integrates these key components In addition to providing the analyst with a framework for considering and articulating key aspects of PSIA for a given reform it offers a template for making explicit some of the results and assumptions underlying such analysis The matrix itself can serve as a useful tool during the PSIA process For instance an analyst may wish to sketch out the priors in each of the 10 elements of good PSIA before even undertaking an analysis and then return to the matrix to validate or correct these hypotheses The matrix calls for the analyst to set out the reform components and the reasons for selecting that reform 42 for PSIA question 1 and the institutional mecha nisms through which the reform will be carried out question 2 It then allows
61. R Reinikka and P Collier eds Uganda s Recovery The Role of Farms Firms and Government World Bank Regional and Sectoral Studies Washington D C World Bank Reinikka R and J Svensson 2002a Explaining Leak age of Public Funds Discussion Paper 3227 Cen tre for Economic Policy Research London Reinikka R and J Svensson 2002b Working for God Evaluating Service Delivery of Religious Not for Profit Health Care Providers in Uganda World Bank Development Research Group Washington D C Processed Reinikka R and J Svensson 2003 The Power of Information Evidence from an Information Campaign to Reduce Capture World Bank Washington D C Processed Republic of Gambia 2002 Strategy for Poverty Alle viation SPAII PRSP Department of State for Finance and Economic Affairs Strategy for Poverty Alleviation Coordinating Office Banjul Processed Republic of Uganda 2000 Tracking the Flow of and Accountability for UPE Funds International Ltd Kampala Development Consultants Processed Republic of Uganda 2001 Study to Track Use of and Accountability of UPE Capitation Grants Inter 88 national Development Consultants Ltd Kampala Processed Rickson R J Western and R Burge 1990 Social Impact Assessment Knowledge and Develop ment Environmental Impact Assessment Review 10 World Bank Washington D C Robb C 2002 Can the Poor Influ
62. What can it be used for What does it tell you Complementary tools Key Elements Requirements Data information Time Skills Supporting software Financial cost Limitations References and applications Beneficiary Assessment A participatory assessment method and monitoring tool that incorporates direct consultation of those affected by and influencing reform Similar to PPA it relies primarily on qualitative research though with less emphasis on the use of visual techniques and on community follow up to the research process Has traditionally been used to evaluate projects or sectoral reforms in the health education infrastructure social protection and agricultural sectors but can be adapted to assess or monitor the impact of some discrete policy interventions where transmission channels and affected groups are clearly defined Can be used even for countries with limited capacity as an add on to other economic tools Used both to evaluate proposed reforms to signal constraints to participation faced by target group as well as to gain beneficiary feedback for ongoing reforms What is the beneficiary perspective on the problem being addressed by the reform their perception of the proposed policy and of any mitigatory measures being considered Provides insights into the likely reception the reform will receive as well as issues that may arise during implementation Tends to reach down to the community level but
63. a major downsizing operation involving the liquidation divestiture or restructuring of approximately 6 000 state owned enter prises resulting in unemployment of roughly 5 percent of the Vietnamese labor force or 450 000 workers In anticipation of the massive layoffs a special compensation package was devel oped which amounted to two months of salary per year of ser vice plus a substantial cash training allowance This package was a result of policy debates around simulations generated by Rama using DOSE Downsizing Options Simulation Exer cise The simulation computed acceptance rates for alterna tive severance packages based on the characteristics of indi vidual workers The acceptance rate is defined as the fraction of the workers for whom the separation package would exceed the present value of the estimated loss from job separation Rama found that a formula based solely on earnings history had a consistently higher acceptance rate for men while women found a uniform lump sum compensation more attractive Based on these sim ulations the government of Vietnam picked a separation pack age that involved a sizeable lump sum component in the form of the training allowance in order to ensure that female work ers would not be unduly penalized by the layoffs A User s Guide to Poverty and Social Impact Analysis impacts By addressing these questions explicitly adjustments can be made to mitigate the risks for example mod
64. acts of improved service delivery and higher growth will typically take more time to materi alize Stakeholders might therefore feel both negative and positive impacts but at different points in time Elements of Good Poverty and Social Impact Analysis Element 4 Assessing institutions As discussed above institutions affect the impact that policies have on poverty and the welfare of different households or groups First institutions mediate the transmission of certain policy impacts to people Under standing social and market institutions helps to under stand impacts of a given policy change such as deregulation privatization or removal of an export tax Second institutions are often the object of many types of policy reform Privatization civil service reform decen tralization and expenditure management reform are examples of institutional reform that involve changes in the incentives and rules that govern public and private organizations Third many policy changes depend on particular organizations for their implementation The incentives performance and capacity of these organiza tions will be critical to the actual implementation of the policy and thus its impact Fourth aside from well known barriers to entry faced by the poor institution specific intents of the reform may introduce new transaction costs stemming from information asymme try and bounded rationality that affect market behavior or access to public ser
65. al choices schooling demand for various goods or services etc This includes among others changes in taxes expenditure and targeted programs It can also be used for any exogenous change in the environment of a household likely to trigger a non negligible behavioral response e g accessibility of various types of services conditions on the labor market producer and consumer prices What does it tell you It tells you what would be the likely distributional impacts of policies changes taking the behaviors of various stakeholders into account Complementary tools Tools such as Stakeholder Analysis Social Impact Analysis and in some cases the Social Capital Assessment Tool can help analysts better understand the variables that are most likely to affect household behavior Key Elements The technique proceeds as follows 1 identification of the policy reform to be analyzed 2 identification of data set and information sources which contains the necessary information 3 specification of the economic model which captures the mechanisms likely to affect the individual or household s responses to the policy 4 estimation of the model 5 and simulation of the policy reform using the empirical estimate of the model Requirements Data information Household surveys specific surveys or questions depending on the issue of interest Time 6 months with experienced microeconomic modeler Skills Micro econometric modeling
66. allenges of ex post evalua tion and the need for more rapid feedback on the evolution and impact of policy PSIA implies a special role for monitoring for purely practical purposes Although monitoring cannot attribute causality it can say something about whether for whatever reasons assumptions are holding and expected impacts are materializing Monitoring can identify where things are going well or going wrong as well as where sup plementary interventions or changes in policy may be needed to ensure that the desired impacts materialize For example reforms that affect service delivery may benefit from participatory monitoring and evaluation that provides feedback from intended beneficiaries on quality of service delivery Some methods for partici patory M amp E are described below Choosing indicators for PSIA Several key criteria may be used to choose relevant indicators to monitor for PSIA First if impacts are transmitted through specific channels for example changes in producer prices increases in sectoral employment these are obvious indicators to track Second if the conceptual framework underpinning the analysis hinges on specific assumptions for example that traders or firms will enter with liberal ization that consumers or producers will substitute or even that certain elasticities will be of certain magnitude the validity of these assumptions hold ing over time can also be monitored As discussed above
67. aluating the Poverty and Distributional Impact of Economic Policies Binswanger and Quizon 1984 1986 on agriculture in India Dorosh del Ninno and Sahn 1995 on food aid in Mozambique e Minot and Goletti 1998 on tice refom in Vietnam 65 A User s Guide to Poverty and Social Impact Analysis Tool Name Partial Equilibrium Analysis reduced form estimation What is it Partial equilibrium model focusing on the effects of policy changes including interest rate changes taxes etc or exogenous shocks a change in import tariffs in another country or a terms of trade shock on a variable of interest such as aggregate consumption or income What can it be used for Analysis of partial equilibrium on the basis of reduced form estimation is one of the most common applications of econometric analysis and can be used to examine a myriad of different outcomes It can be applied to most policy changes or exogenous shocks It is most useful for PSIA of policy reforms which have significant indirect effects For example simple tax incidence analysis see Table on this method can analyze the direct distributional impacts of tax changes but does not capture the impact of tax changes on the overall economy and growth thereby only providing a partial answer to the question of impact Partial equilibrium analysis with reduced form estimation can capture this indirect impact and provide a first approximation of the expected impact on aggregate incomes
68. an overview of the technique see Datt Ramadas van der Mensrugghe Walker and Wodon 2003 Chapter 10 of the Toolkit for Evaluating the Poverty and Distributional Impact of Economic Policies Wodon et al 2003 Ramadas et al 2002 Software available at www worldbank org simsip 70 Annex Economic and Social Tools for Poverty and Social Impact Analysis Tool Name 123 PRSP What is it 123PRSP one country two sector and three goods is a static computable general equilibrium CGE model What can it be used for 123PRSP can be used to analyze the impact of macroeconomic policy and external shocks on income distribution employment and poverty What does it tell you It allows for a forecast of welfare measures and poverty outcomes consistent with a set of macroeconomic policies in the context of a very simple general equilibrium model For a given set of macroeconomic policies 123PRSP generates a set of wages sector specific profits and relative prices that are mutually consistent The projected changes in prices wages and profits are then inputted into household data on wages profits and commodity demand for representative groups or segments of the distribution In principle 123PRSP can calculate the policy impact on each household in the sample so as to capture the effect on the entire distribution of income For a given poverty line 123PRSP can also compute the effect of different poverty measures Complementary tools Analys
69. antage is that the tool relies on a desk assessment and lacks the interactive dimension of interviews with staff of the organizations that are being reformed The tool is currently better suited for the analysis of institutions with respect to investment operations but it could be used to assess institutions in the context of the implementation of policy reform Element 5 Gathering data and information Assessing data needs and available data and planning the phasing of future data collection efforts are an important part of PSIA Identification of data needs will benefit from the prior identification of policy issues stakeholders and likely transmission channels as outlined above Four discrete steps are suggested mapping out desirable data for PSIA taking stock of available data and analysis coping with PSIA data lim Elements of Good Poverty and Social Impact Analysis itations up front and addressing PSIA data limitations today so they do not limit PSIA in the future Mapping desirable data for PSIA Analysis of the poverty and social impacts of policy can be extremely data intensive Specific data require ments will of course depend on the nature of the reform being analyzed and the analytical tool or tech nique being employed In approaching data and meth ods it is useful to distinguish among data collection instruments close ended or open ended data type numeric or non numeric and associated methods of data ana
70. apping and structured interviewing of individuals communities or focus groups This information can be used to undertake stakeholder analysis discussed above participatory poverty assessment beneficiary assessment institutional analysis and risk analysis discussed below Open ended data collection meth ods such as those described in table 1 permit an inter active analytical process one in which research questions can be formulated answered and analyzed iteratively in the field The open ended approach allows subjects to articulate the research problem and question This interactive analytical process could enable quicker turnaround and a shorter time lapse between questionnaire design and analysis than close ended data collection methods and associated statisti cal analyses Open ended data collection methods may also be undertaken using a random sample or a purposive sample and may also be quantified to tabu late and analyze information In undertaking PSIA there is much benefit to mix ing and where possible matching elements of the above approaches This includes drawing on different types of data collected by different techniques for mul tidisciplinary analysis It is important to be aware that economic analysis is not limited to quantitative analy sis Close ended and or open ended data collection techniques can be used to generate numeric and or non numeric data for analysis using quantitative and or qualitative
71. ating ICRG TI and social science research as well as from implementing agencies and partners Primary data that identifies the spectrum of risks to and from the reform illustrates their likelihood of occurrence and importance to the policy and helps develop adequate risks management strategies Can be undertaken rapidly 2 4 person weeks in country depending on reform complexity Sociological and anthropological training are helpful It is crucial to have an in depth knowledge of the country context reform area country and sector evel assessment of key assumptions regarding the reform and objective country level risk indicators vi Can be undertaken at relatively low cost 05516 25 000 Limitations If poorly facilitated or done with contentious stakeholders assessment can easily produce skewed perceptions of risks that are based for instance on dogma or political calculation rather than reflection and deliberation As findings are necessarily based on stakeholder understanding of complex issues it is key to validate results through reiteration exercises Beck et al 2002 Kaufman and Kray 2000 World Bank 2002c Economist Intelligence Unit Country Risks Ratings http www eiu com Transparency International Corruption Perception Index http www transparency org International Country Risk Guide ratings http www prsgroup com References and applications 75 A User s Guide to Poverty and Social Impact
72. ayments and monetary accounts Macroeconomic policies are then fed into the Get Real Module or an alternative country specific model of long run growth determination and into a trivariate VAR module of short run fluctuations This trivariate module would require historical national account data Both long run and short run projections would then feed into the 123 model to generate projections on changes in wages profits and the prices of the three goods which in turn are fed in a household data module to capture the effects of macroeconomic policies on poverty Time About three months if a household survey and the macro model are available Skills Experienced modelers with expertise in financial programming and advanced time series econometrics Supporting software Eviews Excel Without the cost of developing the macro model or the Household survey about USS25 000 to set a new model Limitations As noted above 123PRSP adopts several strategic simplifications in order to make the model user friendly The cost of adopting this approach is that the causal chain from macroeconomic policies to poverty is in one direction only The model in this regard does not capture the feedback effect of changes in the composition of demand due to shifts in the distribution of income on macroeconomic balances References and applications For an overview of the technique see Devarajan and Go 2003 Chapter 13 of the Toolkit for Evaluating the Povert
73. ca Elements of Good Poverty and Social Impact Analysis Box 10 Net Fiscal Incidence in the Philippines Ideally one should be able to analyze the incidence of tax and expenditure policies simultaneously that is conduct a net fis cal incidence analysis In practice this type of analysis is diffi cult to undertake because the data requirements are extensive Devarajan and Hossain 1998 completed one of the few exam ples of this type of analysis in the Philippines The net inci dence of fiscal policy indirect taxes direct taxes and expenditures was estimated using a variety of data sources and tools For both direct and indirect taxes the authors calculate the effective tax rate for each income decile defined as the change in purchasing power of each income class For direct taxes they calculated the effective tax rate using actual tax collection rates broken down by gross income The family income and expen diture survey was used to map income classes into deciles For indirect taxes a multisector CGE model was used to calculate the incidence of taxes The effective tax rate for each type of tax such as VAT import tariffs excise taxes was calculated indi vidually This was done by simulating the removal of each type of tax with the CGE model The incidence reflects both actual tax collections and the increased costs associated with each tax The effective rates for indirect and direct taxes were aggregated to obtain
74. ca Research Working Paper R98 08 Harvard University Kennedy School of Government Cambridge Mass Kahane A 1996 The Mont Fleur Scenarios What will South Africa be like in the year 2002 Deeper News Volume 7 Number 1 Emeryville CA Kahane A 1998 Destino Colombia A Scenario Planning Process for the New Millenium Deeper News Volume 9 Number 1 Emeryville CA A User s Guide to Poverty and Social Impact Analysis Kaufman D and A Kraay 2000 Governance Matters II Updated Indicators for 2000 01 Working Paper No 2772 World Bank Washington D C Lampietti J A Kolb S Gulyani and V Avenesyan 2001 Utility Pricing and the Poor Lessons from Armenia Technical Paper 497 World Bank Washington D C Lanjouw P 2003 Estimating Geographically Disag gregated Welfare Levels and Changes In F Bour guignon and L A Pereira da Silva eds Evaluating the Poverty and Distributional Impact of Economic Policies Techniques and Tools Washington D C World Bank Lanjouw P M Pradhan F Saadah H Sayed and R Sparrow 2001 Poverty Education and Health in Indonesia Who Benefits from Public Spending Policy Research Working Paper 2739 World Bank Washington D C Lanjouw P and M Ravallion 1999 Benefit Incidence and the Timing of Program Capture World Bank Economic Review 13 2 257 274 Lanjouw P and M Ravallion 1995 Poverty and Household Size
75. ce analysis evaluates the distributional incidence of taxation its incidence for various household groups on the basis of income geographic location and other dimensions The taxes have an effect on real income directly or via prices See also Table on Benefit Incidence Analysis What can it be used for Tax incidence analysis can be used to analyze the distributional impact of taxes or subsidies It can also be used to analyze the distributional impact of other exogenous changes in prices and publicly provided services What does it tell you The tool estimates the effect of changes in prices and incomes on the welfare of individuals or households Most analysis is concerned with the share of taxes paid by different groups Taxation is understood as a loss in real income gt lt Complementary tools Tox incidence analysis can be complemented by the analysis of the statutory incidence of taxation i e the analysis of the rules which set who has to pay which taxes and by the analysis of the functioning of the tax collection processes see Tables on Institutional Analysis and Quantitative Service Delivery Surveys As tax incidence analysis benefit incidence analysis simple and marginal assesses the incidence of benefits and behavioral BIA assesses distributional changes from change in benefits taking into account reactions to the change See Tables on these two techniques Key Elements The technique 1 defines the groups
76. cial Impact Analysis Name CGE models What is it CGE models are completely specified models of an economy or a region including all production activities factors and institutions The models therefore include the modeling of all markets in which agents decisions are price responsive and markets reconcile supply and demand decisions and macroeconomic components such as investment and savings balance of payments and government budget W at can it be used for CGEs can be used to analyze the poverty and social impacts of a wide range of policies including exogenous shocks exchange rate international prices etc changes in taxation subsidies and public expenditure including changes in trade policies and changes in the domestic economic and social structure including technological changes asset redistribution human capital formation W at does it tell you CGE models are best chosen for policy analysis when the socioeconomic structure prices and macroeconomic phenomena all prove important for the analysis CGEs allow to take into account all the sectors of the economy as well as the macro economy and hence permit the explicit examination of both direct and indirect consequences of policies This is particularly important for those policy reforms that are likely to play a large role in the economy and might have important impacts on other sectors and or on the flow of foreign exchange or capital Complem
77. cidence of Indirect Taxes in Developing Coun Bibliography tries In F Bourguignon and L A Pereira da Silva eds Evaluating the Poverty and Distributional Impact of Economic Policies Techniques and Tools Washington D C World Bank Salmen Lawrence F 2002 Beneficiary Assessment An Approach Described Social Development Paper No 10 World Bank Social Development Depart ment Washington D C Salmen Lawrence E1998 and Amelga Misgana Implementing Beneficiary Assessment in Education A Guide for Practitioners with examples from Brazil Social Development Paper No 25 World Bank Social Development Department Washing ton D C Salmen Lawrence F 1995 Participatory Poverty Assess ment Incorporating Poor People s Perspectives into Poverty Assessment Work Social Development Paper No 11 World Bank Social Development Department Washington D C Sechaba Consultants 2002 Ability and Willingness to Pay for Urban Water Supply Maseru Lesotho Processed Shoven J and J Whalley 1992 Applying General Equilibrium New York Cambridge University Press Singh I L Squire and J Strauss 1986 Agricultural Household Models Extensions Applications and Policy Baltimore Johns Hopkins University Press Squire L and H van der Tak 1975 Economic Analy sis of Projects Baltimore Johns Hopkins Univer sity Press for the World Bank Stone R 1954 Linear Expenditure Systems and Demand Analys
78. consumption Requirements Data information Multi market models require 1 a disaggregated set of data on income or consumption distribution across households 2 a complete parameterization for supply and demand functions in the market s directly affected by the policy reform 3 a determination of the closures of the market s being modeled 4 software to solve a system of potentially non linear equations for the endogenous prices and quantities and 5 a quantitative mapping of these endogenous variables into the income and consumption of households Time The required time to perform an analysis based on partial equilibrium models depends to a large extent on data availability and degree of sophistication of the econometric model It could vary from about one week for a simple model to three months for very detailed models Skills Familiarity with basic partial equilibrium modeling and micro econometric estimation techniques Supporting software Stata SAS GAMS USS5 000 for simple models USS25 000 for detailed or especially complex models Limitations These models are limited to selected markets and hence ignore other interlinked markets by design It is also prudent for the analysis to conduct sensitivity analysis of the results for different values of the parameters used in the model References and applications For an overview of the technique see Arulpragasam and Conway 2003 Chapter 12 of the Toolkit for Ev
79. cross rows That is to say any tool that can be used in the context of lower data time capacity can also be used with higher data time capacity and certain tools such as social impact assessment can be applied to examine higher indirect impacts reform in question Choices will therefore have to be made on a case by case basis In contemplating the choice of tools a helpful first step is to consider whether the reform in question is likely to have low or high indirect impacts The answer will depend partly on the scale of the reform and its importance to the economy as well as the time hori zon With regard to the latter elasticities are typically lower in the short run than in the long run For instance a tax reform may have low indirect impacts in the first year of implementation but much larger ones in subsequent years as agents adjust to the new tax rates As another example the indirect impact of utility reforms could be very low in the case of changes in tariffs paid only by a handful of rich con sumers or they could be very significant as with the wholesale restructuring of the electricity sector in an industrial country Moreover the impact of individual reforms may be low but if they are taken as a package the combined impact could be high While country circumstances and reform specifici ties will ultimately determine the strength of indirect impacts it is possible to broadly classify specific reforms as having lowe
80. ctors from the macro model ii One month to link the macro model to the household survey data and iii One month to run the macro and household module together and adjust Skills Knowledge of i National Accounts based macroeconomic models ii of basic labor demand models and iii of the structure of household surveys is required Supporting software Eviews Excel USS25 000 when the data is available This does not include the cost of developing a macro model or a new household survey Limitations The main limitation is the lack of feedback of the micro model into the macro model References and applications For an overview see Pereira da Silva Essama Nssah and Samake 2003 Chapter 11 of the Toolkit for Evaluating the Poverty and Distributional Impact of Economic Policies e Pereira da Silva Essama Nssah and Samake 2002 72 Annex Economic and Social Tools for Poverty and Social Impact Analysis Tool Name Integrated macroeconomic model for poverty analysis IMMPA What is it IMMPA is a dynamic computable general equilibrium CGE model What can it be used for IMMPA can be used to analyze the impact of macroeconomic policy and external shocks on income distribution employment and poverty What does it tell you One of the main features of IMMPA is that it integrates the real and financial side of the economy in this regard IMMPA is useful to analyze both the impact of structural reforms such as changes in ta
81. d K Simler 2002 Are Neighbours Equal Estimating Local Inequality in Three Developing Countries paper presented at the LSE Cornell WIDER con ference on Spatial Distribution of Inequality Lon don School of Economics London European Commission 2002 Project Cycle Manage ment Handbook EuropeAid Cooperation Office General Affairs Evaluation Brussels Finsterbusch K J Ingersoll and L Llewellyn 1990 Methods for Social Analysis in Developing Coun tries San Francisco Westview Press Foster V and C Araujo 2001 Does Infrastructure Reform Work for the Poor A Case Study from Guatemala World Bank Washington D C Processed Galasso E M Ravallion and A Salvia 2001 Assisting the Transition from Workfare to Work A Ran domized Experiment Policy Research Working Paper 2738 World Bank Washington D C Gelbach J and L Pritchett 2000 Indicator Targeting in a Political Economy Leakier Can Be Better Journal of Policy Reform 4 2 113 45 Bibliography GTZ Gesellschaft fiir Technische Zusammenarbeit 1991 Methods and Instruments for Project Plan ning and Implementation Eschborn Germany Gibson J 1998 Indirect tax reform and the poor in Papua New Guinea Pacific Economic Bulletin 13 2 29 39 Gittinger J 1985 Economic Analysis of Agricultural Projects Washington D C World Bank Goldman L R ed 2000 Social Impact Analysis An Applied A
82. d effective participation and thus for an informed debate 4 Challenges and Operational Principles The previous chapter has presented a road map to conducting good PSIA Practitioners should follow an approach to PSIA that is country and context spe cific dependent upon available data and capacity as well as the reform issue in question Key constraints and principles are briefly outlined below Constraints Specific challenges that analysts may expect in practice include constraints on data analysis capacity and time Data and information constraints In many instances the data and information required to do a comprehensive analysis are not readily avail able Household survey data which are particularly relevant to undertaking distributional analysis on a national level sometimes do not exist or are dated Equally common information sources that do exist including survey data and sociological analyses may not address questions relevant to the reform at hand Analytical constraints First it is difficult to analyze the impact of macro economic and structural reforms at the microeco nomic or household level Policies have many direct and indirect effects at the microeconomic level mediated through local institutions and behavior It is often difficult to capture the complexity of reality in a model The analyst has to walk a fine 39 line between simplifying reality to explain impacts and capturing context specif
83. de jointly by the PSIA team and the relevant min istry or agency implementing the reform under con sideration In the context of social accountability discussed above the government may integrate these debates within existing political processes for exam ple by opening parliamentary debates to outside stakeholders but may also consider setting up more inclusive long term structures of policy debate such as regular consultations national workshops or town A User s Guide to Poverty and Social Impact Analysis hall meetings In many low income countries such structures were established during the poverty reduc tion strategy PRS consultation process Building on those structures may be an easy and viable way to sus tain this policy dialogue Feeding back into policy choice Ensuring that lessons learned from the continuous monitoring and analysis of policy implementation feed back to the redesign and adjustment of policy is a major objective of PSIA Sound ex ante PSIA as dis cussed should lead to an explicit articulation of expected impacts transmission mechanisms and assumptions and the establishment of a monitoring system for key indicators tracking the evolution of the reform program Necessarily ex ante PSIA will not get everything right Rather monitoring and evaluation during and after policy implementation is a critical part of PSIA with the objectives of a correcting flawed policies b making adj
84. der organ izations Ideally quantitative and perception surveys can be used in tandem to provide critical informa tion on the issues surrounding design and access to policy reform Elements of Good Poverty and Social Impact Analysis Box 13 M amp E Tools for Promoting Accountability and Transparency during Policy Reform Public expenditure tracking surveys PETS quantitative ser vice delivery surveys QSDS participatory public expenditure reviews PPER and citizen report cards are useful tools for tracking public expenditure and monitoring reform effective ness as it pertains to the expected outcomes processes and impacts that will occur as a result of policy reform PETS and QSDS collect data through structured interviews and documentation from service providers While a PETS traces money through an organization a QSDS provides a more robust analysis by pinpointing organizational weak nesses that can be addressed through reform One output of these survey instruments is a case specific diagnosis of public service delivery helping to identify weaknesses in implementa tion capacity and suggesting where reform efforts should be concentrated Data from PETS and QSDS can help provide answers to several kinds of questions including How to strengthen the voice of service users m What kind of accountability mechanisms between different levels of government can improve service delivery How to regulate privat
85. duction needs the household will be a net supplier of products labor and vice versa In those circumstance demand and supply analysis can be a complement fo household models Also if there are no market failures the household behaves as if production and consumption decisions were taken sequentially in which case theory of production i e supply analysis and consumption i e demand analysis applies Social impact analysis and beneficiary assessment which looks at household level determinants of behavior can provide information on household preferences and likely switching behavior in the event of a reform Key Elements If the household model is separable i e production and consumption decisions can be assumed to be taken sequentially the problem can be divided into two parts demand and supply If the model is not separable the estimation of production and consumption must be done simultaneously One possibility is proceeding with a reduced form approach A second possibility is the calibration and simulation of a structural household model Requirements Data information These models require integrated household surveys Information is needed both on the demand side and the supply side Ideally the models would also account for the allocation of time within the household which requires data on factors that do not usually appear on consumption or production surveys such as allocation of time to child care or other unremunerat
86. e Delivery Surveys QSDS are described in more detail in the section on monitoring and evaluation and in box 13 and are presented in the Annex under the monitoring and evaluation section Behavioral analysis Behavioral analysis includes economic tools that go beyond direct impact analysis to recognize some behavioral responses among households and eco nomic agents Behavioral analysis includes methods that permit non zero own price and cross price elas ticities In other words with a price or other policy change households may switch to consuming or pro ducing other goods and services and move along their respective demand or supply curves The approach is however limited to a purely micro focus Namely supply is not equated to demand in a market markets do not clear and prices are therefore not endogenous Rather households simply react to an exogenous pol icy shock based on behavioral specifications and assumptions If data time and capacity permit behavioral analysis should always supplement simpler incidence analysis to more fully illuminate household responses to policy change Some of the tools of behavioral analysis are behavioral incidence analysis demand supply analysis and household models Elements of Good Poverty and Social Impact Analysis Box 6 Impact of Public Expenditures in Indonesia Average versus Marginal Benefit Incidence Average and marginal benefit incidence has been examined
87. e QSDS is typically implemented with the following steps 1 Consultations with key stakeholders including government agencies donors and civil society organizations are carried out to define the objectives of the survey identify the key issues determine the structure of resource flows and the institutional setup review data availability outline hypotheses and chose the appropriate survey tool 2 Survey instruments are then constructed and implemented The QSDS deals with the fact that agents may have strong incentives to misreport data by using a multi angular data collection strategy and carefully considering which sources and respondents have incentives to misreport and identifying sources that tare the least contaminated by these incentives Requirements Data information In addition to the 0505 itself uses public accounts sample data preferably panel data on government spending and information on outputs of service providers at ministerial regional local and service provider levels Field testing of the survey is key to ensuring high quality results Time Consultations design and pre testing take several months The survey itself takes 1 2 months depending on sample size and data accessibility Skills Some prior experience of micro survey work and STATA required and a detailed knowledge of the relevant institutional context Microeconomics of provider behavior incentives and organization theory Supporting software STATA or
88. e adjustments to the reform program over time Notes 1 Fifteen PRSPs were completed by end July 2002 and included those for Albania Bolivia Burkina Faso Guyana Honduras Malawi Mauritania Mozambique Nicaragua Niger Tanzania Uganda Vietnam Yemen and Zambia Seven of these strategies call for utility reforms 5 for reforms of public sector pensions 6 for civil service reforms 7 for fiscal decentralization 11 for reforms in the tax system incl VAT and other consump tion taxes 11 for land reforms 10 for trade reforms and 6 for reforms of the macro economic framework 2 Of course structural changes could have macro economic effects For instance trade liberalization could have serious consequences for the fiscal deficit the current account deficit and macroeconomic sta bility Understanding how these impacts affect the poor is critical to PSIA 3 This User s Guide lays out existing economic and social tools and approaches for distributional analysis in order to give a broader picture of poverty to policy analysts and decisionmakers Insofar as the economic tools draw on existing examples of such analysis appli cations focus mainly on income expenditure measures of welfare Increased attention to assessing the impacts of policy on non income measures of welfare is an A User s Guide to Poverty and Social Impact Analysis important priority for future work The social develop ment tools described in this User
89. e govern ment first take action to drop barriers to entry or encourage private merchants to pursue untapped markets before it dismantles the commodity board Also sustainability of the reform process can be enhanced with quick wins among key stakeholders to build support for reform For example new resources for mining safety in Russia were used to persuade the unions of the need for reform Consider direct compensatory mechanisms When adverse impacts of reform are unavoidable con siderations driving the decision to compensate losers may be based on a poverty grounds especially if some of the poor lose in the short run and the objec tive of the policy is poverty reduction b equity grounds especially if groups that have traditionally been the poorest and most vulnerable lose ground to those with greater economic security or c political economy grounds especially if the losers have the capacity to organize and threaten either the sustain ability of reform or survival of the government Careful consideration is required in the design of compensatory schemes to ensure appropriate target ing of intended beneficiaries and cost effectiveness and to avoid perverse or distortionary incentive schemes that might compromise implementation of the intended policy see box 12 It is also important to calculate the cost of compensation and consider it rel ative to the expected benefits of reform In terms of costs the compensatio
90. e providers Drawing on a number of successful cases and tested models from around the globe the World Bank has developed a frame work for a PPER in which civic groups influence stages of the budget process in a cyclic and iterative manner The PPER framework can also be applied to the participatory monitoring and evaluation of policy reforms covering all levels of indica tors input output outcome impact in a participatory manner The system has four key stages Formulation how expenditure proposals are made to which sectors and in what amount Analysis review of the impact and implication of alterna tive policy proposals and allocations Expenditure tracking identification of elusive bureau cratic channels through which funds flow bottlenecks in the flow of resources and other deficiencies of delivery systems Performance evaluation direct feedback from citizens for example report cards on quality of access to and satisfac tion with public services One off engagement at any stage of the PPER cycle can be use ful but participatory public expenditure systems only deliver when the feedback loop is institutionalized and space is given to external voice at each stage Achieving that level of institu tionalization requires the commitment of significant resources over the long term A few key principles should be borne in mind in establishing an M amp E system Participatory monitoring and evaluation can hel
91. e purpose of presenting this simple table indicative classifications of high medium and low are used whereas clearly this is a continuum in practice While recognizing that time data and local capacity are not perfectly correlated they are deemed a close enough match to collapse into a single dimension For example when data is used as a proxy for this dimen sion low means that no nationally representative household survey data exist medium means that nationally representative household survey data exist and high indicates the existence of nationally repre sentative household survey data along with other data such as census data for poverty mapping national accounts and other data for computable general equi librium models 14 The Social Analysis Sourcebook World Bank 2002c provides a more detailed description linking equity and social sustainability to development out comes 15 Incidence analysis has drawbacks First it does not explain why things are the way they are Second whereas incidence may use public expenditure as the measure of the service s benefit to the recipient there may be no correlation between expenditure and received or perceived value or outcomes Third as with many interpersonal welfare comparisons the results of the analysis may vary depending on the method and the dimension used to rank households See Demery 2000 and van de Walle 1998 See also 37 tools to assess
92. e several months The survey itself takes 1 2 months depending on sample size and data accessibility Skills Some prior experience of micro survey work and STATA required and a detailed knowledge of the relevant institutional context Microeconomics of provider behavior incentives and organization theory Supporting software STATA USS60 100 000 plus desig Limitations Results suffer from data limitations i e where service provision is not well recorded or is in kind Respondents may have incentives to misreport information References and applications Foran overview see Dehn Reinikka and Svensson 2003 Chapter 9 of the Toolkit for Evaluating the Poverty and Distributional Impact of Economic Policies Reinikka and Svensson 2002a for an overview of the approach Reinikka 2001 Reinikka and Svensson 2003 Republic of Uganda 2000 and 2001 on Uganda Government of Tanzania 1999 and 2001 on education and health care in Tanzania Xiao and Canagarajah 2002 on Ghana Das et al 2002 on Zambia World Bank 2001b on Honduras See www publicspending org and http econ worldbank org programs public_services topic tools for some of the tools available and their applications 77 A User s Guide to Poverty and Social Impact Analysis Tool Name Quantitative Service Delivery Survey QSDS What is it A technique to survey the efficiency of service provision What can it be used for 0505 can be used for t
93. ed subsidized One month if the data are clean and include a calculated welfare variable such as household expenditure consumption or income Skills Familiarity with the tax system and market structure of the country Econometric skills and expertise in the supporting software see below Supporting software Any statistical software package can calculate point estimates easily Stata SPSS etc For variances a matrix programming language Gauss Matlab SAS IML is useful The software package DAD calculates concentration curves and other summary measures of incidence with standard errors Limitations Simple analysis of the incidence of taxes does not account for behavioral changes and hence only provides a first order approximation of a tax s true incidence Furthermore inaccuracy can come from the simple assumption of how statutory taxes translate into economic incidence In addition many indirect taxes are also levied on intermediate goods and estimating the incidence of the tax on final consumer would require complex models Finally the method only focuses on the incidence of faxes and should be complemented by an analysis of the economic and administrative efficiency of the system References and applications For an overview of the technique see Sahn and Younger 2003 Chapter 1 of the Toolkit for Evaluating the Poverty and Distributional Impact of Economic Policies Alderman and del Ninno 1999 on the targeti
94. ed work e g time spent fetching water If an integrated household survey exists a few months Time Skills Advanced experience with household surveys and econometric skills Supporting software Statistical packages for the analysis of household data including Stata SPSS and other software US510 000 US 30 0000 Limitations References and applications an extensive review of these models see Sadoulet and de Janvry 1995 Singh Squire and Strauss 1986 on impact of price changes De Janvry et al 1991 on household models for agricultural households 64 Annex Economic and Social Tools for Poverty and Social Impact Analysis Tool Name Partial Equilibrium Analysis Multi Market Models What is it Multi market models belong to the class of partial equilibrium models They use partial equilibrium analysis of the impact of changes prices and quantities in selected markets on household income and expenditure They specify a system of demand and supply relationships for a few sectors of the economy so that the impact of policies on one sector can be seen on other sectors in the economy What can it be used for Multi market models are useful to analyze the poverty and distributional impact of policies that affect the prices and quantities of a small group of commodities For example they can be used in estimating distributional impacts of the imposition or change in taxes subsidies
95. ements of good PSIA Finally chapter 6 closes with brief conclu sions A User s Guide to Poverty and Social Impact Analysis Notes 1 This User s Guide uses the terms well being and welfare synonymously 2 The PSIA website http www worldbank org psia presents guidance on the application of economic and social tools and methods for PSIA country experience in undertaking PSIA for specific reforms training events and material and other resources 3 The Bank has been engaged in this area for some time especially in the context of projects For eco nomic literature on the topic see among others Squire and van der Tak 1975 Timmer Falcon and Pearson 1983 and Gittinger 1985 For anthropological and sociological literature see Finsterbusch Ingersoll and Llewellyn 1990 Becker 1997 Goldman 2000 and Brinkerhoff and Crosby 2002 2 A Conceptual Framework for Understanding Poverty and Social Impacts This chapter presents the main concepts underlying poverty and social impact analysis It addresses seven key areas What is being analyzed What is the welfare measure being assessed Whose welfare is being analyzed B How are impacts channeled How do institutions affect outcomes When do impacts materialize What are the risks of an unexpected outcome Impact of what What is being analyzed Poverty and social impact analysis focuses on the impact of policy change The scope
96. ence Policy Participa tory Poverty Assessments in the Developing World Washington D C World Bank Robillard A S E Bourguignon and S Robinson 2001 Crisis and Income Distribution A Micro Macro Model for Indonesia International Food Policy Research Institute Washington D C Processed Robles M C Siaens and Q Wodon 2003 Poverty Inequality and Growth in Paraguay Simulations Using SimSIP Poverty Economia amp Sociedad Forthcoming Rosenbaum P and D Rubin 1983 The central role of the propensity score in observational studies for causal effects Biometrika 70 41 55 Round Jeffery 2003 Social Accounting Matrices and SAM based Multiplier Analysis guignon and L A Pereira da Silva eds Evaluating In E Bour the Poverty and Distributional Impact of Economic Policies Techniques and Tools Washington D C World Bank Rutherford M 1994 Institutions in Economics The Old and the New Institutionalism New York Cam bridge University Press Sadoulet E and A de Janvry 1995 Quantitative Devel opment Policy Analysis Baltimore Johns Hopkins University Press Sahn D and H Alderman 1995 Incentive Effects on Labor Supply of Sri Lanka s Rice Subsidy In D Van de Walle and K Nead eds Public Spending and the Poor Theory and Evidence Baltimore Johns Hopkins University Press for the World Bank Sahn D E and S D Younger 2003 Estimating the In
97. ence research and in country assessments of organizational structures and institutional settings Primary data that illustrates informal practices and identifies the dynamic processes within the policy design and implementation A few weeks 4 5 person weeks to a few months 2 3 person months for fieldwork analysis and report Can be completed quickly in combination with a Stakeholder Analysis to gain a brief overview of the formal and informal rules of the game Institutional Analysis that aims to identify the dynamic processes within the policy design and implementation requires a more in depth analysis and may take a few months Sociological anthropological and public policy training incl qualitative field research skills are helpful In depth knowledge of the country context reform area policy design and implementation and political economy including interests and influences of key stake holders is crucial IPS Ltd http www ips uk com ProcessMapping htm ProcessMap Toolpack com http www toolpack com workflow html HPS Inc http www hps inc com ithinkDemo htm Triaster http www processnavigator com english index html Ash House http www ashhouse co uk process htm Process Mapping http www processmapping com TSQ Europe http www tqseurope com activemo htm Designtech http www designtech com processmap html Depending on the depth of analysis it can be low cost if used in combination
98. enditure and sectoral reforms with potential impacts on livelihoods and vulnerability Dulamdary and others 2001 BAs tend to use similar qualitative data gathering techniques but they focus specifically on consultation with those groups directly affected by a specific intervention project or policy and therefore have not typically looked for national representativity They do not focus specifically on the poor The social capital assessment tool SOCAT measures social capital institutions and networks their underlying norms and values at the level of house holds communities and key organizations It allows analysts to identify how these social assets affect pro ductive behavior for example income generation and risk management and how this in turn responds to policy reform For instance well functioning networks with high levels of trust such as among parent teacher associations or farmer associations may facilitate policy changes that call for collective action or cooperation Alternatively SOCAT data make it possible to assess whether certain policies strengthen or undermine social assets The tool can be tailored to specific policies or used to give depth to other methods of data collection and analysis A tailored version of the SOCAT survey was administered in Bosnia and Herzegovina where measurement of the level of social capital led to recom mendations for reform of the social welfare system and improvements i
99. entary tools Other tools described here belong to this class of models with an additional model to take distribution into account the 1 2 3 PRSP IMMPA and the Augmented CGE Model with Representative Household Approach See their respective Tables Key Elements A CGE can be described by specifying the agents and their behavior the rules that bring the different markets in equilibrium and the macroeconomic characteristics CGEs are based SAMs see Table on Social Accounting Matrices and can be distinguished by the complexity and level of disaggregation of productive activities factors and institutions including households SAM which is then used as the foundation of the CGE Requirements Data information CGE models are datc intensive They are constructed from combined national accounts and survey data These are first compiled into a Time A few months fo a year depending on the existence of a SAM or of another CGE model built to address a different question Even these simple CGEs can be complex and time consuming An alternative is to use a previously constructed CGE For example lanchovichina et al 2001 use a CGE model constructed by the Global Trade and Analysis Project GTAP to examine the impact of NAFTA on household welfare in Mexico However the use of a previously constructed simple CGE can limit the number of policy changes that can be simulated in the previous example the model was constructed to examine trade policy
100. ention This is done to ensure that agreed targets are met and the policy is on track Eval uation analyzes how and why observed changes in indicators have occurred Impact evaluation assesses the extent to which a past intervention has contributed to changes in outcomes or impacts for individuals groups households and institutions Particular characteristics of M amp E in the context of PSIA M amp E related to PSIA may be seen as a subset of a national poverty monitoring system and as having several characteristics It is focused on monitoring impacts of specific policy reforms with a view to vali dating policy analysis or informing policy adjustment during the course of implementation This ideally requires information on key indicators before base 31 line data during and after the reform The evaluation problem is particularly challenging in the case of econ omy wide policy reforms As these reforms often apply to whole sectors or economies unlike projects which are restricted to a group or specific region it is diffi cult to establish the counterfactual Use of control groups is possible only when the policy has been ini tially designed as a pilot or phased in so that those who do not initially experience the reforms can serve as controls The particular challenges of ex post evalua tion for certain kinds of economy wide reform require particular foresight in setting up an evaluation frame work ex ante Given the ch
101. eral calendar months Skills Sociological or anthropological training is helpful as is a background in political science Local knowledge including contacts with local experts is crucial Those carrying out the analysis must also thoroughly understand the reform and the recent history in the sector Supporting software N A Financial cost When combined with other qualitative work the incremental cost of stakeholder analysis can be as low as USS10 000 When no qualitative work is planned costs can be up to 525 000 Limitations Stakeholder analysis relies on qualitative data and perceptions and preferences The absence of statistical representative places greater onus on careful selection of respondents and interpretation of data References and applications Bianchi and Kossoudji 2001 e Brinkerhoff and Crosby 2002 World Bank 20026 Annex VII on Guyana 49 A User s Guide to Poverty and Social Impact Analysis Tool Name What is it What can it be used for What does it tell you Complementary tools Key Elements Requirements Data information Time Skills Supporting software Financial cost Limitations References and applications Institutional Analysis An analytical approach that uses qualitative methods to unpack the black box of decision making and implementation processes Useful for PSIA regardless of reform type but particularly important for policy changes involv
102. erty and Distributional Impact of Economic Policies Ulrich Zachau and Stefan Koeberle provided valuable advice particularly on the interface of this analytical approach with emerging trends within the World Bank on policy based lending Many others inside and outside the World Bank provided valuable comments and feedback on the first draft which has been posted on the Bank s external website since April 2001 We would like to acknowl edge the extensive comments received among others from the ADB Catholic Relief Services Christian Aid DfID GTZ IMF Ministrie van Buitenlandse Zaken The Netherlands OXFAM World Vision and World Learning The team organized a wide range of consultations during the two years from the initial outline to the final version including numerous meetings with non governmental organizations as well as multilateral and bilateral partner organizations The approach was refined through a series of learning events and a sem inar series over these two years The team also assisted country teams to field test the core approach review ing the lessons learned during a workshop organized jointly with the IMF and DfID in October 2002 The discussions and comments from participants at those events contributed to the development of the User s Guide Materials from this work have been posted on a new website launched jointly by PRMPR and SDV www worldbank org psia which will continue to be updated with new t
103. erty based on the country and policy context Impact on whom Whose welfare is being analyzed PSIA is concerned with the distributional impacts of policy change on various groups with a particular focus on the welfare of the poor and those vulnerable to impoverishment Depending on country circum stance groups may be defined in terms of income class gender ethnicity age geographic location liveli hood or other such criteria In practice however household members do not always pool resources or allocate benefits equally When the impacts on differ ent members within a household are likely to differ it is important to also analyze intra household effects PSIA is concerned with distributional impacts for two reasons First policy change can have a direct impact on the welfare of the poor or other disadvan taged groups Understanding the impacts of policy change on these groups can inform the design of pol icy Second the distributional impacts of a policy even among non disadvantaged groups are important for the effectiveness of that policy and its ultimate sus tainability Even if a policy change results in overall welfare gains it is likely that some groups may experi ence losses at least in the short run While losers may not necessarily be poor reduction in their welfare may not be acceptable for social or political economy rea sons and may significantly affect the implementation and sustainability of the reform Fo
104. ess evaluation Social impact assessment Incidence analysis Elements of Good Poverty and Social Impact Analysis element of the dialogue on the country s poverty reduction strategy Fostering and drawing upon public discussion of policy can be useful at various points of the PSIA process for example to help identify stake holders and their positions to understand transmis sion channels to validate technical impact analysis or to leverage social accountability It is critical for PSIA to close the loop and ensure that the lessons learned from impact analysis monitoring and evaluation social accountability and public policy debate actually inform and affect policy 6 Fostering policy debate Policy formulation is not simply a technical process it is political as well PSIA provides the technical param eters for evidence based policymaking laying out for policymakers what is feasible and what are the likely impacts of proposed policies and reform actions The accompanying debates determine what is likely to be realistic in that political context where the perceptions and interests of particular constituencies are invari ably weighed against the merits and demerits of the reform For that reason the policy debate needs to involve technocrats and researchers as well as parlia mentarians civil society donors and other key stake holders whose support is essential to the reform The process of policy debate includin
105. essment is relevant fo all reforms that have significant poverty and social impacts Particularly useful for decentralization reforms civil service retrenchment land reform financial sector reform e g regulatory reform privatization of SOE labor market reform e g minimum wage legislation social safety nets pension reforms and agricultural reform e g changing domestic subsidies and taxes eliminating marketing boards Social Risk Assessment follows an analysis of stakeholders institutions and social impacts and feeds into M amp E systems by establishing a baseline of objective risk indicators for country and sector level risk assessments What does it tell you Helps to a identify risks that could undermine policy reform objectives b inform analysis of alternatives in policy design and inform design of complementary measures when it appears that a reform will have adverse impacts c develop risk management strategies for the identified risks to and from the policy reform Risk assessment involves the following steps i identification of assumptions implicit or explicit about what should or should not happen in order to for a policy to achieve its goals ii assessing the likelihood that these assumptions will hold and their importance to policy iii assessing the impact of policy change should the assumptions prove invalid iv informing risk management strategies to address important risks that are unavoidable
106. ets of actors it increases the relevance of more complex analysis of poverty and social impacts while reducing time and cost A more detailed discussion of stakeholders and their relevance to policies and programs is provided in the Social Analysis Sourcebook World Bank 2002c 3 The identification process disaggregates these actors in terms of social characteristics such as cul tural structural economic political or governmental 4 Doing this early on provides a basis for early val idation of hypotheses subsequent identification of data and information needs and more rigorous analy sis of hypotheses in subsequent steps of PSIA 5 Some questions address issues of ownership and commitment discussed in the previous section In sit uations where informant interviews are not feasible or where findings are not considered reliable the institu tional assessment tool can be used to conduct or com plement stakeholder analysis 6 Toolkits for institutional assessments can be found at http www1 worldbank org publicsector toolkits htm 7 This statement requires qualifiers First faster methods of close ended data collection and analysis are being developed for example the Core Welfare Indicator Questionnaire Second reliable open ended analysis requires time and care if quality is to be ensured 8 These data collection instruments have often been employed using non random samples for exam ple in ethnographic analysis How
107. ever there is no rea son that they could not be used on random samples to generate statistically representative data Likewise non numeric data could be coded into numeric data 9 See Rao and Woolcock 2003 for examples of mixed methods 10 Most countries have now undertaken at least one national household survey although at times the vintage and quality of data are an issue Intra house hold data when available can permit distributional analysis at the level of individual household members a particular concern in considering the welfare of Elements of Good Poverty and Social Impact Analysis women or other individuals who may be less powerful or privileged within the household 11 In examining an economy wide reform such as a rice tariff increase it would obviously be preferable to adopt a representative sample for any new survey or to adopt the same sample or select a panel from a household survey for which data already exist Where the reform is location specific or affects a specified population for example with the shutting down or privatization of a state mining company a purposive sample of those expected to be directly affected would be appropriate 12 Using a non representative sample to extrapo late differentiated impacts of policies among groups nationwide assumes that national distributional char acteristics are identical to those of the non representa tive sample a non trivial assumption 13 For th
108. ews with staff at all levels of the organization focus ing particularly on those at the front line of delivering services The main advantage of organiza tional mapping is its ability to expose a problem area that may not be readily seen by relying directly on stakeholders to describe their interests and constraints see box 4 A drawback is that it is more time con suming costly and technically demanding than guided questionnaires Good process mapping needs to be used iteratively to test assumptions by monitor ing institutional performance over time The institutional assessment tool was designed to per mit an institutional analysis of various components of a project The tool consists of questions that help the analyst structure thinking about the complex relation ships and processes within organizations upon which reforms depend The questions are used to evaluate the effectiveness of institutions from performance incentives to their capacity to implement policy They address key issues of relevant organizations including 14 a roles b knowledge and access to information c incentive structures d receptivity to policy change e capacity f resources or financial clout and g scope to adapt to the new reform agenda The advan tage of the institutional assessment tool is that it can enable more systematic analysis of issues ranging from political incentives to administrative capacity at low cost The disadv
109. examining growth and distributional issues within a single analytical framework It can be seen as a tool for the organization of information in a single matrix of the interaction between production income consumption and capital accumulation SAMs can be used for some simple policy simulations SAMs can be applied to the analysis of the interrelationships between structural features of an economy and the distribution of income and expenditure among household groups SAMS would complement and be complemented by the use of household surveys to map impacts into distributional changes Stakeholder analysis can be useful to identify different groups of interest A typical SAM contains entries for productive activities commodities factors institutions the capital account and the rest of the world An activity produces and receives income from commodities buys commodities as production inputs pays wages to labor rents to capital and taxes to the government Factor income accrues to households as owners of the factors The SAM can be constructed to distinguish household groups by for example sources of income SAM techniques select some accounts as exogenous and leave the remaining accounts endogenous In part this selection can be made with a sound theoretical basis but it is offen arbitrary For example if the SAM contains an account for agricultural production and one for transportation an experiment can be run by imposing some exoge
110. f farm labor market Multimarket models permit the combined estimation of systems of supply and demand relationships so that the analyst can see how policies in one sector impact on other related sectors Multimarket models repre sent a simpler alternative to computable general equi librium models and have been used for example to examine the welfare impact of technical change in agriculture increased exports and input subsidies in India Binswanger and Quizon 1984 1986 and agri cultural subsidies and tariffs in Turkey see box 9 Reduced form estimation can be used to simulate the impact of different policy variables on poverty and social outcomes The approach is less data intensive than multimarket modeling For instance reduced form techniques were used to study rural poverty in Zambia taking advantage of household budget data time use information and other sociological and anthropological data General equilibrium analysis General equilibrium analysis goes beyond partial equi librium analysis in that it models all economic accounts in the economy and thus aims to present a comprehensive picture What the methods in this cat egory have in common is a complete specification of 25 the economy in varying degrees of aggregation In theory a well specified general equilibrium model can capture indirect impacts of policy generated from all other markets However in practice as with any eco nomic estimation it cap
111. form to improve performance By explaining the causal links that tie program inputs to expected outputs out comes and the ultimate goal of improving farmer income the team has explicitly outlined the assumptions for each trans mission channel of the reform so that they can be verified The PSIA that grew out of these discussions has three compo nents a an economic scenario study of different options for privatization b ex ante qualitative analysis and a baseline quantitative survey and c ex post analysis that includes both qualitative and quantitative methods The aim of the scenario study is to identify and evaluate the technical and economic efficiency of alternative scenarios for privatizing Cotontchad The study examines options for priva tization such as continued vertical integration separate pri vate ginneries and so on and assesses the risk posed by each In parallel with this study the PSIA assesses the impacts of the reforms on the welfare of farmers in the sector The ex ante quali tative component identifies relevant stakeholders including farm ers Cotontchad employees microentrepreneurs barriers faced by stakeholders under different reform scenarios the strength of cur rent institutional structures and the social risks of reform The quantitative and qualitative analyses look at the compen sation and enhancement measures necessary for reform suc cess and highlight farmer capacity access to credit
112. g among stakeholders can be just as important as the analysis Numerous studies have concluded that policy is most likely to be effective where there is broad ownership and policy debate among stakeholders is useful in developing consensus and building ownership One way to approach this is to disseminate information about the proposed reform and the results of the PSIA to the public especially to key stakeholders and then to organize a policy forum where stakeholders can dis cuss the tradeoffs involved Such a policy forum can produce invaluable information Insights gained through dialogue may be technical for example aca demic research or social for example the perspec tives and concerns of groups that typically do not participate in the formal policy debate process These insights can either validate or revise previous hypothe ses or analysis including critical assumptions Com municating policy impacts to stakeholders can also enhance their understanding of the logic behind a 35 given policy reform Such initiatives are particularly relevant in the context of widespread uncertainty sus picion and ignorance or in countries where poor and marginalized groups have no political voice Establishing systems and forums for policy debate is not only a valuable part of ex ante PSIA but is also important for its contribution to monitoring and social accountability during implementation of a reform and ex post as discussed abo
113. g un responses The basic theory of production is based on profit maximization with respect to output and input quantities Maximization techniques will yield a set of input demand and output supply functions that are then used to solve for quantities The impact of price changes on producers can be estimated for a single commodity or for a system of commodities in the case where the firms households produce multiple outputs It is also important to distinguish between short run and long run outcomes It is usually assumed that certain productive factors are fixed in the short run In agriculture for instance the amount of land and the level of technology do not change within a cropping cycle Labor too may be relatively slow to adjust For this reason it can be argued that the supply elasticity of agriculture is close to zero in the short run In the medium and long term fixed investments in productive technology come on line and supply can increase Requirements Data information In the case of producing households this requires householc level production data For firm level analysis firm survey data is needed Between 1 and 3 months if the data is available Skills Advance econometric techniques Supporting software Advanced econometric software such as SAS STATA etc Financial cost Limitations References and applications US 10 000 to USS30 000 Despite its different focus on short run and long run effects supply analys
114. ganizations Organizations in turn act in response to incentives created by the set of public private and civil society institutions whose rules mediate economic activity in the society Ruther ford 1994 These institutions include markets legal systems and the formal rules and informal behavior of implementing agencies including government Policy reform can affect institutions by changing organiza tional structures roles and responsibilities or rules and incentives as well as by altering market incen tives for example by removing price distortions or encouraging competition These reforms in turn affect the behavior of economic agents and interest groups and thereby economic outcomes including distribu tion and poverty reduction Many reforms depend for their implementation on institutional change This may involve creating new organizations or changing rules and incentives to achieve new objectives through existing organizations for example improved cooperation among govern ment agencies Creation or modification of organiza tional structures does not in itself guarantee the institutional changes necessary for the reform to suc ceed Changes in formal rules of the game often must be accompanied by changes in incentives in order to alter the behavior of agents Moreover it is often assumed that institutions including markets func tion smoothly and according to formal rules In prac tice high transaction costs
115. ge of the program and its setting is crucial Supporting software SOCAT Toolkit including interactive CD ROM is available Financial cost Depends on sample size and local wage and transport costs for field team Typical range for standalone SOCAT exercise would be USS50 000 to US 200 000 Costs can be substantially lower if used in conjunction with other data collection instruments Limitations Collects social capital data only at micro and meso levels For analysis of links between social capital and poverty combination with other survey is necessary References and applications e Grootaert and van Bastelaer 2002 e Additional information at http poverty worldbank org library topic php topic 4294 or at http iris umd edu adass proj soccap asp 54 Annex Economic and Social Tools for Poverty and Social Impact Analysis Tool Name Demand Analysis Consumer Assessment What is it The adaptation and expansion of traditional demand analysis to a broader qualitative and quantitative research process that looks at consumer or client demand for different types of services willingness to pay ability to pay preferences probes qualitative and other factors driving demand and potential substitutes obtains feedback on likely responses to potential changes tariffs or in service management such as privatization and explores ways in which to more effectively help the poor in terms of price and access based on local institutional
116. gh an explicit treatment of the financial system Third the model emphasizes the negative effect of external debt on of debt overhang Finally IMMPA accounts explicitly for the channels through economy Requirements Data information The greatest drawback of any fully specified CGE model is the time and data The process can take more than a year and rarely less than a few months private investment and therefore incorporates the possibility which various types of public investment outlays affect the required to construct it The model must be constructed from combined national accounts and survey data These are first compiled into a SAM which is then used as the foundation of the model IMMPA for example consists of 131 equations more than 30 exogenous variables and more than 200 endogenous variables Skills Experienced modelers with substantial prior exposure to Computable General Equilibrium Models are required Supporting software Eviews Excel USS75 000 to develop the IMMPA general equilibrium model Limitations CGE simulations depend to a large extent on the assumptions made in the model especially those that are required to close the model They are also data intensive and difficult to master something that could limit its usefulness under tight deadlines or capacity constraints References and applications e Agenor Izquierdo Fofack 2003 73 A User s Guide to Poverty and Social Impact Analysis Tool
117. gnificant Finally the choice of indicators can be informed by the existing set of indicators already monitored in the country in the context of the existing national poverty monitoring system or of regular government reporting to its stakeholders Building on existing systems reduces costs and limits duplications In addition indicators should satisfy a simple set of basic technical criteria true for all monitoring indica tors The ideal indicator will be EH Highly and unambiguously correlated with the objective variable of interest for instance test scores accurately reflect literacy E Sensitive to changes in the outcome or impact of interest Timely in that it can be collected in time to feed back into policy adjustment Relatively insensitive to other unrelated changes in the sector Relatively difficult to manipulate either by target groups or by policymakers E Not too costly to monitor 32 Effective monitoring facilitates good evaluation Understanding gained during the process of ex ante analysis in the course of PSIA and the identification of indicators helps in designing a good evaluation Process evaluation is important to understanding the hows and whys of policy reform Process indica tors are usually timely and not costly to collect Trac ing transmission mechanisms prior to the reform helps in thinking through implicit assumptions and highlights where potential constraints or risks may ari
118. hat for this to be possible approaches and methods will need to be adapted to fit the context and circumstances at hand and the limits to what is possible through ex ante analy sis will need to be addressed through continual moni toring analysis and reevaluation of policy over time This User s Guide has laid out 10 key elements to be considered by analysts and policymakers in 45 approaching PSIA Furthermore it has given a brief overview of some of the tools and methods that might be used in undertaking analysis of poverty and social concerns associated with policy change In so doing it has attempted to draw upon tools used by economists and social scientists and to present them in an integrated fashion Applying these tools to the operational context using this multidiscipli nary approach will lead to a richer more integrated understanding of policy impacts Moreover because of the marked differences between individual cases in terms of reform issues transmission channels and available data the choice of tools and methods used for PSIA will vary substantially by type of reform Annex Economic and Social Tools for Poverty and Social Impact Analysis This annex presents information on a series of tools and methods available for the analysis of poverty and social impacts of reforms This annex presents summary information on the tools drawing in par ticular on the Toolkit for Evaluating the Poverty and Distributional
119. he analysis of public expenditure management reforms service delivery reforms reforms to improve the efficiency of public expenditure as well as cross cutting public sector reforms What does it tell you A QSDS examines the efficiency of public spending and incentives and various dimensions of services delivery in provider organizations especially at the level of the service facility It quantifies the factors affecting quality of service such as incentives accountability mechanisms and the relationship between agents and principals Complementary tools A QSDS can be cross validated by a Public Expenditure Tracking Survey PETS which tracks the flow of resources from the central level to the level of service provider A QSDS analysis can also be linked upstream to public administration surveys and downstream to household surveys 0505 analysis can also be linked upstream to public administration surveys and downstream to household surveys e Linking a 0505 with household surveys would allow to include the demand for services or outcomes Benefit incidence analysis can be enhanced by using filter coefficients obtained from PETS QSDS to deflate cost per user to take into account leakage or capture of funds Institutional and stakeholder analysis can help define the parameters of PETS surveys e Citizen Report Cards can serve as a monitoring tools to verify the perceived effectiveness of public services for stakeholders Key Elements Th
120. he main con straints and operational principles for PSIA It is intended for practitioners undertaking PSIA in developing coun tries It does not set out operational policy or guidance to World Bank staff This User s Guide highlights some of the key tools that practitioners may find useful to analyze poverty and social impacts of policy reforms but does not aim to be comprehensive in its coverage As a complement to this User s Guide the World Bank has also developed guidance on selected tools vii and techniques through the Toolkit for Evaluating the Poverty and Distributional Impact of Economic Policies and the Social Analysis Sourcebook available on the World Bank website Additional guidance on economic and social analysis tools and methods is under preparation The Bank is also developing guidance on issues challenges and tools that may be of particular relevance in analyzing specific reforms summary matrix and reform specific notes will be posted on an ongoing basis on the PSIA website More generally the PSIA website presents resources on economic and social tools and methods for PSIA country experience in undertaking PSIA for specific reforms training events and material and other resources http www worldbank org psia Sugges comments are most welcome tions and psia worldbank org 1 Introduction Poverty and social impact analysis PSIA refers to the analysis of the distributional impact of polic
121. hod In poor countries capacity to analyze policy is typically limited among government agencies aca demia and civil society organizations So while rigor ous analysis might call for complex tools and methods local capacity may be suited to simpler approaches Over time however the capacity of in country devel opment agencies also requires strengthening in terms of both core analytical expertise and resources allo cated to PSIA Time constraints While the analyst may face difficult data and analytical challenges the policymaker is often under pressure to make fast policy decisions and will not want to wait for a rigorous PSIA to be completed In such circum stances such as in an economic crisis arguments for postponing policy decisions until there is adequate analysis debate and consensus will need to be weighed against the case for acting expediently In other cases policymakers may want to time their action for a particular moment in tune with the policy or political cycle Principles The challenges outlined above have often deterred pol icy analysts and decisionmakers from undertaking ex ante assessments of the poverty and social impacts of reform While some have argued that no analysis is bet ter than bad analysis it is important to consider what analysis is feasible even where data and capacity are limited The question then is how to approach poverty and social impact analysis in the face of the vario
122. ic institutions and behavior Second the extent and nature of reform impacts may differ over time For instance the impact of tax reform might be limited to a single sector in the short run but might expand to other sectors over time as agents adjust to the new tax rates Or a policy might result in short term losses and gains among different groups even when long term effects are expected to be positive Capturing these inter temporal dimen sions within distributional analysis is a complex undertaking Third rigorous analysis requires a comparison to be made between outcomes with and without reform the status quo itself being an alternative policy choice or counterfactual This is very hard to do ex ante when the analyst has to simulate what would happen without a reform It is also challenging in ex post analysis as many factors will have changed during reform implementation masking reform specific effects Finally addressing these analytical challenges requires the right economic and social tools Many useful tools exist and this User s Guide highlights some of the main ones But more work is needed to develop analytical methods that are better equipped to meet the gaps and to develop more rigorous indicative survey tools and analysis where adequate information is otherwise lacking A User s Guide to Poverty and Social Impact Analysis Capacity constraints Capacity constraints affect the choice of analytical met
123. ical Inference for Stochastic Dominance and for the Measure ment of Poverty and Inequality Econometrica 68 6 1435 64 Das J S Dercon J Habyarimana and P Krishnan 2002 Rules vs Discretion Public and Private Funding in Zambian Basic Education Part I Funding Equity World Bank Washington D C Datt G Ramadas D van der Mensbrugghe Walker and Q Wodon 2003 Predicting the effect of aggregate growth on poverty In F Bour guignon and L A Pereira da Silva eds Evaluating the Poverty and Distributional Impact of Economic Policies Techniques and Tools Washington D C World Bank Datt G and T Walker 2002 PovStat 2 12 A Poverty Projection Toolkit Users Manual World Bank Washington D C Processed Davidson R and J Duclos 2000 Statistical Inference for Stochastic Dominance and for the Measure ment of Poverty and Inequality Econometrica 68 6 1435 64 Deaton A and J Muellbauer 1986 Economics and Consumer Behavior New York Cambridge Uni versity Press 83 Decaluw B J C Dumont and L Savard 1999 Measuring Poverty and Inequality in a Com putable General Equilibrium Model Working Paper 9920 Universit Laval Centre de Recherche en Economie et Finance Appliqu es Montreal Decaluw B A Patry L Savard and E Thorbecke 1999 Poverty Analysis within a General Equilib rium Framework Working Paper 9909 Univer sit Lava
124. ich include elasticities on both the demand and supply sides will allow for indi rect impacts that occur when changes in one market affect other markets but they will only capture these changes to the extent that they include the relevant markets This is their biggest drawback relative to general equilibrium approaches For this reason par tial equilibrium analysis is better suited to analyzing sectoral reforms such as agricultural marketing and pricing and utility pricing reforms that are less likely to have large impacts on macro aggregates Partial equilibrium techniques fall within the high medium category of table 2 in that they at least require house hold survey data Tools for partial equilibrium analysis are multimarket models and reduced form techniques Box 7 Impact of Utility Pricing on the Poor in Armenia Demand Analysis A recent study Lampietti and others 2001 uses multivariate welfare analysis to assess the poverty impact of raising tariffs in the electricity and water sectors in Armenia It looks ex post at the impact of higher electricity prices and an accompany ing expansion in social safety net provision and ex ante at increased water tariffs The study estimates a demand function to examine consumers responses to changes in prices includ ing through substitution of other forms of fuel for electricity Possible supply side adjustments to the cost and structure of production are not taken int
125. icients obtained from PETS QSDS to deflate cost per user to take into account leakage or capture of funds Institutional and stakeholder analysis can help define the parameters of PETS surveys Citizen Report Cards can serve as a monitoring tool to verify the perceived effectiveness of public services for stakeholders Key Elements A PETS is typically implemented with the following steps 1 Consultations with key stakeholders including government agencies donors and civil society organizations are carried out to define the objectives of the survey identify the key issues determine the structure of resource flows and the institutional setup review data availability outline hypotheses and chose the appropriate survey tool 2 Survey instruments are then constructed and implemented The PETS deals with the fact that agents may have strong incentives to misreport data by using multi angular data collection strategy and carefully considering which sources and respondents have incentives to misreport and identifying sources that tare the least contaminated by these incentives Requirements Data information In addition to the PETS itself uses public accounts sample data preferably panel data on government spending and information on outputs of service providers at ministerial regional local and service provider levels Field testing of the survey is key to ensuring high quality results Time Consultations design and pre testing tak
126. ience However there are some useful criteria for predicting the propensity of a group to lobby the govern ment The logic of collective action suggests that interests will exert more pressure on policymakers or elected leaders when a the number of group members is small b the benefits or rents that would accrue to each member from the desired pol icy are very substantial and easy to perceive and c members have the means especially the financial resources and net works to protect their interests The behavioral premise is sim ple people fight harder when they have a large personal stake In contrast the more diffused interests of unorganized groups such as consumers are typically less influential Many develop ment interventions are designed to reduce or eliminate rents among a small group of privileged interests and increase the overall welfare of the public These are precisely the policies that are most likely to be fought making either tough political decisions or a concerted communications strategy paramount However if the impact is sufficiently large public interest groups may emerge to advocate the interests of the less power ful or violent street protests may break out For example the Consumers Rights Commission of Pakistan was formed to advocate consumer interests on tariff reform and this lobby ing is substituting for more violent forms of urban protest example some countries pursue bank deregulation and pri
127. ific information needed to assess reform impacts Requirements Data information 1 The degree of diversity of the groups likely to be affected to influence a reform from the stakeholder analysis based in part on detailed country level contextual information cultural ethnic regulatory and institutional issues relevant to the reform or affected groups typically from existing studies press reports and key informant interviews This determines the sampling strategy for fieldwork 2 Direct data on stakeholder perspectives typically from field research 3 Quantitative data typically on income expenditures behavioral responses coping mechanisms or other variables relevant to the reform to compare with results from qualitative data Typically SIA uses purposes surveys to obtain quantitative information relevant to a particular reform expected to have disproportionate impacts on a specific region or known population groups The sample will then be representative of that region but not nationally representative This is particularly useful for situations when national household data do not exist or do not contain the specific information needed Time S As can vary greatly in length depending on the scale of research and the number of sample areas which will be in part a function of the diversity or complexity of the groups involved and the size of the population affected As this is typically combined with stakeholder analysis a minima
128. ifying the reform or introducing com plementary measures Risk analysis can therefore help governments to anticipate and avoid major unintended conse quences The analysis should consider risks to the reform program as well as risks emanating from its impacts Part of the challenge is to identify explicitly in the analysis the assumptions that must be valid for a policy to have its intended impact This is a difficult task and underscores the need to make operating assumptions explicit in monitoring the evolution of the policy reform and its evolving impacts see the sec tion on monitoring and evaluation below There are four main types of risk in PSIA Institutional risks These include risks that assump tions made regarding institutional performance were incorrect This could be due for example to market or institutional failures in existence where none was assumed such as asymmetric informa tion or missing markets or to the fact that key organizations involved perform in unexpected ways Political economy risks This includes the risk that powerful interest groups may undermine reform objectives by blocking implementation capturing benefits or reversing reform actions Exogenous risks These include risk of shocks to the external environment such as a natural disaster or regional economic crisis that might have a bearing on the vulnerability of the poor Other country risks These include the threat of an increase i
129. ikely to be able to easily voice their opposition to or support for a policy even if their support may be crucial to reform success While secondary resources such as social science research news media reports and advocacy literature can help identify broad political economy issues and social tensions key informant interviews may be needed to analyze the interests of stakeholders whose support is critical to reform implementation includ ing those within government agencies or interest groups able to influence reform Analyzing interests of stakeholders who are less organized may involve spe cial surveys or focus groups Stakeholder analysis contributes to an assessment of the extent of country ownership of a particular pol icy in order to predict how different interests are likely to influence government in general and the policy process in particular Ownership assessment reveals sources of potential resistance to policy change and provides a rough estimate of the location and extent of pressure that government will face in adopting a pol icy reform This helps to assess government s willing ness to undertake and stick with the reform over time Weak ownership can lead governments to abandon reforms midterm or produce distorted policies For A User s Guide to Poverty and Social Impact Analysis Box 3 Interest Groups and Collective Action Estimating the influence of a particular group over decisions is as much art as sc
130. ineffective enforcement or lack of competition or accountability can lead to sub optimal performance of government market or civil institutions In some cases institutional change accompanying policy reform is not internalized by key implementing agents and the behavior of these agents can thus lead to perverse policy outcomes Understanding the impact of a policy reform requires an appreciation of the country s organiza tional structures and the institutional rules governing them PSIA therefore depends upon careful organiza tional and institutional analysis of the formal and informal rules the behaviors of key stakeholders who can affect reform outcomes and the underlying dynamics among them This allows policymakers to determine whether and how the existing rules and informal practices will affect real costs and quality of goods and services for the poor and other stakeholders in the context of a specific policy change Impact when When do impacts materialize A major challenge to PSIA is understanding that poli cies can affect different groups in very different ways A Conceptual Framework for Understanding Poverty and Social Impacts This is in large part because some of the economic and behavioral responses to a policy change can take time What is fixed in the short term may be variable in the longer term Understanding and explaining how short run losses may result in long run gains for given groups or how immediate ga
131. ines Municipal governments did not have the revenue base to sup port the schools and other services formerly provided by the mines and were hard hit by the closures An Interagency Coal Commission with representatives from municipalities ministries and government agencies helped discuss and plan reforms The Ministry of the Treasury was identified as a transparent channel through which social pro tection funds could be transferred directly to the workers rather than moving funds through the Ministry of Energy and regional governments The analysis of stakeholder interests was used to create a system of checks balances and independ ent assessments to ensure that all actors followed the rules laid out in mine closure plans A distinction should be made between stakeholders who share multiple characteristics that enable them to coalesce as a cohesive group for example labor unions and those that are analytical categories rather than organic groups for example the fourth income quintile or the poor Stakeholder analysis goes beyond simply identifying groups to analyzing the stated or unstated interests of actors in relation to a policy as well as the nature and degree of their organ ization or ability to mobilize behind a common pur pose see box 3 To the extent that groups of the second type are atomized or unorganized such as landless peasants non unionized workers small busi nesses consumers they are less l
132. ing institutional reforms such as decentralization of public services utility reforms land reforms social safety net reforms Useful for policy design and implementation Understanding of political economy and governance issues through analysis of the institutions that are involved in the design and implementation of reforms and identification of dynamic processes and potential constraints in this respect Steps include i Identification of government agencies non government organizations and firms that carry out the policy reform ii Identification of their characteristics and dynamic relationships Output Understanding of the formal rules of the game via static mapping i e functional organigram and the informal rules that govern actual behavior in decision making processes via process mapping of crucial resource flows e g money information Used in conjunction with Stakeholder Analysis SIA and demand analysis customer assessments e PETS Benefit Incidence Analysis Three types of information i background information on key stakeholders and organizational structures of relevant agencies and ii in depth interviews or focus groups with key informants from government agencies non government organizations and firms iii triangulation and cross referencing with other information to validate background information and key informant interviews Secondary material including PERs DPRs IGRs social political sci
133. ini mize certain impacts Matching or triangulating results is particularly important to validate such results Elements of Good Poverty and Social Impact Analysis Second after identifying the availability of relevant primary data ascertaining the existence of analysis and secondary data on the policy issue at hand is an obvi ous next step In many instances burning policy issues have been the subject of analysis and debate in the past it is useful to draw on whatever analysis already exists and whatever public debate has already occurred Pro ject and program documentation as well as data and analyses from other development agencies are invalu able For sectoral reforms information from existing sector analysis including administrative household survey and qualitative data can strengthen PSIA Aca demic research and theses can also yield in depth insights not normally available in official reports Third it is useful to ascertain and build the capac ity of local agencies involved in data collection and analysis such as national statistical offices ministries universities research organizations consulting firms NGOs and so forth to collect and analyze data Coping with PSIA data limitations In many countries there are severe data limitations to conducting poverty and social impact analysis Some or many of the desired data outlined above may simply not be available In this case policymakers and analysts will need
134. ins may lead to eventual losses is one of the challenges inherent to PSIA For instance trade liberalization may cause employment losses in the nontradable sector in the short term However increased efficiency may later result in eco nomic growth and some of the laid off workers may find jobs in the expanding tradable sector In addition some consumers may switch to cheaper nontraded goods thereby increasing consumption of these The combination of all these effects will determine the net impact on different groups over the long term To take another example a policy that pursues or results in an overvalued exchange rate will benefit some population groups in the short run consumers and importers But if the overvaluation proves unsustain able in the long run and devaluation occurs those same groups will be negatively impacted The net effect for these groups of having an initially overvalued exchange rate a gain followed by a devaluation a loss will clearly depend on the magnitude of the deviations The international evidence suggests that sustained overval uations may lead to abrupt currency collapses as in Mexico in 1994 East Asia in 1997 Brazil in 1999 and Argentina in 2002 that are likely to generate net long run losses The issue becomes even more complex if one considers the impact on exporters Unlike importers exporters are harmed by an overvalued exchange rate and are likely to benefit from devalua tion Eventua
135. ion Element 6 Analyzing impacts Element 7 Contemplating enhancement and compensation measures Element 8 Assessing risks Element 9 Monitoring and evaluating impacts Element 10 Fostering policy debate and feeding back into policy choice Challenges and Operational Principles Constraints Principles 5 Possible Summary Matrix 6 Conclusions lt lt 100 F amp F FW CO Q NO eRe ee mre ON amp gt C9 oo 9 4 A wm N A User s Guide to Poverty and Social Impact Analysis Annex Economic and Social Tools for Poverty and Social Impact Analysis Bibliography Boxes 1 Asking the Right Questions 2 Analyzing the Impact of Mine Closure in Russia Stakeholder Analysis 3 Interest Groups and Collective Action 4 Decentralization in Indonesia Institutional Analysis and Social Accountability 5 Illustrative Categorization of Selected Reforms according to Scale of Indirect Impacts 6 Impact of Public Expenditures in Indonesia Average versus Marginal Benefit Incidence 7 Impact of Utility Pricing on the Poor in Armenia Demand Analysis 8 Impact of Liberalization in Mexico Supply Side Analysis 9 Impact of Agricultural Subsidies and Tariffs in Turkey Multimarket Modeling 10 Net Fiscal Incidence in the Philippines 11 Impact of the Indonesian Financial Crisis on the Poor Partial Equilibrium Modeling and CGE Modeling with Micro simulation 12 Labor Downsizing and the Desig
136. ion of the pace sequencing or institutional arrangements of the reform or the introduction or strengthening of miti gation measures Finally ex post PSIA assesses the actual distributional impacts of a completed reform which helps analysts understand the likely impacts of future reforms PSIA is not new and lessons can be drawn from past experiences Effective PSIA is undertaken early enough to inform the design of reforms clearly sets out the assumptions behind the analysis addresses the risks to policy implementation considers all stake holders in the analysis and promotes transparency about expected impacts to strengthen local ownership Analysts have typically faced constraints in terms of data analysis capacity and time Some of these con straints can be addressed by building on earlier expe rience and by employing flexibility in the choice of tools and methods The User s Guide is organized as follows Chapter 2 introduces the main concepts underlying PSIA and establishes the conceptual framework Chapter 3 then presents an approach to PSIA by reviewing 10 basic elements underlying the sound analysis of the poverty and social impacts of reforms Chapter 4 considers some of the major constraints often identified by PSIA practitioners especially in developing countries and provides basic operational principles for PSIA Chap ter 5 proposes a summary matrix that can be a useful tool to capture and integrate the various el
137. ional Management Consultants 2000 Second Annual Report of the Kecamatan Development Project Jakarta Processed North D 1990 Institutions Institutional Change and Economic Performance New York Cambridge University Press Norton A B Bird K Brock M Kakande and C Turk 2001 A Rough Guide to PPAs Participatory Poverty Assessment An Introduction to Theory and Practice London ODI Publications Orbeta A and M Alba 1998 Simulating the Impact of Macroeconomic Policy Changes on the Nutri tional Status of Households Micro Impacts of Macroeconomic and Adjustment Policies MIMAP Research Paper 21 International Development Research Centre Ottawa Papanek G 1994 The Social Impact of Program Lend ing Manila Asian Development Bank Pereira da Silva L A B Essama Nssah and I Samak 2002 A Poverty Analysis Macroeconomic Simu lator PAMS Linking household surveys with macro models Working Paper 2888 World Bank Washington D C Pereira da Silva L A B Essama Nssah and I Samak 2003 Linking Aggregate Macro Consistency Mod els to Household Surveys A Poverty Analysis Macro economoic Simulator PAMS In Bourguignon and L A Pereira da Silva eds Evaluating the Poverty and Distributional Impact of Economic Policies Tech niques and Tools Washington D C World Bank Powell M and J I Round 2000 Structure and Link age in the Economy of Ghana A SAM Approach
138. ions and Policy Baltimore Johns Hopkins University Press for the World Bank Lopez R J Nash and J Stanton 1995 Adjustment and Poverty in Mexican Agriculture How Farmers Wealth Affects Supply Response Policy Research Working Paper 1494 World Bank Washington D C Lundberg M M Over and P Mujinja 2000 Sources of Financial Assistance for Households Suffering an Adult Death in Kagera Policy Research Work ing Paper 2508 World Bank Washington D C Maack J 2001 Scenario Analysis A Tool for Task Managers In R Krueger M Casey J Donner S Kirsch and J Maack Social Analysis Selected Tools and Techniques Social Development Papers 36 World Bank Social Development Department Washington D C Minot N and F Goletti 1998 Export Liberalization and Household Welfare The Case of Rice in Viet nam American Journal of Agricultural Economics 80 3 738 749 Mistiaen J A 2002 Small Area Estimates of Welfare Impacts The Case of Food Price Changes in Madagascar World Bank Washington D C Processed Mistiaen J A Ozler B Razafimanantena T and Razafindravonona J 2002 Putting Welfare on the Map in Madagascar World Bank Washington D C Processed Narayan D and P Petesch 2002 An Empowering Approach to Poverty Reduction In Voices of the Bibliography Poor From Many Lands New York Oxford Uni versity Press for the World Bank Nat
139. ions of policy changes Tools linking microeconomic distribution or behavior to macroeco nomic frameworks or models Under each class of meth ods the discussion presents an overview of specific tools referred to in hold text that are discussed in greater detail in the annex including their data require ments and particular advantages and shortcomings Social analysis The first approach consists of several techniques of social analysis that combine understanding of direct 20 impacts with behavioral analysis These tools analyze how people are likely to be affected by reform how this impact will differ among groups based on gender or ethnicity for example what coping mechanisms people have to deal with changes effected by reform and who is most likely to be vulnerable to a particular reform In addition to the analysis of direct impacts social analysis typically also includes an evaluation of how different people are likely to respond to a reform behavioral response and some of the institutional constraints the reform may face during implementa tion In addition to demand and supply analyses which are multidisciplinary tools typically carried out using a combination of qualitative and quantitative techniques presented below under behavioral analy sis three broad classes of methods fall within the repertoire of social analysis for policy reform social impact assessment participatory poverty assessments and the
140. ique Lesotho Angola and Zambia Supply analysis is most A User s Guide to Poverty and Social Impact Analysis suited to analyzing agricultural reforms that affect the poor in their role as producers and has been used to examine the impact of agricultural liberalization on poor farmers in Mexico box 8 Supply and demand analyses are typically carried out using a combination of qualitative and quantitative techniques Household models are somewhat more complex in that they analyze impacts by taking account of house holds as both consumers and producers The models integrate producer consumer and worker decisions into a household problem to reflect the fact that many households especially in rural areas are simultane ously units of production and consumption They are particularly suited to addressing agricultural reforms but have been used in relation to large sets of reforms including taxation Partial equilibrium analysis Partial equilibrium analysis goes a step beyond behav ioral impact analysis in that it equates supply and demand in one or more markets so that prices clear at their equilibrium level Thus prices are now endoge nous Partial equilibrium analysis is distinguished from general equilibrium analysis discussed below in that it does not include all production and consump tion accounts in an economy and does not attempt to capture all markets and prices in an economy Partial equilibrium approaches wh
141. is An Application to the Pattern of British Demand Economic Journal 64 511 27 Strauss J 1984 Joint Determination of Food Con sumption and Production in Rural Sierra Leone Estimates of a Household Firm Model Journal of Development Economics 14 77 103 Subramanian S and A Deaton 1996 The Demand for Food and Calories Journal of Political Econ omy 104 133 62 89 Tarp F D Roland Holst and J Rand 2002 Trade and Income Growth in Vietnam Estimates from a New Social Accounting Matrix Economic Systems Research 14 2 157 184 Thorbecke E and Jung 1996 A Multiplier Decomposition Method to Analyze Poverty Alle viation Journal of Development Economics 48 2 279 300 Timmer C P W Falcon and S Pearson 1983 Food Policy Analysis Baltimore Johns Hopkins Univer sity Press Torero M and A Pasc Font 2001 The Social Impact of Privatization and the Regulation of Utilities in Peru Discussion Paper 2001 17 UNU WIDER Helsinki Tymons R T and Jacobs R A 1997 Multi level Process Mapping A tool for Cross Functional Quality Analysis Production and Inventory Man agement Journal 4th Quarter 71 75 van de Walle D 1992 The Distribution of the Bene fits from Social Services in Indonesia 1978 87 Policy Research Working Paper 871 World Bank Washington D C van de Walle D 1994 The Distribution of Subsidies through Public Health Ser
142. is is a static tool In addition at the firm level many decisions are based on expectations that are difficult to model e L pez et al 1995 on Mexico 63 A User s Guide to Poverty and Social Impact Analysis Name Household Models What is it Micro econometric models that integrate producer consumer and worker decisions into a household problem These models reflect the fact that many households especially in rural areas are simultaneously units of production and consumption What can it be used for In the context of farm households when markets are perfect the only link between production and consumption decisions is through the level of farm income from production If there are market imperfections policies that affect the prices of goods factors both produced used and consumed sold thus have complex implications for production and welfare These models have been used fo examine a wide range of policy reforms such as price and marketing changes market failures and taxation In addition separate models can be constructed for different groups to examine structural differences in the impact policies have on these different groups What does it tell you The models allow to estimate the response of households to changes in terms of their consumption production labor supply and more generally any allocation of resources within the household Complementary tools e When production labor exceeds consumption pro
143. is of impacts on income distribution could be complemented by social impact analysis and institutional analysis which look at variables that would affect household participation in growth Scenario analysis which helps policymakers assess the effects of major discontinuities on economic projections could complement CGE models operating on a long time horizon Key Elements 123PRSP can be viewed as a middle ground between consistency models such as RMSM X and more sophisticated approaches such us disaggregated computable general equilibrium models The former are simple to estimate and use but take the two most important determinants of poverty economic growth and relative prices as exogenous The latte are useful to capture the poverty impacts of policies but are too datc intensive and difficult to master One salient feature of 123PRSP is its modular approach by linking several existing models together it can make use of individual modules which already exist Further if for data or other reasons a particular module is not available the rest of the framework can be implemented without it Requirements Data information The 123PRSP model requires national accounts a social accounting matrix SAM and some basic distributional data or a household survey The model builds on an existing static aggregate model such as the IMF s Financial Programming Model containing a consistent set of national accounts which are linked with fiscal balance of p
144. istics such as household type household size ethnicity gender location occupation and so forth For modeling work stakeholder analysis can serve as an input into determining how best to disaggregate repre sentative household groups or subgroups Stakeholders in the second category organized groups such as unions business associations donors and civil society organizations may become sources of support or opposition to policies Analyzing such influential actors is essential to understand behavioral responses that condi tion impacts and the likelihood of reform success Box 2 illustrates the use of stakeholder analysis to address the impact of mine closures in Russia Box 1 Asking the Right Questions The analysis of a fiscal reform ideally includes an evaluation of the short term impact as well as the expected longer term impact and the assumptions underlying the realization of long term benefits But beyond the dynamic impact of the reform the analyst should also consider whether structural issues are affecting the country s fiscal performance In PSIA work in the Pakistan energy sector the initial focus was on an electricity tariff increase to cover costs that repre sented a significant and chronic fiscal drain Further problem analysis revealed that questions about the increased costs of power generation and non tariff charges and the imbalance between distribution and generation investments were equally importan
145. ive explicit consideration to such meas ures as alternative policy choices and complementary or compensatory policies intended to enhance the benefits to stakeholders especially poor people and minimize the losses they may experience as a result of reform This will strengthen the pro poor impact of policies and improve their acceptability and sustainability 41 Build national capacity Building national capacity is key to improving ana lytical rigor over time in tandem with strengthened country ownership Many low income countries have limited capacity and experience in areas of crit ical importance to PSIA These areas include data collection systems monitoring and evaluation sys tems the capacity to conduct analysis and to trans late data and analysis into policy and the institutional structures and mechanisms for debate on such policy issues in the public domain Building national capacity in these areas must be a funda mental crosscutting aspect of PSIA Development partners including the Bank have an important role in strengthening national capacity and in filling ana lytical gaps PSIA approaches that foster learning by doing should undergird development partners assistance to countries 5 Possible Summary Matrix Chapter 3 presented a series of elements for good PSIA Pulling these elements together in a coherent strategic and integrative fashion is what makes for good poverty and social impact analysis
146. l Centre de Recherche en Economie et Finance Appliqu es Montreal Dehn J R Reinikka and J Svensson 2003a Survey tools for Assessing Performance in Service Deliv In F Bourguignon and L A Pereira da Silva eds Evaluating the Poverty and Distributional Impact of Economic Policies Techniques and Tools Washington D C World Bank de Janvry A M Fafchamps and E Sadoulet 1991 Peasant Household Behaviour with Missing Markets Some Paradoxes Explained Economic Journal 101 1400 17 de Maio L Stewart and R van der Hoeven 1999 Computable General Equilibrium Models Adjustment and the Poor in Africa World Devel opment 27 453 75 Demery L 2003 Analyzing the Incidence of Public Spending In F Bourguignon and L A Pereira da Silva eds Evaluating the Poverty and Distribu tional Impact of Economic Policies Techniques and Tools Washington D C World Bank Demery L 2000 Benefit Incidence A Practitioner s Guide World Bank Africa Region Poverty and Social Development Group Washington D C Demery L S Chao R Bernier and K Mehra 1995 The Incidence of Social Spending in Ghana PSP Discussion Papers Series 82 Poverty and Social Policy Department World Bank Washington D C Demery L M Ferroni and C Grootaert eds 1993 Understanding the Social Effects of Policy Reform Washington D C World Bank Demombynes G C Elbers J O Lanjouw
147. l time for both exercises is approximately 3 man months Skills Often requires either a team with mixed skills in qualitative techniques and in quantitative data collection and analysis and preferably with someone with sector knowledge or two teams individuals working together The coordination and iterative analysis of both qualitative or participatory data collection methods and quantitative analysis is paramount Supporting software N A Financial cost Varies according on the depth and purpose of analysis A complete mixed methods SIA costs US 80 100 000 When national household survey data exist a supplementary SIA for a specific reform would cost an average of USS35 000 excluding supervision time May cost more where local capacity is low and needs to be supplemented by international consultants Limitations SIA is not the best instrument to use for broad based reforms where the transmission channels and groups affected are not well known References and applications Finterbusch Ingersoll and Llewellyn 1990 Goldman 2000 Becker 1997 World Bank 2002c http www worldbank org socialanalysissourcebook socialassess htm Cernea and Kudat 1997 on the application to sectoral policy reforms including tariff issues Other applications http Inweb 1 8 worldbank org ESSD essdext nsf 6 1 ByDocName CaseStudies 51 A User s Guide to Poverty and Social Impact Analysis Name What is it
148. labor particularly in sectors that employ the poor such as unskilled rural off farm and agricultural labor the welfare of low income households will be affected There may be direct transmissions through this channel in the case of certain policies for exam ple restructuring of a state enterprise may lead directly to retrenchment of workers In other cases transmission may be indirect For instance macro policies may stimulate faster growth leading in turn to increased employment among the poor an exchange rate depreciation or trade liberalization may result in contractions and layoffs in the nontradable sector Alternatively some policies will have different impacts on formal labor markets and informal labor markets A Conceptual Framework for Understanding Poverty and Social Impacts that employ many of the poor For example expendi ture increase reduction or switching may have differ ent impacts on formal sector employment and informal sector employment due to labor market seg mentation Ag nor and Aizenman 1999 Prices production consumption and wages Prices determine real household income Prices in the markets for goods and services differentially affect the real income of households to the extent that they con sume or produce these products How policy affects prices will have an important bearing on income and directly or indirectly on non income measures of wel fare For all households but especially for
149. lds from the 1993 SUSENAS survey together with detailed information on price changes over the 1997 98 crisis period to compute household specific cost of living changes It finds that the poorest urban households were hit hardest by the shock experiencing a 10 30 percent increase in the cost of living depending on the method used to calculate the change Rural households and wealthy urban households actually saw the cost of living fall These results suggest that the poor are just as integrated into the economy as other classes but have fewer opportunities to smooth consumption during a crisis However the methods used have at least three serious drawbacks First the consump tion parameters are fixed that is no substitution is permitted between more expensive and less expensive consumption items Second the results are exclusively nominal in that the welfare changes are due entirely to changes in the price of con sumption and do not account for any concomitant change in income Third this analysis cannot control for other exoge nous events such as the El Ni o drought and resulting wide spread forest fires Robillard Bourguignon and Robinson use a CGE model con nected to a micro simulation model The results are obtained in two steps First the CGE is run to derive a set of parameters for prices wages and labor demand These results are fed into a micro simulation model to estimate the effects on each of 10 000 househ
150. ll hold and its importance to policy The more likely it is that an important assumption will be invalid the greater will be the need to alter the policy If assumptions are considered important but more likely to be valid there may be a need for a con tingency plan A variety of tools are available for risk assessment In particular social risk assessment com pares data and indicators from the World Develop ment Indicators with external agencies to estimate the likelihood and importance of risks to the reform pro gram see annex Sensitivity analysis is usually applied in the context of quantitative economic models and entails varying the magnitude of certain key parameters to judge their sensitivity to the model s outcomes Sensitivity analy sis is especially important for parameters that are par ticularly uncertain as may be the case where these are based on estimates from other countries or where risks are known for example droughts in the Sahel One practical limitation of the approach is that it is more often used to test sensitivity within a given model than to assess alternate scenarios using different models which is not always feasible Scenario analysis is a tool for helping decisionmak ers consider how policy impacts might vary in differ ent plausible scenarios Scenarios are based on a range of social economic political or technological out comes that drive change in the country In this way unexpected ri
151. ll you Existence of institutions and networks affected by and or involved in reform implementation Which norms and values lead to policy adoption or resistance The distribution of social assets and their role in income generation and risk management What are the impacts of reforms on households with low social assets Which adaptations in policy formulation and or which mitigation measures are advisable Complementary tools Stakeholder analysis institutional analysis social impact analysis SIA beneficiary assessments BA Key Elements Integrated application and analysis of quantitative and qualitative information surveys key informant interviews focus groups obtained at the level of households communities and organizations Analysis builds on the understanding of solidarity trust and cooperation and conflict resolution cognitive social capital as well as organizations and their membership structural social capital Requirements Data information Use as standalone tool for social capital analysis or use in conjunction with other surveys e g LSMS income expenditure surveys for analysis of links between poverty and social capital Modules for integration in other surveys are available so are sector specific questionnaires Typical application requires 3 4 months Skills Sociological or anthropological training are helpful in particular a sound understanding of formal and informal institutions and networks Good knowled
152. lly it will be necessary to consider both the net effects across groups for a given time horizon and the net effects over time for a given group Impact if What are the risks of an unexpected outcome The design of reforms is based on underlying assump tions about the context and the behavioral response of key institutional and human actors If these assump tions are not realized reform outcomes are at risk A crucial element of PSIA therefore is understanding and publicly articulating ex ante the key assump tions for the success of the policy reform Assump tions must be made explicit as to how economic agents and institutions are expected to act for example the sign and magnitude of an elasticity and how policy impacts would be transmitted to households A second set of assumptions concerns conditions exogenous to the policy that need to be in place for the reform to achieve its intended impacts In addition to questions of direct relevance to a reform risks from underlying country conditions for example ethnic tensions need to be factored into the risk assessment Clearly identifying and articulating critical assumptions will serve to sharpen the rigor of the analysis increase its transparency and facilitate its validation and if neces sary correction by knowledgeable stakeholders The analysis will also permit the monitoring of and hence improve the understanding of transmission channels and impacts with possibl
153. lt with issues related to the inclusion of investment and administrative costs and the treatment of cost recovery Estimations are sometimes made at a regional level to account for cost differences 2 Identification of the users on the basis of household surveys 3 Aggregation of users into groups of interest commonly defined by income levels region urban rural location poor non poor occupation ethnicity etc 4 Accounting for household spending in case of out of pocket expenditures to access the benefit In case of financial transfers the income groups can be defined pre or posHransfers which will yield different results Requirements Data information 1 individual or household level data from household surveys on welfare and on the use of service and receipt of public spending and 2 information on public expenditure to estimate the value of the benefits For marginal BIA panel data is ideal although methods exist for cross sectional data Time Analyzing household survey data can be time consuming depending on how clean the data are and how well managed the data entry process was BIA can take between 4 to 8 weeks depending on the condition of the household survey data and the accessibility of the unit cost of providing those services usually obtained from government data If a survey has to be undertaken first then the timeframe extends significantly to between 1 to 2 years Skills Good data handling skills
154. ltivariate analysis to test hypotheses and determine relationships see table 1 Aspect Close ended Data collection instrument Structured formal predesigned questionnaires such as living standards measurement study social impact assess ment survey willingness to pay survey client satisfaction survey citizen report card Open ended e In depth open ended or semi structured interviews such as key informant interviews and case histories focus group interviews community interviews mini surveys Ethnographic observation Systematic or directed consultation such as beneficiary assessment Participatory data collection methods such as participatory action research participatory rural appraisal participatory public expenditure review Focus group discussion Community and institutional surveys Written documents for example program records process documentation media reports Participatory visual exercises Analytic method Predominantly statistical analysis Deductive reasoning Advantages e Findings can be generalized Can quantitatively estimate size and distribution of impacts Explains statistical correlations Disadvantages Results not available for long period of time Limited types of information can be gathered Can sometimes be expensive and time consuming Inductive reasoning Interactive analytical process research questions for
155. lude information on education water health public services agricultural production etc depending on the reform of interest Complementary tools A poverty map can be merged with other GIS Geographic Information Systems containing information on a variety of public actions Social Impact Analysis and Participatory Poverty Assessments can help explain the geographic trends revealed in a poverty map Key Elements The method uses a household survey and a census It imputes information on poverty and inequality in the census using estimates from the household survey through the construction of consumption based welfare indicators for small geographic areas In order to do so 1 the variables common to the survey and the census are identified 2 the survey is used fo estimate a prediction model relating consumption to the variables which the two data sets have in common 3 the parameter estimates can be applied to the census data to derive poverty statistics for each household in the census and 4 poverty and inequality estimates can be calculated for small geographic areas and transposed into a GIS system Requirements Data information A household survey and a population census ideally from the same year If different years are used the compatibility of the two sources showed be checked by comparing the estimates with basic poverty inequality statistics in the sample data In this case the welfare estimates refer to the year of the cens
156. lysis quantitative or qualitative Tradition ally analytical approaches have been either quantita tive in nature and based on numeric data collected using close ended data collection methods or qualita tive in nature and based largely on non numeric data collected using open ended data collection methods Mixed methods are increasingly being employed and are extremely useful for PSIA Table 1 Data Collection Methods The approach based on quantitative analysis numeric data and close ended data collection offers certain advantages Analyzing the poverty and distributional impacts of policy on welfare indicators will require link ing data at the macro or sectoral level generally corre sponding to the level of policy intervention to disaggregated household level data that capture the wel fare measure of interest usually an income expenditure aggregate but possibly other welfare measures such as lit eracy or infant mortality and other behavioral variables such as access Close ended surveys have generally been used to collect such data For analysis to be generalizable data should be derived from a random sample When the reform is expected to impact only a discrete group for example laid off mine workers or a geographic subre gion purposive sampling of just that group or subregion may be more appropriate and economical than a nation ally representative survey Numeric data can be used to undertake statistical and mu
157. model is linked to a CGE through wages and the sec toral allocation of employment and prices It is con strained to be consistent with the output of the CGE Element 7 Contemplating enhancement and compensation measures Poverty and social impact analysis is undertaken to maximize welfare gains in particular for the poor by influencing the design of a policy reform To the extent that there are losers from the reform PSIA can inform policy design leading to choices that minimize the number of losers or the extent of adverse impacts Bet 27 ter understanding of adverse impacts can also inform the design of appropriate compensation mechanisms if needed This component of the PSIA is informed by the analysis and tools laid out in the previous section This analytical work can provide potential options to limit the negative impacts on the welfare of the poor or other groups In addition finding the appropriate solu tion or set of solutions also often necessitates substan tial discussion and debate by key stakeholders in particular consultation with those affected to test whether the proposed compensation measures can fea sibly be implemented In short if the ex ante poverty and social impact analysis shows that a proposed reform will have short term adverse impacts on the liv ing standards of the poor or other groups it is critical that the analyst address the following considerations Consider alternative design The desig
158. ms that are not having their intended poverty or social impact In many low income countries national poverty monitoring capacity is being developed through PRS monitoring systems Whenever possible PSIA monitoring should be integrated within the PRS monitoring system Maintain flexibility on tools and methods It is important to tailor approaches to country capac ity reform issues data availability and time pressures In some circumstances some basic economic analysis enriched with qualitative analysis may be appropriate while in other cases econometric modeling may be the most useful entry for PSIA Understanding of impacts is enhanced when results from different analytical techniques reinforce each other or highlight different aspects of impacts Increase transparency in the links between policy and poverty There is much to be gained from laying out for public scrutiny the logic behind a policy choice including Challenges and Operational Principles expected losers and winners from reform key assump tions and transmission mechanisms It can help pro mote national debate and acceptance of reform and serve as a baseline against which to monitor progress Moreover it can highlight potential tradeoffs between the long run benefits of reform in terms of higher growth and poverty reduction and possible welfare declines in the short run Strive to enhance gains and minimize losses especially among the poor PSIA should g
159. mulated answered and analyzed iteratively e g in stakeholder analysis participatory poverty assessment scenario analysis Methods tailored to social context e Able to analyze behavioral responses explore new hypothesis or recognize previously undiscovered phenomena More effective in capturing intra household features and non income dimensions of poverty Con identify particularly vulnerable subgroups Allows respondents to articulate their own views Findings difficult to generalize and difficult to aggregate and compare systematically Fieldwork requires greater research skills than for quantitative enumeration Note This table is intended to provide an indicative distinction between these methods and not a comprehensive description of individual techniques a Social impact assessment adopts a more eclectic approach to data collection choosing among open ended semi structured and close ended instruments to fill information gaps for mixed method analysis Sources Adapted from Carvalho and White 1997 Baker 2000 and World Bank 2002a 15 A User s Guide to Poverty and Social Impact Analysis Likewise the approach based on qualitative analysis and open ended data collection has particular strengths A variety of open ended data collection methods can be used to collect non numeric informa tion relevant to PSIA Qualitative and contextual data can be collected through participatory appraisals asset m
160. n of Compensation Packages in Vietnam 13 M amp E Tools for Promoting Accountability and Transparency during Policy Reform 14 Poverty and Social Impact Analysis of Cotton Reform in Chad Tables 1 Data Collection Methods 2 Considerations in Choosing Impact Analysis Approaches 3 Planning M amp E as Part of Poverty and Social Impact Analysis 4 A Summary Matrix for Poverty and Social Impact Analysis of Reform 47 81 10 11 12 14 20 23 24 25 26 27 28 29 33 43 15 19 34 44 Acknowledgments This User s Guide is a collaborative product of the PREM Poverty Group PRMPR and ESSD s Social Development Department SDV It has been pre pared by a team comprised of Jehan Arulpragasam Sabine Beddies Sophie Brown Aline Coudouel Anis Dani Andreas Groetschel Sarah Hague Sarah Keener Timothy Kessler Humberto Lopez Mattias Lundberg Jonathan Maack Nayantara Mukerji Stefano Pater nostro and Sharon White Joyce Chinsen and Nelly Obias provided technical support to PSIA team through the entire production process Cathy Sun shine helped to edit the final draft of the User s Guide The User s Guide team received useful advice from John Page and Steen Jorgensen and members of the PREM Poverty and the Social Development Boards The report has also received substantive inputs from the editors Francois Bourguignon and Luiz Pereira da Silva and the authors of various chapters in the Toolkit for Evaluating the Pov
161. n of reform may be improved by including enhancement or mitigation measures or by different sequencing of public actions First one may opt to proceed with the implementation of a reform as planned but with a subsidization arrangement to pro tect the poor or others adversely affected by the policy For example a water tariff increase associated with utility reform may be designed to protect those who A User s Guide to Poverty and Social Impact Analysis Box 11 Impact of the Indonesian Financial Crisis on the Poor Partial Equilibrium Modeling and CGE Modeling with Micro simulation General equilibrium models permit the analyst to examine explicitly the indirect and second round consequences of pol icy changes These indirect consequences are often larger than the direct immediate impact and may have different distribu tional implications General equilibrium models and partial equilibrium models may thus lead to significantly different conclusions A comparison of conclusions reached by two sets of researchers examining the same event using different methods reveals the differences between the models Levinsohn Berry and Friedman 1999 and Robillard Bourguignon and Robin son 2001 both look at the impact of the Indonesian financial crisis on the poor the former using partial equilibrium meth ods the latter using a CGE model with micro simulation The Levinsohn study used consumption data for nearly 60 000 househo
162. n political instability or social tensions that could undermine effective implementation There are three main methods available to conduct a risk analysis risk assessment sensitivity analysis and scenario analysis The first and third are discussed in more detail in the annex Risk assessment is an approach for systematically identifying risks and their importance to the reform at hand It looks beyond vulnerability risks which are captured by the impact analysis to include considera tion of risks arising out of the sociopolitical and insti tutional context that could undermine the reform as 30 well as risks arising out of behavioral responses to the proposed reforms Obvious examples are political economy risks that may be latent but may become more acute when interest groups perceive reforms as a threat Another example might be increased expo sure to exogenous market conditions in the absence of risk coping or insurance mechanisms to deal with external competition or market failures Risk assess ment is based on the premise that risks become real ity when assumptions turn out to be wrong The likelihood of an assumption being invalid is there fore another way of judging the extent of risk The first step is to identify the assumptions implicit and explicit about what should and should not happen in order for a policy to achieve its goals The next step is to make a judgment as to the likelihood that each assumption wi
163. n scheme itself for example a large retrenchment or social program will have fiscal costs that depending on magnitude can have indirect impacts on fiscal stability prices and the economy Moreover there is an opportunity cost as any com pensation scheme will use resources that would other wise have been spent elsewhere Consider delay or suspension If the findings of PSIA suggest that the short to long term benefit of the best designed policy intervention does not exceed the short term or long term costs of mitigating or compensating the poor or that other important groups might suffer irreversible losses then consideration could be given to delaying the reform that is resequencing or abandoning or suspending implementation of the policy Element 8 Assessing risks Upon laying out the broad parameters of possible reform alternatives it is important to consider the risk that some of the assumptions underlying the analysis may not be realized This process may pro vide further insight into policy choice and design including sequencing Risk analysis addresses the issue of what could go wrong to prevent a policy reform from delivering the intended poverty or social Box 12 Labor Downsizing and the Design of Compensation Packages in Vietnam The issue of labor downsizing and the design of compensation packages have been analyzed ex ante in the context of Vietnam by Martin Rama 2001 Proposed reforms included
164. n service provision and the integration of returning refugees World Bank 2002b Direct impact analysis Direct impact analysis is a simple assessment of who is directly affected by a policy change and how much they are affected It assumes no behavioral response from affected households or groups that is if prices change quantities do not adjust Effectively all elastic ities are assumed to be zero including own price elas ticities This assumption is appropriate for assessing short term impacts before economic agents have time to make adjustments It otherwise represents a limita tion of the approach In particular it will tend to over state the impact on household welfare The approach can be used to analyze any type of policy change for example a change in prices such as a commodity price tariff wage or exchange rate or a change in A User s Guide to Poverty and Social Impact Analysis public finance policy such as an expenditure program subsidy tax civil service or state owned enterprise retrenchment But it is best suited to reforms whose impacts are mainly short term Examples include the removal of a subsidy a small scale privatization or a single price change in a relatively isolated market Below are three examples of tools that fall within this approach incidence analysis poverty mapping and tools to assess public service delivery These range in terms of data time capacity requirements from low to high
165. nd demands for such informa tion among country stakeholders including govern ment as well as improved understanding of what constitutes a good information base and how that information base can be used for more creative analy sis and for immediate policy decisionmaking 36 This discussion deals with policy feedback only as it relates to PSIA It is not intended as a compre hensive treatment of the issue 37 Under some circumstances there may be com pelling political reasons to avoid public forums Exam ples of situations in which a policy dialogue may be inadvisable are a government commitment to the policy is irreversible regardless of public reaction to short term costs b an intransigent opposition party or social movement is expected to use the forum sim ply as a vehicle to embarrass the government c rep resentatives of marginalized people are lacking meaning that the only organized interests likely to have a seat at the table are privileged social groups or d open violence between participants is a serious possibility In such cases some other form of consulta tion with stakeholders may be more appropriate than a public policy forum 38 This is another area where good PSIA should consider capacity building as part of the agenda At the institutional level capacity is required to organize such forums and to open up space for policy discus sion At the individual level capacity is often required for informed an
166. nd satisfaction with public services are absent By collecting and aggregating user feedback they provide an avenue for citizens to signal public agencies and politicians on key reform areas and also to create competition among state owned monopolies Citizen Report Cards provide feedback from actual users of services regarding issues such as a Availability of services b Satisfaction with services Reliability Quality of services and the indicators to measure these Responsiveness of service providers Hidden costs corruption and support systems f Willingness to pay and g Quality of life be used in conjunction with national service delivery and other household surveys It is also being supported by the more qualitative community scorecard process e Needs to be complemented with effective communications and publicity strategy to put information in the public domain and increase effectiveness The data from citizen report cards can also be used in conjunction with Public Expenditure Tracking Surveys example Sierra Leone and Benefit Incidence Analysis 1 e User determined assessment criteria quantitative feedback on service delivery quality media involvement and broad public debate on process and survey results Being a survey itself the only data information required is for developing the sampling frame for the execution of the survey For this basic demographic economic and social data from recent hou
167. nd to be rather evenly distributed across quintiles while government spending on hospitals was highly regressive The authors also considered the marginal benefit incidence of public expenditures In other words they asked how a change in government spending would be felt across expenditure groups First the incidence of changes in education and health provi sioning across two periods of approximately a decade each was analyzed Second the quintile specific marginal odds ratio of participation defined as the incremental increase in the quin tile specific participation rate associated with an aggregate change in the program participation rate was estimated on the basis of survey data This was compared with the average odds ratio the quintile specific participation rate in a given year relative to the participation rate for the population On the basis of the historical analysis as well as the estimation results the evidence suggests that changes in public spending on pri mary education would be even more strongly felt in the bottom two quintiles than what static analysis would suggest Expenditure Quintile 1 2 Population age 7 12 millions 6 8 6 2 Public school students millions 6 2 5 9 Average per capita transfer rupiah 47 898 45 324 Percent of total 24 0 23 5 3 4 5 Total 5 4 4 8 3 8 27 0 5 2 4 5 3 3 25 2 40 004 34 375 25 270 38 574 20 7 17 8 13 1 100 0 Behavioral incidence analysis combines incidence
168. ng Paper Series 2 Asian Development Bank Eco nomics and Research Department Manila Bourguignon E EH G Ferreira and P Leite 2002 Ex ante Evaluation of Conditional Cash Transfer 82 Programs the Case of Bolsa Escola World Bank Policy Research Working Paper 2916 Washing ton DC Bourguignon F and F H G Ferreira 2003 Ex Ante Evaluation of Policy Reforms using Behavioral Models In F Bourguignon and L A Pereira da Silva eds Evaluating the Poverty and Distribu tional Impact of Economic Policies Techniques and Tools Washington D C World Bank Bourguignon F and L A Pereira da Silva eds 2003 Evaluating the Poverty and Distributional Impact of Economic Policies Techniques and Tools Wash ington D C World Bank Brinkerhoff D and B L Crosby 2002 Managing Pol icy Reform Concepts and Tools for Decision Makers in Developing and Transition Countries Bloom field Conn Kumarian Press Carvalho S and H White 1997 Combining the Quantitative and Qualitative Approaches to Poverty Measurement and Analysis The Practice and the Potential Technical Paper 366 World Bank Washington D C Castro Leal 1996 Poverty and Inequality in the Distribution of Public Education Spending in South Africa PSP Discussion Paper Series 102 World Bank Poverty and Social Policy Depart ment Washington D C Castro Leal F J Dayton and L Demery 1997 Public Social Spending in Africa
169. ng of VAT exemptions in South Africa Ahmad and Stern 1984 1987 1990 and 1991 on alternative forms of taxation in India and Pakistan Chen et al 2001 on Uganda Gibson 1998 on Papua New Guinea and the introduction of VAT Younger et al 1999 on Madagascar Younger 1993 on Ghana 57 A User s Guide to Poverty and Social Impact Analysis Tool Name Poverty Mapping What is it Technique to estimate geographically disaggregated welfare and inequality levels and changes for small geographic areas such as districts and sub districts This allows to take geographic heterogeneity into account What can it be used for The method can inform the targeting of public resources and can simulating the geographic impact of policy reforms such as changes in trade barriers decentralization public expenditure etc Information disaggregated for small geographic areas is particularly important in the context of decentralization of public services What does it tell you The method provides an estimation of poverty inequality distribution across a country s sub regions It identifies poverty pockets by giving satisfactorily precise estimates of poverty at levels of disaggregation far below that allowed by typical household surveys Poverty and inequality estimates can then be represented on maps These maps on which other variables of interest can be applied help assess the spatial impact of policies Typically the poverty maps can also inc
170. nguistic and religious divisions within a country When used to challenge analytic assumptions rather than to build support among stakeholders the scenario exercise itself could be completed in three to four staff weeks A participatory scenario exercise is usually carried out in two to three workshops lasting several days each These workshops are usually spread over several calendar months in order to allow time for data collection and to accommodate the schedules of participants An individual with strong facilitation skills and specific experience running scenario exercises Research skills including familiarity with economic and demographic trends A small exercise intended to ensure that the assumptions of policymakers are challenged would cost approximately USS10 000 A full exercise with participatory workshops designed to build support among stakeholders could cost as much as USS30 000 Successtul scenario analysis is based on the skill of facilitators and the choice of participants Because the process is participatory and based on subjective understanding it is best for strategic rather than tactical questions Maack 2001 Pruitt 2000 Civic Scenarios Kahane 1996 on South Africa Kahane 1998 on Colombi Planning Scenarios see experience of Utah at http www envisionutah org e 76 Annex Economic and Social Tools for Poverty and Social Impact Analysis Tool Name Public Expenditure Tracking Survey
171. not focused exclusively on the poor or the community Used in conjunction with stakeholder analysis and institutional analysis Can also complement representative quantitative surveys e Information on how different groups are likely to react to a proposed policy change can influence assumptions in macro and micro models in terms of behavioral response particularly where historical data is insufficient or lacking Relies primarily on three data collection methods 1 conversational interviews 2 focus group discussions which in some cases have been combined with PRA tools and 3 direct and participant observation Although information collected may be qualitative in nature also includes quantitative analysis of this beneficiary feedback Background information on stakeholders on cultural ethnic or socioeconomic variations and on the variables determining whether specific groups would be affected such as type of access is required to properly design a BA and its sampling strategy Generally within three to four months from design to presentation of the final report Sociological or anthropological training are helpful but good listening skills are paramount Good knowledge of the program historical and cultural setting also important N A Average of USS40 000 Tends to have a narrower focus than SIA or PPA providing less contextual and historical background information though also likely less resource intensive
172. nous change a shock to agriculture while leaving the transport sector fixed or while allowing the transport sector to adjust endogenously as a result of the shock The data sources for SAM come from input output tables national income statistics and a household survey with a labor module About three months for a moderately detailed SAM Working with household datasets strong knowledge of national accounts use of Excel and maybe GAMS for using dedicated software Excel and GAMS based dedicated software STATA SAS or SPSS for working with household datasets USS25 000 when the data is available This does not include the cost of developing a new household survey SAM models have at least two major drawbacks First prices are fixed and do not adjust to reflect changes in say real activity As a result supply is either perfectly elastic if chosen to be endogenous and entirely demand driven or perfectly inelastic that is supply is constant Second the results of the simulations vary greatly depending on the assumptions made about which accounts are exogenous and which endogenous For an overview of the technique see Round 2003 Chapter 14 of the Toolkit for Evaluating the Poverty and Distributional Impact of Economic Policies Pyatt and Round 1985 Powell and Round 2000 Reinert and Roland Holst 1997 Sadoulet and de Janry 1995 Tarp Roland Holst and Rand 2002 67 A User s Guide to Poverty and So
173. ntative Household into a separate module that contains additional information about each household Requirements Data information Representative Household Models require a social accounting matrix SAM and distributional data describing the Representative Household groups or more specifically a household survey Time Only a few days to generate a base solution if data and skills are available Between six months and a year to collect data and work with the simulations Skills Experienced modelers with substantial prior exposure to Computable General Equilibrium models are required Supporting software Excel Eviews Gauss Financial cost US 25 75 000 depending on the data that exists Limitations In the absence of a CGE model to feed in the Representative Household module it is data intensive and difficult to master References and applications For an overview see Logfren Robinson and El Said 2003 Chapter 15 of the Toolkit for Evaluating the Poverty and Distributional Impact of Economic Policies e Robillard Bourguignon and Robinson 2001 on Indonesia Coady and Harris 2001 on Mexico e Lofgren et al 2002 74 Annex Economic and Social Tools for Poverty and Social Impact Analysis Tool Name Social Risk Assessment What is it Analytical approach that uses qualitative methods to identify and assess risks to and from the policy reform and to inform risk management strategies What can it be used for Risk ass
174. nthropology Manual Oxford Berg Press Government of Tanzania 1999 Tanzania Public Expenditure Review Health and Education Finan cial Tracking Study Final report Vol III Price Waterhouse Coopers Dar es Salaam Processed Government of Tanzania 2001 ProPoor Expenditure Tracking Research on Poverty Alleviation and Economic REPOA and Social Research Founda tion to Tanzania PER Working Group Dar es Salaam Processed Grootaert C and T van Bastelaer eds 2002 Under standing and Measuring Social Capital A Multidis ciplinary Tool for Practitioners Washington D C World Bank Hammer J and A Tan 1989 A Multimarket Model for Turkish Agriculture Working Paper Series 285 World Bank Agriculture and Rural Develop ment Department Washington D C Hammer J I Nabi and J Cercone 1995 Distribu tional Effects of Social Sector Expenditures in Malaysia In D Van de Walle and K Nead eds Public Spending and the Poor Theory and Evi dence Baltimore Johns Hopkins University Press for the World Bank Haney M M Shkaratan V Kabalina V Paniotto and C Rughinis 2003 Mine Closure and Its Impact on the Community Five Years after Mine Closure in Romania Russia and Ukraine World Bank Washington D C Forthcoming Howes S 1993 Mixed Dominance A New Criterion for Poverty Analysis Working Paper DARP 2 London School of Economics Suntory and Toyota 85 Inte
175. o account The analysis draws on two specially commissioned surveys undertaken over the course of the electricity reform a quanti tative household survey of water and electricity consumption patterns as well as of standard information on income and demographics and a qualitative consumer satisfaction survey based on focus group research concerned with attitudes toward provision For electricity the data are matched with administrative statistics on payment and consumption The electricity study examines changes in consumption and payment behavior pattern of arrears and so forth of poor and non poor households following reform The water analysis considers a how much extra non poor and poor households would be willing to pay for an improved service and b the policy tradeoff involved in raising tariffs which can help cover costs but also threatens to reduce household consumption In both cases results from survey data are corroborated against the predictions from multivariate models of household expen diture per head The models include as explanatory variables demography asset holding and regional location each is esti mated separately for rural and urban households The electricity study finds that households cut their consump tion and switched to wood and natural gas alternatives as a result of the rate increase This effect was particularly marked for poor households As a result the reform has produced only a modest
176. of interest typically in terms of income consumption geographic location gender ethnicity age socio economic group etc and 2 calculates the taxes paid by each household groups To do so one needs to recognize that the statutory incidence of taxation those who have to transfer the tax to the government is not the same as the economic incidence of taxation those whose real purchasing power declines because of the tax The difference results from the fact that different statutory taxes are shifted among agents Typically one assumes that indirect taxes on goods are completely shifted to the consumer i e the prices reflect the taxes paid by other categories and that duty taxes are reflected in prices Hence taxation has impacts on various groups of households through the goods services transfers and subsidies that they receive To quantify the tax paid the technique either estimates the taxes paid as the official tax rate times the pre tax value of expenditure if taxes can be assumed to be collected according to the letter of the law or b estimates the effective tax rate for different categories of expenditure by dividing the tax base by the actual tax revenues and applies it to these categories Requirements Data information The analysis requires information on tax subsidy and their changes and nationally representative household income or expenditure survey data e g LSMS including information on specific items to be tax
177. olds in the 1996 SUSENAS survey In the micro simulation model workers are divided into groups according to sex residence and skill Individuals earn factor income from wage labor and enterprise profits and households accrue profits and income to factors in proportion to their endow ments Labor supply is endogenous The micro simulation model is constrained to conform to the aggregate levels pro vided by the CGE model The Robillard team finds that poverty did increase during the crisis although not as severely as the previous results suggest Also the increase in poverty was due in equal parts to the cri sis and to the drought Comparing their micro simulation results to those produced by the CGE alone the authors find that the representative household model is likely to underesti mate the impact of shocks on poverty On the other hand ignoring both substitution and income effects as Levinsohn Berry and Friedman do is likely to lead to overestimating the increase in poverty since it does not permit the household to reallocate resources in response to the shock consume relatively small quantities of water by incor porating a subsidy mechanism Often contextual information and consultations are required to select the most appropriate type of mechanism to best fit specific country circumstance and implementation capacity Alternatively analysis of an electrical utility reform may determine access to be the main con straint f
178. on on a how inputs or expenditures match with entitlements allocations at the local facility level b the criteria used by the community and by providers themselves to assess their own performance c how both the community and providers score themselves on these criteria d anecdotal evidence on which these scores are based and e how the assessments by the community and providers can be used to develop an action plan for improvements in the project service Complementary tools e an be used in conjunction with national service delivery surveys and the citizen report card survey form participatory component of public expenditure reviews public expenditure tracking surveys formal financial audits and benefit incidence analyses Key Elements Community based i e designed and executed qualitative service assessment professionally facilitated public discussion of results Requirements Data information The input tracking scorecard requires supply side information on inputs and expenditures such as Budgets allocations to a facility project b Entitlements as specified under a policy project document C List of inventories at facility level etc At the community level an existing social mapping and basic demographic data is needed to divide the community into focus groups If the process is to be conducted on a representative sample of communities across the nation district then basic socio economic data would
179. ools and methods and country applications produced by the World Bank countries and external partners Suggestions and comments are most welcome at psia worldbank org Acronyms ADB BA CGE DFID GTZ IMF M amp E NGO PETS PPA PREM PRS PRSP PSIA QSDS SAM SDV SIA SOCAT Asian Development Bank Beneficiary assessment Computable general equilibrium Department for International Development UK Deutsche Gesellschaft fiir Technische Zusammenarbeit Germany International Monetary Fund Input output Monitoring and evaluation Nongovernmental organization Public expenditure tracking survey Participatory poverty assessment Poverty Reduction and Economic Management Network World Bank Group Poverty reduction strategy Poverty Reduction Strategy Paper Poverty and social impact analysis Quantitative service delivery survey Social accounting matrices Social Development Department World Bank Group Social impact assessment Social capital assessment tool vi Purpose of the User s Guide Poverty and social impact analysis PSIA involves the analysis of the distributional impact of policy reforms on the well being of different stakeholder groups with a particular focus on the poor and vulnerable PSIA is a systematic analytic approach not a separate product This User s Guide introduces the main concepts underlying PSIA presents key elements of good practice approaches to PSIA and highlights some of t
180. or state level transport investment in the United States Scenario analysis lets policy makers i pre test the performance of a policy reform in different plausible situations allowing for the creation of alternate plans ii assess the level of ownership for a reform agenda among key stakeholders iii get support for a reform agenda by including relevant stakeholders in discussions around scenarios to build a shared understanding of key issues in a reform Normally used in conjunction with economic models which can serve as inputs to the scenario building process and stakeholder analysis which helps determine key groups to consider in different scenarios The elements of a complete scenario analysis are i preliminary scenario workshop which brings together relevant stakeholders to brainstorm the key issues around a reform agenda ii data collection wherein a researcher assembles relevant information around the issues identified in a workshop iii scenario building workshop where relevant stakeholders build alternate scenarios iv dissemination process where scenarios are shortened to one page briefing notes and shared with the public via newspapers television and radio Scenario analysis requires i economic information including standard economic projections ii demographic information iii sector specific information relevant to the issues at hand iv a basic profile of a country s political economy and of ethnic li
181. or the poor resulting in the design of subsi dized grid connection fees for targeted poor communities In fiscal reform key staple goods that make up the bulk of consumption for the poor may be exempted from taxation Second the policy set may need to be expanded beyond the core policy measures driven by the prob lem diagnosis to include complementary measures For example if behind the border bottlenecks such 28 as barriers to entry in the domestic transport sector reduce the benefits of trade liberalization accruing to intended beneficiaries taking measures to address those constraints will be critical to achieving expected welfare gains Similarly it will be essential to under stand and address the factors that constrain the poor or other target groups from benefiting from market reforms for example lack of assets land credit electricity grid connection or of capabilities price information market access Micro econometric analysis as well as qualitative analysis can assist in identifying the type of complementary measures that might be necessary Third it is important to carefully consider sequenc ing For example shutting down a commodity board can eliminate monopsony and subsidized inputs at the Elements of Good Poverty and Social Impact Analysis same time If critical inputs are likely to be unavailable or prohibitively expensive for vulnerable farmers in certain locations PSIA might suggest that th
182. ormation Reduced form models require information on the variable of interest and its hypothesized determinants The specific data requirements depend on the unit of analysis from household or individual level to country level Time The required time to perform analysis based on partial equilibrium model and reduced form estimation depends to a large extent on the data availability and the degree of sophistication of the econometric model It could vary from a week for a simple model to three months for very detailed models Skills Econometric skills Supporting software Eviews STATA Gauss etc Financial cost US 5 000 for simple models USS25 000 for detailed complex models Limitations The elasticities of the policy variable to the variable of interest are often based on cross country regressions and may differ from the elasticity in the country itself References and applications e Barro 1997 Quah and Durlauf 1999 e Dollar and Kraay 2002 66 Annex Economic and Social Tools for Poverty and Social Impact Analysis Tool Name What is it What can it be used for What does it tell you Complementary tools Key Elements Requirements Data information Time Skills Supporting software Financial cost Limitations References and applications Social Accounting Matrices A social accounting matrix SAM is a technique related to national income accounting providing a conceptual basis for
183. ough transfers and tax policy Public expen diture programs may focus on granting additional resources to particular groups through transfer poli cies which may be in the form of subsidies or direct targeted income transfer programs Social protection programs may be useful in protecting the poor against risk and vulnerability depending on their targeting Tax policy has direct distributional effects to the extent that the resources or income of a household are taxed Regressive tax regimes disproportionately burden less well off households Subsidies may be captured by the non poor or may simply be badly targeted There may also be a conflict between strict progressivity and the political feasibility of policies see Gelbach and Pritch ett 2000 Poorer households may also be hurt in the long run if the funds for public expenditure are bor rowed and must be repaid they will suffer either from any attempt to inflate away the debt or from increased future taxes needed for repayment In soci eties with high gender inequities the intra household impact of transfers may warrant special attention Impact how How do institutions affect outcomes The impacts of policy reform on economic agents are mediated through institutions Institutions are the for mal and informal rules of the game in society they are the shared understandings that allow organizations to interact The impact of a policy reform is influenced by the behavior of or
184. overnmental bodies to vil lage councils Through the interview process the team iden tified the Village Infrastructure Project as a field tested means to get money directly from central accounts to the vil Source National Management Consultants 2000 lage level An existing government agency the Department of Community Development acted as a partner and enforcing agency The KDP used transparency and social accountability to make the new institutional structure work Existing village councils at the kecamatan subdistrict level which were formal organ izations that had met once a year to feed into the government s planning process became the primary decisionmaking bodies Decisions on proposals from villages were made in public meetings of the council procurement forms were limited to one page expenditure information was kept on cash ledgers and information about the program was disseminated through posters flyers and radio broadcasts Further the KDP worked with the Association of Independent Journalists to ensure media coverage and gave small grants to reporters to build capacity for independent reporting cedures in the relationship between organizations and in the relationship with the authorizing environ ment Addressing them may require fine tuning pro cedures recasting fundamental rules of operation or even replacing entire organizations Process maps are constructed through in depth semi structured inter vi
185. p promote ownership of reform It can be used to identify output outcome process and impact indi cators that are meaningful to stakeholders Reaching agreement on key performance indicators can be challenging and is much better dealt with prior to the reform Agreement on standards to be achieved is valuable both for policy managers and for affected parties who are then more likely to accept the results of monitoring reports and use this to improve policy In addition follow up public disclosure of informa tion strengthens commitment to the reform Accountability can be promoted by employing spe cific data collection tools designed to allow benefi ciaries to monitor inputs and outputs of the reform while also soliciting their views on the effects of policy outcomes on their well being Selectivity in choosing whether to conduct an impact evaluation or not is important because 33 impact evaluation is data and time intensive rela tive to other forms of evaluation and often can only be implemented after the reform has already been in place for some time Therefore the decision to do impact evaluations should be based on a need to fill knowledge gaps or to apply lessons learned in expanding reforms Involvement of national expertise in the implemen tation and setting up of an M amp E system trelevant ministries the statistical office the planning office private research agencies universities NGOs not only promotes owner
186. pacts to individual reforms and consider sequencing on a reform specific basis Consideration of the impacts of a package of reforms is still perti nent however Where they cannot be analyzed in a sin gle analytical framework their combined effects on various groups such as the poor may be most practi cally considered by independently assessing the impact of each reform set on each group However such an approach will tend to lose interaction effects Impact on what What is the welfare measure being assessed PSIA focuses on assessing distributional impacts on welfare or well being including both its income and non income dimensions With poverty now recog A User s Guide to Poverty and Social Impact Analysis nized as multidimensional World Bank 2000a devel opment efforts are being targeted to address both income and non income measures of welfare and poverty recently captured in part by the Millennium Development Goals Until recently the income dimen sion of welfare was the main focus of poverty and dis tributional analysis and economic tools were most often applied in analyzing the money metric welfare measure Now however non income dimensions of welfare and poverty such as human development and social development indicators addressing risk vulnerability and social capital are being given closer consideration In undertaking PSIA the analyst will need to choose appropriate indicators of welfare and pov
187. poverty and inequality impact of policies affecting sector level output and employment growth rates What does it tell you PovStat simulates poverty and inequality measures under alternative growth scenarios Forecasts of varying levels of complexity may be computed depending on the availability of reliable data and the extent to which factors influencing poverty levels are incorporated The simulations vary according to optional projection parameters Complementary tools Other software programs that provide poverty and inequality forecasts include SimSIP Poverty see Table on SimSIP and DAD a software for distributive analysis Social impact analysis and institutional analysis could complement this analysis by identifying constraints to market participation by certain groups which can affect poverty and inequality estimates Key Elements On the basis of household level data the software translates differential output and employment growth across sectors into differential growth in per capita income or consumption of households across those sectors The tool simulates the impact of policies affecting output on poverty using the fact that poverty changes can be decomposed into two parts a component related to the uniform growth of income and component due to changes in relative income The simulations are made under the assumption either that the policy analyzed will be distribution neutral or conversely assuming a specific quantifiable form fo
188. public service delivery later in this section 16 Behavioral impact analysis in focusing on demand analysis and supply analysis separately can arguably be seen as a partial equilibrium analysis The distinction drawn here is that since market demand and supply are not equated and do not clear it is not technically equilibrium analysis 17 In general equilibrium terms it also effectively assumes a closure 18 The standard caution and caveat with respect to economic modeling thus applies great care should be taken in specifying the model and its parameters to country context and in making explicit the specific assumptions and limitations of simulations derived from such models 19 Supply is either perfectly elastic if chosen to be endogenous and entirely demand driven or perfectly inelastic that is supply is constant SAM IO simula tions also vary greatly depending on the assumptions made about which accounts are exogenous and which endogenous 20 Dervis de Melo and Robinson 1982 and Shoven and Whalley 1992 provide good summaries 21 It is also possible to run the micro simulation exercise not on the basis of parameters derived from a consistent macro model but on the basis of exoge nously assumed changes in parameters Such an approach would not be so different from the simplest form of direct impact analysis described earlier 22 This is also an area where work is still ongoing and new tool
189. quotas tariffs on specific commodities rise or fall in the price of imported or exported commodity What does it tell you Multi market models allow the estimation of the impact of a policy or external shock on prices and output in a few sectors and on household well being Complementary tools Stakeholder analysis can be useful to identify different groups of interest e Multi market models are not general equilibrium models since they are not necessarily fully specified If the policy reform is likely to have general equilibrium impacts the analysis should be complemented by a CGE model Key Elements A multi market model expands the traditional benefit incidence analysis to capture the induced substitution effects across selected goods in response to policy reform The first step with this approach would be the identification of the market or markets where the policy reform under analysis is expected to have a direct effect Household survey information would then be used to derive estimates of income own price and cross price elasticities of demand for the entire set of interlinked markets Market closure either price or quantity clearing is imposed for each good in the system of equations In short multi market models involve a system of equations representing actors producers consumers government production or profit functions factor and product markets income accruing to the owners of productive inputs including labor and final
190. r analysis using structured interviews in Moscow mine visits and dis cussions with union leaders The analysis was designed to clar ify the nature of the problem identify the interests of various actors and develop a solution for effective fund transfer using existing actors The team grouped the stakeholders into several categories Government ministries were not seen as neutral agents and their interests were explicitly identified Similarly the options of mine employees were differentiated by their pre vious employment Workers on the mine face analytic and administrative support workers and workers in the schools and hospitals previously funded by mine revenue would be impacted differently as mines closed The interests of Sources Lockhart 2001 Haney and others 2003 municipal and oblast level governments were based par tially on the revenues that each could muster in the event of mine closure The differences between stakeholder groups lay largely in their analysis of the core problem On the one hand the Ministry of Energy regional governments the labor union and the mine face workers advocated a narrow solution focused on preserv ing the mining industry in some form On the other hand municipal governments social service workers employed by the mines and local businesses focused on the need to find new drivers of growth in mono industry towns as well as sources of funding for services previously supplied by the m
191. r instance business and union interests that fear the impact of competi tion on protected commodity and labor markets can derail trade liberalization Similarly vested interests within the public sector can also derail reforms PSIA thus should identify and analyze the impact of policy on other stakeholders beyond the poor who are affected by or can influence reforms Impact how How are impacts channeled Policy reforms can be expected to have an impact on various stakeholders through five main transmission channels outlined below employment prices pro duction consumption and wages access to goods and services assets and transfers and taxes Each pol icy reform is likely to have impacts through more than one channel For example utility reforms might result in changes in prices and access but might also have an impact on the fiscal stance of a country and hence on transfers and taxes Further different stakeholders are likely to be affected differently through these channels For example relative price changes will affect net con sumers and net producers differently and even among these groups the impact may vary For example con sumers will be affected differently depending on their consumption patterns or their ability to substitute goods Employment The principal source of income for most households is employment To the extent that a policy change affects the structure of the labor market or the demand for
192. r or higher indirect impacts based on the scale on which they are undertaken in most low income countries Box 5 provides an indica tive breakdown 19 Once the relevance of indirect impacts has been determined the next consideration will be the avail ability of data time and capacity Where these are in short supply the analysis might need to use simpler tools and methods in the short term In such cases an action plan to strengthen data and capacity should be put in place for more robust analysis in the future This way countries in the low data and capacity situation could aim to improve their information base so they have the option of adopting methods in the medium and high columns as appropriate See Annex for data time and skill requirements for each tool PSIA can utilize various methods and tools many of which require the combined skills of various disci plines for example macroeconomics microeconom ics social and political analysis Where feasible it is advisable to integrate economic and social analyses in order to deepen the analysis For instance social impact assessments can be used to help define the parameters and explanatory variables used in econo metric modeling and conversely an understanding of economic dynamics and constraints can strengthen the social analysis of a given policy The rest of this section briefly lays out the different social and economic tools for PSIA and the
193. r the distributional change Changes in occupationa distribution are accommodated through reweighing of sample households Requirements Data information This program requires unit record household survey data Also a poverty line survey year and forecast horizon are parameters that must be provided by the user Macroeconomic variables at the nationally aggregated or sectorally disaggregated level and growth rates of income employment and population are also required In addition the user can input change in CPI and GDP deflator change in relative price of food and shares of food in CPI and changes in poverty line consumption bundle This allows to generate different types of fore casts optional projection parameters such as employment shifts across sectors The software can also be adapted for grouped data 1 2 days to format the household survey data collate and check exogenous economic variables and enter everything into PovStat Skills Familiarity with Excel and appropriate household data handling software such as Stata Also with PovCal if synthetic data from a grouped distribution are to be used Supporting software Excel Limitations PovStat does not capture second round effects These may be captured by CGE models References and applications For an overview of the technique see Datt Ramadas van der Mensrugghe Walker and Wodon 2003 Chapter 10 of the Toolkit for Evaluating the Poverty and Distributional Impact
194. re PSIA When circumstances dictate that a policy decision needs to be made without adequate data it is impor tant that steps be taken to improve the information set over time Since PSIA is necessarily a dynamic process of formulating and adjusting policy based on increased knowledge it would also be important to put into place a strategy to gather the necessary data to enhance the basis for further and future ex ante and ex post analysis of the poverty and social impacts of policy Such a strategy can be designed in a manner that builds national capacity for data collec tion and analysis Where possible a strategy for data collection should be linked to the timetable for policy formulation or for policy review and reformulation In other words the reason for developing a strategy for future data collection is not solely to permit ex post monitoring and evaluation of a current policy decision but also to lay the groundwork for future ex ante analysis Developing such a strategy is an integral part of PSIA Element 6 Analyzing impacts This section begins with general considerations in choosing approaches to impact analysis and then pro vides an overview of several broad classes of methods for estimating impacts 18 Considerations in choosing approaches to impact analysis In general four factors will condition the choice of approach or tool to be used in analyzing the poverty and distributional consequences of a given refo
195. riffs or the composition of public expenditure and the effects of short term stabilization policies such as a cut in domestic credit or a rise in deposit interest rates The detailed treatment of the labor market is key for the assessment of the poverty reduction impact of macroeconomic policies Also it is useful to make the distinction between rural and urban sectors by completing separate projections on output and employment fluctuations for both areas and therefore to study poverty in different geographical areas Complementary tools IMMPA would complement and be complemented by the use of household su Stakeholder analysis can be useful to identify different groups of interest Social impac analysts identify constraints to market participation by certain groups which would affec Key Elements The main distinguishing features of IMMPA from other CGE models are the fo rveys fo map impacts into distributional changes t analysis and institutional analysis could help poverty and inequality estimates lowing First IMMPA has a very detailed specification of the labor market which is the main transmission channel of macroeconomic shocks and adjustment policies to economic activity employment and relative prices The labor market specification allows for a disaggregation at the urban and rural levels and in turn for each of these areas in the formal and informal sectors Second IMMPA links real and financial sectors throu
196. ring of state owned utilities increased private participation full divestiture Financial sector reform privatization closure of state banks promotion of financial institutions serving the poor Privatization lease of assets private management con tracts full divestiture Civil service retrenchment layoffs reductions in the wage bill Decentralization of public services Social safety nets changes in targeted cash in kind trans fers benefits to needy groups such as AIDS orphans social insurance benefits Pensions scaling back pay as you go public schemes increased private provision introduction of social pensions cash assistance for poorest pensioners either direct or behavioral analysis methods and or to inform the approaches for indirect impacts It then reviews the two broad economic approaches to analyz ing direct impacts direct impact analysis and behavioral analysis Finally the section reviews complementary economic approaches to analyzing indirect impacts The first covers macroeconomic frameworks that aim at modeling the different impacts of policy interventions on a variety of sectors or markets but that leave open the distributional implications of policy changes These frameworks are either partial equilibrium analysis or general equilibrium techniques Then the second group comprises tools that use as inputs the results of any of the macroeconomic frameworks and assess the distrib utional implicat
197. rm the importance of indirect impacts data availability time availability and capacity For purposes of presenting a simple typology these four factors can effectively be collapsed into two dimensions The first is the importance of indirect impacts As noted above policy changes may have direct and or indirect impacts depending on the reform in question and the structure of the economy A policy reform has high indirect impacts if the net effect is transmitted through several channels and markets leads to behav ioral changes at the household level and or has multi ple round effects that may take time to work themselves through the economy An example could be a massive devaluation that immediately results in changes in relative prices consumption and power structures but over time might be expected to lead to shifts in the structure of employment and the econ omy changes in productivity improved governance by removing rent seeking and possibly growth Second is the availability of data time and local capacity As discussed above data availability and domestic capacity for data collection and analysis will necessarily constrain the type of approach adopted The simple typology presented here collapses data time capacity into a single dimension Over time an objective of PSIA ought to be to improve the capac ity of local practitioners and users Wherever possible it is important that local partners in the government or
198. rnational Centres for Economics and Related Disciplines London Hunt D 1996 Process Mapping How to Reengineer Your Business Processes New York John Wiley amp Sons Ianchovichina E A Nicita and I Soloaga 2001 Trade Reform and Household Welfare The Case of Mexico Working Paper 2667 World Bank Washington D C Ironmonger D 1999 An Overview of Time Use Sur veys Paper presented at the International Semi nar on Time Use Studies Ahmedabad India December 7 10 Jabara C M Lundberg and A Sireh Jallow 1992 Social Accounting Matrix for The Gambia Working Paper No 20 Cornell University Cornell Food and Nutrition Policy Program Ithaca N Y Jalan J and M Ravallion 2003a Estimating Benefits Incidence for Anti poverty Program using Propensity Score Matching Journal of Business and Economic Statistics Volume 21 Issue 1 Jalan J and M Ravallion 2003b Does Piped Water Reduce Diarrhea for Children in Rural India Journal of Econometrics Volume 112 Issue 1 Jalan J and M Ravallion 1999 Are the Poor Less Well Insured Evidence on Vulnerability to Income Risk in Rural China Journal of Develop ment Economics 58 1 61 81 Jalan J and M Ravallion 1997 Spatial Poverty Traps Policy Research Working Paper 1862 World Bank Washington D C Jensen R 1998 Public Transfers Private Transfers and the Crowding Out Hypothesis Evidence from South Afri
199. rsue more than one policy reform but also to be on the alert for inter active effects that those reforms might have on each other In another example a policymaker faced with inadequate public revenues may decide to raise taxes However this will not be the appropriate response if the real problem is that expenditures are too high rather than that revenues are too low In order to avoid inappropriate or mismatched policies it is important that the constraints on development objectives be made explicit rather than assumed at the begin ning of the PSIA process Element 2 Identifying stakeholders After asking the right questions and identifying the problem that requires solution an early identification of relevant stakeholders is important Not only can policy choices affect different stakeholders or eco nomic agents in different ways but these stakeholders can also influence whether a policy is adopted and how it is implemented Stakeholder analysis identifies people groups and organizations that are important to take into account when conducting PSIA It identifies and analyzes those who are affected by the policy as well as those who can potentially affect policy implementation Identifying and disaggregating the stakeholders in the first category beneficiaries and those who suffer adverse impacts is central to the analysis of poverty and social impact of policy They can be disaggregated by a large number of character
200. rticipatory poverty assessment Social capital assessment tool Demand analysis Consumer assessment IV Analyzing Impacts Economics Tools 1 Direct impact analysis tools Benefit incidence analysis Average and Marginal Tax incidence analysis Poverty mapping 2 Behavioral models Ex post behavioral marginal incidence analysis of public spending and social programs Ex ante behavioral marginal evaluation of policy reforms Ex post impact evaluation methods for assigned programs Demand analysis Estimating demand functions Supply analysis Household models 3 Partial equilibrium models Partial equilibrium analysis Multi market models Partial equilibrium analysis Reduced form estimation 4 General equilibrium models Social Accounting Matrices Computable General Equilibrium CGE Models 5 Tools linking microeconomic distribution or behavior to macroeconomic frameworks or models PovStat SimSip Poverty 123 PRSP Poverty Analysis Macroeconomic Simulator PAMS Integrated macroeconomic model for poverty analysis IMMPA Augmented CGE Model with Representative Household Approach V Assessing Risks Social Risk Assessment Scenario Analysis VI Monitoring and Evaluation Public expenditure Tracking Survey PETS Quantitative Service Delivery Survey QSDS Citizen Report Card Community Score Card 48 Annex Economic and Social Tool
201. s either geographically or preferably over time Time 1 to 3 months Skills For reduced form models basic econometric skills may suffice For structural models advanced econometric and typically programming skills Supporting software Software for the analysis of household level data Financial cost US 5 000 for simple reduced form models US 35 000 for detailed of especially complex models Limitations Reduced form demand equations are simple to estimate but the results depend on the choice of functional form and variables included in the equation It also requires constancy in elasticities over all values of exogenous variables Structural models on the other hand are affected by the theoretical underpinnings used to derive the estimable model and can be extremely complex to estimate References and applications For the estimation of demand systems Stone 1954 on the Linear Expenditure System e Deaton and Muellbauer 1986 on the Almost Ideal Demand System e Christensen et al 1975 on the Transcendental Logarithmic System 62 Annex Economic and Social Tools for Poverty and Social Impact Analysis Tool Name What is it What can it be used for What does it tell you Complementary tools Key Elements Supply analysis System of input and output equations used to determine supply responses to changing circumstances by producers including households Supply analysis takes into account changes in both
202. s an integral part of the PRSP process and as an Table 3 Planning M amp E as Part of Poverty and Social Impact Analysis Reform timeline PSIA timeline STAGE 1 Prior to reform risks for investigation Trace out theory of how reform will lead to the desired results on the ground Preliminary field visit for ex ante analysis Design ex ante analysis Conduct ex ante analysis STAGE 2 During implementation of reform STAGE 3 Completion post implementation of reform 3 6 months to 1 year after completion of reforms depending on outcomes of interest Identify key reform issues questions outcomes and 3 6 months after initial implementation and periodically up until completion of reforms follow up analysis M amp E processes timeline Identify input output intermediate outcome and impact indicators Identify availability of baseline data Identify existing information sources and gaps Specify required tasks needs for covering gaps in M amp E Identify specific institution s to be responsible for M amp E Begin to define process for M amp E periodicity for data collection storage maintenance etc Plan collection of baseline data if such data do not exist Refine preliminary indicators with input from key stakeholders Collect baseline data Design instrument to be used in measuring indicators Process evaluation Social impact assessment Preliminary incidence analysis Proc
203. s and applications continue to be devel oped 23 This has been done for example by Ag nor 2002 who has estimated such an equation includ ing the relevant elasticities on the basis of a cross country regression tailored to take as inputs the outputs of the RMSM X model One limitation to this approach relates to the robustness of cross country estimates of these elasticities when applied to a national context 24 SimSIP has a module that looks at growth impacts and is being expanded to include a module that will accept as inputs the key aggregate wage and consumption variables generated from the 1 2 3 model A User s Guide to Poverty and Social Impact Analysis 25 The separate labor and poverty module can simulate the impact of policies on the labor market income and expenditures and related social welfare indicators It permits the reallocation of labor in response to changes in prices and wages 26 Ianchovichina Nicita and Soloaga 2001 used a similar approach to examine the impact of NAFTA on household welfare in Mexico 27 PSIA conducted for the water sector in Africa has highlighted the importance of carefully evaluating which mechanism is best suited to specific country conditions lifeline tariffs coupon schemes subsidized types of supply This is often done by consulting con sumers and key stakeholders such as utility personnel 28 Subsidization choice would depend at least in part on institutional
204. s can be made to collect any missing baseline data ideally before implementation of the reform During the reform or implementation period there could be a periodic collection of indicators proxy inter mediate every three to six months some indicators such as prices every month outcome impact indicators on a six month plus cycle depending on the reform Soon after implementation begins perhaps after three to six months preliminary monitoring and evaluation of processes can be conducted to see whether the theory of how the reform would work is being supported in prac tice Do specified inputs and outputs appear to be lead ing to outcomes or impact in the manner expected If not why not At this time midstream adjustments are made as required to ensure the reform is on track In the post reform or completion stage roughly three to six months after completion of the reform there could be as a matter of good practice a fol low up assessment and an incidence analysis of basic outcome indicators to identify early losers and win ners and reasons for the patterns observed This analysis along with a more rigorous evaluation should ideally be repeated as required to fill knowledge gaps in key policy areas or to inform plans to further deepen or expand reforms or scale up pilots Element 10 Fostering policy debate and feeding back into policy choice For low income countries PSIA has been conceptual ized a
205. s for Poverty and Social Impact Analysis Tool Name Stakeholder Analysis What is it Stakeholder analysis is systematic methodology that uses qualitative data to determine the interests and influence of different groups in relation to a reform What can it be used for While stakeholder analysis can be carried out for any type of reform it is particularly amenable to structural and sectoral reforms Basic stakeholder analysis should precede reform design and should be consistently deepened as reform elements are finalized What does it tell you Stakeholder analysis assesses i the extent to which reform may provoke political or social action ii the level of ownership among different groups iii differences in perception of the reform among different ethnic religious or linguistic groups Stakeholder analysis can be expanded into fuller political economy analysis that identifies affected groups and looks at i their position vis vis policy ii their influence on government iii the likelihood of their participation in coalitions to support change iv strategies for overcoming opposition such as compensating losers or delaying implementation Complementary tools e Normally used in conjunction with social impact analysis Stakeholder analysis identifies groups to consider as categories for analysis It is useful for the design of household surveys microeconomic modeling and micro macro linked models Key Elements S
206. s often required For an overview of the technique see Ravallion 2003 Chapter 5 of the Toolkit for Evaluating the Poverty and Distributional Impact of Economic Policies Galasso et al 2001 and Angrist et al 2001 on randomized programs Van de Walle 20020 Jalan and Ravallion 20030 and 20036 on propensity score matching e Ravallion et al 2001 on double differences techniques 61 A User s Guide to Poverty and Social Impact Analysis Tool Name Demand Analysis Estimating demand functions What is it Partial equilibrium model that focuses on the level of demand for the commodities an individual household or producer demands given the structure of relative prices faced real income and a set of individual characteristics See also Table on Demand Analysis Consumer Assessment What can it be used for Can be used with a broad range of reforms for which the knowledge of consumer behavior is important This simple technique which focuses on a single good can be particularly useful for the analysis of changes in prices in which the good or service in question has few if any substitutes This can include changes in tariffs subsidies and other prices What does it tell you How changes in income or in the price of a given good affect the demand of a particular group of consumers or producers Complementary tools be used in conjunction with stakeholder analysis The analysis of a complete demand system is of
207. se The process also helps to evaluate whether the expected impact of the reform is borne out in practice Where it is not more in depth analysis to explain divergence can be conducted When results confirm the assumptions documenting the lessons learned can help in the design of similar reforms elsewhere or in the future The approach used in identifying indicators will ideally encompass both open ended and close ended methods and as far as possible incorporate participa tory methods Open ended methods examine the how and why of policy reform and in the case of participa tory methods promote ownership accountability and transparency Close ended methods on the other hand only touch on the how and why of changes and are primarily designed to assess the magnitude of change M amp E to promote social accountability and transparency Monitoring and evaluation can also be implemented to promote social accountability during the process of reform thereby leading to increased ownership and sustainability There are various M amp E tools avail able that if used appropriately can help to promote social accountability These include public expendi ture tracking surveys PETS quantitative service delivery surveys QSDS citizen report cards and participatory public expenditure reviews see box 13 Similarly perception surveys that capture more qualitative information provide another means of pinpointing problems within service provi
208. sehold surveys would be needed to decide on the stratification Between 3 6 months from the initial scoping to the dissemination stage In most countries an initial orientation workshop for different stakeholders is included Usually the citizen report card is managed by a different agency from the on that actually executes the survey For the latter the norm has been to out source to a market research agency such as ORG MARG India or the Social Weather Station Philippines which has adequate market research and statistical survey analysis skills The managing organization is either an independent CSO with solid advocacy skills networks and reputation India an international donor like the World Bank Philippines or a Government Department in charge of monitoring and independent review oversight of public services N A Varies according on the depth and purpose of analysis A full national survey in a moderately sized country would cost in the range of USS100 000 The limitations include i requires an agency with market research and data collection skills to conduct the survey ii requires support of media iii role of expectations in user perceptions needs to be factored iv limitations in comparability across services v cost considerations vi large sample required for heterogeneous population and lesser used services vii effort amp time to stimulate action by service agencies amp civil society viii lack of predictabili
209. ship but helps to build capac ity for poverty analysis Planning and implementing M amp E activities related to each stage of the PSIA Where possible monitoring and evaluation systems for PSIA should be integrated within an existing national poverty monitoring and evaluation system Building on existing resources reduces the cost of set ting up the system and further strengthens existing national capacity A User s Guide to Poverty and Social Impact Analysis Before the reform while analysts are still grappling with the key questions and objectives of the PSIA a preliminary list of indicators and required tasks and timeline for the M amp E system can be identified In par ticular it will be important to ascertain the existing information base and gaps including the availability of relevant baseline data with regard to key indicators and welfare measures and the possible need to collect baseline data see table 3 Once some ex ante analysis is completed and there is an improved understanding of how the reform will operate the preliminary list of indicators particularly intermediate and proxy indicators can be refined these may include views and perceptions of those to be affected An instrument can then be developed to be used in measuring the indicators It is important that improved understanding of the program and indica tors feed into the design of the quantitative evaluation Once indicators have been identified plan
210. sks can be highlighted and contingency plans made Elements of Good Poverty and Social Impact Analysis Element 9 Monitoring and evaluating impacts When identifying and designing reform based on ex ante PSIA it is important to consider setting up at an early stage systems for monitoring social accountabil ity and ex post evaluation of the impacts In doing so some specific concerns should be borne in mind in the context of reform specific PSIA This section outlines these issues 4 As noted above good PSIA calls for monitoring and evaluation M amp E both to validate ex ante analyses and to influence the reformulation of policy Effective PSIA therefore implies a heavy demand on data and information bases In considering the infor mation needs of PSIA it is essential to build where possible on existing systems of M amp E This should be done with a view to developing a coherent national poverty monitoring system that brings together infor mation bases indicators mechanisms for linking M amp E and policy decisionmaking and so forth This is another area where capacity building is an embedded part of PSIA the development or refinement of sys tems for monitoring social accountability and evalu ation is most effective where it strengthens in country capacity Monitoring involves tracking the progress of processes and implementation as measured by indi cators on inputs outputs and outcomes associated with an interv
211. spending and programs on education health and cash transfer programs It can also be used in the analysis of other reforms including land reform pension reform and micro finance programs The analysis allows to estimate the distributional impacts of changes in public spending or programs taking the behavioral responses or beneficiaries and implementing agencies into account By examining actual change ex post these methods can also provide a reality check for the results of methods that attempt to approximate or predict changes ex ante Ex post Social Impact Analysis can complement these efforts as can adaptations of tools such as the Quantitative Service Delivery Survey and Public Expenditure Tracking Surveys that use historical data see Tables on these tools and techniques The technique entails the econometric analysis of household data on welfare indicators and on receipt of the benefit under consideration and the modeling of household responses such as changes in labor supply Behavioral marginal incidence can be done using 1 single household survey cross section with sufficient regional disaggregation and variance in participation 2 two or more comparable household cross sections 3 Household level panel data or 4 geographic level panel data for dynamic marginal incidence A few weeks to a few months depending on the quality of the data Econometric skills EXCEL and STATA or other micro econometric and spreadsheet software
212. ssing the counter factual to evaluate the poverty impact of assigned programs Any policy program or shock that are assigned to some observational units but not others and the units not assigned are largely unaffected The units might be people households firms communities provinces or even countries It measures the impact typically defined as difference between the value of the outcome with the program and its value under the counter factual what would have been the value of the indicator in the absence of the program The best evaluations often combine multiple methods randomizing some aspects and using econometric methods to deal with the non tandom elements or by combining matching methods with longitudinal observations to try to eliminate matching errors with imperfect data Complementary tools include Benefit Incidence Analysis Social Impact Assessment and Demand Analysis which can help policymakers track the impact of historical policy changes by combining household survey data with financial or service provision data The identification strategy establishes the assumptions under which observed outcomes for participants and non participants can be used often in combination with other data to infer impact If the program is randomly assigned across the population every has the same chance ex ante of being in the program then the observed ex post differences in outcomes are attributable to the program This is not offen the case
213. t incidence analysis is most commonly used fo examine the impact of public expenditures and public expenditure reforms It is also applicable to other policy reforms including reforms affecting prices that change household income or expenditure and tax reforms It can be applied to direct transfers as well as to transfers obtained by consuming subsidized goods or services What does it tell you Benefit incidence tells us who benefits from services transfers or price changes When estimating the size of benefits received by different groups average BIA calculates the benefits received on average i e on the basis of average unit costs marginal BIA tells you who will benefit from a increase or decrease in benefit i e the marginal change These two might be very different typically additional beneficiaries are more likely to belong to groups not yet covered by the system e g remote areas Complementary tools Simple or marginal BIA can be combined with information on household or individual behavior see Tables on Behavioral Benefit Incidence Analysis Social Impact Analysis and Beneficiary Assessment These techniques explain distributional changes from a policy reform by taking into account the reactions households or individuals will have to the change Key Elements BIA proceeds as follows 1 estimation of the value of the benefit typically estimated as the cost of providing the service transfer or subsidy This can be quite difficu
214. t to achieving a more sustainable energy sector Reform of the sugar sector in Guyana is being analyzed because of its fiscal cost and the number of people affected by the reform The analysis is comparing the reform s direct impacts on employment and indirect effects on municipal ser vices and dependents with the long term employment and fis cal losses that would likely occur if the sector were to continue in its current state given the continuing decline in world sugar prices and the phasing out of preferential prices under the Lom Accord j H a 4 5 10 Elements of Good Poverty and Social Impact Analysis Box 2 Analyzing the Impact of Mine Closure in Russia Stakeholder Analysis In the early 1990s the Russian coal industry was in a state of crisis A large number of economically inefficient mines were kept afloat by subsidies that reached 2 76 billion more than 1 percent of GDP in 1994 Restructuring entailed closing 183 loss making mines and downsizing the workforce including those involved in coal production administration social ser vices and other auxiliary activities from 900 000 in 1992 to 328 000 by end 2001 The Bank provided 1 3 billion in loans and played a major role in helping the Russian government develop its strategy for mitigation of the poverty and social impact of coal sector restructuring The team carried out a stakeholde
215. takeholder analysis is iterative and usually proceeds through the following sources of data to reach final conclusions i background information on constraints to effective government policy making ii key informant interviews that identify specific stakeholders relevant to the sustainability of policy reform Participants should be drawn from a diverse groups of interests in order to limit bias iii verification of assumptions about stakeholder influence and interest through survey work and quantitative analysis of secondary data Requirements Data information Stakeholder interests are seldom explicitly spelled out in existing sources The main sources of information are I key informant interviews ii secondary material such as newspaper articles and social science research grow out of the findings of other analytic work Ensuring a complete and updated picture may require that specialists carry out the work Time In cases where key informant interviews are already being carried out as part of other qualitative analysis preparing an analytical piece on stakeholders can take as little as one additional staff week of effort In cases where there is no significant qualitative work planned a thorough exercise would likely involved a trip to the field and two to three staff weeks of effort Analysis that is meant to predict the positions of key stakeholders in different reform scenarios is not a one off piece of work and should over sev
216. techniques and approaches More over analytical methods can be mixed sequentially or in parallel over time Mixed methods can leverage the benefits of both quantitative and qualitative analysis Qualitative analysis can inform the design of close ended questionnaires or the specification of an econo metric model and generate hypotheses to be tested further through quantitative research Hypotheses generated by qualitative analyses can be tested for gen eralizability using quantitative approaches The results of quantitative analysis can be further examined using open ended data collection methods to develop a 16 richer understanding of the impacts of policy on dif ferent subsets of the population and to analyze counter intuitive results that might otherwise be dis missed as spurious And a successful mixture can elu cidate history context process and identification of transmission channels and differential impacts While mixed methods can involve higher costs requiring more complex skills and coordination with multidisci plinary teams the benefits in some cases outweigh the costs As the work of Amartya Sen and others demon strate economics has contributed a great deal to and made liberal use of qualitative analyses Taking stock of available data and analysis The first element of the stocktaking is to ascertain the existence of key data This will allow identification of data gaps that need to be filled or taken into acco
217. ten used as the basis for more complex multimarket and computable general equilibrium models see Tables on these two techniques The most common complete demand systems are Linear Expenditure System LES the Almost Ideal Demand System AIDS and the Generalized Almost Ideal Demand System GAIDS Demand analysis is also used to build household models in combination with supply analysis Key Elements Methodologically there are two main approaches to estimate the parameters of a demand equation One consists of specifying estimable single equation demand functions in a pragmatic fashion without recourse to economic theory using reduced form estimation Alternatively one may wish to use the theory of demand to derive an estimable structural model which should provide guidance for the choice of variables to be included functional forms and restrictions on the parameters This model although usually difficult to estimate due to its typical high nonlinear nature provides straightforward interpretations of the transmission channels When demand analysis is used for complete models see for instance Table on multi market analysis or CGEs complete systems of demand equations must be specified and estimated which are able to take into account the mutual interdependence of large numbers of commodities in the choices made by consumers Requirements Data information Requires household level consumption and income data with sufficient variation in price
218. the analyst to summarize the anticipated impact of the policy reform on differ ent stakeholders as transmitted through the five chan nels discussed in chapter 2 employment prices access to goods and services assets and transfers and taxes questions 3 4 and 5 The analyst should explicitly recognize the stakeholders who are likely to gain from the reform those who are likely to lose and those who are likely to have significant influence over the reform The matrix also calls for an explicit statement of the assumptions underlying the reform Depending on the country concerned conclusions on likely policy impacts will draw on differing information bases and tools For example in one country context the matrix may be filled out using informed reasoning based on secondary data and qualitative field research in another context the conclusions may be based on empirically simulated effects derived from modeling techniques using data from a recent household survey and existing social analysis In either instance the matrix calls for a description of the nature of the information base and analytical methodology The matrix also calls for the analyst to specify key risks associated with the reform their likelihood and expected magnitude question 6 Finally it proposes to present the impact that the analysis has had on national policy discussions question 7 Possible Summary Matrix Box 14 Poverty and Social Impact Analysis of Cot
219. thers endogenous For instance in a SAM con taining agricultural production and transportation accounts the impact of an exogenous change to agri culture can be simulated leaving transport fixed or the other way round SAMs have some serious limi tations including the facts that prices do not adjust to reflect changes in real activity and results are highly sensitive to which accounts are assumed to be endoge nous and which exogenous Computable general equilibrium CGE models are com pletely specified models of an economy or a region They vary in their complexity from the basic 1 2 3 model one country two activities three goods to versions with several activities and actors and hun dreds of parameters CGEs can be used in a number of policy contexts including public finance reform and macroeconomic stabilization Box 10 illustrates the use of a CGE model to calculate the impact of fiscal incidence in the Philippines As well as being data intensive CGEs even simple ones can be difficult to build and understand Tools linking microeconomic distribution or behavior to macroeconomic frameworks or models The last class of tools and methods links microeco nomic behavior and or distribution with a consistent macroeconomic framework or model Distributional 26 and poverty outcomes are arrived at iteratively and outside the macro modeling exercise In its simplest form the macroeconomic framework model such as
220. to dominate and require analysis will vary and will have distinct impacts on dif ferent stakeholders depending on the reform and the country context Impacts may differ along two key dimensions first they can be direct or indirect and second they can occur in the short or the long term Some policy reforms may have primarily direct impacts that is impacts that result directly from changes in the policy levers altered by the reform For example an increase in the value added tax will trans late directly into lower purchasing power for a given disposable income Reforms may also have important indirect impacts that is impacts resulting from the reform through channels other than the actual policy lever or action Thus an increase in value added tax rates will have a positive impact on the fiscal stance of the country if this is translated into increased govern ment expenditure it will have impacts on various groups of households through the goods services transfers and subsidies they receive Such a stronger fiscal stance also will likely generate improved growth affecting household welfare The second critical dimension relates to the timing of impacts Given that the nature of the impacts may change over time so will net impacts on various stake holders To keep our earlier example of an increase in value added tax rates the direct impacts on purchasing power will likely be felt in the very short term while the indirect imp
221. ton D C World Bank 2001b Honduras Public Expenditure Management for Poverty Reduction and Fiscal Sustainability Report 22070 Poverty Reduction and Economic Sector Management Unit Wash ington D C World Bank 2002a Monitoring and Evaluation Some Tools Methods and Approaches Opera tions Evaluation Department Washington D C World Bank 2002b Bosnia and Herzegovina Local Level Institutions and Social Capital Study Find ings and Recommendations Europe and Central Asia Environment and Socially Sustainable Development Department Washington D C Processed 90 World Bank 2002c Social Analysis Sourcebook Incorporat ing Social Dimensions into Bank Supported Projects Social Development Department Washington D C World Bank 2002d Filipino Report Card on Pro Poor Services Summary ESSD Unit East Asia and Pacific Region 2002 Washington D C Processed World Bank 2002e Program Document for a Poverty Reduction Support Credit in the amount equiva lent to SDR 9 1 million to the Cooperative Repub lic of Guyana Washington D C Processed Xiao Y and S Canagarajah 2002 Efficiency of Pub lic Expenditure Distribution and Beyond A Report on Ghana s 2000 Public Expenditure Tracking Survey in the Sectors of Primary Health and Education Africa Region Working Paper Series 31 World Bank Washington D C Yitzhaki S and J Slemrod 1991 Welfare Domi nance An Application
222. ton Reform in Chad Cotton is a key crop in Chad both for revenue generation and for poverty reduction Cotton accounted for 24 percent of total government revenues in 1997 and is the most important cash earner for about 300 000 rural farm families However weak organization and knowledge among farmers groups coupled with structural inefficiencies in the sector have resulted in low yields and low farmer revenues To address these inefficiencies the government of Chad has decided to privatize Cotontchad the parastatal that currently manages national cotton production and strengthen farmers groups A key objective of the cotton sector reforms is to improve farmer incomes Several factors underscore the gov ernment s decision to proceed carefully in designing and implementing the reforms the possibility that yields will fall further if reform prompts farmers to return to subsistence agriculture the limited availability of information on rural poverty and cotton farmers perceptions of the risks involved with the reform For these reasons the government is carrying out a poverty and social impact analysis to guide the reform In order to analyze the likely poverty and social impacts of reform ex ante the PSIA needs to do a problem analysis and clarify the assumptions on which the program is based The PSIA team in consultation with the government and local counterparts has identified pathways through which they expect the re
223. tracing impacts through transmission chan nels and making all assumptions explicit in under taking PSIA increases understanding of the theoretical premises on which the program is based A User s Guide to Poverty and Social Impact Analysis In the context of M amp E the process of tracing through the theory based transmission channels also enables one to identify potential intermediate and process indicators that can be used to monitor the implementation and outcomes of reform Third given the importance of monitoring for adjusting policy in real time some indicators for PSIA such as prices should be chosen so that they can be tracked over a short time period such as six months The purpose is to identify proxy or inter mediate indicators for outcomes or impacts that will gradually materialize One way to do this is to trace through the critical assumptions or theory through which it is believed the reform will influ ence outcomes Fourth it is important to establish indicators to monitor key risks to reform see the preceding section on risk assessment These might cover reform specific risks regarding transmission mechanisms or institutions for example or broader risks arising from the sociopolitical context such as the risk of elite capture Fifth when monitoring the impacts of a reform it is important to ensure that impacts on gender or the environment are included especially when they are expected to be si
224. tures indirect impacts only from those markets that are included in the model and results depend on the model specification and parameters While general equilibrium analysis can be used to analyze most types of policy reform it is most relevant to reforms with multiple and significant indirect impacts on the economy through a number of transmission channels An exchange rate devaluation or alternative aggregate fiscal policies would be best assessed with a general equilibrium approach data and capacity permitting General equilibrium analysis in capturing accounts from the entire economy requires not only household survey data but also com prehensive and consistent national aggregate data The computational and capacity requirements are also generally high Other drawbacks are that the technique can be difficult to explain to policymakers and results are sensitive to the assumptions on which a particular model is based The approach hence is presented in the high high cell in table 2 Specific tools for general equilibrium analysis are social accounting matrices A User s Guide to Poverty and Social Impact Analysis Box 9 Impact of Agricultural Subsidies and Tariffs in Turkey Multimarket Modeling Hammer and Tan 1989 constructed a multimarket model of the agricultural sector in Turkey Their model contains eight separate agricultural markets all of which are potential substi tutes for each other Some of these are traded
225. ty in how different players respond e World Bank 20020 e Public Affairs Center 2002 79 A User s Guide to Poverty and Social Impact Analysis Tool Name Community Score Card qt is it community based qualitative monitoring tool that draws on techniques of social audit community monitoring and citizen report cards What is it A ity based qualitati itoring tool that d techniques of social audit ity monitoring and citizen report card The process is also an instrument for empowerment and accountability as it includes an interface meeting between service providers and the community that allows for immediate feedback What can it be used for The community scorecard is a tool for Participatory Public Expenditure Reviews It is also used for local level monitoring and performance evaluation of services projects and even government administrative units like district assemblies by the community themselves The process allows for a tracking of inputs or expenditures e g availability of drugs b monitoring of the quality of services projects generation of benchmark performance criteria that can be used in resource allocation and budget decisions d comparison of performance across facilities districts e generating a direct feedback mechanism between providers and users f building local capacity and g strengthening citizen voice and community empowerment What does it tell you The community scorecard provides informati
226. uality Comparisons Using Group Data Washington DC World Bank Ravallion M 1999 Monitoring Targeting Perfor mance When Decentralized Allocations to the Poor Are Unobserved Policy Research Working Paper 2080 World Bank Washington D C Ravallion M with Less Spending International Tax and Public Finance 6 411 19 1999 Is More Targeting Consistent Ravallion M 2003 Assessing the Poverty Impact of an Assigned Program In F Bourguignon and L A Pereira da Silva eds Evaluating the Poverty and Distributional Impact of Economic Policies Tech niques and Tools Washington D C World Bank Ravallion M E Galasso T Lazo and E Philipp 2001 Do Workfare Participants Recover Quickly from A User s Guide to Poverty and Social Impact Analysis Retrenchment Policy Research Working Paper 2672 World Bank Washington D C Rao V and M Woolcock 2003 Integrating Qualita tive and Quantitative Approaches in Program Evaluation In Techniques and Tools for Evaluat ing the Poverty and Distributional Impact of Eco nomic Policies Processed World Bank Washington D C Reinert K A and D W Roland Holst 1997 Social Accounting Matrices In J F Francois and A Reinert eds Applied Methods for Trade Policy Analysis A Handbook Cambridge Cambridge University Press Reinikka R 2001 Recovery in Service Delivery Evi dence from Schools and Health Centers In
227. ublic action to increase access to reform benefits with a particular focus on constraints for the poor Complementary tools Used in conjunction with stakeholder analysis an also be used to complement institutional analysis larger representative household surveys or SOCAT be used together with poverty mapping statistical analysis of household surveys public expenditure tracking surveys and benefit incidence analysis Key Elements PPAs i use a variety of flexible participatory methods that combine visual methods mapping matrices diagrams and verbal techniques open ended interviews discussion groups and ii emphasize exercises that facilitate information sharing analysis and action with a goal of giving communities more control over the research process By their very nature PPAs may create opportunities or expectations of follow up at the community level such as the development of community action plans often supported by local government or NGOs Requirements Data information Selecting the appropriate purposive sample areas for PPAs typically from 40 60 sample communities requires an adequate understanding of social economic and poverty context of the various regions or areas of a country PPAs focus on direct field research and therefore do not have other information pre requisites Time From 5 to 9 months for research and analysis assuming a research team of between 10 and 20 people Skills
228. umption of households across those sectors The tool simulates the impact of policies affecting output on poverty using the fact that poverty changes can be decomposed into two parts a component related to the uniform growth of income and a component due to changes in relative income The simulations are made under the assumption either that the policy analyzed will be distribution neutral or conversely assuming a specific quantifiable form for the distributional change Changes in occupational distribution are accommodated through reweighing of sample households Requirements Data information SimSIP Poverty uses grouped household data typically groups by income the mean income or consumption by group and the share of these groups are required In addition SimSIP Poverty requires macroeconomic data at a nationally aggregated or sectorally disaggregated level This includes for example past or expected growth rates of output employment and population by sector Finally the population size and growth and a poverty line are necessary for calculating poverty incidence Time 1 day to gather the data on population shares and mean income consumption by group check the realism of scenarios and enter the data into the software Skills Familiarity with Excel Supporting software Excel Financial cost Limitations SimSIP does not capture second round effects These may be captured by CGE models References and applications For
229. unt when choosing an analytical approach Household sur vey data are generally pivotal to undertaking quantita tive poverty and distributional analysis An important consideration for poverty and social impact analysis is whether in addition to a welfare e g income expenditure aggregate there is information in the survey that provides the variable or the computa tion of such a variable related to the policy lever in question for example household expenses on trans port or specifically public bus transport if bus tariffs are to be increased or purchases of maize at subsidized prices if the subsidy is to be removed Other important sources of data include sector studies which may include administrative data household survey data and qualitative information and information on the macroeconomic situation including national accounts In analyzing policy reform it is very useful where pos sible to test the robustness of conclusions by matching data from different sources This is often referred to as triangulation the practice of validating results among three different sources For example in Arme nia three different sources were used to compile and compare information on consumption of and expen diture on utilities using household survey data utility accounts data and focus groups Similarly for partic ularly controversial issues participants in discussion groups may have an incentive to exaggerate or m
230. urrent practices and norms in relevant organizations that cannot easily be gleaned from documents or diagrams It does so by tracing flows of critical resources decisionmaking authority and information in the current system This helps cre ate an understanding of the rules and incentives that affect internal behavior and the extent to which organ izations pursue development objectives Process map ping can help identify constraints to effective policy implementation at three levels in organizational pro A User s Guide to Poverty and Social Impact Analysis Box 4 Decentralization in Indonesia Institutional Analysis and Social Accountability A research team led by Scott Guggenheim carried out an institutional analysis of village level governmental structures and traditional village decisionmaking bodies in Indonesia as part of a decentralization project designed to address corrup tion and top down decisionmaking The Kecamatan Devel opment Project KDP was committed to using local capacity rather than developing a separate project implementation unit The analysis conducted through focus groups and interviews with government officials helped to identify the relative strength and capacity of existing systems the flow of money and information and the location and nature of deci sionmaking in the chain The project changed the role and authority of those structures shifting the locus of power within the system from regional g
231. us whose explanatory variables form the basis of the predicted expenditure distribution Depends on the quality of the survey and census data minimum of two months six months on average Skills Good knowledge of poverty and inequality measurement Good data handling skills and experience with analyzing large scale household survey and census data sets Experience with related statistical software packages SPSS SAS STATA Supporting software SPSS SAS STATA and GIS software such as ARCView purpose written software produced by the World Bank http econ worldbank org programs poverty topic 14460 USS20 100 000 depending on level of specialized consultant availability of counterpart contributions in terms of computational assistance etc Limitations Household variables do not capture some unobserved geographic effects such as climate quality of local administration etc Hence it may be desirable to complement the analysis using such additional data Also when using the technique to simulate the impact of reforms behavioral changes are typically ignored References and applications For an overview of the technique see Lanjouw 2003 Chapter 4 of the Toolkit for Evaluating the Poverty and Distributional Impact of Economic Policies e Elbers Lanjouw and Lanjouw 2002 on the overall approach For purpose written software and manual as well as other country applications see http econ worldbank org programs poverty topic
232. us con straints Some basic principles for a good analysis of poverty and social impacts of reforms are as follows Promote country ownership If PSIA is to be an effective tool for policy it needs to be country owned Ideally countries should be responsible for the choice of reforms and for the analysis In undertaking the analysis they can seek external assistance from partners including the World Bank the United Nations and bilateral donors 40 Increase attention to ex ante analysis It is important that ex ante analysis of expected poverty and social impacts underpin the design and choice of policies particularly those that are expected to have the greatest impacts in the short to medium term This will help ensure that policies are conceived designed and implemented with a view to enhancing poverty reduction and social objectives Build on earlier experience In practice reforms often involve a series of measures over a long period of time The ex ante analysis of future reforms can be informed by the analysis of ear lier reforms to ensure that past events and changes are considered Where possible ex post and ex ante analysis should be combined Use monitoring and evaluation to validate ex ante analysis Ex ante analysis cannot fully capture policy impacts It is therefore important to track actual results through monitoring and where possible ex post evaluation That way midcourse corrections can be made to refor
233. ustments to improve policy choices and or c identifying constraints and opportunities for further public action to maximize poverty reducing impacts A critical step in the PSIA loop therefore is the feedback of lessons from the monitoring of reforms during implementation and the subsequent evaluation of the poverty and social impacts of policy choice so that the M amp E can lead to appropriate adjustment of policy Institutional setups are fundamental here A common pitfall is that units or systems charged with amp are not properly linked with the decisionmaking bodies responsible for policy formulation The crucial final link in an effective PSIA process then is ensuring that the key body making decisions about a particular policy reform is accountable for and charged with the reporting of related M amp E and the periodic reassess ment of policy Here again building institutional capacity by creating such linkages where they may not previously exist is an important part of the PSIA agenda Notes 1 The problem tree is a tool that has been popular ized through its integration within the ZOPP method ology championed by many European development 36 organizations see GTZ 1991 For a description of the problem tree see http europa eu int comm euro peaid evaluation methods PCM_Manual_ EN march pdf and European Commission 2002 2 To the extent that stakeholder analysis helps focus subsequent research on specific s
234. utputs of most analytical tools For instance a poverty map can be combined with maps that show the placement of primary health care facili ties to understand the access to health services by the poor The technique is particularly suited to reforms with regionally differentiated impacts such as decen tralization and agricultural reform as in the case of rice price changes in Madagascar Mistiaen 2002 22 Applications also include planning of public invest ments in education health and transport and target ing of direct social assistance and food aid to vulnerable populations The method is most useful when constructed at a fine level of disaggregation but this requires very large data sets Tools to assess public service delivery allow analysts to measure the efficiency of public spending and the delivery performance through assessing leakages and their sources captures of financial flows and incen tives and accountability mechanisms at all stages of the expenditure chain This complements incidence analy sis which relies on analyzing the cost of the services provided irrespective of the service that actually reaches the beneficiaries Applications of these tools include the analysis of the efficiency and quality of health and education service delivery in Tanzania and Uganda Government of Tanzania 1999 and 2001 and Reinikka 2001 These tools including Public Expendi ture Tracking Surveys PETS and Quantitative Servic
235. vatization but refuse to remove barriers to entry because of entrenched interests resulting in an oligopolistic sector that charges high interest rates and provides poor services Factors that typically affect ownership can be ana lyzed by looking at both the political economy of a country and its diversity based on ethnic religious linguistic gender and age differentials By considering political economy analysts can identify affected groups and assess their influence over government decision makers Taking stock of diversity is important because reforms may polarize existing tensions in the short term even while improving welfare in the long run Element 3 Understanding transmission channels Once potential stakeholders have been identified an important early step in the PSIA process is to delineate the channels by which the analyst expects a particular policy change to impact various stakeholder groups Itis important to explicitly present the hypotheses and assumptions underlying this analysis These can then be tested empirically through economic and social analysis techniques As discussed in chapter 2 the expected impact of a policy change on the welfare of target groups and other key stakeholders takes place through five main transmission channels employment prices produc tion consumption and wages access to goods and services assets and transfers and taxes The transmis 12 sion channels that are going
236. ve There may also be good reasons for a government to take a policy forum seriously Elected leaders who rely on democratic legitimacy to bolster their popular ity may find such a forum attractive as may policy makers who are genuinely uncertain about which policy reform path to take From a leadership perspec tive it may be sensible and more sustainable to pursue a policy that rests on a social coalition or bargain than one that theory may dictate as first best Convening such policy forums among stakeholders however is not without risks One is that implicit con flict between major interests may become open hostil ity A second risk is that political competition may override the possibility of constructive dialogue Yet another common risk is that overly high expectations of the forum will result in disappointment people may assume that public debate will lead to the adop tion of a policy that simultaneously meets the needs of all stakeholders whereas in reality the typical process of negotiation and compromise during policy formu lation often leads to policies that do not mirror all stakeholder preferences Managing the process of policy debate and discus sion itself requires some planning particularly in order to manage risks In particular once the decision is made to convene a forum three concrete issues must be addressed whom to invite what to discuss and how to structure the dialogue These decisions are best ma
237. ved road infrastructure could dramatically enhance access to markets and services for groups in certain geo graphic areas A policy that expands connections to an electricity grid particularly among the poor can also represent a welfare gain In this regard privatization of service provision could either increase or decrease access relative to public sector provision Lack of access to key infrastructure or services either because they do not exist or because they are of poor quality can limit the intended benefit of a policy For example restructuring a marketing board may be fiscally desir able but may eliminate key market services where alternatives do not exist Structural or cultural norms such as restrictions on female mobility or female property rights may also impose higher transaction costs or create barriers to access Assets Changes in the value of households assets will affect income and non income dimensions of welfare Changes in asset values can be due to changes in their levels or their returns Assets themselves can be cate gorized into five classes all of relevance to poor house holds physical such as housing natural such as land water human such as education skills finan cial such as a savings account and social such as membership in social networks that increase access to information or resources Policy changes can have a direct or indirect impact on these assets and their returns For e
238. vices Powers 2003 Two key areas of focus for PSIA are the analysis of market structure and the analysis of implementing agencies Analysis of market structure Surveys among consumers and producers of goods and services can be useful approaches to enhancing understanding of context specific market structure Identifying the nature of the market monopoly monopsony oligopoly perfectly competitive etc and what determines this market structure natural monopoly restrictions to entry or collusion for example is a crucial first step toward understanding the enabling conditions that would need to be created for market reform to lead to improvements in per formance and better outcomes for the poor Enterprise or trader surveys can be useful for understanding the nature of the market the number and types of economic agents and market constraints as well as de jure and de facto barriers to entry and transaction costs In the case of privatization or liber alization where an assumption is that market entry will lead to competition and price reduction it might 13 also be useful to undertake concurrently an analysis of the constraints to private sector entry and participa tion Quantitative or qualitative household surveys can also reveal who buys services where and at what price Quantitative service delivery surveys and citizen report cards can be applied to the analysis of the effec tiveness of state marketing agencies Price
239. vices in Indonesia 1978 87 World Bank Economic Review 8 2 279 309 van de Walle D 1998 Assessing the Welfare Impacts of Public Spending World Development 26 3 365 79 van de Walle D 2002a Choosing Rural Road Invest ments to Help Reduce Poverty World Develop ment 30 4 575 89 van de Walle D 2002b The Static and Dynamic Inci dence of Viet Nam s Public Safety Net Policy Research Working Paper 2791 World Bank Wash ington D C van de Walle D 2002c Poverty and Transfers in Yemen Middle East and North Africa Working Paper 30 World Bank Washington DC van de Walle D 2003 Behavioral Incidence Analysis of Public Spending and Social Programs In F A User s Guide to Poverty and Social Impact Analysis Bourguignon and L A Pereira da Silva eds Eval uating the Poverty and Distributional Impact of Economic Policies Techniques and Tools Wash ington D C World Bank Wodon Q K Ramadas and D van der Mens brughghe 2003 SimSIP Poverty Module World Bank Washington D C World Bank 2000a World Development Report 2000 2001 Attacking Poverty New York Oxford University Press World Bank 2000b Modeling Pensions Reform The World Bank s Pension Reform Options Simula tion Toolkit Human Development Network Social Promotion Washington D C World Bank 2001 Malawi Public Expenditures Issues and Options Report 22440 MAI Washing
240. vil service reform and fiscal policy It is particularly rele vant for understanding the quality of impact on dif ferent groups and examining how the poor cope with reforms and access market opportunities Given the overlap of research methods SIA is more cost effective when undertaken simultaneously with institutional analysis and social risk assessment Participatory poverty assessments PPA and beneficiary assessments BA both rely on direct consultation of spe cific groups and field observation using primarily qual itative techniques focus groups key informant interviews and a range of other tools classified under the broad label of participatory rural appraisal Like poverty maps PPAs have often been used before the analysis of a specific policy reform to identify those policies and issues of most relevance to the poor and to understand the non income dimensions of poverty and the processes through which reform actions filter down to the poor PPAs tend to focus on information and analysis at the national level by selecting a sample of regions for intensive research on poor people s views in order to understand poverty impacts through a series of rapid assessment tools and structured task based ana lytical exercises They can be adapted for use in moni toring or seeking feedback on a particular policy and in designing pro poor public policies Norton and others 21 2001 They are more relevant to broad based fiscal exp
241. xample land reform may directly result in an increase or decrease in land assets of the poor Policy changes can also impact assets through indirect channels For example inflationary policies will have a negative wealth effect on those with monetary savings while participatory budgeting or community pro grams may increase social capital Pricing or trade changes could affect the natural resource assets of households or groups such as by increasing or decreasing deforestation or desertification or even their human capital such as by causing a deteriora tion in health conditions due to increased indoor air pollution as a result of energy price changes In many cases certain assets are also prerequisites to benefit from a reform For example if farmers cannot reach a market due to lack of transport the benefits of price liberalization are likely to be realized primarily by middlemen and traders It is important to take into account the legal and regulatory frameworks when analyzing this transmission channel for example A User s Guide to Poverty and Social Impact Analysis there are sometimes constraints on female land own ership Transfers and taxes Household welfare finally is affected by transfers to and from the household These transfers can take the form of private flows such as gifts and remittances or public flows such as subsidies and taxes Public finance has a direct impact on the welfare of specific groups thr
242. y and Distributional Impact of Economic Policies 71 A User s Guide to Poverty and Social Impact Analysis Tool Name Poverty Analysis Macroeconomic Simulator PAMS What is it PAMS is an econometric model that links a macro consistency model or macroeconomic framework to a labor poverty module What can it be used for PAMS can be used to address the impact of macroeconomic policies and exogenous shocks such as an exogenous rise or fall in output growth or a change in the sectoral composition of output on individual households What does it tell you PAMS can produce historical or counterfactual simulations of i alternative growth scenarios with different assumptions for inflation fiscal and current account balances These simulations allow for testing tradeoffs within a macro stabilization program ii Different combinations of sectoral growth agricultural or industrial tradable or nontradable goods sectors within a given aggregate GDP growth rate iii tax and budgetary transfer policies Complementary tools Stakeholder analysis can be useful to identify groups to inform the selection process of micro categories Social impact analysis and institutional analysis could help analysts identify constraints to market participation by certain groups which would affect poverty and inequality estimates Key Elements PAMS has three main components i a standard aggregate macro framework that can be taken from any macro consistency model
243. y reforms on the well being or welfare of different stakeholder groups with particular focus on the poor and vulner able The adoption of the Poverty Reduction Strategy Paper approach and of the Millennium Development Goals has led to an increased need for more systematic analysis of the poverty and social implications of reforms This User s Guide is part of a comprehensive response undertaken by the World Bank to address those concerns The User s Guide is intended for practitioners undertaking PSIA in developing countries Given the broad scope of policy issues methods and challenges involved the User s Guide does not specify minimum standards for PSIA but rather provides suggestions on how to approach the analysis In advocating a multi disciplinary approach to PSIA the User s Guide pres ents both economic and social analysis tools and methods While focusing on distributional impacts PSIA also addresses issues of sustainability and risks to policy reform that come with the poverty and social impacts of policy changes PSIA includes ex ante analysis of the likely impacts of specific reforms analysis during reform implemen tation and ex post analysis of completed reforms Each of these has a specific utility Ex ante PSIA can inform the choice design and sequencing of alterna tive policy options During implementation the mon itoring of a reform and its impacts can lead to refinement of the reform a reconsiderat

A User's Guide to Poverty and Social Impact Analysis

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