Systematic country diagnostic: Poverty and equity analyses Poverty and Equity GP Summer University, July 2017

What does an SCD look like? Based on these questions, the SCD identifies priority or focus areas for a country, in order to maximize poverty reduction and welfare improvements among the less well off. What are the country’s main issues, in terms of the current trends and patterns in poverty, shared prosperity and sustainability? What are the critical factors driving or constraining economic growth? What are the critical factors determining the inclusiveness of growth, namely increase in welfare of the poor and less well-off? How sustainable (environmentally, socially and fiscally) is the current pattern of growth, distribution and poverty reduction? Systematic Country Diagnostic

Framing the issues, in terms of achieving the goals Some examples: What are the levels and trends in poverty and incomes of the bottom 40% in the country over the past 5 to 10 years? How does the country’s performance in poverty reduction and shared prosperity compare to regional and global benchmarks, and its own historical performance? What are the levels and trends of aggregate growth and how are they related to performance on poverty and shared prosperity? Is aggregate income growth low overall, or is growth is not inclusive or “shared” enough? What is the distribution of growth, by sector, spatial patterns, etc.? What are profiles of the poor, vulnerable, and the less well off, and drivers of poverty and income growth of the bottom 40%? What major trends in environmental, fiscal or social sustainability may impede achievement of the country’s development goals? How do government capacity and governance impede poverty reduction, inclusion, and sustainability? Does recurrent conflict and violence impede inclusive growth and development?

A typical diagnostics approach What key constraints and opportunities does the country face in accelerating progress in poverty reduction and shared prosperity sustainably? Inadequate growth Inclusiveness of growth Risks to the sustainability of growth, distribution and poverty reduction Cross-cutting themes (e.g. gender, fragility and conflict) Constraints to private investment, productivity and entrepreneurship economy- wide and across sectors and firms Adequate & equal opportunities and basic elements of well-being (education, health, sanitation, physical safety) Unsustainable depletion of per-capita total wealth, acute environmental issues, or high vulnerability to natural disasters Risks to macro- economic stability, fiscal sustainability, threats of financial crisis or external shocks Agency and social inclusion: voice, freedom and influence in social, economic and political domains The three themes or “branches” are intertwined Organizing around three big themes is imperfect, but useful as it breaks down analysis into familiar pieces Many potential complementarities and (sometimes) tradeoffs Given interlinkages, analysis going down one branch needs to consider implications for other branches Interlinkages also arise due to constraints that are cross- cutting, e.g. Governance (institutional arrangements and capacity, transparency, and accountability) Conflict and violence, and their root causes, in certain countries Identifying market and institutional failures – critical for finding solutions Some constraints have to do with clear market failures (e.g. imperfect credit markets, insufficient insurance mechanisms, etc.), which merit specific types of intervention Others may be related to institutional failures, which do not correct or exacerbate the market failures Adequate distribution of gains from growth? how assets, prices, markets and institutions affect the income of the poor/less well-off High threat to social or political stability Detailed set of guiding questions to identify constraints Priorities

Analysis of inclusion – a snapshot What are critical factors influencing inclusion, i.e. increase in welfare of poor and less well- off? Adequate, equal opportunities and basic elements of well-being. E.g. What are coverage, quality, and equality of basic opportunities? Even if there is sufficient access, what about quality, cost-effectiveness, and other factors that affect equal opportunities Voice/Agency and social inclusion. E.g. Are all individuals and groups (e.g. the bottom 40%, women, minorities) able to make choices and transform them into actions and outcomes through participation in social, economic and political domains? Are certain groups socially excluded and in which ways? Are there identifiable processes through which exclusion from markets, services and spaces takes place? Why are these groups excluded? Adequate distribution of gains from growth. E.g. Focus on specific groups identified as inadequately benefiting from overall growth, e.g. The poor and bottom 40%; women; sectors (e.g. informal); occupation groups (e.g. casual wage workers); lagging regions For such groups, detailed analysis of factors that constrain employment and earnings: Assets and access to capital Prices/returns they face Access to markets and economic opportunities Policies and institutions that influence distribution of gains from growth

Prioritization – suggested criteria A suggested list of criteria, to help teams assess all constraints. “Weights” of the criteria could vary across countries Impact on goals: size of impact on sustainable increase in welfare of the poor and less well-off (relative to that of other constraints) – the “dominant” criterion Time horizon: balance of short-term and longer-term impacts Pre-conditions: critical issues for other things to work Complementarities: constraints/opportunities that generate benefits beyond one dimension Evidence base: Degree of confidence in the evidence – for identifying the problem and solutions. As a part of this exercise, identify critical data and knowledge gaps Political feasibility – not influence the analysis but could be considered in identifying priorities

Full SCD Guidance Note (http://scd) More on process: Guidance on consultations and disclosure Peer reviewers IFC involvement Recommendations of what the concept note should include: Recommended length of document More on nature of analysis in SCDs More guidance on prioritization, benchmarking More on cross-cutting themes (gender, climate, FCV, jobs, private sector) Data diagnostic

Data diagnostic template