Poverty Reduction and Economic Management Network Louise Cord PREM Poverty Reduction Group The World Bank Hanoi, February 2007 Poverty and Social Impact Analysis Building capacity for evidence-based decision making

Page 2 What is a good PSIA? Five analytical lessons 1.Impact on different groups Functional groupings are often more useful than income groups 2.Negative and positive impacts Understanding the political economy of reforms is crucial 3.Short and long-term impacts Direct effects and indirect effects (‘knock-on’ and behavior change) 4.Multiple transmission channels 1) Wages & prices, 2) employment, 3) access to goods & services, 4) assets, 5) transfers & taxes, and 6) authority 5.Choice of methods and team Appropriate analytical tools, triangulation of data sources and disciplines (complementary quantitative and qualitative analysis)

Page 3 What is a good PSIA? Five operational lessons 1.Identifying priority reforms From national policy process (PRS or CAS), selectivity essential, specific and well-defined reforms work best 2.Design of the PSIA Transparent stakeholder consultations on the scope of analysis and results, but not the analysis itself 3.Analysis of the reform Emphasis on maintaining high technical standards, potentially involving a range of organizations (esp. implementing agency). 4.Policy dialogue and upstream integration Need to align with country’s planning & policy cycle Policy process has no clear beginning/end (continuous scrutiny) 5.Monitoring and evaluating the reforms Need to re-visit the assumptions of the ex ante PSIA, and adjust as appropriate. Integration with national monitoring systems helps.

Page 4 Looking ahead: building country capacity  Strengthening in-country capacity to carry out multi-disciplinary distributional analysis.  Developing capacity of policymakers and stakeholders to be good demanders and consumers of distributional analysis.  Improving transparency and dissemination of the analysis, contributing to open and informed policy debate.

Page 5 Looking ahead: challenges  Making PSIA relevant:  Timing -conducting PSIA “upstream” as part of PRS.  Cost  Complexity  Managing the political economy considerations:  Disclosure  Only one tool for evidence based decision making:  Impact evaluation  PIA and other cost-benefit tools for investment projects  Analytical work  Monitoring systems

Page 6 PSIA User’s Guide Guidance on specific sectors Trade, monetary policy, utility provision, agricultural markets, land policy, education (Volume 1) Health, labor market, pension, decentralization, public sector downsizing, taxation, and macroeconomic modeling (Volume 2) Country case studies: “ Poverty and Social Impact Analysis of Reforms: Lessons and Examples from Implementation” (Coudouel, Dani & Paternostro, 2006) Tools for Institutional, Political and Social analysis (March 2007) PSIA e-learning course PSIA Good Practice Note Economic tools for impact analysis: “Evaluating the Impact of Macroeconomic Policies on Poverty and Income Distribution Using Micro-Macro Linkages Models” (forthcoming) “The impact of Economic Policies on Poverty and Income Distribution: Evaluation Techniques and Tools” (Bourguignon and Pereira da Silva, 2003)