1 March 2006 Aline Coudouel Poverty Reduction & Economic Management The World Bank Poverty and Social Impact Analysis in the World Bank

2 What PSIA does Analysis of distributional impact of policy interventions on the well-being of different groups, with a particular focus on the poor and vulnerable. PSIA helps to:  Keep a pro-poor focus in policy reform  Underpin policy reforms with empirical evidence  Provide inputs towards a better policy dialogue  Contribute to country ownership of policies  Ultimately: Enhance the effectiveness of interventions

3 PSIA in the World Bank Initial efforts:  Develop users’ guide  Prepare technical guidance  Intensive training  Provide additional funding to teams Results:  Over 150 PSIAs since 2002, in 72 countries  After phase with incremental funds, now funded from regular budgets

4 Regional distribution of PSIAs with incremental funding Number of PSIAs

5 Sectoral distribution of PSIAs with incremental funding

6 Five analytical lessons 1.Impact on different groups  Operational (and reform-specific) groups 2.Negative and positive impacts, influence  Political economy of reforms is critical 3.Multiple channels, short and long-term  Net impacts (affect direction/size of impact) 4.Institutions matter  Transaction costs, incentives, performance, capacity 5.Choice of methods and team  Multiple data sources, complementarity  Multi-disciplinary best, but hard

7 Five operational lessons 1.Reform identification  From national policy process, selectivity essential, specific works best 2.Analytical work  Rigorous and unbiased, transparent and easy to understand 3.Interface analysis/policy making  Reform implementing agency close to analytical process 4.Policy dialogue and debate  Align with broader policy cycle  Policy process no clear beginning/end (continuous scrutiny) 5.Participation  Part of broader policy process (choice and debate)  No monopoly on analysis (but objectivity and rigor)  Stakeholders’ perception part of inputs into analysis

8 Challenge: Consolidating success Steady state scenario  PSIA conducted by countries, part of PRS process  WB relies on PRS (or similar) In the meantime…  Part of operational policy on Development Policy Lending (OP 8.60)  Mainstreaming in analytical and operational tools - Country Assistance Strategy, analytical pieces (PA, CEM, PER), lending (PRSC, DPL)

9 Ensuring the future: country capacity 1.Capacity to analyze and monitor:  Research organizations and government  Data collection and analysis  Methods should be understandable and replicable. 2.Capacity to use results:  Ability of policymakers to utilize the findings  Dissemination transparent  Communication of results in right format 3.Interest for evidence-based policymaking Multi-donor effort ongoing.

10  PSIA User’s Guide  PSIA e-learning course  PSIA Good practice Note  Economic tools for impact analysis: “The impact of Economic Policies on Poverty and Income Distribution: Evaluation Techniques and Tools” (Bourguignon and Pereira da Silva, 2003) “Evaluating the Impact of Macroeconomic Policies on Poverty and Income Distribution Using Micro-Macro Linkages Models” (forthcoming)  Tools for Institutional, Political and Social analysis  Country examples, case studies (book out June 2006)  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)