The Operational Relevance of Poverty and Social Impact Analysis

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The Operational Relevance of Poverty and Social
Impact Analysis

• Erika Jorgensen (OPCS)
• April 19, 2007
• with acknowledgements to Andy Norton, SDV, and
  Ken Simler, PRMPR

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• Definition
• Background history/experience of PSIA
• The OP 8.60 framework
• Poverty and Social Impact Analysis in the first
  wave of DPLs
• Lessons learned
• Challenges and future directions

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• Poverty and Social Impact Analysis (PSIA)
• Definition
• PSIA is the analysis of the distributional impact
  of policy reforms on the welfare of different
  social groups, with a particular focus on poor
  and vulnerable groups
• What is it? An approach to
• understand the impact of policy reforms and
  public actions on poverty and social outcomes
  (income and non-income effects)
• analyze intended and unintended consequences of
  policy interventions (ex-ante, during
  implementation, ex-post)
• consider tradeoffs between social costs and
  benefits of reform by assessing opportunities,
  constraints and social risks
• design appropriate mitigating measures and risk
  management strategies for the reform program,
  when adverse impacts and risks are unavoidable

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• PSIA summary history
• PSIA work program since 2001 collaboration
  between SDV and PRMPR. Implementation since 2002
  154 PSIAs in 72 countries
• embedded in lending/non-lending operations (e.g.
  projects, DPLs, PRSCs, PAs, CEMs)
• anchored in Bank policy on Development Policy
  Lending (OP 8.60, 2004)
• Body of knowledge
• 154 PSIAs across 19 sectors and all regions
• Conceptual framework and tools (PSIA Users
  Guide, 2003)
• Technical guidance (Good Practice Note, 2004)
  Sector guidance notes (2005) Case studies (2006)
• Tools Economic toolkit (2003) Institutional,
  political and social - TIPS Sourcebook (2005),
  E-Learning Hard Cover (2006)
• Partnerships
• PSIA Multi-donor Network, Norway/Finland TF (1.8
  million FY02-03), German TF (4.5 million
  2004-09), WB/UNDP/Belgium TF (3 million,
  recipient executed, 2005)

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• Sectoral and Regional Distribution of PSIA
  (FY03-06)

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• PSIA Framework
• Asking the right questions
• Analyzing stakeholders, institutions, impacts,
  risks
• Understanding transmission channels
• Gathering data and information to fill gaps
• Enhancing positive address negative impacts
• Establishing monitoring and evaluation systems
• Fostering policy debate and feedback for policy
  adjustment

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• PSIA and Development Policy Operations
• The operational policy (OP 8.60) expects program
  documents for development policy support
  operations to specify which policies supported by
  the operation may have significant distributional
  consequences.
• If significant poverty and social impacts likely
  for policy reform supported by a specific lending
  operation,
• Analysis is either conducted by the Bank or other
  partners before operation goes to Board, and
  summarized in the program documents,
• or
• Operation proceeds to the Board with an action
  plan for Poverty and Social Impact Analysis
  during implementation of DPL

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Example Indonesia Fuel

• Reduction of regressive subsidy politically
  contentious
• Prior to policy reform government undertook PSIA
  and engaged in dialogue with partners in donor
  and civil society
• Although regressive some impact on the poor
  govt reallocated funds to a UCT program for poor
  hhs
• PSIA work a major input to extensive discussions
  with stakeholder groups (private sector,
  parliameentarians, regional govts etc.)

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Criteria to select reforms for PSIA

• The expected size and direction of the poverty
  and social impacts
• The prominence of the issue in the governments
  policy agenda
• The level of national debate surrounding the
  reform
• The timing and urgency of the underlying policy
  or reform

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• Review of PSIA in DPLs
• Majority of DPLs (35 out of 39) comply with OP
  8.60 by addressing poverty and social impacts
• Although most documents mention distributional
  impacts, some fail to clearly link the general
  material on poverty to an analysis of
  distributional impacts of key reforms
• Available analytic work often not fully utilized
• PSIA could be better embedded in upstream
  processes and partner policy systems
• Plans and results of PSIA work could be disclosed
  earlier and more widely

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• Lessons Learned
• Reform identification
• Selection should come from national policy
  processes (e.g. PRS) rather than a duplicate
  process
• Selectivity necessary because of cost and time
  and because PSIA works best for specific,
  well-defined reforms (and alternative)
• Interface analysis/policy making
• Reform implementing agency close to analytical
  process
• Feed analytical work into operation design
• Align with broader policy cycle in country
  (Policy process no clear beginning/end)
• Clear findings, easy to understand and
  communicate
• Contribution to public debate about policy
  choices
• Participation
• Part of broader policy process (choice and
  debate)
• No monopoly on analysis (but objectivity and
  rigor)
• Stakeholders perception part of inputs into
  analysis
• Coordinate with other partners

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• Lessons Learned
• PSIA ex ante and monitor results during
  implementation
• Integrate monitoring of impacts within national
  monitoring systems
• Add relevant questions to ongoing household
  surveys, establish control groups, panel data
• Build country capacity to sustain PSIA work
• Capacity of policy actors to ask the right
  question, commission and supervise work, use
  findings to choose between policy options
• Capacity of research institutions and government
  agencies to collect data and analyze. Tools and
  methods should be realistic, understandable, and
  replicable
• Capacity of key stakeholders to use evidence
  during policy debates and to build ownership for
  the reform.

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• Summary where we are now
• PSIA can be seen as in transition between an
  RD phase and a mainstreaming phase
• RD responding to external critique activity,
  product-based focus on developing technical
  methods use of incremental resources due
  diligence focus
• Mainstreaming (post OP8.60) moving from tracking
  outputs and activities to tracking results
  emphasis on PSIA as process rather than product
  using mainstream resources emphasis on PSIA to
  strengthen reform ownership.

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• Challenges and Future Directions
• Embedding PSIA within partner policy systems
  (response GPSAF country programs, TIPS, PSIA
  network)
• Methods and approaches which enable delivery
  within available time and budget (TIPS, PIA)
• Better understanding of the political economy of
  policy reform (TIPS/PIA)

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• www.worldbank.org/psia
• PSIA Users 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
• www.worldbank.org/tips
• 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)