Monday, December 5, 2011

Knowledgeable bankers? the demand for research in World Bank operations

In trying to understand the impact of development aid, much attention has been given to the role played by the circumstances of recipient countries, notably whether their policy environment and governance are conducive to high social returns from aid.

The literature has given less attention to the role played by the staff and managers in donor organizations. In the case of the World Bank, there have been concerns about the Bank’s ―lending culture,‖ which tends to reward operational staff for the volume of their lending, with (it is argued) too little weight given to the quality of lending.

In one of the few studies of aid effectiveness to look at these issues, Denizer, Kaufmann and Kraay (2011) confirm that the ―macro‖ variables concerning recipient countries are relevant to the (subjectively but independently assessed) quality of the Bank’s development projects. But they also find that the bulk of the variance in the quality of the Bank’s lending operations is within countries rather than between them. The quality of the staff in charge of projects on the donor’s side matters at least as much as the policy environment on the recipient’s side.

The knowledge of operational staff within donor agencies is likely to be important to the quality of development aid. There is evidence that the stock of prior analytic work by the Bank on a recipient country is a strong predictor of the subsequent quality of its lending operations to that country (Deininger, Squire and Basu, 1998; Wane, 2004) and that the quality of prior analytic work matters to the quality of its projects (Fardoust and Flanagan, 2011). The stock of practitioners’ knowledge depends on their demand for knowledge, as well as its supply. Thus the incentives for learning within aid organizations have been identified as one factor in the quality of development aid (Wane, 2004; Ravallion, 2011). The generation of relevant knowledge and its diffusion within donor agencies is a poorly understood factor in development effectiveness.

While research is clearly a key element of knowledge generation and innovation, any large and complex organization like the World Bank will face challenges in assuring that relevant basic research is both produced and used.4 As the literature on organizations has emphasized, a key factor is the ability to exploit the internal division of labor to support innovation (Hage, 1999). The role of a designated ―research department‖ in bringing together internal research capabilities and in absorbing new external information to assure innovation has long been recognized in the literature (following, in particular, Cohen and Levinthal, 1990). But having such a department does not guarantee that practitioners will have the incentive to learn from research, and that the research produced will serve their needs. In practice, there may well be frictions within an organization that inhibit learning even when the incentive is there.

The World Bank (WB) has a department dedicated to research, the Development Research Group (DECRG), within the Development Economics Vice-Presidency (DEC), as well as researchers scattered across other units. Research accounts for roughly 1% of Bank staff; there are about 75 full-time research staff in DECRG and probably another 25 or so full-time equivalent researchers outside DECRG.

DECRG spans all sectors of the Bank’s work. Its research is almost invariably empirical and typically draws on economics as the primary discipline, though increasingly drawing on insights from other social sciences. By objective criteria, the scale and quality of its research on development exceeds that of virtually all other international agencies and universities. DECRG aims in part to serve the needs of its operational units, which provide development lending and policy advice to developing countries.

However, we know very little about the demand for Bank research among the Bank’s operational staff. How familiar are they with research? How much do they rely on it for their work? How do the answers to these questions vary across units and sectors of the Bank? We know even less about the incentives for learning among the Bank’s operational staff. Those incentives depend crucially on the value attached to WB research by staff for their work. Do the Bank’s practitioners value research for their work, and (if so) does this incentive to learn translate into greater familiarity and use of the Bank’s research?

This paper tries to throw new light on the demand for research by development practitioners within the World Bank. A key empirical question is how operational staff are mapped into the four groups identified in the following table. If the Bank’s operational staff highly value research for their work, and the research done within the Bank is relevant to their needs and accessible to them, then the bulk of staff will fall into the category ―functionally well-informed.‖ For this group, the incentive to learn comes with acquired knowledge. There may also be staff who are well-informed about research, but not because it matters to their work; they are ―independently well-informed.‖ And some value research for their work but face hurdles in accessing it, so their familiarity is low; these are the ―frustrated uninformed.‖ The remainder comprise those who do not see any value to research for their work, and so do not seek it out; they can be said to be ―happily uninformed.

The paper uses a specially commissioned survey of the World Bank’s senior operational staff to determine how they are mapped to these four groups. The paper’s analysis of these data aims to better understand the demand for research by the Bank’s practitioners—reflecting both their incentives to learn and the responsiveness of the supply of research to their needs.

World Bank.Author: Ravallion, Martin.Document Date: 2011/12/01.Document Type:Policy Research Working Paper.Report Number: WPS5892. Volume No:1 of 1.