A User’s Guide to Poverty and Social

Impact Analysis
World Bank
Poverty Reduction Group (PRMPR) and
Social Development Department (SDV)

WORK IN PROGRESS
DRAFT FOR COMMENT
APRIL 19, 2002 VERSION
 Table of Contents

I. Introduction........................................................................................................................... 2

II. Background and Challenges ................................................................................................ 2

III. Implications: Principles for Operationalizing Poverty and Social Impact Analysis ...... 4

IV. A Conceptual Framework for Understanding Poverty and Social Impacts ................... 5

V. Elements for Good Poverty and Social Impact Analysis (PSIA) .................................... 11
1. Asking the Right Question 12
2. Identifying Stakeholders 12
3. Understanding Transmission Channels 14
4. Assessing Institutions 15
5. Gathering Data and Information 18
6. Analyzing Impacts 23
7. Contemplating Enhancement and Compensation Measures 36
8. Assessing Risks to PSIA 38
9. Monitoring, Social Accountability, and Evaluation of PSIA 39
10. Feedback of PSIA into Country Policy Choice 46

VI. Possible Summary Matrix .................................................................................................. 47

VII. Conclusions .......................................................................................................................... 51

Appendix 1 Typology of Tools for Poverty and Social Impact Analysis ............................... 52

Appendix 2 Poverty and Social Impact Analysis – Reform-by-Reform Application of Key

Tools ........................................................................................................................ 56

References .................................................................................................................................. 58

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Annex: Economic and Social Tools for Poverty and Social Impact Analysis

I. Identifying Stakeholders ..........................................................................................................66

Stakeholder Analysis ..............................................................................................66

II. Assessing Institutions ..............................................................................................................67

Institutional analysis ..............................................................................................67

III. Analyzing Impacts – Social Tools ........................................................................................68

Social Impact Assessment (SIA) ...........................................................................68
Participatory Poverty Assessments (PPA) .............................................................71
Social Capital Assessment Tool (SOCAT) ............................................................72

IV. Analyzing Impacts – Economics Tools ................................................................................73

1. Direct Impact Analysis – Incidence Tools .....................................................................73
Simple Benefit Incidence Analysis ........................................................................73
Poverty Mapping....................................................................................................75
2. Behavioral Models. ........................................................................................................76
Behavioral incidence analysis ................................................................................76
Demand analysis ....................................................................................................77
Supply analysis ......................................................................................................78
Household models..................................................................................................80
3. Partial Equilibrium Models ............................................................................................81
Multimarket models ...............................................................................................81
Reduced- form estimation.......................................................................................82
4. General Equilibrium Models..........................................................................................83
Social Accounting Matrices and Input-Output models..........................................83
Computable General Equilibrium (CGE) Models .................................................83
5. Microeconomic Simulations Linked to Macroeconomic/Sectoral Models ..................86

V. Assessing Risks ........................................................................................................................89

Social Risk Assessment .........................................................................................89
Scenario Analysis...................................................................................................91

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 Preface

This draft User’s Guide lays out an approach to poverty and social impact analysis (PSIA). This
draft Guide provides a menu of possible tools and techniques for such analysis; it does not set
out minimum standards. PSIA is not a discrete product within the Bank’s Economic and Sector
Work (ESW) “product line” but rather an approach that may be used as part of Bank ESW or by
other donors or developing countries. This draft Guide does not constitute Bank operational
policy for poverty and social impact analysis. Specific guidelines for Bank staff on poverty and
social impact analysis are being developed separately.

The draft Guide is a work in progress. It is being circulated in draft form for external comment,
and we would very much welcome reactions on its usefulness from policy makers and analysts in
developing countries, as well as from representatives of donor agencies and civil society
organizations. Feedback and comments can be sent to psia@worldbank.org. At the same time, a
process of consultation with national teams and Bank operational staff is underway. We plan to
update the draft Guide over time to reflect further country experience and good practice with
PSIA as well comments on the approach. In this regard, we would be particularly grateful for
country examples of good practice.

The draft Guide is one element of a much larger work program by the Bank on poverty and
social impact analysis. Key elements of this work program include:
• PSIA Toolkit: this will provide more detailed technical guidance on the tools highlighted in
the draft User’s Guide, and will be available later this year.
• Reform-by-Reform Supplement to the draft User’s Guide: this will discuss tools for PSIA
on a reform-by-reform basis. This will also be available later this year.
• Learning Program: this is underway and is being rolled out gradually. It will focus in the
first instance on Bank and Fund staff, and over time be extended to country counterparts. In
addition to formal training, the Learning Program includes action learning focusing on teams
applying PSIA to operational work and on learning through cross country experience.
• Country Cases: PSIA of specific reforms is being carried out in a set of low income
countries in order to derive lessons for wider application. This work is being done in
collaboration with DFID who are supporting similar case studies.

1
 I. Introduction

1. Increased attention to poverty reduction as the central goal of development has

highlighted the need for an improved understanding of how policies affect the poor. With the
advent of the Poverty Reduction Strategy Paper (PRSP) process, many low income countries are
struggling over the choice of public actions that will have the greatest impact on poverty. The
Bank has a major role to play in helping countries improve the analysis on which such choices
are made, and the international community has high expectations of our delivery in this area.

2. This draft User’s Guide is intended for practitioners undertaking PSIA in developing
countries.. The draft Guide provides a menu of possible tools and techniques for such analysis; it
does not set out minimum standards. The main section defines PSIA and outlines the various
tools that can be used to carry it out. The Annex provides more detail on individual tools. The
draft User’s Guide, in advocating a multi-disciplinary approach to PSIA, presents both economic
and social tools and quantitative and qualitative methods. 1

3. Given the broad scope of policy issues and methods, this draft User’s Guide cannot be
comprehensive in its treatment. Instead, it attempts to provide some general guidance on how to
approach the analysis of poverty and social impacts of policy reform, and it provides a typology
of tools, illustrated by country examples. To supplement the draft User’s Guide,
DEC/PREM/WBI plan to issue a toolkit on PSIA which will provide more in-depth guidance on
the economic tools discussed in this paper. The Social Development Department is organizing
an intensive learning program to provide further guidance on the social development tools for
PSIA. In addition, the draft User’s Guide will itself be appended to include more guidance on
the application of tools and approaches to address specific reform issues confronting low income
countries. 2

4. The draft User’s Guide – and the other guidance material as it becomes available -
forms the basis of a new learning program for Bank staff, beginning in April 2002.

II. Background and Challenges

5. “Poverty and social impact analysis” (PSIA) is used in this draft User’s Guide to mean
analysis of the distributional impact of policy reforms on the well-being or welfare of different
stakeholder groups, with particular focus on the poor and vulnerable 3 . In so doing, it also
addresses issues of sustainability and risks to policy reform that come with social impacts of
policy changes. Section IV provides a more detailed conceptual framework for PSIA.

6. Analysis of poverty and social impacts of public action is not new. There is a long
history of work in this area, initially in the context of projects. Many of the methods now
considered standard for project analysis were developed at the Bank in the 1960s and 1970s

1
This work has been the product of a joint PRMPR-SDV team.
2
The draft User’s Guide is envisioned as an evolving product that will incorporate good practice and comment as it
becomes available.
3
This paper uses the concepts of ‘well-being’ and ‘welfare’ synonymously.

2
(Gittinger, 1985; Timmer, Falcon and Parson, 1983; Squire and van der Tak, 1975). The impact
of government policies on poverty and distribution received more attention following the
adjustment reforms of the 1980s. Similarly, social impact analysis has emerged in the
anthropological and sociological literature initially for project analysis (Goldman, 2000; Becker,
1997; Finsterbusch, 1994) with increasing recognition of its relevance to policy (Rickson, 1990;
Kudat, 2000). Partly in response to a critical report on the social costs of adjustment by Cornia
et al (1987), the analysis of poverty and social impacts of policy became intensified in the 1980s
and 1990s. 4

7. While PSIA is not new, this draft User’s Guide is written in recognition of the fact that
there have been a number of weaknesses in its application to the design of government policy. In
particular:

• PSIA is often not undertaken early enough to inform the design of policy.
• When there is analysis, the assumptions behind it are frequently not set out in public
documents, which reduces transparency.
• The risks to policy implementation are generally not well addressed.
• Policy- makers often fail to explicitly recognize potential losers from reform and/or
consider mitigating measures.

8. These gaps can weaken the likelihood that reforms will succeed in meeting their poverty
and distributional objectives. The fact that PSIA has not been undertaken systematically to
inform major policy decisions reflects the challenges involved:

• Data constraints. In many instances, the data required to do a comprehensive analysis

are not readily available. Household survey data, which are particularly relevant to
undertaking distributional analysis on a national level, sometimes do not exist or are
dated. Equally common, the survey data that do exist do not address questions relevant
to the reform at hand.

• Analytical constraints.
⇒ The impact of macroeconomic and structural reforms cannot easily be analyzed at the
microeconomic or household level. Policies have many direct and indirect effects at
the microeconomic level, mediated through local institutions and behavior. Fully
capturing the complexity of reality ex-ante in a model is difficult. The analyst has to
walk a difficult line between simplifying reality to explain impacts and capturing
context- specific institutions and behavior.
⇒ Impacts may differ over time. For instance, a policy may result in short-term losses
and gains among different groups, even when longer-term effects are expected to be
positive. Capturing these inter-temporal dimensions within distributional analysis is a
complex undertaking.

4
Notably such analysis was done under the auspices of the Social Dimensions of Adjustment program within the
Bank, and the USAID funded Cornell University Food and Nutrition Policy Program. Related work on this issue
includes Demery, Ferroni, Grootaert, 1993.

3
 ⇒ Rigorous analysis requires a comparison to be made between impacts with and
without reform, (the status quo itself being an alternative policy choice or
counterfactual). This is hard enough to do on an ex-ante basis. It is also challenging
in ex-post analysis as many factors will have changed, masking reform-specific
effects.
⇒ Addressing these analytical challenges requires the right economic and social tools.
Many useful tools exist, and this draft User’s Guide will highlight some of the main
ones. But, more work is needed to develop analytical methods which are better
equipped to meet the gaps and to develop more rigorous indicative survey tools and
analysis thereof, where good data is otherwise lacking.

• Capacity constraints. The analytical challenges are complicated by capacity constraints.

In poor countries capacity to analyze policy is weak among government agencies,
academia and civil society organizations. So while rigorous analysis might call for
complex tools and methods, local capacity may be suited to more basic approaches. Over
time, however, the capacity of in-country development agencies also requires
strengthening both in terms of core analytical expertise and resources allocated to PSIA.

• Time constraints. While the analyst may face difficult data and analytical challenges, the
policy- maker is often under pressure to make fast policy decisions which cannot wait for
a rigorous PSIA to be completed, (such as in an economic crisis). In these circumstances,
arguments for postponing policy decisions until there is adequate analysis, debate and
consensus will need to be weighed against the case for acting expediently to address a
crisis, or at a time which is more in tune with the policy or political cycle.

III. Implications: Principles for Operationalizing Poverty and Social Impact Analysis

9. The challenges outlined above have often deterred policy analysts and decision makers
from undertaking ex-ante assessments of the poverty and social impacts of reform. While some
have argued that “no analysis is better than bad analysis,” it is important to consider what
analysis is feasible, even where data and capacity are limited. The question, then, is how is to
approach poverty and social impact analysis in the face of the various constraints.

10. Good practice suggests that the following principles are important:

• Country ownership. If PSIA is to be an effective tool for policy, it needs to be country-

owned. Countries are responsible for the choice of reforms and for the analysis. In
undertaking the analysis, they can seek external assistance from partners including the
World Bank, UN and bilateral donors.

• Increased attention to ex-ante analysis. It is important that ex-ante analysis of expected

poverty and social impacts underpin the design and choice of policies, particularly those
that are expected to have the greatest impacts in the short to medium term. This will help
ensure that policies are conceived, designed, and implemented with a view to enhancing
poverty reduction and social objectives. In doing so, it is important to recognize that

4
 there is also a need to build on analysis of earlier reforms in order to inform ex ante
analysis.

• Monitoring and evaluation t o validate ex ante analysis. Ex ante analysis cannot fully
capture policy impacts. It is therefore important to track actual results through
monitoring and, where possible, ex-post evaluation. That way, mid-course corrections
can be made to reforms that are not having their intended poverty or social impact.

• Flexibility on tools and methods. It is important to tailor approaches to country capacity,

reform issues, data availability and time pressures. In some circumstances, qualitative
analysis based on economic intuition may be appropriate, while in others complex
econometric modeling may be the most useful method. Understanding of impacts is
enhanced when results from different analytical techniques reinforce each other or
highlight different aspects of impacts.

• More transparency in the links between policy and poverty. There is much to be gained
from laying out for public scrutiny the logic behind a policy choice – including expected
losers and winners from reform, key assumptions and transmission mechanisms. It can
help promote national debate and acceptance of reform, and serve as a baseline against
which to monitor progress. Moreover, it can highlight potential trade-offs between the
long run benefits of reform in terms of higher growth and poverty reduction, versus
possible short-run worsening of welfare.

• More explicit consideration of measures to enhance gains, minimize losses – especially

among the poor (such as alternative policy choices, complementary or compensatory
policies). This will strengthen the pro-poor impact of policies, and improve their
acceptability and sustainability.

• Building national capacity. Building national capacity is key to improving analytical

rigor over time, in tandem with strengthened country ownership. Many low income
countries have limited capacity and experience in areas of critical importance to PSIA.
These areas range from data collection systems, analytical capacity, monitoring and
evaluation systems, the capacity to translate data and analysis into policy, and the
capacity for debate on such policy issues in the public domain. Building national
capacity in these areas thus must be a fundamental cross-cutting aspect of PSIA.
Development partners, including the Bank, have an important role in strengthe ning
national capacity and in filling in analytical gaps. PSIA approaches that foster “learning
by doing” would be a key tenet to development partners’ assistance to countries.

IV. A Conceptual Framework for Understanding Poverty and Social Impacts

11. This section presents the main concepts underlying poverty and social impact analysis. It
addresses seven key areas: (i) What is being analyzed? (ii) What is the welfare measure being
assessed? (iii) Who is being analyzed? (iv) How are impacts channeled? (v) How do institutions

5
affect outcomes? (vi) When do impacts materialize? (vii) What are the risks of an unexpected
outcome?

Impact of what: what is being analyzed?

12. Poverty and Social Impact Analysis is focused on the impact of policy change. To a
large extent, developing countries have gone beyond the first generation of adjustment reforms
common in the 1980s, namely with a primary focus on macroeconomic stabilization and
adjustment and “getting prices right”. In most low income countries economic stabilization,
including exchange rate adjustment and large scale cuts in inflation, have been achieved.
Consequently, the policy debate in many countries is now increasingly focused on specific
structural and public expenditure reforms. A survey undertaken of national poverty reduction
strategies 5 , albeit a small sample, shows that public actions that constitute such poverty reduction
strategies most commonly focus on enhanced expenditure programs (especially in health,
education, water and sanitation, and roads and infrastructure); institutional reforms to improve
governance (e.g. decentralization, civil service reform, tax reform); and structural reforms (e.g.
trade reform, privatization, financial sector reform, and agriculture sector reform). 6 Very few
strategies to date advocate major macroeconomic policy changes other than adjustments in the
fiscal target. In light of this reality, tools for PSIA need to be able to address not just major
macroeconomic reforms, but also the key structural and sectoral policy changes with which
countries are currently contending7 .

13. This shift from broad-based “stabilization and adjustment” suggests that PSIA be
undertaken on a reform-specific basis. Such an approach also makes the task of analyzing the
impact of several reforms more tractable. While conceptually preferable, few tools are able to
assess the combined effect of a series of policy changes in a single analytical framework – and
these tend to be complex and data intensive. Therefore, it is often more practical to disaggregate
expected overall impacts to individual reforms, and consider sequencing on a reform-specific
basis. Consideration of the impacts of a “package” of reforms is still pertinent, however. Where
they cannot be analyzed in a single analytical framework, their combined effects on various
groups such as the poor may be most practically considered by independently assessing the
impact of each reform set on each group. However, such an approach will tend to lose
interaction effects.

5
The sample consists of 9 full PRSPs completed by end March 2002. They include the PRSPs for Uganda, Burkina
Faso, Tanzania, Mauritania, Bolivia, Mozambique, Honduras, Nicaragua, and Niger.
6
For example, 44% of the 9 full PRSPs to date call for changes in tariff rates; 44% plan for the privatization of
utilities; 33% plan for pension reforms of the public sector; 44% call for civil service reform; 89% have fiscal
decentralization on the agenda; 56% call for reform of agricultural legislation; 33% plan on raising VAT and other
consumption taxes; 22% plan on liberalizing interests rates; and 44% call for changing fiscal deficit targets (vis -à-
vis the previous IMF program or PFP).
7
Of course, structural changes could have macroeconomic effects. For instance, trade liberalization could have
serious consequences for the fiscal deficit, the current account deficit and macroeconomic stability. Understanding
how these impacts affect the poor is critical to PSIA.

6
Impact on what: what is the welfare measure?

14. PSIA is focused on assessing distributional impacts on welfare, or well-being. In recent

years, increased attention has been given to the non- income as well as income dimension of
welfare. Poverty is now recognized as being multi-dimensional (World Bank, 2000a), and
development efforts are now being targeted to address both income and non- income measures of
welfare and poverty, as recently captured in part by the Millennium Development Goals. It is
important, therefore, that the analysis of poverty and social impacts of policy cover both income
and non- income dimensions of welfare. To date, the income dimension of welfare has been the
typical focus of poverty and distributional analysis, and economic tools ha ve been most often
applied in analyzing the money- metric welfare measure 8 . Non- income dimensions of welfare
and poverty – such as human development indicators and indicators of risk, vulnerability, and
social capital – are now being given closer consideration. In undertaking poverty and social
impact analysis, the analyst will need to choose appropriate indicators of welfare and poverty
based on country and policy context.

Impact on whom: who’s welfare is being analyzed?

15. PSIA is concerned with the distributional impacts of policy change on various social
groups, with a particular focus on the welfare impacts among the poor and those vulnerable to
impoverishment. Depending on country circumstance, social groups may be defined in terms of
income classes, gender, ethnicity, age, geographic location, livelihoods, etc.

16. PSIA is concerned about distributional impacts for two reasons. First, as already
discussed, the welfare impact of policy on target groups such as the poor, or women, is the
ultimate objective of policy change. Understanding the impacts of policy change on these
groups thus motivates the policy change and the analysis of impacts. Second, understanding the
distributional impacts of policy, even among non-target groups is important for the effectiveness
of a policy and its ultimate sustainability. Policy changes — even if welfare improving —
almost invariably result in losers, at least in the short-run. While losers may not necessarily be
poor, reduction in their welfare may not be acceptable for social welfare or political economy
reasons and may significantly affect the implementation and sustainability of reform. For
instance, trade liberalization can be derailed by business and union interests who fear the impact
of competition on protected labor and commodity markets. Similarly, reforms can also be
derailed by interests within the public sector. PSIA thus ought to identify and analyze the impact
of policy on other stakeholders, beyond the poor, who are affected by or can influence reforms.

8
This draft Guide lays out existing economic and social tools and approaches for poverty and distributional analysis
in order to give a broader picture of poverty to policy analysts and decision makers. Insofar as the economic tools
draw on existing examples of such analysis, applications focus mainly on income/expenditure measures of welfare.
Increased attention to assessing the impacts of policy on non-income measures of welfare is an important priority for
future work. The social development tools described in this draft User’s Guide are more focused on non-income
dimensions of poverty, such as social capital and vulnerability.

7
Impact how? How are impacts channeled?

17. Policy reform can be expected to have an impact on poor households and other
stakeholders through five main transmission channels: employment and wages (labor market);
prices (markets for goods and services); access (all markets); assets; and transfers and taxes.

18. Employment. The principal source of income for most households is through
employment. To the extent that a policy change affects the structure of the labor market or the
demand for labor, particularly in sectors which employ the poor (e.g. unskilled labor; off- farm
and agricultural rural labor), the welfare of low income households will be affected. There may
be direct transmissions through this channel in the case of certain policies (e.g. retrenchment of
workers in restructuring of a state enterprise) or indirect transmissions in the case of other
policies (e.g. macro policies leading to faster growth may lead to increased employment among
the poor; an exchange rate depreciation or trade liberalization could lead to contractions and
layoffs in the non-tradeable sector). Alternatively some policies will have different impacts on
formal labor markets and informal labor markets which employ many of the poor. For example,
expenditure reduction and expenditure switching may increase formal sector employment at the
expense of the informal sector employment due to labor market segmentation (Agenor and
Aizenman 1999).

19. Prices – production, consumption, and wages. Prices determine real household income.
Prices in the markets for goods and services differentially affect real income of households to the
extent they are consumers or producers of these products. How policy affects prices will have
an important bearing on income and (directly or indirectly) on non- income measures of welfare.
For all households, but especially for small farmers and the self-employed price changes will
affect both consumption and resource allocation decisions. On the consumption side, policies
that cause an increase in the prices of goods consumed by the poor will have a direct negative
effect on household welfare. These can include import tariffs on traded staples, or increased
utility tariff rates. Consumer prices may be indirectly affected, as well, e.g. through
expansionary monetary policy that leads to general price inflation. Producers will also be
affected by policies that cause relative price changes – particularly changes to the price of their
outputs or their inputs. Producer incomes are further affected by the difference between
farmgate and market prices, often conditioned by transport costs and the degree to which private
markets are efficient and competitive, rather than monopsonistic. Wage changes will affect net
buyers and sellers of labor differently; and policies that change relative prices will induce shifts
in both demand and supply.

20. Access. Well-being will be affected by the access of households to goods and services,
be it through physical or effective access to markets, or through access to publicly or privately
provided services. Policy can affect access directly by enhancing the provision of infrastructure
or services in question, or indirectly by removing constraints to particular households’ or groups’
access. For example, improved road infrastructure could dramatically enhance the access of
groups in certain geographic areas to markets. A policy that expands connections to an
electricity grid, particularly among the poor, can also represent a welfare gain. 9 In this regard,

9
To the extent that increasing access is viewed as a reduction in transport and transaction costs it is effectively
reducing the “price” of the good or service in question.

8
privatization of service provision could either increase or decrease access relative to public
sector provision10 . Policies that address issues of social exclusion are also relevant here.

21. Assets. Changes in the value of households’ assets will affect income and non- income
dimensions of welfare. Changes in asset values can be due to changes in their levels or their
returns. Assets themselves can be categorized into five classes, all of relevance to poor
households: physical (e.g. housing); natural (e.g. land, water), human (e.g. education, skills);
financial (e.g. savings account); and social (e.g. membership in social networks that increase
access to information or resources). Policy changes can have a direct or indirect impact on these
assets and their returns. For example, land reform may directly result in an increase or decrease
in land assets to the poor. Policy changes may also impact assets through indirect channels. For
example, inflationary policies will have a negative wealth effect on those with monetary savings;
participatory budgeting or community programs may increase social capital; pricing or trade
changes could affect the natural resource assets of households or groups (e.g.
increasing/decreasing deforestation or desertification) or even their human capital (e.g. by
causing a deterioration in health conditions due to increased indoor air pollution as a result of
energy price changes). In many cases, certain assets may also be prerequisites to benefit from a
reform. For example, if a farme r cannot reach a market due to lack of physical assets, the benefit
of price liberalization may be internalized by middlemen and traders.

22. Transfers and taxes. Household welfare, finally, is affected by the extent of transfers to
and from the household. These transfers can take the form of private flows (e.g. gifts and
remittances) or that of public flows (e.g. subsidies and taxes). Public finance has a direct impact
on welfare of specific groups through transfers and tax policy. Public expenditure programs may
directly focus on granting additional resources to particular groups through transfer policies.
These may be in the form of direct targeted income transfer programs, or subsidies. Social
protection programs may be useful in protecting the poor against risk and vulnerability,
(depending on their targeting). Tax policy has direct distributional effects to the extent that the
resources or income of a household are taxed. Regressive tax regimes disproportionately burden
less well off households. Subsidies may be captured by the non-poor or may simply be badly
targeted. There may also be a conflict between strict progressivity and the political feasibility of
policies (see Gelbach and Pritchett, 2000). Poorer households may also be hurt in the lo ng run, if
the funds for public expenditure are borrowed and must be repaid; they will suffer either from
any attempt to “inflate away” the debt or from increased future taxes needed for repayment.

Impact how: how do institutions affect outcomes?

23. The impacts of policy reform on economic agents are mediated through institutions.
Institutions are the formal and informal rules of the game in society. They are the shared

10
Sometimes an increase in access may come at the cost of a higher price, or at a “high” price whereas previously
there was no access at all. In urban Peru, liberalization of telephone services led to greater access for the poor as
well as lower prices. On the other hand, liberalization of electricity has led to greater access and reliability, but
higher prices and lower overall consumption (Torero and Pascó-Font, 2001).

9
understandings that allow organizational entities to interact. 11 Policy reform is affected by
public, private and civil society institutions whose rules mediate economic activity in a society
(Rutherford, 1994). These include markets, legal systems and the formal rules and informal
behavior among implementing agencies (including governme nt). Policy reform can affect
institutions by changing organizational structures, roles and responsibilities, or rules and
incentives, as well as by altering market incentives, e.g. by removing price distortions or
encouraging competition. These in turn affect the behavior of economic agents and interest
groups, and thereby economic outcomes, including distribution and poverty reduction.

24. Many reforms depend for their implementation on institutional change. This may involve
creating new organizations or changing rules and incentives to achieve new objectives in existing
organizations (e.g., improved cooperation among government agencies). Creation or
modification of organizational structures does not per se guarantee the institutional changes
necessary for the reform to succeed. 12 Changes in the formal rules of the game often need
changes in the incentives in order to alter the behavior of agents. Moreover, it is often assumed
that institutions (including markets) function smoothly and according to formal rules. In practice,
transaction costs, ineffective enforcement, or lack of competition or accountability can lead to
sub-optimal performance of government, market or civil institutions. Perverse outcomes can also
arise when institutional change accompanying policy reform is not internalized by key
implementing agents.

25. Understanding the distributional impact of policy requires an appreciation of the

organizational structures and the institutional rules governing them on which the poor and other
stakeho lders rely. Careful organizational and institutional analysis – including explicitly setting
out critical assumptions about institutional rules and the behavior of key stakeholders that affect
reform outcomes – is, therefore, central to PSIA.

Impact when: when do impacts materialize?

26. A major challenge to PSIA is understanding that policy impacts can have substantially
different impacts on different groups over time. This is in large part because the economic and
behavioral responses to a policy change take time. What is fixed in the short-term may be
variable in the longer term. For instance, an exchange rate depreciation may lead to employment
losses in the non-tradeable sector in the short-term. Increased efficiency may well result in net
growth and expansion of the economy. Some workers may eventually find jobs in the expanding
tradeable sector; others may fall back on the informal sector. Moreover, to the extent that
consumers switch to cheaper non-traded goods, consumption effects would be mitigated. With
adjustment leading to relative price and income changes, the combined effect will determine the
net impact on different groups over the longer term. The speed with which the economy adjusts,

11
Organizations are purposive entities (e.g., public agencies or firms) which have a formal structure and seek to
achieve certain objectives within the opportunities and constraints afforded by the institutional framework of society
(North, 1990).
12
Formal changes in organizational structure are relatively easy to make but may take much longer to be
institutionalized. In such cases, it is important to pay attention to the capacity and accountability of the concerned
agencies as well as the power relations within them. Understanding these issues allows for the mobilization of
existing capacity and for the tailoring of interventions to the institutional and organizational contexts in which they
will be implemented.

10
however, will depend on many things, including the options for production and consumption
substitution.

27. A mirror example is also useful to illustrate the importance of understanding ex ante the
potential for different short and long-run impacts. Maintaining an unsustainably appreciated
exchange rate and consequent fiscal stance can be extremely beneficial to some groups in the
population, including the poor, over the short-term. However these unsustainable policies, often
reflected in a ballooning public debt, may result in massive default and protracted economic
crisis, possibly at a great cost – and perhaps particularly to the poor – over the longer term.
Another example is that of targeted social assistance programs. While possibly an effective
means of support to the poor in the short term, they can prove fiscally unsustainable and thus
harm the poor and other beneficiaries in the longer-run if they lead to fiscal collapse.
Understanding and explaining how short-run losses (gains) may result in longer-term gains
(losses) for given groups is one of the challenges inherent to PSIA.

Impact if: what are the risks of an unexpected outcome?

28. A crucial element of PSIA is understanding and (publicly) articulating ex ante the key
assumptions for the success of the policy reform. 13 Assumptions need to be made explicit as to
how economic agents and institutions are expected to act (e.g. the sign and magnitude of an
elasticity) and how policy impacts would then transmit to households. A second set of
assumptions concerns conditions exogenous to the policy that need to be in place for the reform
to achieve its intended impacts. Clearly identifying and articulating critical assumptions will
serve to sharpen the rigor of the analysis; increase its transparency; facilitate its validation (and if
necessary, correction) by knowledgeable stakeholders; and permit the monitoring and hence
improved understanding of transmission channels and impacts with possible adjustments to the
reform program over time.

V. Elements for Good Poverty and Social Impact Analysis (PSIA)

29. Although there is no template methodology to analyzing the poverty and social impacts
of policy, there are several elements that make for good PSIA. Many practitioners, in attempting
to undertake or advise on the analysis of the poverty and social impacts of policy, will be
confronted with whether and how to address each of these elements. This section outlines these
different elements, providing a road- map on what to consider in undertaking good practice PSIA.
These are: (i) asking the right question; (ii) identifying stakeholders; (iii) understanding
transmission channels; (iv) assessing institutions; (v) gathering data and information; (vi)
analyzing impacts; (vii) contemplating design and compensatory schemes; (viii) assessing risks;
(ix) setting- up monitoring and evaluation systems; and (x) fostering policy debate and feeding
back for policy adjustment. While there is a logical sequence to addressing these elements, this
does not imply that they need to be undertaken in a strict chronological order or that all the steps

13
Forecasting or simulating likely impacts of policy by definition pre-supposes a view of likely causality and
behavior. Depending on the analyst’s information base these can be empirically “estimated” based on the past,
derived on the basis of theory, or assessed on the basis of knowledge of the country context and discussions with key
stakeholders and experts.

11
will be feasible in all country circumstances. This section, moreover, provides a broad overview
of specific tools that can be used to address each of these elements, pointing to the Annex for
more details and references on covered tools. (The convention used in this paper is that specific
methods or tools discussed in further detail in the annex are presented in bold in the text.) The
elements presented in this section and their different components represent a menu of tools to
choose from depending on country circumstance rather than any minimum requirement or
standard for PSIA. Building capacity has been presented in Section III as an overarching
‘principle for operationalizing PSIA’ rather than as a discrete element of PSIA below. It is
important that PSIA be undertaken in a fashion that strengthens capacity at every step.

1. Asking the Right Question

30. The first step in analyzing policy impacts is to identify and prioritize development
objectives. While poverty reduction may be an overarching objective, poor countries may well
have multiple priorities in reaching that objective, and measures to address all of them are not
necessarily compatible. For example, a country’s priorities may include fiscal discipline, full
employment and greater efficiency of firms. Tightening budgets may improve macroeconomic
stability while slowing growth and reducing employment in the short term. While inflation hurts
the poor, so too does joblessness. In order to undertake country-level PSIA, it is important to
identify the priority reforms that merit further analysis. This selection process is a matter of
judgment at the country- level, and will depend on factors such as the likely size and uncertainty
of the poverty and social impacts (e.g. with regard to the number of people affected and the
magnitude of impact); the degree of controversy of the reform issue; and the time sensitivity of
the reform.

31. Policy reforms are often implemented to remove constraints which stand in the way of
achieving certain development goals. For instance, a country may be unable to balance its
budget because of unsustainable losses by state owned enterprises. The problem in this case will
be to improve the overall fiscal balance as well as the performance of individual agencies. A
problem diagnosis helps trace a chain of cause-effect relationships from policy objectives, to
constraints, to choices, to impacts. For some objectives, there may be multiple constraints, some
being more important than others. In such cases, it may be necessary to pursue more than one
policy reform, but also to be on the alert for interactive effects that those reforms might have on
each other.

32. Identifying policy constraints is the first stage in the analytical process and can often
prevent subsequent missteps. For example, a policy- maker faced with inadequate public
revenues may decide to raise taxes. However, this will not be the appropriate response if the real
problem is that expenditures are too high, rather than that revenues are too low. In order to avoid
inappropriate or mismatched policies, it is important that the constraints on development
objectives be made explicit – rather than assumed – at the beginning of the PSIA process.

2. Identifying Stakeholders

33. Upon asking the right question and identifying the problem that requires solution, an
early identification of relevant stakeholders is important. Policy choices can affect diverse

12
stakeholders or economic agents in different ways. Furthermore, these stakeholders can also
influence whether policy is adopted and how it is implemented.

34. Stakeholder analysis identifies people, groups and organizations that are important to
take into account when conducting PSIA. 14 It addresses those people who are affected by policy,
as well as those who affect policy. Identifying and disaggregating the first type -- intended
beneficiaries and those who suffer adverse impacts - is central to the analysis of poverty and
social impact of policy. For modeling work, stakeholder analysis can serve as an input into
determining how best to disaggregate representative household groups. The second type --
organized groups such as unions, business associations or NGOs -- may become sources of
support or opposition to policies. Box 1 illustrates the use of stakeholder analysis to address the
impact of mine closures in Russia.
Box 1: Analyzing the impact of mine closure in Russia: Stakeholder analysis

Ghani1 carried out a stakeholder analysis using structured interviews in Moscow, mine visits and discussions
with union leaders allowed the team to group the stakeholders into several camps. Stakeholder analysis was
designed to: clarify the nature of the problem; identify the interests of various actors; and develop a solution for
effective fund transfer based on existing actors.

Government ministries were not seen as neutral agents, and their interests were explicitly identified. Similarly,
the options of mine employees were differentiated by their previous employment. Workers on the mine face,
analytic and administrative support workers, and workers in the schools and hospitals previously funded by
mine revenue would be impacted differently as mines closed. The interests of municipal and oblast-level
governments were based partially on the revenues that each could muster in the event of mine closure. The
difference between stakeholder groups lay largely in their analysis of the core problem.

• The Ministry of Energy, regional governments, the labor union and the mine face workers advocated a
narrow solution focused on preserving the mining industry in some form.
• Municipal governments, social service workers employed by the mines and local businesses focused on
the need to find new drivers of growth in mono-industry towns as well as sources of funding for
services previously supplied by the mines.
• Municipal governments did not have the revenue base to support the schools and other services formerly
provided by the mines, and were hard -hit by changes.

As a result of the analysis, an Interagency Coal Commission was created with representatives from
municipalities, ministries and government agencies that helped discuss and plan reforms. The Ministry of the
Treasury was identified as a transparent way to get social protection funds directly to the workers rather than
physically moving it from the MoE through regional governments. Last, stakeholder interests were used to
create a system of checks, balances and independent assessments to ensure that all actors followed the rules laid
out in mine closure plans.

1
As described in Lockhart and Ghani, 2001.

35. A distinction should be made between stakeholders that readily identify themselves as a
cohesive group (e.g., unions) versus analytical categories that do not (e.g. “the fourth income
quintile,” or even “the poor”). Stakeholder analysis can also describe the stated or unstated
interests of actors vis-à-vis the policy, as well as the nature and degree of their organization or

14
To the extent that stakeholder analysis helps focus subsequent research on specific sets of actors, it increases the
relevance of more complex analysis of poverty and social impacts while reducing time and cost.

13
ability to mobilize behind a common purpose, (see Box 2). To the extent that groups of the first
type are atomized or unorganized (e,g., landless peasants, non- unionized workers, small
businesses), they are less likely to play a significant role in terms of support or opposition to a
policy. 15 While secondary resources (e.g. social science research, news media, and advocacy
literature) can help identify broad political economy issues and social tensions, key informant
interviews may be critical to analyze the interests of stakeholders whose support is critical to
reform implementation, especially those within government agencies, or interest groups able to
influence reform.

Box 2: Collective Action and Political Pressure

Estimating the influence of a particular group over decisions is as much art as science. However, there are some
useful criteria for predicting the propensity of a group to lobby the government. The logic of collective action
suggests that interes ts will exert more pressure on policy-makers or elected leaders when: (1) the number of
group members is small; (2) the benefits or rents that accrue to each member are easy to perceive; and (3) the
benefits or rents that accrue to each member are significant for each member. The behavioral premise is simple:
people fight harder when they know a lot is at stake. This explains why the interests of unorganized groups such
as consumers are typically not influential. Many development interventions are designed to reduce or eliminate
rents among a small group of privileged interests and increase the overall welfare of the public. However, these
are precisely the policies that are most likely to be fought, making either tough political decisions or a concerted
communications strategy paramount.

36. Stakeholder analysis does more than describe the main actors. It contributes to an
assessment of the extent of ownership to understand how different interests are likely to
influence government in general, and the policy process in particular. Ownership assessment
helps reveal sources of potential resistance to or distortion of policy choices. It examines
government’s willingness to undertake and stick with reform over time. Weak ownership can
lead governments to abandon reforms, mid-term or produce distorted policies. For example,
some countries pursue bank deregulation and privatization, but refuse to remove barriers to
entry, resulting in an oligopolistic sector that charges high interest rates and provides poor
service.

37. The basic output of an ownership assessment is an estimate of the location and extent of
pressure that government will experience in adopting a policy reform. Factors which most
typically affect ownership can be analyzed by looking at the political economy and social
diversity (e.g.. ethnic, religious, linguistic, gender, and age) of a country. The former identifies
affected groups, and assesses their influence over government decision- makers. The latter
recognizes that reforms may in the short term polarize existing social tensions based on ethnic,
religious or other lines, even while raising growth in the longer run.

3. Understanding Transmission Channe ls

15
The identification process disaggregates these actors in terms of social characteristics – such as cultural,
structural, economic, political, or governmental.

14
38. Having identified potential stakeholders, laying out a priori the channels by which the
analyst expects a particular policy change to impact various stakeholder groups is an important
early step to the PSIA process. 16 The transmission channels that are going to dominate will be
different, depending on the reform in question. Also, the importance and role of indirect “feed-
back” effects (perhaps through secondary transmission channels) might be particularly important
in the case of some reforms. Also, given that feedback effects may be time differentiated, so will
net impacts on various stakeholders. An important example is that of policies aimed at
improving the efficiency of the economy, which by virtue of changing the status quo may have
certain dis tributional effects in the short-term, but, by aiming to foster increases in productivity
and growth may be expected to have a positive net welfare improvement for most people over
the longer term.

39. The expected impacts of a policy change on the welfare of target groups and other key
stakeholders manifests itself through various transmission channels and over time. It is
important to make explicit hypotheses and assumptions that can then be further analyzed
empirically and/or validated through interviews, focus group techniques, and other qualitative
techniques. It is also important that the analyst consider the impact of policy on the poor and
other groups through the five transmission channels introduced above.

• Employment
• Prices – production, consumption, and wages
• Access to goods and services
• Assets
• Transfers and taxes

4. Assessing Institutions

40. As discussed above, institutions affect the impact that policy has on poverty and welfare
among different groups. First, institutions are important in that they mediate the transmission of
certain policy impacts to households or groups. Important in this regard are markets as
institutions. Understanding context- specific market structure, therefore, will be critical to
understanding how a given policy change (such as deregulation, privatization, or removal of an
export tax) will affect impacts. Second, institutions are often the object of many types of policy
reform. Indeed privatization, civil service reform, decentralization, and expenditure management
reform are examples of institutional reform which change the incentives and rules that govern
public and private organizations. Third, many types of policies or policy changes call for a
central (or in some instances an accompanying) role of particular organizations in their
implementation. The incentives, performance, and capacity of these organizations will also be
critical to the actual implementation of policy and thus its impact. Two key areas of focus when
assessing institutions are (i) the analysis of market structure and (ii) the analysis of institutions.

41. Analysis of market structure. Surveys among consumers and producers of goods and
services can be useful approaches to enhancing understanding of context specific market

16
Doing this early on provides basis for early validation of hypotheses, subsequent identification of data and
information needs, and more rigorous analysis of hypotheses in subsequent steps of PSIA.

15
structure. Identifying the nature of the market (e.g. monopoly, monopsony, oligopoly, perfectly
competitive, etc.) and what determines this market structure (e.g. natural monopoly, restrictions
to entry, collusion, etc.) is a crucial first step to understand the enabling conditions that would
need to be created for market reform to lead to improvements in performance and better
outcomes for the poor.

42. Enterprise (or trader) surveys can be useful for understanding the nature of the market,
the number and types of economic agents, and market constraints as well as de jure and de facto
barriers to entry and transactions costs. In the case of privatization or liberalization, where an
assumption is that market entry will lead to competition and price reduction, it might also be
useful to concurrently undertake an analysis of the constraints to private sector entry and
participation. Quantitative or qualitative household surveys can also get at who and where
services are bought, and at what price. Quantitative Service Delivery Surveys (QSDS) and
Citizens’ Report Cards can be applied to the analysis of the effectiveness of state marketing
agencies. Price analysis is always useful in ascertaining the competitiveness of a market and of
market structure.

43. Analysis of institutions. It is also important to understand the functioning of institutions

that matter for the effective implementation of a policy. In judging the likely poverty impacts of
reforms that involve a change in government responsibility, or cooperation among government
agencies, the flow of decision-making, information and resources within and among public
sector organizations needs to be considered (See Box 3).
Box 3 Decentralization in Indonesia: Institutional analysis and social accountability

Guggenheim, et al. (2000) 2 carried out an institutional analysis of governmental structures at the village level and traditional
village decision-making bodies in Indonesia as part of a decentralization program designed to address the issues of corruption
and top-down decision making. The Kecamatan 1 Development Program was committed to using local capacity rather than
developing a separate Project Implementation Unit. The institutional analysis addressed: the relative strength and capacity of
existing systems, the flow of money and information, and the location of decision-making in the chain.

Institutional analysis, conducted through focus groups and interviews with government officials and villagers throughout
Indonesia, helped the project to identify existing structures and understand how they made decisions. The project changed
the role and authority of those structures, changing the locus of power within the system. Through the interview process, the
team identified Village Infrastructure Project (VIP) as a field-tested means to get money directly from central accounts to the
village level. An existing government agency, the Department of Community Development (BPM), acted as a partner and
enforcing agency.

The KDP used transparency and social accountability to make the new institutional structure work. Existing kecamatan-level
village councils, which were formal organizations that had met once a year to feed into the government’s planning process,
became the primary decision-making body. Decisions on proposals from villages were made in public meetings of the
council, procurement forms were limited to one page, expenditure information was kept on cash ledgers and information
about the program was disseminated through posters, flyers and radio broadcasts. Further, the KDP worked with the
Association of Independent Journalists to ensure media coverage and gave small grants to reporters to build capacity for
independent reporting.
1
Kecamatan is the sub-district level in Indonesia
2
National Management Consultants. Second Annual Report of the Kecamatan Development Program. Sep 2000

44. Two options for collecting this kind of information are organizational mapping and the
institutional assessment tool:

16
 • Organizational mapping is a method enhances understanding of the internal behavior
of organizations by creating an inventory of the actors carrying out reforms and explicitly
revealing relationship among them. Organizational mapping has two components: (i)
static mapping and (ii) process mapping. Static mapping identifies ex ante the specific
public actions associated with a policy reform, and the organizations (which may be
outside government) responsible for implementing these. It maps out the relations among
the implementing agencies and identifies those expected to support or obstruct the
reform. The exercise is informed by earlier stakeholder analysis (see Section V.2) of
government and other organized actors. Process mapping, which draws on work carried
out to improve efficiency in the public and private sector in industrialized countries
(Hunt, 1996), identifies current practices and norms in relevant organizations that cannot
be easily gleaned from documents or diagrams. It does so by tracing flows of critical
resources, decision- making authority and information in the current system. This helps
create an understanding of the rules and incentives that affect internal behavior and the
extent to which organizations pursue development objectives. Process mapping can help
identify constraints to effective policy implementation at three levels: in organizational
procedures, the relationship between organizations, the relationship with the authorizing
environment (e.g. Ministry of Finance). Addressing them may require fine tuning
procedures, recasting fundamental rules of operation, or even replacing entire
organizations. Process maps are constructed through in-depth, semi-structured
interviews with staff at all levels of the organization, focusing particularly on those at the
‘front- line’ of delivering services. The main advantage of organizational mapping is its
ability to “drill down” into a problem area that may not be readily visible by relying
directly on stakeholders to describe their interests and constraints, (see Box 3). A
drawback is that it is more time-consuming, costly and technically demanding than
guided questionnaires. Good process mapping needs to be used iteratively to test
assumptions by monitoring institutional performance over time.

• The institutional assessment tool was designed to permit an institutional analysis of

various components of a project. The tool consists of questions that help the analyst
structure thinking about the complex relationships and processes within organizations
upon which reforms depend. 17 The questions are used to evaluate the effectiveness of
institutions, from performance incentives to their capacity to implement policy. They
address key issues of relevant organizations, including: (i) roles; (ii) knowledge and
access to information; (iii) incentive structures; (iv) receptivity to policy change; (v)
capacity; (vi) resources or financial clout; (vii) scope to adapt to the new reform agenda.
The advantage of the institutional assessment tool is that it can enable more systematic
analysis of issues ranging from political incentives to administrative capacity at low cost.
The disadvantage is that the tool relies on a desk assessment, and lacks the interactive
dimension of interviews with staff of the organizations that are being reformed. The tool
is currently better suited for the analysis of institutions with respect to investment

17
Some questions address issues of ownership and commitment discussed in the previous section. In situations in
which informant interviews are not feasible or where findings are not considered reliable, the institutional
assessment tool can be used to conduct or complement stakeholder analysis.

17
 operations but could be adopted to assess institutions in the context of the implementation
of policy reform. 18

5. Gathering Data and Information

45. Assessing current data to determine the type of analysis and planning the phasing of
future data collection efforts are an important part of PSIA. Identifying data needs will benefit
from the prior identification of policy issues, stakeholders, and likely transmission channels,
outlined above. Four discrete steps are suggested: mapping out desirable data for PSIA; taking
stock of available data and analysis; coping with PSIA data limitations ex-ante; and addressing
PSIA data limitations today so they are not limitations for PSIA in the future.

A. Mapping desirable data for PSIA

46. The analysis of the poverty and social impacts of policy can be extremely data- intensive.
Specific data requirement s will, of course, depend on the nature of the reform issue being
analyzed and the analytical model being employed. In approaching data and methods, it is useful
to distinguish among data collection instruments (close-ended or open-ended); data type
(numeric or non-numeric); and associated methods of data analysis (quantitative or qualitative).
Traditionally analytical approaches have been either quantitative in nature, based on numeric
data collected using close-ended data collection methods; or been qua litative in nature, based on
non-numeric data collected using open-ended data collection methods. In addition, it is
increasingly being recognized that “mixed methods” can be extremely useful.

• Quantitative analysis; numeric data; close-ended data collection. Analyzing the

poverty and distributional impacts of policy on welfare indicators will require linking
data at the macro or sectoral level (generally corresponding to the level of policy
intervention) to disaggregated household level data which captures the welfare measure
of interest (most generally an income/expenditure aggregate, but possibly other welfare
measures such as literacy or infant mortality) and other behavioral variables (such as
access). Close-ended surveys have generally been used to collect such data. For analysis
to be generalizable, data ought to be derived from a random sample. Sometimes,
purposive sampling may make sense (for example when the interest is in collecting
information from laid-off mine workers). Numeric data can be used to undertake
statistical and multivariate analysis to test hypotheses and determine relationships. (See
Table 1).

• Qualitative analysis; non-numeric data; open-ended data collection. A variety of open-

ended data collection methods can also be used to collect non-numeric data relevant to
the analysis of the poverty and social impacts of policy. Non-numeric and contextual
data can be collected through participatory appraisals, asset mapping, structured
interviewing of individuals, communities, or focus groups. These data can be used to
undertake stakeholder analysis (discussed above), participatory poverty assessment,

18
A dedicated website for the electronic tool is being prepared by the Public Sector Group and should be available
during the spring.

18
 beneficiary assessment, institutional analysis, and risk analysis (discussed below). Open-
ended data collection methods such as those described in Table 1 permit an interactive
analytical process – one in which research questions can be formulated, answered, and
analyzed iteratively in the field. The open-ended approach allows subjects to articulate
the research problem and question. This interactive analytical process could enable
quicker turn-around and shorter lapse in time between questionnaire design and analysis
than close-ended data collection methods and associated statistical analyses19 . Open-
ended data collection methods may also be undertaken using a random sample or a
purposive sample. 20
Table 1: Data Collection Methods
Aspect Close-ended Open-ended
Data collection • Structured, formal, pre- • In-depth, open-ended or semi -structured interviews,
instrument designed questionnaires, such such as key informant interviews and case histories,
as LSMS, social impact focus group interviews, community interviews, mini-
assessment (SIA) survey, surveys
client satisfaction survey, or • Ethnographic observation
citizen report card. • Systematic (or directed) consultation, such as
beneficiary assessment
• Participatory data collection methods, such as
participatory action research , participatory rural
appraisal , participatory public expenditure review
• Focus group discussion
• Community and institutional surveys
• Written documents (for example, program records,
process documentation, media reports)

Analytic method • Predominantly statistical • Inductive reasoning.

analysis
• Deductive reasoning.
Advantages • Findings can be generalized;
can quantitatively estimate
size and distribution of
impacts
Disadvantages • Results not available for long
period of time; limited types
of information can be
gathered; expensive and
time-consuming
• Interactive analytical process: research questions
formulated, answered, and analyzed iteratively, e.g. in
stakeholder analysis, participatory poverty assessment,
scenario analysis.
• Ability to analyze behavioral responses, explore new
hypothesis or recognize previously undiscovered
phenomena. Allows subjects to articulate their own
views. Can be rapid.
• Findings difficult to generalize, and difficult to
aggregate and make systematic comparisons. Needs
further validation. Fieldwork requires greater research
skills than for quantitative enumeration.

Source: Adapted from Carvalho and White, 1997; Baker, 2000; and World Bank, 2002a.
Note: this table is intended to provide an indicative distinction between these methods and not a comprehensive description of
individual techniques.
• Mixed methods. In undertaking poverty and social impact analysis there is much benefit
to mixing and, where possible, matching among the above approaches. Much is to be

19
This statement requires qualifiers. First, faster methods of close-ended data collection and analysis are being
developed (e.g. CWIQ). Second, reliable open-ended analysis requires time and care if quality is to be ensured.
20
These data collection instruments have often been employed using non-random samples, for example in
ethnographic analysis. However there is no reason that they cannot be used on random samples to generate
statistically representative data. Likewise, non-numeric data could be coded into numeric data.

19
 gained by not restraining data collection and analytical methods along the silos outlined
above. 21 Close-ended and/or open-ended data collection techniques can be used to
generate numeric and/or non-numeric data, for analysis using quantitative and/or
qualitative analytical techniques and approaches. Moreover, analytical methods can be
mixed sequentially (e.g. with qualitative analysis informing the design of a close-ended
data collection instrument or the specification of an econometric model) or in parallel
over time. Mixed methods can leverage the benefits of quantitative and qualitative
analysis: qualitative social analysis can inform the design of close-ended questionnaires
and generate hypotheses to be tested further through quantitative research; hypotheses
generated by qualitative analyses can be tested for generalizability by quantitative
approaches; quantitative results can be examined using open-ended data collection
methods to develop a richer understanding of the impacts of policy on different subsets of
the population; a successful mixture can elucidate history, context, process, and
identification of transmission channels and differential impacts. While mixed methods
can involve higher costs, skills and coordination with multidisciplinary teams, the
benefits can also outweigh the costs.

B. Taking stock of available data and analysis

47. The first element of the stocktaking is to ascertain the existence of key data. This will
allow identification of data gaps that need to be filled or taken into account when choosing an
analytical approach. Household survey data is generally pivotal to undertaking quantitative
poverty and distributional analysis 22 . An important consideration for poverty and social impact
analysis is whether, in addition to a welfare (e.g. income/expenditure) aggregate, there is
information in the survey that provides the relevant variable (or the computatio n of such a
variable) related to the policy lever in question (e.g. household expenses on transport, or
specifically public bus transport, if bus tariffs are to be increased; or purchases of maize at
subsidized prices, if the subsidy is to be removed). In analyzing policy reform, it is useful,
where possible, to match data from different sources. For example, in Armenia household
survey data was matched, through utility account numbers, to administrative billing information
for consumers. This permitted an analysis of utility consumption behavior by income group.

48. Second, beyond identifying the availability of relevant primary data, ascertaining the
existence of analysis and secondary data on the policy issue at hand is an obvious next step.
Project and program documentation, as well as data and analyses from other development
agencies are invaluable. Academic research and theses can also yield in depth insights not
normally available in official reports. In many instances, burning policy issues have been the
attention of analysis and debate in the past; it is useful to draw on whatever analysis already
exists; and to whatever public debate has already occurred.

21
Social impact assessment adopts a more eclectic approach to data collection, choosing among open-ended, semi -
structured and close-ended instruments to fill information gaps for mixed method analysis.
22
Most countries have now undertaken at least one national household survey, although at times the vintage and
quality of data is sometimes an issue. Intra-household data, when it ideally exists, can permit distributional analysis
at the level of the individual household members, a particular concern in considering the welfare of women or other
individuals who may be less powerful or privileged within the household.

20
49. Third, it is useful to ascertain the capacity of local data collection agencies (e.g. national
statistical offices, ministries, universities, think-tanks, consulting firms, etc.) to collect data and
possibly to analyze them.

C. Coping with PSIA data limitations ex-ante

50. In many countries there are severe data limitations to conducting poverty and social
impact analysis. Some or many of the desired data outlined above may simply not be available.
In this case, policy- makers and analysts approaching the challenge of impact analysis will need
to bear in mind several factors, outlined below.

• Adapt analytical approach to data currently available. If the urgency for policy action
severely limits the time to gather further data, expeditious analysis focused on using
whatever data is available may be required. Some tools and approaches to poverty and
social impact analysis are far less demanding on data than are others. Adapting the
analytical approach to the available data, such as using time use data or focus group data
to construct a simple household model, might be the necessary course of actio n. While
any analysis entails making assumptions, taking short-cuts generally means making more
assumptions in order to proceed. The analysis should be honest and transparent in stating
these assumptions. Qualitative techniques, such as individual, community, or focus
group interviews can be used to validate assumptions and inform the design of
quantitative surveys.

• Collect more data. If there are identified and critical data gaps, it may be useful to gather
the data – whether it be administrative or survey data. In the interest of building national
capacity and enhancing ownership of the data and its analysis, where possible these data
collection efforts should be undertaken through national institutions, such as the
statistical agency, ministries, or universities. Undertaking a national household survey is
a large undertaking; it can take months to plan, implement, and analyze the data from
larger surveys.

⇒ Where possible, it is useful to identify planned household surveys that are to be

fielded imminently and to add key questions relevant to the policy issue at hand.
These questions can leverage a wealth of analytical possibilities in the context of a
full- fledged household survey.
⇒ Alternatively, there are now several “off-the-shelf” survey instruments that can be
used to quickly collect, enter, and analyze data (e.g. the CWIQ survey).
⇒ Social impact assessment surveys, based on purposive sampling, can often be turned-
around in a shorter time than a representative national household survey.
⇒ Likewise, depending on the reform issue at hand, quantitative surveys can be
employed using a purposive sample (e.g. among workers of a firm that is to be down-
sized). 23 When possible, mixed methods, combining qualitative and quantitative

23
In examining an economy -wide reform, such as a rice tariff increase, it would obviously be preferable to adopt a
representative sample for any new survey, or to adopt the same sample (or select a panel) from a household survey
for which there is already data. Where the reform is location specific, or affects a specified population – e.g. with the

21
 analytical approaches to triangulate results increases the confidence of findings. The
use of data from a non-representative sample to estimate parameters may sometimes
be required – as may be the “borrowing” of parameters from other countries. Again,
clearly stating assumptions (e.g. that these elasticities apply to the population at hand)
will be important in these instances. Care should be taken when generalizing from
such a purposive sample. 24

• Rethink the policy decision or the sequencing and pace of reform. One option is to
postpone the policy decision until adequate data can be collected and appropriate analysis
conducted. If this course is taken, the costs of delaying reform (a policy decision in itself)
would need to be considered. Other possibilities are to pilot or phase the reform, so that
progress can be monitored before a final decision is taken to implement a national
program.

51. In the end, a tactical judgment will have to be made as to how to proceed based on these
considerations. This judgment will be influenced by the time and resources at one’s disposal,
which in turn will depend critically on political and economic pressure for action. In most
instances, decision makers may not want to embark on a major policy change without a sound
understanding of the poverty and social implications of policy action, particularly if such action
is aimed at reducing poverty. In some instances, however, political or economic imperatives (e.g.
in a crisis situation) may lead policy- makers to take quick action. Where this happens, it will be
important to undertake PSIA as soon as is feasible and to consider measures to protect the poor
from adverse impacts and vulnerability to significant risks (see Section V.8).

D. Addressing PSIA data limitations today so that they do not limit future PSIA

52. When circumstances dictate that a policy-decision needs to be taken without adequate
data, it is important that steps be put into place to improve the information set over time. Since
PSIA is necessarily a dynamic process of formulating and adjusting policy based on increased
knowledge, it would also be important to put into place a strategy to gather the necessary data to
enhance the basis for further and future (ex ante and ex post) analysis of the poverty and social
impacts of policy. Such a strategy can be designed in a manner that builds national capacity for
data collection and analysis. Where possible, a strategy for data collection should be linked to the
timetable for policy formulation, or for policy review and reformulation. In other words, a
strategy for future data collection is not motivated solely on ex-post monitoring and evaluation of
current policy decision (see Section V.9), but also to permit future ex-ante analysis. Developing
such a strategy is an integral part of the PSIA effort.

shutting down or privatization of a state mining company – a purposive sample of those expected to be directly
affected would be appropriate.
24
Using a non-representative sample to extrapolate differentiated impacts of policies among groups nation-wide
assumes that national distributional characteristics are identical to those of the non-representative sample, a non-
trivial assumption.

22
6. Analyzing Impacts

53. Analysis of the likely poverty and social impacts of policy reforms is central to PSIA.
This section begins with general considerations in choosing impact analysis approaches, and then
provides an overview of several broad classes of methods for estimating these impacts. These
classes are categorized by the extent to which they capture “feedback” effects in the economy
resulting from a policy change. Approaches include: direct impact analysis and behavioral
analysis (“low” in capturing feedback effects); as well as partial equilibrium analysis; general
equilibrium analysis; and micro-distributional analysis linked to macro- models (“high” in
capturing feedback effects). Under each class of methods, the discussion presents an overview of
more specific tools (referred to in bold text). These are summarized in Appendix 1 and are
discussed in greater detail in the Annex (including data requirements and particular advantages
and shortcomings). An ongoing collaborative effort between DEC/PREM/WBI is developing
more detailed modules for each economic tool. In parallel, the Social Development Department
is engaged in a similar effort for its social tools for PSIA. These products will be the basis for the
development of an expanded PSIA learning program.

A. Considerations in Choosing Impact Analysis Approaches

54. In general, there are five factors that will condition the choice of approach or tool to be
used in analyzing the poverty and distributional consequences of a given reform: the type of
reform; the importance of feedback effects in determining the final net impact; data availability;
time availability; and capacity. For purposes of presenting a simple typology, these five factors
can effectively be collapsed into two dimens ions.

• Importance of feedback effects. Depending on the reform in question and the structure of
the economy, the impact of a policy change may be direct and short-term or may have a
high degree of feedback effect on the economy. “Feedback effect” is used here to indicate
multiple-round effects that are transmitted through other markets or with a time lag.
Effectively, the type of reform and the importance of feedback effects can be collapsed
into one dimension for the simple typology presented here. “High” feedback effects
would represent policy reforms, where the net effect is transmitted through several
channels and markets, leads to behavioral changes at the household level, and has
multiple round effects which will take time to work themselves through the economy. An
example could be a massive devaluation which immediately results in changes in relative
prices, consumption, and power structures, but over time might be expected to lead to
shifts in the structure of employment and the economy, changes in productivity,
improved governance (by removing rent seeking) and possibly growth. “Low” feedback
effects would represent reforms where impacts are short-term, direct and transmitted via
few channels. Small-scale civil service lays-offs might be one example.

• Data/time/local capacity availability. As discussed in Section V.5, data availability and

domestic capacity (for data collection and analysis) will necessarily constrain the type of
approach adopted. The simple typology presented here collapses data/time/capacity into a
single dimension. Where local capacity is less extensive than in the Bank or in other

23
 donor agencies, this may be the binding constraint on the choice of approach. Over time,
an objective of PSIA ought to be to improve the capacity of local practitioners and users.
Wherever possible, it is important that local partners – in the government or outside
organizations, as appropriate – are involved both in selecting tools for analysis and in
applying them. This engagement can be the basis for strengthening domestic skills, so
that over time a larger share of the analysis is conducted by local people rather than
development agencies.

55. Table 2 presents an indicative typology of how an analyst may want to select an
approach. It lays out a choice of tools based on the importance of feedback effects (as defined
above) for the reform in question, taking into consideration constraints of data, time, and
capacity25 .

Table 2. Considerations in Choosing Impact Analysis Approaches

Data/Time/Local Capacity Availability

Low Medium High

• Social impact assessment • Social impact assessment • Poverty mapping

(Qual) (Qual and Quant)
• Participatory poverty
assessments
Low • Benefit incidence
analysis
• Social capital assessment
Feedback tool (SOCAT)
Effects • Demand/Supply analysis
• Household models

• Social impact assessment • Multi-market analysis • Social Accounting

(Qual) • Reduced form Matrices – Input/Output
High • Collect more data • Computable general
• Use tools in adjacent cells equilibrium
in conjunction with • Macro-model + micro-
assumptions simulation

NOTE: The tools presented along the dimension of “Data/Time/Capacity Availability” are additive across
rows. That is to say, any tool that can be used in the context of lower data/time/capacity can also be used
with increased data/time/capacity. For instance, social impact assessment can be used across the entire
row.

25
For the purpose of presenting this simple table, the indicative classifications of “high”, “medium”, and ‘low” are
used, whereas clearly this is a continuum in practice. While recognizing that time, data and local capacity are not
perfectly correlated, they are deemed a close enough match to collapse into a single dimension. Using data as a
proxy for all three factors, the following criteria were used for the classification along the data/time/capacity
dimension: low (no nationally representative household survey data); medium (nationally representative household
survey data exists); high (need to use nationally representative household survey data in conjunction with other data
– e.g. census data for poverty mapping; national accounts and other data for computable general equilibrium models,
etc.)

24
56. In contemplating the choice of tools, most analysts will have a particular reform in mind.
A helpful first step, therefore, is to consider whether the reform in question is more likely to have
low or high feedback effects. The answer will depend partly on the scale of the reform and its
importance to the economy, as well as the time horizon. With regard to time horizon, short-run
elasticities are lower than in the long-run. So a tax reform may have low feedback effects in the
first year of implementation, but much larger impacts in subsequent years as agents adjust to the
new tax rates. For instance, the feedback effects of utility reform could be very low – e.g., in the
case of changes in tariffs paid only by a handful of rich consumers – or very significant – as with
the wholesale restructuring of the electricity sector in an industrialized country. Similarly, the
feedback effects of privatization will vary depending on the number and importance of the state
owned enterprises that are divested. Moreover, the individual feedback effect of a series of
reforms may be low, but taken as a package the combined impact could be high. Nevertheless,
while country circumstances will ultimately determine the strength of feedback effects, it is
possible to classify in broad terms specific reforms between lower and higher feedbacks, based
on the scale on which they are being undertaken in most low income countries. Box 4 provides
an indicative breakdown. Appendix 2 sets out in more detail types of tools suitable for each
reform, and possible transmissions mechanisms.

Box 4: Indicative Categorization of Reforms According to Scale of Feedback Effects

This categorization is indicative only: actual feedback effects of a given reform will ultimately be driven by
country circumstances, including the scale and complexity of the policy adjustment.

A. Higher Feedback Reforms

• Macroeconomic and fiscal Reform: Monetary policy reforms, affecting inflation and interest rates; broad
external policy, affecting balance of payments and reserves; and broad fiscal policy, affecting fiscal
deficits.
• Trade and exchange rate reform: Reform of tariff and non-tariff barriers, and exchange rate adjustments.
• Agricultural reform: Elimination of administered prices, changes in domestic subsidies and taxes,
abolition of marketing boards.
• Financial sector reform: Liberalization of interest rates, allocation of credit; lowering barriers to entry;
and regulatory reform.

B. Lower Feedback reforms

• Public finance reform: Changes in allocation and level of public expenditures; changes in level and
composition of revenues; improvements in tax administration; cost recovery.
• Land reform: Distribution to landless; changes in legal rights to own, exchange, inherit land.
• Utility Reform: Restructuring of state owned utilities; increased private participation; full divestiture.
• Financial sector reform: Privatization/closure of state banks; promotion of financial institutions serving
the poor.
• Privatization: Lease of assets; private management contracts; full divestiture.
• Labor market reform: Changes in minimum wages/job security regulation; active labor market measures
for laid off workers.
• Civil service retrenchment: Lay-offs, reductions in the wage-bill.
• Decentralization of public services.
• Social safety nets: Changes in targeted cash/in-kind transfers, benefits to needy groups (eg AIDs
orphans)·and social insurance benefits.
• Pensions: Scaling back pay-as-you-go public schemes; increased private provision; introduction of social
pensions (cash assistance for poorest pensioners).

25
57. Having determined the relevance of feedback effects, the next consideration will be the
availability of data, time, and capacity. Where these are in short supply, simpler approaches may
be all that is feasible. In such cases, limitations of the approach should be explicitly stated, and
an action plan to strengthen data and capacity should be put in place for more robust analysis in
the future. This way countries in the “low” data and capacity situation could aim to improve their
information base so they have the option of adopting methods in the “medium” and “high”
columns, as appropriate, (see Appendix 1 for data, time and skill requirements for each tool).

58. The rest of this section briefly lays out the different social and economic tools for PSIA,
and the reforms to which they are best applied. For ease of exposition, each approach is
discussed in turn. Where feasible it is advisable to integrate economic and social analyses in
order to deepen the analysis. For instance, social impact assessments can be used to help define
the parameters and explanatory variables used in econometric modeling.

B. Methods: Reforms with “Low” feedback effects

59. There are two broad approaches to analyzing reforms with low feedback effects. The first
– direct impact analysis - is a simple assessment of who is directly affected by the policy change,
and by how much. It assumes no behavioral response from affected households or groups i.e., if
prices change, quantities do not adjust. Effectively all elasticities are assumed to be zero,
including own-price elasticities. This assumption is appropriate for assessing short-term reform
impacts, before economic agents have time to make adjustments. It otherwise represents a
limitation of the approach. In particular it will tend to overstate the impact on household
welfare. The approach can be used to analyze any type of policy change – for example, a change
in prices (e.g., commodity price, tariff, wage, or exchange rate) or a change in public finance
policy (e.g., expenditure program subsidy, tax, civil service or state owned enterprise
retrenchment). But it is best suited to reforms whose impacts dominate in the short term e.g., the
removal of a subsidy, a small-scale privatization, a single price change in a relatively isolated
market.

60. Three tools fall within this approach: social impact assessment, simple incidence
analysis, and poverty mapping. These range in terms of data/time/capacity requirements from
“low” to “high” in Table 2, poverty mapping being by far the most demanding.

• Social impact assessment (SIA) is used to assess how the costs and benefits of reforms
are distributed among different stakeholders and over time. It is particularly useful in
understanding how assets (physical, financial), capabilities (human, organizational),
economic and social relations (e.g. gender, exclusion) of stakeholders, and the institutional
mechanisms through which policy actions are transmitted affect policy outcomes.
Stakeholder analysis is a prerequisite for SIA. When reasonable national survey exists, SIA
uses a range of qualitative data collection tools (focus groups, semi-structured key informant
interviews, ethnographic field research, stakeholder workshops) to determine impacts,
stakeholder preferences and priorities, and constraints on implementation. In the absence of
adequate quantitative data, SIA supplements qualitative, sociological impact analysis with
purposive surveys that capture direct impacts and behavioral responses to reform, or specific
dimensions (e.g. time-use patterns) that affect reform outcomes; (the “low- low” cell in Table

26
 2). SIA is useful to examine the impacts of structural reforms such as privatization of state
owned enterprises, agricultural reform, reform of basic services, utility reform, civil service
reform and fiscal policy. It is particularly relevant for understanding the quality of impact on
different social groups, and examining how the poor cope with reforms and access market
opportunities. Given the overlap of research methods, SIA is more cost effective when
undertaken simultaneously with institutional analysis and social risk assessment.

• Simple incidence analysis estimates the distributional incidence of a component of

income or expenditure at the household level. The analysis is an appropriate starting point
where quantitative data are available; (the “low- medium” cell in Table 2). A useful first step
is to examine key descriptive statistics for the country to see which households are “exposed”
to the policy change. The most common application is to tax the expenditure reform, and the
technique has been used for instance to estimate the incidence of education expenditure in
Malawi. It can also be used for reforms which affect prices and consequently household
incomes, such as utility or agricultural reform. Applications of this type include access to
utility services in Guatemala (see Annex Box 3). The approach has some drawbacks,
including the fact that it measures average not marginal benefits i.e., it says nothing about
the next unit of expenditure 26 . Marginal incidence analysis addresses this shortcoming, (see
Box 5).Poverty maps are geographical profiles that show the spatial distribution of poverty
within a country, and where policies might have the greatest impact on poverty reduction.
For instance, a poverty map can be combined with maps that show the placement of primary
health care facilities to understand the access to health services by the poor. The technique is
particularly suited to reforms with regionally-differentiated impacts such as decentralization
and agricultural reform. Applications include planning of public investments in education,
health, and transport and targeting of direct social assistance and food aid to vulnerable
populations. The method is most useful when constructed at a fine level of disaggregation,
but this requires very large datasets.

26
Not only does simple incidence analysis focus on average, not marginal, benefits, its other drawbacks. First, it
does not explain why the things are the way they are. Second, whereas incidence may use public expenditure as the
measure of the service’s benefit to the recipient, there may be no correlation between expenditure and received (or
perceived) value, or outcomes. Third, as with many interpersonal welfare comparisons, the results of the analysis
may vary depending on the method and the dimension used to rank households. See Demery (1997) and van de
Walle (1998).

27
 Box 5: Impact of Social Expenditures in Indonesia: Average versus Marginal Benefit Incidence

Average and marginal benefit incidence has been examined by Lanjouw et al. (2001) to assess how education
and health expenditures affect different income groups in Indonesia. Static benefit incidence analysis entailed
dividing groups by expenditure quintiles and computing utilization rates of the facilities for each group. For
primary education total government outlays in 1998 amounted to nearly 8000 billion Rupiah (covering both
routine and development expenditures). In that year there were just over 25 million students enrolled in
public primary schools. Assuming uniform transfers, the government thus transferred some 307,000 Rupiah
per student per year in public primary school. The Table below gives the incidence of Government primary
education spending per expenditure quintile, and illustrates that because the poorest quintile includes nearly
twice as many students as the richest (6.2 million versus 3.3) the amount received per person in the botton
quintile (47,898 Rupiah) is also nearly twice that received in the top quintile (25,270). The incidence of
public spending on primary education thus clearly favors the relatively poor.

Benefit incidence of primary education spending by expenditure quintile

1 2 3 4 5 Total
Population age 7-12 6.8 mn. 6.2 mn. 5.4 mn. 4.8 mn. 3.8 mn. 27 mn.
Percent of total 25.4 22.9 20.1 17.6 14.0 100.0
Public school students 6.2 mn. 5.9 mn. 5.2 mn. 4.5 mn. 3.3 mn. 25.2 mn.
Per capita transfer 47,898 45,324 40,004 34,375 25,270 38,574
Percent of total 24.0 23.5 20.7 17.8 13.1 100.0

A similar exercise was carried out for junior and senior secondary education and indicated that
benefits of public spending for higher education levels becomes increasingly regressive. In health, per capita
transfers on primary health care were found to be rather evenly distributed across quintiles, while government
spending on hospitals was highly regressive.

Lanjouw et al (2001) also considered the marginal benefit incidence of public social expenditures.
In other words, they asked how a change in government spending would be felt across expenditure groups.
First the incidence of changes in education and health provisioning across two periods of approximately a
decade each was analyzed. Second, the quintile-specific “marginal odds ratio” of participation -defined as
the incremental increase in the quintile-specific participation rate associated with an aggregate change in the
program participation rate - was estimated on the basis of survey data. This was compared with the “average
odds ratio” - the quintile specific participation rate in a given year relative to the participation rate for the
population. On the basis of the historical analysis as well as the estimation results, the evidence suggests that
changes in public spending on primary education would be even more strongly felt among the bottom two
quintiles than what static analysis would suggest.

Source: Lanjouw, et al, (2001).

61. The second approach goes beyond direct impact analysis to allow for some behavioral
responses among households and economic agents. This class of behavioral analysis includes
methods which permit non- zero own-price and cross-price elasticities. In other words, with a
price or other policy change, households may switch to consuming or producing other goods and
services and move along their respective demand or supply curves. The approach is, however,
limited to a purely “micro” focus. Namely, supply is not equated to demand in a market; markets
do not clear; and prices are therefore not endogenous. Rather, households simply react to an
exogenous policy shock based on behavioral specifications and assumptions. If data, time, and
capacity permit, behavioral analysis ought always to supplement simpler incidence analysis to
more fully understand household responses to policy change.

62. The tools of behavioral analysis are social impact assessments (discussed above),
participatory poverty assessments, behavioral incidence analysis, the social capital assessment

28
tool (SOCAT), demand/supply analyses and household models. With the exception of SIA which
is in the “low- low” category in Table 2, all tools in this class are “medium- low” in that they
require greater data and in some cases econometric skills.

• Participatory Poverty Assessments (PPAs) have been more commonly used for poverty
diagnostics but have demonstrated good potential to include poor people’s views to
understand poverty impacts and formulate pro-poor public policy (Norton et. al. 2001)
through a series of rapid assessment tools and structured task based analytical exercises.
PPAs are particularly useful in understanding non- income dimensions of poverty and in
understanding the processes through which reform actions filter down to the poor. They
are more relevant to broad-based fiscal/expenditure and sectoral reforms with potential
impacts on livelihoods and vulnerability (Dulamdary et. al. 2001). The participatory
nature of PPAs strengthens poor people’s influence over decisions that affect their lives.
Beneficiary assessments are a subset of SIA that captures poverty impacts primarily
through unstructured or semi-structured beneficiary interviews.

• Behavioral incidence analysis, combines simple incidence analysis with econometric

estimates of household behavior. It can be used to explain distributional changes arising
from a policy change, (and thereby addresses one of the shortcomings of simple
incidence analysis). Applications include analysis of the role of government policy (vis-à-
vis the private sector) in expanding access to education in Malaysia (Hammer et al,
1995), examination of the disincentive effects of food stamps on labor supply in Sri
Lanka (Sahn and Alderman, 1995), and study of the crowding out of private transfers by
public funds in the Philippines and South Africa, (Cox and Jimenez, 1995) and Jensen
(1996) respectively.

• Social Capital Assessment (SOCAT) measures social capital (institutions and networks,
and their underlying norms and values) at the level of households, communities, and key
organizations. It allows analysts to identify how these social assets affect productive
behavior, (e.g., income generation and risk management) and how this in turn responds to
policy reform. For instance, well functioning networks with high levels of trust such as
among parent-teachers’ associations or farmers’ associations may facilitate policy
changes which call for collective action or cooperation. Alternatively, SOCAT data
make it possible to assess whether certain policies strengthen or undermine social assets.
The tool can be tailored to specific policies or used to give depth to other methods of data
collection and analysis. A tailored version of the SOCAT survey was administered in
Bosnia and Herzegovina, where measurement of the level of social capital led to
recommendations for reform to the social welfare system, and improvements in service
provision and the integration of returning refugees (World Bank, 2002c).

• Demand/supply analyses estimate the response of consumers/producers to price

changes. Demand analysis can assess how willing consumers at different income levels
are to pay for public services like water and electricity. It has been used to assess the
impact of higher ele ctricity tariff rates in Armenia (Box 6), and is being applied to the
same issue in Kyrgyz Republic. Supply analysis is most suited to analyzing agricultural

29
 reforms which affect the poor in their role as producers, and has been used to examine the
impact on poor farmers of agricultural liberalization in Mexico (see Annex Box 4).

• Household models are somewhat more involved in that they analyze impacts taking
account of households as both consumers and producers. They are particularly suited to
addressing agricultural reforms, but have been used in relation to large set of reforms,
including taxation.

Box 6: Impact of Utility Pricing on the Poor in Armenia – Demand Analysis

A recent World Bank study uses multivariate welfare analysis to assess the poverty impact of raising tariffs
in the electricity and water sectors in Armenia. It looks ex post at the impact of higher electricity prices
(and an accompanying expansion in social safety net provision) and ex ante at increased water tariffs. The
study estimates a demand function to examine consumers’ responses to changes in prices, including
through substitution from electricity to other forms of fuel. Possible supply side adjustments (to the cost
and structure of production) are not taken into account.

The analysis draws on two specially commissioned surveys, undertaken over the course of the electricity
reform - a quantitative household survey of water and electricity consumption patterns (as well as of
standard information on income and demographics) and a qualitative consumer satisfaction survey based on
focus group research concerned with attitudes towards provision. For electricity, the data are matched with
administrative statistics on payment and consumption.

The electricity study examines changes in consumption and payment behavior (pattern of arrears etc) of
poor and non-poor households following reform. The water analysis considers (i) how much extra poor and
non-poor households would be willing to pay for an improved service, and (ii) the policy trade-off between
raising tariffs by enough to cover costs vis -à-vis the threat of reduced household consumption.

In both cases results from survey data are corroborated against the predictions from multivariate models of
household expenditure per head. The models include as explanatory variables demography, asset holding
and regional location; each is estimated separately for rural and urban households.

The electricity study finds that households cut their consumption and switched to wood and natural gas
alternatives as a result of the rate increase. This effect was particularly marked for poor households. As a
result, the reform has produced only a modest improvement in revenue. One policy implication is that
future tariff rises are more closely aligned with likely consumer responses. Another is the need for action to
mitigate poverty and environmental impacts.

The results of the water analysis suggest that consumers are reluctant to pay significantly more for a service
they deem unreliable. The authors suggest that reform should, therefore, proceed in two stages – first
enforcing payment from households with reliable service, and then raising tariffs incrementally to balance
cost recovery with the need to maintain access of poor users.

Source: Julian Lampietti et al, (2001)

30
C. Methods: Reforms with High Feedback Effects27

63. There are four classes of methods able to analyze with high feedback effects such as
macroeconomic and exchange rate adjustments: partial equilibrium analysis, general equilibrium
techniques, and macroeconomic frameworks linked to microeconomic models. All of them are
taxing in terms of data/time/capacity, the latter two particularly so, (and range from the
“medium- high” to “high- high” cells in Table 2). Social impact assessments ma y also be used,
and is less demanding. As discussed in Section V.5., there is much to gained from mixing
analytical methods, if possible. Qualitative analyses can inform and enrich the analysis derived
from quantitative modeling methods described in this section when undertaken in conjunction
with such methods.

(i) Partial Equilibrium Analysis

64. Partial equilibrium analysis is a step beyond behavioral impact analysis in that it equates
supply and demand in one or more markets so that prices clear at their equilibrium level. 28 Thus
prices are now endogenous. Partial equilibrium analysis is distinguished from general
equilibrium analysis (below) in that it does not include all production and consumption accounts
in an economy, and does not attempt to capture all markets and prices in an economy. Thus,
while partial equilibrium approaches (which include elasticities on both the demand and supply
side) will allow for indirect feedback effects from the impact of changes in one market on other
markets, they will not capture all such changes to the extent that they exclude any key markets.29
This is its biggest drawback relative to general equilibrium approaches, (see below). For this
reason, partial equilibrium analysis is better suited to analyzing sectoral reforms (such as
agricultural marketing and pricing and utility pricing reforms) that are less likely to have large
impacts on macro aggregates. Partial equilibriums techniques fall within the “high- medium”
category of Table 2 in that they at least require household survey data.

65. Tools for partial equilibrium analysis are multi-market models and reduced form
techniques. The former permits the combined estimation of systems of supply and demand
relationships, so that the impact of policies in one sector can be seen on other related sectors.
They represent a simpler alternative to computable general equilibrium models, and have been
used in a number of contexts to examine: the welfare impact of technical change in agriculture,
increased exports, and input subsidies in India (Binswanger and Quizon (1984, 1986); and
agricultural subsidies and tariffs in Turkey, (see Box 7). The latter technique can be used to
simulate the impact of different policy variables on poverty and social outcomes. It has many
applications, including assessing the impact of public services or policy reforms on poverty or
other welfare measure. The approach is less data intensive than multi- market modeling. For

27
It is particularly important that reforms with high feedback effects are subjected to good stakeholder analysis to
isolate impacts on different groups, and to careful risk analysis to assess what might undermine the reform.
28
Behavioral impact analysis, in focusing specifically on demand analysis separately and on supply analysis
separately, can also be argued as a “partial” equilibrium analysis. The distinction drawn here is that since market
demand and supply are not equated and do not clear, it is not technically “equilibrium” analysis.
29
In general equilibrium terms, it also effectively assumes a closure.

31
 Box 7: Impact of agricultural subsidies and tariffs in Turkey: Multi-market modeling

Hammer and Tan (1989) construct a multimarket model of the agricultural sector in Turkey. Their model
contains eight separate agricultural markets, all of which are potential substitutes for each other. Some of
these are traded internationally. Incomes in the rural areas are derived from agricultural profits. The model
also includes an explicit government account, which taxes, provides subsidies, and intervenes directly in the
markets for selected outputs. Elasticities for supply and demand were taken from published sources, and
modified to satisfy theoretical restrictions and to conform with base data. Sensitivity analysis confirmed that
the model was robust to large changes in these and other assumptions.

The model simulates the impact of changes in government policy concerning direct intervention (subsidies
and support prices), and tariffs. The results indicate that reducing export taxes leads to a broad-based
increase in supply and exports; and that the incidence of subsidies to fertilizer and feedgrains is sufficiently
skewed that they could be cut without damage to farm incomes or export earnings. Also, import duties on
milk products are regressive. Imposing border prices (removing import tariffs and restrictions) leads to
improved government finance and foreign exchange earnings. It also improves the incomes of middle and
wealthy farm households, but at the risk of harming consumers – especially the poor – through higher prices.

Source: Hammer and Tan, 1989.

instance, reduced form techniques were used to study rural poverty in Zambia taking advantage
of household budget data, time use information, and other sociological and anthropological data.

(ii) General Equilibrium Analysis

66. General equilibrium analysis goes beyond partial equilibrium analysis in that it models all
economic accounts in the economy and thus aims to present a comprehensive picture of the
economy. What they have in common is a complete specification of the economy, in varying
degrees of aggregation. In theory, a well-specified general equilibrium model can capture
indirect feedback effects of policy generated from all other markets. However, in practice, as
with any economic estimation, it captures feedback effects only from those markets that are
included in the model, and results depend on the model specification and parameters. 30 While
general equilibrium analysis can be used to analyze most types of policy reform, it is most
relevant to reforms with multiple and significant feedback effects on the economy through a
number of transmission channels. An exchange rate devaluation or alternative aggregate fiscal
policies would be best assessed with a general equilibrium approach, data and capacity
permitting. General equilibrium analysis, in capturing accounts from the entire economy, require
not only household survey data but also comprehensive and consistent national aggregate data.
The computational and capacity requirements are also generally high. Other drawbacks are that
the technique can be difficult to explain to policy makers, and results are sensitive to the
assumptions on which a particular model is based. The approach is hence presented in the “high-
high” cell in Table 2. Specific tools for general equilibrium analysis are Social Accounting
Matrices and Input-Output Models (SAMs), and computable general equilibrium models
(CGEs):

• SAMs can be used for simple policy simulations (by selecting some accounts as
exogenous, and leaving the others endogenous). For instance, in a SAM containing

30
The standard caution and caveat with respect to economic modeling thus applies: great care should be taken in
specifying the model and its parameters to country context and great care should be taken in making explicit the
specific assumptions and limitations of simulations derived from such models.

32
 agricultural production and transportation accounts, the impact of an exogenous change
to agriculture can be simulated (leaving transport fixed) or the other way round. 31 SAMs
have some serious limitations, including the fact that prices do not adjust to reflect
changes in real activity, and that results are highly sensitive to which accounts are
assumed endogenous and which exogenous.

• CGEs are completely-specified models of an economy, (or a region). They vary in their
complexity from the basic 1-2-3 model, (one country, two activities, and three goods) to
versions with several activities and actors and hundreds of parameters. CGEss can be
used in a number of policy contexts, including public finance reform and macroeconomic
stabilization. 32 Box 8 illustrates the use of a CGE model to calculate the impact of fiscal
incidence in the Philippines. As well as being data intensive, CGEs – even simple ones –
can be difficult to build and understand.

Box 8 : Net Fiscal Incidence in the Philippines

Ideally one should be able to analyze the incidence of tax and expenditure policies simultaneously, i.e., conduct a
net fiscal incidence analysis. In practice, this type of analysis is difficult to undertake because the data
requirements are extensive. One of the few examples of this type of analysis was done in the Phillipines by
Hossain and Devarajan (1998). The net incidence of fiscal policy (indirect taxes, direct taxes, and expenditures)
was estimated using a variety of data sources and tools.

For both direct and indirect taxes, the authors calculate the effective tax rate for each income decile defined as the
change in purchasing power by each income class. For direct taxes, the authors calculated the effective tax rate
using actual tax collection rates broken down by gross income. The family income and expenditure survey was
used to map income classes into deciles. For indirect taxes, a multisector CGE model was used to calculate the
incidence of taxes. The effective tax rate for each type of tax (e.g. VAT, import tariffs, excise taxes) was
calculated individually. This was done by simulating the removal of each type of tax with the CGE model. The
incidence reflects both actual tax collections and the increased costs associated with each tax. The effective rates
for indirect and direct taxes were aggregated to get overall tax burden.

For expenditures, the authors focused on health, education, and infrastructure spending. Nation-wide incidence
patterns were derived from regional pattern of expenditures along with information on income distribution. To
derive benefit incidence, the authors inferred the implicit subsidy on health, education, and infrastructure for each
income decile. Overall incidence of public expenditures in health, education, and infrastructure was calculated as
the weighted average of the regional incidence, with the weights being the regional allocations of these
expenditures. Total incidence of public expenditures was calculated as benefits as a share of gross income.

The results indicate that tax incidence is fairly neutral. Expenditure incidence is strongly progressive as is the
combined incidence.

Source: Devarajan and Hossain (1998)

31
Supply is either perfectly elastic (if chosen to be endogenous) and entirely demand driven, or perfectly inelastic –
that is, supply is constant. SAM-IO simulations also vary greatly depending on the assumptions made about which
accounts are exogenous and which endogenous.
32
Dervis, de Melo, and Robinson (1982) and Shoven and Whalley (1992) provide good summaries.

33
(iii) Micro-level Simulation linked to Macro/Sectoral Models (or Assumptions)

67. This class of analysis links microeconomic behavior and/or distribution with a consistent
macroeconomic framework or model. In contrast to CGE models described above, the detailed
and disaggregated household behavioral responses are not modeled simultaneously in the
computation of general equilibrium outcomes. Rather, distributional and poverty outcomes are
arrived at iteratively – and outside the macro modeling exercise. In its simplest form, the macro
or sectoral model is solved to derive the main equilibrium parameters (e.g. prices, wages, fiscal
deficit, etc.); these are then fed into a micro model. In principle, any variety of macro or sectoral
models (such as a CGE, multimarket, or macro-consistency framework, for example) could be
used to derive the equilibrium economic parameters. Likewise, any number of micro approaches
can be used to derive poverty and distributional outcomes based on the parameters derived from
the macro or sectoral model. 33 Hence, an advantage of the approach is the flexibility it affords
the analyst. The approach can be applied to a wide variety of reforms. However, it is data and
skills intensive, and is located in the “high- high” cell in Table 2. 34 Specific techniques include:

• Linking Macro-Framework to a Reduced Form Estimation. This is a minimalist

approach which simulates poverty impacts on the basis of various macroeconomic
variables 35 . Tools have also been developed to examine how changes in certain macro-
variables – most particularly growth rates - affect poverty, based on a country-specific
distribution. SimSIP is a tool of this type, (see Annex). 36

• Linking Macro-Framework to Behavioral Analysis Estimated for Representative

Households. This has been done in the 1-2-3 PRSP model (Devarajan et al, 2001), which
links the 123 model to a behavioral analysis of representative households, and PAMS,
which joins a labor-poverty module to a macro-consistency model (such as the Bank’s
RMSM-X). 37 The technique can be used to simulate a wide range of policies, from labor
and wage policies to taxation, prices, and the allocation and levels of government
spending. Applications include the linking of a simple CGE model with a demand system
for food to examine the impact of macroeconomic policy changes on food consumption
and nutritional status in the Philippines (Orbeta and Alba, 1998)38 .

33
It is also possible to run the micro-simulation exercise not on the basis of parameters derived from a consistent
macro-model, but on the basis of exogenously assumed changes in parameters. Such an approach would not be so
different from the simplest form of “direct impact analysis” described earlier.
34
This is also an area where work is still ongoing and new tools and applications continue to be developed.
35
This has been done, for examp le, by Agenor (2002) who has estimated such an equation – including the relevant
elasticities – on the basis of a cross-country regression tailored to take as inputs the outputs of the RMSM-X model.
One limitation to this approach relates to the robustness of cross-country estimates of these elasticities when applied
to a national context.
36
SimSIP has a module that looks at growth impacts, is being expanded to include a module that will accept as
inputs the key aggregate wage and consumption variables generated from the 1-2-3 model.
37
The separate labor and poverty (LP) module can simulate the impact of policies on the labor market, income and
expenditures, and related social welfare indicators. It permits the reallocation of labor in response to changes in
prices and wages.
38
A similar approach was undertaken by Ianchovichina, Nicita, and Soloaga (2001) to examine the impact of
NAFTA on household welfare in Mexico.

34
• Linking Macro-Framework to Micro-simulation. A more disaggregated variant of the
representative household method above is to simulate behavior at the level of the
individual household. Robillard et al. (2001) use this approach to analyze the poverty
impact of the Indonesian financial crisis, (see Box 9). Their household model is linked to
a CGE through wages, and the sectoral allocation of employment and prices. It is
constrained to be consistent with the output of the CGE.

Box 9: Impact of the Indonesian financial crisis on the poor: partial equilibrium modeling and CGE
modeling with micro-simulation

General equilibrium models permit the analyst to examine explicitly the indirect and second-round
consequences of policy changes. These indirect consequences are often larger than the direct, immediate
impact, and may have different distributional implications. General equilibrium models may thus reach
significantly different conclusions from partial equilibrium models.

These differences are illustrated by comparing the conclusions reached by examining the same event using
different methods. Levinsohn et al (1999) and Robillard et al (2001) both look at the impact of the Indonesian
financial crisis on the poor; the former using partial equilibrium methods, the latter using a CGE model.

Levinsohn et al (1999). use consumption data for nearly 60,000 households from the 1993 SUSENAS survey,
together with detailed information on price changes over the 1997/98 crisis period, to compute household-
specific cost-of-living changes. They find that the poorest urban households were hit hardest by the shock,
experiencing a 10-30 percent increase in the cost of living (depending on the method used to calculate the
change). Rural households and wealthy urban households actually saw the cost of living fall.

These results suggest that the poor are just as integrated into the economy as other classes, but that they have
fewer opportunities to smooth consumption during a crisis. However, the methods used have at least three
serious drawbacks. First, the consumption parameters are fixed – no substitution is permitted between more
expensive and less expensive consumption items. Second, the results are exclusively nominal, in that the
welfare changes are due entirely to changes in the price of consumption, and do not account for any
concommitant change in income. Third, this analysis can’t control for other exogenous events, such as the El
Niño drought and resulting widespread forest fires that occurred at the same time.

Robillard et al, (2001). use a CGE model, connected to a microsimulation model. The results are obtained in
two steps. First, the CGE is run to derive a set of parameters for prices, wages, and labor demand. These
results are fed into a microsimulation model to estimate the effects on each of 10,000 households in the 1996
SUSENAS survey. In the microsimulation model, workers are divided into groups according to sex,
residence, and skill. Individuals earn factor income from wage labor and enterprise profits, and households
accrue profits and income to factors in proportion to their endowments. Labor supply is endogenous. The
microsimulation model is constrained to conform to the aggregate levels provided by the CGE model.

Robillard et al (2001). find that poverty did increase during the crisis, although not as severly as the previous
results suggest. Also, the increase in poverty was due in equal part to the crisis and to the El Niño drought.
Comparing their microsimulation results to those produced by the CGE alone, they find that the
representative household model is likely to underestimate the impact of shocks on poverty. On the other
hand, ignoring both substitution and income effects, as Levinsohn et al. (1999) do, is likely to lead to
overestimate the increase in poverty, since it does not permit the household to reallocate resources in
response to the shock.

Source: Levinsohn et al, 1999 and Robillard et al, 2001.

35
7. Contemplating Enhancement and Compensation Measures

68. Poverty and social impact analysis is undertaken to maximize the welfare gains among
the poor and other targeted groups. To the extent that there are losers from the reform, PSIA can
inform policy design that minimizes the number of losers or the extent of losses. Where
appropriate it also informs compensation mechanisms. In short, if in the first instance ex ante
poverty and social impact analysis (above) shows that a proposed reform will have short term
adverse impacts on the living standards or the poor or other groups, it is critical that the analyst
address the following considerations.

A. Consider alternative design.

69. The design of reform may be improved by including enhancement or mitigation

measures, or different sequencing of public actions.

• First, one may opt to proceed with the implementation of a reform as planned, but with a
subsidization arrangement to protect the poor or others adversely affected by the policy.
For example, a water tariff increase associated with utility reform may be designed to
protect those who consume relatively small quantities of water by incorporating lifeline
tariffs. Alternatively, analysis of an electrical utility reform may determine access to be
the main constraint for the poor, resulting in the design of subsidized grid connection fees
for targeted poor communities. 39 In fiscal reform, key staple goods that comprise the bulk
of consumption for the poor may be exempted from taxation. 40

• Second, the policy set may need to be expanded beyond the core policy measures (driven
by the problem diagnosis) to include complementary measures. For example, if “behind
the border” bottlenecks (such as barriers to entry in the domestic transport sector) reduce
the benefits of trade liberalization accruing to intended beneficiaries, taking measures to
address those constraints will be critical to achieving expected welfare gains. Similarly,
understanding and addressing the factors that constrain the poor or other target groups
from benefiting from market reforms – e.g. due to lack of assets (land, credit, electricity
grid connection) or capabilities (price information, market access) will be essential.
Microeconometric analysis as well as qualitative analysis can assist in identifying what
type of complementary measures might be necessary.

• Third, it is important to carefully consider sequencing. For example, shutting down a

commodity board can eliminate monopsony and subsidized inputs at the same time. If
critical inputs are likely to be unavailable or prohibitively expensive for vulnerable
farmers in certain locations, PSIA might suggest that government first take action to drop
barriers to entry or encourage private merchants to pursue untapped markets before

39
Subsidization choice would depend, at least in part, on institutional capacity and transactions costs of delivering
the subsidy.
40
It is worth noting that such exemptions may introduce undesirable distortions into the tax and incentive scheme,
not only from an efficiency standpoint. To the extent that it allows non-poor producers to avoid taxes legally or
facilitates tax evasion, exemptions that appear patently progressive can limit progressive budgets that address social
program for the poor.

36
 dismantling the commodity board. Also, sustainability of the reform process can be
enhanced with quick wins among key stakeho lders to build support for reform. For
example, new resources for mining safety in Russia were used to persuade the unions of
reform.

B. Consider direct compensatory mechanisms

70. When adverse impacts of reform are unavoidable, considerations driving the decision to
compensate losers may be based on: (i) poverty grounds (especially if some of the poor lose in
the short run and the objective of the policy is poverty reduction); (ii) on equity grounds
(especially if groups that have traditionally been the poorest and most vulnerable lose ground to
those with greater economic security); or (iii) on political economy grounds (especially if the
losers have the capacity to organize and threaten either the sustainability of reform or survival of
the government).

71. Careful consideration is required in the design of compensatory schemes – to ensure

appropriate targeting of intended beneficiaries and cost effectiveness, and to avoid perverse or
distortionary incentive schemes that might compromise implementation of the intended policy,
(see Box 10). It is also important to calculate the cost of compensation, and consider it relative
to the expected benefits of reform. In terms of costs, the compensation scheme itself (e.g., a large
scale retrenchment or social program) will have fiscal costs that, depending on magnitude, can
have feedback effects on fiscal stability, prices, and the economy. Related, there is an
opportunity cost to any compensation scheme, which will use resources that would otherwise
have been spent elsewhere. 41

Box 10: Labor Downsizing and the Design of Compensation Packages in Vietnam

The issue of labor downsizing and the design of compensation packages has been analyzed ex ante in the context
of Vietnam by Martin Rama (2001). Proposed reforms included a major downsizing operation involving the
liquidation, divestiture, or restructuring of approximately 6000 state-owned enterprises (SOEs), resulting in
unemployment of roughly 5% of the Vietnamese labor force or 450,000 workers. In anticipation of the massive
layoffs a special compensation package was developed which amounted to two months of salary per year of
service plus a substantial cash training allowance. This package was a result of policy debates around
simulations generated by Rama using DOSE (Downsizing Options Simulation Exercise). The simulation
computed ‘acceptance rates’ for alternative severance packages, based on the characteristics of individual
workers.

The acceptance rate is defined as the fraction of the SOE workers for whom the separation package would
exceed the present value of the estimated loss from job separation. Rama found that a formula based solely on
earnings history had a consistently higher acceptance rate for men; while women found a uniform lump sum
compensation more attractive. Based on these simulations, the government of Vietnam picked a separation
package which involved a sizeable lump -sum component under the form of the training allowance in order to
ensure that female workers are not unduly penalized by the layoffs.

Source: Rama, 2001.

41
The opportunity cost calculation is complicated to the extent that the reform package as a whole might be
conditional on the compensation mechanism.

37
C. Consider delay or suspension

72. If the findings of PSIA suggest that the short-to- long term benefit of the best designed
policy intervention does not exceed the short-term (or longer-term) costs of mitigating or
compensating the poor, or that other important groups might suffer irreversible losses, then
consideration could be given to delaying the reform (i.e., re-sequencing) or abandoning or
suspending implementation of the policy.

8. Assessing Risks to PSIA 42

73. Upon laying out the broad parameters of possible reform alternatives, it is important to
consider the risk that some of the assumptions underlying the analysis are not realized. This
process may provide further insight into policy choice and design, including sequencing. Risk
analysis addresses the issue of what may go wrong in terms of a policy reform delivering
intended poverty or social impacts. By addressing these questions explicitly, adjustments can be
made to mitigate the risks (e.g. modifying reform, or introducing complementary measures).

74. Risk analysis can therefore help governments to anticipate – and avoid – major
unintended consequences. Part of the challenge is to identify explicitly in the analysis the
assumptions that must be valid for policy to have its intended impact. This is a difficult task and
underscores the need to make operating assumptions explicit in monitoring the evolution of the
policy reform and its evolving impacts (see Section V.9).

75. There are four main types of risk in PSIA:

• Institutional risks. These include risks that assumptions made regarding institutional
performance were incorrect. This could be due, for example, to market or institutional
failures in existence where none were assumed (e.g. asymmetric information or missing
markets) or to the fact that key organizations involved perform in unexpected ways.
• Political economy risks. This includes the risk that powerful interest groups may
undermine reform objectives by blocking implementation, capturing benefits, or
reversing reform actions.
• Exogenous risks. These include risk of shocks to the external environment such as a
natural disaster or regional economic crisis that might have a bearing on the vulnerability
of the poor.
• Country risks. These include the threat of an increase political instability or social
tensions that undermine effective implementation.

76. There are three main methods available to conduct a risk analysis: social risk assessment,
sensitivity analysis, and scenario analysis. The first and third are discussed in more detail in the
Annex.

42
This discussion relates to risk analysis only as it relates to PSIA. It is not intended as a comprehensive treatment
of the issue.

38
 • Social Risk Assessment. This is an approach for systematically identifying risks, and
their importance to the reform at hand. It is based on the premise that risks become reality
when assumptions turn out to be wrong. The likelihood of assumption being invalid is,
therefore, another way of judging the extent of risk. The first step is to identify the
assumptions – implicit or explicit – about what should (or should not) happen in order for
a policy to achieve its goals. The next step is to make a judgment as to the likelihood that
the assumption will hold, and its importance to policy. The more likely it is that an
important assumption will be invalid, the greater will be the need to alter the policy. If
assumptions are considered important but more likely to be valid, there may be a need for
a contingency plan.

• Sensitivity Analysis. This is usually applied in the context of quantitative economic

models, and entails varying the magnitude of certain key parameters to judge their
sensitivity to the model’s outcomes. Sensitivity analysis is especially important for
parameters which are particularly uncertain (as may be the case where these are based on
estimates from other countries) or where risks are known (e.g. droughts in the Sahel).
One practical limitation of the approach is that it is more often used to test sensitivity
within a given model rather than to assess alternate scenarios using different models, (not
always feasible). 43

• Scenario Analysis.44 This is a tool for helping decision- makers consider how policy
impacts might vary in different plausible scenarios. Scenarios are based on a range of
social, economic, political or technological outcomes that drive change in the country. In
this way, unexpected risks can be highlighted, and contingencies made.

9. Monitoring, Social Accountability, and Evaluation of PSIA45

77. Upon identifying and designing reform based on ex-ante PSIA, it is important to consider
setting up at an early stage systems for ex-post monitoring, social accountability and evaluation
of the impacts. In doing so, there are some specific concerns to bear in mind in the context of
reform-specific PSIA. This section outlines these issues.

78. As noted in Section III, good PSIA calls for monitoring and evaluation, both to validate
ex ante analyses and to influence the reformulation of policy. Effective PSIA therefore implies a
heavy demand on data and information bases. In considering the information needs of PSIA, it is
essential to build where possible on existing systems of M&E. This should be done with a view
to developing a coherent national poverty monitoring system, which brings together information
bases, indicators, mechanisms for linking M&E and policy decision making etc. This is another
area where capacity building is an embedded part of PSIA: the development or refinement of

43
This is being done, for example, in Madagascar, where three different modeling approaches are being used to
assess the impact of a rice tariff on distribution.
44
For an operational discussion with examples, see Maack, 2001. For in-depth case studies of applied scenario
analysis, see: www.gbn.org/public/gbnstory/downloads/gbn_mont_fleur.pdf (South Africa)
45
This discussion relates to monitoring, social accountability and evaluation only as they relate to PSIA. It is not
intended as a comprehensive treatment of the issue.

39
systems for monitoring, social accountability, and evaluation is most effective where it
strengthens in-country capacity. 46

79. Monitoring involves tracking the progress of processes and implementation (as measured
by indicators on inputs, outputs, and outcomes) associated with an intervention. This is done to
ensure agreed targets are met and the policy is on track. Evaluation explains or analyzes how and
why observed changes in indicators have occurred. Impact evaluation assesses the extent to
which a past intervention has contributed to changes in outcomes or impacts for individuals,
groups, households, and institutions. An M&E system includes the institutional structure and
processes by which indicators are identified and tracked, as well as an explanation of how and
why changes have occurred.

A. Particular characteristics of M&E in the context of PSIA.

80. M&E in the context of PSIA may be seen as a sub-set of a national poverty monitoring
system, and as having several characteristics. First, it is focused on monitoring impacts of
specific policy reforms with a view to validating policy analysis or informing policy adjustment
during the course of implementation. This ideally requires information on key indicators before
(i.e. baseline data), during, and after the reform. Second, the evaluation problem is particularly
challenging in the case of economy-wide policy reforms. As these reforms often apply to whole
sectors or economies, unlike projects, which are restricted to a group or specific region, it is
difficult to establish the counterfactual. Use of control groups is possible only if the policy has
been initially designed as a pilot or phased in so that those who do not initially experience the
reforms are used as controls. The particular challenges of ex-post evaluation for certain kinds of
economy- wide reform require particular foresight in setting up an evaluation framework ex-ante.
Third, in part given the challenges of ex-post evaluation and in part driven by the need for more
rapid feedback on the evolution and impact of policy, PSIA implies a special role for monitoring
for purely practical purposes. Although monitoring cannot attribute causality, it can say
something about whether, for whatever reasons, assumptions are holding and expected impacts
are materializing. Related, monitoring can inform where “things are going wrong”, as well as
where supplementary interventions or changes in policy may be needed to ensure that the desired
impacts materialize.

B. Choosing indicators for PSIA.

81. Several key criteria may be used to choose relevant indicators to monitor for PSIA. First,
if impacts are transmitted through specific channels (e.g. changes in producer prices, increases in
sectoral employment, etc. – see Section V.3), these are obvious indicators to track. Second, if the
conceptual framework underpinning the analysis hinges on specific assumptions (e.g. traders or
firms will enter with liberalization, consumers or producers will substitute, or even that certain
elasticities will be of certain magnitude), the validity of these assumptions holding over time can
also be monitored. As discussed above, tracing through transmission channels and making all

46
Building capacity in this context includes not only the development of technical skills, but also changes in
incentives and demands for such information among country stakeholders (including government) as well as
improved understanding of what constitutes a good information base and how that information base can be used for
more creative analysis and for immediate policy decision making.

40
assumptions explicit in undertaking PSIA, increases understanding of the theoretical premises on
which the program is based. In the context of M&E, the process of tracing through the theory-
based transmission channels also enables one to identify potential intermediate and process
indicators that can be used to monitor the implementation and outcomes of reform. Third, given
the importance of monitoring for adjusting policy in “real time”, some indicators for PSIA (e.g.
prices) ought to be chosen so that they can be tracked over a short time period (e.g. 6 months).
The implication is to identify proxy or intermediate indicators for outcome or impact indicators
that take longer periods to change. One way to do this is to trace through the critical assumptions
or ‘theory’ through which it is believed the reform will influence outcomes. Fourth, it is
important to establish indicators to monitor key risks to reform (see Section V.8). These might
cover reform– specific risks (e.g., regarding transmission mechanisms or institutions) or broader
threats (e.g., to the political economy).

82. In addition indicators should satisfy a simple set of basic technical criteria true for all
monitoring indicators. The ideal indicator will be:

• highly and unambiguously correlated with the objective variable of interest (e.g., test
scores accurately reflect literacy);
• sensitive to changes in the outcome or impact of interest;
• timely, in that it can be collected in time to feedback into policy adjustment;
• relatively insensitive to other unrelated changes in the sector;
• relatively difficult to manipulate, either by target groups or by policymakers;
• not too costly to monitor.

C. Effective monitoring facilitates good evaluation.

83. Understanding gained during the process of ex-ante analysis in the course of PSIA and
the identification of indicators helps in designing a good evaluation. Process evaluation are
important to understanding the “hows” and “whys”, and the associated indicators are usually
timely and not costly to collect. Tracing transmission mechanisms prior to the reform helps in
thinking through implicit assumptions and highlights where potential constraints or risks may
arise. The process also helps to evaluate whether the expected impact of the reform is borne out
in practice. Where it is not, more in-depth analysis to explain divergence can be conducted.
When results confirm the assumptions, documenting the lessons learned can help design similar
reforms elsewhere.

84. The approach used in identifying indicators will ideally encompass both open-ended and
close-ended methods, and as far as possible incorporate participatory methods. Open-ended
participatory methods examine the how and why of policy reform, and in the case of
participatory methods, promote ownership, accountability and transparency. Close-ended
methods, on the other hand, only touch on questions of how and why of changes, and are
primarily designed to answer the question of how much.

41
D. M&E to Promote Accountability and Transparency.

85. Monitoring and evaluation can also be implemented to promote social accountability
during the process of reform, thereby leading to increased ownership and sustainability. There
are various M&E tools available that if appropriately, used can help to promote social
accountability. These include Public Expenditure Tracking Surveys (PETS), Quantitative Service
Delivery Surveys (QSDS), Citizen Report Cards, and Participatory Public Expenditure reviews,
all illustrated in Box 11. Another useful tool is perception, which provide another means of
Box 11. M&E Tools for Promoting Accountability and Transparency during Policy Reform

Public Expenditure Tracking Surveys (PETS), Quantitative Service Delivery Surveys (QSDS),
Participatory Public Expenditure Reviews and Citizens’ Report Cards are useful tools for tracking public
expenditure and monitoring the effectiveness of reforms, as it pertains to the expected outcomes, processes and
impacts that will occur as a result of policy reform.

PETS and QSDS collect data through structured interviews and documentation from service providers. While
PETS trace money through an organization, QSDS provide a more robust analysis by pinpointing
organizational weaknesses that can be addressed through reform. One output of these survey instruments is a
case-specific diagnosis of public service delivery, helping to pinpoint weaknesses in implementation capacity
and suggesting where reform efforts should be concentrated. Data from PETS and QSDS can help provide
answers to several kinds of questions, such as:

• How to strengthen the “voice” of service users?

• What kind of accountability mechanisms between different levels of government can improve service
delivery?
• How to regulate private providers?

Drawing on a number of successful cases and tested models from around the globe, the World Bank has
developed a framework for Participatory Public Expenditure System, in which civic groups influence stages of
the budget process in a cyclic and iterative manner. The framework can also be applied to the participatory
monitoring and evaluation of policy reforms covering all levels of indicators—input, output, outcome,
impact—in a participatory manner. The system spans four key stages:

• formulation: how expenditure proposals are made – to which sectors and in which amount.
• analysis: review of the impact and implication of alternative policy proposals and allocations
• expenditure tracking: identification of elusive bureaucratic channels through which funds flow,
bottlenecks in the flow of resource, and other deficiencies of delivery systems
• performance evaluation: direct feedback from citizens on the quality of, access to, and satisfaction with
public services (e.g., report cards).

One-off engagement at any stage of the cycle can be useful, but participatory public expenditure systems only
deliver when the feedback loop is institutionalized and space is given to external voice at each stage.
Achieving that level of institutionalization requires the commitment of significant resources over the long
term.

pinpointing problems within service provider organizations. Ideally, quantitative and perception
surveys can be used in tandem to provide critical information on the issues surrounding design
and access to policy reform.

42
86. There are key principles to bear in mind in establishing the M&E system:

• Promoting ownership of reform can be facilitated through the use of participatory

monitoring and evaluation. This can be used to identify output, outcome, process and
impact indicators that are meaningful to stakeholders. Reaching agreement on key
performance indicators can be challenging, and is much better dealt with prior to the
reform. Agreement on standards to be achieved is valuable both for policy managers as
well as for affected parties who are then more likely to accept the results of monitoring
reports and use this to improve policy. In addition, follow- up public disclosure of
information strengthens commitment to the reform.
• Promoting accountability can be achieved by employing specific data collection tools
designed to allow beneficiaries to monitor inputs and outputs of the reform, while also
soliciting their views on effects of policy outcomes on their well-being
• Selectivity in choosing whether to conduct an impact evaluation or not is important
because impact evaluation is data and time intensive relative to other forms of evaluation,
and often can only be implemented some time after the reform is already in place.
Therefore, the decision to do impact evaluations should be based on a need to fill
knowledge gaps, or to apply lessons learned in expanding reforms.
• Employing local counterparts in the implementation and setting up of M&E system –i.e.
relevant ministry, statistical office, planning office, private research agencies,
universities, NGOs— not only promotes ownership, but helps to build capacity in poverty
analysis.

E. Planning and implementing M&E: M&E activities related to each stage of the PSIA.

87. Prior to the reform, while still grappling with the key questions and objectives of the
PSIA, preliminary list of indicators, and required tasks for the M&E system can be identified,
timeline and TORs defined, and consultants hired. In particular, it will be important to ascertain
the existing information base and gaps, including the availability of relevant baseline data with
regard to key indicators and welfare measures and possible need for collecting baseline data (See
Table 3).

88. Once some ex ante analysis is completed, and there is an improved understanding of how
reform will operate, the preliminary list of indicators (which may include views perceptions of
those to be affected), particularly intermediate and proxy indicators can be refined, and
instrument developed to be used in measuring indicators. It is important that improved
understanding of the program, and indicators feed into the design of the quantitative evaluation.
At this point in time, once indicators have been identified, plans can be made to collect any
missing baseline data, ideally prior to implementation of the reform.

89. During the reform or implementation period, there could be a periodic collection of
indicators, (proxy/intermediate every, 2-4 or 3-6 months; some indicators, such as prices, every
month; outcome/impact indicators on a 6 month plus cycle, depending on the reform). Soon after
implementation begins, perhaps 3-6 months, preliminary monitoring and evaluation of processes
can be conducted to see whether the theory of how reform would work is proceeding as

43
planned—i.e. do specified inputs/outputs appear to be leading to outcomes/impact, in the manner
expected? If not, why not? At this time mid-stream adjustments are made, as required, to ensure
the reform is on track.

90. In the post reform or completion stage, roughly 3-6 months after reform is in place, there
could be – as a matter of good practice - a follow- up qualitative assessment and an incidence
analysis of basic outcome indicators to identify early ‘losers’ and ‘winners’ and reasons for
observed patterns. This analysis, along with a more rigorous evaluation can be repeated once a
year or as requir ed to fill knowledge gaps in key policy areas, or to inform plans to further
deepen or expand reforms, or scale up pilots.

44
 Table 3: Planning M&E as part of Poverty and Social Impact Analysis: Guidance for Countries

Reform Timeline PSIA Timeline M&E Processes Timeline

STAGE 1: Identify key reform issues, questions, outcomes and risks for Identify input, output, intermediate, outcome
Prior to reform investigation and impact indicators
Trace out ‘theory’ of how reform will lead to the desired results on Identify existing information sources and gaps;
the ground. identify availability of baseline data
Specify required tasks/needs for covering gaps
TORs for M&E

Preliminary field visit for ex-ante analysis Identify specific institution(s) to be responsible
Design ex-ante analysis for M&E and/or hire consultant(s); begin to
define process for M&E –i.e. periodicity for
data collection; storage; maintenance etc.
Plan collection of baseline data, if it does not
exist.

Conduct ex-ante analysis Refine preliminary indicators

Collect baseline information
Design instrument to be used in measuring
indicators
Stakeholder analysis
Institutional analysis

STAGE 2: During 3-6 months after initial implementation (and periodically up until Process evaluation
implementation of completion of reforms): follow-up analysis Social impact assessment
reforms Preliminary incidence analysis
Institutional analysis

STAGE 3: 3-6 months to 1 year after completion of reforms (depending on Process evaluation
Completion/ Post outcomes of interest) Social impact assessment
implementation of Incidence analysis
reform

45
10. Feedback of PSIA into Country Policy Choice 47

91. Fostering and drawing upon public discussion of policy can be useful at various points of
the PSIA process – for example to help identify stakeholders and their positions, to understand
transmission channels, to validate technical impact analysis, or to leverage social accountability.
Ensuring that the lessons learned from impact analysis, monitoring and evaluation, social
accountability, and public policy debate, furthermore, is critical for PSIA to “close the loop” and
actually inform and affect policy.

A. Fostering policy debate.

92. There are situations when the process of policy debate, including among stakeholders, is
just as important as analysis. First, policy debate among stakeholders can be useful in
developing consensus and building ownership. Numerous studies have concluded that policy is
most likely to be effective only where there is broad ownership. Second, a policy forum can
produce invaluable information. Insights gained through dialogue may be technical (e.g.
academic research) or social (e.g. the perspectives and concerns of social groups that typically do
not participate in the deliberate process). For low-income countries, PSIA has been
conceptualized as an integral part of the PRSP process and as an element of the dialogue on the
country’s poverty reduction strategy. These insights can either validate or revise previous
hypotheses or analysis, including critical assumptions. It can also enhance the understanding of
the logic behind a given policy reform among stakeholders. Such initiatives would be
particularly relevant in the context of widespread uncertainty, suspicio n, and ignorance – or in
countries in which poor or marginalized groups have no political voice. Third, and related,
establishing systems and fora for policy debate is important not only with respect to its value as
part of ex-ante PSIA, but also for its contribution with regard to monitoring and social
accountability during implementation of a reform and ex-post, as discussed above.

93. Convening such policy fora among stakeholders, however, is not without its own risks.
One is the risk that implicit conflict between major interests becomes open hostility. Indeed there
may be compelling political reasons to avoid such a fora. 48 There may also be good reasons for a
government to take a policy forum seriously. Elected leaders who rely on democratic legitimacy
to bolster their popularity may find such a forum attractive, as may do policy-makers who are
genuinely uncertain about which policy reform path to take. From a leadership perspective, it
may be sensible and more sustainable to pursue a policy that rests on a social coalition or bargain
than one that theory may dictate as first-best.

47
This discussion relates to policy feedback only as it relates to PSIA. It is not intended as a comprehensive
treatment of the issue.
48
Examples of situations in which a policy dialogue may be unadvisable are: (a) government commitment to a
policy is irreversible regardless of public reaction; (b) an intransigent opposition party or social movement is
expected to use forum simply as a vehicle to embarrass the government; (c) representatives of marginalized people
are lacking, meaning that the only organized interests likely to have a seat at the table are privileged social groups;
(d) open violence between participants is a serious possibility; (e) the government is an authoritarian regime that
prohibits autonomous organizations or public expression of citizens’ opinions.

46
94. Managing the process of policy debate and discussion itself requires some planning,
particularly to manage risks. In particular, once the decision is made to convene a forum, three
concrete issues must be addressed: who to invite; what to discuss; and how to format the
dialogue. Moreover, in the context of social accountability discussed above, the government may
wish to consider setting up longer-term structures of policy debate – such as regular
consultations, “national workshops”, or “town hall meetings”. 49

B. Feeding back for policy adjustment.

95. Ensuring that the lessons learned from the continual monitoring and analysis of policy
implementation feed back to the redesign and adjustment of policy is a major objective of PSIA.
Sound ex-ante PSIA, as discussed, ought to lead to an explicit articulation of expected impacts,
transmission mechanisms, and assumptions, and the establishment of a monitoring system for
key indicators tracking the evolution of the reform program. Necessarily, ex-ante PSIA will not
get everything right. Rather, monitoring and evaluation, during and after policy implementation,
is a critical part of PSIA with the objective of (i) correcting flawed policie s, (ii) making
adjustments to improve correct policy choices, and/or (iii) identifying constraints and
opportunities for further public action to maximize poverty reducing impacts.

96. The feedback of lessons from the monitoring during implementation and subsequent
evaluation of poverty and social impacts of policy choice to the adjustment of policy is thus a
critical step in the PSIA loop. Fundamental here are institutional setups. A common pitfall is that
units or systems charged with M&E are not properly linked with the decision- making bodies
responsible for policy formulation. Ensuring that the key decision- making body with regard to a
particular policy reform is accountable for and charged with the reporting of related M&E and
the periodic reassessment of policy is the crucial final link to an effective PSIA process. Here
again, building institutional capacity, by creating such linkages where they may not previously
exist, is an important part of the PSIA agenda.

VI. Possible Summary Matrix

97. Section V above has presented a series of elements for good PSIA. Pulling these elements
together in a coherent, strategic, and integrative fashion is what makes for good poverty and
social impact analysis. Invariably, as discussed throughout this paper, a sensible approach to
PSIA is going to be country and context specific, dependant upon available data and capacity as
well as the reform issue in question. Box 12 provides an example of the PSIA approach
currently being undertaken in Chad to address an ongoing reform issue in that country.

98. A summary matrix may be a useful tool to aid analysts in capturing and integrating the
various elements of good PSIA outlined in the previous section. Table 4 presents such a
summary matrix. In addition to providing the analyst with a framework for considering and

49
This is another area where good PSIA should consider capacity building as part of the agenda. At the institutional
level, capacity is required to organize such fora and to open up the space for policy discussion. At the individual
level, capacity is often required for informed and effective participation and thus for an informed debate.

47
 Box 12. Poverty and Social Impact Analysis of Cotton Reform in Chad

Cotton is a key crop in Chad, both for revenue generation and poverty reduction. Cotton accounted for 24% of
total government revenues in 1997 and is the most important cash-earner for about 300,000 rural farm families.
Weak organization and knowledge among farmers’ groups coupled with structural inefficiencies in the sector
have resulted in low yields and low farmer revenues.

To address these inefficiencies, the government of Chad has decided to privatize Cotontchad, the parastatal that
currently manages national cotton production, and strengthen farmers’ groups. A key objective of the cotton
sector reforms is to improve farmer incomes. Several factors underscore the government’s decision to proceed
carefully in designing and implementing the reforms: the possibility that yields will fall further if reform prompts
farmers to return to subsistence agriculture, the limited availability of information on rural poverty, and cotton
farmers’ perceptions of the risks involved with the reform. For these reasons, the government is carrying out a
Poverty and Social Impact Analysis to guide the reform.

In order to analyze the likely poverty and social impacts of reform e x-ante, the PSIA needs to do a problem
analysis and clarify the assumptions on which the program is based. The PSIA team, in consultation with the
government and local counterparts, have identified pathways through which they expect the reform to improve
performance. By explaining the causal links that tie program inputs to expected outputs, outcomes and the
ultimate goal of improving farmer income, the team has explicitly outlined the assumptions for each
transmission channel of the reform so that they can be verified.
The PSIA that grew out of these discussions has three components: (i) an economic scenario study of different
options for privatization; (ii) ex-ante qualitative analysis, and baseline quantitative survey; (iii) ex-post analysis
that will include both qualitative and quantitative methods.

The aim of the scenario study is to identify and evaluate the technical and economic efficiency of alternative
scenarios for privatizing Cotontchad. The study examines options for privatization (e.g. continued vertical
integration, separate private ginneries, etc) and assesses the risk posed by each.

In parallel with this study, the PSIA of the reforms assesses the impacts on the welfare of farmers in the sector.
The ex-ante qualitative component identifies relevant stakeholders (e.g. farmers, Cotontchad employees,
micro -entrepreneurs), barriers faced by stakeholders under different reform scenarios, the strength of current
institutional structures, and the social risks of reform.

The quantitative and qualitative analyses look at the compensation and enhancement measures necessary for
reform success and highlights: farmer capacity, access to credit, input use, and transport. Further work involves
a “quasi-comparison group” for different types of farmers—i.e. those that produce cotton and those that do not or
have abandoned cotton—in order to analyze the likely impact of the reforms on different groups and to get a
sense of the welfare impact on farmers who abandon cotton production.

The different scenarios for partial and complete privatization and the ex-ante qualitative and quantitative work
will be discussed during a stakeholder forum. This public discussion is meant to increase the transparency of the
reform and build ownership by fostering policy debate.

In addition, there will be an ex-post impact evaluation of the reform. The ex-ante analysis will define baseline
indicators to be monitored for policy feedback in ex-post analysis. The ex-post analysis will employ
quantitative methods of impact evaluation, which attempt as far as possible to assess impact based on what
would have happened in the absence of reforms. This ex-post quantitative analysis will be applied to a panel
dataset, to estimate the impact on producer welfare.

articulating key aspects of PSIA for a given reform, it gives a template for making some of the
results and assumptions underlying such analysis explicit.

48
99. The matrix calls for the analyst to set out ex ante the anticipated net effect of the policy
reform on the poor (or conceivably another target stakeholder group), as transmitted through
each of the five channels discussed in Section IV (i.e., labor market, prices, access, assets,
transfers), in the short-term (through direct and indirect effects) and in the medium-term.

100. Furthermore, it allows the analyst to explicitly recognize the stakeholders who are likely
to gain and those who are likely to lose from the policy change. It also provides space for an
explicit cons ideration of enhancement or compensation measures. Depending on the country
concerned, conclusions on likely policy impacts will draw on differing information bases and
tools. For example, in one country context, the matrix may be filled out using informed
reasoning based on secondary data and focus group interviews; in another context, the
conclusions may be based on empirically simulated effects derived from modeling techniques
and using recent household survey data. In either instance, the matrix calls for a description of
the nature of the information base and analytical methodology. It also calls for the analyst to
specify critical assumptions and key risks, as well as the key indicators for monitoring
implementation.

101. The matrix can itself serve as a useful tool during the PSIA process. For instance, an
analyst may wish to sketch out the priors in each of the ten elements of good PSIA before even
undertaking an analysis, and then return to the matrix to validate or correct these hypotheses. The
matrix can be particularly useful in articulating impacts (Section V.6); identifying assumptions
and risks (Section V.8); identifying key indicators for monitoring (Section V.9); and informing
the policy debate, which may be instrumental for reformulating policy if necessary (Section
V.10).

49
Table 4. A Summary Matrix for Poverty and Social Impact Analysis of Policy Change
Reform:
Objective:
Stakeholders50 Effect on the poor
Channel Critical
(or target stakeholder group)
assumptions Institutional
Indicators
(including Changes
Potential Potential Indirect short-
General Specific Direct short-run Medium-run counter-factual)
winners losers run
Labor formal
Market informal
output demand
output supply
Prices input demand
input supply
other
private goods and services
Access
public goods and services
physical
financial
Assets human
social
natural
Transfers and private transfers
taxes public transfers and taxes
Net Impact
Other generally relevant assumptions (e.g., economic growth, political stability, external environment):
Key risks:
Information base and analytical methodology:
Mitigation or enhance ment measures:
Summary recommendations:
Adopted from Bolt and Fujimura (2002)

50
Stakeholders include those who influence policy and those who are influenced by policy.

50
 VII. Conclusions

102. This draft User’s Guide to PSIA has sought to provide an initial overview of the key
considerations for practitioners contemplating the poverty and social impacts of policy options
with a view to informing policy choice and design. It takes the view that undertaking ex-ante
analysis of the likely poverty and social impact of specific reform can be undertaken more
systematically. It also takes the practical vie w that, to do so, approaches and methods will need
to be adapted to fit the context and circumstances at hand and that the limits to what is possible
through ex-ante analysis will need to be addressed by continual monitoring, analysis, and re-
evaluation of policy over time.

103. This draft User’s Guide has laid out ten key elements to be considered by the analyst and
policy maker in approaching PSIA. Furthermore, it has given a brief overview of some of the
tools and methods that might be used in undertaking analysis of poverty and social concerns
associated with policy change. In so doing, it has attempted to draw from tools used by
economists and social scientists and to present them in an integrated fashion. These tools have
seldom been used in tandem in the design of policy change (Box 10 provides an example of an
attempt to do so). Applying these tools to the operational context using this multidisciplinary
approach will lead to a richer, more integrated understanding of policy impacts. Moreover, due
to the very different types of reform issues, transmission channels, and available data, the choice
of tools and methods used for PSIA will vary substantially by type of reform. Appendix 2
represents work in progress to develop pointers on issues, challenges, and tools that may be of
specific relevance in tackling reform in specific areas.

51

Tools What it does
A. Measuring Impact – Social Tools
1. Social Impact *Qualitative SIA is usually a
Assessment SIA complement to other analytical
using qualitative work; it identifies perceptions,
techniques only preferences, coping behavior,
and attributes that determine
impacts, and pre-conditions for
affected persons to benefit
from policy reforms
SIA with mixed * Assesses how individuals and
methods diverse social groups are
impacted differentially by
reforms and are likely to
respond to opportunities and
constraints based on their
assets and capabilities.
2. Participatory *PPAs and beneficiary
Poverty assessments (BA) use
Assessment participatory techniques to
include poor people’s views in
the analysis of poverty and the
formulation of policies.
3. Social Capital *Estimates likely changes in
Assessment productive behavior after
Tool policy change based on an
assessment of levels of social
capital
B. Measuring Direct Impact – Incidence Tools
4. Average *Measures direct benefit
Benefit incidence on households at
Incidence different income levels
Analysis
Appendix 1
Typology of Tools for Poverty and Social Impact Analysis
Advantages
*Can be done relatively
quickly and examines
impacts in an open-ended
manner
*Extremely effective in
capturing peoples’
perceptions of reform
*Can be used to generate or
refine hypotheses
*Can be applied to countries
where quantitative data are
lacking or where it does not
permit disaggregation into
social categories relevant to
the reform.
* Very effective in
capturing multiple
dimensions of poverty
*PPA uses structured
analytical exercises to
engage the poor in policy
analysis
*BA can be done relatively
quickly
*Assesses the strength and
nature of underlying social
networks in order to predict
impacts of reform
*Can be carried out at the
nat ional level (potentially as
module of LSMS)
*Simple
*Assesses distributional
incidence
Drawbacks
*Results are subjective and
difficult to aggregate
without contextual analysis.
Results need verification by
triangulation and running
several iterations.
* Provides an assessment of
reform outcomes, not
marginal impacts. Sample
may not be nationally
representative.
*Data derived from
perceptions and personal
experiences of respondents;
can be quantified but care
needed in generalization;
more useful in
understanding depth rather
than incidence of poverty
*Can be costly and time-
intensive; standard survey
questionnaire may need to
be tailored to reform and
country conditions
*Outcomes may not
correlate with incidence;
hence, this method does not
quite assess impacts.
*Measures average not
marginal impacts; (the two
may differ significantly)
*Does not explain pattern of
incidence
52
Reforms
*Any type of policy reform
* Any type of policy
change; quantitative SIA has
comparative advantage for
reforms with low feedback
effects.
*More useful for
simultaneous, multiple
reforms or for reforms with
high feedback effects.
*BA is more useful for
examining direct impacts of
reforms with low feedback
effects
* Particularly relevant to
agricultural, land, pension
and labor market reforms.
Can also be used for safety
net, decentralization and
utility reforms
*Any type of policy change
or public finance reform.
Most often used for tax and
expenditure policy, but also
applicable to reforms
affecting prices which
change household income or
expenditure, e.g., trade or
agricultural reform
Data Completion Time /Skills
Required
* Focus groups, key *Time: 2-4 months for
informant interviews, data collection and
semi-structured analysis.
interviews, on-site field
assessment and *Skills: field researcher
stakeholder workshop. with ethnog/sociological
and facilitation skills is
required.
* As above. Also: *Time: 6-8 mos for data
purposive household collection and analysis.
surveys, time-use *Skills: Field researcher
surveys. with survey design,
ethnog/sociological and
facilitation skills is
required.
*Participatory action *National-level PPAs
research using a series of take 5-9 months, 1-2
rapid appraisal missions. Skills: social
techniques, unstructured researcher plus 4-8 teams
and semi-structured of local researchers.
interviews Facilitation and rapid
*BA: Qualitative data appraisal skills are
from focus groups, open- required. Gender balance
is essential.
ended interviews, and
participant observation *BA: 3-4 months, 2
with a purposive sample. missions. Skills:
anthropologist plus local
field researchers.
* Household survey, *Time: 6-8 months with
community at least one mission.
questionnaire, and an
organizational interview. *Skills: Field researcher
with ethnog/sociological,
facilitation, and statistical
analysis skills.
*Household/individual- *Time: 2-4 weeks for
level data on welfare analysis.
indicator and *Skills: desk economist
consumption of public and RA. Prior experience
service being analyzed. not absolutely necessary.
Could also use
aggregated data, e.g.,
decile-level.
*Govt unit cost of
provision
 Tools What it does Advantages Drawbacks Reforms Data Completion Time /Skills
Required
5. Marginal *Measures marginal benefit * Analyses marginal *More complex and data *As above for simple *As above for simple *Time: 4-6 weeks for
Benefit incidence on households at incidence intensive benefit incidence analysis. incidence analysis analysis.
Incidence different income levels *Suffers from same *Panel data is ideal; *Skills: desk economist
Analysis weaknesses as simple however, there are and RA. Prior experience
incidence analysis except methods for exploiting not absolutely necessary.
measurement of average more commonly
effects available crosssectional
data
6. Poverty *Computes locality-specific *Provides a higher level of *Data intensive; relies on *Particularly useful for *Household survey data. *Time: 1 year (minimum)
Mapping benefit incidence by combining regional disaggregation than complex statistical reforms with regionally *Census data to build map.
household-level data with is possible by using techniques differentiated impacts, e.g., * Skills: desk economist
census data. household-data alone. *Impacts poorly estimated decentralization, regionally plus specialist(s) with
for provinces under- targeted expenditures, etc. prior knowledge of
represented in survey data. technique.

C. Measuring Behavioral Impact – Microsimulation Tools

7. Behavioral Combines econometric * Can be used to explain * More complex – requires As for simple incidence As for simple incidence *Time 4-6 weeks for
Incidence estimation of behavioral distributional impacts econometric modeling analysis. In addition, can be analysis; in addition, data analysis.
Analysis impacts with benefit incidence used to explain contribution must be appropriate for *Skills: desk economist
analysis (simple or marginal). of government policy (vis-a- analyzing behavioral plus RA with some
vis private sector) to responses, e.g., changes econometric skills.
observed changes. in labor supply.
8. Demand Measures impact of prices and *Single good demand *Models including prices of *Useful for reforms of *Household-level *Time: 2-3 weeks to build
analysis income on household models (that do not account subsitutes/complements goods without close consumption and income model; 2 weeks for
consumption for cross-price elasticities) (incl. fully specified demand substitutes, e.g., water and data, with sufficient estimation/simulation.
can be used to assess systems) are data intensive electricity; can also be used variation in prices *Desk economist plus RA
willingness to pay of and complex. to study impact of reforms (geographically, over with some
households for goods with * Demand models do not of goods with subsitutes, time). Household and modelling/econometric
no close substitutes (e.g., capture supply–side e.g. agricultural subsidies, community skills.
water, electricity) impacts, i.e., on production, trade liberalization. characteristics also
wages, profits, and income. *Reforms with limited required.
Hence, may yield supply responses. *Willingness to pay
misleading estimates of the analysis requires specific
total impact of a price survey data on
change on welfare. consumpion of public
*Prices are exogenous services in question.
9. Supply analysis Measures impact of price * Useful in analyzing supply *Supply model do not *As above *Household or firm-level *As for demand analysis.
changes on household/labor, responses, either for one or capture demand–related production data
firm supply, and aggregate several commodities impacts depending on unit of
supply. *Prices are exogenous analysis
*Typically, time series
data (panel or cross-
sectional) has been used.
10. Household Measures distributional *Takes both the household *Data intensive; can be *Wide range of *Complete household *Time: 1-2 months to
models impacts in a framework in supply and demand sides technically complex. microeconomic reforms: survey with information build model; 2 weeks for
which households treated as into account * Prices are exogenous price and marketing on both the demand and estimation/simulation.
both consumers and producers *Wide range of applications changes, market failures, supply side. *Skills: Desk economist
taxation; often used to * Also, ideally one would plus RA with
analyze agricultural reform want data on allocation modelling/econometric
of time within the skills.
household (e.g., on
childcare)

53
 Tools What it does
D. Measuring Partial Equilibrium Effects
11 Multi-market *Measure distributional impact
Models of policy changes on prices and
outputs in one or selected
sectors
*Combined estimation of
systems of supply and demand
relationships. Models are
solved to derive output supply,
inout demand, prices, profits,
and incomes.
12. Reduced Form *Systems of supply and
Models demand equations are solved to
yield reduced form equations
which are then estimated.
*Used to estimate the impact of
past policy changes on welfare
*Often used to examine the
determinants of
poverty/income; can also be
used to examine income
growth rates.
E. Measuring Economy Wider Impacts – General Equilibrium
13. Social Measures distributional
Accounting impacts using policy
Matrices and simulations
Input-Output
Models (SAM-
IO)
14. Computable *Measures distributional
General impact of policy reforms in a
Equilibrium completely specified model of
(CGE) Models economy
(e.g., 1-2-3 *Can be as simple as the 1-2-3
model, model (one country, 2
IMMPA, etc) activities, 3 goods)
*A more complex example is
the IMMPA model which
captures features “typical” of a
developing country, such as
labor market segmentation,
informal employment, and
financial accounts.
Advantages
*Simpler alternative to
computable general
equilibrium (CGE) models,
particularly where indirect
effects are limited (see
below) – do not require
macro balances or complete
specification of all markets.
*Prices are endogenous, i.e.,
markets can clear in these
models
*Provide good snapshots of
impact of reforms on many
different welfare indicators.
*Complete specification of
the economy; however, this
is simpler than a full-blown
CGE (see below).
*Completely specified;
endogenous prices.
*Flexible – can be as simple
as the 1-2-3 model, or
enormously complex.
*Measure indirect effects of
policy changes as well as
direct effects (which is
missed by partial
equilibrium approaches).
*Disciplines analyst to set
out prior assumptions on
distributional and other
channels.
Drawbacks
*These models may
potentially omit important
characteristics of an
economy; missing key
impacts along the way.
*Data intensive and
technically complex.
*Exclusively ex-post
analysis, but results can be
used to simulate ex-ante
impacts of further changes
in policy/price variables.
This is done through
computing elasticities of
outcome variables with
respect to the policy
variables.
*Prices are fixed and
exogenous to the model
*Results vary greatly
depending on assumptions
about the exogeneity/
endogeneity of various
accounts
*Models vary in their
complexity, but all require a
lot of time (possibly more
than a year) to construct and
have extensive data needs.
*A single model may not be
amenable to analyze
different types of reforms.
*Results heavily dependent
on priors and may be
unintuitive to policy makers.
54
Reforms
*Sectoral reforms; most
often applied to agricultural
reform
* Any policy change; e.g.
used to analyze civil service
reforms, general structural
adjustment, and shocks.
*Sectoral reforms
*Wide range of reforms,
e.g., prices, taxes, subsidies,
public expenditure,
stabilization and adjustment,
trade.
Data
More complex variants
(with modelling of more
sectors) are more data
intensive. In general, will
require complete
household survey plus
sectoral accounting data.
*Time series data
preferable – before and
after reform – for welfare
measure and policy
variables.
*Can estimate with cross-
sectional data if there is
sufficient variation across
the sample.
*National acounts
*Household survey
*National accounts
(required to build the
social accounting matrix)
*Household survey
Completion Time /Skills
Required
*Time: 2-4 months to
build model; 1 month for
estimation/simulation.
*Desk economist plus RA
with considerable
modelling/econometric
skills.
*As for demand analysis.
*Time: 6 months to build
SAM; 1 month for
simulation.
*Skills required are that
of a desk conomist plus
RA preferably with
previous experience in
building SAMs.
*1-2-3 CGE model
requires about 2 months
to build; and about 1
week to run the
simulations. Skills: desk
economist plus research
assistant with previous
CGE experience.
*The IMMPA model
takes about a year to
build; simulations require
1-2 months. Skills: desk
economist plus a research
team experienced in CGE
modelling.
 Tools What it does Advantages Drawbacks Reforms Data Completion Time /Skills
Required
F. Microeconomic Simulations Linked to Macroeconomic/Sectoral Models
15. Linking macro- *Simulates (using a reduced *Can be adapted to use *Generally, data intensive *Wide range of reforms, *National accounts, *Time: Sim-SIP requires
f/work to form estimation) the impact on outputs from Bank’s and time consuming e.g., labor and wage sectoral accounts a week to master; and 1
reduced form poverty reduction of various RMSM-X policies, taxation, prices, *Household survey data.. week to complete
estimation of macro variables *Sim-SIP is relatively user- changes in public spending, Note that aggregated data simulations.
poverty *Sim-SIP is a specific tool that friendly. trade, macro stabilization. can also be used. *Skills: desk economist
examines how changes in plus research assistant.
macro variables (e.g., growth Prior experience not
rates, sectoral growth rates) necessary.
may affect income distribution
and poverty. Uses the country-
specific distribution as the
starting point.
16. Linking macro- *Simulates the impact of macro *Behavioral changes can be As above As above *National accounts, *1-2-3 PRSP: 6 mos–1
f/work to variables on household welfare, simulated. household year to build model; 4
behavioral allowing behavioral changes. survey/aggregated data. weeks to complete
analysis Micro-level parameter changes simulations.
estimated for are estimated for representative *PAMS: 6 mos-1 year to
representative household groups. build model; 6 weeks to
households (e.g. *1-2-3 PRSP (a modification of complete simulation.
1-2-3 PRSP, the simple 1-2-3) is used to
PAMS) *Skills: both need desk
derive macro parameters; these economist plus RA with
parameters are then used to prior modelling
simulate the impact of policy experience.
changes on representative
households.
*PAMS links a labor-poverty
module to any macro-
consistency model (e.g.
RMSM-X or the Bank’s
Financial Planning Model.
17. Linking macro *Simulates distributional *Arguably provides more *Very data intensive, time As above *National accounts *Time: 1 year to build
f-work to impacts on welfare at the level accurate estimate of impacts consuming, and still under *Household –level data model; 1-2 months to
micro- of individual households. as it takes greater account of development; therefore, complete simulation
simulation household inequality currently of limited *Skills: desk economist
applicability in low income plus experienced
countries specialist(s) required.

55

Poverty and Social Impact Analysis – Reform-by-Reform Application of Key Tools
[Note: PSIA for each reform needs to undertake a Stakeholder Analysis, some form of Impact Analysis, Institutional Analysis, and
Risk Analysis. It is also important that it include some form of monitoring. This table provides additional guidance on which tool
would be most appropriate for Impact, Institutional, or Risk Analysis for individual reforms]
Reform
1 Macroeconomic and Fiscal Reform
Monetary policy reforms – i.e.,
reforms influencing inflation and
interest rates.
Broad external policy reforms, i.e.,
balance of trade and foreign exchange
reserves
Broad fiscal policy reforms, i.e.,
reforms related to the fiscal deficit.
(Note: typically adjustment involves
reducing expenditures and increasing
taxes).
2 Public Finance
Expenditure reform, e.g., changes in
levels/allocation of sectoral spending
Revenue policies – levels,
composition, improvements in tax
administration, cost recovery in public
services
3 Trade and Exchange Rate Reform
Reforms of tariff and non-tariff
barriers
Exchange rate reforms
4 Agricultural Reform
Eliminating administered prices (i.e.,
price bands, floor and ceiling prices);
ending buffer stock programs (used to
maintain prices).
Changing domestic subsidies and
taxes
Eliminating marketing boards
5 Land Reform , i.e., distribution to the
landless or passing of laws governing
the right to own, exchange, or inherit
land
6 Financial Sector Reform
Financial liberalization (interest rates,
allocation of credit)
Appendix 2
Selected Possible Transmissions Channels Most Useful Tools for PSIA
Price effect – from changes in inflation and interest rates. PPA; demand and and supply analysis;
Income effect – e.g., low and stable inflation will encourage reduced form models.
foreign investment, leading to growth and higher incomes.
Assets – e.g., low inflation rates will protect the value of assets.
Access effect on credit – can be negative following contractions in
money supply (loanable funds decline and interest rates increase).
Price effect – improving the balance of trade and foreign exchange Demand and supply analysis; reduced form
reserves will lead to increasing the price of tradeables relative to models
non-tradeables. This will change consumption and production.
Income effect – incomes of those producing tradeables will
increase.
Access to services – may be affected if public spending is adjusted As above; also:
downward. Social impact assessment; PPA; marginal
Income effect – there can be a short-run negative impact on incidence analysis; scenario analysis.
growth due to adjustment.
Income effect – can be positive or negative depending on the Social impact assessment; PPA; benefit
beneficiary group in question and the direction of the changes. incidence analysis (simple and behavioral);
Access to public services – can expand through increases in demand/supply analysis (including willingness
spending. to pay); reduced form models; institutional
assessment tool (IAT)
Income effect on taxpayers – will be positive (negative) with As above, except for PPA.
decreased (increased) taxation.
Price effect – from changes in indirect taxes
Price effect – lower prices will result from removal of barriers. Social impact assessment; demand/supply
Access – removal of barriers should expand access to goods. analysis; multimarket models;
Employment and wages – there will be a negative impact on reduced form models; CGE
previously protected sectors.
Price effect – terms of trade will change affecting both consumer As above, except for SIA.
and producer prices.
Income effect – liberalization may increase volatility and risk in
the short run. In the long run, liberalized markets should lead to
growth.
Price effect – will directly affect price of liberalized good and Social impact assessment; SOCAT; supply
thereby production and consumption behavior. analysis; household models; multi-market
Employment – changing relative prices will have a direct impact models; reduced form models; CGE;
on the allocation of labor within agriculture and across sectors organizational mapping; social risk assessment
Price effect – will directly affect price of liberalized good and As above
thereby production and consumption behavior.
Employment – changing relative prices will have a direct impact
on the allocation of labor within agriculture and across sectors
Access to services – will be affected by changes in budget
balance.
Price effect – will directly affect agricultural prices As above
Income effect – depends on extent of previous subsidization and
access to subsidy.
Access – budget balance will improve due to the elimination of
subsidization; could be used to improve access to public services.
Employment effect – for employees of the boards
Income effect -- more equitable land distribution will lead to Social impact assessment; organizational
higher wages, production, and growth. mapping; social risk assessment.
Employment effect – will be positive as opportunity cost of time
for the former landless increases.
Assets – the formerly landless will own a major asset post-land
reform.
Access – secure title to land provides collateral for credit.
Income effect via impact on interest rates; also, growth can Social impact assessment; reduced form
increase due to improved efficiency in financial system.
Access – expansion to poor may not occur in the short run.
56
 Reform
Lowering barriers to entry
Regulatory reform
Privatization/closure of state banks
Promotion of financial institutions
serving poor clients
7 Labor Market Reform
Minimum wage legislation
Job security regulation
Active labor market programs
8 Utility Reform
Restructuring state-owned utilities
Increased private participation in
state-owned utility
Full divestiture of utility
9 Privatization
Lease of assets, management contracts
Full divestiture
10 Civil Service Retrenchment
Lay-offs
Reductions in wage bill
11 Decentralization of public services
12 Social Safety Nets
Targeted cash/in-kind transfers
Categorical benefits (e.g., to AIDS
orphans, the disabled, etc).
Contribution-based social insurance
benefits (e.g., disability, health)
13 Pensions
Scaling back public pension schemes
(higher contribution rates, lower
benefits, increased retirement age)
Increasing private provision
Introduction of social pensions (cash
assistance for vulnerable pensioners)
51
World Bank, 2000b.
Selected Possible Transmissions Channels
Access – overall access to credit will increase; including to
financial intermediaries.
Income effect via increased growth – due to increased efficiency
in the system.
Income effect from increased growth – due to improved efficiency
in financial system as well as less vulnerability.
Employment effect – lay-offs of bank workers.
Access – rural branches may have represented welfare subsidy;
may not be replaced if closed. Privatization may also not have a
positive impact on access in the short run.
Assets – transferred to private hands.
Access – expansion for the poor;
Price effect – lower interest rates are typical.
Employment effect – direction hotly debated
Income effect – will affect incidence of low pay and earnings
dispersion
Employment effect – regulations have negative impact on levels
against more stability for those employed
Employment effect – evidence of positive impact is weak
Employment effect – short -term lay offs
Price effect – tariff changes
Impact on access – not easily predicted, e.g., dependent on
changes in subsidies/tariffs and investment in network expansion.
Price effect – higher tariffs, and connection fees
Impact on access – dependent on regulatory framework
Employment effect – short -term layoffs
As above, also:
Assets – transferred into private hands
Price effect – generally higher
Impact on access – dependent on regulatory framework
Employment effect – short -term lay offs
As above, also:
Assets – transferred into private hands
Employment effect – loss of jobs for affected workers
Income effect – loss of income for affected workers
Change in access to public services
Transfers to beneficiary group;
Employment effect (negative if transfers are not tied to
employment)
Transfers to beneficiary group
Income effect on workers
Income effect on workers and pensioners (current and future)
Income effect on current savers, future pensioners;
Employment effect (via greater portability)
Transfers to current pensioners
57
Most Useful Tools for PSIA
Social impact assessment; SOCAT; social risk
assessment
Social impact assessment; social risk
assessment
Social impact assessment; reduced form;
organizational mapping; social risk
assessment; scenario analysis
As above; minus reduced form.
Reduced form model; CGE; social risk
assessment.
As above; also institutional assessment tool.
Social impact assessment; SOCAT;
organizational mapping.
Note: experimental techniques have been used
to study the impact of ALMPs ex-post.
SOCAT; benefit incidence analysis;
demand/supply analysis (incl. willingness to
pay); CGE; organizational mapping.
As above; plus reduced form models and
minus SOCAT.
As for restructuring state-owned utilities.
Social impact assessment; demand/supply
analysis; reduced form models; organizational
mapping; social risk assessment; scenario
analysis.
As above.
Social impact assessment; reduced form
models; social risk assessment.
Social impact assessment; reduced form
models
Social impact assessment; SOCAT; benefit
incidence analysis; reduced form models;
organizational mapping; social risk
assessment.
PPA; benefit incidence analysis; application of
Pensions Reform Options Simulation Toolkit
(under development)51 ; organizational
mapping; social risk assessment
As above
As above
SOCAT; reduced form models (Pension
Reform Options Simulation Toolkit); social
risk assessment.
As above, minus SOCAT
As above, minus SOCAT
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