By Eeshani Kandpal and Charles Kenny, Center for Global Development
A recent PowerPoint presentation presents the outline for the institutional structure of “The WBG Knowledge Bank.” As the document suggests, the World Bank’s global influence rests not only on its financial resources but also on its reputation as a source of rigorous, evidence-based analysis. Any effort to add momentum to the delivery of that analysis should be applauded.
But a knowledge bank owes it to its stakeholders impartial and transparent consideration of all the available evidence, as well as the generation of new evidence where it is needed. And a number of the proposed reforms put in danger the ability of the institution to provide the highest quality advice and research independent of client or internal institutional pressure.
In the new model, it appears that the short-term concerns of the World Bank Group’s dealmakers are likely to gain greater influence over analytical and research output, a step back from a “knowledge bank” and towards the model of economist as salesperson all too common at investment banks. Take one example: “thought leadership” is to be housed under combined IFC/World Bank Chief Economists in combined World Bank/IFC verticals and regions. This will increase the risk that policy research and analysis is motivated and reviewed on the basis of what is good for the private sector (or for IFC dealmaking) rather than what is good for the economy. A case in point: the IFC routinely finances power projects awarded uncompetitively in stark contrast to best practice suggested by the World Bank. Will the merger stop the IFC from doing bad deals, or stop the World Bank from offering good advice? This was one reason that previous efforts to combine IFC and World Bank departments were unwound. But this reorganization is unprecedented in the extent of the merger and will supercharge the conflicts of interest involved, not least by making the IFC/MIGA Deputy Chief Economist Director of the Private Markets team.
Equally concerning is what the reorganization might mean for the future of development research from the institution. The current proposal is for the World Bank’s research department, DECRG, to be reorganized to match the Sector Vice Presidencies—sectors are “verticals” in current World Bank parlance—with work programs managed by sector Chief Economists. Taken at face value, this suggests the potential end to all independent development economics research capacity at the World Bank.
Integration and “operational alignment” of DECRG are important. A refrain often heard in the bank is that “DEC is irrelevant,” too caught up in academic flights of fancy to be useful to practical policymaking and project design. At the World Bank, for a while our colleague David Evans sat in the Africa Chief Economist’s office and used to run “smack downs” in part to confront DEC researchers with the actual challenges faced by operational staff when it came to things like cash transfers, to try to better align their research questions with operational needs.
But at the same time, maintaining an independent research department ensures that the World Bank’s work is perceived as credible, nonpartisan, and analytically sound, rather than as advocacy for its own current lending or policy positions. Of course, this kind of research emerges from across the institution, not only DECRG. But DECRG is the only part of the bank with the core mandate and freedom to produce it. Independence from corporate pressures is what allows DECRG researchers in particular to test bank policies empirically, publish critical findings, and debate orthodoxy—thereby strengthening, not weakening, the institution’s legitimacy.
There are three reasons the World Bank needs an independent research department: rigor and accountability, blue sky thinking, and generating public goods.
1. Rigor and accountability
A central reason to maintain an independent research unit is that it can provide an internal check to the bank’s own operations, allowing the institution to learn and adapt. Without such feedback, operational incentives risk reinforcing path dependency and discouraging honest reflection. IEG, the World Bank Group’s independent evaluation arm, provides a vital function in reviewing policies, programs, and investments, but it is “backward looking” by reviewing past policies, programs and investments. The research department provides insights from applying state-of-the-art methods to current strategies and operations.
For example, DEC research has played a major part in the discussion over the design and impact of macro policy reform programs, the role of donors in those programs, and the effectiveness of aid. The comparative freedom given to researchers has meant that outputs have often contributed to different sides of the debate: the importance of macro stability or the importance of luck to growth outcomes, the role of national policies in determining aid effectiveness or the greater centrality of project-related factors. Similarly, DEC researchers helped both design and robustly criticize the same influential governance measures. Inevitably, not all of the analytical conclusions from this work have stood the test of time (DECRG researchers are again among those contributing to the scrutiny), but there is no doubting their influence on debates in development.
DEC research has also considerably changed World Bank project design–and was only able to do so because of its independence. A DECRG report questioned the Bank’s approach to community-driven development and ran into significant resistance from senior management. But in the years since, the World Bank has effectively stopped its old model of community-driven development and replaced it with an intervention (community-based local development) that addresses many of the concerns outlined in the report. (Watch the Q&A of this presentation to get a flavor of the pushback.)
More recently, DEC research findings have contrasted with World Bank management messaging on poverty trends in India. DEC research suggests slower rates of poverty reduction in the country while senior management tends to accept without question the inflated official numbers. Without the independence of DECRG, there might have been little analysis of the rose-tinted narrative.
2. Blue sky thinking has led to landmark policy shifts
Without a core research group that operates with autonomy, all World Bank research risks becoming instrumental—used to justify existing policy and lending choices—rather than shaping policy through open inquiry.The challenges of development are ever evolving—from industrialization and trade to climate adaptation, digital transformation, and fragility. An independent research department can explore new models and approaches in advance of operational consensus. Indeed, when done right, such types of research can lead to a new operational consensus in the World Bank and beyond.
An example of this is research led by Martin Ravallion, on poverty measurement. The “dollar-a-day” international poverty line (most recently updated to $3.00) is the global benchmark for tracking progress on poverty reduction–so much so that “dollar-a-day” has become a synecdoche for all things poverty measurement. This is a DECRG product that helped force the institution to distinguish between aggregate expansion and inclusive, pro-poor growth. It was the intellectual leadership of DEC researchers—tied to their intellectual freedom to push the envelope—that led to the emergence of poverty and inequality measurement as a central, data-driven pillar of the World Bank’s mission, influencing both its analytical work and operational strategies worldwide.
Or consider the example of DECRG’s influence on World Bank healthcare investments. Research led by Adam Wagstaff demonstrated how health inequities can arise from the way health systems are financed and organized. The promotion of universal health coverage by the World Bank and beyond rests on the foundation of this work. DECRG research is also behind the bank taking on economic analysis of HIV/AIDS and directly accounting for the economic consequences of disease on growth and productivity. This influence was reflected recently in its analysis of the economic impacts of COVID-19, which directly led to early-response cash being a central pillar of the World Bank’s operational response to COVID-19.
Most of these examples are old. That may reflect that existing pressure to align with short-term operational needs has already weakened DECRG’s role in generating big picture thinking about development. But it is also because research has a long shelf life and influential research has long tails.
Take the background research done for the 2004 World Development Report, which spotlighted weak accountability in health and education systems. When that research, demonstrating high levels of absenteeism among teachers in India, was first released, the World Bank was appraising a $500 million credit to the Indian government for primary education, and there was pressure to suppress the finding. But DECRG’s independence prevailed, and over the years, public service quality became a focus of research as well as operational attention, culminating in the 2018 World Development Report which has galvanized education policy in the World Bank and beyond to focus on learning outcomes, system incentives, and evidence-based reform.
In none of these instances was bank operations “aligned” to these topics before the research. But operations in subsequent decades have become aligned because they were shaped by the research. This research engendered billions in new lending operations for the World Bank and—arguably— improved human welfare in its client countries.
3. Development knowledge is a global public good
The bank’s data, methods, and policy analysis inform governments, firms, nonprofits, and researchers worldwide. An independent research department ensures that this knowledge remains open, globally relevant, and responsive to diverse contexts, rather than tied to immediate internal or recipient political priorities.
Take the Development Impact blog—started and operated by DECRG staff. This has helped provide development economists around the world with the tools and knowledge to implement the randomization revolution. It was the ability to spend time on work that isn’t immediately aligned to existing corporate priorities that allowed this public good to emerge. A related example is the Development Impact Evaluation (DIME) initiative, launched by former World Bank Chief Economist François Bourguignon to strengthen the bank’s capacity for rigorous, evidence-based policymaking. By promoting randomized evaluations and embedding research within operations, DIME influenced how the Bank’s client governments learn from projects, linking real-time evidence to development effectiveness.
Some lack of alignment is in the public interest
A fair amount of alignment between World Bank operations and DECRG on broad research areas is probably healthy, and some alignment on specific questions is certainly desirable. But there must be no (ex-ante) alignment on conclusions.
At this year’s ABCDE conference, the current World Bank Chief Economist, Indermit Gill, suggested groupthink was already a problem. He claimed, “(t)here is no independent thinking in this institution.” That suggests an independent research function at the World Bank isn’t a luxury; it is a necessity for the integrity, learning, and credibility of the institution. It should drive blue sky thinking, risk taking, and considered divergence from current operational priorities and practices. And it should allow the World Bank to lead with evidence, not just resources, in shaping a more just and effective approach to development. The current reforms must preserve and extend space for such research.
Source: Center for Global Development
