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May 2000 - Because of the trend toward decentralization in more than 70 countries where the World Bank is active, subnational entities - states, regions, provinces, counties, and municipalities, and the local utility companies owned by them - are now responsible for delivering services and investing in infrastructure. And infrastructure investments are growing rapidly to meet increasing urban demand. How should the World Bank Group help? Subnational debt markets can be a powerful force in a country's development. Through delegated monitoring by financial intermediaries and through debt placed directly with investors, sub-national debt markets account for about 5 percent of GDP in Argentina and Brazil. But they remain embryonic in most developing and transition economies. To resolve a potential clash between the increased financing needs of subnational entities and the limited development of domestic subnational debt markets, it is critical to support the orderly, efficient emergence of such debt markets. As a framework for policy reform, the following steps (mirroring typical weaknesses) are prerequisites for developing a country's subnational debt market: Reducing moral hazard; Improving market transparency; Strengthening market governance; Establishing a level playing field; Developing local capacity for accounting, budgeting, and financial management. In countries where the government shows a clear commitment to market development, says Noel, the IBRD should support the framework needed for policy-based operations that establish hard budget constraints. In doing so, the IBRD should concentrate on (1) supporting national and local capacity building in those areas essential for developing a subnational debt market and (2) financing specific subnational projects with strictly nonrecourse loans. At the same time, the World Bank Group should offer a variety of lending and guarantee instruments that encourage private financing for investments by subnational entities - including, for example, equity participation in (or lines of credit or partial credit guarantees to) financial intermediaries specializing in subnational investment finance or in funds for financing local infrastructure. This paper - a product of the Private and Financial Sectors Development Unit, Europe and Central Asia Region - was prepared as background for a manual on policy issues relating to domestic debt markets. Michel Noel may be contacted at mnoel2@worldbank.org.

Agency Problems --- Bond Market Players --- Debt Market --- Debt Markets --- Decentralization --- Domestic Bond --- Domestic Bond Market --- Domestic Debt --- Domestic Debt Markets --- Finance --- Finance and Financial Sector Development --- Financial Sector Development --- Financial Systems --- Markets Development --- Sub-National Bond --- Sub-National Bond Market --- Sub-National Bond Markets --- Sub-National Debt --- Sub-National Debt Market --- Sub-National Debt Market Development --- Sub-National Debt Markets --- Transition Countries

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The empirical literature on budget cyclicality has generally focused more on assessing the degree of pro-cyclicality in federal (central government) revenues and expenditures and less on budget cyclicality at the sub-national level in multi-tiered systems. This paper attempts to contribute to the literature on budget cyclicality by examining how sub-national fiscal revenues and expenditures are linked to the business cycle in Brazil, particularly after the introduction of the Fiscal Responsibility Law. It explains the degree of pro-cyclicality across Brazilian states, and assesses whether intergovernmental transfers help to stabilize states' finances. These issues are addressed using both a time-series and a cross-section dimension at the Brazilian state level for the period 1991-2006. The empirical evidence suggests the existence of a pro-cyclical fiscal policy in Brazil at the state level. However, the introduction of the Fiscal Responsibility Law helped to reduce Brazilian states' spending-side pro-cyclicality. For the Brazilian states, the main source of the observed pro-cyclicality is found in the behavior of tax revenues directly collected by the state governments. Intergovernmental transfers (federal transfers to the states) are not associated with changes in gross state product, but they are pro-cyclically aligned with national gross domestic product, which could amplify the pro-cyclical behavior of sub-national expenditures.

Central government --- Debt Markets --- Expenditures --- Federal transfers --- Finance and Financial Sector Development --- Fiscal federalism --- Fiscal Policy --- Fiscal variables --- Macroeconomics and Economic Growth --- Municipalities --- Provinces --- Revenue streams --- State budget --- State governments --- Sub-national --- Sub-national expenditures --- Sub-national governments --- Subnational --- Subnational Economic Development --- Subnational expenditures --- Subnational governments --- Tax --- Tax base --- Tax revenues

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This study examines whether political empowerment of women affects their economic participation. In the context of mandated political representation reform for women in India, the study finds that the length of exposure to women politicians affects overall female labor force participation. These effects seem to arise through direct and indirect channels: political representation of women directly affects hours of work assigned to women under the recent national public works program, the Mahatma Gandhi National Rural Employment Guarantee Scheme. In addition, the level of access to public goods, as influenced by exposure to women leaders over time, increases the likelihood of women being engaged in the labor force. The findings suggest that women's participation in politics could be a useful policy tool to increase both the supply of and the demand for labor market opportunities for women, potentially helping to stem India's declining female labor force participation rate.

Decentralization --- Development --- Finance and Financial Sector Development --- Gender --- Gender and Development --- Gender and Health --- Gender and Law --- Jobs --- Labor Markets --- Macroeconomics and Economic Growth, Gender --- Political Reservations --- Population Policies --- Poverty Reduction --- Shared Prosperity --- Social Inclusion --- Social Protection --- Sub-National Development --- Women