How do governments determine policy priorities? Studying development strategies through spillover networks

Abstract

Determining policy priorities is a challenging task for any government because there may be, for example, a multiplicity of objectives to be simultaneously attained, a multidimensional policy space to be explored, inefficiencies in the implementation of public policies, interdependencies between policy issues, etc. Altogether, these factors generate a complex landscape that governments need to navigate in order to reach their goals. To address this problem, we develop a framework to model the evolution of development indicators as a political economy game on a network. Our approach accounts for the -recently documented-network of spillovers between policy issues, as well as the well-known political economy problem arising from budget assignment. This allows us to infer not only policy priorities, but also the effective use of resources in each policy issue.Using development indicators data from more than 100 countries over 11 years, we show that the country-specific context is a central determinant of the effectiveness of policy priorities. In addition, our model explains well-known aggregate facts about the relationship between corruption and development. Finally, this framework provides a new analytic tool to generate bespoke advice on development strategies.

Quantifying the coherence of development policy priorities

“…The framework of Policy Priority Inference was developed by Castañeda et al (2018), and has been previously used to estimate the resilience of development policies (Castañeda and Guerrero, 2018b). The main idea of this approach is to estimate the policy priorities of governments by specifying a political economy game on a spillover network.…”

“…It finds a set of parameters γ to classify all countries while controlling for overfitting. This is a standard method in classification problems, commonly known as finding the true number of clusters in a dataset, and its closest analogy in linear regression would be the problem of parameter heterogeneity across sub-samples (see Castañeda et al (2018) for further details). Figure 3 shows the empirical and estimated levels of corruption.…”

“…Figure 3 shows the empirical and estimated levels of corruption. As an informal validation, we plot the well known relationship between corruption and the level of development of a country (see Castañeda et al (2018) for multiple formal validation tests). In this case, the level of development is measured through the average level of a country's indicators.…”

Rethink government with AI

“…The US federal government is assessing the impacts of potential disasters, such as a nuclear bomb exploding in the heart of Washington DC. And advisers in Mexico are using an agent computing model 5 to identify what the federal government needs to prioritize to reach the United Nations Sustainable Development Goals.…”

The Resilience of Public Policies in Economic Development

“…When countries attempt to reach a large set of goals simultaneously, resilience arises from the evolutionary nature of the process where policies are designed and implemented. The work of [6] (hereon refer to as CCG) provides a framework to model such process as a behavioral game between a central authority (government) and public functionaries (bureaucrats) on a network of policy spillovers. For a country, the estimated "allocation profile"-i.e., the evolved distribution of resources across policy issues-can be thought of as a consistent (or relatively efficient) package.…”