Political economy analysis (old)


Tools for political economy analysis

Several donor agencies have developed tools for political economy analysis. These vary in terms of their methodology and focus (e.g. institutions, power, how change occurs) and can be applied at country level, sector level, or problem level. An emerging area of interest is the application of political economy analysis to the regional/international level.

Page contents:

Where is a good place to start?

Adam, C., Dercon, C., 2009 ‘The political economy of development: an assessment’, Oxford Review of Economic Policy, vol. 25, no. 2, pp. 173-189
How do political choices, institutional structures and forms of governance influence the economic choices made by governments and citizens? How are the methods of modern economics being used to deepen understanding of the ways in which political constraints shape economic development? This article summarises recent developments in the study of the political economy of development, introducing papers that illustrate key themes and methodological innovations. Translating research on the political economy of development into policy remains challenging. It is important to link the innovation of modern microeconomic research with broader aggregate analysis.
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Key sources providing an overview of the tools

DFID, 2009, 'Political Economy Analysis How to Note', A Practice Paper, Department for International Development, London
DFID’s how to note aims to bring together the diverse literature and tools on political economy analysis within a short and accessible document.  It covers the following questions: what is political economy analysis? how and why does political economy analysis add value to development agencies’ work? what political economy tools are available? how does political economy analysis relate to other tools? and how should political economy analysis be prepared, undertaken and applied?  It includes case studies on how political economy analysis has been used by DFID offices.
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The Policy Practice, 2012, ‘Political Economy Analysis: Selected Readings’, The Policy Practice Ltd., London
This paper provides an overview and annotated bibliography of key readings relating to Political Economy Analysis. The bibliography covers: (1) conceptual underpinnings, (2) political economy analysis tools, (3) noteworthy case studies, and (4) practical guidance on using political economy analysis.
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GSDRC, 2010, Political and Social Analysis for Development Policy and Practice: An Overview of Five Approaches
This paper provides a detailed overview of five of these tools and frameworks for Political Economy Analysis: Power Analysis, Drivers of Change, Strategic Corruption and Governance Analysis, Poverty and Social Impact Analysis, and Problem-Driven Political Economy Analysis. Under each tool or framework, it discusses how to use the tool (research methods, processes, outputs, and elements of the approach); skills and resources required; the value added and operational impact of the approaches; key challenges; and linkages with other analytical tools.
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OECD DAC, 2008, ‘Survey of Donor Approaches to Governance Assessment’, OECD DAC, Paris
Many development agencies are engaged in assessing governance. What are their approaches and how can these be more effectively harmonised? This study from the Organisation for Economic Cooperation and Development   surveys donors’ use of general and thematic governance assessments. Most approaches are driven by policy dialogue, detailed planning of governance enhancement activities and strategic decisions regarding aid to specific countries. Linkage to a donor’s programme, demand from the field and removal of institutional disincentives are important in determining how governance assessments are used.
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Country-level tools for political economy analysis

Most political economy analyses have been conducted at country level, to support the design of country strategies and programmes. Some of the more widely cited country-level approaches are DFID’s Drivers of Change, the Dutch Foreign Ministry’s Strategic Governance and Corruption Assessment, and SIDA’s Power Analysis.The World Bank have also recently developed a Problem Driven Political Economy Analysis framework.

DFID’s Drivers of Change

DFID’s Drivers of Change approach aims to identify the opportunities, incentives and blockages to pro-poor change at country level. The analysis centres around agents (individuals and organisations pursuing particular interests), structural features (history of state formation, economic and social structures), and institutions (rules governing the behaviour of agents). Numerous Drivers of Change country studies  have been undertaken to inform country-level planning and to identify and mitigate risk. Nevertheless DFID evaluations have shown that the influence of Drivers of Change Studies on country programming has been rather variable; Some studies have proven more insightful than others in understanding the incentives facing key actors and identifying practical levers for change.

The following briefing notes provide key information about the Drivers of Change approach and its application:

DFID, 2004, 'Drivers of Change', Public Information Note, Department for International Development, London
This note outlines the Drivers of Change approach and reflects on the benefits of Drivers of Change studies conducted in 20 country offices.
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DFID, 2005, 'Lessons Learnt - Planning and Undertaking a Drivers of Change Study', How to Note, Department for International Development, London
This note provides guidance on undertaking and using the findings of a Drivers of Change study.
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DFID, 2005, 'Using Drivers of Change to Improve Aid Effectiveness', Briefing Note, Department for International Development, London
This note reflects on the progress of the Drivers of Change approach; synthesising the main findings of the studies and how they have been used, and highlighting gaps and unresolved issues.
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OECD DAC, 2005, 'Lessons Learned on the Use of Power and Drivers of Change Analyses in Development Co-operation - Final Report', Review commissioned by the OECD DAC Network on Governance (GOVNET), Paris
This review compares and contrasts different donor approaches to conducting Power and Drivers of Change (DoC) analysis, and looks at what is being done with the findings, in order to learn lessons for future work. It draws mainly on studies conducted in four countries – Bangladesh, Bolivia, Kenya, and Tanzania – as a basis for deriving findings and recommendations for this type of work. There appears to be little consistent policy across and within donors on how to scope the studies, or how to link Power and DoC analysis to work on conflict, gender, social exclusion or human rights.
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DFID’s Politics of Development Framework

The Politics of Development framework emerged partly as a response to the limitations identified in the Drivers of Change approach. It aims to go further in analysing the actors, connections and processes making up a political system. 

Leftwich, A., 2007, 'Drivers of Change: Refining the Analytical Framework: Coneptual and Theoretical Issues', Department of Politics, University of York
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Leftwich, A., 2007, 'Drivers of Change: Refining the Analytical Framework to Understand the Politics of the Places We Work: Final Report', Department of Politics, University of York
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Leftwich, A., 2007, 'Drivers of Change: Refining the Analytical Framework to Understand the Politics of the Places We Work: Notes of Guidance for DFID Offices', Department of Politics, University of York
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Leftwich, A., 2007, 'Drivers of Change: Refining the Analytical Framework: A Framework for Political Analysis', Department of Politics, University of York
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Dutch Foreign Ministry’s Strategic Governance and Corruption Assessment (SGACA)

The SGACA includes an assessment of: (i) Foundational Factors, which refer to the contextual factors that fundamentally shape the state and political system, including such topics as territorial integrity, geography, social structures and geostrategic position; (ii) the Rules of the Game, which are the formal and informal institutions shaping the quality of governance, especially for poor people, including topics related to political competition, the distribution of power and state-society relationships; (iii) the Here and Now, referring to the current context for governance and the role of the main actors and stakeholders in driving recent political dynamics; and (iv) Implications for Change, covering operational recommendations.

Unsworth, S., and Conflict Research Unit, 2007, 'Framework for Strategic Governance And Corruption Analysis: Designing Strategic Responses Towards Good Governance', Netherlands Institute of International Relations, Clingendael, The Hague
This paper by the Clingendael Institute describes the Strategic Governance And Corruption Analysis (SGACA) which has been used by the Dutch Ministry of Foreign Affairs to inform country programming across all of the countries where it provides development assistance. SGACA captures the informal, societal and sometimes intangible underlying reasons for the governance situation, which can often differ from the formal configuration of the state. SGACA can improve the design of donor interventions through a better understanding of what happens behind the façade of the state and what really drives political behaviour. 
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SIDA’s Power Analysis

SIDA’s Power Analysis aims to identify where real power in a society lies, how it is distributed and possible conflicts of interests. SIDA emphasises that political economy analyses should primarily rely on local expertise.

SIDA, 2006, ‘Power Analysis - Experiences and Challenges’, Swedish International Development Cooperation Agency, Stockholm
This document argues that an understanding of power relations is critical to understand the factors impeding poverty reduction, as well as the incentives and disincentives for pro-poor development.  It reflects on SIDA’s experience of using concepts of power to analyse development problems, the value added and practical impact of this approach, lessons learned and the way forward.  It includes a useful annex presenting a checklist of issues and questions that should be included in power analysis.
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Norad’s approach to political economy analysis includes an analysis of the legitimacy of the state. It provides a way of analysing governance and statebuilding, particularly in situations of fragility.

Moen, E. and Eriksen S. S., 2010, 'Political Economy Analysis with a Legitimacy Twist: What is It and Why Does It Matter?', Norwegian Agency for Development Cooperation, Oslo
How can a 'legitimacy lens' enhance political economy analysis? This guidance introduces political economy analysis as a powerful tool for increasing understanding, and improving the effectiveness, of aid. It argues that consideration of state legitimacy can add value to such analysis by enhancing understanding of what citizens expect from the state, and of how those in control of the state can improve its standing among citizens.
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World Bank

The problem-driven framework is not a specific 'tool' itself, but rather a 'platform' that tries to bring together and to summarize for Bank teams some practices, thinking, and lessons learned; and to point to some existing tools, such as varieties of stakeholder analysis. The PGPE approach is similar to Sida’s power analysis and DFID’s drivers of change approach in that both direct researchers to look at actors (or stakeholders), institutions and structures that influence poverty and development policies at the macro level. However the PGPE analysis can also be applied to the sector and thematic level, or the project- and policy specific level; or a combination of levels.

Fritz, V., Kaiser, K., and Levy, B., 2009, ‘Problem-Driven Governance and Political Economy Analysis: Good Practice Framework’, World Bank, Washington, D.C.
This framework seeks to contribute to smarter, more realistic and gradual reforms in developing countries. It emphasises a problem-driven approach: i) define what the issue is that teams are grappling with; ii) examine the governance and institutional arrangements; and iii) examine the underlying political economy drivers. While directed primarily at the World Bank’s own teams, the framework can be useful outside the organisation. Problem-driven Governance and Political Economy analysis can provide advice on shaping strategies and operations in ways that range from adjusting them to the existing space for change to developing proactive strategies for expanding the space for change.
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European Commission

The European Commission (EC) has begun to examine ways to better integrate political economy analysis into its Project and Programme Cycle Management (PPCM) Guidance. The EC approach is largely based on the Strategic Governance and Corruption Assessment (SGACA) tool.

Unsworth, S. and Williams G., 2011, 'Political Economy Analysis to Improve EU Development Effectiveness: DEVCO Concept Paper'
This paper provides practical guidance on how to undertake political economy analysis at country and sector level. It suggests how to draw on political economy analysis to inform EU development activity, including programming, identification and formulation of specific interventions, risk management and policy dialogue.
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Sector-level tools for political economy analysis

Sector level analysis identifies the interests, incentives, power structures and relations that shape policy and practice at the level of sectors. Proponents argue that this approach lends itself more easily to identifying practical entry points for action.

Poole, A., 2011, 'Political Economy Assessments at Sector and Project Levels', How-To Note, World Bank, Washington, D.C.
This note draws on lessons learned to provide an introduction to political economy (PE) assessment for World Bank sector- and project-based operational teams. The last decade of experience has demonstrated that PE assessments can improve project design, lessen risk, explain why reform champions may fail to deliver, and can promote more thoughtful engagement with client governments. .
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Moncrieffe, J. M., and Luttrell C., 2005, 'An Analytical Framework for Understanding the Political Economy of Sectors and Policy Arenas', Overseas Development Institute (ODI), London
How can donors conduct political analysis of specific sectors and policy arenas within a country so as to support pro-poor change processes more effectively? This analytical framework from the Overseas Development Institute is designed for use by DFID country offices. It suggests guidelines for political analysis in three stages: (a) an historical/foundational country overview; (b) organisations, institutions and actors; and (c) operational implications. Deep sector/policy analysis facilitates a better understanding of entry points and helps staff to design incentives for maximum impact on development outcomes.
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European Commission, 2008, ‘Analysing Sector Governance’, Chapter 4 in Addressing Governance in Sector Operations, EC Sector Reference Document
How can political and institutional constraints be addressed so as to improve the effectiveness of aid at sector level? This section from a European Commission publication offers a framework for analysing sector governance. The framework focuses on the context of sector governance, actors’ interests, power and incentives, and governance and accountability relationships. Where opportunities for short-term governance enhancement at sector level are limited, sector specialists can look for alternative entry points. These might include supporting the private sector and civil society.
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World Bank, 2008, 'The Political Economy of Policy Reform: Issues and Implications for Policy Dialogue and Development Operations', World Bank, Washington D.C.
How can donors improve the effectiveness of policy reform processes? This study from the World Bank addresses the political economy of sector reform in agricultural marketing, and water supply and sanitation. It uses a social analysis perspective to analyse stakeholder interests, incentives, institutions, risks and opportunities. Development agencies should undertake timely political economy analysis and establish a sustainable process for building broad coalitions. They should also promote transformative institutional change that includes empowering forms of bottom-up accountability.
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Danida, 2011, ‘Applying Political Stakeholder Analysis: How Can it Work?’, Technical Advisory Services, Ministry of Foreign Affairs of Denmark, Danida, Copenhagen
This report provides a brief review of existing approaches to and format for political stakeholder analysis at the sector level. It addresses how the findings of a political economy analysis can feed into a stakeholder assessment at the sector level and provides a framework for such analysis. It also evaluates what has worked well and less well in the field test of existing approaches.
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