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The poverty analysis and policy sector functions in the World Bank evolved from the Living Standards Measurement Study (LSMS) research project launched in 1980 by the Development Research Center (DRC) located in the Development Policy Staff (DPS). The LSMS was developed to improve the quality of collection of household data. In turn, this data was used to monitor progress of living standards; identify consequences of government policies on households; and to improve exchange of data between survey statisticians, analysts, and policy makers. LSMS efforts were overseen by DRC from 1980 to 1982. In March 1983, DRC was replaced by the Development Research Department (DRD). The DRD was located in DPS successor Economics and Research Staff (ERS). A Living Standards Measurement Unit (DRDLS) was established in DRD to oversee LSMS research projects. Dennis N. de Tray was appointed the Head of DRDLS.
In June 1987, DRD was terminated. LSMS functions were transferred from DRDLS to the new Welfare and Human Resources Development Division (PHRWH) located in the Population and Human Resources Department (PHR). Jacques van der Gaag was appointed Chief of PHRWH. The transfer of LSMS functions from DRDLS to PHRWH changed LSMS focus from a long-term research project to a permanent means of data collection, monitoring, and policy analysis within Bank operations. In 1990, the working paper entitled Improving data on poverty in the Third World: the World Bank's Living Standards Measurement Study documented this shift. LSMS additionally served as a tool for PHRWH's broader functions focused on poverty analysis and policy. PHRWH functions focused on: expanding the Bank's knowledge base regarding the causes and consequences of poverty; and providing operational and analytical support to the Regions in the design and evaluation of poverty reduction interventions. Activities undertaken in support of these functions included:
- designing and validating development policies that benefit the poor, with emphasis on the human capital formation of the poor;
- designing and validating anti-poverty strategies that target the poor;
- researching the impact of the education and training services;
- implementing the Living Standards Measurement Study (LSMS) surveys as a core basis for sector work and design of projects for poverty alleviation; and
- researching the response of households to changes in their economic environment.
In January 1992, PHRWH was closed and its functions were transferred to the Population and Human Resources Poverty Analysis and Policy Division (PHRPA). PHRPA functions included:
- research and policy analysis (including LSMS);
- monitoring poverty trends and policy implementation;
- operational support; and
- dissemination and training.
PHRPA, however, was terminated along with PHR in December 1992.
As part of the reorganization that took effect in January 1993, PHR was split between two newly created departments: the Population, Health and Nutrition Department (PHN) and the Education and Social Policy Department (ESP). Both of these departments were placed in the new Human Resources Development and Operations Policy Vice Presidency (HRO). The LSMS related functions of PHRPA were transferred to the Poverty and Human Resources Division (PRDPH) of the Policy Research Department located in the Development Economics Vice Presidency (DEC). ESP absorbed the functions of PHRPA, as well as a number of other social sectors. ESP performed work in four main thematic areas: Poverty analysis and social policy; Labor markets and safety nets; Women in Development; and Education and Training. The ESP Department was responsible for:
- formulating and disseminating policies and guidelines for its sectors;
- monitoring the effectiveness of policies and approaches;
- identifying and disseminating best practices and lessons of experience;
- liaising with Bank-external organizations and professionals in the field;
- assessing skills requirements and upgrading skills; and
- providing operational support to the Regions.
On July 1, 1995, HRO became Human Capital Development and Operations Policy (HCO). The education team was removed from ESP and placed in the newly established Human Development Department (HDD) of HCO. ESP was terminated, and the remaining teams were moved into the new Poverty and Social Policy Department (PSP). PSP contained four thematic Groups: Gender Analysis and Policy; Poverty and Social Assistance; Labor Markets, Social Protection, and Public Sector Management; and Participation and Non-Governmental Organizations. PSP's work was focused on different social sectors, but had a particular poverty reduction emphasis. Responsibilities included:
- performing analytical work covering the three elements of the Bank's poverty reduction strategy: (i) encouraging policies conducive to labor-absorbing growth; (ii) promoting human development through the provision of social services, especially primary education, primary health care, and family planning; and (iii) designing and implementing safety nets to protect vulnerable groups in society when necessary;
- providing support in preparation of poverty assessments;
- monitoring Country Assistance Strategies (CAS) to ensure poverty is at the center of the strategy; and
- preparing an annual progress report on poverty.
On December 31, 1995, Human Capital Development and Operations Policy (HCO) was terminated, and replaced by the Human Capital Development Vice-Presidency (HCD). PSP remained in HCD.
In December 1996, the Human Capital Development Vice-Presidency (HCD) was terminated. The PSP Groups of HCD were transferred to the Development Economics Vice Presidency (DEC) under the oversight of International Economic Department Director (IECDR) Masood Ahmed. The Gender Analysis and Policy Group, the Poverty and Social Assistance Group, and the Public Sector Management Group temporarily became the Poverty, Gender, and Public Sector Management Department (PGP) in January 1997. These PGP sector groups were then mapped into independent units in the new Poverty Reduction and Economic Management Network (PREM) launched in July 1997.
The new PREM Poverty Division (PRMPO) launched in July 1997 absorbed the functions of the Poverty and Social Assistance Group of PGP. The objectives of PRMPO included:
- to develop approaches to country assistance strategies that are firmly grounded on analysis and determinants of poverty, with the participation of the poor;
- to foster implementation and monitoring of poverty-focused strategies through sharing and documentation of good practices;
- to strengthen understanding of how public policy can lead to the poor expanding their capabilities and managing risks they face;
- to deepen understanding of the links between patterns of development and poverty reduction, and implications for assistance strategies;
- to deepen the Bank's understanding of the linkages between poverty and social exclusion, post-conflict situations, gender, and violence;
- to develop a program of analytical work and a broad consultative process to build up to the WDR 2000 on poverty;
- to develop practical approaches for evaluating the impact of interventions on poor households, controlling for general patterns of change;
- to support a shift in project work to greater use of feedback, evaluation and redesign of interventions and institutions to increase gains for the poor;
- to strengthen in-country capacity to generate and use data for the monitoring and diagnosis of poverty;
- to make both data and analyses widely and regularly available, within and, especially, outside the World Bank; and
- to assess the progress of the World Bank in supporting strategies, policies, and projects to reduce poverty.
In June 2001, PRMPO was closed and was replaced by the Poverty Reduction Group in the PREM Network (PRMPR). Sometime after 2005, the Poverty Reduction Group was renamed the Poverty Reduction and Equity Department (PRMPR).