Evidence-based policy making

In addition to the traditional education system targeting children and youth, one potentially important vehicle to improve literacy and numeracy skills is adult literacy programs (ALPs). In many developing countries, however, these programs do not seem to achieve these hoped for, ex ante, objectives and have therefore received less attention, if not been largely abandoned, in recent years. But, evidence shows that ALPs do affect other important socio-economic outcomes such as health, household income, and labor market participation by enhancing participants’ health knowledge and income-generating activities.

The EU’s largest economy, Germany, has managed to find an effective and unique combination of flexibility and rigidity in its labor market. Institutions that typically characterize rigid labor markets are effectively balanced by flexibility instruments. Important developments since 2000 include steadily decreasing unemployment rates (since 2005), increasing participation rates, and (since 2011) moderately increasing labor compensation. The German labor market has also been remarkably robust to the impacts of the Great Recession, thus providing a useful case study for other developed countries.

Research finds that hot weather causes a fall in birth rates nine months later. Evidence suggests that this decline in births is due to hot weather harming reproductive health around the time of conception. Birth rates only partially rebound after the initial decline. Moreover, the rebound shifts births toward summer months, harming infant health by increasing third trimester exposure to hot weather. Worse infant health raises health care costs in the short term as well as reducing labor productivity in the longer term, possibly due to lasting physiological harm from the early life injury.

By supporting aggregate demand, including by easing financial constraints that affect businesses and house­holds, accommodative monetary policy increased employment during the 2008 financial crisis and its aftermath. But, monetary policies that ease financial pressures also reduce necessary restructuring that normally contributes to productivity growth. One reason why productivity growth has been weaker in the aftermath of the crisis is that aggressive monetary policy actions have weakened underlying supply-side performance and labor productivity.