Enforcement improves legal compliance, but its
impact on welfare is country specific and unclear
More than half of private sector employees in
the developing world do not receive legally mandated labor benefits. These
regulations have typically been enacted by democratically elected
governments, and are valued by both formal and informal workers. Increasing
public enforcement (e.g. inspections, fines, and workers’ access to the
judiciary) can be a powerful tool to reduce violations (e.g. increase the
number of employees earning above the minimum wage). Which factors determine
enforcement, and whether enforcement produces more social benefits than
costs, are, however, unanswered questions.
State capture and uneven infrastructure development due to foreign direct investment can outweigh productivity gains
Firms in the new EU member states of Eastern Europe are more productive than those in other transition economies, but with a diminishing advantage. The least productive firms benefit the most from membership, although the situation is reversed in the case of foreign-owned firms. Foreign direct investment fails to promote knowledge and technology spillovers beyond the receiving firms. The dominance of multinational enterprises in the new EU member states enhances the threat of corporate state capture and asymmetric infrastructure development, whilst access to finance remains a constricting issue for all firms.
Countries give basic education and health
care to everyone, and for good reasons—why not basic income?
Globalization and automation have brought
about a tremendous increase in productivity, with enormous benefits, but
also a dramatic reallocation of jobs, skills, and incomes, which might
jeopardize the full realization of those benefits. Current social policies
may not be adequate to successfully redistribute the gains from automation
and globalization or to advance the reallocation of jobs and skills. Under
certain circumstances, an unconditional basic income might be a better
alternative for achieving these goals. It is simple, transparent, and has
low administrative costs, though it may require higher taxes or a
cut/reallocation of other public expenditures.
Do structural reforms or educational expansion
drive higher employment and participation rates?
Employment and labor force participation (LFP)
rates have increased throughout Europe since the 1990s, with little
interruption from the Great Recession. While many credit labor market
reforms for this progress, ongoing educational expansion might actually be
more important. This implies that the overall employment rate of an economy
can change if the share of the population with tertiary education increases,
even in the absence of any labor market reforms or effects of the business
cycle. Taking this compositional effect into account makes it possible to
disentangle the impact of reforms.
Increased competition affects the pay incentives
firms provide to their managers and may also affect overall pay
Deregulation and managerial compensation are two
important topics on the political and academic agenda. The former has been a
significant policy recommendation in light of the negative effects
associated with overly restrictive regulation on markets and the economy.
The latter relates to the sharp increase in top executives’ pay and the
nature of the link between pay and performance. To the extent that
product-market competition can affect the incentive schemes offered by firms
to their executives, the analysis of the effects of competition on the
structure of compensation can be informative for policy purposes.
CEO pay, often contentious, is the product of
The escalation in chief executive officer (CEO)
pay over recent decades, both in absolute terms and in relation to the
earnings of production workers, has generated considerable attention. The
pay of top executives has grown noticeably in relation to overall firm
profitability. The pay gap between CEOs in the US and those in other
developed countries narrowed substantially during the 2000s, making top
executive pay an international concern. Researchers have taken positions on
both sides of the debate over whether the level of CEO pay is economically
justified or is the result of managerial power.
How to design social protection programs that
poor women can benefit from
Women are more likely than men to work in the
informal sector and to drop out of the labor force for a time, such as after
childbirth, and to be impeded by social norms from working in the formal
sector. This work pattern undermines productivity, increases women's
vulnerability to income shocks, and impairs their ability to save for old
age. Many developing countries have introduced social protection programs to
protect poor people from social and economic risks, but despite women's
often greater need, the programs are generally less accessible to women than
Happiness is key to a productive economy, and a
job remains key to individual happiness, also under robotization
Measures of individual happiness, or well-being,
can guide labor market policies. Individual unemployment, as well as the
rate of unemployment in society, have a negative effect on happiness. In
contrast, employment protection and un-employment benefits or a basic income
can contribute to happiness—though when such policies prolong unintended
unemployment, the net effect on national happiness is negative. Active labor
market policies that create more job opportunities increase happiness, which
in turn increases productivity. Measures of individual happiness should
therefore guide labor market policy more explicitly, also with substantial
robotization in production.
Do poor labor market opportunities lead to
Immigration is one of the most important
policy debates in Western countries. However, one aspect of the debate is
often mischaracterized by accusations that higher levels of immigration lead
to higher levels of crime. The evidence, based on empirical studies of many
countries, indicates that there is no simple link between immigration and
crime, but legalizing the status of immigrants has beneficial effects on
crime rates. Crucially, the evidence points to substantial differences in
the impact on property crime, depending on the labor market opportunities of
Measures of intergenerational persistence can be
indicative of equality of opportunity, but the relationship is not
A strong association between incomes across
generations—with children from poor families likely to be poor as adults—is
frequently considered an indicator of insufficient equality of opportunity.
Studies of such “intergenerational persistence,” or lack of
intergenerational mobility, measure the strength of the relationship between
parents’ socio-economic status and that of their children as adults.
However, the association between equality of opportunity and common measures
of intergenerational persistence is not as clear-cut as is often assumed. To
aid interpretation researchers often compare measures across time and space
but must recognize that reliable measurement requires overcoming important
data and methodological difficulties.