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Cognitive skills are more relevant in explaining earnings,
socio-emotional skills in determining labor supply and schooling
Common proxies, such as years of education, have been shown to
be ineffective at capturing cross-country differences in skills acquisition, as well as the
role they play in the labor market. A large body of research shows that direct measures of
skills, in particular cognitive and socio-emotional ones, provide more adequate estimations of
individuals’ differences in potential productive capacity than the quantity of education they
receive. Evidence shows that cognitive skills in particular are quite relevant to explain
wages, while socio-emotional skills are more associated with labor force and education
participation decisions.
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Sectoral collective contracts reduce
inequality but may lead to job losses among workers with earnings close to
the wage floors
In many countries, the wage floors and
working conditions set in collective contracts negotiated by a subset of
employers and unions are subsequently extended to all employees in an
industry. Those extensions ensure common working conditions within the
industry, mitigate wage inequality, and reduce gender wage gaps. However,
little is known about the so-called bite of collective contracts and whether
they limit wage adjustments for all workers. Evidence suggests that
collective contract benefits come at the cost of reduced employment levels,
though typically only for workers earning close to the wage floors.
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Declining union power would not be an
overwhelming cause for concern if not for rising wage inequality and the
loss of worker voice
The micro- and macroeconomic effects of the
declining power of trade unions have been hotly debated by economists and
policymakers, although the empirical evidence does little to suggest that
the impact of union decline on economic aggregates and firm performance is
an overwhelming cause for concern. That said, the association of declining
union power with rising earnings inequality and the loss of an important
source of dialogue between workers and their firms have proven more
worrisome if no less contentious. Causality issues dog the former
association and while the diminution in representative voice seems
indisputable any depiction of the non-union workplace as an authoritarian
“bleak house” is more caricature than reality.
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Business consulting and supervisory skills
training can improve firm productivity and labor relations
Productivity differences across firms and
countries are surprisingly large and persistent. Recent research reveals
that the country-level distributions of productivity and quality of
management are strikingly similar, suggesting that management practices may
play a key role in the determination of worker and firm productivity.
Understanding the causal impacts of these practices on productivity and the
effectiveness of various management interventions is thus of primary policy
interest.
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Linguistic and cultural barriers affect
international migration flows
As migration flows to developed countries have
increased in recent decades, so have the number of countries from which
migrants arrive. Thus, it is increasingly important to consider what role
differences in culture and language play in migration decisions. Recent work
shows that culture and language may explain migration patterns to developed
countries even better than traditional economic variables, such as income
per capita and unemployment rates in destination and origin countries.
Differences in culture and language may create barriers that prevent the
full realization of the potential economic gains from international
mobility.
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In post-Soviet countries, well-functioning
institutions are needed to foster productive entrepreneurial development and
growth
Supportive institutional environments help build
the foundations for innovative and productive entrepreneurship. A few
post-Soviet countries have benefitted from international integration through
EU membership, which enabled the development of democracy and free market
principles. However, many post-Soviet economies continue to face high levels
of corruption, complex business regulations, weak rule of law and uncertain
property rights. For them, international integration can provide the needed
support to push through unpopular yet necessary stages of the reform
process.
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Market adjustments to tax evasion alter factor
and product prices, which determine the true impacts and beneficiaries of
tax evasion
How does tax evasion affect the distribution of
income? In the standard analysis of tax evasion, all the benefits are
assumed to accrue to tax evaders. However, tax evasion has other impacts
that determine its true effects. As factors of production move from
tax-compliant to tax-evading (informal) sectors, these market adjustments
generate changes in relative prices of products and factors, thereby
affecting what consumers pay and what workers earn. As a result, at least
some of the gains from evasion are shifted to consumers of goods produced by
tax evaders, and at least some of the returns to tax evaders are competed
away via lower wages.
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Refugee status and country of origin shape the
economic outcomes of newcomer children later in life
The number of refugees has increased worldwide,
and about half of them are children and youth. These refugee children arrive
in resettlement countries with a unique set of challenges caused by, for
instance, extreme stress and trauma that call for specific policies to
address their needs. Yet, the long-term effect of refugee status on newcomer
children's economic trajectories varies by country of origin, signaling the
need for effective resettlement support and initiatives to tackle broader
systemic barriers for newcomer children, beyond refugees. Such findings
challenge the commonly held notion of refugees as a distinctive, relatively
homogeneous group with similar trajectories.
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Remittances have the potential to lift up
developing economies
Remittances have risen spectacularly in recent
decades, capturing the attention of researchers and policymakers and
spurring debate on their pros and cons. Remittances can improve the
well-being of family members left behind and boost the economies of
receiving countries. They can also create a culture of dependency in the
receiving country, lowering labor force participation, promoting conspicuous
consumption, and slowing economic growth. A better understanding of their
impacts is needed in order to formulate specific policy measures that will
enable developing economies to get the greatest benefit from these monetary
inflows.
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Unemployment insurance generosity should be
greater when unemployment is high—and vice versa
High unemployment and its social and economic
consequences have lent urgency to the question of how to improve
unemployment insurance in bad times without jeopardizing incentives to work
or public finances in the medium term. A possible solution is a rule-based
system that improves the generosity of unemployment insurance (replacement
rate, benefit duration, eligibility conditions) when unemployment is high
and reduces the generosity when it is low.
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