Long-term unemployment did not rise under the
flexicurity model during the great recession, despite the large drop in
Before the great recession of 2008–2009, the
“flexicurity” model (with flexibility for firms to adjust their labor force
along with income security for workers through the social safety net)
attracted attention for its ability to deliver low unemployment. But how did
it fare during the recession, especially in Denmark, which has been
highlighted as having a well-functioning flexicurity model? Flexible hiring
and firing rules are expected to lead to large adjustments in employment in
a recession. Did the high rate of job turnover continue or did long-term
unemployment rise? And did the social safety net become overburdened?
Poor public transport can reduce employment in
the formal sector
Public transport infrastructure has not kept up
with the demands of growing populations in cities in developing countries.
Infrastructure provision has historically been biased against less affluent
areas, so access to formal jobs is often difficult and costly for a large
part of the lower-income population. As a result, low-income workers may be
discouraged from commuting to formal jobs, lack information on job
opportunities, and face discrimination. Through these channels, constrained
accessibility can result in higher rates of job informality. Reducing
informality can be a target for well-designed transport policies.
Unemployment increases crime among youth, while
active labor market policies can mitigate the problem
Active labor market programs continue to receive
high priority in wealthy countries despite the fact that the benefits appear
small relative to the costs. This apparent discrepancy suggests that the
programs may have a broader purpose than simply increasing employment—for
instance, preventing anti-social behavior such as crime. Indeed, recent
evidence shows that participation in active labor market programs reduces
crime among unemployed young men. The existence of such effects could
explain why it is the income-redistributing countries with greater income
equality that spend the most on active labor market programs.
While mostly missing their primary objectives, adult
literacy programs can still improve key socio-economic outcomes
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.
A child’s age at school entry matters, and the
implications of policy changes can have long-lasting effects
Laws on age at school entry affect student
achievement and often change for a number of reasons. Older students are
more mature and ready to learn. This can have positive impacts on academic,
employment, and earnings outcomes. The costs of holding children back
include another year of childcare expenses or income forgone by the
caregiver parent. Entering the workforce one year later also has
implications for lifetime earnings and remittances to governments.
School-entry policies could be a useful tool in increasing student
achievement, but the short- and long-term impacts need to be better
Labor productivity is generally seen as bringing
wealth and prosperity; but how does it vary over the business cycle?
Aggregate labor productivity is a central
indicator of an economy’s economic development and a wellspring of living
standards. Somewhat controversially, many macroeconomists see productivity
as a primary driver of fluctuations in economic activity along the business
cycle. In some countries, the cyclical behavior of labor productivity seems
to have changed. In the past 20–30 years, the US has become markedly less
procyclical, while the rest of the OECD has not changed or productivity has
become even more procyclical. Finding a cogent and coherent explanation of
these developments is challenging.
Higher levels of air pollution reduce worker
productivity, even when air quality is generally low
Environmental regulations are typically
considered to be a drag on the economy. However, improved environmental
quality may actually enhance productivity by creating a healthier workforce.
Evidence suggests that improvements in air quality lead to improvements in
worker productivity across a range of sectors, including agriculture,
manufacturing, and the service sectors. These effects also arise at levels
of air quality that are below pollution thresholds in countries with the
highest levels of environmental regulation. The findings suggest a new
approach for understanding the consequences of environmental
Exposure to elevated levels of air pollution
adversely affects educational outcomes
The link between air pollution and human health
is well-documented in the epidemiology and economic literature. Recently, an
increasing body of research has shown that air pollution—even in relatively
low doses—also affects educational outcomes across several distinct age
groups and varying lengths of exposure. This implies that a narrow focus on
traditional health outcomes, such as morbidity and mortality, may understate
the true benefit of reducing pollution, as air pollution also affects
scholastic achievement and human capital formation.
Excessive drinking is the main cause of high
male mortality rates, but the problem can be addressed
Eastern European countries, particularly former
Soviet Union economies, traditionally have the highest rates of alcohol
consumption in the world. Consequently, they also have some of the highest
male mortality rates in the world. Regulation can be effective in
significantly decreasing excessive drinking and its related negative
effects, such as low labor productivity and high rates of mortality.
Understanding the consequences of specific regulatory measures and what
tools should be used to combat excessive alcohol consumption is essential
for designing effective policies.
How different procedures might succeed in
Alternative dispute resolution procedures such as
arbitration and mediation are the most common methods for resolving wage,
contract, and grievance disputes, but they lead to varying levels of success
and acceptability of the outcome depending on their design. Some innovative
procedures, not yet implemented in the real world, are predicted to improve
on existing procedures in some ways. But controlled tests of several
procedures show that the simple addition of a nonbinding stage prior to
binding dispute resolution can produce the best results in terms of cost
(monetary and “uncertainty” costs) and acceptability.