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.
Trade policy is not an employment policy and
should not be expected to have major effects on overall employment
Trade regulation can create jobs in the sectors
it protects or promotes, but almost always at the expense of destroying a
roughly equivalent number elsewhere in the economy. At a product-specific or
micro level and in the short term, controlling trade could reduce the
offending imports and save jobs, but for the economy as a whole and in the
long term, this position has neither theoretical support nor empirical
evidence in its favor. Given that protection may have other—usually
adverse—effects, understanding the difficulties in using it to manage
employment is important for economic policy.
Does formal work pay? Synthetic measurements of
taxes and benefits can help identify incentives and disincentives to formal
Evidence from transition economies shows that
formal work may not pay, particularly for low-wage earners. Synthetic
measurements of work disincentives, such as the formalization tax rate or
the marginal effective tax rate, confirm a significant positive correlation
between these measurements and the probability of informal work. These
measures are especially informative for impacts at lower wage levels, where
informality is highest. Policymakers who want to increase formal work can
use these measurements to determine optimal labor taxation rates for
low-wage earners and reform benefit design.
Households can benefit from international trade
as it lowers the prices of consumer goods
Imported products tend to have lower prices than
locally produced ones for a variety of reasons, including lower labor costs
and better technology in the exporting country. The reduced prices may lead
to wage losses for individuals who work in the production of a local version
of the imported item. On the other hand, lower prices may be beneficial to
households if the cheaper product is in their consumption basket. These
welfare gains through consumption, on average, are found to be larger in
magnitude than the wage effect for some developing countries.
Can the privatization of state-owned enterprises generate
a virtuous cycle between exports and employment?
The privatization of state-owned enterprises (SOE) in
transition economies has often been found to improve employment and productivity of
privatized SOEs, despite policymakers’ fears regarding possible job cuts. This positive
effect can be enhanced if privatization also promotes firms’ exports. A recent
firm-level analysis of China reveals that privatization has indeed a positive effect on
export propensity, employment, and productivity in both the short and long term. The
effect mostly stems from changes in firms’ attitudes about profits and risks due to
Reducing informality requires better enforcement,
more reasonable regulation, and economic growth
In developing and transition economies as much as
half the labor force works in the informal sector (or “shadow economy”).
Informal firms congest infrastructure and other public services but do not
contribute the taxes needed to finance them. Informal workers are
unprotected against such negative shocks as ill-health, but for certain
groups there can be scarce opportunities to enter the formal sector.
Reducing informality requires better enforcement, more reasonable
regulation, and economic growth.
Economic progress coupled with political and
institutional stability is needed to reduce unhappiness
Since 1989, post-communist countries have
undergone profound changes in their political, economic, and social
structures and institutions. Across a range of development outcomes—in terms
of the speed and success of reforms—transition is an “unhappy process.” The
“happiness gap,” i.e. the difference in average happiness levels between the
populations of transition and non-transition economies, is closing, but at a
slower pace than the process of economic convergence. Economic growth, as
the determinant of a country’s collective well-being, has been superseded by
measurements of institutional quality and social development.
Workers and policymakers may fear that
privatization leads to job losses and wage cuts, but what’s the empirical
Conventional wisdom and prevailing economic
theory hold that the new owners of a privatized firm will cut jobs and
wages. But this ignores the possibility that new owners will expand the
firm’s scale, with potentially positive effects on employment, wages, and
productivity. Evidence generally shows these forces to be offsetting,
usually resulting in small employment and earnings effects and sometimes in
large, positive effects on productivity and scale. Foreign ownership usually
has positive effects, and the effects of domestic privatization tend to be
larger in countries with a more competitive business environment.
Policies to increase formal finance to smaller
firms requires improving the functioning of government bureaucracies
Although small- and medium-sized enterprises
(SMEs) represent more than 90% of all enterprises and play an important role
in employment generation, they lack access to affordable formal finance.
Conventionally, market failures and information imperfections are seen as
major causes of this misallocation. However, the role of social and political
factors in resource allocation, including access to formal finance, has
recently become more widely accepted. Firm-level evidence from
post-communist economies, for example, shows that political connectedness
improves access to bank credit, but is not associated with enterprise
More important than defining and measuring
informality is focusing on reducing its detrimental consequences
There are more informal workers than formal
workers across the globe, and yet there remains confusion as to what makes
workers or firms informal and how to measure the extent of it. Informal work
and informal economic activities imply large efficiency and welfare losses,
in terms of low productivity, low earnings, sub-standard working conditions,
and lack of social insurance coverage. Rather than quibbling over
definitions and measures of informality, it is crucial for policymakers to
address these correlates of informality in order to mitigate the negative
efficiency and welfare effects.