Institutions, policies, and labor market outcomes

  • Access to public transport and labor informality

    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.
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  • Alcoholism and mortality in Eastern Europe

    Excessive drinking is the main cause of high male mortality rates, but the problem can be addressed

    Evgeny Yakovlev, July 2015
    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.
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  • Can diversity encourage entrepreneurship in transition economies?

    Harnessing the benefits of diversity is essential for encouraging entrepreneurship in the transition region

    Elena Nikolova, May 2017
    Entrepreneurship is an important lever for spurring transition in the economies of the former Soviet Union and Central and Eastern Europe. Utilizing diversity, in terms of religion or gender, can positively affect entrepreneurial development. Programs that encourage entrepreneurial initiatives (such as business start-ups) in culturally diverse localities should rank high on the policy agenda. Prompting women to start a business, along with female-friendly measures (including targeted legislation), can positively affect entrepreneurial behaviour and the performance of existing enterprises.
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  • Cash wage payments in transition economies: Consequences of envelope wages

    Reducing under-reporting of salaries requires institutional changes

    In transition economies, a significant number of companies reduce their tax and social contributions by paying their staff an official salary, described in a registered formal employment agreement, and an extra, undeclared “envelope wage,” via a verbal unwritten agreement. The consequences include a loss of government income and a lack of fair play for lawful companies. For employees, accepting under-reported wages reduces their access to credit and their social protections. Addressing this issue will help increase the quality of working conditions, strengthen trade unions, and reduce unfair competition.
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  • Defining informality vs mitigating its negative effects

    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.
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  • Do economic reforms hurt or help the informal labor market?

    The evidence is mixed on whether and how economic reforms benefit informal labor

    Saibal Kar, June 2016
    The evidence is mixed on whether informal labor in developing countries benefits from trade and labor market reforms. Reforms lead to higher wages and improved employment conditions in the informal sector in some cases, and to the opposite effect in others. At a cross-country level, lifting trade protection boosts informal-sector employment. The direction and size of the impacts on informal-sector employment and wages are determined by capital mobility and the interactions between trade and labor market reforms and public policies, such as monitoring the formal sector. To guarantee best practice policymakers need to take these interdependencies into account.
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  • Do institutions matter for entrepreneurial development?

    In post-Soviet countries, well-functioning institutions are needed to foster productive entrepreneurial development and growth

    Ruta Aidis, February 2017
    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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  • Do trade unions in Central and Eastern Europe make a difference?

    Low coverage and greater fragmentation can limit the benefits of trade unions

    Iga Magda, May 2017
    Countries with strong industrial relations institutions and well-established social dialogue often perform well in terms of economic growth and social cohesion. The weak and fragmented bargaining and low levels of union coverage in Central and Eastern Europe (CEE) raise concerns about these countries’ potential to maintain competitiveness, tackle demographic and macroeconomic challenges, and catch up with Western European economic and social standards. There is evidence that unions in CEE continue to protect their members and generate wage premiums, despite their institutional weaknesses.
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  • Does accession to the EU affect firms’ productivity?

    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.
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  • Does religiosity explain economic outcomes?

    Understanding religiosity is crucial to informed policy making

    Olga Popova, February 2017
    Most religions in transition economies were marginalized by their former communist regimes. Today, some of these countries are experiencing a revival of religiosity, while others are prone to secularization. Religious norms affect individual decision making with respect to human capital investment, economic reforms, marital stability, employment, and other contexts. This implies that the interests of both religious and non-religious communities may differ and must be taken into account when designing and implementing economic policies, which is a challenge for policymakers.
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