Syndicate content

Trade

Does competition create or kill jobs?

Klaus Tilmes's picture

Greater competition is crucial for creating better jobs, although there may be short term tradeoffs.

Job creation on a massive scale is crucial for sustainably ending extreme poverty and building shared prosperity in every economy. And robust and competitive markets are crucial for creating jobs. Yet the question of whether competition boosts or destroys jobs is one that policymakers often shy away from.

It was thus valuable to have that question as a central point of discussion for competition authorities and policymakers from almost 100 countries – from both developed and developing economies – who recently gathered in Paris for the 14th OECD Global Forum on Competition (GFC).

According to World Bank Group estimates the global economy must create 600 million new jobs by the year 2027 – with 90 percent of those jobs being created in the private sector – just to hold employment rates constant, given current demographic trends.
Yet the need goes further than simply the creation of jobs: to promote shared prosperity, one of the urgent priorities – for economies large and small – is the creation of better jobs. This is where competition policy can play a critical role.
 
Competition helps drive labor toward more productive employment: first, by improving firm-level productivity, and second, by driving the allocation of labor to more productive firms within an industry.
 
Moreover: Making markets more open to foreign competition drives labor to sectors with higher productivity – or, at least, with higher productivity growth. Making jobs more productive, in turn, generally increases the wages they command.
 
That’s in addition to cross-country evidence on the impact of competition policy on the growth of Total Factor Productivity and GDP, and the fact that growth tends not to occur without creating jobs. Thus there’s compelling evidence that – far from being a job killer, as skeptics might fear – competition (over the long term) has the potential to create both more jobs and better jobs.



The key question then becomes whether such long-term benefits must be achieved at the expense of short-term negative shocks to employment – especially in sectors of the economy that may experience sudden increases in the level of competition.
 
Progress toward better jobs is driven partly by the disappearance of low-productivity jobs, as well as the creation of more productive jobs in the short run. Competition encourages that dynamic through firm entry and exit, along with a reduction in “labor hoarding” in firms that have previously enjoyed strong market power.
 

How to reconnect South Asia through trade

Prasad Thakur's picture
India is home to 15,000 kilometers of navigable inland waterways.
India is home to 15,000 kilometers of navigable inland waterways. Photo credit: Anirban Dutta / World Bank



South Asia can now reap the benefits of greater regional integration it once enjoyed before its partition into various countries. But first, the region must break down the barriers that impede its intra-regional trade. 

The potential of one South Asia in 4 numbers

Delilah Liu's picture
Young Indian Female Student holding a "I believe in One South Asia" Sign
Young Indian Female Student at the South Asia Economic Forum 2015. Credit: World Bank

You don’t have to be a number-cruncher to enjoy this challenge:

1, 5, 200, and 2,800,000. Close your eyes after reading these numbers. Can you recite them in the right order?

Intrigued? If you’re interested in the development of South Asia, these four numbers will resonate with you. They represent four areas of opportunity for the region to further integrate and thrive economically.

Last month, prior to the South Asia Economic Conclave #SAEC15, Sanjay met with 30 Indian graduate students holding or currently pursuing advanced degrees in history, economics, and South Asia studies. He shared the 4 numbers with them and observed their responses. Here’s an overview of the conversation:​

Markets prey on our weaknesses. Two Nobel Laureates say so.

Dani Clark's picture
One more swipe at homo economicus and he might just meet his maker. This time two Nobel laureates George Akerlof (2001) and Robert Shiller (2013) are packing the punch. In a new book called “Phishing for Phools,” they offer their take on the gap between what economic models foretell and what human psychology actually delivers. On October 19 in Washington they presented the book before a room packed full of Bank staff and guests drawn by the duo’s ivory tower star power.
 
The World Bank’s Marcelo Giugale with Nobel laureates Robert Shiller
and George Akerloff at the World Bank on October 19.
Photo: Nazanine Atabaki.

Exporting on eBay: The Impact of Lowering the Hassle Costs of Exporting

David McKenzie's picture
Getting more firms to export is a policy goal in many countries around the world. However, the trade literature has not had very many well-identified evaluations of policy interventions that facilitate exports (a notable exception being work by Atkin et al in Egypt). So I thought it would be useful to share the results of a recent experiment by Xiang Hui making it easier for sellers to export on eBay.

Doing development differently: what does it mean in the roads sector?

David Booth's picture



There is no sign that the revival of interest in adaptive and entrepreneurial approaches to development work is going tail off soon.

That’s why the demand is growing for indications of how the broad principles, as summarised in the Doing Development Differently Manifesto, apply to the various sectors where interested practitioners are found.
 
Fred Golooba-Mutebi and I have just published an ODI working paper that begins to fill that gap for one particular economic infrastructure sector, road construction and maintenance. The country is Uganda. The purpose of the study was to revisit a 2009 paper on the political economy of reform in the sector, which was followed by the launching of a DFID-funded programme called CrossRoads.
 

Transforming livelihoods through good governance and seaweed farming

Alice Lloyd's picture


​A tourist eyeing the gorgeous azure waters around Zanzibar, Tanzania, might think about taking a frolic in the waves, but for local fishers, the sea means business--the seafood business.

Exploring the nexus between trade policy and disaster response

Selina Jackson's picture
 Nugroho Nurdikiawan Sunjoyo/World Bank


Strong trade connectivity can help disaster response and recovery by ensuring that humanitarian relief goods and services get to where they are needed when disaster strikes.  Trade policy measures, however, can sometimes have adverse effects.  Research led by the World Bank highlights that a common complaint of the humanitarian community is that customs procedures can delay disaster response, leaving life-saving goods stuck at borders.  Other measures such as standards conformity procedures, certification processes for medicines, and work permits for humanitarian professionals can slow the delivery of needed relief items.  Border closures can exacerbate situations already marked by human tragedy and unlock   full-scale economic crises. 
 
This nexus between trade policy and humanitarian response was discussed at an event organized jointly by the International Federation of the Red Cross and Red Crescent Societies (IFRC), the World Bank Group and World Trade Organization at the 5th Global Review of Aid for Trade on June 30 in Geneva.  Among the steps suggested to address concerns were rigorous disaster planning; better coordination between humanitarian actors, implementation of the WTO's Trade Facilitation Agreement and better recognition of the role of services.  

Why are Indian firms five times less productive than American ones? One reason is land.

Ejaz Ghani's picture
How important is land as a factor of production in India? In a recent paper (The misallocation of land and other factors of production in India," Policy Research Working Paper Series 7221), we focused on its role, and examined how the misallocation of land has impacted the country’s manufacturing sector.
 

Message for Latin America: Protect social gains and jobs amid slowdown

Donna Barne's picture

The economic slowdown in Latin America and the Caribbean is putting pressure on workers and wages and forcing some people out of the labor force, according to a new report released during a live-streamed event of the same name, “Jobs, Wages, and the Latin American Slowdown,” in the lead-up to the World Bank Group-IMF Annual Meetings in Peru.

“A lot of women joined the labor force in the good times. Now, in the slowdown, people are exiting the labor force — men and youth with little education. This is good news if they’re going to university, but bad if they’re going to live with their parents and be idle,” said Augusto de la Torre, the World Bank’s chief economist for Latin America and the Caribbean.

Moreover, the “exit of youth from the labor force will affect poor families more than wealthier ones – inequality could become greater,” said de la Torre.


Pages