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The challenges of informality

Shu Yu's picture

Download the January 2019 Global Economic Prospects report.

The informal sector — labor and business that is hidden from monetary, regulatory, and institutional authorities — accounts for about a third of GDP and 70 percent of employment (of which self-employment is more than a half) in emerging market and developing economies. While offering the advantage of employment flexibility in some economies, a large informal sector is associated with low productivity, reduced tax revenues, poor governance, excessive regulations, and poverty and income inequality.

Addressing the challenge of pervasive informality will require comprehensive policies that take into account country-specific conditions.  Initiatives to boost long-term development might include measures aimed at reducing regulatory and tax burdens, expanding access to finance, improving education and other public services, and strengthening public revenue frameworks.
 
One-half of the world’s informal output and 95 percent of its informal employment is in emerging market and developing economies. Both informal output and employment have declined since 1990, particularly in countries with higher output growth, rapid physical capital accumulation, and larger improvements in governance and business climates.

Share of informal output and employment

By when would universal social protection be achieved?

Ugo Gentilini's picture

I am 41 years old and, with business as usual, I would be 106 when universal social protection (USP) is realized.

The drive for USP – a definition of which is to  ensure that everyone is covered by some form of social assistance or insurance – lies at the heart of various efforts at country and global levels.

But where are we with attaining such goal, exactly? Here are some back-of-the-envelope calculations.

On risk and black swans in developing countries

Carlos Végh's picture

In 2014, the World Bank issued a highly relevant and timely report titled Risk and Opportunity:  Managing Risk for Development. This report analyzed the growing number of heterogenous risks and opportunities affecting developing countries.  A clear challenge in finding a consistent risk management strategy stems from the sharp differences in the risks faced by developing countries; for example, commodity price shocks, financial crises, and natural disasters have all different defining characteristics.  While we could tailor risk management strategies to each one of these types of risks, not having the benefit of a unifying framework can lead to mistakes and mismanagement of the scarce resources available to developing nations to deal with these potentially disastrous events.  Five years after the publication of the report, in a time of growing macroeconomic headwinds for emerging markets and higher exposure to natural disasters, understanding the risks faced by these economies and how to effectively manage them continues to be a key policy challenge.

What do public officials know? Why do some know more than others?

Daniel Rogger's picture

Many people working in development hope to `inform’ public officials.  For example, academic research or the Bank’s own analytical studies often conclude with `policy recommendations’ to be taken on by individuals in charge of translating policies into practice, or public administrators.  Yet what is the baseline level of knowledge of public officials that this work is building on?  What do they already know and not know?
 
We investigated this question in Ethiopia by surveying a representative sample of 1,831 public officials across 382 organizations spanning all three tiers of government. We compared their estimates of key characteristics of their constituents to objective administrative and survey data to create a direct test of their knowledge.  How did they do?
 
We start our blog with a quiz to you, the reader, to assess your priors on the accuracy of public officials in guessing the key characteristics of the local citizens that they serve. 

Take the Quiz
Create your own user feedback survey

Energy prices fell 11 percent in December–Pink Sheet

John Baffes's picture
Energy commodity prices plunged more than 11 percent in December, led by oil (-13 percent), the World Bank’s Pink Sheet reported.

Non-energy prices fell marginally as losses in beverages, fertilizers, and metals were balanced by gains in food and precious metals.

Agricultural prices gained less than one percent—a 3.5 percent decline in the beverage price index was offset by a 3.5 percent gain of the food price index in response to grain price increases.

Oral democracy

Vijayendra Rao's picture

The challenges of electoral democracy are becoming increasingly visible worldwide. Elite capture, corruption and patronage are serious concerns, and the legitimacy of some elections has come under critical scrutiny. This has led to a revival of the idea of direct democracy – giving power directly to groups of people to make collective decisions.



The Global Economic Outlook: Darkening Skies

Carlos Arteta's picture

Download the January 2019 Global Economic Prospects report.

Global growth sputtered in 2018 amid weakening trade and manufacturing, tighter financing conditions, and elevated policy uncertainties. 

Growth decelerated in almost 80 percent of advanced economies and in nearly half of emerging market and developing economies in 2018. This year, it is expected to slow further in a majority of advanced economies and in about a third of emerging market and developing economies. 

In all, global growth is predicted to moderate from 3.0 in 2018 to 2.9 percent in 2019 and an average of 2.8 percent in 2020-21, below previous forecasts. 

Risks of even slower-than-expected growth have become more acute. Financial market pressures and trade tensions could escalate, denting confidence and further setting back growth prospects in emerging market and developing countries. 

Here is a look at global economic prospects in five figures:

1. Global growth is moderating as trade and manufacturing lose momentum. The deceleration in global activity was more pronounced than previously expected in 2018, as reflected in softening export orders and industrial production growth. The slowdown in global trade came against the backdrop of ongoing trade tensions involving major economies. A. Global industrial production andnew export orders

A. Global industrial production and new export orders

New year’s resolutions

Pinelopi Goldberg's picture
  1. Travel no more than once per month.
  2. Despite number one above, participate in a World Bank mission to see how it really works.
  3. Despite numbers one and two above, get to Africa. It is a shame I have not been there yet.
  4. Master the WBG (World Bank Group) acronyms.
  5. Attend at least one seminar per week.
  6. Dedicate one day per week to research.
  7. Explain to the world why the global growth projections of the WB and IMF sometimes differ.
  8. Despite all of the above, continue to get my eight hours a night of sleep.

Tax policy should recognize the true value of user data

Simeon Djankov's picture

The latest revelations regarding covert data sharing practices by large tech companies demand governments finally take action to curb the unwanted exploitation of user data. To date, attention has been focused on privacy regulation; governments would be well served to look at tax policy, too. Digital taxes would better align taxation rights with value creation in the digital economy. They might also serve to communicate the growing frustration with abusive data management practices by the biggest offenders.

Holiday reading

Pinelopi Goldberg's picture
The holidays are upon us - a time to relax, see friends and family, and generally catch up. If you are anything like me then catching up will involve reading, so I thought that I’d share with you ten of my favorite papers in Development from 2018 (published and accepted for publication this year).  They reflect my own personal tastes rather than any specific external metric. Since this is the holiday season and a new year beckons, I have favored papers which convey messages of hope (tied to appropriate policies). Happy holidays and happy reading! 

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