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Austria

Why Jobs Need to Come Before Skills

Wolfgang Fengler's picture

The Western Balkans Case

When I travel to the Balkans for work, the journey typically begins with a cab ride to the airport from my home in Vienna. The taxi company I use is run and operated by Serbs living in Austria. It’s a great company: very reliable, clean cars and friendly drivers who are always keen to discuss the politics and economics of the Balkans. When I arrive in Belgrade, I’m picked up by drivers who have very similar skills to those of their compatriots in Vienna. However, the former have better salaries and opportunities simply because the company they work for operates in an environment that is much more conducive to nurturing and growing a business. In Austria, unlike in Serbia, a company can operate efficiently, is subject to a relatively fair tax treatment and knows the industry standards it needs to comply with. In turn, this explains to a large extent why workers, at any given levels of skills, are more productive in Austria – a basic intuition which William Lewis develops in his book The Power of Productivity, projecting the gains that Mexican construction workers make when moving to the USA.

Why should Governments Spend on Sanitation?

Shanta Devarajan's picture

A puzzle:  Sanitation is one of the most productive investments a government can make.  There is now rigorous empirical evidence that improved sanitation systems reduce the incidence of diarrhea among children.  Diarrhea, in turn, harms children’s nutritional status  (by affecting their ability to retain nutrients).  And inadequate nutrition (stunting, etc.) affects children’s cognitive skills, lifetime health and earnings.  In short, the benefits of sanitation investment are huge.  Cost-benefit analyses show rates of return of 17-55 percent, or benefit/cost ratios between 2 and 8.

But if the benefits are so high (relative to costs), why aren’t we seeing massive investments in sanitation?  Why are there 470 million people in East Asia, 600 million in Africa and a billion people in South Asia lacking access to sanitation?  Why are there more cellphones than toilets in Africa?