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Private Sector Development

Tax, Electricity and the State

Richard Mallett's picture

Some Observations from Nepal

Power lines in Kathmandu I've been in Nepal since January helping out with the implementation of a household survey. Throughout February and March, we asked people in two districts – Jhapa, in the south-east of the country on the Indian border, and Tibetan-bordering Sindhupalchok to the north – about their livelihoods, the various taxes they pay, and their relationships with state governance. As part of this research, we've also been carrying out a number of more in-depth qualitative interviews.
 
When asked about the kinds of taxes that most affect their livelihoods on a day-to-day basis, one of the things that struck me about people's responses was the frequency with which electricity bills were mentioned. At first, I couldn't quite understand why this was coming up so much: that's not a tax, I thought, it's simply a payment made in exchange for a service. In my mind, I began to discount these responses, passing them off as information that missed the points we were trying to get at.
 
My assumptions were misplaced.

What will Transformation do for Today’s African Youth?

Louise Fox's picture

Bapsfontein informal settlement Africa’s combination of urban, educated, unemployed youth and economies still dominated by a narrow range of commodities and the public sector has spurred many to call for structural shifts in production and employment as part of an inclusive growth strategy. A recent entry into the debate is the 2014 African Transformation Report, launched last week by the African Center for Economic Transformation (ACET).  As Homi’s and Julie’s post states, the depth, sophistication and pragmatism of the analysis are commendable. But if all the recommendations were implemented, what would they do for the employment prospects of today’s African youth? Not much. They would barely affect the job prospects of 90 percent of young people entering the labor force in this decade.

Nine Reasons why Corruption is a Destroyer of Human Prosperity

Augusto Lopez-Claros's picture

Anti-Corruption billboard In an earlier blog post, we commented on the sources of corruption, the factors that have turned it into a powerful obstacle to sustainable economic development. We noted that the presence of dysfunctional and onerous regulations and poorly formulated policies, often created incentives for individuals and businesses to short-circuit them through the paying of bribes. We now turn to the consequences of corruption, to better understand why it is a destroyer of human prosperity.

All in the Family

Bob Rijkers's picture

Crony capitalism is the key development challenge facing Tunisia today

A plaque for Place de 14 janvier, 2011, Last week’s Economist magazine focused on Crony Capitalism.  From the powerful oil barons in the USA in the 1920s to today’s oligarchs in Russia and Ukraine, they show that such entrenched interests have been a major concern over time and around the globe.  North Africa is no exception. The fortunes  accumulated by the family and friends of President Zine Al-Abidine Ben Ali of Tunisia and Hosni Mubarak of Egypt were so obscene that they helped trigger the Arab Spring revolutions, with protestors demanding an end to corruption by the elite.

Depth in Africa’s Transformation

Homi Kharas's picture

Construction workers Africa is growing fast but transforming slowly. This is the message of the 2014 African Transformation Report, launched last week by the African Center for Economic Transformation (ACET). The report addresses a worry on the minds of many: in spite of impressive growth, the structure of most sub-Saharan African economies has evolved little in the past 40 years, with a poorly diversified export base, limited industrialization and technological progress, and a large informal economy whose economic potential remains mostly overlooked. In many African economies, manufacturing—the sector that has led rapid development in East Asia—is declining as a share of GDP. The worry is that without a major transformation Africa’s recent growth may soon run out of steam. The report argues that for growth to continue, Africa needs to invest in “DEPTH”–diversification, export competitiveness, productivity, and technological upgrading, all for the purposes of human well-being.

A Working Future for Turkey’s Women?

Martin Raiser's picture
Also available in: Türkçe

Building hospital gurneys at the Tautmann factory in Turkey A couple of weeks ago, just after International Women’s Day, we had a coffee hour in the World Bank’s Ankara office to watch short videos of five women that have recently started up their own business and transformed their lives and that of their families (stay tuned for the release of these films, currently being edited). Their stories were uplifting, but the discussion quickly turned to the dismal field of statistics. Commentators stressed that female labor force participation in Turkey remains at only half of the OECD level, that Turkey loses around 25 percent of its potential GDP because of this, and lamented that social norms and mixed political messages on the role of women in society were preventing greater progress towards gender equality.

Overcoming the Middle Income Trap

Wolfgang Fengler's picture

The Western Balkans Case

ZM-SE003 World Bank The Western Balkans have a lot going for them: ideal location next to the world’s largest economic bloc, a well-educated workforce, relatively low wages and decent infrastructure. FDI and investors should be rushing in … but are they?

Southeast Europe is the next frontier of EU expansion and includes six countries: Albania, Bosnia & Herzegovina, Kosovo, Macedonia, Montenegro and Serbia. These countries have a lot in common and an equal amount of differences. They are all relatively small open economies, with a growth strategy premised on deeper international integration. Some, especially Macedonia, are more advanced in attracting international investors but as a whole, the region seems to be stuck in a classical Middle Income Trap: they are too rich to compete on low-cost manufacturing but are too poor to be global innovators. After a strong recovery following war and conflicts in the 1990s, the growth momentum has stalled over the last five years and the region has been particularly vulnerable to external shocks.

Can Tax Reforms Help Create Jobs?

Sebastian Eckardt's picture

Europe faces a significant job challenge. At an average of 11 percent, unemployment remains stubbornly high while labor force participation, at 58 percent of the working age population, lags behind most other regions of the world. This means, that only every second person in working age currently has a paying job across the region. Addressing the job challenge requires multifaceted labor market policies. We argue however that reducing the tax burden on labor, which remains high across the region, holds the promise of improving labor market outcomes. Such tax cuts could especially target low-wage workers, which often face the highest marginal tax rates and very elastic labor demand and are therefore most likely to be priced out of the formal labor market.

Achieving Shared Prosperity in the Middle East and North Africa

Elena Ianchovichina's picture

In terms of the World Bank’s twin goals of eliminating extreme poverty and boosting shared prosperity, the Middle East and North Africa Region was making steady progress. The percentage of people living on less than $1.25 a day was 2.4% and declining.  And the incomes of the bottom 40% have been growing at higher rates than average incomes in almost all MENA countries for which we have information.

Yet, there were revolutions in several countries and widespread discontent. Why?

 

Informality – a Blessing or a Curse?

Megha Mukim's picture

IN134S06 World Bank Governments (and donors alike) don’t like dealing with informality. It’s messy, dirty, essentially unmeasurable, and its character varies dramatically. From one industry to the next. From one city to the next. It’s also beset with fiendishly difficult problems – informal firms are often household enterprises (employing mainly family labour, and not hired labour). Thus, they have to make impossible trade-offs between production and consumption.
 
And yet – the size and the importance of the informal sector in most countries shows no signs of abating. On average the informal share of employment ranges from 24 per cent in transition economies, to 50 per cent in Latin America and over 70 per cent in sub-Saharan Africa. In India, employment within the informal sector is growing, while that in the formal sector remains stagnant. Yet - very little is known about the relationship, whether symbiotic or competitive, between the two sectors.
 
In a new paper, I notice that in India formal firms tend to cluster with informal firms – especially in industries like apparel, furniture and meal-making. The firms coagglomerate not only so that they can buy from and sell to one another – but importantly, also because formal firms tend to share equipment with and transfer technical knowledge to their informal counterparts. Such technical and production spillovers are found in clusters of domestic-foreign, exporter-non-exporter and high-tech-low-tech firms. It is no surprise then that formal and informal activity could be complementary. Informal can also be an outlet for entrepreneurial activity, especially in places with high levels of corruption, or where formal firms are often mired in complex regulations.

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