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This blog is maintained by the Growth and Crisis (GC ) Program of the World Bank Institute.

We bring you timely news, resources, tools, ideas and commentaries on issues related to the global economic crisis and growth.

June 2007

Fridays Academy: The Labor Market, Economic Growth and Poverty Reduction (II)

Submitted by Ignacio on Fri, 06/29/2007 - 05:24

Like every Friday, from Raj Nallari and Breda Griffith's lecture notes.

 

Labor Friendly Economic Growth

 

What does it mean to make growth more labor friendly?  First, there are cases by which growth in output is not translated into growth in employment and unemployment actually increases and/or the informal sector expands.  For example, Pierrre and Scarpetta (2004) note that while many countries in East and South Asia managed to successfully combine strong economic growth with increasing employment, for many other developing regions, especially Sub-Saharan Africa, increases in the working age population outstripped job opportunities in the formal sector with a resultant increase in employment in the informal sector.  Furthermore, strong economic growth in the transition economies in recent years has been accompanied by large and increasing unemployment rates. The unemployment rate in Poland, Slovak Republic and Former Yugoslavia has been close to 20 percent with declining labor force participation rates.  Similar tales abide in Latin America where the unemployment rate doubled to more than 10% in Argentina, Brazil and Chile during the 1990s combined with an expansion of the informal sector “the working poor” and rising wage and income inequality (Pierre and Scarpetta, ibid.)  

 

Employment and Productivity Intensiveness of Economic Growth 

 

Youth and Development: Investing in the Next Generation

Submitted by Ignacio on Tue, 06/26/2007 - 13:21

The latest issue of the World Bank Institute's Development Outreach magazine is out, with the title Youth and Development: Investing in the Next Generation

Fridays Academy: The Labor Market, Economic Growth and Poverty Reduction

Submitted by Ignacio on Fri, 06/22/2007 - 04:34

This Friday we begin the study of the relationship between the labor market, economic growth, and poverty reduction. As usual, from Raj Nallari and Breda Griffith's lecture notes.

 

The labor market represents one of the main conduits through which economic growth can help to reduce poverty.  Economic growth arises from increases in employment and/or productivity (how employment-intensive economic growth is and what part of growth is due to labor productivity will be discussed).  And, from the flip side, an economy’s failure to translate economic growth into employment opportunities can stunt its efforts to reduce poverty. Labor is the main asset of poor people and jobs represent the main pathway out of poverty for the poor. Furthermore, labor is an important factor of production for firms.

 

The functioning of countries’ labor markets is affected by a wide array of factors, including not only labor market conditions (labor regulations, tax wedges, and so on), but also natural endowments, cultural factors, and long-run economic performance.  Furthermore, external factors such as globalization and technological change play an increasing part in determining labor market outcomes within countries.  

 

Given its importance, strengthening and improving labor market conditions should bring about tangible improvements in poverty. In the short run, this will require measures that make the labor market more flexible, while closing the gap between labor supply and demand in the long run requires slower yielding policies, including improvements in human capital and training.   

 

Fridays Academy: Health, Poverty Reduction and Economic Development (VI)

Submitted by Ignacio on Fri, 06/15/2007 - 10:41

After a few weeks break, we continue with our Fridays Academy series where we left it. As usual, from Raj Nallari and Breda Griffith's lecture notes.

 

The PRSP and Funding for Health

From the late 1990s, the multilaterals, working through the Enhanced HIPC Initiative and the PRSP, have recognized the importance of social spending for health and education in the macroeconomic framework by strengthening the link between debt relief, poverty and social policies. Funds freed up because of debt relief can now be increasingly targeted for government spending on public services that directly benefit the poor.  

According to Gupta et al. (2001), countries that have reached their completion point should benefit from a reduction in debt service payments of 1.9 percentage points of GDP on average a year.  For some countries, the savings from debt relief would be even more substantial—9 percent of GDP in Guyana over the coming years, Exhibit below.

 

Total revenue, Total Spending and Spending on Health in HIPCs that have reached the Decision Point

 

Total revenue, Total Spending

 
 
                    Source: Gupta et al., 2001