Pension reform, growth, and the labor market in Ukraine

In recent years -as a result of economic contraction, declining employment and real wages, and changes in labor market behavior- Ukraine's tax base of the social security system has declined, threatening its sustainability. About 40 percent of the labor force works in the informal sector, paying no taxes, and many members of the formal workforce underpay taxes because they also do informal work. Using a model that links the socialsecurity system, the labor market, and the macroeconomy, the authors ran simulations to assess the sustainability of the current pension system and the relevance and viability of possible reforms. All simulations assume economic reform and the resumption of growth. They conclude: (1) Economic contraction is not the only cause of problems with the pension system. To reverse current trends, most of the labor force would need to be working in the formal sector -an unlikely event, given current incentives. (2) Reform is essential. Restoring the former system would be too costly, and maintaining the status quo would make the system unsustainable. (3) Reforms focusing on short-term budgetary effects and neglecting the interactions between the social security and the labor market are likely to fail. (4) Raising the retirement age to 65 would have a significant financial impact, but would need to be accompanied by deeper structural reforms. Raising the retirement age quickly may entail the least political cost, as many old people are currently working. (5) For the deeper structural reforms needed, introducing a funded-tier should be considered. It would be an effective way to correct distortions and restore credibility. (6) Introducing such reforms will be costly and affect several generations of workers and pensioners in different ways. Tradeoffs must be carefully evaluated.Public Health Promotion,Banks&Banking Reform,Environmental Economics&Policies,Pensions&Retirement Systems,Labor Policies,Environmental Economics&Policies,Pensions&Retirement Systems,Poverty Assessment,Banks&Banking Reform,Health Monitoring&Evaluation

Unemployment in Mexico : its characteristics and determinants

The restructuring of Mexico's economy has had surprisingly little effect on Mexican unemployment, which is low even in the worst years. The authors ask: Is the official definition of unemployment adequate? Is unemployment properly measured? And who bears its burden? Is the welfare cost of unemployment widespread or are certain population groups especially vulnerable to it, repeatedly hit by it, and therefore deserving of special attention? Is most unemployment associated with normal turnover (movements from one job to another) or with certain individuals being out of work a long time? The authors address these questions using panel data from the quarterly urban labor force survey, a household-based survey of 16 urban areas, and data from the National Employment Survey carried out every two to three years, and find the following. The structure of unemployment in Mexico is broadly similar to that in other countries. Unemployment is highest for those 16 to 25, especially women. Surprisingly, however, it is higher among secondary school graduates than among the less educated. Unemployment as officially measured is quite low, and has remained moderate during adjustment. Most adjustment occurred through the real wage rather than through unemployment. Therehas been relatively little restructuring for greater productivity. The official definition of unemployment leads to an underestimate of the jobless, because it ignores short spells out of the labor force transitions in and out of the labor force which are frequent. Using a more extension definition of unemployment raises the rate of male unemployment for 1988 from 3.4 percent to 6.4 percent, with the greatest increases in unemployment observed for people under 20 or with little education - yielding a structure of unemployment more like the one observed in other countries. Age, gender, and education are key determinants of unemployment. The probability of unemployment decreases with age and education for both men and women. Marriage is associated with lower risk of unemployment for men and for more educated women, but more probability of unemployment for women with less education. The typical spell of unemployment is not long: a mean duration of 5.7 months for men and 7.2 months for women (which explains the higher average unemployment rate for women). The duration of unemployment is longer for older workers but does not vary substantially according to educational attainment. Heads of households and individuals with household responsibilities tend to exit from unemployment faster. Although the typical spell of unemployment is relatively short, almost 70 percent of all unemployment in 1990-91 was attributable to spells lasting at least six months, and 30 percent corresponded to spells lasting at least a year. Although unemployment rates, as measured over a one-week period, are low (3 to 6 percent), 15 to 20 percent experience at least one spell of unemployment over a year. Among teenagers, the proportion is highest (50 percent) while it is only 10 percent for workers over 30.Economic Theory&Research,Youth and Governance,Health Monitoring&Evaluation,Labor Markets,Environmental Economics&Policies

The impact of Mexico's retraining program on employment and wages

The authors evaluated how Mexico's Labor Retraining Program (PROBECAT) affected unemployment and displaced workers. As part of the World Bank supported Manpower Training project, PROBECAT has provided short-term vocational training to more than 250,000 unemployed people. Their evaluation was based on new longitudinal data on PROBECAT trainees developed for this purpose, and includes data on a control group of unemployed people who did not join PROBECAT. Their main findings were as follows: On average, the trainees found jobs more quickly than the control group. But training does not shorten the term of unemployment for those without work experience. Male trainees are more likely to be employed three and six months after training than are the controls. Female trainees with work experience are more likely to be employed three, six, and twelve months after training than are the controls. Male trainees are more likely to find employment in large firms than are comparable controls. Training increases the monthly earnings of male trainees, but this effect varies systematically depending on the person's level of schooling attainment. The monetary benefits of training outweigh the costs of the PROBECAT program for certain groups of trainees. For male trainees over 25 with prior work experience, the benefits outweigh the costs of training within three months of starting work. For all other males except those with no prior work experience, the benefits outweigh the costs within one year. Men with no prior work experience spend the longest time job hunting after training (8 months, compared with the trainee mean of 4.4 months) and benefit less from training in terms of monthly earnings (128 thousand pesos compared with the average benefit of 152 thousand pesos). For this group, the costs of training are offset only after 17 months of higher earnings.Teaching and Learning,Environmental Economics&Policies,Health Monitoring&Evaluation,Vocational Education&Technical Training,Labor Standards

Does eurosclerosis matter ? - institutional reform and labor market performance in Central and Eastern European countries in the 1990s

This paper examines the labor market dynamics of six CEE countries over the last 10 years, paying special attention to the nature of labor market institutions these countries have adopted and their impact on labor market performance. This paper finds that, compared to EU countries, CEE countries fall in the"middle"of the flexibility scale regarding their employment protection legislation. While the effect of labor market institutions is hard to uncover, it should not be disregarded and they are likely to play an important role in the coming years.Environmental Economics&Policies,Labor Markets,Banks&Banking Reform,Health Economics&Finance,Municipal Financial Management

GEOSTATISTICAL ANALYSIS OF VALIDATION DATA OF AN AIR POLLUTION SIMULATOR

International audienceChemistry-transport models for air quality forecasting are affected by the uncertainty on the input data (emissions of pollutants and meteorological conditions), the approximations in the modelling of the physicochemical reactions, and numerical approximations (space and time discretization). The validation of the accuracy of these simulators can be done by comparing predictions with actual measurements. This exercise has been carried out for a model for daily forecasting at the scale of Europe, with reference to daily measurements at about one hundred stations over one year. A thorough variographic analysis shows that the error field cannot be characterized independently of the predicted and observed fields. Indeed the forecasts usually display space and time variations similar to those of the measurement data, up to a multiplicative factor, but are often poorly correlated with the reality. These results can be used to define priorities in the improvement of the chemistrytransport model. The presentation is focused on sulphates and nitrogen dioxide

Job Growth in Early Transition: Comparing Two Paths

Small start-up firms are the engine of job creation in early transition and yet little is known about the characteristics of this new sector. We seek to identify patterns of job growth in this sector in terms of niches left from central planning and ask about differences in job creation across two different transition economies: Estonia, which experienced rapid destruction of the pre-existing firms, and the Czech Republic, which reduced the old sector gradually. We find job growth within industries to be quantitatively more important than job growth due to across-industry reallocation. Furthermore, the industrial composition of startups is strikingly similar in the two countries. We offer convergence to "western" industry firm-size distributions as an explanation. We also find regularities in wage evolution across new and old firms, including small differences in job quality across the two transition paths.http://deepblue.lib.umich.edu/bitstream/2027.42/39888/3/wp503.pd

Rethinking the Relationship between Neo?patrimonialism and Economic Development in Africa

Is it possible to work with the grain of neo?patrimonial politics to boost investment and growth in Africa? Current donor orthodoxy is that neo?patrimonialism is irredeemably bad for economic development, but evidence from other regions, together with a re?examination of the African record itself, suggests that this may not be true. We present evidence from case studies of Kenya, Côte d'Ivoire, Malawi and Rwanda to show that provided mechanisms can be found to centralise economic rents and manage them with a view to the long term, neo?patrimonialism can be harnessed for developmental ends