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This paper discusses theoretical aspects and evidences related to designing labor market institutions in emerging market and developing economies. This note reviews the state of theory and evidence on the design of labor market institutions in a developing economy context and then reviews its consistency with actual labor market advice in a selected set of emerging and developing economies. The focus is mainly on three broad sets of institutions that matter for both workers’ protection and labor market efficiency: employment protection, unemployment insurance and social assistance, minimum wages and collective bargaining. Text mining techniques are used to identify IMF recommendations in these areas in Article IV Reports for 30 emerging and frontier economies over 2005–2016. This note has provided a critical review of the literature on the design of labor market institutions in emerging and developing market economies, and benchmarked the advice featured in IMF recommendations for 30 emerging market and frontier economies against the tentative conclusions from the literature.
Discusses the unemployment insurance system in which programmes are operated by each state within the minimum standards established by the federal government.
The Unemployment Insurance (UI) system is a lasting piece of the Social Security Act which was enacted in 1935. But like most things that are over 80 years old, it occasionally needs maintenance to keep it operating smoothly while keeping up with the changing demands placed upon it. However, the UI system has been ignored by policymakers for decades and, say the authors, it is broken, out of date, and badly in need of repair. Stephen A. Wandner pulls together a group of UI researchers, each with decades of experience, who describe the weaknesses in the current system and propose policy reforms that they say would modernize the system and prepare us for the next recession.
Designing a good unemployment insurance scheme is a delicate matter. In a system with no or little insurance, households may be subject to a high income risk, whereas excessively generous unemployment insurance systems are known to lead to high unemployment rates and are costly both from a fiscal perspective and for society as a whole. Andreas Pollak investigates what an optimal unemployment insurance system would look like, i.e. a system that constitutes the best possible compromise between income security and incentives to work. Using theoretical economic models and complex numerical simulations, he studies the effects of benefit levels and payment durations on unemployment and welfare. As the models allow for considerable heterogeneity of households, including a history-dependent labor productivity, it is possible to analyze how certain policies affect individuals in a specific age, wealth or skill group. The most important aspect of an unemployment insurance system turns out to be the benefits paid to the long-term unemployed. If this parameter is chosen too high, a large number of households may get caught in a long spell of unemployment with little chance of finding work again. Based on the predictions in these models, the so-called "Hartz IV" labor market reform recently adopted in Germany should have highly favorable effects on the unemployment rates and welfare in the long run.
I use three decades of county-level data to estimate the effects of federal unemployment benefit extensions on economic activity. To overcome the reverse causality coming from the fact that benefit extensions are a function of state unemployment rates, I only use the within-state variation in outcomes to identify treatment effects. Identification rests on a differences-in-differences approach which exploits heterogeneity in county exposure to policy changes. To distinguish demand and supply-side channels, I estimate the model separately for tradable and non-tradable sectors. Finally I use benefit extensions as an instrument to estimate local fiscal multipliers of unemployment benefit transfers. I find (i) that the overall impact of benefit extensions on activity is positive, pointing to strong demand effects; (ii) that, even in tradable sectors, there are no negative supply-side effects from work disincentives; and (iii) a fiscal multiplier estimate of 1.92, similar to estimates in the literature for other types of spending.
The Oxford Handbook of the Welfare State is the authoritative and definitive guide to the contemporary welfare state. In a volume consisting of nearly fifty newly-written chapters, a broad range of the world's leading scholars offer a comprehensive account of everything one needs to know about the modern welfare state. The book is divided into eight sections. It opens with three chapters that evaluate the philosophical case for (and against) the welfare state. Surveys of the welfare state 's history and of the approaches taken to its study are followed by four extended sections, running to some thirty-five chapters in all, which offer a comprehensive and in-depth survey of our current state of knowledge across the whole range of issues that the welfare state embraces. The first of these sections looks at inputs and actors (including the roles of parties, unions, and employers), the impact of gender and religion, patterns of migration and a changing public opinion, the role of international organisations and the impact of globalisation. The next two sections cover policy inputs (in areas such as pensions, health care, disability, care of the elderly, unemployment, and labour market activation) and their outcomes (in terms of inequality and poverty, macroeconomic performance, and retrenchment). The seventh section consists of seven chapters which survey welfare state experience around the globe (and not just within the OECD). Two final chapters consider questions about the global future of the welfare state. The individual chapters of the Handbook are written in an informed but accessible way by leading researchers in their respective fields giving the reader an excellent and truly up-to-date knowledge of the area under discussion. Taken together, they constitute a comprehensive compendium of all that is best in contemporary welfare state research and a unique guide to what is happening now in this most crucial and contested area of social and political development.