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Over the past few years, the countries of Eastern Europe and the Former Soviet Union have seen rapid productivity growth that has driven up living standards and reduced poverty. Unleashing Prosperity examines the microfoundations of the recent growth. The report shows that these countries have enjoyed substantial productivity gains from the reallocation of labor and capital to more productive sectors and firms, from the entry of new firms and the exit of obsolete firms, and from the more efficient use of resources. Unleashing Prosperity also illustrates that policy reforms that promote governance and macroeconomic stability, market competition, infrastructure quality, financial deepening, labor market flexibility, and skill upgrading are important in achieving higher productivity growth. However, significant challenges remain in sustaining productivity growth. The report argues that for the early reformers (most of the 10 new members of the European Union, plus Turkey), policy reforms aimed at improving the ability of firms to innovate and compete in global markets are a main concern. By contrast, for the late reformers (most of Southeastern Europe and the Commonwealth of Independent States), policy reforms aimed at addressing the legacy of transition continue to be a top priority. Unleashing Prosperity shows why microeconomic reforms deserve more attention. It is a must-read for policy makers, government officials, researchers, and economists who are interested in furthering growth and prosperity in the region.

Tunisians are striving for the opportunity to realize their potential and aspirations in a country that is rich in both human and physical capital, but whose recent economic growth has failed to create enough opportunities in the form of good and productive jobs. This report highlights the main barriers that hinder the Tunisian labor market from providing income, protection, and prosperity to its citizens and proposes a set of labor policies that could facilitate the creation of better, more inclusive, and more productive jobs. The weak economic performance and insufficient and low-quality job creation in Tunisia is primarily the result of an economic environment permeated by distortions, barriers to competition, and excessive red tape, including in the labor market. This has resulted in the creation of a insufficient number of jobs, especially in the formal sector. To change this situation, policy makers need to address five strategic directives that can promote long-term inclusive growth and formality: foster competition; realign incentives, pay, and benefit packages in the public sector; move toward labor regulations that promote labor mobility and provide support to workers in periods of transition; enhance the productivity of informal workers through training and skills building; and reform existing social insurance systems and introduce new instruments to attain broader coverage.

Using a nonparametric regression approach, this paper examines the role of firm size and firm age in net employment growth and the differential response of firms to the business cycle. An inverse univariate relationship between firm size and net employment growth disappears after controlling for firm age. With age control, the relationship between net employment growth and firm size is positive but diminishes with firm size. Young firms exhibit higher job creation and destruction rates and higher net employment growth rates than mature firms. Small and young firms are more sensitive with regard to net employment growth to the cyclical downturn than large and old firms.

This report analyzes the paths by which developing country labor markets adjust to permanent trade-related shocks. Trade shocks can bring about reallocation of labor between industries, but the presence of labor mobility costs implies economy-wide losses because they extend the period of economic adjustment. This report focuses primarily on the adjustment costs faced by workers after a trade shock, because of magnitude and welfare implications and policy relevance. From a policy viewpoint, understanding the relative magnitudes of labor mobility and adjustment costs can help policymakers design trade policies that are consistent with employment objectives, can be complemented by labor policies, or support programs to facilitate labor transitions, or both. To complement and validate the analysis based on structural choice models, the study designed a distinct empirical approach using reduced-form econometric estimation strategies. This approach examines the impact of structural reforms and worker displacement on labor market outcomes. This makes it possible to estimate the time required to adjust to a trade-related shock, but does not assume the rigid underlying relationship inherent in structural models. This report is organized as follows: chapter one gives introduction. Chapter two presents evidence from the literature on the relative magnitude of labor adjustment costs borne by workers and by firms. Chapter three presents a new database of country-level labor mobility cost estimates for both developing and developed economies. Chapter four showcases country case studies in which labor mobility costs vary by industry, firm size, and worker type (for example, informal versus. formal). Chapter five analyzes the impact of structural reforms on aggregate labor market outcomes across countries and the effect of worker displacement due to plant closings on the employment outcomes of individual workers in Mexico. Chapter six concludes with a summary of the main findings about the labor adjustment costs associated with trade-related shocks and a discussion of policy responses internationally.

Poor people derive most of their income from work; however, there is insufficient understanding of the role of employment and earnings as a linkage between growth and poverty reduction, especially in low income countries. With the objective of providing inputs into the policy discussion on how to enhance poverty reduction through increased employment and earnings for given growth levels, this study explores this linkage in the case of Madagascar using data from the national accounts and household surveys from the years 1999, 2001, and 2005, a period characterized among others by a short but severe crisis which started at the end of 2001 and the subsequent economic rebound. This report is part of a series of studies conducted in the context of the World Bank’s research framework aiming to improve the understanding of the linkages among growth, labor, and poverty reduction.

The study offers a unified perspective on what has driven productivity, economic integration, migration, employment and living standards in Eastern Europe and the former Soviet Union, drawing on household budget surveys, enterprise surveys and special purpose firm level data sets.

The collapse of the labor, housing, and stock markets beginning in 2007 created unprecedented challenges for American families. This study examines disparities in wealth holdings leading up to the Great Recession and during the first years of the recovery. All socioeconomic groups experienced declines in wealth following the recession, with higher wealth families experiencing larger absolute declines. In percentage terms, however, the declines were greater for less advantaged groups as measured by minority status, education, and prerecession income and wealth, leading to a substantial rise in wealth inequality in just a few years. Despite large changes in wealth, longitudinal analyses demonstrate little change in mobility in the ranking of particular families in the wealth distribution. Between 2007 and 2011, one-fourth of American families lost at least 75 percent of their wealth, and more than half of all families lost at least 25 percent of their wealth. Multivariate longitudinal analyses document that these large relative losses were disproportionally concentrated among lower-income, less educated, and minority households.

The social safety net responded in significant and favorable ways during the Great Recession. Aggregate per capita expenditures in safety net programs grew significantly, with particularly strong growth in the SNAP, EITC, UI, and Medicaid programs. The increase in transfers was widely shared across demographic groups, including families with and without children, and single-parent and two-parent families. Transfers grew as well among families with more employed members and with fewer employed members. In the low-income population, however, the increase in transfer amounts was not strongly progressive across income classes, with transfers to those just below or above the poverty line increasing slightly, compared to those at the bottom of the income distribution. This was mainly because of the EITC program, which provides greater benefits to those with higher family earnings. The expansions of SNAP and UI benefitted those at the bottom of the income distribution to a greater extent.

The Great Recession tested the ability of the \"great U.S. jobs machine\" to limit the severity of unemployment in a major economic downturn and to restore full employment quickly afterward. In the crisis the American labor market failed to live up to expectations. The level and duration of unemployment increased substantially in the downturn, and the growth of jobs was slow and anemic in the recovery. This article documents these failures and their consequences for workers. The U.S. performance in the Great Recession contravenes conventional views of the virtues of market-driven flexibility compared to institution-driven labor adjustments and the notion that weak labor institutions and greater market flexibility offer the best road to economic success in a modern capitalist economy.

The Great Recession had a profound effect on the retirement security of older Americans, and the slow recovery from the downturn will have a lasting impact on their quality of life. The nature of today's retirement system left older households exposed to the collapse in the equity and housing markets and induced many to plan for a later retirement. More late-career workers experienced job loss than in previous recessions, often with long jobless spells, encouraging a record number of early Social Security retirement claims and disability applications. Going forward, workers who lost a job can expect lower earnings and more instability and, potentially, poorer health. Even households that avoided job loss will have less money available for spending in retirement due to low interest rates and reduced home values. These findings emphasize the importance of Social Security as income insurance and the need for a more robust retirement income system.