Kenya has made satisfactory progress in reducing poverty and inequality in recent years. Economic growth in Kenya between 2005-06 and 2015-16 averaged around 5.3 percent, exceeding the average growth of 4.9 percent observed for Sub-Saharan Africa.
... See More + This robust economic growth resulted in a reduction in poverty, whether measured by the national or international poverty line. The proportion of the population living beneath the national poverty line fell from 46.8 percent in 2005-06 to 36.1 percent in 2015-16, showing a modest improvement in the living standards of the Kenyan population. Similarly, poverty under the international poverty line of US$ 1.90 a day declined from 43.6 percent in 2005-06 to 35.6 percent in 2015-16. At this level, poverty in Kenya is below the average in sub-Saharan Africa and is amongst the lowest in the East African Community (World Bank, 2018b). However, the proportion of the population living in poverty remains comparatively high in Kenya and the rate at which growth translated into poverty reduction was lower than elsewhere. At twice the average, Kenya’s poverty rate is still high for a lower-middle income country, a group that Kenya joined only in 2015. In addition, the Kenya’s growth elasticity of poverty reduction, the percentage reduction in the poverty rate associated with a one-percent increase in mean per capita income is only 0.57, lower than in Tanzania, Ghana, or Uganda (World Bank, 2018b). This leads to the obvious question of what can be done to make economic growth more pro-poor in Kenya. This study assesses the distributional consequences of Kenya’s system of taxes and transfers, covering 60 percent of revenue and between 25 and 30 percent of government spending. The analysis of fiscal incidence and distributional consequences of Kenya’s tax and transfer system is an important input for designing pro-poor policies and potentially for influencing the rate at which economic growth translates into poverty reduction. In this study, direct taxes and transfers, indirect taxes (VAT and excise duties), as well as public health and education spending are assessed in terms of their distributional impacts. Overall, these taxes and transfers account for about 60 percent of revenue and between 25 and 30 percent of government spending.
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Mauritius is often cited as one of the few African success stories, and with good reason. In the aftermath of independence (1968), this small island nation in the Indian Ocean seemed to be bound for economic failure because of its high poverty rate and numerous vulnerabilities, including high population growth, ethnic tensions, substantial unemployment, and an economy greatly dependent on the production of sugar for international markets.
... See More + However, Mauritius was successful in diversifying the economy and accomplishing an unprecedented structural transformation.The Inclusiveness of Growth and Shared Prosperity report (World Bank 2015a) turned the spotlight on the expanding gap of inequality in household incomes that occurred between 2007 and 2012 and on the negative impact on poverty. The report estimates that the incidence of absolute poverty between 2007 and 2012 would have declined twice as quickly had growth been shared more widely and inequality not worsened. Building on these earlier findings, this study investigates the driving forces behind the growing income inequality and identifies policy levers that could mitigate and, in the long run, possibly reverse the upward trend.This study takes a comprehensive approach to the determinants of inequality by including the role of the choices of households and individuals, markets, and institutions. The report is structured as follows. Chapter one sets the stage by presenting stylized facts on the trends in household income inequality between 2001 and 2015, comparing these trends with trends in consumption inequality, and identifying the main culprit behind the rapidly rising inequality in household incomes, that is, household labor income. Chapter two supplies a set of descriptive trends of the two groups of factors, namely, household demographics and labor market forces, that contribute to changes in household laborincome and follows up with a decomposition exercise on changes in household labor income between 2001 and 2015.Because the analysis indicates that an unequal increase in female labor force participation and rising inequality in individual earnings are among the main contributors to the expanding inequality in household labor income, Chapter three takes a deep dive into the issue of gender inequality in the labor market. The chapter illustrates the gender gap in labor market participation, describes the differences in the activities of working women in the labor market relative to men, and concludes with a detailed analysis of gender gaps in wages separately in the public and private sectors. Chapter four resumes the main analysis of the drivers of increasing inequality in individual earnings. The chapter first presents stylized facts about overall inequality in wages and then separates out changes in inequality between and within groups defined by demographic characteristics. The chapter distinguishes the role of changes in prices (or wages) and the role of changes in the composition of the workforce in rising earnings inequality. The second part of the chapter is devoted to the analysis of the role of the main potential drivers of expanding earnings inequality. The possible candidates include the interaction of changes in labor supply and labor demand, giving rise to skills shortages or surpluses, and changes in labor market institutions, namely, remuneration orders (ROs). The chapter concludes with an analysis of an additional source of skills mismatches among the employed population, namely, education mismatches, and advances potential explanations for the coexistence of a substantial skills shortage, over education, particularly among youth, and a large share of highly educated youth among the unemployed.
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Gender equality is a core development objective in its own right and also smart development policy and business practice. No society can develop sustainably without giving men and women equal power to shape their own lives and contribute to their families, communities, and countries.
... See More + And yet, critical gender gaps continue to exist in all countries and across multiple dimensions. The gender module of the World Bank’s ADePT software platform produces a comprehensive set of tables and graphs using household surveys to help diagnose and analyze the prevailing gender inequalities at the country level and over time. This book provides a step-by-step guide to the use of the ADePT software and an introduction to its basic economic concepts and econometric methods. The module is organized around the framework proposed by the World Development Report 2012: Gender Equality and Development. It covers gender differences in outcomes in three primary dimensions of gender equality: human capital (or endowments), economic opportunities, and voice and agency. Particular focus is given to the analysis and decomposition techniques that allow for further exploring of gender gaps in economic opportunities.Citation
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Fast growth in Rwanda since the turn of the century has been accompanied by solid poverty reduction. Between 2000 and 2013, gross domestic product (GDP) grew at eight percent per year, resulting in a 170 percent increase in real GDP.
... See More + As the poor almost uniquely depend on labor to generate income, the strong reduction in poverty suggests tangible improvements in employment outcomes over this period. This jobs and employment study focuses on the recent dynamics in Rwanda’s jobs’ landscape. Using data from a variety of sources, mainly the three integrated households living conditions surveys (EICV1, EICV2, and EICV3) and the 2011 establishment census, the report looks at what workers in Rwanda are doing and what they are making, and how this has changed over the past ten to fifteen years. Most of the report focuses on the five years between 2006 and 2011, although at times, the authors will also look at the evolution since 2001. The report concludes with a number of ideas to address Rwanda’s jobs challenge in the near future.
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This report consists of four chapters. Chapter one profiles the trends in household consumption and poverty rates, and in the characteristics of the poor observed between 1991 and 2012.
... See More + Descriptive statistics of consumption and selected poverty indexes are presented and a profile of the characteristics of the poor is given. The chapter concludes with an analysis of vulnerability. Chapter two uses descriptive and econometric techniques to identify the drivers of Ghana’s success over the last two decades. Chapter three examines the main challenges Ghana continues to face: widening inequalities, a persistent spatial divide, and the deteriorating macroeconomic environment. Chapter four provides a roadmap for policy action to effectively address these challenges and consolidate Ghana’s success as a middle-income economy.
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Improving access to productive employment is a key policy challenge, especially in low-income countries (LICs), where the only asset in abundance is labor.
... See More + Building on ongoing research on earnings mobility, this study uses unusually rich longitudinal data from Ghana and Tanzania to identify engines of, and barriers to, earnings and earnings mobility. It examines the role of individual characteristics such as gender, age, and skills and characteristics of the job, but it also focuses on the role of job switches for example, moves into and out of self-employment. It zooms in particularly on the drivers of transitions between low-paying and high-paying jobs, and addresses questions such as whether being low paid is a transitory or permanent phenomenon, and whether it has a scarring effect on an individual's employment prospects. The extent to which earnings dynamics differ for women and young adults is also discussed in detail. The cross-country comparison of earnings dynamics and labor market transitions helps shed light on the institutional factors that promote labor market mobility and entrepreneurship. The report is organized as follows: chapter one gives introduction. Chapter two presents a brief review of related literature. Chapter three gives a descriptive overview of the labor markets in the two countries. Chapter four examines the determinants of earnings levels. Chapter five examines determinants of earnings growth. Chapter six focuses on low-pay and high-pay transitions and analyzes whether the experience of being in a low-paying job undermines an individual's future earnings prospects. Chapter seven discusses key policy implications.
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The Results-Based Initiatives (RBI), launched in 2007, were a pioneering attempt to provide comprehensive, coherent, and rigorous evidence on effective interventions to foster the economic empowerment of women.
... See More + Increasing women's access to earning opportunities, productive resources, and decision-making power can result in a more productive use of resources, more investment in children's welfare, and more representative public institutions. The RBI comprised five small pilots with built-in impact evaluation designed to identify what works best in promoting better outcomes for women as entrepreneurs, wage earners or farmers, under different country contexts. When the RBI were conceived, rigorous evidence in this area was close to nonexistent, because no systematic impact evaluations had been carried out in developing countries. This paper highlights lessons from the RBI with respect to both the impact of the interventions and dos and don'ts in the design and implementation of pilots. This paper focuses on three issues: how effective have different policy interventions been in terms of strengthening female economic empowerment? What are the main challenges involved in carrying out small-scale pilots with impact evaluations, especially with a gender focus? And what have we learned from the RBI that can help navigating these challenges more effectively in future interventions? The lessons learned from the RBI can be grouped under three headings: 1) risks at the design stage-including objectives and use of resources, 2) issues related to the impact evaluation methodology, and 3) the importance of adequate monitoring. Three main messages emerge. First, for a pilot to be able to generate meaningful, it is essential to align resources with expectations. Second, even minor methodological weaknesses in the design and implementation of the impact evaluation component may invalidate the findings and 0ify its value. Finally, close and continuous monitoring during project implementation is essential to detect shortcomings in the design and implementation strategy. However, the impact evaluations suggest that, with the exception of Peru, the interventions did not significantly increase women's earnings and had little impact on other dimensions of their economic empowerment.
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Publication 83276 DEC 05, 2013
Silva, Sara Johansson de; Paci, Pierella; Posadas, JosefinaDisclosed
This document seeks to examine how the Great Recession affected labor markets in developing countries and how governments responded. The recession that began with the collapse of housing markets in the United States and Europe in late 2008 hit the labor markets particularly hard.
... See More + Employment outcomes worsened sharply as economies shrank. Advanced economies and countries in Central and Eastern Europe suffered the most, with a sharp fall in the Gross Domestic Product (GDP). In Latin America and the Caribbean, output fell significantly. And although the economies of Asia, Africa, and the Middle East did not contract, their trend growth rates of GDP decelerated significantly. Globally, it is estimated that about 30 million jobs were lost over a period of two years. Where employment did not fall, accommodating the contraction of aggregate demand entailed a sharp drop in total earnings. This document is divided into seven chapters including the overview chapter, and discusses how the crisis affected output across countries, how labor markets adjusted, which workers were more likely to be affected, and which types of policies were implemented. In doing so, the chapters bring together a unique compilation of data and analysis from very different sources, including an inventory of policies implemented during the crisis among countries in Latin America, Eastern Europe, Asia, and Africa.
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This paper reviews evidence from 44 middle-income countries on how the recent financial crisis affected jobs and workers' incomes. In addition to providing a rare assessment of the magnitude of the impact across several middle-income countries, the paper describes how labor markets adjusted and how the adjustments varied for different types of countries.
... See More + The main finding is that the crisis affected the quality of employment more than the number of jobs. Overall, the slow-down in earning growth was considerably higher than that in employment, and the decline in gross domestic product was associated with a sharp decline in output per worker, particularly in the industrial sector. In several counties, hours per worker declined and hourly wages changed little. But both the magnitude and nature of the adjustments varied considerably across countries. For a given drop in gross domestic product, earnings declined more in countries with larger manufacturing sectors, smaller export sectors, and more stringent labor market regulations. In addition, overall employment became more sensitive to growth in gross domestic product. These findings have implications that go beyond the recent financial crisis as they highlight (i) the limitations of focusing policy responses on maintaining jobs and providing alterative employment or replacement income for the unemployed, and (ii) the critical role of fast-track data systems that are capable of monitoring ongoing labor market adjustment during economic downturns, in supporting the design of effective policy responses.
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Policy Research Working Paper WPS5791 SEP 01, 2011
Although economic crises are difficult to predict, their recurrence is a salient feature of emerging market economies. Nevertheless, many developing countries continue to lack an effective policy infrastructure that can mitigate the impacts of economic downturns on employment opportunities without affecting long-term growth prospects.
... See More + This was painfully highlighted by the hasty reactions implemented by many countries in response to the global downturn of 2008-09, and by the ad hoc and reactive nature of many of the policies implemented. The weak ability of governments to systematically foresee, monitor, and offset adverse labor market impacts of economic downturn is of particular concern in developing countries where poverty incidence is high and labor is typically the only asset for the majority of the population. The main objectives of this note are: 1) to highlight the need for policies that limit earnings volatility; 2) to guide policy makers through the challenges inherent in crafting effective and comprehensive policy packages.
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The continuing failure of many countries to adequately mitigate the adverse labor market impacts of economic downturns is of concern, since labor market volatility can exacerbate poverty and stunt growth.
... See More + This article aims to identify potentially effective policies responses to crises by navigating the potential tradeoffs between offsetting adverse short term impacts of economic downturns on the quantity and quality of jobs, and preserving incentives for economic recovery. The authors provide a taxonomy that categorizes interventions depending on whether they mitigate the negative short-term impact of crises or whether they stimulate recovery. The taxonomy helps policymakers to identify "win-win" policies that avoid potential tradeoffs between these objectives by simultaneously serving both. Common elements of effective interventions are feasibility, flexibility (for example the capacity for scaling up and down), and incentive compatibility and there is no substitute for being prepared. Having sound safety nets in place before a crisis is superior to haphazardly implementing responses after a crisis hits.
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In this paper the authors use a search and matching model of multi-sector labor markets, to understand the channels through which economic shocks affect labor market outcomes in developing countries.
... See More + In the model workers can be employed in agriculture, formal or informal urban jobs, or unemployed. Economic shocks are manifested as either increased turbulence in the formal/informal sectors or a decrease in overall sectoral productivity. By calibrating the model to Indonesia and Mexico, the authors are able to understand how the 1998 Indonesian crisis and the 2001 Mexican recession translated into labor market outcomes. They then venture to simulate how the current financial crisis might affect the allocation of labor and earnings across sectors, in these countries. The results suggest that in both countries past crises have increased the degree of turbulence of the formal sector, increasing job destruction. However, while in Indonesia the crisis affected the overall formal sector productivity, this was not the case in Mexico. This explains the larger blow to formal wages -- relative to the size of the shock- witnessed by Indonesian workers. The response of the informal sector was also different: In both countries the informal sector was able to act as a buffer, as relative earnings increased. However, while in Mexico it became much harder to find informal sector opportunities and easier to keep the job once found; in Indonesia turbulence in the informal sector increased substantially increasing the job destruction rate of informal jobs and limiting the cushioning role that the informal sector might have played. The agricultural sector was spared from the shock in both countries. In Indonesia, it actually benefited from an unusual exogenous increase in the price of rise. The simulations show that if either the informal or agricultural sectors are spared from the shocks, large reallocations of labor might occur, and the overall effect of the shock is smaller. Instead, if these sectors cant buffer the shock, the reallocation of labor is much smaller, but earnings in the formal sector drop substantially. The authors also explore the impact of alternative policies. They find that in relatively flexible markets where informality can be seen more as a choice rather than as queuing, unemployment benefits and informal employment subsidies may have paradoxical effects, by discouraging formal search. Instead, policies targeted at creating informal employment and boosting formal TFP growth have the desired effects.
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Policy Research Working Paper WPS5283 APR 01, 2010
Gutierrez, Catalina; Paci, Pierella; Park, Beom S.Disclosed
This note presents early evidence on the labor market impacts of the recent economic crisis in 41 middle-income countries. A broader geographic coverage is prevented by the lack of high-frequency labor market data in other middle-income countries and in the low-income countries.
... See More + Whereas the economic downturn has threatened recent progress in enhancing employment opportunities, the impact has fallen disproportionately on the quality of employment rather than on the number of jobs. Slower growth in earnings accounts for nearly three quarters of the total adjustment for the average country. The bulk of the earnings adjustment was driven by a reduction in working hours, as well as a shift away from the better-paid industrial sector. Evidence of the adjustment's nature and magnitude suggests a policy package that combines: (1) income maintenance programs that is, cash transfers to low-paid poor workers; (2) interventions that facilitate flexible-hours arrangements; and (3) innovative policies that provide workers access to income maintenance mechanisms to compensate for temporary reductions in standard working hours for example, by granting partial compensation from the unemployment benefit system or by providing paid training opportunities.
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Events of the past two years are a reminder that crises are a recurring phenomenon with deep and often protracted impacts on labor markets. This paper examines the challenges inherent in crafting policy responses, with particular attention to developing countries.
... See More + It focuses on the potential tradeoffs between offsetting adverse short-term impacts and preserving incentives for economic recovery and future growth, and between protecting the most vulnerable and compensating those most immediately impacted. It also highlights how policymakers room for maneuver is constrained in crisis times by deteriorating fiscal space, limited institutional capacity, and mounting political pressures. Based on empirical evidence from previous crises, the paper asserts that taking a myopic and reactive approach may be costly and counterproductive. Instead, it advocates a more comprehensive approach, designed to build institutions - such as automatic stabilizers and safety nets - that can deliver a coordinated and coherent policy package. This approach will make crises catalysts for institutional changes and long-run growth.
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Policy Research Working Paper WPS5094 OCT 01, 2009
The objective of this report is to provide some policy guidelines for the fight against poverty. In particular, it hopes to be able to identify the growing sectors, as well as the constraints faced by the poor in benefiting from this growth.
... See More + The report is part of a series of studies conducted within the Poverty Reduction Group (PRMPR) to foster understanding of the role of employment earnings and labor markets in shared growth. In addition, it is intended to function as a background document for the World Bank's Nicaragua Poverty Assessment 2007. The degree to which growth is able to translate into poverty reduction depends on how its benefits are distributed among different segments of society. There is little doubt that growth measured by changes in average income contributes significantly to poverty reduction. However, it is also clear that countries differ in the degree to which income growth spells have translated into poverty reduction. Although differences in the responsiveness of poverty to income growth account for a small fraction of the overall differences in poverty changes across countries, from the point of view of an individual country, these differences may have significant implications for poverty reduction, especially in the short term.
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There is little doubt that economic growth contributes significantly to poverty reduction; however, countries clearly differ in the degree to which income growth translates into reduced levels of poverty.
... See More + Although cross-country estimates suggest that differences in the responsiveness of poverty to income growth account for a small fraction of overall differences in poverty changes across countries, from the point of view of an individual country these differences may have significant implications for poverty reduction, especially in the short term. The report is structured into eight chapters, beginning with this introduction. Chapter two describes the data and the main definitions used in this report. Chapter three provides the socioeconomic context of the study, with a particular emphasis on growth, poverty, and labor market characteristics. Chapter four takes a look at the linkages between macro and microeconomic data by reviewing the ways in which changes in aggregate and sectoral labor productivity translate into individual earnings as gathered from the household surveys. Chapter five also reviews the relationships between productivity and earnings by looking at the linkages between changes in aggregate and sectoral labor productivity data (macro) and changes in individual earnings as gathered from the household surveys (micro). Chapter six examines the origins and determining factors of household earnings and employment and assesses their impact on poverty and poverty reduction. Chapter seven analyzes the individual and household characteristics that are associated with having either 'good' jobs or 'bad' jobs and reviews the question of whether there may be barriers preventing the movement of workers from bad to good labor market segments. Finally, chapter eight describes the main conclusions of this report and provides suggestions for future work based on these conclusions.
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The objective of this report is to analyze the important roles of labor markets, employment, productivity, and labor income in facilitating shared growth and promoting poverty reduction in Bangladesh.
... See More + First, the report provides a background discussion of poverty, reform, and growth in Bangladesh. Following that, it gives an overview of the labor market, describing the country's demographics, the institutional structure of the labor market, and the labor market indicators. Then a poverty profile of the labor market is developed, followed by a discussion of the income sources and a decomposition of poverty reduction. A number of selected issues are discussed in the final section, including rural versus urban conditions; women, and children in the labor market; self-employment and household employment; and socioeconomic inequalities.
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This paper analyzes how the employment/productivity profile of growth and its sectoral pattern are correlated with poverty reduction. The authors use a sample of 104 short-run growth spells in developing countries, between 1980 and 2001.
... See More + They also identify some conditions of the labor market and the economic environment that are associated with employment-intensive growth or specific sectoral growth. The results show that, in the short run, although the aggregate employment-rate intensity of growth does not matter for poverty reduction any more than the aggregate productivity intensity of growth, the sectoral pattern of employment growth and productivity growth is important. Employment-intensive growth in the secondary sector is associated with decreases in poverty, while employment-intensive growth in agriculture is correlated with poverty increases. Similarly, productivity-intensive growth in agriculture is associated with decreases in poverty. Although the study does not address causality, coincidence of these phenomena in this large sample of heterogeneous countries and periods suggests that, in the short run, the sectoral productivity and employment pattern of growth may have important implications for poverty alleviation. Therefore, policies for reducing poverty should not overlook the sectoral productivity and employment implications of different growth policies.
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Policy Research Working Paper WPS4432 DEC 01, 2007
Drawing from a variety of data sources and utilizing a common empirical framework and estimation strategy, this study identifies patterns and statistical profiles of geographical mobility.
... See More + It finds internal migration to be generally low and highly concentrated among better-educated, young, and single workers. This suggests that migration is more likely to reinforce existing inequalities than to act as an equalizing phenomenon. By way of contrast, commuting flows have grown over time and are more responsive to regional economic differentials. The findings suggest the need for appropriate and country-tailored policy measures designed to increase the responsiveness of labor flows to market conditions.
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EMU Enlargement: why flexibility matters, by Philipp Maier and Maarten Hendrikx. Gains from risk sharing in the EU, by Yuliya Demyanyk and Vadym Volosovych.
... See More + Postponing Euro area expectations? by Tanel Ross. European accession and capacity building priorities, by John S. Wilson, Xubei Luo, and Harry G. Broadman. Internal labor mobility and regional labor market disparities, by Pierella Paci, Erwin Tiongson, Mateusz Walewski, Jacek Liwinski, and Maria Stoilkova. Latvian labor market before and after EU Accession, by Mihails Hazans. The impact of EU accession on Poland's economy, by Ewa Balcerowicz. Bulgaria's integration into the pan-European economy, by Bartlomiej Kaminski and Francis Ng. Forming preferences on European integration: the case of Slovakia, by Tim Haughton and Darina Malova. Insert: Whither Europe? Credit expansion in emerging Europe. The economic cost of smoking in Russia, by Michael Lokshin and Zurab Sajaia. Deregulating business in Russia, by Ekaterina Zhuravskaya, and Evgeny Yakovlev. Land and real estate transactions for businesses in Russia, by Gregory Kisunko and Jacqueline Coolidge. Insert: Land Issues: Barriers for Small Businesses. Foreign bank profitability in Central and Eastern Europe, by Olena Havrylchyk and Emilia Jurzyk. Banking in Ukraine: changes looming? By Natalya Dushkevych and Valentin Zelenyuk. World Bank agenda. New books and working papers. Conference diary.
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