Research

This paper examines the effectiveness of income protection and job protection policies for the post-pandemic economic recovery of the second half of 2020 through 2021. The paper is based on a new data set of the budgets of social protection programs implemented as a part of the pandemic stimulus package in 154 countries. The empirical analysis shows that, in the short run, higher expenditure on job protection measures is associated with more robust gross domestic product growth, increased employment, and decreased inactivity and poverty rates compared to the expansion of income protection programs. Both policies had a significant economic impact only in countries with weaker pre-pandemic social insurance systems. In countries with broader coverage of the social insurance system, the income and job protection programs appear to have had a limited impact on post-pandemic recovery. Because the structural economic changes induced by the pandemic are expected to materialize fully in several years, more research is needed to understand the longer-term effects of job protection and income protection policies on labor markets and economic recovery. 

This paper uses a newly assembled data set on various types of social protection spending in 154 countries during the COVID-19 pandemic in 2020 and 2021 to analyze the effect of the electoral cycle on the size and composition of the social protection stimulus budget. The analysis shows that the longer the time since the last election in a country—and thus the sooner the next election date—the larger the share of the social protection pandemic budget allocated to social assistance and income protection, and the lower the share allocated to job retention schemes. The electoral cycle appears to have impacted the size of social assistance spending only in countries with high political competition.

This paper uses labor force survey data to analyze the dynamics of job tenure in seven transition economies of Europe and a comparator country (Türkiye) for an average 13 years per country during the period 1994-2020. The country-specific age-period-cohort decomposition demonstrates that the job tenure of the cohort of workers entering the labor market in the 2000s is four to nine years shorter than that of workers who started working in the 1970s. This difference is at least twice as large as the difference in job tenure observed among workers from the same cohorts in EU countries. These trends in tenure persist after accounting for changes in cohort composition, but they are significantly attenuated by controlling for differences in individual worker characteristics. These results suggest that the evolution of tenure in the transition economies of Europe may still be driven by the transition-induced structural change processes in the labor market. 

This paper proposes explanations of why richer countries spend a higher share of their GDP on social protection than poor countries. It tests a series of hypotheses using newly-assembled data on social protection spending for 142 countries since 1995, treating the pandemic period separately as it entailed a large expansion in social protection efforts. While the mean share of GDP devoted to social protection rises with income, this is attributable to multiple confounders, including relative prices, weak governance in low-income countries and access to information-communication technologies. Controlling for these, social protection spending is similar between rich and poor countries. This was also true during the pandemic. 

The information set from which individuals make their decision on vaccination includes signals from trusted agents, such as governments, community leaders and the media. By implementing restrictions, or by relaxing them, governments can provide a signal about the underlying risk of the pandemic and indirectly affect vaccination take-up. Rather than focusing on measures specifically designed to increase vaccine acceptance, this paper studies how governments' non-pharmaceutical policy responses to the pandemic can modify the degree of preventive health behavior, including vaccination. To do so, we use repeated waves of a global survey on COVID-19 Beliefs, Behaviors and Norms covering 18 countries from October 2020 to March 2021. Controlling for the usual determinants, we explore how individuals’ willingness to get vaccinated is affected by changes in government restriction measures (as measured by the Oxford Stringency Index). This relationship is mediated by individual characteristics, social norms (social pressure to conform with what most people do), and trust in government institutions. Our results point to a complex picture as the implementation of restrictions is associated with increased acceptance in some contexts and decreased acceptance in others. The stringency of government restrictions has significant positive correlations with vaccine acceptance in contexts of weak social norms of vaccine acceptance and lower trust in government. In countries or communities with tighter social norms and high trust in health authorities, vaccine acceptance is high but less sensitive to changes in policies. These results suggest that the effect of government policy stringency is stronger among individuals who report lower trust and weaker social norms of vaccine acceptance. 

During the last quarter century, job tenure in Europe has shortened. Using data from Eurostat Labor Force Surveys of 29 countries from 1995 to 2020 and applying an age-period-cohort decomposition to analyze changes in tenure for specific birth cohorts, this paper shows that tenure has shrunk for cohorts born in more recent years. To account for compositional changes within cohorts, the analysis estimates the probability of holding jobs of different durations, conditional on individual and employment-related characteristics. The estimations demonstrate that, over time, the likelihood of having a medium- or long-term job decreased and holding a short-term job increased. The paper also finds that stricter job protection legislation appears to decrease the probability of holding a short-term job, and higher trade openness and ICT-related technological change are correlated with an increase of that probability.

This paper develops an indicator that measures the level of human capital to address the specific education and health challenges faced by middle income countries. We apply this indicator to countries in Europe and Central Asia, where productive employment requires skills that are more prevalent among higher education graduates, and where good health is associated to low levels of adult health risk factors. The Europe and Central Asia  Human Capital Index (ECA-HCI) extends the World Bank’s Human Capital Index by adding a measure of quality-adjusted years of higher education to the original education component, and it includes the prevalence of three adult health risk factors—obesity, smoking, and heavy drinking—as an additional proxy for latent health status. The results show that children born today in the average country in Europe and Central Asia will be almost half as productive as they would have had they reached the benchmark of complete education and full health. Countries with good basic education outcomes do not necessarily have good higher education outcomes, and high prevalence of adult health risk factors can offset good education indicators. This extension of the Human Capital Index could also be useful for assessing the state of human capital in middle-income countries in general. 

This paper analyzes the reopening process of countries in Europe and Central Asia after the first wave of the COVID-19 pandemic and provides evidence on the effects of different reopening trajectories and their timing and speed on economic recovery. The analysis indicates that countries that adopted a gradual, staged reopening experienced stronger economic recovery compared with the countries that rushed into lifting the restrictive measures before the pandemic was under control. Postponing lifting the restrictions until after the pandemic’s peak was reached has a positive impact on economic activity. Governance also matters: a higher level of trust in government is associated with increased economic activity among countries that carried out a gradual reopening process. There is also suggestive evidence that providing people objective data on the progress of the pandemic may speed up the recovery process. 

This paper estimates the economic impact of the non-pharmaceutical interventions (NPIs) implemented by countries in Europe and Central Asia over the initial stages of the COVID-19 pandemic. The analysis relies on daily electricity consumption, nitrogen dioxide emission, and mobility records to trace the economic disruptions caused by the pandemic and calibrates these measures to estimate the magnitude of the economic impact. To address the potential endogeneity in the introduction of NPIs, we instrument their stringency by the extent of a country’s social ties to China. The results suggest that the NPIs led to about 10 percent decline in economic activity across the region. On average, countries that implemented non-pharmaceutical interventions in the early stages of the pandemic appear to have better short-term economic outcomes and lower cumulative mortality, compared with countries that imposed non-pharmaceutical interventions during the later stages of the pandemic.  Moreover, there is evidence that COVID-19 mortality at the peak of the local outbreak has been lower in countries that acted earlier. In this sense, the results suggest that the sooner non-pharmaceutical interventions are implemented, the better are the economic and health outcomes. 

This paper investigates the link between inequality and demand for redistribution by looking at how individuals form their perceptions of inequality. Most of the literature analyzing demand for redistribution has focused on objective inequality, rather than subjective perceptions of inequality. However, a model that links demand for redistribution to subjective inequality is needed, given that recent empirical research has shown a growing gap between subjective and objective inequality. Using data from the International Social Survey Programme survey, the paper focuses on explaining individuals' formation of inequality perceptions using objective variables. The paper then studies the relationship between these perceptions and individuals' demand for redistribution. The analysis finds that objective macro variables are associated with individuals' perceptions of inequality, and that individual circumstances, some of which relate to self-interest, like age, educational attainment and income, also play an important role. Perceptions of equality, in turn, are significatively correlated to demand for redistribution and seem to substitute for any effect of objective variables. This result suggests that contextual macro variables only affect individuals' demand for redistribution through their perceptions of equality and do not have a direct effect. 

We develop a simple dynamic model of policy reform that captures some of the determinants that underlie these differences between the reform paths taken by a number of countries since the early 1990s. The model focuses on the interaction between domestic institutions and international organizations that promote reform, on the one hand, and the political incentives for reversing reforms, on the other. At equilibrium, there are three types of reform paths. A country can undergo a full-scale, lasting reform, can carry out a partial but lasting reform, or can go through cycles of reforms and costly counter-reforms. Domestic institutions, along with the incentives provided by international organizations, determine the equilibrium path. A politically myopic international organization may induce cycles of reforms and costly counter-reforms, thereby reducing the country's well-being. An international organization that only provides funds to promote reforms may have a less beneficial effect than one that assists the country with fresh funds to defend reforms when there is a risk of reversal. International funds that promote reforms can also influence domestic institutions. For example, due to the intervention of an international organization, countries could have incentives to dismantle institutions that build up reversal cost and/or do not fully build their fiscal capacity. 

European countries have the world's most redistributive tax and transfer systems. While they have been well equipped to deal with vertical inequality - fostering redistribution from the rich to the poor - less is known about their performance in dealing with horizontal inequality, that is, in redistributing across socioeconomic groups. In a context where individuals may not only care about vertical redistribution, but also about the economic situation of the specific groups they belong to, the horizontal dimension of redistribution becomes politically salient and can be a source of social tensions. The authors analyse the performance of the 28 EU countries for redistribution across (i) age groups; (ii) occupational groups; and (iii) household types over the period 2007-2014 using counterfactual simulation techniques. We find a significant degree of heterogeneity acriss ciybtrues: changes in the tax and transfer system have particularly hit the young and the losers of occupational change in Eastern European countries, while households with greater economic security have benefited from these changes. The findings of this study suggest that horizontal inequality is a dimension which policy-makers should take into account when reforming tax and transfer systems.

We exploit three natural experiments in Argentina to study if legislative malapportionment causes the existing biases in the country’s federal tax sharing scheme. We find that legislative malapportionment has had no significant effect on the federal tax sharing scheme during periods when democratic governments were in place; nor did we find any evidence that the tax sharing distribution pattern became less biased under centralized military governments. We argue that these results are attributable to two of Argentina’s institutional characteristics: first, the predominance of the executive branch over the legislature; and, second, the lack of any significant difference in the pattern of geographic representation in the executive branch under democratic and autocratic governments. Thus, the observed biases in the distribution of tax revenues among the Argentine provinces are not caused by legislative malapportionment, but are instead the result of a more structural political equilibrium.

Between late XIXth century and early XXth century Argentina went through a period of rapid demographic change in which millions of European immigrants established themselves mainly in the Litoral region of the country. However, internal migration of the preexistent population was very limited. We explore three hypothesis that explain this different behavior: 1) the existence of labor regimes that constrained free movement of native workers; 2) the emergence of alternative development areas in the North and West of the country as a consequence of protectionism that resulted from a political compromise between elites in the interior and the Litoral; 3) the existence of qualitative differences in the productivity of “Criollos” and Europeans that became an obstacle for a successful labor insertion of natives in agriculture and urban services. The empirical evidence refutes the first hypothesis while it validates the second and especially the third ones, giving some clues about the interaction between migrations and development patterns in the years that followed.

This paper constructs cost-of-living indexes for different groups of households to quantify the differences in the distribution of the burden of high inflation among the populations of countries in Europe and Central Asia. The analysis demonstrates that the cost-of-living crisis of 2021–22 has had a heterogeneous impact on European populations. Poor households appear to suffer the most from rising food and energy prices. Poverty and inequality rates and the profiles of the poor based on household-specific inflation rates systematically differ from those based on the standard consumer price index approach. Accounting for the variability of inflation rates across household types might help policy makers design policies that better protect vulnerable households and promote economic growth.

Based on their objective economic situation and comparing with their peers, individuals form perceptions of their economic position in a society. Data from the three waves of the Life in Transition surveys of European countries show that these perceptions systematically deviate from the rankings obtained using consumption levels. People position themselves in the middle ranks in larger numbers than those who are in the middle ranks according to their consumption levels. Correspondingly, many people who objectively are classified in the top, richest, or bottom, poorest, ranks subjectively feel that they are in the middle class. This puzzling “bunching in the middle” is the focus of this paper. Explanations are tested and discarded that consider subjective perceptions as misperceptions or the result of other mistakes due to data limitations (such as tail bias). The paper concludes that rather than reflecting a subjective assessment of the distribution of welfare, subjective rankings reveal subjective economic well-being. The paper show that monetary consumption is a strong predictor of subjective economic well-being, but that the latter is influenced by many other factors, including economic security, proxied by employment status or other measures of human capital, such as health and education. These findings have policy relevance, since redistribution measures aiming at simply protecting consumption levels may not be sufficient to restore the economic well-being provided by having fulltime secure types of employment. 

Using the management and operational practices survey in the Russian Federation, this paper finds that an average Russian manufacturing firm adopts 43 percent of the structured management practices (a score of 0.43), a value that is far from the frontier (for example, the United States scores 0.62). This average masks the wide heterogeneity in practices, where a large share of firms adopt few structured management practices and only 3.5 percent of them have a score over 0.75. Consistent with findings in other countries, better managed firms in Russia show stronger firm performance, measured as gross revenue per employee, value added per employee, total factor productivity, and employment growth. Improving the management score from the 10th to the 90th percentile is associated with an increase in sales per worker by 87 percent, value added per worker by 30 percent, and total factor productivity by 13.5 percent. What drives better management capabilities? Russian firms are similar to those in other countries, such that exporters and firms with foreign linkages are better managed. Switching from operating purely in the domestic market to being globally linked is associated with a significant increase in management capabilities. However, unlike the results in other countries, management capabilities in Russia are not associated with firm age, implying that firms do not learn to be better managed over their life cycle. This results points to the possibility of inefficient allocation of resources, such that learning and selection mechanism does not weed out the badly managed firms, perhaps due to the lack of pro-competitive forces. 

Earnings inequality and job polarization have increased significantly in several countries since the early 1990s. Using data from European countries covering a 20-year period, this paper provides new evidence that the decline of middle-skilled occupations and the simultaneous increase of high-and low-skilled occupations are important factors accounting for the rise of inequality, especially at the bottom of the distribution. Job polarization accounts for a large share of the increasing inequality between the 10th and the 50th percentiles, but it explains little or none of the increasing inequality between the 50th and 90th percentiles. Other important developments during this period, such as changing wage returns, higher educational attainment, and increased female labor force participation, account for a small portion of the changes in inequality.  

This paper analyses the patterns of intergenerational educational mobility using data on 43 countries in Europe and Central Asia and Middle East and North Africa collected in three rounds (2010, 2016, and 2022-2023) of the Life in Transition Survey. The paper also introduces a new oriented distance-based measure of educational mobility and compares its performance with that of standard mobility measures. It then analyzes the relationship with long term growth across countries. The results indicate that relative mobility and most indicators of absolute mobility do not have a straightforward association with GDP per capita while a specific dimension of absolute mobility -upward mobility in higher education- has a positive association with countries’ income.s.

This paper analyses the effect of expectations of future mobility on individuals’ support for tax-financed education reforms using data from the fourth round of the Life in Transition Survey, which covers 39 countries in Europe and Central Asia and some countries in the Middle East and North Africa. The analysis indicates that individuals who expect their own socioeconomic status to rise and/or their children to live better than they do are more likely to support tax-financed education reforms. This correlation is robust to different formulations of mobility expectations and persists over three survey rounds encompassing both stable and post-crisis economic environments. The relationship is partially mediated by beliefs about the fairness of economic opportunities in society and individuals’ readiness to embrace risks.

New information technologies often change the information set of voters, potentially generating changes in their political behavior. In this study I analyze the impact of access to computers on the political participation of young people. To do so I rely on two policy innovations which happened in Argentina during the last years. On the one hand, the implementation of Conectar Igualdad, a program that distributes laptops for personal use to students in public high schools across the country. On the other hand, the simultaneous extension of vote franchise to 16 and 17 years old. My results shows that access to the program decreases election turnout in 16 and 17 years old by about 5 percentage points and there is also evidence of spillover effect within households, in particular to those members of the household whose vote is voluntary. I present evidence that suggests that the negative effect is driven by an increase in entertainment consumption through computers which results in disenchantment and disinterest in politics and elections among teenagers.

Several works have analized the effect of internet penetration on political outcomes. However, the particular mechanisms that drive those effects have not been well studied. In this paper I propose to analyze the political consequences of the emergence of local news websites in the province of Buenos Aires, Argentina, during the 2000s. I exploit exogenous variability in the location of the optic fiber backbone to identify the informational effects of internet on local elections in the period 1995-2011. The IV results show that the emergence of news websites resulted in more voters casting valid ballots and less voters casting invalid ballots, with no particular effect on turnout, blank votes or other outcomes such as local parties’ votes or mayor reelection. In the overall, these results point out that the informational set of voters may have been potentially expanded by the creation news websites, inducing some voters to switch from casting an invalid ballot to a valid one.

This essay builds a simple model of legislative bargaining in which parties react to the public's perception on legislative inaction. If parties don't agree to a policy proposal, they may be penalized (or rewarded) in terms of popularity. This leads to moderate policies when the agenda setter is penalized for inaction and to radical policies when the agenda setter is rewarded for that. If the public opinion on legislative shutdown varies according to its practical consequences, then moderate policies prevail in all circumstances.