Europe and Central Asia Knowledge Brief

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This is a regular series of notes highlighting recent analyses, good practices, and lessons learned from the development work program of the World Bank’s Europe and Central Asia Region.

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A New Model for Job Creation in Armenia: Promoting More Effective Accumulation, Competition, and Connectivity

2013-11, Bartsch, Ulrich

In Armenia, more effective accumulation, together with greater competition and better connectivity with the rest of the world, will increase pressures on firms to compete and innovate and will thus reinvigorate job creation. In order to more effectively channel savings into investment in those industrial sectors with the best potential for growth and employment creation, a more sophisticated financial system is required. A recently released World Bank report1 finds that Armenias State Commission for the Protection of Competition (SCPEC) needs to be given better tools to carry out its work, and it also needs to shift its focus from price levels to more vigorously pursuing anticompetitive conduct. A liberalization of aviation would boost growth and job creation by better connecting people, ideas, and markets.

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Active Labor Market Programs : How, Why, When, and To What Extent are they Effective?

2012-12, Brown, Alessio J.G., Koettl, Johannes

Active labor market programs (ALMPs) aim to keep workers employed, bring them into employment, increase their productivity and earnings, and improve the functioning of labor markets. ALMPs to retain employment, for example, work-sharing schemes, should be used only for short periods during severe recessions. More cost-effective and useful during recoveries are ALMPs to create employment, which strengthen outsiders labor market attachment and support the outflow out of unemployment. Training programs are especially effective over the long term, particularly the more they target disadvantaged outsiders. ALMPs that improve labor market matching are highly beneficial, but effective only in the short run. ALMPs in general might be more cost effective over the long term (3-10 years) and some may even be self-financing, suggesting that long-term evaluations are needed to better ascertain the impact of individual policies.

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Unemployment Registration and Benefits in ECA Countries

2011-04, Kuddo, Arvo

Public Employment Services (PES) in several Europe and Central Asia (ECA) countries are severely limited by underfunded labor market programs, understaffing, and fragmented networks of employment offices. Cash benefits and other entitlements like health insurance often act as incentives to job seekers to register with PES. However, such benefits can and often do encourage unemployment registration by economically inactive individuals. Registered unemployment exceeds survey based unemployment rates in about half of ECA countries (mostly Central Europe and Western Balkans). Registered unemployment is much lower than survey-based unemployment in the Baltic States and Commonwealth of Independent States (CIS) countries, primarily due to low access to unemployment benefits and active labor market programs (ALMPs). The numbers of unemployment assistance beneficiaries vary significantly across ECA. In 2009, for example, 85 percent of the registered unemployed in Russia received benefits but, in eight ECA countries, less than 10 percent of the registered unemployed received such assistance.

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Enhancing the Employment Chances of Roma

2009-03, Bodewig, Christian

Roma communities in central and southeastern Europe have a history of being excluded from the labor market and still face severe barriers to employment. Besides being marginalized socially, Roma were typically the first to lose their jobs at the outset of the post-communist transition. Many in their next generation grew up in unemployed households, with low educational attainments and limited job skills. The labor market exclusion of Roma persisted even through the years of buoyant economic growth and increasing employment levels prior to the economic slowdown triggered by the global financial crisis in 2008. Many governments in central and southeastern Europe are trying to address the unemployment problem of Roma and other disadvantaged groups by introducing measures to restrict or cut welfare benefit entitlements, so as to strengthen incentives to work. However, research by the World Bank and others shows that simply cutting benefits is unlikely to result in higher employment the labor market exclusion and social marginalization of Roma is a multifaceted issue, and their communities face multidimensional barriers to employment. A more effective way to promote employment among Roma (and other disadvantaged groups) is the employment activation approach increasingly being introduced across many countries in the European Union and the Organization for Economic Co-operation and Development (OECD). This approach balances the mutual obligations of jobseekers and state employment offices in order to secure the successful integration of the most disadvantaged workers.

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Employment Recovery Stalls in Europe and Central Asia

2013-04, Koettl, Johannes, Saiovici, Gady, Santos, Indhira

Employment recovery stalls in Europe and Central Asia (ECA) and Gross Domestic Product (GDP) continues to recover in most ECA countries, but the recovery remains fragile. Growth prospects remain poor in a number of countries where GDP continues to decline. This slowdown in the economic recovery is also evident at the sub-regional level. Unemployment has stabilized, with an average unemployment rate of 12 percent across the ECA region. Since the start of the crisis, men have been disproportionally hit by unemployment. The recent pace of job creation has not been sufficient to absorb the large pool of unemployed, resulting in growing long-term unemployment. Despite the rise in long-term unemployment, activity rates have increased or remained constant in most countries since 2008. ECA labor markets adjusted to the crisis not only through higher unemployment, but also through fewer work hours. Given the already low levels of employment in the region and a bleak demographic outlook, avoiding labor market detachment among the long-term unemployed, the inactive, and youth is the main challenge for policy makers in the near term.

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Accountability in State Noncommercial Organizations in Armenia : An Approach

2012-09, Vatyan, Arman

A World Bank-supported project in Armenia was successful in developing a control framework that balances the need to increase the transparency and accountability of the country s state noncommercial organizations (SNCOs), while also recognizing their financial, administrative, and managerial independence. An innovative approach involving the use of earlier results to guide later ones was used to address the dire need for SNCOs, which account for 70 percent of the total number of state organizations, to make greater efforts to responsibly administer and safeguard the government s assets. The aim was to reduce the market distortions caused by SNCOs that are engaged in significant commercial activities by addressing SNCOs heterogeneity and the need for specific fiduciary control requirements for distinct groups.

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Employment-Related Mitigation Measures in ECA Countries

2010-02, Kuddo, Arvo

There are growing constraints on public finances in many countries due to the actual and projected build-up of public debt, which limits the scope of labor market interventions. Only a few Europe and Central Asia (ECA) countries (most notably Estonia, Kazakhstan and Russia) had set aside resources that can now be used to cushion an externally driven economic slowdown. Currently, the labor market situation in many ECA countries can be characterized as lack of demand for labor. Overall, in 27 ECA countries for which data are available for June 2008 to June 2009, registered unemployment increased from 8.460 million to 11.354 million, or around 34 percent. The number of registered unemployed increased the most in three Baltic States, Turkey and Moldova. Nevertheless, most governments in ECA have responded to the global economic crisis by making additional resources available for labor market and social policies, and with discretionary policy measures to cushion the negative effects of the crisis on workers and low-income households. Spending on unemployment benefits has increased automatically as job losses have mounted, and many governments have moved promptly to scale-up resources for active labor market programs.

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Serbia Country Economic Memorandum : Productivity and Exports

2013-01, Sestovic, Lazar, Miovic, Peter

In order to have both dynamic and better balanced growth, Serbia needs to rely more on exports. In the last decade, Serbia's growth has depended primarily on demand that was fueled by excessive debt finance. In the future, the Serbian economy would be better served by increasing its reliance on exports as a new, potentially powerful source of growth. Serbia's export share of Gross Domestic Product (GDP) is currently 25 percent, but that figure should be closer to 50-75 percent, considering that all European Union (EU) comparator countries1 have export shares of GDP of 60-80 percent. Some sectors of the economy are already better positioned than others to export. For example, sectors in the traditional export base of Serbia, such as food and some chemical products still have vast potential for growth. Agriculture is widely considered to have significant potential for improvement. Although Serbia has recently become a net food exporter, these exports could be substantially higher. The Serbian government's number one task is to accelerate reforms to create an environment that is highly conducive to export-led growth. Serbia will need to fundamentally alter its growth model in order to compete effectively in world markets. The past model of relying on excessive inflows of capital and credit coupled with a consumption boom has run its course in all European countries, including Serbia.

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Employment Recovery in Europe and Central Asia

2011-06, Koettl, Johannes, Santos, Indhira

Despite high unemployment in most Eastern Europe and Central Asia (ECA) countries, people have not withdrawn from the labor market but continue to actively look for jobs. Unemployment increased significantly in ECA countries during the crisis, particularly among youth. However, young people are also the ones benefiting most from the recovery. Labor market recovery remained sluggish up to the third quarter of 2010. Many countries have seen only a slight recovery in unemployment rates, although output is recovering everywhere. Up to the third quarter of 2010, the Gross Domestic Product (GDP) upturn in most ECA countries appeared to be driven by increases in productivity and hours worked; however, these are still below pre-crisis levels. This suggests that there is room in most countries for further increases in productivity and hours worked, which could delay the recovery in employment.

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Reshaping Economic Geography : Implications for New EU Member States

2009-04, Gill, Indermit, Roberts, Mark

The ongoing crisis should spur deeper European integration, rather than a return to the nationalism of the past. The World Development Report 2009, reshaping economic geography, spotlights several issues for new European Union (EU) member states. From 1950 to 1990, Eastern Europe was impermeable to the flow of goods, services and ideas from the West, and grew slowly. During the same period, gross domestic product (GDP) per capita in fourteen Western European economies grew at three times the pace of Eastern Europe. The drivers of West European growth were market economies, regional cooperation, and global economic integration. The European Economic Community, started by six Western European nations in 1957, continued to increase its membership with the ultimate aim of full economic and monetary integration. After the collapse of the former Soviet Union in 1991, the EU10 countries, along with Malta and Cyprus, joined the expanded European Union, an economic zone based on the principles of democracy, markets and the free mobility of goods, capital and labor. The 27country European Union has a combined population of almost 500 million people and accounts for over 30 percent of the world's GDP. But the legacy of division has meant that the EU10 countries lag considerably behind most of the other member states. While the EU10 have brought 123 million people into the European Union, they have reduced its average level of GDP per capita by an estimated 15.6 percent.