Working Paper

Allocating Subsidies for Private Investments to Maximize Jobs Impacts

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collection.link.213
https://openknowledge.worldbank.org/handle/10986/11866
collection.name.213
Other papers
dc.contributor.author
Robalino, David
dc.contributor.author
Romero, Jose Manuel
dc.contributor.author
Walker, Ian
dc.date.accessioned
2020-06-10T15:47:16Z
dc.date.available
2020-06-10T15:47:16Z
dc.date.issued
2020-06
dc.date.lastModified
2021-05-25T09:55:17Z
dc.description.abstract
This paper develops a general framework to allocate subsidies to private investments in the presence of jobs-linked externalities (JLEs). JLEs emerge when wages exceed the opportunity cost of labor (labor externalities), or when there are social gains from creating better jobs for some classes of worker, such as women or youth (social externalities). Like all externalities, JLEs create a gap between private and social rates of return. Investments can be socially profitable (once the corresponding JLEs are internalized) but the private returns may be too low for the firm to go ahead. JLEs help to explain why many developing countries see insufficient investment in projects that would reallocate labor towards better jobs. The concept of JLEs is well established in economic literature, but there is a need for better operational approaches to address them. Like other externalities, JLEs can be corrected using a variety of possible subsidies (such as: grants, subsidized infrastructure, credit, training, technical assistance and tax exemptions). But doing this efficiently and at scale this requires mechanisms to (a) estimate the value of the externality and (b) discover the amount of subsidy needed to trigger the private investment. This paper shows that the optimal way to allocate subsidies to offset JLEs is through a competitive bidding process which selects projects based on the estimated amount of JLEs per dollar of subsidy. The bidding process provides an incentive to investors to reveal the subsidy needed for a project to become privately viable. The authors show that the proposed approach maximizes the jobs impacts of a given amount of fiscal resources that has been allotted to support better jobs outcomes.
en
dc.identifier
http://documents.worldbank.org/curated/en/952491591771431971/Allocating-Subsidies-for-Private-Investments-to-Maximize-Jobs-Impacts
dc.identifier.uri
http://hdl.handle.net/10986/33868
dc.language
English
dc.publisher
World Bank, Washington, DC
dc.relation.ispartofseries
Jobs Working Paper;No. 45
dc.rights
CC BY 3.0 IGO
dc.rights.holder
World Bank
dc.rights.uri
http://creativecommons.org/licenses/by/3.0/igo
dc.subject
ECONOMIC ANALYSIS
dc.subject
LABOR EXTERNALITIES
dc.subject
RATE OF RETURN
dc.subject
COST-BENEFIT ANALYSIS
dc.subject
ENTREPRENEURSHIP
dc.subject
JOB CREATION
dc.subject
INVESTMENT INCENTIVES
dc.subject
SUBSIDIES
dc.title
Allocating Subsidies for Private Investments to Maximize Jobs Impacts
en
dc.type
Working Paper
en
okr.crossref.title
Allocating Subsidies for Private Investments to Maximize Jobs Impacts
okr.date.disclosure
2020-06-09
okr.doctype
Publications & Research
okr.doctype
Publications & Research :: Working Paper
okr.docurl
http://documents.worldbank.org/curated/en/952491591771431971/Allocating-Subsidies-for-Private-Investments-to-Maximize-Jobs-Impacts
okr.googlescholar.linkpresent
yes
okr.identifier.doi
10.1596/33868
okr.identifier.externaldocumentum
090224b087a1e7b5_1_0
okr.identifier.internaldocumentum
32113476
okr.identifier.report
149396
okr.imported
true
en
okr.language.supported
en
okr.pdfurl
http://documents.worldbank.org/curated/en/952491591771431971/pdf/Allocating-Subsidies-for-Private-Investments-to-Maximize-Jobs-Impacts.pdf
en
okr.topic
Public Sector Development :: Public Sector Expenditure Policy
okr.topic
Macroeconomics and Economic Growth :: Investment and Investment Climate
okr.topic
Macroeconomics and Economic Growth :: Taxation & Subsidies
okr.topic
Private Sector Development :: Private Sector Economics
okr.topic
Social Protections and Labor :: Labor Markets
okr.topic
Social Protections and Labor :: Labor Policies
okr.unit
JOBS- CCSA - IBRD (HSPJB)

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