Working papers

Why is there persistent labour market segmentation, as evidenced by gender patterns in employment and occupational mobility? What is the impact and potential of various formalisation policies in MENA countries?
We first provide an overview of the informal economy in its taxonomy, coverage and drivers, across six MENA countries. Next, we analyse workers’ occupational mobility. considering their pre-existing status, age cohort, gender and other demographics, using transition tables and multinomial logistic regressions applied to longitudinal microdata from Labour Market Panel Surveys. We find persistent segmentation and low occupational mobility in all countries, suggesting that informal employment is not driven by choice on the labour supply side but by structural constraints on the demand side. We also find rather modest impacts of existing formalisation policies that encapsulate distinct stick and carrot strategies, as well as business versus workers targeting. We conclude that promoting social and solidarity enterprises, and extending microfinance to informal enterprises, are promising policies for the creation of decent jobs.

This paper considers the role played by capital stock endowments at local level in the private sector’s responsiveness to public investment. Using innovative municipality-level data, empirical evidence is obtained within the context of Northern Italy through a spatial regression discontinuity approach, exploiting the 2012 earthquake as an exogenous shock to private capital stock. The results suggest that, following the shock, areas with lower levels of private capital are more responsive to state-funded investment incentives targeted at production, than direct public investments in transport infrastructure. Investment incentives for production show higher returns in areas with lower private capital stock, on the back of a larger increase in access to secured credit associated with the policy. Instead, direct public investments in infrastructure appear to have a higher return to private employment and investment in areas with higher private capital stock, where private activity can be stimulated through public investment complementary with private capital stock. Overall, these results provide insights applicable to both post-disaster emergency response programmes and public development policies. In order to stimulate private capital and broader economic development, interventions should first aim to develop a sufficiently strong private capital basis and, later, leverage on its complementarity with public infrastructures, in order to further foster economic development.

In recent years, deep trade agreements spread around the world and go beyond tariff reductions. We aim to test whether the depth of agreements foster trade in services. To do so, we use a structural gravity type model and build new indicators of the depth of agreements based on the number of articles that are legally enforceable and that are related to trade in services. We show that, while only the deepest trade agreement raise trade in services, the quality of institution determines how deep agreements a ect both the intensive (measured by the quantity of trade) and extensive margins of trade (measured by the number of service sectors exports and the share of the highest service exported by a country). This result is more pronounced for some service provisions and is robust after we control for the endogeneity of deep trade agreements. Finally, our results also hold for MENA countries that we examine as an example of an emerging region that has a comparative advantage in services but whose most of the trade agreements are rather shallow.