Khalid ElFayoumi, Anta Ndoye, Miss Sanaa Nadeem, and Gregory Auclair
Institutional and market frictions impose costs on the reallocation of labor from low to high
productivity sectors, leading to suboptimal allocations and a loss in aggregate labor productivity.
Using cross-country sector-level data, we use a dynamic panel error correction model to compute
the speed of sectoral labor adjustment, as well as the contribution of structural reforms in
governance, labor and product markets, trade and openness, and the financial sector to lowering
the costs of labor reallocation. We find that, on average, sectoral employment shares converge
towards equilibrium allocations, closing about 13.7 percent of labor productivity gaps each year;
this speed of labor adjustment varies across sectors and income groups. On structural reforms, we
find a significant association between more efficient labor reallocation and financial market
liberalization, less bureaucracy, strong judicial and regulatory environment, trade liberalization,
better education and more flexible labor and product markets.
The June issue of the IMF Research Bulletin looks at the role of IMF programs and capacity building in fostering structural reforms and the economics of Arab countries undergoing political transitions. The Q&A analyzes the neutral interest rate through the experiences of several Latin American countries. The Research Bulletin also includes its regular features: a listing of IMF Working Papers and Staff Discussion Notes, information on the forthcoming IMF Economic Review and the Fourteenth Jacques Polack Annual Research Conference, and recommended readings from IMF Publications.
International Monetary Fund. External Relations Dept.
The Web edition of the IMF Survey is updated several times a week, and contains a wealth of articles about topical policy and economic issues in the news. Access the latest IMF research, read interviews, and listen to podcasts given by top IMF economists on important issues in the global economy. www.imf.org/external/pubs/ft/survey/so/home.aspx
International Monetary Fund. Independent Evaluation Office
This evaluation report covers such topics as the definition and scope of prolonged use, the evolution of IMF policies on prolonged use, characteristics of prolonged users, the effectiveness and design of prolonged users’ IMF-supported programs, and implications of prolonged use of IMF resources for the member country and the IMF. The report also contains detailed case studies on Jamaica, Morocco, Pakistan, the Philippines, and Senegal.