This paper presents a structural model of crime and output. Individuals make an occupational
choice between criminal and legal activities. The return to becoming a criminal is
endogenously determined in a general equilibrium together with the level of crime and
economic activity. I calibrate the model to the Northern Triangle countries and conduct
several policy experiments. I find that for a country like Honduras crime reduces GDP by
about 3 percent through its negative effect on employment indirectly, in addition to direct
costs of crime associated with material losses, which are in line with literature estimates.
Also, the model generates a non-linear effect of crime on output and vice versa. On average I
find that a one percent increase in output per capita implies about ½ percent decline in crime,
while a decrease of about 5 percent in crime leads to about one percent increase in output per
capita. These positive effects are larger if the initial level of crime is larger.
Zidong An, Tayeb Ghazi, Nathalie Gonzalez Prieto, and Mr. Aomar Ibourk
This paper investigates the relationship between economic growth and job creation in developing economies with a focus on low and lower middle-income countries along two dimensions: growth patterns and short-run correlations. Analysis on growth patterns shows that regime changes are quite common in both economic growth and employment growth, yet they are not synchronized with each other. Okun’s Law—the short-run relationship between output and labor market—holds in half of the countries in our sample and shows considerable cross-country heterogeneity.
This supplement presents country case studies reviewing country experiences with managing wage bill pressures, which are the basis for the compensation and employment reform lessons identified in the main paper. The selection of countries for the case studies reflects past studies carried out by either the IMF or the World Bank in the context of technical assistance or bilateral surveillance (Table 1). These studies provide important insights into the different sources of wage bill pressures as well as the reform challenges governments have faced when addressing these pressures over the short and medium term. The studies cover 20 countries, including five advanced economies, six countries from sub-Saharan Africa, two countries in developing Asia, one country in the Middle East and North Africa, three countries in Latin America and the Caribbean, and three countries in Central and Eastern Europe and the CIS. The structure of each case study is similar, with each study starting with a presentation of the institutional coverage and framework for setting and managing the wage bill; a description of employment and compensation levels, including their comparison with the private sector; and a discussion of the challenges that motivated the need for reforms and, when applicable, the reforms implemented and lessons derived from these.
Government compensation and employment policies are important for the efficient delivery of public services which are crucial for the functioning of economies and the general prosperity of societies. On average, spending on the wage bill absorbs around one-fifth of total spending. Cross-country variation in wage spending reflects, in part, national choices about the government’s role in priority sectors, as well as variations in the level of economic development and resource constraints.