This is a revision of the original article.
This is a revision of the original article. Productivity differences across firms and countries are surprisingly large
and persistent. Recent research reveals that the country-level distributions
of productivity and quality of management are strikingly similar, suggesting
that management practices may play a key role in the determination of worker
and firm productivity. Understanding the causal impacts of these practices
on productivity and the effectiveness of various management interventions is
thus of primary policy interest.
While mostly missing their primary objectives, adult
literacy programs can still improve key socio-economic outcomes
In addition to the traditional education system
targeting children and youth, one potentially important vehicle to improve
literacy and numeracy skills is adult literacy programs (ALPs). In many
developing countries, however, these programs do not seem to achieve these
hoped for, ex ante, objectives and have therefore received less attention,
if not been largely abandoned, in recent years. But, evidence shows that
ALPs do affect other important socio-economic outcomes such as health,
household income, and labor market participation by enhancing participants’
health knowledge and income-generating activities.
Expansion of microfinance to rural areas may
reduce credit constraints, helping non-farm sector growth, employment, and
The rural non-farm sector plays an important
role in diversifying income for rural households in developing countries and
has the potential to emerge as a major source of employment. In some cases
it has outgrown the agricultural sector, in part due to the expansion of
credit through microfinance institutions that are supported by governments,
donor agencies, and businesses. However, future expansion of the rural
non-farm sector requires increased flexibility in credit contracts, as well
as decreasing the cost of credit and the delivery of complementary inputs,
e.g. skills training.
Policies in developing countries to improve
women’s access to paid work should also consider child welfare
Engaging in paid work is generally difficult for
women in developing countries. Many women work unpaid in family businesses
or on farms, are engaged in low-income self-employment activities, or work
in low-paid wage employment. In some countries, vocational training or
grants for starting a business have been effective policy tools for
supporting women’s paid work. Mostly lacking, however, are job and business
training programs that take into account how mothers’ employment affects
child welfare. Access to free or subsidized public childcare can increase
women’s labor force participation and improve children’s well-being.
Labor force composition is critical for
understanding employment informality in developing countries
Developing countries have long been struggling
to fight informality, focusing on instruments such as labor legislation
enforcement, temporary contracts, and changes in taxes imposed on small
firms. However, improvements in the labor force’s schooling and skill level
may be more effective in reducing informality in the long term.
Higher-skilled workers are typically employed by larger firms that use more
capital, and that are more likely to be formal. Additionally, when skilled
and unskilled workers are complementary in production, unskilled workers’
wages tend to increase, adding yet another force toward reducing
Better information on university quality may
reduce underemployment and overeducation in developing countries
As the number of secondary school graduates
rises, many developing countries expand the supply of public and private
universities or face pressure to do so. However, several factors point to
the need for caution, including weak job markets, low-quality university
programs, and job–education mismatches. More university graduates in this
context could exacerbate unemployment, underemployment, and overeducation of
professionals. Whether governments should regulate the quantity or quality
of university programs, however, depends on the specific combination of
factors in each country.
Why spending on occupational skills can yield
economic returns to employers
Economists have long believed that firms will not
pay to develop occupational skills that workers could use in other, often
competing, firms. Researchers now recognize that firms that invest in
apprenticeship training generally reap good returns. Evidence indicates that
financial returns to firms vary. Some recoup their investment within the
apprenticeship period, while others see their investment pay off only after
accounting for reduced turnover, recruitment, and initial training costs.
Generally, the first year of apprenticeships involves significant costs, but
subsequently, the apprentice's contributions exceed his/her wages and
supervisory costs. Most participating firms view apprenticeships as offering
certainty that all workers have the same high level of expertise and
ensuring an adequate supply of well-trained workers to cover sudden
increases in demand and to fill leadership positions.
Increasing teacher certification in developing
countries is widely believed to improve student performance; yet the
evidence suggests otherwise
Teachers are perhaps the most important
determinant of education quality. But what makes a teacher effective?
Developing countries expend substantial resources on certifying teachers and
retaining those who become certified; moreover, policymakers and aid donors
prioritize increasing the prevalence of certified teachers. Yet there is
little evidence that certification improves student outcomes. In fact,
augmenting a school's teaching corps with contract teachers hired outside
the civil service and without formal qualifications may be more effective in
boosting student performance.