Office of the Chief Economist, Middle East and North Africa

_{This paper examines the role of data transparency in explaining gross domestic product (GDP) growth forecast errors - the difference between forecasted and realized growth. On average, a one standard deviation increase in the log of a country’s Statistical Capacity Index, a measure of data capacity and transparency, is associated with a decline in absolute forecast errors by 0.44 and 0.49 percentage points for World Bank and International Monetary Fund (IMF) forecasts, respectively. The role of the overall data ecosystem, not just elements related to growth forecasting, is important for forecast accuracy. The study also establishes that forecast errors are large, the Middle East and North Africa region has the largest forecast errors among the world regions, and World Bank forecasts are more accurate and less optimistic than those from the IMF and the private sector.}

_{Citation - Gatti, R., Lederman, D., Islam, A. M., Nguyen, H., Lotfi, R., & Mousa, M. E. (2023). “Data Transparency and GDP Growth Forecast Errors.” Journal of International Money and Finance (forthcoming)}

_{Read More}

_{This study uncovers a gender labor productivity gap among informal firms in 14 developing economies. The mean labor productivity of women-owned informal firms is approximately 15.6 percent (0.17 log points) lower than that of men-owned informal firms. The difference in productivity is larger at the lower quantiles of the labor productivity distribution than at the higher quantiles. The Kitagawa-Oaxaca-Blinder and quantile decomposition methods are used to estimate the aggregate “endowment” vs “structural” effects, and individual factors’ contribution to the productivity gap. Several policy-relevant findings are revealed. First, the labor productivity gap at the mean is significantly larger due to lower education, prior work experience, capitalization, and less protection from crime among women than men owners of informal firms. The smaller size of the women-owned firms and their higher return from operations under contracts narrow the mean productivity gap. Second, the productivity gap at the mean and different labor productivity quantiles can be substantially narrowed by providing more resources to women owners of informal firms, such as education, managerial experience, and physical capital, without improvements in their returns to women-owned informal businesses. Third, overall, there is evidence of “sticky floors” for women owners, but not “glass ceilings”. Fourth, there is heterogeneity in the contribution of individual factors to the productivity gap at different quantiles of the labor productivity distribution. Targeting policies to the relevant quantiles will improve their effectiveness. Fifth, there are important similarities and differences between groups of countries in low-income Africa, middle-income Africa, and Latin America, as far as the gender labor productivity gap and its drivers are concerned. Thus, an eclectic policy approach is needed, combining the broader findings of the literature with the prevailing local conditions. Last, the data do indicate that a majority of women- and men-owned informal businesses would like to formalize.}

_{Citation - Islam, Asif M., & Mohammad Amin. "The gender labor productivity gap across informal firms." World Development 167 (2023): 106229.}

_{Read More}

_{This paper examines fertility and labor supply responses to a French policy reformthat consisted in conditioning the amount of child allowances on household income.Relying on Regression Discontinuity Design and administrative income data, the paperfinds that restricting family allowance eligibility criteria decreases fertility. The resultsalso highlight that receiving half the amount of the allowances or not receiving anyleads to an increase in both male and female labor supply through an increase inovertime. Auxiliary regressions show that the fertility decline reflects a decline in theprobability of having an additional child for already-parents rather than the probabilityof becoming parents for households without children.}

_{Elmallakh, N. "Fertility and Labor Supply Responses to Child Allowances: The Introduction of Means-Tested Benefits in France." Demography 60.5 (2023): 1493-1522.}

_{Read More}

_{This paper examines the impact of massive refugee inflows on the mobility patterns of host communities. We rely on panel data from before and after the Syrian war and exploit the geographical distribution of Syrians across Jordanian subdistricts. Using difference in differences, we find that native outflows of the camp-hosting areas increased by 27%. This increased residential mobility out of the camp-hosting areas seems to be triggered by an increase in rents and a crowding out of Jordanian students by Syrians in schools. Our results also show that the Syrian presence increased Jordanians’ job location mobility into the camp areas.}

_{Citation - Elmallakh, N., & Wahba, J. "Syrian Refugees and the Migration Dynamics of Jordanians: Moving in or moving out?." Economic Development and Cultural Change 71.4 (2023): 000-000.}

_{Read More}

_{The benefits of formal training are numerous, and yet in many regions few firms utilize them. This study builds on the literature by exploring how two forms of human capital—the quality of management practices and the proportion of university educated employees—influence the adoption of formal training. Using both cross-sectional and panel firm-level data for 29 economies in Eastern Europe and Central Asia and six economies in the Middle East and North Africa, the study finds that firm management practices are positively correlated with the implementation of formal training in Eastern Europe and Central Asia but not in the Middle East and North Africa. The proportion of university educated workers is positively correlated with formal training in both regions, but the finding is more robust for the Middle East and North Africa. These findings imply significant heterogeneity across regions in the determinants of formal training, suggesting that policies should be context specific.}

_{Citation -Islam, A. M., & Gatti, R. "The Human Capital of Firms and the Formal Training of Workers." (2022).}

_{Read More}

_{Using firm-level survey data for 29,962 manufacturing firms in 141 developing and emerging countries, the impact of exports (as a percentage of sales) on the share of female workers at the firm is estimated. The impact is positive, large, and statistically significant. For the baseline specification, moving from a firm that does not export to one that does all its sales abroad is associated with a 6.6 percentage point increase in the share of female workers. This positive relationship is much stronger when competition in the domestic markets is low, social attitudes and mobility laws are more favorable to women's work outside the home, and the law-and-order situation is better. We argue that these heterogeneities serve as important checks against endogeneity concerns. We also provide results using the average share of exports in a country–industry cell as an instrument. The policy implications of our findings are discussed in detail.}

_{Citation - Amin, M., & Islam,  A. M. "Export intensity and its effect on women's employment." Kyklos 76.4 (2023): 676-704.}

_{Read More}

_{We consider how fears of model misspecification on the part of the planner and/or the households affect welfare gains from optimal macroprudential taxes in an economy with occasionally binding collateral constraints. In this setup, the decentralized equilibrium may differ from the social planner's equilibrium both because of the pecuniary externalities associated with the collateral constraint and because of the paternalistic imposition of the planner's beliefs when designing policy. When robust agents have doubts about the model, they create endogenous worst-case beliefs by assigning a high probability to low-utility events. The ratio of worst-case beliefs of the planner over the household's captures the degree of paternalism. We show that this novel channel could render the directions of welfare gains from a policy intervention ambiguous. However, our quantitative results suggest that doubts about the model need to be large to make a “laissez-faire regime” better than an intervention regime.}

_{Citation -Fan, R. Y., Lederman, D., Nguyen, H., & Rojas, C. J "Calamities, debt, and growth in developing countries." IMF Economic Review (2023): 1-21.}

_{Read More}

_{We consider how fears of model misspecification on the part of the planner and/or the households affect welfare gains from optimal macroprudential taxes in an economy with occasionally binding collateral constraints. In this setup, the decentralized equilibrium may differ from the social planner's equilibrium both because of the pecuniary externalities associated with the collateral constraint and because of the paternalistic imposition of the planner's beliefs when designing policy. When robust agents have doubts about the model, they create endogenous worst-case beliefs by assigning a high probability to low-utility events. The ratio of worst-case beliefs of the planner over the household's captures the degree of paternalism. We show that this novel channel could render the directions of welfare gains from a policy intervention ambiguous. However, our quantitative results suggest that doubts about the model need to be large to make a “laissez-faire regime” better than an intervention regime.}

_{Citation - Bennett, Federico, Giselle Montamat, & Francisco Roch. "Robust optimal macroprudential policy." Journal of International Economics 141 (2023): 103714.}

_{Read More}

_{Studies have noted that output per worker varies enormously across countries. Using firm-level survey data, the present paper contributes to the related literature by analyzing difference in labor productivity between firms in 22 upper middle-income and 11 high-income countries. Labor productivity in upper-middle-income countries is about 57.5% lower than in high-income countries. The Oaxaca-Blinder decomposition analysis of the productivity gap reveals that the gap is somewhat larger due to differences in the level of contributory factors (endowment effect) than due to differences in the returns to such factors (structural effect). That is, 55.2% of the productivity gap is due to endowment effect and the remaining 44.8% is due to structural effect. The biggest contributors via the endowment effect include tertiary education attainment, law and order, and quality management. Factors that contribute most via the structural effect include secondary education attainment, market size, and law and order. Thus, our results underline the importance of human capital, institutions and market size for the upper middle-income countries aspiring to become high-income countries.}

_{Citation - Galinato, G. I., Hyland, M., & Islam, A. M. (2022). Does corporate social responsibility benefit society? Evidence from Latin America. Emerging Markets Review, 53, 100944.}

_{Read More}

_{This article measures the impact of firms' declaration of Corporate Social Responsibility (CSR) on education and environmental quality. We use 2006 data from the World Bank Enterprise Surveys, the sub-national Human Development Index and the World Health Organization which covers 10 countries in Latin America. We estimate Instrumental Variables regression models. We find that CSR declaration increases the probability of adopting community programs leading to a small, but significant, positive effect on education at the subnational level. Also, CSR declaration has no significant impact on our pollution measure, particulate matter, even when CSR increases the probability of adopting environmental programs.}

_{Citation -Galinato, Gregmar I., Marie Hyland, and Asif M. Islam. "Does corporate social responsibility benefit society? Evidence from Latin America." Emerging Markets Review 53 (2022): 100944.}

_{Read More}

_{This article contributes to better understanding firms’ behavior in the presence of gender discriminatory laws and its linkages with labor market outcomes for women in a developing country setting. Using data collected through the World Bank Enterprise Surveys in the Democratic Republic of Congo, the study documents the existence of nonnegligible employer discrimination in the presence of discriminatory laws. Interestingly, discriminatory behaviors, and the related limitations in women’s autonomy, are more pervasive outside the capital city, Kinshasa, which suggests that differences in enforcement and social norms may be at play. The study also finds that, in those firms that do not enforce discriminatory laws, women benefit from better labor market outcomes, in terms of their representation among the upper echelons of management and their participation in the overall workforce. The positive relationship between nondiscriminatory behaviors and female employment is particularly strong in the manufacturing sector}

_{Citation - Hyland, M., Islam, A. M., and Muzi, S. "Firms’ Behavior Under Discriminatory Laws and Women’s Employment in the Democratic Republic of Congo." Feminist Economics 29.1 (2023): 70-96.}

_{Read More}

_{This paper examines the Arab Republic of Egypt's labor market transition dynamics post—Arab Spring based on the two most recent rounds of the Egypt Labor Market Panel Survey conducted in 2012 and 2018. In addition to providing disaggregated-level analysis by examining labor market transitions by gender, education, and age groups, the paper provides a cross-country, cross-regional perspective by comparing Egypt's labor market transitions with Mexico's, relying on data from the Encuesta Nacional de Ocupación y Empleo. To match the span of Mexico's transitions (which are measured over a one-year period) and Egypt's (which are measured over six years), the analysis uses Monte Carlo simulations of repeated discrete-time Markov chains. Based on these results, the Egyptian labor market appears to be highly rigid compared to the Mexican labor market, which instead shows a large degree of dynamism regardless of individual initial labor market states at baseline. Auxiliary regression analyses focusing on transitions to and from the dominant absorbing labor market states in Egypt—public sector employment for both genders, nonparticipation for women, and the informal sector for men—show that having a post-secondary education is associated with a lower probability of remaining out of the labor force for women who were already out of the labor force at baseline, while being married at baseline is found to be a significant predictor for women to stay out of the labor force if they were already so. Among men, the better educated are found to be more likely to secure formal employment, be it in the public or private sector, and are more likely to keep their public formal jobs once they secure them.}

_{Citation - Deng, J., et al. "Labor Market Transitions in Egypt Post-Arab Spring (Working Paper). Washington, DC: World Bank." (2022).}

_{Read More}

_{This study develops a measure of firm-level credit constraints by leveraging refinements in survey instruments for a widely used database. Using data on more than 65,000 firms across 109 economies, the study uncovers several insights. Around 30 percent of firms in the formal private sector are credit constrained. Firms that are credit-constrained tend to be smaller and negatively correlated with performance. The more developed the economy, the lower the share of credit-constrained firms. One striking finding is that 52 percent of firms do not apply for loans as they have sufficient credit. For some economies, this may be more indicative of poor opportunities for the expansion of firms and thus the lack of demand for credit. The findings suggest that for policies that improve access to credit to be effective, they should go hand in hand with interventions that provide opportunities for firms to expand.}

_{Policy Research Working Paper Report Number WPS10502}

_{Citation:  Islam,Asif Mohammed; Rodriguez Meza,Jorge Luis.How Prevalent Are Credit-Constrained Firms in the Formal Private Sector ? Evidence Using Global Surveys (English). Policy Research working paper ; no. WPS 10502 Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/099344506262340821/IDU00bc67ef80419304a7c083000a12355f3b316}

_{Read More}

_{This paper investigates the impact of civil conflicts on international trade. First, it quantifies how much civil conflicts suppress trade and explores the underlying mechanisms within a structural gravity model. Trade openness can lower the risk of civil conflicts because expected gains from international trade could discourage both governments and rebels from igniting conflicts (deterrence mechanism). Alternatively, international trade could act as a substitute for internal trade, lowering the opportunity cost of civil conflicts (insurance mechanism). This paper empirically investigates both mechanisms. Second, the paper investigates the spillovers of civil conflicts on trade for neighboring countries uninvolved in the conflict. Third, it examines if the impact of civil conflicts is contemporaneous or persistent through time. The paper uses data on violent civil conflicts and international and intra-national trade data from 142 countries to estimate a structural gravity trade model for 1989–2006. The results show that civil conflicts in a country can reduce its trade with other countries by over 40 percent. Spillovers of neighboring civil conflicts are also highly detrimental. Finally, the impact of civil conflicts is highly persistent through time and increases with the duration of the conflict.}

_{Policy Research Working Paper 10465}

_{Citation - “Assem, Hoda. 2023. Trade and Civil Conflicts. Policy Research Working Papers; 10465. © World Bank, Washington, DC. http://hdl.handle.net/10986/39904 License: CC BY 3.0 IGO.”}

_{Read More}

_{This paper examines the role of a country’s data transparency in explaining gross domestic product growth forecast errors. It reports four sets of results that have not been previously reported in the existing literature. First, forecast errors—the difference between forecasted and realized gross domestic product growth—are large. Globally, between 2010 and 2020, the average same-year forecast error was 1.3 percentage points for the World Bank’s forecasts published in January of each year, and 1.5 percentage points for the International Monetary Fund’s January forecasts. Second, the Middle East and North Africa region has the largest forecast errors compared to other regions. Third, data capacity and transparency significantly explain forecast errors. On average, an improvement in a country’s Statistical Capacity Index, a measure of data capacity and transparency, is associated with a decline in absolute forecast errors. A one standard deviation increase in the log of the Statistical Capacity Index is associated with a decline in absolute forecast errors by 0.44 percentage point for World Bank forecasts and 0.49 percentage point for International Monetary Fund forecasts. The results are robust to a battery of control variables and robustness checks. Fourth, the role of the overall data ecosystem, not just those elements related to gross domestic product growth forecasting, is important for the accuracy of gross domestic product growth forecasts. Finally, gross domestic product growth forecasts from the World Bank are more accurate and less optimistic than those from the International Monetary Fund and the private sector.}

_{Policy Research Working Paper 10406}

_{Citation : “Gatti, Roberta; Lederman, Daniel; Islam, Asif M.; Nguyen, Ha; Lotfi, Rana; Mousa, Mennatallah Emam. 2023. Data Transparency and GDP Growth Forecast Errors. Policy Research Working Papers; 10406. © World Bank, Washington, DC. http://hdl.handle.net/10986/39714 License: CC BY 3.0 IGO.”}

_{Read More}

_{This paper examines the impact of changes in the sentiment of migration-related news in destination countries on migrants’ movements’ choices inLibya, the most important gateway to Europe. Using data on news from alldestination countries and geo-localized data on migrants in all the IOM-FlowMonitoring Points (FMPs) in Libya, we show that a more negative tone of thenews in the migrants’ preferred destination countries increases the length oftheir stay in Libya, slowing down their migration journey. The effect is largerfor migrants coming from Western African countries, and located in FMPsthat are closer to departure points to Europe, and in which it is more likelythat they have access to the news. Importantly, the worsening in the tone ofthe news has no effect if the tone of migration-related news in the preferreddestination countries is already mostly negative, it does not make migrantsto return to their origin country, but it induces them to switch to anotherdestination country.} 

_{Policy Research Working Paper 10346}

_{Read More}

_{This paper examines the impact of changes in the sentiment of migration-related news in destination countries on migrants’ movements’ choices inLibya, the most important gateway to Europe. Using data on news from alldestination countries and geo-localized data on migrants in all the IOM-FlowMonitoring Points (FMPs) in Libya, we show that a more negative tone of thenews in the migrants’ preferred destination countries increases the length oftheir stay in Libya, slowing down their migration journey. The effect is largerfor migrants coming from Western African countries, and located in FMPsthat are closer to departure points to Europe, and in which it is more likelythat they have access to the news. Importantly, the worsening in the tone ofthe news has no effect if the tone of migration-related news in the preferreddestination countries is already mostly negative, it does not make migrantsto return to their origin country, but it induces them to switch to anotherdestination country}

_{Policy Research Working Paper 10288}

_{Citation - “Deng, J., Elmallakh, N., Flabbi, L., Gatti, Roberta. 2023. Returns to Education in the Marriage Market: Bride Price and School Reform in Egypt. Policy Research Working Papers; 10288. © World Bank. http://hdl.handle.net/10986/39822 License: CC BY 3.0 IGO.”}

_{Read More}

_{The relationship between paid maternity leave and the share of female workers in registered private firms is analyzed using firm-level survey data for 111 developing and emerging countries. Theoretically, the relationship can be either positive or negative. Higher maternity leave raises the cost of female workers to the employer, discouraging female employment. However, higher maternity leave encourages more females to enter the labor market, implying greater female employment. The results show that the latter effect dominates. That is, a positive, large, and statistically significant relationship is found between maternity leave and female employment. A conservative baseline estimate is that the share of female workers in a firm increases by 2.08 percentage points for each log point increase in the number of days of paid maternity leave. Alternatively, an increase in the number of days of paid maternity leave from its smallest to highest value (0 to 410 days) increases the share of female workers by 12.5 percentage points. The positive relationship between female workers and maternity leave is much larger when maternity leave is fully funded by the government than when paid for by the employer, and in countries where there is a higher share of females in the childbearing age group of 20–29 years. These heterogeneities highlight channels that accentuate the relationship, thereby serving as checks against endogeneity concerns with the estimation. The distributional implications of paid maternity leave are also analyzed by estimating its impact on low-skilled versus high-skilled employment. Important policy implications of the findings are discussed}

_{Policy Research Working Paper 10288}

_{Citation - “Amin, Mohammad; Islam, Asif M.. 2022. The Impact of Paid Maternity Leave on Women’s Employment: Evidence Using Firm-Level Survey Data from Developing Countries. Policy Research Working Papers;10188. © World Bank, Washington, DC. http://hdl.handle.net/10986/38038 License: CC BY 3.0 IGO.”}

_{Read More}