World Bank Open Knowledge Repository

New electronic publications from the World Bank Open Knowledge Repository for the month of September 2020.

1.   Fiscal Rules and Economic Size in Latin America and the Caribbean

Following the collapse of commodity prices in Latin America and the Caribbean (LAC) in 2014-15, many countries in the region were unable to cushion the impact of the shock in order to experience a more gradual adjustment, to a large extent because they had not built adequate fiscal buffers during the commodities' windfall from 2010-14. Many LAC countries entered 2020 and the COVID-19 crisis in an even more difficult position, with rising debt and limited fiscal space to smooth the negative impacts of the pandemic and adequately support their economies. Fiscal policy in most LAC countries has been procyclical. Public expenditure and debt levels have expanded in good times and contracted in severe downswings due to insufficient fiscal buffers, making crises deeper. Fiscal rules represent a promising policy option for these and other economies.

2.   Going Viral: COVID-19 and the Accelerated Transformation of Jobs in Latin America and the Caribbean

The economic impact of COVID-19 is unprecedented in size and scope. It has quickly evolved from a health emergency into an employment crisis. It also has far-reaching implications for workers beyond the immediate employment effects, as it most likely has accelerated the transformation process of jobs that had already started in the region and the world. This book focuses on three important pre-pandemic trends observed in the region-namely, premature deindustrialization, servicification of the economy, and task automation-that were significantly changing the labor market landscape in the region and that have been accelerated by the crisis. While there is still uncertainty about the economic impacts of Covid-19, policymakers need to start planning for a rapidly evolving future that will come sooner than expected. A strong focus on productivity, technology development and adoption, and training in relevant skills will be key to adapting and taking advantage of the new opportunities in the post-pandemic world.

3.   Making It Big: Why Developing Countries Need More Large Firms

Economic and social progress requires a diverse ecosystem of firms that play complementary roles. Making It Big: Why Developing Countries Need More Large Firms constitutes one of the most up-to-date assessments of how large firms are created in low- and middle-income countries and their role in development. It argues that large firms advance a range of development objectives in ways that other firms do not: large firms are more likely to innovate, export, and offer training and are more likely to adopt international standards of quality, among other contributions. Their particularities are closely associated with productivity advantages and translate into improved outcomes not only for their owners but also for their workers and for smaller enterprises in their value chains. The challenge for economic development, however, is that production does not reach economic scale in low- and middle-income countries.

4.   Water in the Balance: The Economic Impacts of Climate Change and Water Scarcity in the Middle East

Innovations in water management and irrigated agriculture powered water-scarce Middle Eastern economies for millennia. However, as water becomes scarcer because of population growth and economic development, and even more erratic because of climate change, the region's water security is coming under increasing threat. This report applies an economic model, the Global Trade Analysis Project (GTAP) computable general equilibrium model, to assess the economic impacts of water scarcity for six Middle Eastern countries and also to examine how water-use efficiency improvements and trade can mitigate these impacts. A 20 percent reduction in water supply could decrease GDP by up to 10 percent, compared to 2016 levels. Furthermore, increased water scarcity could reduce labor demand by up to 12 percent and lead to significant land-use changes, including loss of beneficial hydrological services. The report emphasizes how the growing dependence on shared water resources reinforces the need to manage water across boundaries.

5.   World Bank East Asia and Pacific Economic Update, October 2020: From Containment to Recovery

COVID-19 has delivered a triple shock to the developing East Asia and Pacific (EAP) region: the pandemic itself, the economic impact of containment measures, and reverberations from the global recession. Without action on multiple fronts, the pandemic could reduce regional growth over the next decade by 1 percentage point per year, with the greatest impacts being felt by poor households, because of lower levels of access to healthcare, education, jobs, and finance. Why were many economies in the region able to contain the disease while some others still struggle? How have these shocks affected economic activity and poverty in different countries? What are the prospects for recovery and how will longer-term growth be affected across the region? Is there a tension between containing the disease and providing relief today and promoting recovery and growth tomorrow? These key questions are addressed in the World Bank's October 2020 EAP Economic Update.