Intervention Summary
Title: Growth and Labour Markets in Low Income Countries (LICs)
What support will the UK provide?
DFID will provide £10 million over 6 years for this project for the period from May 2011 to June 2016.
Why is UK support required?
What need are we trying to address?
A recent broad based consultation exercise identified research on labour markets in Low Income
Countries (LICs) as a significant gap. The consultation noted that research on labour markets is mainly
focused on more advanced economies with the evidence base in Low Income Countries (LICs) weak.
Due to the different stage in economic development, the structure of the economy and the size of the
informal sector research policy findings in middle income and developed economies are not readily
transferable to LICs. The consultations concluded that more research is needed to determine the
appropriate theoretical frameworks, factors, institutions and policies that facilitate labour market
outcomes in LICs, as well as identifying the country characteristics that determine the effectiveness of
alternative policies.
Labour is a key universal asset of the poor in LICs. The existence of a large informal sector suggests
that labour is under-utilized in LICs, with implications for aggregate productivity (growth), poverty and
inequality. A better understanding of how labour markets function and appropriate policies is critical
both to facilitate growth and to ensure the benefits are shared. Demographics (a rising young
population) in LICs will make it increasingly important politically, socially and economically to ensure
that a growing number of people are able to benefit from growth through the labour market. We need
better evidence on how to support labour markets to work effectively and deliver an increasing number
of good quality better paid jobs.
How will we tackle the problem/gap?
DFID will support a new and substantial (£10m) programme of research on labour markets in LICs. The
programme will bring together policy makers and researchers with the aim of supporting evidence
based policy. DFID support for research in this area will help to encourage an increased focus on
labour markets in LICs among the academic community and policy makers. The development of better
data sets will support long term research work in this area.
The appraisal considered various options for filling this critical research gap. The preferred option is for
DFID to work in partnership with the leading global research and policy think tank on labour economics
– The institute for the study of Labour (IZA). As a non-profit global leader on labour market research,
IZA provides scientifically founded advice to political and corporate decision makers that is evidencebased and independent of political agendas. IZA’s stated aim is to find sustainable solutions for the
problems in today’s labour markets and to help actively shape tomorrow’s labour economics. The
institute works closely with other prestigious research centres and universities on national, European
and international levels, with access to the largest network of labour economists worldwide.
By tapping into the IZA network, DFID will be able to gain access to a unique network of labour
economist and policy makers through a well established and sustainable network. The impact of the
programme is likely to be sustained through the IZA network and improved data sets beyond the
programmes lifetime.
What are the expected results?
The programme will deliver a significant new body of evidence on labour markets that will help shape
labour market policy in LICs. It is expected that around 30 new research projects on labour markets in
LICs will be supported with subsequent academic journal articles, synthesis reports, policy briefs and
books. The research programme will both respond to and influence labour market policy as
researchers and policy makers are brought together to determine key areas for research and to
discuss and apply the research findings.
The programme will focus on 5 key research areas in LICs including work on:





Growth and labour market outcomes
Labour market institutions
Active labour market policies
Skills
Gender
Data on labour markets in LICs will also be assessed, collected and made accessible to researchers
across these five areas. In the longer term, the data gathering exercise is expected to generate further
investigation, analysis and research work on labour markets in LICs as the data is made freely
available and accessible to researchers beyond the lifetime of the programme.
Importantly, a new labour markets research programme with a unique focus on LICs will send an
important message to the research community.
Business Case for: Growth and labour markets in Low Income Countries
(LICs)
Strategic Case
A. Context and need for DFID intervention
Why growth and labour markets in LICs?
DFID’s primary objective is focused on the achievement of the MDGs, including to reduce by half
those living in extreme poverty and hunger. A growing body of empirical work emphasises the
importance and contribution of economic growth to poverty reduction outcomes1 in developing
countries. Kraay and Dollar (2006) highlighted that growth is more important to poverty reduction
than previously thought and concludes that growth in average incomes accounts for approximately
80% of absolute poverty reduction in the long-run. Growth is a priority area in DFID’s structural
reform plan.
The Growth Report of the Commission on Growth and Development (20082) also concludes that ‘It is
impossible for poor countries to lift large populations out of poverty without growth’. Furthermore, the
Commission noted that while we have an understanding of the basic ingredients that make up a
successful growth strategy, and importantly, we have an understanding of what makes a bad strategy
we need to deepen our understanding, in particular on how to apply strategies and turn them into
practical actions that are sensitive to context. This is particularly evident in Low Income Countries
(LICs) which have received less attention from the research community with much of the research
work focused on middle and higher income developing countries. Part of the explanation for this lack
of empirical work is grounded in the lack of quality data on LICs making it difficult to undertake
research work. This is compounded by the wider research incentive structures that are somewhat
biased against work in LICs. DFID’s niche in growth research is research on LICs, precisely where
the evidence base is weakest and where we concentrate the majority of our development spending3.
Within the LIC growth research area, research on labour markets is a priority. In many LICs the
informal sector is dominant with a large proportion of the workforce engaged in low-wage, lowproductivity occupations. With minimal capital requirements and low barriers to entry and exit, selfemployment provides an alternative to more conventional employment. Labour is typically underutilised with implications for aggregate productivity, poverty and inequality. It also raises the
possibility that workers in the informal sector will be left behind by economic growth and policy
initiatives which primarily benefit those in the salaried formal sector.
Moreover, the Commission on Growth and Development (2008) noted that ‘in a significant number of
LICs the demographics run directly counter to the global trend: high fertility; reduced longevity in
some cases, due to diseases like HIV/AIDS; and an increasingly youthful population’. This raises the
danger of widespread youth unemployment and associated unrest which is being exacerbated by the
current macroeconomic environment following the recent financial crisis. To tackle this challenge
LICs will need to grow faster and in a way that creates good jobs. However, we know very little about
how growth and labour markets interact in LICs4. A good understanding of the informal sector and
implications for jobs is critical in this respect. The recent broad-based consultation exercise (see
1
Kray and Dollar (2006), ‘When is growth pro-poor? Evidence from a panel of countries’, Journal of Development Economics,
80, 2006, 198-227.
2 The Growth Report 2008. Commission for Growth and Development. Growthcommission.org
3
In 2009/2010, DFID expenditure was concentrated in a relatively small group of countries comprising India, Bangladesh,
Pakistan, Afghanistan, Vietnam and a large number of countries of Sub-Saharan Africa, almost all classified as least developed
(Statistics for International Development 2005-2009).
4 Temple and Satchi 2006 Growth and Labour Markets in Developing countries. CEPR Discussion paper 5515.
annex 2) confirmed the need for further research work on growth and labour markets and noted that
research in this area has mainly focused on more advanced economies, while investigation into
these issues from a low income perspective has been limited.
The programme targets an area that is of critical importance to LICs, the development community
and to DFID. The programme directly supports DFID’s structural reform plan priorities of ‘wealth
creation’ and ‘private sector development’. The Research Strategy 2008-2013 also commits DFID to
‘improve understanding of processes and policies to support economic growth’. The programme
focuses on labour market research and data collection in LICs which will support delivery of
Research and Evidence Division’s (RED) three broad objectives – 1) capacity to do and use
research; 2) new knowledge to help shape policy; and 3) evidence and new research are used for
better decision-making.
Why DFID?
There are four key ways in which DFID growth research adds value. Firstly, DFID has strong
incentives to deliver research that has explicit relevance to policy and, through its country offices, can
work to ensure evidence is used in decision-making. Secondly, in comparison to other institutions,
DFID has strong incentives to focus research on LICs, an area that is significantly under-resourced.
Thirdly, DFID can provide growth research at scale providing a basis for research programmes that
are coherent and deliver long-term investments in, for example, data collection and capacity building.
Finally, DFID growth research establishes greater diversity and competition in provision of research
and advice on growth to developing country policy-makers.
DFID research work therefore complements much of the growth research work done by others such
as the World Bank Group and the International Monetary Fund (who have a core mandate to support
economic development in the developing world and global financial and macroeconomic stability), UK
academia (who are partly financed by research councils such as the Economic and Social Research
Council (ESRC)) and others such as the International Growth Centre (IGC) who undertake research
that it is directly responsive to shorter term policy demands in a number of key target countries.
Labour markets in LICs – DFID consultations
To scope out and determine the key policy and research issues, DFID engaged on a wide ranging
consultation on labour markets in LICs in the autumn of 2010. Using an on-line discussion forum
followed by a roundtable conference DFID engaged with labour market academics and policy makers
from across the world in order to determine the labour market research agenda in LICs. The
discussion topics were each led by a leading academic in the corresponding areas. The key outputs
from this consultation are included in annex 2 of this document.
Why labour market research in LICs?
Labour is one of the key and universal assets the poor have access to in LICs. The existence of a
large informal sector suggests that labour is under-utilised in LICs, with implications for aggregate
productivity, poverty and inequality. Understanding labour markets in LICs is critical both to facilitate
growth and ensure the benefits are shared.
Labour markets matter. A person’s economic wellbeing is strongly influenced by how much
individuals earn for their labour and any cash they receive from the government, community and
family. Even with donor assistance, developing country governments are not able to make a
significant dent on poverty through government spending, and families are too poor to make large
transfers to the less-advantaged. Creating more and better earning opportunities is the only option
available (Fields 20085)
The evidence above and discussion with researchers and practitioners throughout the consultations6
highlight the gap in knowledge and research on growth and labour markets in LICs. There is a risk
that without a good understanding of labour market and informal sector interactions in LICs poor
policy options could be undertaken which could negatively impact on growth and the benefits of
growth. The demographics in LICs, with a rising young population, will make it increasingly important
both politically and economically to ensure that people benefit from growth. Labour market policies
will have an important role to play. We need better evidence on which to base these policies.
Lastly, and importantly, the incentives for research work on LICs are also weak.
1. Existing theoretical frameworks on labour markets do not fully reflect the implications of the
informal sector in labour market models. This is of critical importance to LICs considering that
the informal sector accounts for up to 80% of the labour force. Leading global academics
identified this as a significant constraint to labour market analysis in LICs, highlighting that
policies in more advanced economies may not be readily transferable or appropriate in LICs
due to informality issues7.
2. The academic incentives to undertake research work on LICs is not readily evident with top
journals skewed towards developed country analysis. The current global downturn and the
concern over jobs, particularly in advanced economies, may well strengthen the focus on
developed country labour analysis.
3. Data availability is restricting the ability of the research community to undertake work on
labour markets in LICs. Quality data in a format that is readily available to the research
community is needed.
The development of a new and substantial programme of research on labour markets in LICs is a key
priority in order to answer key policy questions that are emerging now and will emerge over the
coming years. A DFID LIC labour market programme has the potential to raise the profile and shift
the incentives for undertaking work on labour markets in LICs.
Why is it feasible for DFID to intervene?
DFID have committed to ensuring that policy is based on the best available evidence. As one of the
lead donors in development research we are well placed to fill the gap identified by the consultation
exercise. To effectively deliver this programme, DFID will need to ensure it is able to access the best
available researchers on the subject, to ensure quality and excellence in the research and analysis
and provide an effective avenue for this work to influence policy makers. These factors will be critical
in deciding the appropriate avenue for delivering the research programme.
What difference intervening will make to reducing poverty
By improving the evidence base for labour market polices and effectively communicating this
evidence to policy makers in an interactive manner, the programme will help support more efficient
and effective labour markets in LICs. This in turn will support an environment whereby poor people
are better able to identify and take up good jobs. Good jobs are one of the key means of the poor
benefiting from growth and one of the main ways they can raise themselves out of poverty. Over time
the project will have a direct impact on poor people in LICs. To achieve this outcome the programme
5
Final paper published as Fields, G. S. (in press). Segmented labour market models in developing countries. In H. Kincaid and
D. Ross (Eds.) The Oxford handbook of the philosophy of economic science. Oxford: Oxford University Press .
6 See Annex 2B of this document – Labour market Roundtable discussions December 2010.
7 See Annex 2B of this document – Labour market Roundtable discussions December 2010.
will need to deliver high quality research and in a manner that is accessible and useable by policy
makers. The development of improved data on labour markets in LICs will further support research
and understanding beyond the life of the project.
B. Impact and Outcome
The Impact (Goal) of the project is: Poverty reduction and employment growth in LICs. The Outcome
(Purpose) is: High-quality evidence based policymaking in LICs.
Appraisal Case
A. Determining Critical Success Criteria (CSC)
Each CSC is weighted 1 to 5, where 1 is least important and 5 is most important based on the
relative importance of each criterion to the success of the intervention.
CSC
1
Description
Weighting (1-5)
High Quality Research and data gathering - undertaken by 5
leading academics, peer reviewed and published
1) global access to leading academics in the field
2) independent peer reviewed selection process
3) research outputs subject to peer review and
publication
2
Engagement with policy makers – Research areas and 4
ideas responsive to policy demands. Research outputs
effectively communicated and linked into policy networks
3
Synthesis, Dissemination and Transparency – Research 4
synthesised, research findings and data is made publicly
available and accessible
4
2
Capacity Building – Strong north-south networks and links
builds capacity of local institutions, researchers and policy
makers
Evidence underpinning the CSC
A large international literature around publicly-funded research, private sector R&D and innovation
exists and reveals a consensus on some of the key characteristics of influential cost-effective
research. The characteristics are identified below and underpin the selection of the CSC above.

The quality of the research is paramount in terms of assessing the economic returns to
research. The returns are further increased if the time lag between research and
implementation can be reduced8.

Early involvement of potential users of the research increases the likelihood that research
results will be utilised. The involvement of users throughout the research process helps to
create a cadre of sophisticated research users who are not only able to make effective use of
the research, but can more clearly specify what their needs are in the next cycle of research
procurement. The research providers, for their part, are better able to generate research
targeted to the users' needs.
8 RAND Europe, 2008 . Medical Research: What’s It Worth? Estimating the Economic Benefits from Medical Research in the UK. M
Buxton, S Hanney, S Morris, L Sundmacher, J Mestre-Ferranditz, M Garau, J Sussex, J Grant, S Ismail, E Nason, S Wooding, S Kapur

It is important to identify the primary users of a particular research project from its inception,
and to acknowledge that the primary users vary from project to project.

"Investing in Innovation", noted that a more forward-looking and strategic approach to
research policy- such as horizon scanning and expert supervision – can sit alongside and
complement “end-user knows best” approaches9.

Dissemination of research findings is not sufficient to ensure that they are used. Experience
has demonstrated the critical importance of complementing dissemination with ‘pull’ or ‘pullthrough’ factors, which are preferably close to customers and markets. (The literature on
private sector innovation emphasises ‘diffusion’ and rarely speaks of ‘dissemination’)10.

Innovation in the public sector requires high quality risk management and safe spaces in
which to test and develop promising ideas. Methods which work backwards from desired
outcomes rather than forwards from existing policies, practices and institutions often generate
a much wider range of potential options.

There is a close link between a country’s capability to do and to use research11.
The evidence above underpins the rationale for the Critical Selection Criteria.
B. Feasible options
The aim of the programme is to strengthen the evidence base and improve data on the labour
markets in LICs. Over the years RED has developed a number of established mechanisms for
delivering research and evidence on new issues. This appraisal considers five possible options
identified below. These are:
1.
2.
3.
4.
5.
Proposed Option (IZA): Partnership with the Institute for the Study of Labour (IZA)
A stand alone, DFID Labour markets programme delivered through an RPC
Work through a Research Council such as ESRC
Direct procurement with DFID management
Counterfactual – do nothing
1. IZA Partnership: The first option is to partner with a global network of researchers and policy
makers. Through a partnership such as this DFID would have access t a global network of
researchers and policy makers to help identify and undertake research on a competitive basis.
Possible partners could be the International Growth Centre (IGC), the Centre for Economic Policy, or
the Institute for the study of Labour (IZA). While the IGC and CEPR have effective research networks
they do not have the specialist labour market network that IZA has established over the last decade
or so. Moreover, DFID have an existing relationship with the IGC and is exploring the establishment
of a partnership with CEPR on PSD. By partnering with a different network DFID is able to establish a
degree of competition between partners helping to incentivise performance.
IZA is the premier global research and policy think tank on labour economics. As a non-profit
organisation IZA is independent of political agendas and short-term commissioned research. IZA’s
focus on urgent labour market problems of our time, its private funding and its international
orientation make IZA a globally unique research institution. The high quality of its research methods
9
Investing in Innovation: A Strategy for Science, Engineering and Technology, HM Stationery Office, 2002. DTI, HM Treasury and
Department for Skills and Education.
10 G. Mulgan & D. Albury 2003 “Innovation in the Public Sector”, Cabinet Office working paper, London.
11 DFID Research Strategy, 2008-13, DFID 2008.
and findings has added to IZA’s strong reputation in the scientific community. As a special service for
labour economists worldwide, the International Data Service Center (IDSC) of IZA offers remote
access to the most relevant datasets in labour economics.
The main objectives of IZA are to pursue original and international competitive research activities in
all fields of labour economics and to transfer scientific results into practical concepts for policymakers
and business leaders. A team of IZA staff researchers works together closely with the group of IZA
Research Fellows, consisting of almost 1,000 renowned researchers worldwide. This combination
places IZA at the cutting edge of international labour economics. The broad spectrum of research on
a consistently high level has established IZA as a member of the international scientific elite. As
such, IZA serves as one of the primary contacts for policy-oriented labour market research for
governments and renowned institutions around the world. Among those are for example the World
Bank, the European Commission, the European Parliament, various national governments and
international foundations.
IZA’s network moreover includes policy makers and business leaders. The institute has established
an exclusive circle of IZA Policy Fellows, with which the institute cooperates in a unique way. This
network of influential representatives from business, politics, society and the media complements the
academic network of IZA Research Fellows. By cooperating actively with these decision-makers
beyond purely scientific matters, IZA aims at satisfying the increasing demand for policy advice and
improving the communication of these services to the public
The proposed option is to work in partnership with the Institute for the Study of Labour (IZA). The
partnership agreement would establish a management framework through a Memorandum of
Understanding (MoU) for competitively procuring research through IZA’s extensive network of labour
economists. The programme would establish a new research area on labour markets with a focus on
Low Income Countries (LICs). The LICs programme would cut across and complement the seven
existing IZA programmes and look to bring together research and policy makers. DFID would achieve
a high profile for LIC labour market research through the development of a new DFID/IZA LIC
programme.
2. Stand-alone RPC programme: DFID has identified labour market research as a critical area for
investment. As this is an investment priority, an alternative approach could be to commission a standalone project through a Research Programme Consortium (RPC). DFID have used RPCs to meet its
broad objectives of quality research, coherence of research, research uptake and capacity building.
While no doubt achieving a response from interested and high quality academics, the RPC approach
does run the risk that the RPC members could capture the majority of the research funds with
research projects not necessarily subject to continued competition during the lifetime of the
programme. While this might be suitable for some forms of research and quality research might well
be the outcome, DFID experience suggests that this is not necessarily the case.
One mechanism for helping support quality is to have an ongoing competitive and rigorous selection
process for research grants. It is not clear that the incentives within an RPC would necessarily
support this. Moreover, while an RPC would no doubt be able to establish a far-reaching and
effective network with researchers and policy makers, there is a significant risk that this would not be
achieved or sustained after the lifetime of the programme. Lastly, data is an important part of the
programme. The development of better data which is made freely available and accessible to the
international research community is an important part of a successful programme. An RPC would
need to establish an accessible and sustainable solution beyond the lifetime of the programme.
3. ESRC: DFID has an ongoing research programme with the ESRC. One possible option is to
extend the scope of this programme to include a labour market component. While ESRC has a well
developed procurement system and could procure competitively there is a risk that they will struggle
to accommodate an additional programme of this size from DFID. Furthermore, while ESRC would
be able to recruit labour market experts, it is not clear whether they would be able to deliver the
breadth and depth of network we are looking for in the programme or provide the coherent and
intellectual leadership function we require.
4. Direct procurement DFID management: As an alternative to an RPC model, DFID could directly
procure global experts to undertake research on labour markets. A network of experts has been
identified during the online consultations and DFID could competitively procure from this network
through open advertisement. Intellectual leadership would be retained within DFID but would need to
be strengthened with the appointment of a programme director. Moreover, DFID would require a
significant increase in its administrative capacity if it were to be able to effectively manage a
programme of this nature.
5. Counterfactual: Without DFID intervening, it is unlikely that a new and focused research
programme on LICs would be established. While other institutions such as the World Bank are
interested in supporting research on labour markets in developing countries, there is not an explicit
focus on LICs. Without a substantial DFID intervention it is unlikely that the incentives will be
significantly shifted in favour of labour market research in LICs.
Conclusion
There is a strong economic case for investing in labour market research in LICs which is further
supported in Section C below. The IZA option appears to be the most appropriate, would support a
global shift in labour market research in LICs and is the most cost-effective option for delivering the
desired outputs and impact. The analysis and rationale underpinning this is discussed further in
sections C and D. We set out below how the preferred option will work and provide a rating of the
evidence that underpins it and associated climate/environment impacts.
Climate and Environment Assessment
This programme carries the opportunity to look into the issues and opportunities for labour markets
associated with new forms of growth and economic activities associated with low carbon, climate
resilient and green development and growth. There are according to UNEP (Green Jobs: Towards
Decent Work in a Sustainable, Low-Carbon World, 2008) several emerging business areas offering
good to excellent potential for the labour market including development of clean technologies,
renewable energy generation, green buildings/retrofitting, small scale sustainable farming,
reforestation and organic farming, including for the informal sector. The wider push for businesses to
adopt greener production practices and processes is also an important factor for consideration. It is
crucial that the workforce in LICs is fully prepared to capture any opportunities arising from these new
developments and this programme is well placed to factor in the necessary analysis. It is important
that the impact of these new opportunities is factored into the research and analysis around the
establishment of labour market institutions, the labour market policies and skills development. The
benefits and opportunities arising from low carbon, climate resilient and green development must
therefore be factored into the entire programme as a cross-cutting issue.
Research carried out by this programme must ensure that it minimises carbon footprint. Researchers
and participants in the programme should ensure that the carbon footprint of all travel supported by
this programme should be minimised or offset where possible. All documents, reports and paper
outputs of research studies funded by the programme should be printed on paper made from
sustainably managed forests and/or recycled paper. Over time as the research impacts on policy it is
expected that there may well be positive climate and environmental impacts as the efficiency of
labour markets are improved in LICs. However, these impacts are likely to be long term and difficult
to observe.
How the proposed option will work:
DFID will work in partnership with the Institute for the Study of Labour (IZA) to deliver a new research
programme on Labour markets in LICs. The LIC programme will cut across IZA’s seven research
themes – (i) Evaluation of labour market programmes; (ii) Behavioural and personnel economics; (iii)
Migration; (iv) Labour markets and institutions; (v) Labour markets in emerging and transition
economies; (vi) The future of labour, and; (vii) Employment and development – and focus on 5 key
policy areas in LICs:





Growth and labour market outcomes
Labour market institutions
Active labour market policies
Skills
Gender
Data will also be a key point of focus throughout the programme. In addition to specific data
proposals, all research programmes on LICS will be required to ensure data is made freely available
to the IZA International Data Service Centre (IDSC). IZA IDSC offers remote access to the most
relevant data sets in labour economics as it is continually updated and refreshed. Management of
IDSC is a core part of IZA’s activities and will be sustained after the programme runs its course.
The LIC research programme will be under the guidance of a DFID/IZA LIC Director who will provide
intellectual leadership of the programme under the direction of a DFID/IZA programme management
group. IZA will procure the research competitively, advertising calls through their network and beyond
using an enhanced administrative systems and capacity. Selection of research proposals will be
under the guidance of an Independent Advisory Committee (IAC) according to the specified criteria
which include, among others, the desirability of developing north-south and south-south networks of
researchers and policy makers. All shortlisted proposals will be peer reviewed under the guidance of
the independent oversight committee.
The programme will also provide the opportunity to bring together researchers and policy makers
through conferences and similar events throughout the programme. The LIC Director will be
responsible for giving oversight to these events which will be organised using IZA administrative staff.
Throughout the programme, the LIC Director will look to ensure key institutions – including the World
Bank, ILO, EC and DFID - are informed and aware of activities and events.
The figure below outlines the theory of change rationale that underpins the programme.
Theory of Change
Labour markets and growth research in LICS
INPUT
Process (Activities)
Outputs
DFID funding of
£10m (£2m per
year for 5
years) for LIC
labour market
research and
data
development
 Under the guidance of an
independent steering
committee competitively
procure research across the
5 areas and data in LICs.
 Promote North-South and
South-South collaboration
in research
 Bring together researchers
and policy makers through
key conferences and events
to determine research
direction and debate
research findings
 Promote peer reviewed
research findings in quality
journals.
 Synthesise research
findings. Develop and
promote policy briefs.
 Provide ongoing access to
LIC labour markets data
through IDSC.
 High quality research
and briefing papers on
labour markets in LICs
 Better understanding
and knowledge of
labour markets and
growth issues in LICs
by north and south
researchers and policy
makers
 Better networking and
collaboration between
researchers and policy
makers in the north
and south on labour
markets in LICs
 Better and more
accessible data sets on
labour markets in LICs
Impact
(Goal)
High quality
evidence on labour
markets, jobs and
growth generated
and incorporated
into policy making by
LICs
Outcome (Purpose)
Improved data sets
and a stronger
evidence base on
labour markets, jobs
and growth in LICs
Evidence rating – Strong, Medium or Climate
change
and
environment
Limited
category (A, B, C, D)
1Strong
C: Low risk / opportunity
Partnership
 Strong evidence that there is a
 The climate and environment
with IZA
gap in research on labour
impact of the programme is likely
markets in LICs
to be minimal.
 Strong evidence that better
information on labour markets is
required by policy makers in
LICs
 Strong evidence that, as the
leading global think tank on
labour economics, IZA is the
Option
best placed institution to deliver
a step change in labour market
economics in LICs
C. Appraisal of options
The IZA option is the preferred option for delivering the desired impact in terms of value for money
and meeting the critical success criteria required to deliver impact. The expected benefits of this
investment are better labour market policies based on high quality research, evidence and data on
labour markets in LICs. The outputs of the programme will be targeted at LIC regional end-users and
other development actors able to use the evidence to improve policy making.
The underlying mechanism for evaluating the rate of return to research is a results chain that links
the research undertaken to a policy intervention/change/reform (or lack of such an
intervention/change/reform) and which then relates the policy intervention/change/reform to a
discernible outcome. Since it is necessary to quantify the benefits of the research in bringing about
policy change that then brings about a particular outcome, the outcome in question must be
amenable to measurement, at least in theory. The results chain, therefore, has three components –
the link between the research undertaken and the policy change (attribution), the link between the
policy change and the outcome (identification) and the quantification of the outcome itself
(measurement).
The calculation of the rate of return to research needs the following three questions to be addressed:
i) did the research influence policy thinking/decisions/processes (the attribution problem); ii) did the
policy intervention/change/reform lead to the observed outcome (the identification problem) and iii)
can the benefits of outcome(s) be quantified? (the measurement problem).
The different components of the results chain are shown in Figure 1. This figure shows the
transmission belt that links research producers to those who use it, and to those who are the ultimate
beneficiaries of the research. The figure also makes clear the various factors that may affect the
working of the chain, which may lead to difficulties both in attribution and identification.
A DFID funded literature review on Rates of Return for Research12, using the framework identified in
figure 1, concluded that while the returns to social and economic research are likely to be high, and
that it may be possible in theory to determine quantitative estimates for the economic return, the
informational requirements for the counterfactual analysis are extremely large. Moreover, the
calculations of the returns to research are likely to be very sensitive to minor changes in the
assumptions regarding links from research to policy with possible problems across all the three areas
of Attribution, Identification and Measurement.
As a result, no cost benefit analysis is undertaken in this appraisal, however, the appraisal does
consider key design and cost effectiveness issues to ensure that there is a greater chance of the
inputs effectively translating into outputs and outcomes. In other words, to improve the probability
that the research will deliver returns at the higher end of the probability distribution. These factors
underpin the Critical Success Criteria (CSC) in section A above and are considered below in section
D.
Figure 1. The Results Chain for Different Types of Research
12
Kunal Sen Literature Review on Rates of Return to Research 2010. See also Kunal Sen and Geoff Hoare, (2005) Rates of
Return to Research: A Literature Review and Critique (Enterplan in association with ODG-DEV and CEG.
The Attribution
Problem
Research
Programmes/
Centres
The
Identification
Problem
Policy Change/
Intervention
/Reform
OutcomesTangibleIntangible
Impact
Communication
Of Research
Findings
The
Measurement
Problem
Contextual Factors
The IZA option allows DFID to buy into a broad global research network, securing access to global
coverage of leading academics working on labour markets. Critical to the success of the programme
is the ability of IZA to bring together policy makers and researchers to both identify key research
needs and to ensure research findings have access to policy makers. This together with an emphasis
on quality and competition in procurement will help ensure that the programme delivers its objectives,
achieves value for money and has an impact beyond the lifetime of the programme.
D. Comparison of options
The same weighting is used as for CSC above. The score ranges from 1-5, where 1 is low
contribution and 5 is high contribution, based on the relative contribution to the success of the
intervention.
CSC 1 - High Quality Research and data gathering - undertaken by leading academics, peer
reviewed and published. Competitive research procurement –
 global access to leading academics in the field
 independent peer reviewed selection process
 research outputs subject to peer review and publication
Option 1 – IZA. IZA has the leading global research network for labour. A team of staff researchers
works together closely with the group of IZA research fellows, consisting of almost 1000 renowned
researchers worldwide. IZA researchers and fellows have a strong incentive to publish in prestigious
academic journals according to normal academic incentives. The programme will establish a
competitive peer reviewed process for procuring research from across the IZA network and beyond.
Procurement will be under the direction of an independent, academic oversight committee.
Partnering with a new institution will also help to establish a degree of competition between DFID’s
growth research partners.
Option 2 – RPC. Dependent on the response from the academic community, it is likely to be possible
to establish an RPC that brings leading academics in the labour markets field. The network, however,
is likely to be more limited than that offered by IZA. While a mechanism could be established to
ensure some degree of competition for research resources, it is not clear how competition could be
maintained throughout the breadth of the programme. There is a risk that the ’winning members’
would capture some if not all of the resources, otherwise there would be little incentive to ‘bid’ in the
first place.
Option 3 – ESRC. It is likely that the ESRC will be able to access leading economic academics
although there is more of a bias toward UK researchers and it does not have an established global
labour markets network. They have a well established competitive peer reviewed procurement
process. ESRC have experience of procuring for high quality research. The network however, is
likely to be less specialised than that of IZA and there is a risk that some labour market economists
would not be accessed. ESRC would also need to ensure that a programme director is hired to
provide intellectual leadership and to provide coherence to the programme. Lastly DFID growth
research already partner with ESRC. There is benefit in DFID having a number of partnerships
beyond the ESRC in order to encourage competition and sharpen incentives.
Option 4 – DFID led. While DFID could access leading economic researchers, it would need to
establish a process for competitively procuring research and for peer reviewing. This is likely to be
administratively expensive.
CSC 2. Strong policy links – Research areas and ideas responsive to policy demands. Research
outputs effectively communicated and linked into policy networks
Option 1 – IZA has a well established global policy network bringing together policy experts from
around the globe including international organisations such as the ILO and the World Bank.
Significant scope exists to bring the policy and research networks together in order to ensure
research responds to policy demands and that research outputs can link into policy discussions. The
programme design will need to ensure these networks are utilised to the full.
Option 2 – Dependent on the response to a DFID call, an RPC could well be in a position to establish
some policy links. However, the network will have to be established and it is likely to be more limited
than that offered by IZA.
Option 3 – The ESRC could establish a network, but it is likely to be more limited that that offered by
IZA, with ESRC much more dependent on the networks provided within the individual research
programmes.
Option 4 – DFID could establish a network but this is likely to be administratively costly and difficult to
incentivise.
CSC 3. Dissemination and Transparency – Research and data is made publicly available and
accessible
Option 1 – IZA has an established International Data Service Center (IDSC) which offers remote
access to data sets for labour market economists. This open access portal is well known within the
labour markets research field and provides an ideal opportunity to provide supplementary data sets
on LICs through a portal that is already well known and used by researchers. The availability and
accessibility of data through a prominent portal is likely to stimulate research on LICs well after the
programme is finished. Sustainability will also be ensured.
Option 2 – An RPC has the option to either create a new portal for LICs labour market data or to tie in
with an existing data set. Costs for setting up and maintaining a data set are likely to be fairly high,
visibility and knowledge of the data set will also need to be established with the wider research
community.
Option 3 – The ESRC would need to establish a portal to house any new data sets. This would be
costly and need to be maintained beyond the life of the programme
Option 4 – DFID could establish a data portal but again likely to be costly and unsustainable beyond
the life of the project.
CSC 4. Capacity Building – Strong north-south networks and links. Strives to build capacity of local
institutions, researchers and policy makers
Option 1 – While IZA has a large network of researchers that includes southern researchers, effort
will be needed to stimulate the development of N-S research links. Selection criteria will need to be
developed that give this an appropriate weighting while bearing in mind the overriding requirement for
quality research.
Option 2 – This may well be stronger under an RPC arrangement as it may be possible to build
longer term relationships between northern and southern researchers.
Option 3 – Likely to be difficult to maintain long term and dependent on the lifetime of individual
projects.
Option 4 – As 3. Likely to be difficult to ensure long term unless a separate capacity building
programme is developed.
Analysis of options against Critical Success Criteria (CSC)
Option 1
Option 2
Option 3
IZA
RPC
ESRC
CSC
1
2
3
4
Totals
Weight
(1-5)
5
4
4
3
Score
(1-5)
5
5
5
3
Weighted
Score
25
20
20
9
74
Score
3
3
2
4
Weighted
Score
15
12
8
12
47
Score
5
2
2
2
Weighted
Score
25
10
8
6
49
Option 4
DFID
procurement
Score Weighted
Score
4
20
2
10
2
8
2
6
44
E. Measures to be used or developed to assess value for money
1. Competition and peer reviewed selection of research proposals – once an individual research
contract has been awarded it is difficult and expensive to monitor. Experience has shown (see
Research Council approach) that the best way of ensuring a quality output (and so value for
money) is through a competitively and peer reviewed selection process for individual research
projects.
2. IZA contribution to cover a significant proportion of administrative costs. Extensive
negotiations with IZA to ensure 94% of DFID funds will be used for research and uptake.
3. Director and any support staff at appropriate regional/international pay levels.
Commercial Case
Indirect procurement
A. Why is the proposed funding mechanism/form of arrangement the right one for this
intervention, with this development partner?
The rationale for a partnership project with IZA, rather than a research programme consortium or
other modality, is set out in the appraisal above.
The proposal is to formalize the partnership between DFID and IZA through a jointly-agreed
Memorandum of Understanding (MoU) that sets out the project objectives, respective roles and
responsibilities, financing and implementation arrangements. An MoU is appropriate because of the
nature of the relationship between DFID and IZA which is based on a partnership of equals. This is
demonstrated through: IZA making a financial contribution to the project costs (thus IZA is an equity
stakeholder, as well as a reputational stakeholder, in the programme); the research work is being
jointly specified and funded; and implementation is being jointly supervised and evaluated. In
addition, as an MoU is not legally-binding it allows more flexibility on both parties as a risk mitigation
strategy. There are MoUs in place for similar programmes with similar organisations across DFID’s
research portfolio.
A contract for services would represent a possible alternative approach. This would be inappropriate
in this instance because of the stakeholder nature of the partnership (joint financing arrangements,
joint research specification, joint supervision etc.). We are seeking to work with IZA because of its
intellectual leadership, excellent reputation and world-leading access to the best researchers and
networks in labour market economics. These are not “services” that can be bought and defining the
performance standards for a contract based on these would be exceptionally difficult.
B. Value for money through procurement
The strategy to ensure best value for money (vfm) in procuring the research envisaged under this
programme is based on the following points, most of which are derived from and in line with best
practice in research procurement by the UK Research Councils:
(i) use of the best available partners. DFID is seeking a strategic, long-term partnership with an
organisation, (IZA), that is – by common consent among relevant specialists and donors - the leading
global think tank on labour market economics, with direct access to a global pool of labour
economists. IZA has a long history of bringing together its research and policy network to both
determine research agendas and facilitate the adoption of research findings. It has also a substantial
track record of partnership working with donor agencies (The World Bank, European Commission)
and governments (especially the German government).
(ii) clear specification of the research required. This is being achieved through a period of detailed
open consultation with relevant specialists (on which the project themes are now based) and through
detailed ongoing work between DFID and IZA to specify the individual research calls in some detail.
This approach eliminates the risk of effort and funding being directed towards research that is too
general in nature.
(iii) a fully open international competition for research bids, managed by IZA and overseen by the
Programme Management Group (PMG) comprising appropriate IZA and DFID staff. We anticipate a
positive response from the research community. IZA has a high profile in the labour economics field.
A new research programme with an explicit focus on LICs is likely to significantly shift the incentives
and encourage researchers to undertake labour markets research in LICs. As better quality data is
established this should further encourage labour market research in LICs.
(iv) independent peer review of research bids. All qualifying bids will be reviewed by an independent
oversight committee of relevant experts approved by the PMG.
(v) scrutiny and assessment of bid costs, alongside technical review, as one of the key criteria in bid
evaluation.
(vi) regular monitoring and progress reviews of all projects. All projects will be required to provide
regular progress reports and these will be quality assessed by IZA. Continued research funding will
be dependent on demonstrable progress being achieved in line with the envisaged objectives of each
project. The PMG will cancel research contracts where the bidders are deemed to be nonperforming.
(vii) a requirement for all bidders to set out, and report on, their planned research impacts.
(ix) ex post evaluation of the project including a stakeholder survey.
Financial Case
A. How much it will cost
The programme will cost £10.6m over 6 years, with DFID providing £10m (94%) and IZA £0.6m (6%)
broken down as follows:
Budget in £ as per UK financial years
April 2011 - April 2012 - April 2013 - April 2014 - April 2015 - April 2016 March 2012 March 2013 March 2014 March 2015 March 2016 March 2017 Total
Research
Uptake
Administration
Total
of which: DFID
of which: IZA
£0
£39,025
£150,211
£189,236
£114,131
£75,105
£823,655 £1,812,041 £2,800,427 £2,827,875
£44,621
£73,633
£97,931
£72,160
£234,741 £245,639 £245,639 £220,603
£1,103,017 £2,131,312 £3,143,997 £3,120,639
£985,647 £2,008,493 £3,021,178 £3,010,337
£117,370 £122,819 £122,819 £110,302
£631,465
£167,441
£122,525
£921,431
£860,168
£61,262
£8,895,464
£494,812
£1,219,357
£10,609,633
£9,999,954 rounded to £10m
£609,679 rounded to £0.61m
The research budget of nearly £9m will be sufficient to fund approximately 30 grant awards at an
average cost of £300,000 per award throughout the programme. The administration costs will cover:
the costs of the Programme Director (who will give intellectual leadership to the programme); the
costs associated with procuring (including peer reviewing proposals etc), administering and
monitoring the research grants; the costs associated with the independent oversight committee; web
development and support, and; an external audit of the project.
Funds are available for this programme within the agreed budgets for DFID research up to the end of
the current resource allocation period (i.e. the four years to March 2015). Funds beyond March
2015 are subject to the outcomes of UK government future spending decisions.
B. How it will be funded: capital/programme/admin
The programme will be funded from DFID’s programme budget (94%) and by IZA (6%), broken down
as shown above.
C. How funds will be paid out
IZA will manage the funds for the programme as a whole, which will be kept for audit purposes in a
separate account, and will make quarterly funding claims on DFID. Funding claims will be based on
statements of actual needs and previous funds utilisation.
D. How expenditure will be monitored, reported, and accounted for
At the level of individual grants, IZA will monitor expenditure ensuring that grant holders account
regularly and accurately on their expenditure. IZA will report financial progress on the project as a
whole to DFID, both through its quarterly funding claims and through its informal and formal project
progress reports (see below).
IZA will appoint independent professional auditors to conduct annual audits of all project expenditure.
Management Case
A. Oversight
The management structure of the programme will be as shown in the following diagram.
DFID
IZA / DFID
Programme Management Group (PMG)
IZA
Director LIC Programme
Independent
Oversight Committee
(IOC) – strategic
advice and oversight
of selection
Reporting
Advising
Appointment
Strategic oversight and intellectual
leadership

Oversee research content

Oversee conferences and
events

Synthesis and coherence
across the programme
IZA administration and
Programme Management Unit
(PMU)
(a) The Programme Management Group (PMG) will be the programme’s executive decision making
authority. The group will comprise four members: two members from DFID and two members from
IZA. The chair will reside with IZA. The role of the PMG is to set the strategic direction of the
programme. Its members will be senior staff with executive (decision-making) authority within their
organizations. The PMG will meet at least once a year and operate on a consensus basis. It will
define the strategic orientation of the programme and hold the right to veto grant awards. The
Programme Director LIC (PD LIC) will attend PMG meetings on an ex-officio basis and will provide
secretarial functions for the PMG.
The PMG will be informed which proposals have been selected and then will either confirm the
decision or veto it. Should the PMG exercise their veto right the second-best alternative (based on
the ranking by award criteria and price) will automatically be chosen. The PMG will appoint the PD
LIC on the basis of a nomination by IZA.
(b) A Programme Director LIC (PD LIC) will be recruited for the programme. The PD LIC will:
 Provide intellectual leadership and coherence of the programme
 Identify the topic and area of research calls in the boundaries defined by the programme
 Identify research/data gaps that need to be addressed and the best way of addressing them
 Where needed, synthesise evidence from across the research areas and oversee the
development of policy briefs where appropriate
 Consider how to ensure the maximum impact from the programme including identification and
engagement of key end users of evidence




Consider how best to communicate the evidence from the programme and oversee
implementation
Provide intellectual leadership in monitoring and evaluation of programme research projects
Hold a tie-breaking vote in the Independent Advisory Committee when proposals are equally
evaluated
Be supported by a Deputy PD inside IZA, who will be the main point of contact between IZA
and the PD LIC.
(c) The third element of the programme governance structure will be an Independent Oversight
Committee (IOC) which will meet at least once a year during the course of the programme (meetings
will be once a year in person and otherwise by electronic/virtual means). The IOC will be jointly
appointed by IZA and DFID and consist of 6 international specialists. At least half of the members will
be from the South, and the members will either be researchers with a background in policy/practice
or policy makers with a background in research. The IOC will be appointed for the entire duration of
the programme. The committee will only be reorganized in case of IOC members leaving voluntarily
or if an IOC member is dismissed by the PMG. In any such case, replacement committee members
will be jointly appointed by DFID and IZA.
The IOC will give strategic advice to the PD LIC on the emphasis of the overall programme. The IOC
will appoint, monitor and dismiss members of the peer-reviewer pool under the guidance of the PD
LIC. On the basis of an evaluation grid (as defined by the PMG together with the PD LIC), which will
be sent to peer-reviewers alongside proposals, the IOC is responsible for consolidation of peerreview evaluation results. The IOC will consolidate peer review scores before presenting a definite
score to the PD LIC who has a tie-breaking function in case of disagreement between IOC members.
Subject to the development of the programme, the IOC may have a role in conceptualizing further
calls for research.
(d) The supporting platform of the management structure will be the Programme Management Unit
(PMU) which will be established by IZA. The PMU will provide the administrative and financial
management functions for the programme. These will include
 managing the development and issuing of calls for proposals
 managing the proposal procedure and organizing the selection process
 developing and managing research contracts
 providing financial and other information to the PMG and the PD LIC, as required.
B. Management
The day to day management of the programme will reside with IZA according to the structure set out
in section A above. The role of IZA will be:








Managing the delivery and implementation of the programme, including management of the
research commissioning process, the evaluation of proposals, contracting and contract
management
Managing the recruitment of the PD LIC and managing the contract with the PD LIC
Overseeing the programme through the two IZA members of the PMG
Managing and coordinating the Independent Advisory Committee
Providing the IAC, PD LIC and PMG with all the necessary information relating to calls for
proposals, evaluation and awarding of research grants
Determining with the PD LIC and DFID the evaluation criteria for research assessment
Monitoring the performance and delivery of award holders
Ex-post evaluation of project results through peer-reviewers

Supporting DFID in development of any further research themes and calls
The role of IZA will largely be provided by the PMU. The deputy PD will be the IZA point of contact for
the programme and provide access, where appropriate, to IZA executives, networks, and financial
and legal support. Details of IZA staff allocations to the PMU are detailed in Annex A.
The role of DFID will be:









Funding the programme
Overseeing the programme through the two DFID members of the PMG
Assisting the PD LIC in working up the scientific details of the call for proposals based on the
agreed research agenda
Agreeing on the evaluation criteria for projects with IZA and the PD LIC
Drawing on its expertise in development. In particular, this role includes identification of
development networks including users and researchers in development, and assistance with
dissemination of the research call in LICs
Working closely with the PD LIC and award holders in order to maximize impact of the
programme on DFID and other policy-makers
Supporting IZA on programme implementation to ensure effective management
Conducting Annual Reviews of the programme based on the Logical Framework
Leading on the development of any further research themes and calls
The role of DFID will largely be provided by DFID RED Growth Research team, supported, where
appropriate and in particular, by DFID Communications and Research Uptake teams, and the Growth
and Investment Department.
C. Conditionality
None, although the continuation of funding for individual research awards will be subject to
satisfactory progress being achieved.
D. Monitoring and Evaluation
DFID will conduct annual programme reviews against the Logical Framework, which provides an
operational framework for monitoring both delivery and impact of the programme. Refinements to the
Logframe indicators will be made as part of the initial inception phase over the first two years of the
programme.
The Programme Director will monitor the progress of the research, including delivery of research
products, capacity outputs and overall compliance with fiduciary responsibility. All research award
holders will be required to produce six monthly progress reports and final project reports, including a
statement of progress against the impact plans. IZA will review and quality control the progress
reports from individual projects. Satisfactory progress will be a condition of continued funding under
the programme.
IZA will provide a six-monthly update and an annual summary report to DFID under the guidance of
the Programme Director. These will include progress reports specifically linked to the logframe
outputs and milestones.
Provision is made within the budget for various evaluative tools, including a stakeholder survey
during the lifetime of the programme, to generate evidence on the programme’s impact. There will
also be an ex-post evaluation of the programme. IZA will continue to monitor the programme’s impact
beyond the proposed programme timeframe, given the long lead-in times between research and
impact/uptake.
E. Risk Assessment
The key project risk factors, possible impacts and the probability of occurrence are outlined below.
Wherever possible, mitigating measures are built into the project design, monitoring and evaluation
framework.
The programme relies on a good working relationship between IZA and DFID. On-going programme
and advisory input will be required to design, influence and shape the programme going forward. A
Growth Research team representative will be nominated, to maintain an on-going dialogue with IZA
to ensure a good fit between respective institutional priorities,.
The programme’s overall risk rating is medium. A full risk matrix is below.
Risk Matrix
Risk
Probability
Impact
How risks will be
minimized/mitigated
Low
Medium
(i) IZA are aware of the
risk and are taking
necessary steps to
ensure they have the
personnel and back-up
necessary to deliver this
programme. IZA are
recruiting new staff and
developing systems to
ensure that capacity is
supported – ie through
internationally
recognised back-up
support.
Management Risks
(i) IZA programme
management. This is a
new and sizeable
programme for IZA larger
than previous
programmes they have
managed. Will IZA be
able to respond to the
management challenges?
(ii) a good quality
candidate for the LIC
Director post cannot be
found.
(ii) Recruitment of the
LIC Director will include
open advertisement by
IZA, as well as DFID and
IZA. IZA have direct
access to a quality pool
of candidates and know
the field well.
The size of the research
programme on labour
markets in LICs may be
too big for the research
community to absorb and
respond to effectively.
Low
Medium
IZA/DFID are aware of
the risk and will monitor
and adjust the
programme as
necessary. IZA have a
global network of nearly
1000 research fellows
with the likelihood that
the programme can be
absorbed and will
indeed shift research
interests toward LICs.
Moreover data
requirements in LICs will
also absorb funds.
Research Risks
Research procured fails to
have policy relevance.
Low
High
Poor quality research
funded
Low
High
Research does not have
an impact on potential
users.
Med
High
The programme IAC
incorporates users on
the commissioning panel
from both the north and
south to help identify
research gaps and
reflect user demand. In
addition various
methods have been
adopted during initial
scoping to establish
genuine gaps in
research and user
needs. These activities
have informed the shape
and initial direction of
both research
programmes.
IZA has a strong focus
on research excellence
and is well regarded for
the quality of its
research. A sift and peer
review process will filter
poor quality and
unfocused proposals
during the early stages.
IZA’s emphasis on the
publication of outputs
post award provides
researchers with strong
incentives to produce
quality outputs. Clearly
articulating the
questions we want
addressed within the call
specifications will also
support the production
of quality focused
outputs.
Quality of proposals
(including evaluating
methodology) will form
key criteria for project
selection.
As part of IZA
procedures, applicants
are required to submit a
pathways to impact plan
which outlines how the
research will benefit end
users. The impact plan
will form part of the peer
review and assessment
process.
The LIC Director will
also oversee the
synthesis of research
outputs, identifying key
policy lessons and
developing a policy
engagement and
communications plan.
The PMG, International
Oversight Committee,
DFID’s advisory cadre
and Research Uptake
team in RED will also
advise on an on-going
basis, on how best to
maximise impact
drawing lessons from
other research
programmes.
Research findings too
disparate and do not add
up to a coherent set of
findings
Low
Low
Southern partners fail to
bid for research work or
where they do are
represented only
peripherally to the
commissioned research.
Med
Low
An independent
evaluation of project
impact is planned at the
end of the project cycle.
Dedicated resources are
allocated within the
programme for LIC
Director whose principal
role will be to cohere
emerging research
outputs both within and
across the themes.
Pro-active and targeted
publicising of growth
programme awards in
relevant print media and
networks will be
undertaken with ample
lead times including
developing a pre-call
guidance note to provide
guidance to prospective
applicants on research
themes and
administrative
processes.
F. Results and Benefits Management
See logframe annex 1
Annex 1A - IZA Labour market proposal
Proposal
for
The IZA/DFID Growth and Labour Markets
in Low Income Countries Programme
CONTENTS
1.
PROGRAMME OUTLINE ....................................................................................................... 29
1.1 OVERALL TOPIC AND GENERAL RESEARCH DIRECTION ................................................................. 29
1.2 IZA: A GLOBALLY UNIQUE RESEARCH INSTITUTION ...................................................................... 30
1.3 IZA/DFID SPECIAL PROGRAMME AREA:
“GROWTH AND LABOUR MARKETS IN LOW INCOME COUNTRIES”.............................................. 30
2.
RESEARCH SPECIFICATION, GUIDING PRINCIPLES AND IMPACT............................................. 31
2.1 RESEARCH SPECIFICATION: TOPIC AREAS..................................................................................... 31
2.2 FURTHER DEVELOPMENT OF TOPIC AREAS AND RESEARCH SPECIFICATION ............................... 34
2.3 GUIDING PRINCIPLES: QUALITY, UPTAKE AND CAPACITY BUILDING ............................................ 35
2.4 IMPACT AND OVERALL AIM........................................................................................................... 37
3.
IMPLEMENTATION .............................................................................................................. 39
3.1 MANAGEMENT ARRANGEMENTS ................................................................................................. 39
3.2 INSTITUTIONAL ROLES ................................................................................................................... 40
3.3 TIMING .......................................................................................................................................... 41
3.4 FUNDING ....................................................................................................................................... 42
3.5 CONTRACTING AND PROCUREMENT ............................................................................................ 43
3.6 ACCOUNTING AND AUDIT ............................................................................................................. 44
3.7 MONITORING AND REPORTING .................................................................................................... 44
ANNEX A: STAFF RESOURCING .................................................................................................... 45
ANNEX B: TIMING....................................................................................................................... 47
ANNEX C: PROPOSAL PROCEDURE .............................................................................................. 48
ANNEX D: FIDUCIARY RISK .......................................................................................................... 57
ANNEX E: MONITORING ............................................................................................................. 58
ANNEX F: CALL DISSEMINATION – IZA CALL ALERT SYSTEM .......................................................... 60
ANNEX G: TRANSPARENCY.......................................................................................................... 61
ANNEX H: DETAILED BUDGET ...................................................................................................... 62
ANNEX I: SELECTED REFERENCES ................................................................................................. 64
1.
Programme Outline
The research agenda of the proposed joint IZA/DFID programme will focus on labour markets and
growth in low income countries (LICs). Research on labour markets and economic growth has mainly
focused on more advanced economies – developed and middle income countries – with limited
research in LICs. The proposed programme aims to address this important gap, and hence it will
focus on various labour markets issues in LICs.
1.1 Overall Topic and General Research Direction
The overall topic of the programme is driven by the important observation that research on labour
markets in developed and middle income countries is not necessarily applicable to LICs for various
reasons. These include the differing stages in economic development, the particular structure of the
economies, and the importance and size of the informal sector in these countries. As a result, the
research and policy findings from middle income and developed countries are not easily transferable
to LICs. Moreover, there is a broad consensus that data of suitable quality are a significant constraint
for research in LICs. This is one main reason for the relative paucity of research in LICs.
More research is therefore needed to identify appropriate theoretical frameworks, factors,
institutions and policies that facilitate labour market outcomes in LICs, but also to help identify
country characteristics that determine the effectiveness of alternative policies. This will constitute
the guiding principle for the general research direction of the proposed programme.
It is moreover important to notice that the majority of jobs in LICs are located in the informal sector.
Hence, questions that need to be answered differ from those in middle income and developed
countries. To be able to answer these questions, a better understanding of the workings and
functioning of the informal sector labour market is needed. Currently, there is a lack of sufficiently
developed theoretical framework or empirical evidence that fully accounts for the informal sector,
its different characteristics and implications.
The research programme will aim at including work on the underpinning theoretical framework as
well as macroeconomic and microeconomic studies of a carefully selected representative group of
countries (and groupings within countries) where relevant policy and economic changes have
occurred. Ideally, these studies use quantitative methods to identify policy impacts but are also
likely to need qualitative methods to highlight factors that had either helped or hindered the policy
interventions. Given the economic structure of most LICs, these studies will investigate labour
market impacts both across the economy and across a mix of sectors.
Adequate data are rarely available for LICs. However, longitudinal or panel data sets at the
household and firm level – which are for example able to capture gender dimensions across a range
of LICs – are needed and would support wider research on labour markets within LICs.
The topics of gender, climate change, political economy and conflict affected states are of crucial
importance for the societal development of LICs. Solution concepts in these dimensions are needed
today, and the demand is very likely increasing in the future. It will be therefore more than desirable
to explore how such issues have implications for labour markets in LICs.
Finally, the ultimate goal of the programme is not only to conduct high-quality research, but also to
put the research results and evidence into actual practical use. Research uptake is of crucial
importance – and will be ensured by the means of a highly relevant research agenda, and the
involvement of researchers, policymakers and business leaders throughout the programme. This will
include individuals both from the North and the South.
1.2 IZA: A Globally Unique Research Institution
IZA is an economic research centre concentrating on the scientific analysis of labour market
developments all over the world. Though primarily acting in the field of labour economics, it
recognizes the role and influence of other related scientific disciplines and encourages
multidisciplinary as well as interdisciplinary approaches in its research agenda. IZA provides
scientifically founded advice to political and corporate decision makers. As a non-profit private
organization, IZA is independent of political agendas and short-term commissioned research. Its aim
is to find sustainable solutions for the problems in today’s labour markets and to help actively shape
tomorrow’s labour economics. In its role as a place of communication between economic science,
political practice, businesses and society, IZA also offers information and expertise on labour market
questions to a broader public. The institute works closely with other prestigious research centres
and universities on national, European and international levels, with access to the largest network of
labour economists worldwide.
IZA was founded in 1998 on an initiative of the Deutsche Post Foundation, from which it has drawn
substantial support and which is the owner of the institute. Prof. Dr. Klaus F. Zimmermann (also
Professor of Economics at the University of Bonn and Honorary Professor at the Free University of
Berlin and the Renmin University of China) serves as the institute’s director.
IZA’s focus on urgent labour market problems of our time, its private funding and its international
orientation make IZA a globally unique research institution. The high quality of its research methods
and findings has added to IZA’s strong reputation in the scientific community. As a special service for
labour economists worldwide, the International Data Service Center (IDSC) of IZA offers remote
access to the most relevant datasets in labour economics.
The main objectives of IZA are to pursue original and international competitive research activities in
all fields of labour economics and to transfer scientific results into practical concepts for
policymakers and business leaders. A team of IZA staff researchers works together closely with the
group of IZA Research Fellows, consisting of almost 1,000 renowned researchers worldwide. This
combination places IZA at the cutting edge of international labour economics. The broad spectrum
of research on a consistently high level has established IZA as a member of the international
scientific elite. As such, IZA serves as one of the primary contacts for policy-oriented labour market
research for governments and renowned institutions around the world. Among those are for
example the World Bank, the European Commission, the European Parliament, various national
governments and international foundations (see Annex I for selected references on previous
projects of IZA).
IZA’s network moreover includes policy makers and business leaders. The institute has established
an exclusive circle of IZA Policy Fellows, with which the institute cooperates in a unique way. This
network of influential representatives from business, politics, society and the media complements
the academic network of IZA Research Fellows. By cooperating actively with these decision-makers
beyond purely scientific matters, IZA aims at satisfying the increasing demand for policy advice and
improving the communication of these services to the public.
1.3 IZA/DFID Special Programme Area: “Growth and Labour Markets in Low Income Countries”
IZA will create a separate and independent Special Programme Area called “Growth and Labour
Markets in Low Income Countries,” which will be jointly organized by DFID and IZA for the duration
of the programme. The Special Programme Area will aim at assisting the international research
community in addressing the proposed priority research as outlined in the subsequent section. It
will provide the necessary resources to stimulate and conduct research on the programme
components which are to be developed and undertaken on a competitive basis. The Special
Programme Area benefits from the synergies and overlaps with other IZA Programme Areas, and in
particular with the work done on Employment and Development, Evaluation, Institutions,
Transitions Economics and Migration.
IZA will include the programme as a new Special Programme Area in its portfolio of existing
activities. The choice not to include the programme just as another Programme Area is due to the
specific character of the programme, which is somewhat different to existing programme areas. The
rationale behind the existing programme areas is mainly to provide an organizational framework for
research activities of IZA’s in-house researchers and the large network of IZA Fellows and Affiliates.
However, existing Programme Areas for example do not disseminate any calls. It thus seems very
appropriate to lift the programme out of already existing programme areas. The prominent
character of the Special Programme Area recognizes the importance of the programme’s visibility
and recognition in the research community. IZA commits to communicate the programme
offensively, among others things with a prominent position in its web presence.
In the course of the programme, IZA will broaden its range of activities. IZA can build upon its
experience in applying for grants on the national, European and international level. This provides the
necessary and sufficient basis for IZA’s new role in the programme outlined in this document. IZA is
well prepared to change sides for the purpose of this programme and to engage in procurement.
Appropriate management arrangements and processes are either established already or will be
established in due time. Details of these arrangements are given below.
Although the details about the precise management arrangements will be given further below in this
proposal, it seems appropriate to briefly introduce the role of three important actors in this Special
Programme Area already at this stage. First, the Programme Management Group (PMG) will sign off
the exact research direction and all research details. It will include members from both DFID and
IZA. Second, the Programme Director (PD LIC) will play a key role in ensuring that these principles
are adhered to throughout the programme and will be in charge of developing the research calls in
close collaboration with the PMG. The PD LIC will be recruited by IZA, and DFID will be involved with
the selection. The PD LIC is the intellectual leader of the Special Programme Area. Third, the
Independent Oversight Committee (IOC) is comprised by independent experts in their field, with
different regional and professional backgrounds. It provides strategic advice on the emphasis of the
overall programme and is the management and oversight committee for peer-review evaluation of
proposals.
2. Research Specification, Guiding Principles and Impact
In this section, details are given about a) the research specification of the programme, which
includes five broad topic areas, b) how the research specification and topic areas will be further
developed during the course of the programme, and c) the three guiding and overriding principles of
quality, uptake and capacity building, which should be adhered to throughout the programme.
2.1 Research Specification: Topic Areas
The research specification will cover five broad topic areas. These areas have been identified as
research priorities for the following reasons: a) they are important areas in which research progress
could have substantial impact on economic development in LICs, b) there exist important gaps in
research on LICs in these areas, and c) it is likely that previous findings in these areas, which are
based on more advanced economies, are not easily transferable to LICs.
It is, however, important to note that the five topic areas outlined below will be subject to a
dynamic process. During the course of the programme, the need to address additional topics within
the five topic areas – and beyond – may arise. Therefore, the research specification described below
should be understood as an outline for the initial stage, which can be modified if needed. Such
modifications will be initiated and discussed by the PD LIC, the PMG and the IOC. The PMG will
eventually sign off possible modifications.
Growth and Labour Market Outcomes
A core priority of the programme’s research specification will be research on economic growth and
labour market outcomes. This topic area will provide the overarching framework within which
labour market issues in LICs can be better assessed. It will also pick up on wider issues of trade,
integration and gender. There is for example an important need for a theoretical framework which
sufficiently factors in the informal sector. The limited research on LICs in this regard will be extended
within this topic area.
The following research questions could be addressed within this topic area:
 What are the appropriate theoretical models to study the informal sector, labour markets and
growth in LICs?
 What are the main factors that contribute towards the creation of better jobs in LICs?
 Does economic growth lead to lower unemployment, reduced underemployment, selfemployment and to the creation of higher paid jobs?
 How it is that labour markets transmit economic growth?
Labour Market Institutions
Previous research has shown that the question whether LICs should be regulating labour markets is
very likely misleading. It appears more appropriate to focus on the question how to protect workers
in LICs while at the same time creating jobs. In this context, the role of local conditions should be
carefully taken into account. Furthermore, previous research indicates that major differences do not
necessarily occur in terms of rich vs. poor countries as there are important differences between
middle income countries (MIC) and LICs (e.g., the size of informal sector or the institutional quality).
Though research findings on other OECD countries are not applicable in every context, research that
will be conducted in this topic area can yet draw upon these findings. The constraints and
preferences in LICs, however, are different. Examples include culture, education and attitudes
towards risk. Research that addresses these issues will therefore be encouraged.
When considering LICs, one should not underestimate the importance of the evidence which is
accumulated to date. For example, it is a well established finding that badly designed regulations
can distort labour markets. However, what is so far not well understood is what factors mediate the
effects. It is very likely that impacts will depend on factors such as the economic structure,
institutions and their enforcement, and the nature of regulations (i.e., how systems are designed).
At some point, countries will face a trade-off between protection and efficiency. But it appears likely
that in most LICs, there may still be scope to improve both protection and efficiency simultaneously.
Research conducted in the programme may be able to identify countries in which the latter is the
case.
The following research questions could be addressed within this topic area:
 How does the structure of LICs’ economies affect the thinking on labour market institutions?
 What is the structure and design of labour market institutions in LICs that can protect workers
while at the same time creating jobs?
 How to expand the coverage of income protection systems?
 How should these institutional policies differ between LICs and other countries?
 Which are the most effective labour regulations in LICs and how can they be improved to
further support labour market flexibility?
 What is the role of the quality of enforcement in this context?
Active Labour Market Policies
Active labour market policies (ALMP) have mainly been examined in the context of developed
economies. The main objective in these countries is social inclusion. This is also an issue in
developing countries, although given for example the scale of social transfers in Latin America, the
issue of employment is beginning to receive greater attention. But so far, the latter issue has
received very little attention in LICs.
Therefore, an urgent need for conceptualizing ALMP in LICS exists. This implies considering policies
within the context of the informal economy, noting that the informal economy is not homogenous.
For instance, some parts of the informal economy are entrepreneurial, whereas others are not.
Many ALMP are in fact social policies. There exists significant evidence for developed economies and
middle income countries on the effectiveness of ALMP. However, the evidence is mixed, and often
not very clear about the underlying causes on both the demand and supply side. This highlights the
need to be clear on the underlying mechanisms and to be very specific about factors on both the
demand and supply side. For example, if the problems are structural in nature, then ALMP are likely
to be largely ineffective. Furthermore, when considering the conceptual framework in this topic
area, it is important to focus on labour market outcomes in the aggregate, i.e., getting more people
into better jobs.
The following research questions could be addressed within this topic area:
 What is the appropriate conceptual framework to consider ALMP in LICs?
 What are the implications of the informal sector and quality of institutions for ALMPs in LICs?
 ALMPs that support micro-enterprise development and creation of firms are particularly
relevant for LICs given the size of the informal sector. How can we best design and implement
such policies in LICs?
Skills
Skill shortages and skill mismatches are very likely factors impeding growth in developing countries.
There are indications that in these countries, an unmet demand for skills exists. However, one of the
main constraints to more thoroughly investigate this issue is the lack of adequate data in LICs. There
is for example a lack of data about the distribution of different skills sets in the labour force and
about the demands for different skills. The literature typically uses approximations such as years of
education or school diplomas (primary, secondary, tertiary), which appear as only very rough
approximations. Moreover, policymakers often engage in reforms of training programmes to try to
make training more relevant and improve labour market opportunities of trainees, but there seems
to be little supporting evidence from LICs in this case.
The following research questions could be addressed within this topic area:
 Considering that private returns to education dominate the literature, what are the social
returns to education in LICs and how do they compare with the private returns?
 What is the impact of different types of skills sets (including non-cognitive) on labour market
outcomes in LICs?
 What types of skills are associated with innovation and productivity growth in LICs?
 What are the main policy implications of these findings?
Gender
There is a need to better understand a) the barriers to female labour participation in the context of
household decision making and cultural norms in LICs, and b) the conditions and terms of female
employment and how they differ from those of men. It is important to account for and to better
understand the informal sector in this context. Moreover, access to high-quality data to investigate
these issues is very limited. In particular, existing data are not adequately capturing internal
household decision making and power relations within households. Therefore, the collection and
improved access to longitudinal and panel datasets will very likely have a huge impact.
The following research questions could be addressed within this topic area:
 Which models can help us better understand the barriers to female labour participation in the
context of household decision making and cultural norms?
 Are there significant differences in job security and employment conditions between men and
women in LICs (especially in light of the informal sector)?
 What is the impact of globalization?
 Are there specific policies and institutions that are needed to effectively support women?
2.2 Further Development of Topic Areas and Research Specification
Based on the programme’s five broad topic areas, the exact research specification will be further
developed during the course of the programme. This will be done under the intellectual leadership
of the PD LIC and the IOC, and in close collaboration with the PMG. After the PD LIC has been
selected and the IOC has been established, the programme will officially start.
The official programme start will be accompanied by a kick-off workshop as well as by a number of
short papers and policy briefs (about five), in which renowned experts in the field summarize their
key issues for labour markets in LICs. The workshop and the papers will help generate an early
impact of the programme and they will also draw attention to the programme, both among
researchers and policymakers. This early impact is very important as the programme is expected to
deliver its first results only after an initial period in which calls are disseminated and the first
commissioned projects conduct their research activities. The kick-off workshop, the kick-off papers
and policy briefs are therefore expected to set the frame for the programme’s further activities.
A more detailed content and specification of the research programme will be based on discussions
between the PD LIC and the IOC, and in close collaboration with the PMG. The kick-off workshop will
provide an excellent opportunity for an intensive discussion, very likely also with the involvement of
other renowned experts in the field who are invited to participate. For example, because of the
programme’s overlap with existing IZA Programme Areas, the involvement of the Programme
Directors of these areas seems very reasonable. The kick-off workshop will moreover involve
policymakers and business leaders to ensure that content and research specification meet their
needs and demand, and thus to increase the likelihood of research uptake. The kick-off papers and
policy briefs will of course constitute a very important input for this discussion as they summarize
the key issues for labour markets in LICs.
The kick-off workshop will take place before the first call is disseminated (September 2011). The
kick-off papers and policy briefs are an important input to this workshop, and they will thus be
finalized beforehand (August 2011). Based on the results of the kick-off workshop and of the
discussion between the PD LIC, the IOC and renowned experts in the field from both Northern and
Southern countries, the outline of the programme’s first round of calls will be developed. This will
be done in conjunction with a further development and more precise definition of the programme’s
research specification.
The first round of calls may for example include a project in which a systematic literature review is
conducted. The results of this project may be available within the programme’s first year, which may
furthermore help generate an early impact of the programme. It may also be very reasonable that
the first round of calls includes projects in which data of suitable quality is generated. Since such
data, and especially panel data, are a significant constraint for research in LICs, other projects that
are conducted at a later stage of the programme would in this case be able to benefit from the data
that are generated.
2.3 Guiding Principles: Quality, Uptake and Capacity Building
The envisaged research programme will be based on three overriding and guiding principles: a) highquality research, b) research uptake, and c) capacity building. It is very important to ensure that
these principles are adhered to throughout the implementation of the programme. More
specifically, excellence in research and impact on policy are both necessary and equally important
targets of the programme. Capacity building, the third target of the programme, constitutes another
important objective of the programme. However, it should not undermine the other two objectives
of quality and uptake.
High-Quality Research
Conducting high quality research will be of first order priority throughout the course of the
programme. Among other things, this will involve the following important elements:
 a very careful, competitive, transparent and peer-reviewed project selection process,
 intellectual leadership through the PD LIC, and Deputy PD
 regular interim reports by the award holders, and
 ex post evaluations of the quality of the research projects.
Details on these elements are given in the course of the document. However, it is important to note
that high-quality research will be assessed before the projects start (project selection), during the
course of the projects (through PD LIC and Deputy PD LIC on the basis of regular interim reports),
and also after the projects have been completed (ex post evaluations). Therefore, a broad strategy is
pursued to ensure high-quality research.
During the course of the programme, high-quality research will also be ensured via annual research
conferences. Altogether five research-oriented conferences will be organized to foster exchange
among the projects that are conducted under the programme. Such a format will enable
participating researchers to get feedback on their ongoing work from their colleagues. These
conferences should moreover be viewed as a dissemination activity of the programme. Reporting on
these conferences (e.g., through media coverage) may raise the public awareness of the programme
and its results. Finally, participation in these conferences is not necessarily limited to award holders
of the programme. Other researchers, potentially also from LICs, as well as policymakers and
business leaders may act as multipliers for the programme’s impact.
Research Uptake
Equally necessary and important as conducting high quality research is to transfer the scientific
results into practical concepts for policy makers, practitioners and business leaders. The ultimate
goal of the research that will be conducted is to put the research findings into actual practical use.
The programme will identify and engage policy-users at the outset, and throughout the project,
drawing on best practice in research uptake.
IZA can rely on its experience in this matter. For example, IZA has scientifically accompanied the
reform process in Germany’s labour market for more than a decade. Activities include various
publications for a broader public in which – based on scientific findings – reform concepts and
proposals are described. IZA has also been involved in the evaluation of particular reforms that were
actually implemented. One example is the reform of training programmes for the unemployed in
Germany. Recently, IZA advised the Slovak Ministry of Labour about possible labour market reforms
where the idea was to learn from the German reform experiences and to transfer “best practices” to
the Slovak Republic.
Another example how to transfer scientific results into practical concepts is IZA’s cooperation with
the Word Bank in the Programme Area “Employment and Development.” Among other activities,
the two institutions jointly organize a conference format which was held for the first time in Berlin in
2006. Since then, the event has developed into an annual conference taking place at alternating
locations in developed and developing countries including Morocco, South Africa and Mexico.
Moreover, the aim is to bring together researchers and practitioners with different regional
background, i.e., from both developed and developing countries.
Moreover, the institute can rely in this matter on its existing exclusive circle of IZA Policy Fellows.
The programme will expand this circle to specifically include influential representatives from
business, politics, society and the media in LICs.
Based on these experiences, the following instruments appear of particular importance to ensure
the transfer of scientific results into practical concepts:
 Publications with a specific focus on the target groups of policy makers and business leaders
 Conference formats which bring together researchers and practitioners, also from LICs
 Synthesis and communication of knowledge on issues of labour markets, and policy in LICs,
especially to LIC policymakers and business leaders
Publications can take various formats, including books, collected volumes, journal articles and
working papers. As outlined above, the project start will be accompanied by a short paper in which
renowned experts in the field summarize their key issues for labour markets in LICs. Close to the end
of the programme, a book or collected volume will be produced which includes the programme’s
key findings. This publication will be accompanied by a policy paper which summarizes these
findings in a more condensed way. Both publication will be an integral part of the end-ofprogramme workshop.
The programme will include different conference formats. Besides the kick-off workshop, the endof-programme workshop and the five annual research conferences, two policy oriented conferences
during the course of the programme will be organized. In this format, researcher will present their
key findings to a broader public of policymakers, business leaders and practitioners. These target
groups will moreover been given the opportunity to discuss and comment on these findings, which
can potentially be of high value to the researchers and influence the further course of the
programme. However, the overriding aim of these two policy-oriented conferences is to ensure the
transfer of scientific results into practical concepts. Details on another conference format (two
training workshops in LICs) are given below.
An important element in the context of research uptake is furthermore to synthesize and
communicate knowledge on labour markets, in particular on those in LICs. This includes not only
new knowledge from the programme’s projects, but also already existing knowledge on labour
market issues in LICs, in particular to policymakers and business leaders in LICs. Knowledge synthesis
and communication are viewed as a key functions of the PD LIC and the PMG..
Finally, the applications for research projects will be assessed on the basis on the credibility of their
plan for user engagement. Besides the requirement for projects to publish their findings in formats
that are specifically targeted at policy makers and business leaders (e.g., policy briefs and executive
summaries), other uptake and dissemination activities for this target group will be considered in the
assessment of applications.
Capacity Building
Capacity building in LICs is an important objective of the programme. It should, however, not
undermine the quality objectives. Capacity building will be fostered though various forms of
interactions between the North and the South throughout the course of the programme. Such
interactions will be established on an individual level. However, also on the institutional level
various forms of interactions and cooperation can be fostered, for example with the African
Economic Research Consortium (AERC). In the first year IZA will explore all options for building
capacity of Southern researchers, including considering how to better support Southern research
institutions.
The interactions will generally take various forms. Of crucial importance appears to establish NorthSouth links in a number of dimensions. These can and should be fostered via cooperation in the
projects conducted in the programme and via personal exchange in the programme’s conference
formats.
Moreover, the programme will include two training workshops in LICs, in which researchers from
these countries meet established experts from the field of labour economics. This format is targeted
at providing participants with the necessary tools to conducting, understanding and transferring the
scientific evidence into practical policy. Although the number of participants will be limited, it should
be feasible that those researchers act as multipliers and, hence, that the workshops’ impact
materializes beyond the actual participants. Finally, it may be reasonable to invite also policy
makers, practitioners and business leaders from LICs to the workshops (potentially in a specific
session or on a specific day) to ensure that research is understood by and communicated to these
important target groups.
2.4 Impact and Overall Aim
The impact and overall aim of the programme is to highlight the importance of economic and labour
market issues in LICs and to provide the grounds for evidence-based policy making in these
countries. This will be achieved by ensuring that highly relevant, high-quality research is conducted,
including North-South links via cooperation and personal exchange. To ensure uptake, it will be of
crucial importance that the research findings are actually transferred into concrete policy advice. On
that basis only, the aim of evidence-based policy decisions in LICs will be reached.
In this context, it is important that the relevant topics – both from a research and policy perspective
– are carefully identified and selected. The research specification and topic areas take this into
account. Dissemination of the research results to the general public, to policymakers and to business
leaders is of crucial importance for the success of the project and will be ensured on several
dimensions. In this matter, the extension of IZA Policy Fellows to LICs will certainly turn out to be
very helpful. Capacity building in LICs through various channels is also an important instrument and
outcome of the programme to ensure a long-lasting and growing interest in these topics.
The programme should be highly visible during its course, and ideally also afterwards. IZA intends to
measure its visibility with the following items, which will be closely monitored:





Downloads and citations of working papers, journal articles and policy papers
Quality of journal articles based on the journal’s impact factor and ranking position
Media appearances (internet, newspaper, radio, television)
Concrete policy advice activities (national governments, international organizations)
Conferences and workshops, number of participants.
Next to these items, an opinion survey of stakeholders provides additional information about the
visibility of the programme. The target group of the survey includes researchers, policymakers and
business leaders in developed and middle income countries as well as in LICs. The survey is
conducted for the first time when the programme is still running (e.g., after an initial period of 2
years). Based on the survey’s results, it is possible – if necessary – to adjust the programme’s
orientation. The survey is conducted for a second time when the programme has expired. The
results of this survey will provide the basis for an ex post evaluation of the programme’s visibility
and success.
The programme’s overall impact and success is subject to an ex-post evaluation, which might
include external referees. Criteria of this evaluation include the results of both surveys (see above)
as well as other quantitative and qualitative measures which are yet to be defined.
The above outlined impact and overall aim of the programme will moreover be subject to a longterm monitoring. The ideal scenario is that the programme will impact policymaking over and
beyond its period of operation and funding. Research uptake and policy suggestions are therefore
monitored also after the programme has officially ended. The role of IZA is to provide this, e.g., by
yearly updated policy bulletins and IZA commits to deliver these over a long-term period (up to 5
years after the programme has finished).
Next to a long-term monitoring IZA also commits to encourage further research on the topic areas
over and beyond the programme’s official end. Although the programme will fill important gaps in
the literature and answer crucial policy questions in this context, there will most certainly be scope
for further research. This research can of course benefit from the experiences made within the
programme and also from the data that have been generated in the programme. IZA will use its
International Data Service Center (IDSC) as a platform to store such data after the programme’s end.
Interested and qualified researchers from all over the world will have the opportunity to access
these data and use the data for scientific purposes (given legal requirements are met and approval
of IZA/DFID). However, access to data will be only one part of a long-term strategy to generate
impacts on research and policy over and beyond the programme’s official end. Further details of this
strategy have yet to be developed by the PD LIC, the PMG and the IOC. This strategy may also
include, e.g., to talk to other potential partners with the aim to spur research in LICs in the long-run
and to ensure that the research results have a long lasting impact on policymaking.
3. Implementation
3.1 Management Arrangements
DFID
IZA / DFID
Programme Management Group (PMG)
IZA
Director LIC Programme
Independent
Oversight
Committee (IOC) –
strategic advice
and selection
Reporting
Advising
Appointment
Strategic oversight and
intellectual leadership

Oversee research
content

Oversee conferences
and events

Synthesis and
coherence across the
programme
IZA administration and
Programme Management Unit
(PMU)
(a) The Programme Management Group (PMG) will be the programme’s executive decision making
authority. The group will comprise four members: two members from DFID and two members from
IZA. The chair will reside with IZA. The role of the PMG is to set the strategic direction of the
programme. Its members will be senior staff with executive (decision-making) authority within their
organizations. The PMG will meet once a year and operate on a consensus basis. It will define the
strategic orientation of the programme and hold the right to veto grant awards. The Programme
Director LIC (PD LIC) will attend PMG meetings on an ex officio basis and will provide secretarial
functions for the PMG.
The PMG will be informed which proposals have been selected and then will either confirm the
decision or veto it. Should the PMG exercise their veto right the second-best alternative (based on
the ranking by award criteria and price) will automatically be chosen
The PMG will appoint the PD LIC on the basis of a nomination by IZA.
(b) A Programme Director LIC (PD LIC) will be recruited for the programme. The PD LIC will:
 Provide intellectual leadership and coherence of the programme
 Identify the topic and area of research calls in the boundaries defined by the programme
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Identify research/data gaps that need to be addressed and the best way of addressing them
Synthesize evidence from across the research areas and oversee the development of policy
briefs where appropriate
Consider how to ensure the maximum impact from the programme including identification
and engagement of key end users of evidence
Consider how best to communicate the evidence from the programme and oversee
implementation
Provide intellectual leadership in monitoring and evaluation of programme research projects
Hold a tie-breaking vote in the Independent Oversight Committee when proposals are
equally evaluated
Be supported by a Deputy PD inside IZA, who will be the main point of contact between IZA
and the PD LIC.
(c) The third element of the programme governance structure will be an Independent Oversight
Committee (IOC) which will meet at least once a year during the course of the programme
(meetings will be once a year in person and otherwise by electronic/virtual means). The IOC will be
jointly appointed by IZA and DFID and consist of 6 international specialists. At least half of the
members of the IOC will be from the South, and the members will either be researchers with a
background in policy/practice or policy makers with a background in research. There will be
members who are from the South and have a background as policymakers or business leaders, i.e.,
Southern users. The IOC will be appointed for the entire duration of the programme. The committee
will only be reorganized in case of IOC members leaving voluntarily or if an IOC member is dismissed
by the PMG. In any such case replacement committee members will be jointly appointed by DFID
and IZA.
The IOC will give strategic advice to the PD LIC on the emphasis of the overall programme and will
appoint, monitor and dismiss members of the peer-reviewer pool under the guidance of the PD LIC.
On the basis of the evaluation by peer-reviewers, the IOC will discuss the proposals and sort them
into a selection ranking. Based on this ranking, the highest ranking proposal that passes a detailed
administrative scrutiny and the PMG veto will be selected. Subject to the development of the
programme, the IOC may have a role in conceptualizing further calls for research.
(d) The basis/platform of the management structure will be the Programme Management Unit
(PMU) which will be established by the IZA project administration. The PMU will provide the
administrative and financial management functions for the programme. These will include
 managing the development and issuing of calls for proposals
 managing the proposal procedure and organizing the selection process
 developing and managing research contracts
 providing financial and other information to the PMG and the PD LIC, as required.
3.2 Institutional roles
The role if the IZA will be:


Managing the delivery and implementation of the programme, including management of
the research commissioning process, the evaluation of proposals, contracting and contract
management
Providing intellectual leadership and knowledge synthesis throughout the programme
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Managing the recruitment of the PD LIC and managing the contract with the PD LIC
Overseeing the Programme through the two IZA members of the PMG
Managing and coordinating the Independent Oversight Committee
Providing the IOC, PD LIC and PMG with all the necessary information relating to calls for
proposals, evaluation and awarding of research grants
Determining with the PD LIC and DFID the evaluation criteria for research assessment
Monitoring the performance and delivery of award holders
Ex-post evaluation of project results through peer-reviewers
Supporting DFID in development of any further research themes and calls.
The role of the IZA will largely be provided by the PMU. The deputy PD will be the IZA point of
contact for the programme and provide access, where appropriate, to IZA executives, networks, and
financial and legal support. Details of IZA staff allocations to the PMU are detailed in Annex A.
The role of DFID will be:
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Funding the programme
Overseeing the Programme through the two DFID members of the PMG
Assisting the PD LIC in working up the scientific details of the call for proposals based on the
agreed research agenda
Agreeing on the evaluation criteria for projects with IZA and the PD LIC
Drawing on its expertise in development. In particular, this role includes identification of
development networks including users and researchers in development, and assistance with
dissemination of the research call in LICs
Working closely with the PD LIC and award holders in order to maximize impact of the
programme on DFID and other policy-makers
Supporting IZA on programme implementation to ensure effective management
Conducting Annual Reviews of the programme based on the Logical Framework
Leading on the development of any further research themes and calls.
3.3 Timing
Should all IZA assumptions hold true, the programme will run from June 2011 to May 2016, with
research activities starting June 2012 and ending in February 2016. Key milestones are:
May 2011
June/July 2011
August 2011
September 2011
November 2011
From June 2012
February 2016
May 2016
Signature of MoU (contract) between DFID and IZA
Appointment of the PD LIC, the Deputy PD, the IOC and the PMU
Kick-off papers and policy briefs to be completed
Kick-off workshop
First Call for proposals issued
Research to commence
All research to be completed
End of programme
Calls will be prepared based on the development and the needs of the programme and in close
collaboration with the PMG and the PD LIC. In general the number of projects selected for funding
each year will be flexible, but on average IZA envisions approximately ten projects will be selected
per year for three years. The last call will be issued no later than December 2014 to allow sufficient
time for research completion before the end of the programme. All awards will be for twelve to
eighteen months. A detailed timeline is at Annex B.
3.4 Funding
Of the total programme value of £10,609,684, £9.39 million (88.5%) will be available for research
(£8,895,500 – 83.84%) and uptake (£494,816 – 4.66%). £1,219,368 (11.49%) will be used to cover
administrative costs.
IZA will contribute additional funds to the amount of one half of the actual administrative costs. The
IZA contribution thus amounts to £609,684. This leads to the total programme value of £10,609,684,
94.25% of which are contributed by DFID and 5.75% by IZA.
Growth and Labour Markets in LIC Programme Cost Structure Overview
Funds
Percentage of £10.6 million
Research
£8.895.500
83,84%
Uptake
£494.816
4,66%
Admin
£1.219.368
11,49%
Total
Contribution by DFID
Contribution by IZA
£10.609.684
£10.000.000
£609.684
94,25%
5,75%
Awards for the programme will be valued at £300.000 on average. The minimum award value will be
£50.000. PMU will define the maximum percentage of grant money to be used for overhead by the
grant holder before issuing the calls.
IZA estimates around 30 grants will be awarded throughout the duration of the programme.
All funds provided by DFID for the programme will be transferred to IZA on a quarterly basis and
placed in a programme escrow account by IZA. From these funds IZA will withdraw up to £609,684
to cover administrative costs. Funds withdrawn for uptake activities and payment of grants will be
billed against the escrow account at the time they are needed.
The £609,684 for administrative cost will be withdrawn on a quarterly basis. The annual amounts
withdrawn for administrative costs will amount to:
 15% in 2011
 20% in 2012, 2013 and 2014
 18% in 2015
 7% in 2016
of the total of £609,684.
A detailed budget is available at Annex H.
3.5 Contracting and Procurement
Research procurement will be managed by IZA. For this purpose IZA will increase its administrative
and project management capacity and will put in place the suggested proposal procedure outlined
in Annex C.
Building on existing resources, a programme team will be set up within the organizational structure
of IZA, which will be dedicated to implementing and managing the programme. The team will
comprise existing staff from the IT and accounting departments of IZA as well as from the project
management team. Additionally, new personnel will be recruited where appropriate. Legal and
financial advisors will support the IZA team with their expertise where needed. Additional
information on staff resourcing at IZA can be found in Annex A.
Calls for research projects will be disseminated broadly and internationally. For this purpose IZA will
set up a news alert service, the IZA CAS, to automatically publish information about current calls.
Subscription to this news alert will be open to any interested institution, but to get the process
started IZA will invite several important institutions to subscribe and to forward the invitation to
subscribe to any institution that might be interested. The call dissemination methods and the CAS
are explained in Annex E. Additionally, IZA will build on its network of Research Fellows and Affiliates
to establish further contact with interested institutions across the globe.
Interested parties may apply for funding by delivering a complete proposal including supportive
documentation before deadline expiry.
The administrative documentation will be checked by IZA staff (PMU) upon receipt. The
administrative documentation of the selected applicant will be submitted to a detailed scrutiny by
the PMU and external advisors. The applicant may be rejected if any of the exclusion criteria is
found to apply or if the documentation is found to be incomplete or incorrect, in which case the
proposal chosen as second best will be selected.
To ensure that all proposals are treated fairly, the proposals will be submitted to a notary, who will
deliver all proposals to IZA on the day after deadline expiry. The proposals will then be evaluated by
independent peer-reviewers. On the basis of this evaluation the IOC will select the projects which
will receive funding under the programme.
All persons and organizations conducting any research in the course of this programme will be
expected to adhere to the IZA Code of Conduct.
Contracts with award holders will cover grant specific provisions but will generally be similar for all
award winners. Apart from the requirements specified in this proposal, contracts should cover
among others the following issues:




the treatment of intellectual property rights in view of programme result dissemination
applicable Law: German law
all disputes to be settled at the Bonn District Court
potential sanctions.
IZA realizes that the procurement and contracting process may require modification or adjustments
depending on experiences made. Thus the proposal and selection process outlined in Annex C is
merely a suggestion and will be reviewed by the PD LIC at the start of the program. Within the
confines of legal requirements and feasibility and with the approval of the PMG, the PMU will adjust
or modify the process wherever necessary or wherever requested by the PD LIC to do so in order to
develop a quick, simple and accessible application process.
3.6 Accounting and Audit
DFID and IZA will agree on the form and timing of payments, financial forecasting, accounting and
auditing requirement details. IZA will include detailed financial information pertaining to the
programme in its annual reports to DFID.
IZA will allow external audits of its finances by an internationally certified external auditor with
international experience.
An Accountant’s Report on the Current Economic and Financial Condition dated December 31, 2010,
has been sent to DFID in February 2011.
3.7 Monitoring and Reporting
IZA will monitor the delivery of individual research grants using the procedure for monitoring
outlined in Annex E.
In summary, award holders will be required to provide regular interim reports. In principle such
reports will be expected every six months. Interim reports will be evaluated and approved by the
Deputy PD under guidance of the PD LIC. Approved reports are a condition for continued payment
of grants by IZA.
A detailed final report will be expected from each award holder at the end of each project, including
a separate impact report. IZA will provide an annual report to DFID, including individual project
interim reports and Logical Framework revisions.
ANNEX A: Staff Resourcing
IZA will provide dedicated staffing for the implementation of the programme. This will be achieved
through re-deployment of existing experienced IZA staff, as well as additional recruitment where
necessary.
IZA anticipates the following structure for the programme:
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Deputy Programme Director LIC
This post would be for 0.25 FTE on average for the programme.
Programme Manager
This post would be for 0.5 FTE on average for the programme.
Programme Officer
This post would be for 0.5 FTE on average for the programme.
Account Manager
This post would be for 0.2 FTE on average for the programme.
Web Developer
This post would be for 0.2 FTE on average for the programme. .
Detailed description of the staff tasks:
Deputy Programme Director LIC
 Supports PD LIC
 Ensures programme’s fit with IZA Strategy, processes and procedures
 Liaison with PMU
 Overall responsibility for delivery of programme, and reporting against the logframe
 Oversee the Commissioning Process and contribute towards identification of IOC members
 Ensure the call and requirements are communicated widely
 Manage IZA’s relationship with the DFID Growth Team
 Work closely with the PD LIC to deliver programme impact
 Strategic liaison with the IOC.
Programme Manager
 Manage the Programme Commissioning Process
 Lead on the development of programme documentation and guidelines
 Identification of pool of experts for the programme
 Establishment and support of the IOC, including contracts
 Contract finalization for successful projects
 Ongoing management of the portfolio of programme awards including annual reporting by
award-holders
 Oversight of relevant web pages.
Programme Officer
 Day to day commissioning activities, developing and maintaining commissioning spreadsheet
 Assist in the development of programme documentation and guidelines input into call
specification and eligibility criteria
 Conduct full checks on all applications together with external advisors
 Anonymization of referee and assessor comments for feedback to both successful and
unsuccessful applicants. Preparation of decision letters

Assist the IOC in choosing reviewer Pool membership and manage the recruitment to the pool.
Account Manager
 Manage the accounting for the programme.
Web Developer
 Create and manage online content of the programme and publish updates as required.
IZA will also draw on a variety of other resources, most notably outside legal and financial advisors.
For the purpose of evaluating financial documents submitted online, an external auditor (such as
KPMG LLP, Deloitte, PwC) will be included in the process.
External auditor
The external auditor will:
 Check and evaluate the financial documents submitted by otherwise successful applicants
 Audit the budgets and financial reports of award winners
 Audit the grant money account
 Audit IZA programme accounting.
Legal Advisor
The legal advisor will be contacted whenever legal issues arise in programme management and will
assist in drawing up the contracts for the various positions within the programme and for the award
winners.
Notary
The notary will receive all proposals and deliver them to IZA on the day after deadline expiry. The
notary may also be present at IOC meetings to supervise the selection of projects in view of fairness.
ANNEX B: Timing
The proposed detailed implementation deadline is detailed below.
Date
Activity
May 2011
June/July 2011
Signature of MoU (contract) between DFID and IZA
Appointment of PMG, PD LIC, Deputy PD, IOC and PMU
Research on kick-off paper commences
Kick-off papers and policy briefs complete
August 2011
September 2011
Development of first calls commences
Kick-Off Workshop
November 2011
First calls are issued
End of January 2011 Submission deadline for first round of calls
From March 2012
Proposal evaluation
May 2012
Decision and Contracting
June 2012
Research for first projects commences
June 2013
Research for first projects complete (12 months duration)
December 2013
Research for first projects complete (18 months duration)
…
…
Feburary 2016
All research is completed, begin of programme completion process
May 2016
End of Programme
This timetable represents the best IZA estimation of programme timing and is subject to changes
depending on the developments within the programme and within IZA.
The following timeline represents an example of a full project cycle – from drafting the call to
completion of the research with dates based on the first call published in November 2011.
Begin drafting call
Call issued
Deadline for Submission
Evaluation
Contracting
Research commences
Research completed
Sept.
2011
Nov.
Jan.
2012
Mar.
May
June
June-Dec.
2013
ANNEX C: Proposal Procedure
SUBMISSION
PROPOSALS & ADMINISTRATIVE
DATA
INITIAL ADMINISTRATIVE DATA &
BUDGETCHECK
APPROVAL
REJECTION
PEER-REVIEW EVALUATION
IOC
DECISION
PMG
CONFIRMATION
VETO
SECOND BEST PROPOSAL
DETAILED ADMINISTRATIVE DATA
& BUDGETCHECK
PASS
FAIL
SECOND BEST PROPOSAL
CONTRACTING
REJECTION NOTICE
IZA realizes that the procurement and contracting process may require modification or adjustments
depending on experiences made. Thus the proposal and selection process outlined in this Annex is
merely a suggestion and will be reviewed by the PD LIC at the start of the program. Within the
confines of legal requirements and feasibility and with the approval of the PMG, the PMU will adjust
or modify the process wherever necessary or wherever requested by the PD LIC to do so in order to
develop a quick, simple and accessible application process.
1. Eligibility
1.1. Candidates
IZA calls will be open to all institutions and organizations that are not in any of the situations listed
as exemptions to eligibility in section 1.3. Candidates must have considerable professional and
academic experience pertaining to the field and topic outlined in the individual call for proposals.
Individuals will not be eligible to respond to IZA calls.
1.2. Consortia
Joint proposals from consortia will be permitted provided that conditions for adequate competition
are observed. Consortia of considerable size, whose staff numbers, financial situation, political
influence, capacity and resources are beyond those of usual applicants, or who have any other
considerable competitive advantage over usual applicants, may be rejected in order to ensure
adequate competition.
A consortium can be a permanent legal person or a grouping that has been established for the sole
purpose of an individual proposal procedure.
Consortia shall indicate which legal form they intend to assume and specify the role, qualifications
and experience of each member, as well as who has been appointed to represent the consortium as
lead partner. The lead partner shall be the contracting party and shall be responsible for the overall
performance of the contract and the management of the consortium.
All members of a consortium are jointly and, where applicable, severally liable to IZA.
1.3. Exemptions to Eligibility
Otherwise eligible candidates will be excluded from participation in proposal procedures, if:
 they are bankrupt or being wound up, are having their affairs administered by the courts,
have entered into an arrangement with creditors, have suspended business activities, are
the subject of proceedings concerning those matters, or are in any analogous situation
arising from a similar procedure provided for in national legislation or regulations
 they have been convicted of an offence concerning their professional conduct by a
judgment against which no appeal is possible
 they have a record of grave professional misconduct
 they have been convicted by a judgment against which no appeal is possible for fraud,
corruption, involvement in criminal organizations or any other criminal activity or breach of
applicable or national law that is of relevance to IZA and/or proposal procedures
 they have not fulfilled their tax obligations, obligations relating to the payment of social
security contributions or obligations relating to the treatment of employees
 they are citizen of a state that is not diplomatically recognized by the international
community due to human rights abuses
 they are employed by IZA
 their participation would cause a conflict of interest.
Candidates will be requested to submit a statement of honor, in which they guarantee that none of
the above apply.
2. Structure of Calls
2.1. Call-specific Information
Calls for proposals will include the intended topics and scope of the research, as well as the intended
deadlines and project duration and will be made publicly available. The call will also include a
requirement to define an impact plan which outlines who will use the research results and how
these users will be involved in the project.
The topic and scope of the intended research project will be clearly defined. The project definition
will be in the form of a scientific explanation of the area of study, suggested methods, the goals the
project should achieve upon completion and the expected professional and academic experience
and capacity of candidates.
The selection and award criteria for the individual proposal procedure will be explained in detail
and, where applicable and reasonable, samples of evaluation forms will be provided. Any forms
required for a successful submission will be included as samples in the call.
2.2 Legal nature of the Call
Calls for proposals by IZA will not be a legal offer and will not establish contractual obligations
toward participants. For this purpose IZA proposal calls are considered an invitation to submit
proposals.
2.3 Dissemination of Calls for Proposals
IZA calls are disseminated broadly. Interested parties may subscribe to the IZA Call Alert
System (CAS), which will keep all subscribers informed about current and upcoming calls.
Subscription to the CAS is open to all institutions; subscribers will not be checked for eligibility upon
subscription.
3
Submission
3.1 Contact between IZA and Candidates
Contact between applicants and IZA is allowed, but any information made available to any applicant
– whether in response to inquiries or otherwise – will be made available to all applicants.
Requests for additional information made less than seven calendar days before the closing date for
submission will not be processed (for practical reasons).
IZA may, on its own initiative, inform interested parties and candidates of any error, inaccuracy,
omission or any other clerical error in the text of the call for proposals.
3.2 Number of Proposals
Candidates may only submit one proposal per project/research goal. Members of a candidate
consortium may not be members of another consortium submitting a proposal for the same
project/research goal.
Candidates who submit more than one proposal for the same project/research goal will be excluded
from the proposal procedure.
3.3 Submission Procedure
The submission procedure will require a project/research goal specific online enrolment, during
which an applicant number will be provided. All administrative documentation and proof pertaining
to the experience of intended research staff for the project (diplomas) must be submitted online.
The actual proposals must delivered separately.
3.3.1
Administrative and Reference Data Collection
Administrative data and documents as well as any proof of the experience and expertise of intended
research staff should be submitted online via the project specific online portal which is to be set up
on the IZA internet site. All documentation may be provided as scans, but applicants should keep in
mind that they may be required to provide originals (to be sent by post) of these documents if
requested by IZA to do so.
Data may be uploaded as one package or piece by piece, but all required documentation must be
submitted before deadline expiry.
Administrative, legal and financial documents submitted online may be evaluated, verified and
approved by a certified external auditor with global experience (such as the KPMG LLP Group,
Deloitte, PwC), as well as the IZA administration (PMU) and legal advisors. The proof pertaining to
the expertise and experience of the suggested research staff will be checked by the PD LIC under
guidance of the PMG.
3.3.2
Proposal Submission
The proposal as specified in the original call for proposals must be submitted as a PDF file, either
send on CD by post, uploaded to the IZA homepage or delivered by a duly authorized representative
of the applicant
In case of delivery of proposals, a receipt must be obtained, dated and signed by the notary in
charge of proposal collection as proof of submission.
3.3.3
File Name
The proposals must be submitted as a PDF file, which is entitled ‘Proposal by (name of applicant) for
call no. (Call number).’ Where a proposal is being resubmitted the file name should include a
reference to the resubmission number as follows ‘Resubmission X’ where X is the number of
resubmission.
3.3.4
Submission Collection
To ensure transparency and fairness, proposals will be delivered to a notary, who will hold all
proposals until the day after the submission deadline. The notary will then send all proposals to the
IZA PMU, who will start the evaluation process.
3.4 Deadlines
Deadlines will be defined in the call for proposals.
For all required documentation the submission deadline is met, if all documents are uploaded by
clicking the “Submit” button before the expiry of the deadline. An electronic e-mail receipt will be
generated for every document submitted and will serve as proof of submission.
For proposals the submission deadline is met, if the proposals are received by the notary in charge
of proposal collection no later than the day of deadline expiry.
Applicants will bear the risk of failure of delivery (by post or otherwise).
3.5 Proposal Modification and Resubmission
Already submitted proposals may be resubmitted in case of modifications made to the proposal
before the deadline expires. In this case resubmissions must be clearly numbered (see section 3.3.3).
Only the proposal carrying the highest number will be considered for evaluation.
3.6 Validity of the proposal
Applicants must keep their full proposals valid for a period of 12 months after the expiry of the
deadline without changing or modifying the terms of the proposal. Applicants will be required to
include a statement to this effect in their proposal.
3.7 Confidentiality
IZA considers all submitted proposals to be confidential.
Submitted administrative, financial and legal documents may be given to external advisors of IZA for
the purpose of evaluation and verification. Proposals will be evaluated and assessed by independent
peer-reviewers. Candidates will be expected to give their consent for any such external evaluation.
IZA will ensure that all external advisors and independent evaluators have signed confidentiality
agreements.
3.8 Return of submitted Documents
Documents submitted to IZA for proposal procedures will not be returned after the procedure has
ended.
3.9 Cost of Proposal Procedure
Costs incurred by the applicant are not subject to reimbursement. All costs incurred by the applicant
in the course of the application procedure must be borne by the applicant. IZA will not provide
financial assistance to applicants.
3.10 Completeness and Correctness of submitted information
All information submitted in the course of the proposal procedure must be complete. Incomplete
proposals, with missing or false information or documents or containing misrepresentations of facts
will be rejected.
4. Proposal Composition
All proposals submitted for proposal procedures must be in line with the requirements of the call.
4.1 Administrative Data
The following documents will need to be provided online for every application:
Proof of Eligibility:
 Commercial register excerpt
 Statement of honor.
Administrative Information:
 Intended Budget for the project
 Bank details
 Balance sheets of the last three years
 Bank statement
 Proof of authority of contact person
 Statement of exclusivity and availability.
 Signed consent form
Proof of Professional Capacity:
 Suggested research staff
 Expertise of research staff (Scans of diplomas).
Supporting Information:
 Gender and Ethics declaration.
4.2 Proposal
The proposal will be a technical proposal, outlining the intended research and methodology. It will
include similar projects of the applicant for reference, CVs of the intended research staff including
publications and relevant experiences and an overview of the applicants project management
capabilities (in line with the criteria B and C of the evaluation criteria). It will also include an impact
plan which outlines who will use the research results and how these users will be involved in the
project.
4.3 Language of the Proposal
The proposal must be submitted in English, including all supporting documents. Where any required
document cannot be obtained in English, a translation – verified and approved by an official
authority – must be submitted.
4.4 Currency of the Financial Proposal and Payment of Grants
All financial aspects of proposals are calculated in Euros. Payments of awarded grants will also be
made in Euros.
5. Selection
Administrative Checks
The PMU will perform an initial check of the required documents for each project that have been
submitted via the online portal. The initial administrative Check will be overseen by the Deputy PD
under guidance of the PD LIC. In particular, the documentation will be checked for the following:

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



Is the applicant financially capable of achieving the goals set out in the proposal?
Is the applicant in a stable enough financial position to ensure completion of the project?
Is the proof provided for the expertise of intended research staff (diplomas) credible?
Is there any reason to doubt the applicant’s ability to efficiently handle the project?
Have all required documents been submitted and are they correct and complete?
Does the project budget give enough details and are numbers presented within the budget
feasible (especially considering the location of the applicant organization)?
Proposals may be rejected if any of these criteria are not sufficiently met. Proposals may also be
rejected if any of the documents submitted are incomplete, incorrect or have not been submitted in
English. In the latter case, the PMU may inform the applicant of missing documents or errors and
may grant the applicant a period of ten days after deadline expiry to submit missing documents or
correct any errors.
Peer-Review Evaluation
For each project, each proposal will be evaluated by two peer-reviewers specifically selected for the
project by the IOC from a peer-review pool based on their expertise. This peer-review pool will be
comprised of IZA Fellows and Affiliates who have been appointed by the IOC. Members of the peerreview pool will be continuously monitored by the IOC, which, based on monitoring results, may
dismiss peer-reviewers no longer considered eligible to be included in the pool. The IOC will discuss
the composition of the peer-review pool at least once a year and, if required, will dismiss members
or nominate new or additional peer-reviewers. This serves to ensure a peer-review pool that
includes only the most experienced specialists and that covers expertise in all possible research
areas of the programme.
Peer-reviewers, who are based in institutions around the world, will receive the proposals
electronically and will be required to fill out an evaluation form online. This evaluation form will
include a scoring table and a section for project price appreciation plus a space for comments. See
below for an example scoring table:
Award Criteria
Quality of the research proposal
Clear description of the conceptual framework,
analytical framework, research questions, and of the
intended methodology and its appropriateness to the
Criterion A
research questions, demonstrating in-depth knowledge
of the issue.
Clear relevance to policy in LICs. Who will be using the
evidence and how will they be engaged?
Possible Score
35
35
Criterion B
Criterion C
Proposal Score
Quality and composition of the project team
Relevance of the skills and multidisciplinarity of the
project team; inclusion of Southern researchers
Quality of the Project management
Quality control and quality assurance mechanisms
included in the project plan. Peer-review. Quality of the
project plan submitted in respect of work organization,
resource allocation (personal and budget) and the
feasibility of the time plan
Institutional Score
Total Score
(70)
20
10
(30)
(100)
The criteria in this table are merely a guideline and may be modified according to the nature and
requirements of individual projects or the requirements of IZA, DFID and the PD LIC. Each criterion
may be split into sub-criteria, but in principle scientific quality should account for 70% and
institutional qualifications for 30% of the total quality score.
Peer-reviewers will be required to comment on each criterion, explaining their reasons for any
specific score. Peer-reviewers will be allowed approximately three to four weeks for evaluation,
after which the online evaluation forms must be filled out and submitted. There will be a cut off
score for each of the three criteria which will be defined by the PMG. Proposals that achieve a lower
score than the cut off score for any of the criteria will be rejected. IZA envisions the cut off scores to
be 40 points for quality, 15 points for research team and 5 points for project management
After expiry of the evaluation deadline, the IOC will review the filled out evaluation forms. Should
any peer-reviewer fail to meet the deadline, he or she can be dismissed from the peer-review pool
by the IOC (through the PD LIC) and unevaluated proposals will be send to a replacement reviewer
who has volunteered as an ad hoc evaluator. In addition the IOC may choose to pass on proposals to
two ad hoc evaluators for re-evaluation if the original evaluation seems unreasonable. Based on reevaluation results, the original reviewer may be dismissed from the peer-review pool. Should there
be any disagreement between members of the IOC as to which evaluations are deemed
unreasonable and require re-evaluation; a vote to that effect will be cast. In case the vote is tied, the
PD LIC, as lead of the IOC has a tie breaking vote in this matter.
Once all proposals have been evaluated properly (usually after four to six weeks) the IOC will discuss
the evaluation results and rank the proposals. For this purpose the IOC will meet either in person or
by electronic means.
The highest ranking proposal will be passed on to the PMU who will deliver the relevant
administrative documentation to an external auditor for a detailed scrutiny. The external advisors
will pay particular attention to the exclusion criteria defined in section 1.3 of Annex C. Should the
winning proposal pass this scrutiny, it will be passed on to the PD LIC and PMG for confirmation.
Should the winning proposal fail the evaluation by the external advisors, the second highest ranking
proposal will take its place and will receive the same treatment.
Confirmation or Veto
The PMG as the highest executive body of the joint IZA/DFID Growth and Labour Markets in LICs
Programme will make the final decision. It can either confirm the proposal chosen through peerreview, IOC discussion and a detailed administrative check as the award winning proposal or it can
veto the selection. Whenever the PMG utilizes its veto right, the originally selected proposal is
rejected and the grant will automatically be awarded to the next highest ranking proposal, providing
it passes the administrative check.
IOC Disagreements
In the unlikely event that the IOC cannot decide the ranking position of some or all proposals
because a vote to that effect is tied, the PD LIC will hold a tie braking vote.
Depending on the quantity and quality of the submissions received by IZA, the PMG will have the
right to implement a more detailed prior screening process if necessary.
ANNEX D: Fiduciary Risk
IZA will put in place a range of policies and procedures to maintain quality in the research funded
under the programme and to ensure an efficient and effective use of the funds provided. Through
peer-review, expert advice and evaluation through the PD LIC and PMU grants will only be given to
institutions recognized as bona-fide institutions with a sound financial situation, provided that these
institutions agree to adhere to the programme conditions.
IZA will put in place a system of sanctions against institutions that fail to comply with the terms and
conditions of their grants to ensure compliance. This system will be updated and modified regularly
based on experiences with the programme and outside advice.
However, as the reach of the LIC programme is intended to be global and to focus specifically on
LICs, the extent to which sanctions deployed by IZA are applicable or enforceable in a global context
may reduce the ability to enforce compliance. This produces risks above and beyond the normal IZA
operations and whilst some of these additional risks can be minimized or mitigated through peer
review and stringent operational management, there are risks that cannot be fully covered by IZA
operating procedures.
IZA will make every effort to mitigate these risks through appropriate systems and procedures, but
cannot accept any liability, financial or otherwise.
Risks will be fully considered in the evaluation of proposals and adequate resources will be made
available in the budget for recovering such losses.
ANNEX E: Monitoring
IZA will report to DFID against the Logical Framework. The IZA PMU team will provide a six-monthly
update and an annual report to DFID under the guidance of the PD LIC. These will include progress
reports specifically linked to the logical framework’s outputs and milestones. For this purpose, the
PD LIC will monitor the progress of the research, including delivery of research products, capacity
outputs and overall compliance with fiduciary responsibility.
The DFID management team will conduct annual reviews in line with DFID best practice. Provision
will also be made for an independent mid-term review of DFID investment. This will enable an
assessment of the progress towards the research outputs as well as the capacity building goals.
Award holders will be monitored through a system of interim and final reports for their research
projects.
Interim Reports
During the course of their research, all award holders will be required to submit progress reports to
IZA. These reports should be between two and four pages of A4 and include the following:







Progress of the Research Programme
Engagement Strategy
Outputs of the project to date
Activities, Events and Outputs planned
Project management
Financial management
Any unforeseen obstacles and information on how they will be addressed.
The progress reports will be subject to approval by the Deputy PD. Approval will be a requirement
for continued payment of the grant money. Should the Deputy PD withhold his approval, he will
discuss and agree with the grant holder the changes required for the research, after which payments
will continue.
End of Award Report
Award holders will be required to submit an End of Award final report within three months of the
grant end date. The final report should provide a clear picture of the project, the research
conducted and the outcome of the project. It should include, but is not limited to:
a.
b.
c.
d.
Non-technical summary
Project overview
 Objectives of the project
 Project outline
 Methodology
 Activities
 Project Findings
 Benefits of the project findings
Suggestions for uses of the project findings
Early and anticipated impacts
e.
 Summary of impacts to date
 Anticipated or potential future impacts
Declaration of research integrity.
Impact Report
Award holders will be required to submit an Impact report to IZA approximately one year after the
grant end date. The Impact Report should cover scientific, economic and societal impacts as well as
any unexpected impacts of the project. It should consist of the following headings:
a.
b.
c.
d.
Scientific Impact

Summary

Findings and Outputs which led to these impacts

How the impacts were achieved

Who was impacted by the findings and outputs outlined.
Economic and Societal Impacts

Summary

Findings and Outputs which led to these impacts

How the impacts were achieved

Who was impacted by the findings and outputs outlined.
Unexpected and Potential Impacts

Unexpected Impacts

Potential Future Impacts
Impact Limitations

Limited Scientific Impact – Reasons

Limited Economic and Societal Impacts – Reasons
The end of award evaluation is undertaken by peer reviewers. Depending on the size of the grant,
one to three peer review reports will be required. Each peer reviewer will grade the project, after
which the grades from all peer reviewers will be aggregated to provide an overall rating for the
research on the following scale: Outstanding, Very Good, Good, Satisfactory, Weak, Unacceptable.
The final instalment of the grant will not be paid until an End of Award Report has been completed
in full and accepted by IZA. Award holders whose End of Award Report is overdue or incomplete will
not be eligible for further funding by the IZA until the report has been accepted. IZA reserves the
right to recover a sum of the expenditure incurred on a grant if the End of Award Report is overdue.
End of Award Reports will be shared with DFID and will be publicly available. Similarly, intermediate
outputs such as working papers will be required and will be shared with DFID, for potential use in a
DFID working papers series.
ANNEX F: Call Dissemination – IZA Call Alert System
Calls for proposals will be disseminated broadly. For this purpose the IZA Call Alert System (CAS), an
electronic automated news alert system, will be integrated into the IZA homepage. Institutions
interested in calls for proposals in connection with the LIC programme can subscribe to the CAS and
will then be informed about current and upcoming calls via email. While subscription to the CAS is
open to anyone as there will be no eligibility check upon subscription, IZA realizes that this does not
guarantee a broad dissemination.
IZA will promote the CAS internationally to ensure that a broad range of institution subscribe to the
CAS before the first call for proposals is issued. Promotion of the CAS will build on the IZA fellows
network for contact with institutions. Additionally the following institutions will be contacted and
informed about the programme and the CAS and asked to forward the invitation to subscription to
any institution they think could be interested:







National ministries focusing on development
International chambers of commerce
Embassies
International Universities
OECD
World University Services
International Development Association AID.
The contacted institutions will be asked to inform IZA of any institutions that were notified of the
possibility of subscribing to the CAS.
In addition an electronic copy of the first call for proposals will be send to the OECD and Embassies
in Germany accompanied by a request to forward the information to interested parties.
ANNEX G: Transparency
Transparency throughout the entire programme is of the highest priority to IZA. Procedures and
Processes will be put into place to ensure that transparency is ensured at every step of the process.
For this purpose and as a first step to ensure transparency all IZA employees are exempt from
applying to any calls for proposals issued in the course of the programme. In addition the following
procedures will safeguard transparency:
Recruitment and Appointment
IZA employees will not be eligible to be appointed as PD LIC or members of the IOC. In addition
anyone whose appointment as PD LIC or member of the IOC would result in a conflict of interest
shall not be eligible. While members of the IZA fellows network may be appointed as PD LIC or
members of the IOC, they may not participate in proposal evaluation if their home institution has
applied for funding – alone or as member of a consortium - for the relevant project. Should this be
the case for the PD LIC at any time, the Deputy PD will temporarily assume PD LIC responsibilities for
the relevant project.
Call for Proposals
IZA will make sure that calls for proposals are widely available and open to a broad range of
applicants. Any additional information requested by interested parties and made available by IZA
will be made available to all interested parties simultaneously.
Administrative Data and Documentation Checks
The evaluation of financial information and documents submitted online will be carried out by the
PMU for all applicants and an external auditor such as KPMG LLP, Deloitte or PwC for the winning
applicant. The check of documentation pertaining to the experience and expertise of intended
research staff will be carried out under the supervision of the PD LIC and the PMG.
Evaluation
Proposals will be delivered to a notary who will ensure that the proposals cannot be processed
before deadline expiry. This helps to ensure that no applicant is given an advantage due to early
access to the proposal..
Proposals will be evaluated by peer-reviewers with the IOC monitoring the evaluation and agreeing
on a final ranking of projects. The winning proposal will be chosen based on this ranking. The
technical proposal will account for 60% of the overall score. The experience and expertise of the
intended research staff and of the applicant institution will account for 40% of the overall score.
Rejection
The notifications of rejection during any of the phases of evaluation shall include the grounds of
rejection and will be sent after the award winner has been chosen. Where applicable the filled out
evaluation forms will be attached to rejection notices.
ANNEX H: Detailed Budget
2
Research Costs
2011
Research (annual) 1
Total Research Cost
2012
0 €
2013
1.118.600 €
2014
2.237.200 €
2015
3.355.800 €
2016
3.169.357 €
Total in EUR
Total in GBP
186.431 €
10.067.388 €
8.895.500 £
Uptake Costs 2
2011
Workshops
Kick-Off/End of Program Workshop
Annual Research Conference
Policy Conferences
Training Workshop
Publications
Book / Collected Volume
Other Publications
Annual Uptake Total
2012
2013
2014
2015
2016
30.000 €
30.000 €
40.000 €
30.000 €
40.000 €
25.000 €
30.000 €
50.000 €
30.000 €
100.000
150.000
80.000
50.000
80.000 €
100.000 €
70.688 £
88.360 £
560.000 €
494.816 £
50.000 €
Total in EUR
25.000 €
3.000 €
20.000 €
20.000 €
20.000 €
20.000 €
80.000 €
17.000 €
53.000 €
50.000 €
90.000 €
115.000 €
75.000 €
177.000 €
Total Uptake Cost
Total in GBP
€
€
€
€
88.360
132.540
70.688
44.180
£
£
£
£
Admin Costs 2
PMG
(4 members, annual meetings)
PD LIC
0,25 FTE
Honorarium, travel allowance, overhead
IOC
(expense allowance, 6 members
à 5.000 €, 1 x p.a. )
Deputy PD
(travel budget, overhead, 0.25 FTE)
(travel budget, overhead)
PMU
Program Manager
(0.5 FTE)
Program Officer (0.5 FTE)
Account Manager (0.2 FTE)
Web Developer (0.2 FTE)
Building up/Implementaion
online submission system, website
Notary
External Auditor
Legal Advisor
Peer-Review
(3 Reviewers per project, 90 total)
Annual AdministrativeTotal
2011
2012
2013
2014
2015
2016
15.000 €
20.000 €
15.000 €
40.000 €
15.000 €
40.000 €
15.000 €
40.000 €
15.000 €
40.000 €
0 €
20.000 €
75.000 €
200.000 €
66.270 £
176.720 £
30.000 €
30.000 €
30.000 €
30.000 €
30.000 €
0 €
150.000 €
132.540 £
15.000 €
30.000 €
30.000 €
30.000 €
30.000 €
15.000 €
150.000 €
132.540 £
20.000
15.000
5.000
6.000
40.000
€
€
€
€
€
40.000
30.000
10.000
12.000
0
€
€
€
€
€
40.000
30.000
10.000
12.000
0
€
€
€
€
€
40.000
30.000
10.000
12.000
0
€
€
€
€
€
3.000 €
15.000 €
20.000 €
6.000 €
20.000 €
15.000 €
6.000 €
20.000 €
15.000 €
6.000 €
20.000 €
15.000 €
€
30.000 €
30.000 €
30.000 €
204.000 €
278.000 €
278.000 €
278.000 €
40.000
30.000
10.000
12.000
0
€
€
€
€
€
2.000 €
20.000 €
15.000 €
244.000 €
20.000
15.000
5.000
6.000
0
Total in EUR
€
€
€
€
€
2.000 €
5.000 €
10.000 €
Programme Total
257.000 €
1.446.600 €
2.605.200 €
3.748.800 €
3.488.357,00 €
€
€
€
€
€
176.720
132.540
44.180
53.016
35.344
£
£
£
£
£
25.000 €
100.000 €
90.000 €
22.090 £
88.360 £
79.524 £
90.000 €
79.524 £
1.380.000 €
1.219.368 £
12.007.388,30 €
10.609.684 £
98.000 €
Total Administrative Cost
Annual Programme Total
200.000
150.000
50.000
60.000
40.000
Total in GBP
461.431 €
1
The annual research costs are based on an evolving structure of starting, active and completed
projects under the programme. The assumption is that active projects requiring funds will number
up to 10 in 2012, 20 in 2013, 30 in 2014 and 20 in 2015, with 10 projects ending in February 2016.
Refer to Annex B.
2
This budget is based on several assumptions and estimates and yearly sums can therefore not be
viewed as fixed. However, IZA will guarantee that the total sums for research (£8,895,500), uptake
(£494,816) and administrative activities (£1,219,686) will not be exceeded.
Conferences/Workshops
At the beginning of the programme a kick-off workshop will be held to inform PMG, IOC, PD LIC and
PMU of the process their duties.
In addition IZA will organize approximately five annual research conferences during the course of
the programme and two policy conferences, as well as two training workshops. The exact timing of
these workshops and conferences will depend on the development of the programme.
At the end of the programme a final workshop will be held to present and discuss the results and to
prepare a possible publication.
Publications
Aside from various publications a book or collected volume will be published at the end of the
programme, which will include the key findings of the programme.
PMG
The four members of the PMG will meet for an annual meeting in London or Bonn. Calculation is
based on travel, accommodation for two nights (4-star hotel) and expected reimbursement claims.
PD LIC
The PD LIC contract will be held by IZA. On a consultancy basis the contract will include a package of
annual honorarium, travel allowance and overhead. The calculation is based on 0.25 FTE.
IOC
The IOC will consist of 6 members from all over the world. The group will meet in person once a
year. The calculation is based on 6 business class flights (partly overseas), 2 nights of
accommodation (4-star hotel), per diem and overhead.
Deputy PD
The Deputy PD will be an in-house researcher employed by IZA. The calculation is based on a 0.25
FTE post, including travel budget and overhead.
PMU
The PMU will manage the complete administrative part of the programme. A team of two
employees will be needed (Programme Manger and Programme Officer), each calculated with 0.5
FTE, as well as support by an Account Manager (0.2 FTE) and a Web Developer (0.2 FTE).
In addition external support will be needed once for building up and implementation of the website
and the online submission system.
The external auditor, legal advisor and notary will be engaged in the process as described in Annex A
and paid accordingly.
The funds withdrawn from the escrow accout to cover administrative costs (£609,684) will be
withdrawn on a quarterly basis as follows:
Total Admin Cost
50% of admin costs withdrawn from the account
Payment 2011
Payment 2012
Payment 2013
Payment 2014
Payment 2015
Payment 2016
Total
Percentage*
15%
20%
20%
20%
18%
7%
100%
Quarterly amount
£45.726,30
£30.484,20
£30.484,20
£30.484,20
£27.435,78
£21.338,94
£1.219.368,00
£609.684,00
Annual amount
£91.452,60
£121.936,80
£121.936,80
£121.936,80
£109.743,12
£42.677,88
£609.684,00
ANNEX I: Selected References
A.
World Bank
Ref No 1
IZA
Project title
Country
US
Annual IZA – World Bank International Conference Employment
and Development
Overall Proportion
project carried out
value (EUR)
by
candidate
(%)
412.000
100
Name of client
World Bank
Detailed description of project
While most research in labor economics focuses on the US and Western
Europe, the majority of the world’s population, and particularly the poor
and young live in countries where labor markets often work quite
differently. To stimulate and promote research on employment and labor
economics in developing countries, the World Bank and IZA initiated a
work programme on “Employment and Development” in 2006. Since
then, the annual conference on Employment and Development has
provided a platform for researchers and policy experts to discuss new
research findings and identify areas in which further work is needed. The
past annual conferences organized by IZA and the World Bank took place
in:
Berlin 2006 (USD 70.000)
Bonn 2007 (USD 80.000)
Rabat 2008 (USD 250.000)
Bonn 2009 (USD 35.000)
Capetown 2010 (USD 135.000)
Origin of
funding
Dates
(start/end)
US
2006 ongoing
Name
of
partners
if any
B. European Commission / European Parliament
Ref No 2
IZA
Project title
Country
EU
Analysis of costs and benefits of active compared to passive Labour
Market Policy measures”
Overall Proportion Name of client
project
carried
value
out by
(EUR)
candidate
(%)
299.900
42
European
Commission
Origin of
funding
Dates
(start/end)
Name
of
partners
if any
European
Commission
2010-2011
ECORYS
Detailed description of project
Because of the financial crisis of 2009/2010, there is a need for a
convincing strategy to reduce government deficits in balance with
overarching economic and social goals. Ensuring the effectiveness of
governmental policies, including labour market policies, has gained in
importance. How can we achieve the same (or more) with smaller
budgets, is one of the important policy challenges throughout Europe
in current times. The objective to which the study should contribute, is
an effective communication between the Commission and the
Member States on the implementation of a mix of active and passive
labour market policies in the next ten years as part of the EU 2020
strategy.
Ref No 3
IZA
Project title
NEUJOBS-Employment 2025: How will multiple transitions affect
the European labour market (Collaborative project FP7-SSH-20101)
Country
Overall
project
value
(EUR)
Proportion
carried
out by
candidate
(%)
EU
7.740.277
6,2
Name of
client
European
Commission
Detailed description of project
The objective of NEUJOBS is to imagine future, or rather various
possible futures, under the conditions of the socioecological transition
(and incorporating other key influences), map the implications for
employment overall, but also in key sectors and relevant groups and
integrate all of this together under a single intellectual framework. It
will do so by combining EU-wide studies based on existing datasets
with small-N comparative research dealing with one or more
countries. Furthermore, the output will be a mix of quantitative and
qualitative analysis, foresight activities and policy analysis. The
proposal is organised in 24 workpackages that will run over a period of
48 months. The Consortium is composed by a team of 32 partners
chosen among top research centres in Europe.
Origin of
funding
Dates
(start/end)
Name
of
partners
if any
European
Commission
2010-2011
32
partners
Ref No 4
IZA
Project title
Study on the Social and Labour Market Integration of Ethnic
Minorities
Country
Overall
project
value
(EUR)
Proportion
carried
out by
candidate
(%)
EU
321.655
100
Name of client
Origin of
funding
Dates
(start/end)
Name
of
partners
if any
European
Commission
European
Commission
2006-2007
ESRI
DG
Employment
and Social
Affairs
DG
Employment
and Social
Affairs
Detailed description of project
The overriding objective of the study is to provide the European
Commission High Level Group on the social and labour market
integration of minorities with an expert analysis of mechanisms to
overcome the barriers that members of ethnic minorities in Europe
may face in gaining access to employment. Several initiatives, such as
the network of ten Country Experts and the IZA Expert Opinion
Survey, have been fostered within this project.
Ref No 5
IZA
Project title
Geographic Mobility in the European Union: optimising its social and
economic benefits
Country
Overall
project
value
(EUR)
Proportion
carried
out by
candidate
(%)
Name of
client
Origin of
funding
Dates
(start/end)
Name of
partners if
any
EU
229.450
60
European
Commission
European
Commission
2006-2008
DG
Employment
and Social
Affairs
DG
Employment
and Social
Affairs
NIRAS
Consultant,
AMS
Sweden
Detailed description of project
The study requires accomplishment the following tasks: •
Establishment of an empirical basis for examining geographical
mobility in Europe • Presentation of statistical evidence on the
extent of geographical mobility between regions and countries of
the EU, in terms of stocks and flows • Discussion of an “optimal”
level of mobility and how to achieve more mobility.
Ref No 6
IZA
Project title
Study on Active Inclusion of Migrants
Country
Overall
project
value
(EUR)
Proportion
carried
out by
candidate
(%)
EU
280.010
70
Name of client
Origin of
funding
Dates
(start/end)
Name
of
partners
if any
European
Commission
European
Commission
2008-2010
ESRI
DG
Employment
and Social
Affairs
DG
Employment
and Social
Affairs
Detailed description of project
The European Union has been the destination to large numbers of
migrants every year. In 2006 about 3.8% of the EU25 population were
resident third country nationals and continuing migrant inflows are
projected. The observed disparities between native and immigrant
social and economic outcomes are thus a major challenge to the
European society. They are also in stark conflict with the cornerstone
values of the EU as embedded in acquis communautaire. Yet, social
and economic disintegration remains an everyday challenge to
millions of members of immigrants living in Europe today. Integration
challenges appear in a variety of forms, from unequal access to health
care and social services to unemployment, underemployment, and
substandard remuneration of individuals belonging to different
immigrant groups.
Ref No 7
IZA
Project title
Framework Contract on External Expertise on emerging regulatory
and policy issues related to Social Policies and Social Protection
Country
Overall
project
value
(EUR)
Proportion
carried
out by
candidate
(%)
EU
900.000
30
Name of client
European
Parliament
Detailed description of project
Several Studies:
“The mobility and integration of people with disabilities into the
labour market”
”The role of social protection as economic stabilieser: lessons from the
current crisis”
”The external dimension of social policy”
”Analysis of the Social Agendas”
Origin of
funding
Dates
(start/end)
Name
of
partners
if any
European
Commission
2009-2011
IDEA
Consult,
WIFO,
NIRAS,
FRDB
Ref No 8
IZA
Project title
Study and conferences on European Labour Market Analysis using
Firm-level Panel Data and linked Employer-Employee Data
Country
Overall
project
value
(EUR)
Proportion
carried
out by
candidate
(%)
EU
349.909
5
Name of
client
Origin of
funding
Dates
(start/end)
Name of
partners if
any
European
Commission
European
Commission
2006-2007
DG
Employment
and Social
Affairs
DG
Employment
and Social
Affairs
London
School of
Economics
(coord.)
and
several
others
Detailed description of project
Project includes analysis of the following key areas: 1. Labour
turnover flows and mobility 2. Rent-sharing and profitability 3.
Employment and social impact of international production patterns
4. Development of linked and panel data sets for European labour
market and social policy analysis
Ref No 9
IZA
Project title
Sharing Expertise in the Field of Labour Economics through a
Programme of Long-Term Visiting Scholars (TOK)
Country
Overall
project
value
(EUR)
Proportion
carried
out by
candidate
(%)
Name of client
Origin of
funding
Dates
(start/end)
EU
593.000
100
European
Commission
Marie Curie
Host
Fellowships for
the Transfer of
Knowledge
(TOK)
European
Commission
Marie Curie
Host
Fellowships
for the
Transfer of
Knowledge
(TOK)
2004-2008
Detailed description of project
The goal of the project ist to bring senior established scholars in the
field of labour economics to IZA and interact with the in-house staff of
young post-docs for a substantial length of time. It is planned to have
each year: 1 very experienced research for one year and 1 for three
months. Furthermore, 1 less experiences researcher for six months
and 1 for 3 months.
Name
of
partners
if any
C. German Ministries
Ref No 10
IZA
Project title
Evaluation der Programmeme “Gründercoaching Deutschland”
und “Gründercoaching Deutschland – Gründung aus der
Arbeitslosigkeit”
Country
Overall
project
value
(EUR)
Proportion
carried
out by
candidate
(%)
Name of client
Origin of
funding
Dates
(start/end)
Name
of
partners
if any
Germany
600.284
40
Federal
Ministry of
Economics and
Technology
(BMWi)
Germany
2010-2013
DIW,
infas
Detailed description of project
To support business founders, the German Government launched in
2007/2008 two programmes that provide funding for external coaching
during the founding period. Whereas one programme is tailored for
business founders who started their business out of unemployment, the
other one addresses all start-ups. They cover a certain percentage of the
total amount spent on external coaching and aim at encouraging a
sustainable firm development, potentially leading to a faster growing of
the businesses. Both programmes became an important part of the
general promotion of start-ups in Germany. IZA evaluates the
effectiveness and efficiency of both programmes on behalf of the
Federal Ministry of Economics and Technology and the Federal Ministry
of Labour and Social Affairs since November 2010.
Ref No 11
IZA
Project title
Evaluation of the New Start-up Subsidy
Country
Overall
project
value
(EUR)
Proportion
carried
out by
candidate
(%)
Name of client
Origin of
funding
Dates
(start/end)
Germany
176.734
100
Institute for
Employment
Research (IAB),
Nuremberg
Germany
2009-2012
Name
of
partners
if any
Detailed description of project
In 2006 the German government introduced the “new start-up subsidy”
(Gründungszuschuss) to support unemployed individuals to become selfemployed. The implementation of this programme replaced the earlier
programmes, i.e., the bridging allowance (Überbrückungsgeld) and the
start-up subsidy (Existenzgründungszuschuss). Evaluation of the latter
two programmes within the “Hartz-Evaluation” showed that they were
throughout successful. The current project aims at evaluating the new
start-up subsidy and depicts therefore a consistent extension of the
research on start-up promotion in Germany. We adopt a holistic
evaluation approach, comparing the labour market outcomes of
subsidized founders and a control group of other unemployed
individuals on the one hand, and the performance of subsidized
businesses to unsubsidized start-ups on the other. Furthermore, we
conduct a survey with supported entrepreneurs right after their start up,
allowing an assessment of the dynamic process during the founding
period.
Ref No 12
IZA
Project title
Promotion of Professional Training and Transfer Programmes in
Germany
Country
Overall
project
value
(EUR)
Proportion
carried
out by
candidate
(%)
Germany
1.215.000
50
Detailed description of project
Name of
client
Origin of
funding
Dates
(start/end)
Name
of
partners
if any
German
Federal
Ministry for
Economics
and Labour
(BMWA)
Germany
2004-2006
DIW
The evaluation project investigates the implementation and impact of the
reformed promotion of professional training (FbW) and transfer
programmes. Besides an implementation analysis, microeconometric
measurement of the causal effects on participants is at the core of the
evaluation project. Econometric impact analyses are based on
administrative data and complementary panel surveys of participants and
matched non-participants.
D. Foundations
Ref No 13
IZA
Project title
The Economics and Persistence of Migrant Ethnicity
Country
Overall
project
value
(EUR)
Proportion
carried
out by
candidate
(%)
Germany
580.000
100
Name of
client
Volkswagen
Foundation
Detailed description of project
In December 2004, the Volkswagen Foundation (VolkswagenStiftung)
granted five million Euros to eight research groups to study “Migration
and Integration” for the next three years. By means of integration
policy research projects the initiative of the Volkswagen Foundation
focuses on a productive accompaniment of the forthcoming
internationalization processes of societies. IZA, as one of the funded
study groups, started its project on the “The Economics and
Persistence of Migrant Ethnicity” in April, 2005. It thereby aims to
define migrant ethnicity, measure ethnic capital, and identify the
parameters for immigrants’ success or failure in the field of economy
and society. The need for additional knowledge about the costs and
benefits of ethnicity and migration has further increased as a result of
the effects of globalization, the upcoming demographic burden, and
the sluggish economic development in many parts of the world. A
major topic of the IZA project therefore is to identify the forces which
determine immigrant ascension to major indicators of success like
citizenship, interethnic marriages and self-employment, as well as to
define and measure immigrants’ ethnic capital.
Origin of
funding
Dates
(start/end)
Volkswagen
Foundation
2005-2007
Name
of
partners
if any
Ref No 14
IZA
Project title
On the Political Economy of Labour Market Reform in Transition:
A Comparative Perspective”
Country
Overall
project
value
(EUR)
Proportion
carried
out by
candidate
(%)
Name of client
Origin of
funding
Dates
(start/end)
Germany
441.000
100
Volkswagen
Foundation
Germany
2007 2010
Detailed description of project
Name
of
partners
if any
Type of services provided
While research on the political constraints of economic reform has been
a fertile field in economics and political science, the analysis of the
interplay of general economic policies and labour market reform, on the
one hand, and political structures and labour market reform, on the other
hand, has been rather limited, especially within a transition context. This
project tries to fill this gap by a large comparative study involving an
international team of researchers. The project has a core part and two
complementary parts. The core part is a comparative study of labour
market reforms and how they relate to general economic policies and
political institutions using available macro data from eight transition
countries. In addition to this core part, the first complementary part will
consist of four country studies that give a more detailed account of the
political economy of labour market reform in Estonia, Poland, Russia, and
Ukraine, combining the efforts of political scientists and economist. The
second complementary sub-project analyzes the incidence and cost of job
loss across the four mentioned countries in a comparative perspective.
Ref No 15
IZA
Project title
Tax and transfer systems and the development of economic
inequality in Europe
Country
Overall
project
value
(EUR)
Proportion
carried
out by
candidate
(%)
Germany
280.000
100
Name of client
Deutsche
Forschungsgemeinschaft
(DFG)
Detailed description of project
Brief description: The project analyses the relationship between the
development of the tax and transfers systems in Western European
countries and the development of economic inequality within these
states. The particular contribution of the project is the analysis of this
question using international micro data and the multi-country tax benefit
simulation model EUROMOD.
Origin
of
funding
Dates
(start/end)
2009-2012
Name
of
partners
if any
Annex 1B – Logframe
Note each milestone and target has a 3 levels of performance L=Low, M=Medium, H=High
PROJECT
NAME
IMPACT
IZA/DFID Growth and Labor Markets in Low Income Countries (LICs) Program, 2011-2016
Poverty reduction
and employment
growth in LICs
Proportion of people
living in extreme poverty
in LICs
Impact Indicator 1
Planned
Baseline
(2009)
SubSaharan
Africa: 64%;
Developing
regions: 31%
Milestone 1
(2013)
Sub-Saharan
Africa: 62%;
Developing
regions: 28%
Milestone 2
(2015)
SubSaharan
Africa: 58%;
Developing
regions: 26%
Target
(2016)
SubSaharan
Africa: 56%;
Developing
regions:
24%
Achieved
Source
Impact Indicator 2
Increase employmentto-population ratio in
LICs
Planned
Baseline
(2009)
SubSaharan
Africa: 65%;
Developing
regions: 62%
Milestone 1
(2013)
Sub-Saharan
Africa: 66%;
Developing
regions: 64%
Milestone 2
(2015)
SubSaharan
Africa: 68%;
Developing
regions: 66%
Target
(2016)
SubSaharan
Africa: 70%;
Developing
regions:
68%
Achieved
Source
United Nations: The Millennium Development Goals Report
2010.
OUTCOME
Outcome Indicator 1
High-quality
evidence based
policymaking on
labour markets
Number of policies,
programs and practices
influenced by research
funded under this
Planned
Baseline
(2011)
0
Milestone 1
(2013)
L=2 M=4 H=6
Milestone 2
(2015)
L=8, M=10,
H=12
Target
(2016)
L=18,
M=24, H=30
Assumptions
Governments
and other key
stakeholders
have political will
and growth in
LICs
program
to implement
appropriate
policies,
programmes and
practices.
Achieved
Research and
monitoring are
Progress reports against Impact Plans in all projects funded
not destabilised
under the Program.
by political
IZA/DFID annual progress reports.
intervention,
IZA/DFID reporting against DFID RED annual indicators,
armed conflict or
including Composite Publications Index.
other external
Independent project evaluation.
crises.
Govt (£)
Other (£)
Total (£)
DFID SHARE (%)
Sources
INPUTS (£)
DFID (£)
10,000,000
INPUTS (HR)
DFID (FTEs)
OUTPUT 1
Output Indicator 1.1
High-quality
research on
labour markets
and growth in
LICs
Number of research
awards that meet the
quality standards set
by the Programme on
a continuous basis.
Output Indicator 1.2
Number of peerreviewed articles,
reports and
conference papers
produced by projects
609,684
Baseline
(2011)
Planned
0
Milestone 1
(2013)
L=15, M=18,
H=20
10,609,684
Milestone 2
(2015)
L=20, M=25,
H=30
94.25%
Target
(2016)
L=20,
M=25, H=30
Achieved
Sources
Progress reports against Impact Plans in all projects funded under the
Program.
IZA/DFID annual progress reports.
Independent project evaluation.
Baseline
Milestone 1
Milestone 2
Target
(2011)
(2013)
(2015)
(2016)
Planned
0 L=8 (1 gender),
L= 15(3
L= 25 5
M=10 (2
gender)
gender),
gender), H = 12 M=20 (4
M=30 (6
(3 gender)
gender) H =
Gender)
25(5 gender) H=35 (7
gender)
Assumptions
Applications of
good quality are
high for the
Programme.
Articles are
accepted for
publication in
peer review
journals, etc.
funded under the
Programme. (DFID
RED indicator).
Number that
incorporate gender
analysis
IMPACT
WEIGHTING (%)
50%
INPUTS (£)
Output Indicator 1.3
Research
conferences on
labour markets and
growth in LICs
DFID (£)
9,421,242
INPUTS (HR)
Achieved
Sources
Progress reports against Impact Plans in all projects funded under the
Program.
IZA/DFID annual progress reports.
Independent project evaluation.
Baseline
Milestone 1
Milestone 2
Target
(2011)
(2013)
(2015)
(2016)
Planned
0 L=0M=1H=2
L=2 M=3
L=3 M=4
H=4
H=5
Achieved
Sources
RISK RATING
LOW
Progress reports against Impact Plans in all projects funded under the
Program.
IZA/DFID annual progress reports.
Independent project evaluation.
Govt (£)
IZA
Total (£)
DFID SHARE (%)
Contribution(£)
0
304,842
9,726,084
97%
DFID (FTEs)
To be determined.
OUTPUT 2
Output Indicator 2.1
Research use by
policy makers in
LICs
Policy-oriented
conferences on
labour markets and
growth in LICs
Output Indicator 2.2
Number of project
To be
determined.
Baseline
(2011)
Planned
0
Milestone 1
(2013)
L=0 M=1 H=2
Milestone 2
(2015)
L=1 M=2
H=3
Target
(2016)
L=1 M=2
H=3
Achieved
Sources
Progress reports against Impact Plans in all projects funded under the
Program.
IZA/DFID annual progress reports.
Independent project evaluation.
Baseline
Milestone 1
Milestone 2
Target
(2011)
(2013)
(2015)
(2016)
Planned
0
L=10 M=15
L=25 M=30
L=25 M=30
Assumptions
Policy makers,
business leaders
and practioners
become aware of
the program and
sufficiently
interested in the
research to
attend the
conferences. The
book will receive
sufficient
attention in its
target
based events with policy
makers to discuss
exisitng evidence and
research findings
Output Indicator 2.3
Book / collected volume
H=20
H=35
H=35
Achieved
Sources
Progress reports against Impact Plans in all projects funded under the
Program.
IZA/DFID annual progress reports.
Independent project evaluation.
Baseline
Milestone 1
Milestone 2
Target
(2011)
(2013)
(2015)
(2016)
Planned
0
0
0 L=0 M=1
H=2
Achieved
group.Sufficient
willingness to
response to
survey of
stakeholders.
Sources
Output Indicator 2.3
Policy briefs and
synthesis products
Progress reports against Impact Plans in all projects funded under the
Program.
IZA/DFID annual progress reports.
Independent project evaluation.
Baseline
Milestone 1
Milestone 2
Target
(2011)
(2013)
(2015)
(2016)
Planned
0 L=3 M=5 H=7
L=8 M=10
L=12M=15
H=15
H=20
Achieved
Sources
IMPACT
WEIGHTING (%)
35%
Output Indicator 2.4
Survey of
stakeholders - impact
perception scores for
the programme
Progress reports against Impact Plans in all projects funded under the
Program.
IZA/DFID annual progress reports.
Independent project evaluation.
Baseline
Milestone 1
Milestone 2
Target
(2011)
(2013)
(2015)
(2016)
Planned
0 L=60% positive
L=65%
L=65%
M= 75%
positive M=
positive M=
positive H=
80% positive 80%
85% positive
H= 90%
positive H=
positive
90%
positive
Achieved
Sources
RISK RATING
INPUTS (£)
DFID (£)
344,604
INPUTS (HR)
Capacity Building
in LICs
63%
DFID (FTEs)
To be determined.
OUTPUT 3
Low
Progress reports against Impact Plans in all projects funded under the
Program.
IZA/DFID annual progress reports.
Independent project evaluation.
Govt (£)
IZA
Total (£)
DFID SHARE (%)
Contribution(£)
0
203,228
547,832
To be
determined.
Output Indicator 3.1
Number of southern
researchers
participating in the
programme
Baseline
(2011)
Milestone 1
(2013)
Planned
Milestone 2
(2015)
Target
(2016)
L=30%
M=40%
H=50% of
research
conducted
with
southern
research
engagement
Achieved
Sources
Output Indicator 3.2
Training workshops in
LiCs
Progress reports against Impact Plans in all projects funded under the
Program.
IZA/DFID annual progress reports.
Independent project evaluation.
Baseline
Milestone 1
Milestone 2
Target
(2011)
(2013)
(2015)
(2016)
Planned
0 L=0 M=1 H=2
L=1 M=2
L=1 M=2
H=3
H=3
Achieved
Sources
Progress reports against Impact Plans in all projects funded under the
Program.
IZA/DFID annual progress reports.
Independent project evaluation.
Assumptions
Researchers in
LICs are
interested and
willing to
participate in the
training
workshops.
Output Indicator 3.3
Proportion of funds
routed to southern
researchers
Baseline
(2011)
Milestone 1
(2013)
Planned
Milestone 2
(2015)
Target
(2016)
L=15%
M=20%
H=25% of
research
funds
Achieved
Sources
IMPACT
WEIGHTING (%)
15%
Output Indicator 3.4
Start /end-of-program
workshop
Progress reports against Impact Plans in all projects funded under the
Program.
IZA/DFID annual progress reports.
Independent project evaluation.
Baseline
Milestone 1
Milestone 2
Target
(2011)
(2013)
(2015)
(2016)
Planned
1
1
1
2
Achieved
Sources
INPUTS (£)
DFID (£)
INPUTS (HR)
DFID (FTEs)
234,154
To be determined.
RISK RATING
Low
Progress reports against Impact Plans in all projects funded under the
Program.
IZA/DFID annual progress reports.
Independent project evaluation.
Govt (£)
IZA
Total (£)
DFID SHARE (%)
Contribution(£)
0
101,614
335,768
To be
determined.
70%
Annex 2 – Consultation documents
A - Labour markets background consultation document
B - Roundtable discussion document
C - Forward research agenda
Annex 2A – Background – Labour markets, skills and growth
This note comprises three parts; an introduction, a partial review of evidence relating
to labour markets and policy in LICs, and ideas on a possible research agenda.
1.
Background
What are the stylised facts of labour markets in developing countries? In some
developing countries, unemployment is high13. And unemployment may increase
due to the global economic crisis and, in some countries, demographic pressures.
But, in general, in developing countries, unemployment is low. The central issues
concern the extent of employment, average wages, conditions of work, and who
benefits from the labour market. A large proportion of the labour force find
employment in the informal sector, and, in most cases, they are under-employed,
wages are low, and conditions of employment poor. Labour markets outcomes are
weakest for particular groups, notably, young people and women.14
Labour markets matter. A person’s economic wellbeing is strongly influenced by
how much individuals earn for their labour and any cash they receive from the
government, community and family. Even with donor assistance, developing country
governments are not able to make a significant dent on poverty through government
spending, and families are too poor to make large transfers to the less-advantaged.
Creating more and better earning opportunities is the only option available (Fields
2008).
In this note, labour markets, labour market policy and labour market outcomes are
broadly defined. Labour markets include those who are self-employed, a significant
proportion in developing countries. There are policies that impact directly on the
operation of labour markets and are commonly referred to as labour market policies.
Active policies include public sector employment and support for job search.
Passive policies include the various institutions and regulations of labour markets
13
In South Africa, the rate of unemployment is in excess of 40%.
In the world, young people (aged 15 to 24) are three times more likely to be unemployed than
adults14. In SSA, youth comprise a very large 36% of total working age population. In the world and
in Sub-Sahara, for males, the rate of unemployment and the ratio of employment to population have
remained constant over the recent decade, at, respectively, 6% and 8%, and 74% and 75%. For
women, in both regions, the rates of unemployment are higher at 6.5% and 8.5%, and the ratio of
employment to population much lower at approx 50% and 55%. In SSA, almost three fifths of
employed are classified as ‘extreme poor’. The ILO deemed approximately half of employed in the
world are in ‘vulnerable’ employment’ (i.e., ‘unpaid contributing family workers or own-account
workers’). In SSA, vulnerable employment accounts for more than three quarters of the employed.
Wage inequality has increased through recent decades, associated with an increase in ratio of wages
of skilled versus unskilled workers. This is highest in SSA at approx 6.8.
14
that provide protection to employees, and include employment protection legislation
(regarding dismissal), legislation regarding conditions of work such as hours of work,
leave entitlement and minimum wage, labour taxation and insurance, unionisation
and welfare provision, such as unemployment benefits. In this note, ‘social
protection’ is narrowly interpreted to describe transfers of cash and kind to
vulnerable groups, such as the poor or unemployed. Labour market policies also
describe those policies that impact indirectly on labour markets. These include tax,
exchange and fiscal policies that impact on the demand for labour, and policies of
education and training that impact on supply of labour. Labour market outcomes are
broadly understood. The key elements are the level of employment, the wage,
security of employment, and other conditions of work.
2.
Understanding labour markets in developing countries
In a simple model of an open economy with well-functioning markets, factor prices
are flexible and countries produce goods and exploit production processes that
make best use of their relative endowments. In a typical low-income economy
relatively endowed with labour, firms produce with labour intensity, employment is
high and wages are low. Assuming no significant shock to the supply of labour,
productivity growth will be reflected in rising wages, and improved standards of
living.
Evidence indicates that labour markets in LICs are complex, and do not conform to
the simple model. Most research assumes that labour markets in LICs comprise
segments. The formal sector is strongly influenced by labour market institutions,
employment is low and conditions of work relatively good. The large proportion of
the population is employed in the informal sector. Some models distinguish between
the urban informal sector and the agricultural sector. Recent models distinguish
between those who choose to work in the informal sector, and the majority who are
obliged to, in the absence of any other source of income. In the informal sector, skill
and capital requirements are typically low. For migrants, it is a natural entry point to
the urban labour market. So what are the key determinants of demand and supply of
labour, employment and wage-setting and the movement of people across markets
and occupations?
Substitutability of factors, and the demand for labour
The simple model assumes that factors of production are substitutable; i.e., that
countries have choice in the techniques they use. An alternative hypothesis is that
capital-intensity is more efficient, and there are various reasons, related to efficient
production at scale, and quality control. In these circumstances, in the typical LIC
with scarce capital endowment, there will be unemployment and inequality, at least
in the absence of significant incentives to capital accumulation.15 Arguments of this
sort have been employed to justify intensive industrial policy.
Evidence on the substitutability of factors is reviewed in White (1978), drawing on
engineering and process-analysis studies, case studies of technologies, analysis of
This is the concept of ‘fixed factors of production’. There are various ways in which capital intensity
may matter. Capital may substitute for managerial skills that are scarce in developing countries.
Capital-intensity provides return to capitalists and capitalists have higher rates of saving (see
Galenson and Leibenstein). Capital intensity may provide quality and homogeneity of products.
15
use of second-hand machinery, and examples of adaptation of technology in MNCs.
The broad conclusion is not supportive of the hypothesis. Evidence indicates that,
for many products and processes, capital may be substituted, and efficiency
achieved with varying factor ratios (see Timmer 1975, Pack 1972). Efficient factor
proportions vary by product allowing economies to specialise in products that best
suit their endowments.
A recent and related concept is ‘skills-biased technological change (SBTC). In
traditional models of growth, technological progress is said to be factor-neutral,
raising productivity of both labour and capital, with no impact on factor choice. By
contrast, skill-biased technological change is a change in technology that is biased
towards one factor, skilled workers.16 The phenomenon is closely associated with
the introduction and diffusion of new information and communication technologies 17,
and is said to explain the increase observed throughout the world in the relative
wage of skilled workers in the context of significant increase in their supply.18
In most cases, technologies are developed in the rich world and reflect the relative
endowments of capital abundant economies. The endogenous growth literature has
emphasised how LICs may benefit from these technologies but, to do so, they must
adapt them to their circumstances, and in ways that exploit any abundance in labour.
The focus of policy is on removal of considerable barriers to adaptation. Key issues
include financing of high-risk investments, enforcement of intellectual property rights,
competition, and low levels of appropriate skills (Ayyagari et al 2009).
Education, training and the supply of labour
There is lengthy and inconclusive literature on the role of education and human
capital in economic growth (see Lucas, 1988, Romer 1990, Mankiw, Romer, Weil
1992, Benhabib and Spiegel 1994, Pritchett 2001 and Blis and Klenow 2000). In
cross-country empirical analysis, Barro demonstrates a relationship between
education and growth but only where there is control for the quality of education
(Barro 1990). Hanushek and Woessman (2007) analysed data from 50 countries
between 1960 and 2000 and showed that an additional year of schooling lifted
annual GDP growth by 0.37%, and when combined with improved cognitive skills,
the figure rose to 1%19. A recent study by the same authors (2009)20 used
extensive sensitivity analyses on cross-country growth regressions to show that this
For a brief overview see G. Violante, 2009, “Skill-Biased Technical Change,” in L. Blume, and S.
Durlauf, eds The New Palgrave Dictionary of Economics, London, McMillan. For a detailed review of
the earlier literature, see D. Acemoglu, 2002, “Technical Change, Inequality and the Labor Market,”
Journal of Economic Literature 40, 7-72. For an up-to-date review see N Chusseau, M Dumont and J
Hellier, 2009, “Explaining Rising Inequality: Skill-Biased Technical Change and North–South Trade,”
Journal of Economic Surveys Vol. 22, No. 3, pp. 409–457.
17 See D. Autor, A. Krueger and L. Katz. 1998. “Computing Inequality: Have Computers Changed the
Labor Market?” Quarterly Journal of Economics 113:4, pp. 1169–213. More recently, the terms of this
debate have been along these lines: M Goos and A Manning, 2007, “Lousy and Lovely Jobs: The
Rising Polarization of Work in Britain,” Review of Economics and Statistics, Vol. 89:1, pp. 118-133.
18 The very definition of neutral technological change sidelines the issue of relative prices.
Conceptualising technological change as “biased” links it to distribution of income matters.
19 Hanushek, EA and Wöessman, L (2007) The Role of Education Quality for Economic Growth,
Washington, DC, World Bank, Human Development Network (Policy Research Working Paper, 4122)
20 Hanushek, EA and Wöessman, L (2009) Do better schools lead to more growth? Cognitive skills,
economic outcomes and causation. IZA Discussion paper NO. 4745, Institute for the Study of
Labour, Bonn.
16
relationship is causal. There is a literature on earnings functions (Willis, 1986). This
concludes that earnings are higher for workers with more schooling and work
experience, for men and for formal sector workers. Pscharopoulos (2004)
concludes that the rate of return to education is highest for primary, and lowest for
HE, and that individual returns are higher than social returns. Aghion (2009)
demonstrates that countries which lie below the world technological frontier benefit
more from primary and secondary education, whilst those that are close to the
frontier benefit more from tertiary education21.
Labour market institutions
The argument widely favoured in the mid-1990s is that developing economies do not
have incentives to employ ‘appropriate’ technology, largely due to policies that raise
the relative price of labour to capital. Much attention has focused on institutions and
regulations of labour markets that raise the cost of hiring and firing employees, such
as minimum wages, working hours, and rules regarding speed of and justification for
redundancy, and on powers of labour unions. In parts of Europe, for example, it is
argued that rigidities in labour markets interact with skills-biased technological
progress to create unemployment. In SSA, it is argued, labour market rigidities
account for the growth in the informal sector, and the numbers of ‘vulnerable
employed’. The relative price of factors is also influenced by subsidies to capital
arising from, for example, low interest-rates, the exchange-rate regime, and trade
and tax incentives for import of and investment in capital. In many models,
imperfectly competitive markets remove incentives for firms to pursue appropriate
technology. In these circumstances, theories have illustrated how firms may adopt
capital-intensive technology because it is ‘off-the-shelf’ or for reasons of prestige.
In a recent presentation to the Commission on Economic Development, Freeman
(2007) reviews the evidence on the impact of labour market institutions and
regulations, and his broad conclusion challenges the consensus. He argues that the
impact is primarily distributional, and, citing evidence of rising inequality within
countries, makes a broad case for the extension of labour institutions across
informal sectors to provide protection to workers. Empirical evidence is provided
from a large number of studies employing variety of methodology, including studies
of the impact of minimum wages and union power on unemployment and wages, of
the relationship between wages and unemployment across geographic regions, and
cross-country studies of indices of labour regulations and unemployment. Freeman
cites the 1988 World Bank study of labour market adjustments in 12 developing
countries. The broad conclusion from these is that labour markets function more
flexibly than generally supposed. He points to two cases where labour market
institutions support growth, in recent China, and in recovery in Argentina in the
2000s.
Recent research has demonstrated the capacity of labour markets to adjust to
restrictive legislation (and other shocks). For example, firms shift the burden
imposed by payroll taxes to employees by lowering real wages; employers
circumvent restrictions on firing by replacing permanent with temporary workers;
21
Aghion, P (2009) Growth and Education. Working Paper No. 56, Commission on Growth and
Development. IBRD/the World Bank.
firms employ workers informally. Based on this kind of evidence, some policy
makers have concluded that targeting the labour market for regulatory reform is
unnecessary. Labour market reforms are also likely to be politically costly (Harrison
2000).
Social protection measures may be defined as transfers in cash or kind to vulnerable
groups such as the poor and the unemployed. In developed market economies,
‘welfare payments’ may contribute to ‘poverty’ and ‘unemployment traps’, reducing
the incentive to work, and increasing unemployment. On the other hand, there may
be positive effects, particularly in developing countries, where welfare payments are
low or do not exist. There are various hypotheses. For example, transfers may
increase labour force participation by financing job search and migration. If there is
substitution between adult and child labour, public works programmes may reduce
child labour and increase participation in education.
Migration
There is a long literature that explores the consequences of internal migration. On
the one hand, migration is a prerequisite of urbanisation, enabling the development
of a modern economy exploiting economies of agglomeration. Urban migration can
also contribute to rural development by increasing the return to rural education,
financing investment through remittances given credit constraints, and increasing
family risk-taking (Stark and Lucas, 1988). On the other hand, migration exerts
pressure on cities to absorb large population inflows particularly of young people,
and to provide an adequate level of public goods – leading to slum formation, crime
and unrest. Famously, Todaro (1969) and Harris-Todaro (1970) developed models
to show how policies that induce migration to urban areas, such as provision of
urban services, may increase urban unemployment, particularly where there are
labour market rigidities22.
The broad consensus of the literature appears to conclude that migration is
beneficial for various outcomes, including growth and wellbeing. In general, the
focus of the policy and research agenda concerns how to maximise the benefits of
urban migration23. One key question concerns how to increase speed of job
matching by, for example, increasing the flow of information on job and worker
characteristics. Another important direction for research focuses on the implications
of urban migration for rural and agricultural areas. Studies looking at the impact of
migration on rural production identify an important difference between long and short
run impacts. Looking at the impact of male migrants to South African mines Lucas
22
There have been many strong critiques of the Todaro and Harris-Todaro model and the resulting
policies aimed at restricting migration. Firstly, job allocation does not fit the random assumption in the
Todaro model with evidence suggesting migrants undertake significant investment in job search.
Second, no attention is given to the informal sector which has significant demand for labour. Third,
there is little evidence in support of the modern sector rigid wage assumption even allowing for trade
union pressure and minimum wage assumption (Montgomery 1985). Fourth, the Todaro is not able to
deal with differing discount rates, time horizons in the net present value calculations. Fifth, the model
abstracts from many additional influences on migrant behaviour including risk management, relative
depravation, cooperative family games and market failures in other areas such as capital markets.
Moreover, governments are concerned with overall national employment not just urban. Evidence
seems to undermine the Todaro model.
23 Lall et al, (2006). Rural urban migration in developing countries. A survey of theoretical predictions
and empirical findings, World Bank Policy Research Working Paper 3915.
(1987) found that, in the short run, production in the place of origin is negatively
affected through loss of labour but enhanced in the long run through investments
remitted by migrants. Rozelle, Taylor and DeBrauw (1999) find similar results in
northeast China. Migration can have a negative affect on the stock of human capital
by removing skills or it could have a positive effect by stimulating investments in
human capital (Stark and Wang 2002). Kochar (2004) studying rural education
decisions in India concluded that investments are undertaken in response to the
possibility of employment in the urban areas rather than in the rural area.
3.
Research agenda
What is the motivation for a research programme on labour markets in
developing countries?

Labour markets matter for developing countries. Income from labour income is
the primary route out of poverty. Unemployment and wage inequality are key
determinants of instability

There are problems in developing country labour markets. In some countries,
there is high unemployment. In general, there is significant under-employment
and low average wages.

The problems in labour markets are likely to get worse, due to the global crisis
and demographic pressures. Labour markets are highly political, and are likely
to become of increasing importance to developing country policy-makers.

The status of research and policy in labour markets in developing countries is
weak. Much research is based on theoretical foundations that do not fully
reflect the complexity of labour markets in developing countries and provide an
incomprehensive account of impacts on which to draw strong policy
implications. For example, minimum wage policy is analysed only in terms of
disemployment caused with no account of the effect on wages; the return to
education is estimated without account of the costs to society of providing
education. In conclusion, labour markets are complex and characterised by
multiple and conflicting outcomes. There is a need for better quality research
that meets these challenges.

Education research is a priority for DFID research. The impression is that the
evidence base is relatively weak.
What are the objectives?
The broad objective is to improve labour market outcomes in developing countries
through better policy informed by high-quality research. A list of research topics is
identified below. A secondary objective is to catalyse high quality research on
labour markets in LICs. In general, the evidence base in this area is weak. An
objective is to develop research on education and training with a focus on the role of
education in developing skills for productive employment.
Topics
1.
Growth and labour market outcomes

To what extent does economic growth improve labour market outcomes
in LICs? If so, through what channels, and who benefits? There is a perception
that growth has not translated into desirable outcomes. Is this perception true?
Where, and, under what circumstances. Growth has been characterised in some
countries as jobless. To what extent is this true?

Has the relationship between growth and labour market outcomes changed as
the world has become more globalised?
2.
Demand for labour

What determines the demand for labour? Given the nature of labour
market institutions and the characteristics of the labour force, what policies
can influence the demand for labour, to create ‘good’ jobs that the labour force
can realistically aspire to? Researchers should consider the impact of policies
other than those that impact directly on labour markets, such as policies towards
trade and foreign investment. Researchers should consider how policy may impact
on the types of goods produced.
3.
Supply of labour
We strongly encourage research on the role of education and skills. It is useful to
distinguish between higher level questions regarding the demand for skills and what
skills matter for growth and employment, and questions concerning how to deliver
skills focusing more on the role of government and the institutions of education.
What skills?

What are the educational and skill characteristics of the labour force and how
have they changed through time? To what extent do they conform to the education
and skills demanded by employers?

What types of cognitive skills are most important for employment? How does
this differ between the formal sector, the urban informal sector and the rural informal
sector?

How does demand for different skills (core and technical) change as the
structure of the economy changes and at different stages of growth? What are the
gender dimensions?

How important are increase in years of education and the level of cognitive
skills in increasing the number of people in jobs? Are these factors more important
for creating formal sector rather than informal sector jobs?

How do gender inequalities in education and skills impact on gender gaps in
labour force participation, entry into more highly remunerated occupations and in
earnings? What can be done to address this?

What are the implications of skills-biased technical change for education and
training in LICs, considering, for example, the relative emphasis on technical and
vocational versus general training, and maths and science and humanities?
How to deliver skills?

What types of educational/training programmes have the greatest impact on
jobs and how does this vary between countries?

How and where should governments intervene to improve the impact of
education and training on labour markets? What is the appropriate mix of basic and
upper secondary education, TVET and higher education provision? How may
government intervene to promote private provision and financing of education?
What is the role of certification or accreditation of qualifications? What is an
effective role for industry bodies and professional associations?

What are the most effective ways (e.g. labour market information systems
and skills forecasting; national skills frameworks) to anticipate or respond to labour
market demand for skills?

How effective are TVET and other skills development programmes in terms of
labour market outcomes? How does this vary for women and men, and in rural or
urban areas? What youth skills development and employment promotion strategies
are most effective?

How can the primary, secondary and tertiary education sectors become more
responsive to labour market demands (e.g. revising school examination systems
and curricula to measure and incentivise skills that are important to the private
sector; careers counselling)?

What is the impact on the skills market of investing in skills development
programmes? Will it displace competition or develop the market by building
competition between training providers, increasing suppliers, and by creating a payfor-training culture? What are the policy implications?

What are the most effective approaches to skills formation for the informal
economy, e.g. modular employable skills, apprenticeships, certification and
accreditation of qualifications to increase portability24 of skills? Who benefits from
these opportunities and how can barriers to access be tackled? Do these
approaches increase participation by women and men in formal labour markets and
facilitate occupational mobility? How does this differ in rural/urban areas?
4.
Understanding how labour markets work?
institutions
Role of labour market

To what extent are labour markets in LICs segmented?

To what extent are conditions of employment determined by supply and
demand, and to what extent by minimum wages, labour unions and other labour
market institutions? Which labour market institutions are most effective in LICs?

To what extent are labour market adjustments impeded by employment
protection legislation, generosity of unemployment benefits, active labour market
policies, labour taxation, and unionization rates. Is this set of institutions adequate to
understand the dynamics of labour markets outcomes in LICs?

What is the relationship between labour market institutions, and how does this
affect their effectiveness? Is the relationship different in LICs than in middle- and
high-income countries? If so, how?
ILO defines ‘portability of skills’ along two dimensions: (a) employable skills which can be used
productively in different jobs, occupations, industries; and (b) certification and recognition of skills
within national and international labour markets.
24

How dependent is the effectiveness of labour market institutions on other
structural reforms in LICs? How dependent are they on governance structures in
LICs (eg, rule of law, enforcement and corruption issues)
5. Migration

What is the relative effectiveness in terms of employment of, for example, (i)
migration policies that facilitate job matching, (ii) policies that channel migrants to
certain industries, (iii) policies that support assimilation of migrants, such as
reception centres?

Which urban public services are most important for the successful assimilation
of migrants? How can congestion of these services be minimised?

What are the implications of migration for education and training? For example;
Is education acquired in the place of origin or in the place of destination more helpful
in speeding assimilation? How can the assimilation of uneducated workers be
enhanced?

What is the impact of migration on source locations, primarily rural and
agricultural, and, what, if any, are the policy implications? In particular, research
should consider the nature of migration, and how impact and policy may vary
depending, for example, on whether migration is circular or permanent.
For
example; Does circular migration result in more or better investment in source
locations and more and better contracts between migrants and rural dwellers? How
important are migrant remittances in overcoming credit constraints?
6. Occupational mobility

To what extent is there occupational mobility in LICs, what are the determinants
and what is the role of policy?
7. Social transfers

What is the effect of transfers in cash or kind on labour market outcomes?
How can SP instruments be designed to maximise their beneficial impact?
Annex 2 B – Labour market roundtable discussions DFID 6th Dec 2010-12-08
Structure of each section discussion. Top 3 priorities identified by the topic lead
followed by roundtable discussion.
Chair
Alan Winters
Attendees
Saul Estrin (LSE), Gary Fields (Cornell), Wiji Arulampalam (Warwick), Marco
Manacorda (QM), Alex.DeRuyter (West of Scotland), Claire Melamed (ODI), Nauro
Campos (Brunel), Nigel Miller (DFID), Max Everest-Philips (DFID), Lucia Hanmer
(DFID), John Piper (DFID), Tom McEnroe (DFID)
Gender
Gender dimension to all the topics
1. Changing aspirations and empowerment of women. For example there is a
significant drop out of girls and women from the education system. How do
changing attitudes to women impact on educational achievement, female
empowerment and labour market outcomes?
2. Large informal sector in LICS. Majority of people working in these sectors are
women, so it is important to look at what job security they have. How this is
changing over time as a result of among other things globalisation. What
labour market institutions are needed to improve outcomes?
3. Health and wellbeing of women working in informal sector. Lot of work on this
in OECD but little to no work in LICs.
Comments and suggestions
When considering gender dimensions it might be helpful to consider the gender
dimension using the following framework
 Barriers to female employment
 Terms of female employment. What are the different challenges and
experiences of women in the labour market and how do they differ from men?
Transitioning mechanisms – what enables women to shift out of low pay informal
sector jobs into higher reward jobs? For example what institutions help this process
in the formal sector and informal sector? How effective is affirmative action, where
does this work? Do we have examples that we could explore? Underlying question is
what changes social norms?
Wider social norms, in terms of enabling women to gain access to jobs critical transport, time poverty, other social norms etc.
What are the constraints and difficulties to research in this area? Is it lack of theory
we do not know what to look for, lack of data to enable policy insights? What is it?
There is data including household data sets around for LIC MICs but they do no not
really capture what is happening in terms of autonomy within the household and do
not really enable us to answer the questions that are currently relevant.
Could try and ask different set of questions. Should we interpret care giving and
other demands deterring women from accessing the labour market? We need to
consider paid/unpaid decisions that affect labour market outcomes for women. Are
there natural examples where external shocks have impacted on female
engagement in the labour market/ empowered women around? Would it be worth
exploring the implications of these?
Empowerment and labour markets – runs both ways. Labour markets may be
empowering and it is a question of which ways. Alternatively women who are more
empowered may engage in labour markets in different ways. Could we disaggregate
this into two different types of questions and look at in a macro and micro way and
determine how you might influence empowerment for positive outcomes?
Let’s recognise the majority of work in LICs is in the informal sector – agreement that
we are not looking to think about conditions that shift people out of informal sector to
formal but rather to improve the conditions of the formal sector.
General consensus that lack of data and understanding of informal labour market
operation and the gender dimensions within this. Improved data would enable further
investigation of this. Total lack of longitudinal/panel data is a serious barrier to study
these transitions.
World Bank LSMS collects some data but may be variable and not necessarily
available in LICs.
Active Labour Market Policy.
1. While solid literature on ALMP in developed economies not the case for LICs
where the framework is weak. Within this two areas are informal sector
workers and the implications of this on how ALMP functions. Second the
quality of institutions both informal and formal. Do they operate in the way you
would expect them to in LICs?
2. Design of research and methodology important – need to go for randomised
experiments in order to have deeper policy validity. Once we have this can
base policy on evidence. At the moment we have very little strong or
consistent evidence on ALMP in LICs. Therefore to some extent we have a
blank page on ALMP in LICs.
3. Entrepreneurship. ALMPs:
 Operate on the demand side – public sector wage and employment rates,
public works programmes etc
 Supply side – primarily training, can target this according to policy - on
disadvantaged groups or areas, training for the unemployed, training for
growth, focus on women etc
 Matching – employment services such as labour exchanges,

Micro-enterprise development – policies on demand or supply side that
assisting in the creation of firms. Particularly relevant in LICs as 60-80%
people in informal economy. It is important to remember that the idea of
taking policies from developed and applying them in developing country
context does not make much sense – on both the demand and supply side.
We need a new conceptual framework that sufficiently takes into account the
informal sector and differing cultural factors when we consider ALMP in LICs.
The conceptual framework will need testing.
Furthermore important entrepreneurial factors include cultural dimensions (as
discussed) and the importance of skills, networks and the role of finance. Often the
way in which entrepreneurial activity is financed is through the informal market
(particularly for women).
Need for conceptualising ALMP in LICs, and to think about policies within the
context of the informal economy. There are different types of informal economy. In
some cases the informal labour market is very entrepreneurial in other cases less
so. We will need to develop a framework that recognises this. This is also related to
how we define informal (different surveys in different countries use different
definitions).
Comments and suggestions
What is good for the individual may not necessarily be good for labour market as a
whole. For example an ALMP to promote information about jobs if there is no
increase in jobs available may simply mean that more people are applying for the
same number of jobs. Our conceptual framework needs to have the right goal which
is – getting more people into better jobs – labour market outcomes in the aggregate.
All of elements of ALMP – jury is still out on effectiveness. Evidence on supply side
using randomised experiments in LAC suggest positive but mixed results – impact
on employment and wages but neither does both. However the evidence on demand
side policies (employment services) both developed and developing countries is very
mixed and maybe negative. Front line employment services improve market
functioning. So if the problem is a mismatch then employment services will help
improve the situation. However, if the problem more structural unemployment then
they are unable to tackle the issue. This leads to issues of entrepreneurship.
Q - Is the issue with entrepreneurship primarily one of encouraging people to be self
employed or encouraging small firms to take on more people?
The determinants of self employed and small entrepreneurs are very different which
makes it complex. There are also issues associated with access to finance,
education and attitudes to risk.
Q – Discussion of enterprise. A lot of the issues are around barriers to
entrepreneurial activities. But what are the policy interventions? Supply of finance,
relationships amongst entrepreneurs so they can talk to one another – network
opportunities. But more likely first order issues in finance that are critical.
We cannot have an effective ALMP discussion in LICs without properly factoring in
the informal sector. Despite a lot of literature on the informal sector it is not
sufficiently understood in this context.
Growth and labour market outcomes
1. What enables more good jobs to be created? Many people on the online
discussions were highlighting issues around what raises the quantity of
registered employment (that is employment in the formal sector and that
would be picked up through enterprise surveys etc). However, this might be
the wrong issue to consider with the key issue in fact being not what raises
formal sector employment but what factors help create more good jobs. A key
dimension of a good job is wages/earnings/pay that is people want to earn
more for the work they do. What theoretical framework can we bring to bear
on why it is that people are not earning more for the work they do? The Lewis
model is still a helpful place to start in that there are constraints on the
number of relatively well paying jobs in the economy and that the reason
many people are self employed is primarily that they can’t get well paid jobs in
salaried employment and not that they don’t want to work in wage and salary
employment. What enables more good well paid jobs to be created?
2. To what extent does economic growth improve conditions in labour markets?
Does it lower unemployment, does it lead to the creation of more high paid
jobs, what wage changes are there in different parts of the economy, what
happens to the number of people who are self employed and their earnings?
This is something that we know very little about. This is the frontier. What has
happened in countries where there has been economic growth or indeed
deep recessions?
3. How it is that labour markets transmit economic growth /decline (in general
but specifically) to the poor? For example has India’s economic growth
benefited the poor? Need to undertake country studies. When economic
growth has happened has it benefited everyone, what has been the impact on
median earnings of workers?
Comments and suggestions
Growth transmission discussion - it would be interesting to compare across countries
to determine the difference between resource driven growth and where growth
driven by exports and trade.
In these cross country studies is it possible to disentangle technical progress and
other factors?
For example, the type of issues we should be looking and casting light on is the
debate around India jobless growth. In looking at this we should be looking at formal
wage and salary employment, but in addition include self employed and unpaid
family workers in order to get a full picture and determine whether people are
earning more for the work they do following economic growth.
Do we have the data to be able to distinguish between the informal sector activities –
sectors/areas where returns to people’s labour are increasing and areas whether
they are stagnating? Once you move away from formal sector surveys might be
difficult to determine without new data?
Could use household surveys – we can identify whether people are self employed or
salaried and can determine whether earnings have been increasing over time.
Should we be looking at the structure of growth economy wide discussions rather
than sectoral growth? The risk of going down the structural approach is that we will
end up looking at formal employment rather than people’s earnings.
Entrepreneurship point. Survival rates are low with new enterprises as you are
bearing a lot of risk. Welfare may be reduced by excessive entrepreneurship as may
bear excessive risk.
Labour market institutions
1. Enforcement and informality – role of enforcement of the informal and formal
institutions. How effective the labour market institutions are in OECD
countries depends on enforcement. This certainly holds in developed
countries as well as in LICs, but we don’t know much about it in LICs.
2. How do the constellation of LM institutions work in LICs – are they more or
less effective. What drives the choice of institutions greater link to growth or
inequality?
3. Political economy drivers – what drives countries to choose different LM
institutions?
Comments and suggestions
Enforcement issue critical
Related to the political economy issue lot of work in OECD that regulation should be
highly flexible and discretionary in OECD countries – how does this apply in LICs?
Labour market institutions definition – enforcement of employment protection
legislation, labour laws, unemployment benefits, tax policy, minimum wage.
Lot of work in OECD countries on labour market institutions. Questions that relate to
this are:
-
How these relate to each other, is the pattern of relationship different in
LICs? How good are they, what do they deliver? Do countries with
more flexible LM institutions have faster growth? And work by Freeman
relationship between flexibility and inequality. More rigid LM institutions
have less inequality.
Interested in how economic growth generates jobs / better jobs and what labour
market policies can facilitate this.
Macro/Trade
1. How does trade liberalisation contribute to labour market reform in LICs?
2. How does macro policy (wider definition including structural reforms etc)
affect LM outcomes in LICs?
3. Should donors/policy makers be concerned with skills based technological
change in LICs?
Should these issues be treated under the general growth topic or across the
research programme or as a stand alone topic?
Data collection does not seem to be as much of an issue in this area as elsewhere –
is this correct?
Comment and suggestions
Degree of integration to the global economy through FDI/Trade is critical to LM
outcomes. Difficult to sideline the issue.
Has playing the world market become so skill and capital intensive that it is not
generating the number of jobs that it has in the past?
Some work UNCTAD suggesting that low grade manufactures become much more
like commodities.
Skills
Main assumption is that skills shortages and skills mismatch impeding growth. Less
work on distributional issues which connect to earlier discussions. Conventional
wisdom is that there is an unmet demand for skills, might not be correct, might not
be the end of the story.
On the supply side, not sufficient supply of the corresponding skills and may be
going hand in hand with oversupply of education. Is it true that returns to skills are
very high? If so what is the market failure and if there is no private sector to provide
training what role for government?
1. Not novel, but look at changes in returns to education. There seems to be a
lack of work on this in LICs - the market for education, the role of demand and
supply, the big demographic changes and the incentives for education (not
just wage return but underemployment). Non-cognitive skills attracting a lot of
attention but more work also needed on cognitive skills. Related to earlier
points who are the big losers and winners from the globalisation of the labour
market.
2. Returns to public and privately provided vocational training. Still not settled.
Returns in LAC may actually be quite low. Issues of brain drain important.
3. Could and should collect more data. In particular on the type of skills firms
value and type of skills supplied. Before non-cognitive skills looked to have
better understanding of role of cognitive skills.
Comment and suggestions
Reading literature it is overwhelmingly about private returns to education. The
development question is about the social returns to education and we know very
little about this. The concern is that the social returns may in fact barely exceed the
private returns.
How do we identify how skills shortages are holding back growth in macro terms?
Does the skills base determine how quickly countries can move toward frontier and
what skills mix (cognitive/non-cognitive) is needed in the workforce.
Wrap-up and next steps
Key messages from today:

Not about how many jobs but the incomes that jobs generate. Might be
interested in distributional issues but mostly about better jobs

Lot about informality – most of the jobs are in the informal sector and we need
to better understanding of this. Within this context the entrepreneurial story
becomes important.

Institutions - if we believe we have to deal with informality it is not entirely
clear that labour market institutions is a priority but open to persuasion.

Growth and labour market outcomes is very important. The nature of growth
(not in terms of sectors) but in terms of labour intensive activities. Implications
of trade and globalisation.

Might be useful to think about occupations – skills and nature of growth.

Skills and returns to education. If it really is the case that we do not have an
idea of the social returns to education, then important to sort this out and
undertake some empirical work.

Data – collecting information – role in collecting data?

Lack of theoretical framework to deal effectively with the informal sector. But
to remember macro and micro approaches are complements and important to
have micro evidence.

Need clarity about what we mean when we say informal/formal sectors and
be clear on the relevant difference and relationships between them.

Other issues not covered so far – important to understand how individuals
and families react to shocks and how they react to labour market shocks. One
of the issues is migration. Also very little work on consequences of youth
unemployment in LICs and important to understand:

In terms of priority two large gaps in literature

In order to know how labour markets have changed as a result of growth
need country by country case studies in places where have had major
changes – China, India Brazil we need to understand what has happened and
why. This can be crossed referenced with work in LICs.

Relevant labour market models. Lewis developed a model but with only 2
sectors. Harris-Todaro gave a model but too simple. We need a more
relevant model with one or two informal sectors with other factors gender
labour search etc. without models lacking in ability to make good policy
interventions.
Annex 2C - An outline research proposal – Labour markets and growth
Research Agenda
1.
What are the research gaps and priorities?
DFID is interested in the research agenda on labour markets and growth in low
income counties (LICs). Recent consultations have confirmed that research on
labour markets and economic growth has mainly focused on more advanced
economies – developed and middle income countries – with limited research in LICs.
The proposed programme aims to address this important gap, and will focus on
labour markets issues in LICs.
The consultations have highlighted that research on labour markets in developed
and middle income countries is not necessarily applicable to LICs for numerous
reasons (chiefly the differing stage in economic development, the structure of LIC
economies and the importance and size of the informal sector.) As a result, the
research and policy findings from middle income and developed countries are not
easily transferable to LICs. Moreover, there is consensus that data of suitable quality
is a significant constraint in LICs and is one main reason for the relative paucity of
research in LICs.
The consultations identified that more research is needed to identify appropriate
theoretical frameworks, factors, institutions, and policies that facilitate labour market
outcomes in LICs but also to help identify country characteristics that determine the
effectiveness of alternative policies.
The majority of jobs in LICs are located in the informal sector. We want to help
answer the questions ‘What enables more and better jobs to be created across both
the formal and informal sectors in LICs and what are the chief policy
recommendations’? To do this we need to better understand the workings and
functioning of the informal sector labour market. At present, we do not have a
sufficiently developed theoretical framework or empirical evidence that fully accounts
for the informal sector and its different characteristics.
The research programme is likely to include work on the underpinning theoretical
framework as well as the macro and micro studies of a carefully selected
representative group of countries (and groupings within countries) where relevant
policy and economic changes have occurred. Ideally, these studies would use
quantitative methods to identify policy impacts but are also likely to need qualitative
methods to highlight factors that had either helped or hindered the policy
interventions. Given the economic structure of most low-income countries, these
studies should look at labour market impacts both across the economy and across a
mix of sectors.
Data has also been identified as a significant constraint to work on labour markets in
LICs. Longitudinal/panel data sets at the household and firm level that are able to
capture gender dimensions across a range of LICs are needed and would support
wider research on labour markets within LICs.
Lastly, DFID also has a strong interest in gender, climate change, political economy
and conflict affected states and it is interested to explore how such issues potentially
impact or have implications for labour markets.
Part 2: What are the thematic areas and research questions?
Drawing on the online discussion and round table event, we have identified the
following research priorities.
1. Growth and labour market outcomes
Of first order importance is research work on economic growth and labour market
outcomes. We envisage this theme will provide the overarching framework within
which we would better assess labour market issues in LICs. The theme would pick
up on wider issues of trade, integration and gender. Discussion in the online
consultations has focused on the need for a theoretical framework which sufficiently
factors in the informal sector. At present this is missing and limits original on LICs.
Suggested research directions
What are the appropriate theoretical models to study the informal sector, labour
markets and growth in Low Income Countries?
What are the main factors that contribute towards the creation of better jobs in LICs?
Does economic growth lead to lower unemployment, reduced under-employment,
self-employment and to the creation of higher paid jobs? What
How it is that labour markets transmit economic growth (in general but also
specifically to women and the poor)?
2. Labour market institutions
The online discussion suggested that we should not be asking whether ‘LICs should
be regulating labour markets’ but rather ‘how to protect workers while creating jobs’?
The discussions noted that we need to be careful about the role of local conditions
and that this is not necessarily in terms of rich vs. poor countries as there are
important differences between MIC and LICs (e.g., size of informal sector and
institutional quality). There is also a lot of work that has been done in OECD
countries and while all issues are not necessarily applicable we can still learn from
OECD experiences. The constraints and preferences, however, are different
(culture, education, attitudes towards risk etc).
When considering LICs we should not underestimate the importance of the evidence
we have accumulated to date - badly designed regulations can distort labour
markets. What we do not understand well is what mediates the effects. Impacts will
depend on: economic structure, institutions (enforcement), and the nature of
regulations (how systems are designed). At some point there will be a trade-off
between protection and efficiency but in most low income countries we may still be
at the point where it is possible to improve both protection and efficiency. In certain
contexts, among workers who have the choice (most likely a MICs issue), they can
provide incentives for informality.
Suggested research direction
How does the structure of LICs economies affect our thinking on labour market
institutions? What is the state of labour market institutions in LICs that can protect
workers while creating jobs?
How to expand the coverage of income protection systems? How should these
policies differ in LICs from elsewhere?
Which are the most effective labour regulations in LICs and how can they be
improved to further support labour market flexibility? What is the role of the quality of
enforcement in this?
3. Active labour market policies
The online discussions noted that active labour market policies (ALMP) have mainly
been examined in the context of developed economies where one chief objective is
social inclusion. In developing countries, the issue is mainly to address social
inclusion although given the scale of social transfer in Latin America the issues of
employment is beginning to receive greater attention. To date the issue has received
very little attention in LICs.
The consultation discussions highlighted the need for conceptualising ALMP in LICs
and to think about policies within the context of the informal economy noting that the
informal economy is not homogenous – some parts are entrepreneurial, others not.
There was also recognition that many ALMP are in fact social policies. Significant
evidence base in developed economies and MICs on the effectiveness of ALMP
mixed on both the demand and supply side, highlight the need to be clear on the
underlying causes. If the problems are structural in nature then ALMP are likely to be
largely ineffective. When considering the conceptual framework the focus should be
on labour market outcomes in the aggregate – getting more people into better jobs.
Suggested research direction
What is the appropriate conceptual framework to consider ALMP in LICs?
What are the implications of the informal sector and quality of institutions for ALMPs
in LICs?
ALMPs that support micro-enterprise development and creation of firms are
particularly relevant for LICs given the size of the informal sector. How can we best
design and implement such policies in LICs?
4. Skills
One main issue in the skills discussion is that of skills shortages as well as skills
mismatch impeding growth in developing countries. Conventional wisdom is that
there is an unmet demand for skills.
One of the main constraints is that we do not have data in LICs neither about the
distribution of different skills sets in the labour force nor about the demands. The
proxies we normally use: years of education and school diplomas (primary,
secondary, tertiary) are very rough proxies. Policymakers often engage in reforms
of TVET or other training programs to try to make training more relevant and
improve labour market opportunities of trainees, but there seems to be little
supporting evidence from LICs in this case.
Suggested research direction
Considering that private returns to education dominates the literature, what are the
social returns to education in LICs and how do they compare with the private
returns?
What is the impact of different types of skills sets (including con-cognitive) on labour
market outcomes?
What types of skills are most closely associated with innovation and productivity
growth in LICs? What are the main implications for policy?
5. Gender
The consultation process highlighted the need to 1) better understand the barriers to
female labour participation in the context of household decision making and cultural
norms and 2) better understand the conditions and terms of female employment and
how they differ from men. Critical in this discussion was understanding of the
informal sector and how this would tie in with the discussions on the theoretical
framework. Once again, data is an issue and although household data are available
they are not good at capturing internal household decision making and power
relations. Longitudinal/panel data sets would make a huge impact and hence are
needed.
Suggested research direction
Which models can help us better understand the barriers to female labour
participation in the context of household decision making and cultural norms?
Are there significant differences in job security and employment conditions between
men and women in LICs (especially in light of informality considerations)?
What is the impact of globalisation and are there specific policies /institutions need
to support women?