Employment Generation in the Challenging Situations of Fragility Annual World Bank Conference on Development Economics Paris, June 1, 2011 Presentation title: Designing Employment Generating Macroeconomic Policy for Conflict Affected Countries by John Weeks Full

Economic Characteristics of Post-Conflict Countries Severe economic contraction, implying: 1. Disruption of productive activity in the private sector (e.g., collapse of investment) 2. Temporary instability in property relations 3. Dollarization (or equivalent with other currency, associated with temporarily low financialization 4. Generalization of poverty & competition for resources 5. Large trade deficit

Social/Political Characteristics of Post-Conflict Countries Social and political collapse, implying 1. breakdown of social order, including restraints on crime of all types, especially violence against women 2. ethnic and community conflict 3. reduced (or loss of) legitimacy of governments 4. unemployed ex-combatants 5. collapse of community and household coping mechanisms, with substantial increase in female headed households

Macroeconomic implications: A successful recovery strategy must be: 1. Public sector led, laying the ground for subsequent private sector driven growth; 2. Export-focused (to create a sustainable current account) 3. Rapid generation employment to alleviate poverty and reduce social tensions

Purpose of the Recovery Program Minimize the probability of future conflict

Guidelines for Recovery 1. Generous development assistance until current account is sustainable 2. Transitory public works employment, in anticipation of private sector recovery 3. Gender-focused employed quotas 4. Avoid targeting on the basis of living standards, region or combat status

An Outline of Strategy (Sierra Leon ) 1. Expansionary fiscal policy focused on generating employment through public works (with minimum quota for female employment). Financed by development assistance & monetizing part of the implied deficit (with flexible deficit target) 2. Implicit exchange rate management to foster export growth (implying flexible inflation target) 3. Donors: Development assistance to cover trade deficit & flexibility for "policy space"

References: 1. Impact of the Global Financial Crisis on Sierra Leone: > Publications > Africa and 2. Youth Employment Programme for Sierra Leone: > Publications > Africa 3. Assessment of Sierra Leone's fiscal expansion: > Publications > Africa