The Algerian Retrenchment System: A Financial and Economic Evaluation

Elizabeth Ruppert

The World Bank Economic Review, 1999, vol. 13, issue 1, 155-83

Abstract: The government of Algeria has adopted a new retrenchment system to facilitate labor shedding in a public sector characterized by redundant workers and in an environment of already high unemployment. This article assess the financial viability of the retrenchment system and the inherent welfare costs and benefits associated with layoffs. A financial flows model tracks the Unemployment Insurance Fund's revenue and expenditure flows during the projected five-year adjustment period. It finds that even in the presence of massive retrenchment (21 percent of formal sector employment), the fund accumulates reserves equivalent to nearly 2 percent of gross domestic product. Because many displaced workers will end up in the informal sector, the resulting productivity gains or losses depend crucially on the initial level of productivity in the public sector. At the same time, retrenchment entails unambiguous benefits by reducing subsidies to state-owned enterprises, thereby generating efficiency gains. Considering these two effects together, the welfare model estimates that retrenching 13 percent of the formal sector will generate annual net welfare gains ranging from costs of $358 million to gains of $774 million. Copyright 1999 by Oxford University Press.

Date: 1999
References: Add references at CitEc
Citations: View citations in EconPapers (6)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:wbecrv:v:13:y:1999:i:1:p:155-83

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

The World Bank Economic Review is currently edited by Eric Edmonds and Nina Pavcnik

More articles in The World Bank Economic Review from World Bank Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK. Contact information at EDIRC.
Bibliographic data for series maintained by Oxford University Press ().