Making Work Pay in Nicaragua

Poor people derive most of their income from work; however, there is insufficient understanding of the role of labor markets, employment, and earnings as a linkage between growth and poverty reduction, especially in low income countries. To provide inputs into the policy discussion on how to enhance poverty reduction through increased employment and earnings for given growth levels, this study explores this linkage in the case of Nicaragua using data for 2001 and 2005. To do so, the study discusses macroeconomic growth and the labor market in Nicaragua, presenting sectoral employment and productivity profiles. A poverty profile of the labor market is developed, with an examination of the income sources and a decomposition of poverty reduction. Other topics include labor regulation, segmentation, and barriers to mobility.This report is part of a series of the studies conducted in the context of the World Bank’s research framework aiming to improve the understanding of the linkages among growth, labor, and poverty reduction.