<mark>is the country in the region with the lowest spending in social assistance relative to GDP (1.6 percent), its resources are very well targeted to the poorest with almost half of the benefits being means-tested but there is still a significant share of social assistance benefits that go the richest quintile (around a quarter). Similar to social assistance, unemployment benefits are among the least generous in the region, although with a very</mark> long average duration (18 months).

<mark>Poland has also made significant reforms in the education sector. As part of its 1999 structural reform of the education system, the Government of Poland introduced a new type of school—the “gymnasium”—to provide lower secondary education. In the course of their evaluation of Poland’s reform, Jakubowski, et al. (2010) found that delaying specialization and exposing students to general education for one additional year was shown to correspond to an average increase of one-quarter of a standard deviation in the math and reading PISA scores. This, in fact, may explain the improvement over time in Poland’s PISA scores. In addition, Poland has introduced per capita financing in tertiary education to better align financing incentives</mark> with outcomes and results.

<mark>Innovation has also played an important role in Poland’s story so far. A transition towards a low-emissions economy is highly likely to benefit Poland in the near future. The demand for products and processes with lower greenhouse gas emissions will accelerate as more countries adopt abatement targets. Innovation will be critical in this growing market for clean technology—the expertise and equipment related to new developments in areas such as renewable energy (in particular, wind power, solar power, biomass, hydropower, and biofuels), electric motors and low emission transportation, energy efficient lighting and appliances, and green buildings. The energy sector, the dominant source of today’s emissions, is also central in the adoption of cleaner technology. Given the well-established fact that the private sector acting alone will tend to under invest in research and development (R&D), governments who are moving early towards abatement, such as Poland’s, need to consider whether active support to clean technology R&D is an</mark> important complementary policy measure (World Bank, 2011a).

Source: Jakubowski, et al. (2010); ECA Social Protection Databse; World Bank (2011a)

# **a.** Labor Market Flexibility

Labor market flexibility refers to the ease with which firms hire, maintain and fire workers as determined by regulation (employment protection legislation, minimum wage, and the maximum length of temporary contracts), interventions (the level of the tax wedge indicating the cost of hiring workers) and institutions (the bargaining power of workers, measured by union density).

Labor market flexibility would allow workers to move to other (greener) sectors more easily. McMillan and Rodrik (2011) find that countries with more flexible labor markets experience greater growthenhancing structural change. This also stands to reason, as rapid structural change is facilitated when labor can flow easily across firms and sectors. The rate at which structural change in the direction of modern activities and greener growth takes place can be facilitated by ease of entry and exit into industry, the flexibility of labor markets, a population with more general and non-cognitive skills, labor market policies that improve employability, social protection that provide income support for workers during transitions, and economic policies that support new industries while limiting distortions. Moreover, McNeill and Williams (2007) also show that combining labor market reforms – in the form of lower labor taxation – with climate change policies could actually lead to an increase in employment.

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