the structure of unemployment we test for a unit root in postwar unemployment rates for sixteen oecd countries when a one time structural break is incorporated the unit root hypothesis can be rejected for most of the countries and the measured persistence of unemployment falls dramatically we then test for multiple structural changes and find evidence of one or two breaks for those countries for which the unit root hypothesis could be rejected almost all of the breaks are positive reflecting the sustained rise in european unemployment the major exception is the united states where long term unemployment rose in the 1970s and fell in the 1980s

enterprise performance and ownership the case of ukraine abstract in this paper we use a unique enterprise level random survey of 150 firms in ukraine to test hypotheses on the relationship between enterprise performance and ownership in transitional economies in particular we explore whether privatisation has yielded improved company performance and whether specific ownership forms insider manager worker and outsider have led to differentiated behaviour at the enterprise level our analysis also explores the determinants and ramifications of barter a widespread phenomenon across the former soviet union we refute the hypothesis that private ownership per se is associated with improved performance and try to isolate any positive performance effects from outsider ownership however we do isolate some clear ownership effects associated with insider ownership we find barter to be associated with lower profitability and to be less common in privatised firms

the output composition puzzle a difference in the monetary transmission mechanism in the euro area and u s we revisit recent evidence on how monetary policy affects output and prices in the u s and in the euro area the response patterns to a shift in monetary policy are similar in most respects but differ noticeably as to the composition of output changes in the euro area investment is the predominant driver of output changes while in the u s consumption shifts are significantly more important we dub this difference the output composition puzzle and explore its implications and several potential explanations for it while the evidence seems to point at differences in consumption responses rather than investment as the proximate cause for this fact the source of the consumption difference remains a puzzle

a re evaluation of the relation between wages and unemployment in the united kingdom this paper examines the long run or equilibrium relationship between wages prices and the unemployment rate in the united kingdom using annual data covering the period 1860 1999 using johansen s maximum likelihood method of testing for cointegration two long run relations are found in a small system of four variables the first relation depicts the co movement of the level of real wages adjusted for productivity together with the unemployment rate and the rate of inflation the second relation shows the co movement between the rate of inflation and deviations of productivity from its trend growth

welfare reform and unemployment in new zealand in the early 1990s new zealand cut benefits and tightened eligibility criteria under its main social welfare programmes these benefit changes varied substantially across both time and demographic groups synthetic panel data are used econometrically to isolate the effects of these reforms on several dimensions of unemployment behaviour a simple theoretical model suggests that cutting benefits could either increase or decrease excess labour supply our results indicate that these reforms increased the official unemployment rate by nearly one quarter of a percentage point but significantly reduced broader measures of economic inactivity or the under utilization of labour in the new zealand economy

price and quantity adjustments in the austrian labour market austria is among the very few countries in the european union which have managed to maintain comparatively low unemployment rates and high employment rates this study looks at the price and quantity adjustment mechanisms in the austrian labour market which may have contributed to this favourable outcome after reviewing briefly the basic theoretical reasoning an empirical investigation is began into gross flow dynamics in the labour market and the cyclical volatility of employment and unemployment in austria in international comparison austrian unemployment is very stable over the business cycle this is due mainly to the high sensitivity of the labour force on cyclical conditions and partly also on the relatively weak responsiveness of employment to cyclical fluctuations in output the latter being possibly attributable to the high degree of real wage flexibility in austria the study proceeds to show that the long run elasticity of wages with respect to unemployment is indeed quite high in austria

asymmetric time series and temporal aggregation the detection of nonlinearities could depend on the sampling frequency asymmetric monthly series may become symmetric when aggregated to quarterly or annual frequencies we test against nonlinearity using the nonlinear autoregressive asymmetric moving average arasma model which nests the linear arma model as a special case using monthly quarterly and annual swedish unemployment series we find support for symmetry linearity in the annual series but not in the monthly and quarterly series

agriculture and the transition to the market agricultural sectors in eastern and central europe are large so that changes in producer prices farm employment and land ownership affect substantial numbers of people in the past food in the region was politicized for decades governments of eastern european countries and the ussr offered their citizens stable subsidized food prices and a steadily improving diet in an effort to demonstrate the superiority of communism over capitalism during the transition the context has changed but food remains politicized many consumers in the region are ill prepared to pay the real costs of food which are quite high the task of reducing those costs will be difficult involving restructuring of farms and fostering competition in processing and distribution management of the agricultural transition will affect the political sustainability of the process and influence agriculture s contribution to the growth of emerging market economies although the agricultural sector of eastern and central europe is large soviet agriculture dwarfs it in its impact on the region and the world a positive program to stop the decline in soviet agriculture could contribute to economic growth and political stability failure to remedy the fundamental flaws in soviet agriculture will speed the country s slide into poverty and ethnic turmoil and undermine the efforts of central and eastern europeans to succeed

beyond privatization institutional innovation and growth in china s large state owned enterprises abstract this article demonstrates that china s large state owned enterprises soes are not stagnant fossils waiting to die under economic reform policies this sector has undergone large change due to enhanced enterprise autonomy the impact of market forces rapid growth of domestic demand for upstream products strategic integration with the world economy and the state s policy to promote large businesses china s large soes are developing new institutional forms that do not neatly fit into existing patterns china is experimentally changing its institutions through a combination of central policy local initiative and interaction with international investment this presents a challenge to the transitional orthodoxy and to ideas concerning property rights in development economics there is not a universal model of property rights and government action that works best in all circumstances china s experience with the reform of large soes shows the diverse possibilities for effective industrial institutions

mass privatization state capacity and economic growth in post communist countries why did the transition from socialism to capitalism result in improved growth in some countries and significant economic decline in others scholars have advanced three main arguments 1 successful countries rapidly implemented neoliberal policies 2 failures were not due to poli cies but to poor institutional environments and 3 policies were counterproductive because they damaged the state we present a state centered theory and empirically demonstrate for the first time one of several possible mechanisms linking neoliberal policies to poor economic performance mass privatization programs where implemented created a massive fiscal shock for post communist governments thereby undermining the development of private sector gover nance institutions and severely exacerbating the transformational recession we performed cross national panel regressions for a sample of 25 post communist countries between 1990 and 2000 and found that mass privatization programs negatively affected economic growth state capacity and property rights protection we further tested these findings with firm level data from a rep resentative survey of managers in 3 550 companies operating in 24 post communist countries within countries that implemented mass privatized programs newly privatized firms were sub stantially less likely to engage in industrial restructuring but considerably more likely to use bar ter and accumulate tax arrears than their state owned counterparts

a note on unemployment and capital tax competition abstract we introduce a labor market imperfection into the capital tax competition literature to study the equilibrium tax formulae and their efficiency in the presence of unemployment since we allow for labor market imperfection the standard conclusions of the tax competition literature would be generalized in the case of non full employment our first result shows that even when head taxes on immobile residents are available the optimal capital tax rate for jurisdictional governments is not zero our second finding is that decentralized equilibrium might be characterized by the overprovision of local public goods when the labor market is imperfect

punitive sanctions and the transition rate from welfare to work in the netherlands the average exit rate out of welfare is dramatically low most welfare recipients have to comply with guidelines on job search effort that are imposed by the welfare agency if they do not then a sanction in the form of a temporary benefit reduction can be imposed this article investigates the effect of such sanctions on the transition rate from welfare to work using a unique set of rich register data on welfare recipients we find that the imposition of sanctions substantially increases the individual transition rate from welfare to work

macroeconomic implications of s s versus accelerator finished goods inventory strategies abstract large scale disaggregated simulation techniques involving 315 firms in 21 different industries holding 6 615 different stockpiles of purchased materials inputs are used to evaluate the implications for the stability of the economy of alternative strategies for managing inventories the simulations reveal that an s s form of production scheduling results in a somewhat less stable economy than is obtained with accelerator type inventory management

what drives unemployment disparities in european regions a dynamic spatial panel approach abstractwhat drives unemployment disparities in european regions a dynamic spatial panel approach regional studies this study analyzes unemployment differentials in european regions during the period 2000 11 to that end a theoretical model with substantive spatial interactions among regions is developed the solution implies a dynamic spatial durbin model specification including regional and institutional level factors as explanatory variables in conjunction with dynamic spatial panel estimates relative importance metrics are used to quantify the effect of regional disequilibrium equilibrium and national level factors relative importance analysis suggests that during the pre crisis period unemployment disparities were mainly driven by regional level equilibrium factors nevertheless labour market institutions are of major importance to explain increasing disparities during 2009 11

emu and labour market reform needs incentives and realisations despite improving labour market conditions in recent years a number of emu countries still suffer from high and persistent unemployment it could therefore be expected that labour market reform would be given a prominent position on the political agenda the new constraints associated with the common monetary policy only increase the pressure for reform relying on the introduction of the single currency as a trigger for labour market reform may be a risky strategy emu generates a complex set of re optimising strategies of the players on the labour market which makes it difficult to get a clear idea what impact it will have on labour market reform evaluation of recent reform measures does not make one confident either the empirical analysis confirms to some extent the idea that countries with higher unemployment rates have carried out more labour market reform this finding holds however only for countries that do not belong to emu emu countries have on average carried out no more reform than countries outside emu and any link between the initial unemployment level and the labour market reform indicators seems to lack it may become apparent that more reform is needed once the macroeconomic environment becomes more unfavourable

taking stock a critical assessment of recent research on inventories empirical and theoretical aspects of inventory behavior became hot topics in the 1950s and early 1960s no one seemed to notice the tension that was developing between the emerging macroeconomic and microeconomic views of inventories macroeconomists routinely thought of inventories as a destabilizing factor yet the prevailing micro theory viewed inventories as a stabilizing factor it was a fascinating question that was barely explored instead somewhat inexplicably interest in inventories dried up as if inventories were of minor economic significance and little intrinsic interest by the early 1980s then economists once again knew something they had known in the 1950s that inventory investment is of first order importance in business cycles but they were also beginning to realize that the standard production smoothing buffer stock model of inventories was in deep trouble this paper focuses on developments since that realization

emerging varieties of capitalism in transition countries industrial relations and wage bargaining in estonia and slovenia this article analyzes patterns of economic coordination in estonia and slovenia two postsocialist countries in central and eastern europe by using the varieties of capitalism voc framework the

unemployment insurance and male unemployment duration in canada a model of unemployment duration is estimated with weekly micro data on canadian men entitlement provisions in the unemployment insurance program and demand conditions are found to have a significant effect on the probability of leaving unemployment the probability of a worker leaving unemployment declines with the duration of unemployment holding unemployment insurance entitlement constant when entitlement is allowed to vary the probability of leaving first falls and then generally rises with unemployment duration these results are robust with respect to allowing for person specific unobserved heterogeneity and alternative specifications of duration dependence

the impact of the potential duration of unemployment benefits on the duration of unemployment abstract this paper examines the impact of the potential duration of unemployment insurance ui benefits on unemployment in the united states first we use a large sample of household heads to examine differences in the unemployment spell distributions of ui recipients and nonrecipients sharp increases in the escape rate from unemployment both through recalls and new job acceptances are apparent for ui recipients around the time of benefits exhaustion such increases are not apparent at similar points of spell duration for nonrecipients second our analysis of accurate administrative data from 12 states indicates that a one week increase in potential benefit duration increases the average duration of the unemployment spells of ui recipients by 0 16 to 0 20 weeks

unemployment equilibria and input prices theory and evidence from the united states the paper develops an efficiency wage model where input prices affect the equlibrium rate of unemployment we show that a simple framework based on only two prices the real price of oil and the real rate of interest is able to explain the main post war movements in the rate of u s joblessnss the equations do well in forecasting unemployment many out of sample and provide evidence that the oil price spike associated with iraq s invasion of kuweit appears to be a component of the mystery recession which followed

privatization in eastern europe irreversibility and critical mass effects abstract this paper proposes a model to shed light on two important policy features of privatization in central and eastern europe the idea of a necessary critical mass of privatization on one hand and the great difficulties encountered in the actual privatization process on the other the model incorporates a positive externality related to the size of the private sector multiple equilibria may arise for political and economic reasons policies of free distribution are analysed with the model they may eliminate the danger of policy reversals due to excess unemployment but may at the same time increase the relative cost of restructuring leading in some cases to pareto inferior outcomes

the relationship between unemployment and vacancies in australia the paper addresses the existence of an equilibrium unemployment vacancies uv relationship in australia cointegration test results suggest that no bivariate long run uv relationship exists moreover this finding fails to support the basic model of labour job search however a modified beveridge curve is proposed where it is found that a number of trivariate equilibrium relationships exist between unemployment vacancies and one other variable the replacement ratio the proportion of long term unemployed or the real wage the existence of an equilibrium relationship in the multivariate framework is due to the endogenous modelling of the un employment flows which are assumed to be exogenous in the bivariate framework of the beveridge curve

why is production more volatile than sales theory and evidence on the stockout avoidance motive for inventory holding this paper argues that the macroeconomically interesting features of inventory behavior are well captured by a model in which firms face only demand uncertainty with a nonnegativity constraint on inventories empirical implications of the stockout avoidance model of inventory behavior are derived and then tested on disaggregated automobile industry data the results largely support the model though they suggest a small role for production smoothing as well subsidiary evidence on the relative variance of demand and cost shocks suggests that demand shocks are indeed more important

complex business cycles and recurrent unemployment in a non walrasian macroeconomic model abstract in a dynamic non t tonnement macroeconomic model trades take place in each period even when prices are not walrasian prices are adjusted between trading periods according to the intensity of disequilibrium a reliable measure of which is obtained by means of stochastic rationing the degree of downward nominal wage stickiness as well as government policy parameters are decisive for the dynamics that emerge in particular it is possible for the economy to converge to quasi stationary states involving permanent unemployment and decreasing nominal wages or to produce complex business cycles with structural features recurrent over time but varying and unpredictable shape and size

inventory changes and the closing of macroeconometric models inventory changes can help econometric models to balance the supply and the demand side and to endogenize utilization variables without resorting to an arbitrary potential output level both results stem from formu lating inventory augmented production functions in which inventory changes act as a stationary ecm between value added and inputs on one side and value added and nal sales on the other this happens because factors or prices may adjust too slowly to productivity and sales shocks the empirical imple mentation refers to the italian treasury econometric model item in which inventory changes are obtained as a residual from endogenous value added and spending components

the political economy of the neoliberal transformation of french industrial relations the author advances the literature on the role of the state in the decentralization of industrial relations in france by providing a political economic analysis of right and left backed governments in recent decades while both have pursued reforms to reduce regulation and to increase labor market flexibility they have used the state apparatus in different ways to achieve these goals the right has reformed labor law by obtaining partial support from employers associations and unions the social partners the left by contrast has relied on decentralized bargaining with the social partners because its political base would not have accepted flexibility increasing legal reforms the author examines critical episodes of reform in collective bargaining unemployment insurance and employment protection laws to show how the state has intervened in different ways depending on the political identity of the governing coalition

prices productivity and wage bargaining in open economies according to the standard union bargaining model unemployment benefits should have big effects on wages but product market prices and productivity should play no role in the wage bargain we formulate an alternative strategic bargaining model where labour and product market conditions together determine wages a wage equation is derived and estimated on aggregate data for four nordic countries wages are found to depend not only on unemployment and the replacement ratio but also on productivity international prices and exchange rates there is evidence of considerable nominal wage rigidity exchange rate changes have large and persistent effects on competitiveness

financial development by learning abstract this paper analyzes financial development driven by accumulation of information through learning by doing financial intermediaries discover good investment opportunities by making loans to industrial projects they thereby accumulate information that improves the allocation of savings an initial equilibrium with poor information and thus no industrial investment may trap the economy in financial underdevelopment such a trap is informational and can be overcome by the remedies that resolve informational externality

unemployment dynamics across oecd countries abstract the european community and the us have experienced vastly different unemployment dynamics over the last two decades this paper investigates whether these differences are due to exposure to different shocks or reacting differently to the same shocks with the premise of a search theoretic framework and a structural var methodology the paper robustly identifies aggregate versus reallocative shocks with the exception of spain where most of the dynamics seem to be driven by reallocation it is found that most differences in unemployment dynamics arise because of differences in responses to shocks in particular the us labour market is quicker to adjust than the european community this implies that eec economies might be dynamically sclerotic even if the size of the steady state labour market flows give the impression that european labour markets are quite active various identifying assumptions additional labour supply shocks and different variables are used yet the results appear robust

estimating a structural search model the transition from school to work this paper presents a finite horizon search model that is econometrically implemented using all of the restrictions impli ed by the theory following a sample of male high school graduates fr om the youth cohort of the national longitudinal surveys from graduat ion to employment search parameters are estimated reservation wages and offer probabilities are estimated to be quite low simulations a re performed of the impact of changing the parameters on the expected duration of unemployment copyright 1987 by the econometric society

unemployment dynamics in britain we examine the inter related dynamics of the unemployment flows and stock our model allows them to be linked through the standard accounting identity but also through behavioural relationships we find that for the uk the bulk of the correlation between duration and the unemployment stock arises from the dependence of duration on unemployment taking careful account of the inter temporal identity outflow shocks have contributed little to the evolution of unemployment since the late 1960s given that the correlation of duration and unemployment arises from the behavioural relationship we show that unemployment dynamics arise mostly from shocks to the inflow unemployment remains one of europe s more pressing economic and social problems as highlighted in the eu s lisbon declaration of 2000 a dynamic approach to unemployment starts from the recognition that unemployment is a stock and changes through shocks to the outflow and inflow the research and policy focus has generally been on the outflow process or equivalently unemployment duration a glance at figure 1 shows why this might be so it reveals a very strong co movement of the unemployment rate and the proportion of the unemployed out of work for a year or more analysts have used data like this to argue that the source of unemployment fluctuations has been changes in the outflow process 1 possibly as a consequence of this most policies directed at reducing unemployment focus on improving the search effectiveness and employability of the currently unemployed the unemployment flows and stock are related in quite complex ways and in this paper we focus on these inter related dynamics the model we use allows them to be linked in two ways first there is the simple accounting relationship whereby shocks to the flows accumulate in the stock second search and matching models suggest behavioural relationships of the flows depending on unemployment the presence of the nonlinear accounting identity in the model makes the analysis of the joint system problematic so we proceed sequentially investigating first one link and then the other we find that for the uk the bulk of the correlation between duration and the unemployment stock displayed in figure 1 arises from the dependence of the former on the latter we find a strong dependence of the outflow rate on unemployment taking careful account of the inter temporal identity on the other hand outflow shocks have contributed little to the evolution of unem

does unemployment compensation affect unemployment duration abstract we use a flexible hazard rate model with unrestricted spell duration and calendar timeeffects to analyse a dataset including all norwegian unemployment spells during the1990 s the dataset provides a unique access to conditionally independent variation inunemployment compensation we find that a marginal increase in compensation re duces the escape rate from unemployment significantly irrespective of business cycleconditions and spell duration the escape rate rises sharply in the months just prior tobenefit exhaustion while men are more responsive than women with respect to mar ginal changes in compensation women are most responsive with respect to benefitexhaustion keywords unemployment spells business cycles unemployment compensation non parametric duration analysis jel classification c41 j64 the ragnar frisch centre for economic research oslo we wish to thank the re search council of norway for financial support and christian brinck harald goldstein costas meghir espen moen steinar strom rolf aaberge and three anonomyous referees for helpful comments cor respondence to knut roed the ragnar frisch centre for economic research gaustadalleen 21 0349oslo norway e mail knut roed frisch uio no

measuring worker flows the study explores differences between two measurement concepts of worker flows widely used in the literature referred to as the turnover and reallocation concepts it is found that measuring worker flows by the turnover concept leads to substantially about 5 of total employment higher worker flow estimates and slightly increases age size and industry group effects on firm level worker flows as well as differences between growing and declining firms relative to the reallocation concept

estimating the effect of counseling and monitoring the unemployed using a job search model this paper examines the impact of the counseling and monitoring program for the unemployed with particular reference to their job finding rate application intensity and matching probability the effectiveness of counseling and monitoring is measured by using a job search model in which the job finding rate is equal to the product of the application intensity and the matching probability counseling and monitoring is an intensive job search assistance program designed to help unemployed people receiving unemployment benefits to find a job as quickly as possible the empirical analysis is based on data from a social experiment a sample of the inflow into unemployment was randomly assigned to a treatment and a control group the empirical results based on formal reduced form models show that counseling and monitoring does reduce the time taken to find a job because people participating in the program make more applications than those who are not participating although no differences are found in matching probabilities

small system modelling of real wages inflation unemployment and output per capita in italy 1970 1994 the relationships between real wages output per capita inflation and unemployment in italy between 1970 and 1994 are modelled using a cointegrated vector autoregression there is evidence of a change in the underlying equilibria and in the dynamic evolution of the variables probably associated with the substantial changes in many sectors of the italian economy after 1979 alternative ways to model structural change in the italian labour market are considered in adopting a split sample approach the results favour an hysteresis interpretation of unemployment

intertemporal labour supply with search frictions starting in the 1970 s wage inequality and the number of hours worked by employed u s prime age male workers have both increased we argue that these two facts are related we use a labour market model with on the job search where by working longer hours individuals acquire greater skills since job candidates are ranked by productivity greater skills not only increase worker s productivity in the current job but also help the worker to obtain better jobs when job offers become more dispersed wage inequality increases and workers work longer hours to obtain better jobs as a result average hours per worker in the economy increase this mechanism accounts for around two thirds of the increase in hours observed in data part of the increase is inefficient since workers obtain better jobs at the expense of other workers competing for the same jobs copyright oxford university press

stabilization and recession in a transitional economy the case of poland abstract this paper analyzes the polish experiences in 1990 of the stabilization shock therapy implemented simultaneously with the set of system transforming reforms the orthodox exchange rate based stabilization program brought about a substantial reduction in inflation and the establishment of market clearing prices but the economy fell into unexpectedly deep recession our findings suggest that the recession which has been common to all postsocialist countries was mainly caused by a system specific output decline related to the dismantling of a centrally planned system and the transition to market economy

in search of economic well being worker power and the effects of productivity inflation unemployment and global trade on wages in ten wealthy countries theory the theory addresses the forces that determine the real wages which workers receive it is proposed that in the free market system worker power plays a crucial mediating role between economic considerations involving labor supply and productivity and the real wages available to workers in the economy hypotheses in moderate and weak worker power countries real wages will vary inversely with the labor supply in terms of domestic unemployment and international trade in strong worker power countries real wages will vary with changes in productivity and inflation methods separate regression analyses are developed for 10 countries varying in their level of worker power over a 30 year time frame results in moderate and weak worker power countries changes in real wages were best predicted by levels of unemployment and changes in global trading in strong worker power countries changes in real wages were best predicted by changes in productivity and inflation although in one case of a strong worker power country a significant positive association occurred between global trading and real wages

search behaviour transitions to non participation and the duration of unemployment using longitudinal micro data on unemployed individuals for 1983 85 a structural job search model is estimated the model allows for transitions from unemployment to nonparticipation an extended version of the model deals with the influence of on the job search and prospective wage increases on search behavior of the unemployed the empirical results show that the probability of accepting a job offer is almost one for most unemployed individuals a large portion of unemployment spells ends in a transition out of the labor force the effects of changes in benefits on duration appear to be extremely small copyright 1990 by royal economic society

reform in eastern europe how can the new governments of eastern europe succeed in moving from centrally planned to freemarket economies this incisive report identifies and describes the major policy choices to be made and discusses what will work and what will not reform in eastern europe provides a comprehensive easily read statement of reform policy that stands in the mainstream of modern western economics based on their experience with stabilization policies in other countries the authors show how eastern europe can reduce unemployment during the painful adjustment process create effective and socially acceptable mechanisms to subject enterprises to market discipline and replace barter trade under cmea with market based international trade

search benefits and entitlement in a simultaneous analysis of unemployment duration and search intensity we estimate a non structural search model accounting explicitly for two features of the benefit system benefit level and time remaining until exhaustion of the entitlement period residual entitlement special attention is paid to the number of search contacts as an indicator for search intensity to assess the effect of the benefit level and residual entitlement on the number of search contacts we estimate a poisson model our results suggest that benefits work through a reduction of search efforts whereas residual entitlement is effective mainly through the reservation wage

privatization possible lessons from the hungarian case abstract hungary was the first eastern european country to tackle the problem of economic reform initially in piecemeal fashion then by introducing broad sets of measures aimed at establishing a market based economic system this paper reviews the hungarian experience with privatization policies and presents some general conclusions regarding the design of successful privatization schemes that might serve as rough guidelines for other countries trying to reduce a vastly overextended public sector

unemployment insurance and the business cycle an equilibrium model is developed to study the interaction of the business cycle unemployment insurance and the labor market for young men in canada the model combines optimal job oer layo and recall decisions within a numerically solved and restricted bayesian nash equilibrium we consider the long run implications of changes made to unemployment insurance in canada during the 1990s the changes lead to equilibrium increases in average rates of unemployment layos and recalls eliminating ui lowers the equilibrium unemployment

general equilibrium macroeconomic models of unemployment can they explain the unemployment path in the oecd several theories which seek to explain the high and apparently persistent unemployment in the oecd countries over the past two decades have arisen within the framework of imperfections in the goods and labour markets probably the most prominent theories within this class of models are the general equilibrium models of phelps 1994 layard and nickell 1986 and layard et al 1991 labelled structuralist theories of unemployment by phelps 1994 common to the structuralist theories is that the low frequency movements in unemployment or the nairu are determined by structural variables such as unemployment benefits taxes real interest rates etc however the high frequency movements in unemployment are determined by wage and price surprises and in the layard and nickell 1986 model also by cyclical mark ups employment is entirely determined by the firms willingness to supply and the firms are never sales constrained by contrast the general equilibrium model of sarantis 1993 which is in post keynesian spirit suggests that unemployment on all frequencies is mainly an outcome of demand side factors in this model imperfections in the goods and labour markets are less important determinants of unemployment in this paper i estimate the extent to which the models of phelps 1994 layard and nickell 1986 henceforth l n and sarantis 1993 are able to explain the unemployment path of the oecd countries using annual data over the period 1960 to 1993 the theoretical set up of the models is presented in section 1 and the empirical estimates are set out in section 2

credit market imperfections and persistent unemployment abstract this paper develops the thesis that credit market frictions may be an important contributor to high unemployment in europe when a change in the technological regime necessitates the creation of new firms this can happen relatively rapidly in the u s where credit markets function efficiently in contrast in europe job creation is constrained by credit market imperfections so unemployment rises and remains high for an extended period the data show that there has not been slower growth in the most credit dependent industries in europe relative to the u s but the share of employment in these industries is lower than in the u s this suggests that although credit market imperfections are unlikely to have been the major cause of the increase in european unemployment they may have played some role in limiting european employment growth

exploring the political economy of labour market institutions labour markets how reforms took place many economists argue that the european unemployment problem relates to large labour market rigidities this paper argues that many of those inflexibilities and the underlying institutional regulations can be understood as the outcome of political influence by incumbent employees this is because many policies that increase unemployment actually benefit these insiders an empirical investigation of the determinants of labour market institutions demonstrates that the observations are consistent with this view the findings imply 1 higher exposure of the employed to unemployment facilitates a reduction in the level of employment protection 2 unemployment benefits are lower the more employment reacts to wages 3 a higher level of unemployment and the existence of a right wing government slow down the growth rate of the minimum wage giles saint paul

hysteresis in unemployment unemployment has risen sharply in a number of countries and it appears to be becoming more persistent the experience of the 1970s and 1980s showed that adverse unemployment shocks could have long lasting effects with very serious economic and social consequences a key mechanism producing these adverse consequences was hysteresis in unemployment whereby temporary rises in unemployment generated by supply and or demand shocks had permanent or at least very persistent effects clearly it is important to understand how hysteresis mechanisms might operate in order to avoid such adverse outcomes on the other hand experience during the subsequent two decades showed that under more favourable macroeconomic conditions it is possible to observe good hysteresis effects now is a very appropriate time to re visit the issue of hysteresis in unemployment in order to avoid the errors of the 1970s and 1980s and if possible to get hysteresis effects working in a positive direction copyright 2011 oxford university press

estimating unemployment inflows outflows and long term unemployment in britain using the cointegration approach a model is estimated of flows into and out of unemployment using the johansen multivariate cointegration approach and uk data for the period 1974q4 to 1993q3 two long run equilibrium relationships are obtained covering the outflow rate and unemployment duration which include variables such as the replacement ratio structural change and output a unique feature of the model is that it allows the inflow rate to determine the outflow rate and vice versa this is argued to be important given the common european stylized fact that inflows and outflows are both countercyclical and strongly correlated thus if firms and workers are heterogeneous hiring and firing is contemporaneous necessitating the type of model estimated here some interesting results include the finding that output is not important in determining the outflow rate and that the speed of adjustment of the outflow rate to changes in its underlying equilibrium is slow in contrast the proportion of long term unemployed is positively re

a search model applied to the transition from education to work this paper presents the specification and estimation of a search model applied to the transition from education to work the theoretical search model includes the possibility of variable search intensity the empirical model with a reservation wage relation is estimated using maximum likelihood methods a data set containing information on new law graduates is used for the estimation finally the model is estimated for two separate subperiods to investigate the effects of market changes

unemployment benefits and search effort in the uk labour market in this paper the impact that receipt of unemployment benefit has on job search effort is investigated utilizing data drawn from the 1984 labor force survey reduced form search effort equations are estimated conditional on the decision to seek work after controlling for potential selectivity bias personal characteristics and demand conditions those claiming benefit are shown to search more extensively than nonclaimants benefit claimants maintain a clear attachement to the labor market and appear more able to prolong search effort receipt of unemployment benefit increases the likelihood of contacting a job vacancy copyright 1991 by the london school of economics and political science

the political economy of restructuring and privatization in eastern europe this paper reports some of the recent research in the political economy of transition in central and eastern europe with special emphasis on restructuring and privatization this line of research is concerned with the political feasibility of reform packages and the effect of political constraints on the design of reforms political constraints appear to play a major role in economic transition 2 in poland transition started with a homogeneous solidarity led government enjoying great legitimacy l balcerowicz the finance minister who had launched reform in january 1990 had however to leave office and part of his policies are now being reversed parliament is fragmented government duration is becoming increasingly short workers are striking against privatization plans czechoslovakia is breaking up partly because the slovak population is not ready to follow the rhythm of reforms initiated by v klaus in prague the support for e gai dar s transition program in russia has dwindled among the population conservative forces are gathering momentum alarming neonazi manifestations in east germany are an indicator of the low tolerance of the population for the changes imposed on them some countries are doing better hungary is doing comparatively well with a more stable political situation and relative successes in reforms allowing it to attract foreign direct investment china is experiencing a rapid expansion of the non state sector and smooth advances in the reform process in a context of sustained economic growth qian and xu 1992 these two countries

inventory investment and gdp characteristics in oecd countries abstract there are very few research studies on macroeconomic inventory behaviour of various countries it is clear that macro inventories are the results of a large number of individual microdecisions however we believe that it is worth analysing how inventories develop in the individual countries and why we can see different tendencies this paper is the newest piece in a series of studies on the above subject we use the oecd database to analyse inventory trends between 1987 and 2004 in nine of the most developed economies of the world annual inventory investment data are used and their connections with other components of gdp expenditure governmental and private consumption investment in fixed assets and foreign trade balance as well as the annual growth rate of gdp are examined by multi variable statistical analysis conclusions include the steadily decreasing tendency of inventory fluctuations the varying periods of higher and lower rates of inventory investments and the differences of main influencing factors by country

governance structures and the durability of economic reforms evidence from inflation stabilizations abstract this paper investigates the relationship between a country s political economic and institutional environment and its ability to implement sustainable economic reform programs the policy issue on which the study focuses is inflation stabilization it consists principally of econometric estimations of the relationship between the success of stabilizations in a large sample of countries and several political and economic explanatory variables the hypotheses tested are drawn both from the recent macroeconomic literature on policy credibility and from political science the major findings include the following 1 a despite the conventional wisdom to the contrary political repression does not appear to be an effective means for implementing sustainable stabilization policies durable economic reforms and political freedoms appear to be complementary 2 b as has been previously argued theoretically and demonstrated empirically political instability is detrimental to policy reform 3 c the political will and popular consensus for stabilization policies are enhanced during a severe economic crisis 4 d there is weak evidence that intervention by the international monetary fund rather than supporting reform programs can undermine their credibility

motivating wealth constrained actors we examine how owners of productive resources e g public enterprises or financial capital optimally allocate their resources among wealth constrained operators of unknown ability optimal allocations exhibit 1 shared enterprise profit the resource owner always shares the operator s profit 2 dispersed enterprise ownership resources are widely distributed among operators of varying ability 3 limited benefits of competition the owner may not benefit from increased competition for the resource and sometimes 4 diluted incentives for the most capable more capable operators receive smaller shares of the returns they generate implications for privatizations and venture capital arrangements are explored

central and eastern europe a decade after the fall of state socialism regional dimensions of transition processes following the collapse of state socialism a decade ago central and eastern european countries ceecs opted for democracy and market economy there was a widespread belief that transition to a market economy via neo liberal shock therapy would lead to a quick closure of the wealth gap with the west a decade later however neo liberal expectations of convergence under market conditions never materialized instead new europe has been experiencing fragmentation and growing disparity between west and east and also within the east itself in examining regional patterns and building on the strengths of institutional and radical approaches this article challenges neo liberal accounts of uneven development in eastern europe it argues that diverging economic trajectories should be understood in the light of the structural legacies of both the state socialist and pre socialist past and the way these are exposed to and interact with international political economy

fighting inflation in a transitional regime russia s anomalous stabilization russia s recent experience fighting inflation dramatic success in 1995 96 after repeated failures in 1992 94 poses a challenge for existing theories of the politics of macroeconomic stabilization monthly inflation rates fell to close to zero despite a deeply unpopular president distracted by heart disease a government penetrated by economic lobbies a far from independent central bank a parliament dominated by opposition factions a lively election season and the fiscal pressures of fighting a regional war the article reviews this experience shows its incompatibility with existing political economy theories and proposes an explanation with implications for other reforming regimes success was achieved by offering previous beneficiaries from inflation major commercial banks and subsidized sectors other sources of government protected rents that did not increase the money supply even when expropriating powerful rent seekers is politically infeasible it is sometimes possible to trade them less inflationary rents for ones that are more inflationary

reforms lobbies and welfare a common agency approach citizens with heterogeneous tastes delegate to policy makers the authority to choose public policies they may try to influence legislators in various ways in this paper we assume that monetary lobbying and direct threats are the only instruments private individuals can use to influence the legislator we model the relationship between the citizens and a single policy maker as a common agency game lobbies offer a policy and a payment according to a truthful contribution schedule and the government takes the policy decision in the truthful equilibrium the government implements the social surplus maximizing policy introducing also direct threats we find that as far as both groups have an instrument to influence the legislator the efficiency result is robust we also show that when the lobby groups have asymmetric interests and political power not all groups necessarily participate in the auction in particular it turns out that one lobby or non lobby equilibria may arise and those equilibria are also efficient

joint micro and macro effects on inventories in transition economies abstract this paper examines how macro and micro level effects on inventory behavior interact in transition economies we first analyze the general nature of changes then some macro level phenomena will be discussed in the main part of the paper the behavior of companies and its inventory consequences will be examined and a feedback to the macro level is made the general conclusion of the paper is that in czechoslovakia poland and hungary the eastern european countries included in the analysis the manufacturing sector has moved towards the establishment of a market economy type inventory behavior faster than expected

speed of adjustment and self fulfilling failure of economic reform abstract an economic reform programme where inefficient public labour is laid off is considered the immediate effect is a lowering of wages and increased profitability in the private modern sector over time as capital accumulates in the modern sector wages and production increases big bang reform generates a sharp transitory drop in wages while gradual reform gives a more modest decline in the presence of a subsistence wage constraint popular resistance can cause the cancellation of big bang reform two arguments for gradualism can in that case be made first a more gradual reform requires a less abrupt drop in the wage and will therefore be feasible second the initial wage drop will be stronger if a cancellation of reform is expected and since cancellation is dependent on the severity of the initial wage drop multiple equilibria occurs the existence of multiple equilibria is dependent on the speed of reform sufficiently gradual programmes have a unique successful equilibrium

growth in transition what we know what we don t and what we should abstract this essay surveys macroeconomic issues that marked the transition from planned to market economy in central and eastern european and former soviet union countries we first establish stylized facts of the transition so far we then critically survey the theoretical literature on transition discussing explanations for the initial output fall and mediumterm issues such as optimal speed of transition disorganization institutions and sectoral reallocation as source of output dynamics we review the empirical literature to assess how well it translates the theoretical models and explains the stylized facts we conclude with suggestions for future research

long term trends in inventory investment in traditional market and post socialist economies abstract inventories form a small but important part of national wealth and constitute the most volatile component of gdp their moves are important indicators of the dynamics of the economy both at the micro and macro level in this paper the authors venture to explain long term macroeconomic inventory investment trends from new perspectives we compiled a data set of 24 oecd countries for the 1970 2011 time period and addressed three sets of questions how can inventory investment be characterised in the sample countries and what are the general tendencies does the analysis on the substantially larger data set compared to those in our previous studies verify earlier results regarding the declining global trend in inventory investment and the convergence of inventory features in different countries a quarter of a century ago a substantial change in the economic systems of certain oecd countries took place the transition of central eastern european countries from planned to market economies the difference in inventory behaviour in the two sets of countries was obtrusive before the transition the changes following the transition reveal very important consequences of systemic changes are there substantial connections between fundamental country characteristics and inventory behaviour can regression and correlation analysis reveal some decisive relationship between certain macroeconomic indicators and inventories our analysis resulted in mostly positive or at least meaningful answers to the above questions and opened up a broad field for further research

unemployment insurance and unemployment spells this paper tests the effects of the level and length of unemployment insurance benefits on unemployment durations the paper particularly studies individual behavior during the weeks just prior to when benefits lapse higher unemployment insurance benefits are found to have a strong negative effect on the probability of leaving unemployment however the probability of leaving unemployment rises dramatically just prior to when benefits lapse individual data are used with accurate information of spell durations and the level and length of benefits the semiparametric estimation techniques used in the paper yield more plausible estimates than conventional approaches and provide useful diagnostics copyright 1990 by the econometric society

capital accumulation and unemployment a tale of two continents in contrast to much recent work regarding the causes of european unemployment in this paper we emphasize the importance of capital accumulation but unlike the few previous studies which have examined the relationship between capital accumulation and unemployment we argue that what matters for the evolution of employment and the unemployment rate is not the absolute growth rate of a country s capital stock but its evolution relative to other countries capital stock the empirical validity of the above statement is demonstrated for almost all oecd countries using quarterly time series data for the period 1961 1995 more detailed evidence is also presented for germany japan and the united kingdom

do wages compensate for anticipated working time restrictions evidence from seasonal employment in austria this article investigates the existence of compensating wage differentials across seasonal and long term jobs that arise due to anticipated working time restrictions using longitudinal information from the austrian administrative records we derive a definition of seasonality based on observed regularities in employment patterns as wages change across seasonal and long term jobs for the same individual over time we can control for individual specific effects and use variation in the starting month of seasonal jobs as an exogenous predictor of anticipated unemployment we find that employers pay on average a positive wage differential of about 11 for seasonal jobs

creation of financial markets in previously centrally planned economies abstract one of the key issues in reforming previously centrally planned economies is the creation of financial markets in the present paper the macroeconomic consequences of their introduction are investigated given the impossibility of the immediate introduction of a complete set of markets in the transition phase the second best theorem applies using an overlapping generation model it is shown that the existence of financial markets allows the choice of different combinations of growth and consumer s welfare given the existing trade off between these two targets financial markets can exist under different ownership schemes in the context of the model chosen it is shown that it is impossible to obtain unequivocal conclusions about the sequence of financial reforms and the optimal ownership scheme thus it is necessary to judge on a case by case basis and caution is suggested in the policy prescriptions

the role of selective job search in uk unemployment selective search where unemployed job losers confine their job seeking efforts to matches in the pre separation sector has attracted consid erable attention as a possible source of high and persistent unemployment however this idea is questionable those opting for selection may do so because this strategy is more effective at gener ating an acceptable offer using uk microdata i find evidence in support of the latter view selective searchers cannot account for the persistence of high unemployment since the early 1980s

local governments as industrial firms an organizational analysis of china s transitional economy despite widespread skepticism about government ownership in transitional economies china s rapid industrial growth has been led by public enterprises kornai s theory of soft budbet constraints born of the failure of earlier hungarian reforms fosters such skepticism but it assumes as fixed organizational characteristics that in fact vary widely across government jurisdictions local governments with smaller industrial bases have clearer financial incentives and constraints fewer nonfinancial interests in enterprises and a greater capacity to monitor them in china s vast public sector the fastest growth in output and productivity has occurred where government ownership rights are clearest and most easily enforced which enables officials to manage public industry as a diversified market oriented firm

inventory investment and sectoral characteristics in some oecd countries this paper discusses the effects of sectoral structure on the long run macroeconomic inventory behaviour of national economies data on 15 oecd countries are included in the analysis which is based on correlation and cluster analysis methodologies the study is part of a long term research project exploring factors influencing the inventory behaviour of national economies first we introduce some basic characteristics of macroeconomic inventory formation in the 15 oecd countries we argue that our previous results on the existence of specific characteristic features of macroeconomic inventory investment are justified hence it makes sense to study the factors influencing these features we then examine the contribution of various sectors to the production of in the countries involved and the relationship between sectoral structure and inventory intensity annual inventory change gross value added we find that the high share of agriculture and manufacturing increases inventory intensity that the increasing share of services has a negative effect and that the role of construction and trade is not obvious the relatively low stability of the statistical results warns us to be cautious with our judgements further case by case analysis would be required to obtain more solid results

unemployment in regional labor markets using structural theories to understand local jobless rates in west virginia the author uses a range of structural labor market models to understand differing regional jobless rates in a state affected by pockets of structural unemployment four theories of regional structural unemployment are presented and their hypotheses are statistically evaluated using west virginia county panel data the author then presents case study evidence to compare these statistical results with the realities of the county labor markets both types of empirical evidence suggest that a segmented non market clearing model in which structural unemployment stems from queuing for above market clearing wages in both a high wage primary sector and a lower wage secondary sector can shed the most light on regional unemployment rates in west virginia

capital markets in central and eastern europe christian helmenstein edward elgar publishing ltd cheltenham uk and northampton ma usa 1999 100

wages and the value of nonemployment nonemployment is often posited as a worker s outside option in wage setting models such as bargaining and wage posting the value of nonemployment is therefore a key determinant of wages we measure the wage effect of changes in the value of nonemployment among initially employed workers our quasi experimental variation in the value of nonemployment arises from four large reforms of unemployment insurance ui benefit levels in austria we document that wages are insensitive to ui benefit changes point estimates imply a wage response of less than 0 01 per 1 00 ui benefit increase and we can reject sensitivities larger than 0 03 the insensitivity holds even among workers with low wages and high predicted unemployment duration and among job switchers and recently unemployed workers the insensitivity of wages to the nonemployment value presents a puzzle to the widely used nash bargaining model which predicts a sensitivity of 0 24 0 48 our evidence supports wage setting models that insulate wages from the value of nonemployment

how to reform a planned economy lessons from china the countries of eastern europe and the former soviet union have been flooded with advice from the west on how to liberalize their planned econo mies this advice is unfortunately offered in an empirical vacuum no one knows how these econo mies will react to the proposed liberalization meas ures there exists however a neglected source of information china offers a long time series of data over a decade s worth on the effects of reforms on a planned economy china s reforms were gradual but their cumulative effect has been large and they have been remarkably successful china s experiments provide some practical les sons on what kinds of reforms can work elsewhere the dominant school of thought among economists favours the big bang policy of reforming quickly and according to a comprehensive plan partial reforms in this view are useless they will be negated by the remnants of the planning system the proponents of big bang reform have been influential with poland czechoslovakia and rus sia announcing plans for a rapid transition to capi talism