the swedish unemployment experience abstract since the 1960s sweden has sustained a remarkably low unemployment rate while the average duration of unemployment spells has been increasing over time this pattern is reproduced in an equilibrium search model incorporating progressive income taxes generous unemployment compensation and a program for preventing unemployed workers from abusing the system our analysis raises concerns about how well the swedish system is equipped to handle the current situation of high unemployment

institutional determinants of labor reallocation in transition the transition process differed in the countries of the former soviet union fsu and those of central and eastern europe cee in terms of reallocation of labor real wage employment and output adjustment we sift through the theoretical and empirical literature to find an explanation for these diverging adjustment trajectories and conclude that they can be explained by the fact that the cee countries adopted social policies that upheld wages at the bottom of the distribution forcing the old sector to restructure or collapse while the fsu countries allowed wages to free fall not forcing the hand of the old sector

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

imperfect competition multiple equilibria and unemployment policy this paper takes a simple imperfectly competitive macro model with increasing returns and shows how it can lead to nonexistence or multiplicity of equilibria the consequences for government policy toward unemployment are explored and shown to be very different from the traditional model it is argued that a multiple equilibrium model is an attractive possible explanation of the behavior of u k unemployment in the 1980s copyright 1990 by royal economic society

relative earnings and individual union membership in the united kingdom considerable attention has been focused in recent years on the empirical analysis of the effect of trade unions on the structure of earnings such empirical investigation usually entails measurement of the union non union differential in wages or earnings at the level of the individual this involves comparison of the earnings of union members with estimates of what their earnings would be were they not union members or equivalently examination of differences in earnings between individuals comparable with regard to all other relevant characteristics who differ in their union membership alone in the united kingdom all previous attempts at estimation of this differential have used aggregate data at either the industry or occupation level 1 the conventional methodology involves regression of the logarithm of the average wage on either the proportion of workers who are union members or the proportion covered by a collective agreement together with a vector of industry characteristics that are deemed to determine the non union wage however several problems are immediately apparent with this methodology first the model ignores the possibility of variation in the differential across industries which has potentially serious consequences second the vector of other characteristics customarily used is somewhat limited and raises doubts concerning the adequacy of the standardization for what might loosely be termed labour quality third only a sub sample of industries is ever used owing to lack of data those industries excluded are generally smaller in terms of employment that those included if the differential varies with the size of the industry a further bias will be induced all of these problems are either removed or lessened by the use of individual level data for an analysis of their impact at the industry level see geroski and stewart 1981 2 as a result it is now widely accepted that the appropriate way to measure such differentials is to use micro data sets at the level of the individual worker until recently suitable data have not been available for the united kingdom and hence such analysis was not possible this paper presents the first estimates for the united kingdom based on individual level data if the value of the union non union differential were the same for all workers in the unionized sector analysis at the industry level and the individual level would produce similar results however the marshallian laws of derived demand suggest that this will not be the case despite this clear prediction of variation in the differential there has been little systematic investigation of the variation this paper also presents such an analysis since variation in the differential across industries results in aggregation bias in industry level studies such an analysis is of considerable relevance to the evaluation of the evidence from such studies as well as being of interest in its own right the paper is laid out as follows section i presents a method of estimating the union non union differential at the individual level while section ii

wage and price control policies in transition economies abstract this paper studies the structural impact of wage and price control policies in transition economies using a two sector three factor small open economy model it illustrates the results quantitatively via simulation exercises at the earlier stage of the transition when labor is immobile a strict control on the price of the nontradables and the wage rate minimizes the fall in employment and output also a more severe control on the price of the nontradables than on the wage rate alleviates the fall in the real wage at negligible costs in lost employment and output at the later stage of the transition when labor becomes mobile the liberalization of the price of the nontradables can proceed faster than that of the wage rate this policy combination increases employment and output and reduces the shortage for the nontradables but lowers the real wage

combining intended demand and yes no responses in the estimation of contingent valuation models abstract the contingent valuation method cvm has limitations arising from the lack of a direct link between estimated willingness to pay and consumer behavior regarding the use of the good being evaluated to estimate the total value of a resource under a capacity constraint information on intended use is introduced as an integral part of the cvm this combined approach allows use and non use values to be distinguished for a sample of users and non users the econometric specification is applied to estimate the benefits of reducing water pollution on beaches located near an important metropolitan area of south america

the determinants of equilibrium unemployment in britain a lot of energy is currently being expended in trying to understand what has been happening to unemployment in britain and the rest of the developed world in this paper we look at this question in the british context by trying to confront some possible explanations with the data since the data we use are quarterly over rather a short period we are setting the explanations a very hard test most explanations tend to be rather casual and the theories underpinning them ill developed thus for example the so called real wage argument is based on the idea that real wages affect labour demand and that the equilibrium real wage bears some relatively stable relationship to output per head but how stable is not clear thus whether or not we can expect a well defined stable ceteris paribus dynamic relationship between real product wages as a proportion of output per head and unemployment is equally unclear so if such a relationship does not show up in a quarterly regression model this may not be that serious for the theory nevertheless we must look for the relationship for how else are we ever to discriminate between a plethora of conflicting views the primary emphasis in this paper is on the secular factors affecting unemployment rather than the cyclical variables consequently we shall not be concerned with developing a coherent theory of cyclical fluctuations and in the empirical work we shall control for the cycle simply by making use of those exogenous or predetermined variables which other work in this field suggests are important 2 the remainder of the paper is set out as follows the next section is concerned with specifying a model which generates a definition of equilibrium unemployment the outline of this model is a pair of equations determining the flows into and out of unemployment and these are specified in section ii which looks closely at the possible variables involved section iii then deals with the results and presents some general conclusions

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

do regions benefit from active labour market policies a macroeconometric evaluation using spatial panel methods dauth w hujer r and wolf k do regions benefit from active labour market policies a macroeconometric evaluation using spatial panel methods regional studies the effect of active labour market policies on all job seekers in a region is assessed using the variation in the participation in these programmes across regions over time the starting point is an augmented regional matching function which is extended by allowing for a heterogeneous search effectiveness parameter for current participants and job seekers who finished a measure recently a spatial dynamic panel data model is estimated by using a quasi ml estimation procedure it is found that job schemes in the non profit sector wage subsidies and advancement of apprenticeships significantly increase the regional number of matches

local pay determination theoretical models of local pay are reviewed ranging from neoclassical perspectives unemployment wage trade off models and segmented labor market approaches the empirical work on u s north south differentials is discussed for the u k studies of the extent of and trends in geographical pay differentials are considered as well as behavioral explanations focusing on the role of excess demand the issue of adjustment processes is then discussed both in theory and in relation to empirical work for the u s and u k this discussion focuses largely on geographical spillover effects in terms of origins evidence and issues of identification finally the impact of certain impediments in the adjustment process are considered specifically in relation to the u k these concern the role and influence of national wage bargaining as well as factors inhibiting labor migration stemming from the housing market and the climate of the national labor market copyright 1992 by blackwell publishers ltd

help wanted job needed estimates of a matching function from employment service data i estimate a function that matches vacant jobs and unemployed workers to produce new hires israeli law requiring vacancy registration yields unique data quality the literature underestimates matching function coefficients because of a simultaneity bias as the outflow of hires depletes stocks of unemployed and vacancies instruments and a new simulation method address this bias a new test reveals strong evidence of heterogeneity in unemployed and vacancies estimates imply labor market dynamics that absorb shocks completely within only 2 months reductions in the hire rate of referrals can explain a 2 1 percentage point increase in unemployment between 1978 and 1990

wage inflation and unemployment in europe the regional dimension johnes g and hyclak t j 1989 wage inflation and unemployment in europe the regional dimension reg studies 23 19 26 in this paper a bargaining model of wage and unemployment determination is used to estimate regional phillips curves for britain italy and the federal republic of germany estimates of region specific non accelerating inflation rates of unemployment nairu are provided movements of these over time are examined the impact of inter regional differences in wage rigidity on unemployment change is analysed in the final section johnes g et hyclak t j 1989 l inflation par les salaires et le chomage en europe l optique regional reg studies 23 19 26 cet article se sert d un modele de la determination des salaires et de l emploi afin d estimer des courbes de phillips pour la grande bretagne l italie et la republique federale allemande on fournit des estimations des taux de chomage regionaux etant donne une inflation stable et on examine les mouvements de ces taux sur le temp

non uniformity of job matching in a transition economy a nonparametric analysis for the czech republic this study explores the properties and development of the matching technology in the czech republic during the transition to a market economy nonparametric additive modelling allows us to assess flexible functional forms which comprise for instance ces and trans log specifications this enables us to evaluate the matching process locally for each combination of unemployment and vacancies rather than being restricted to global coefficients special interest is devoted to analysis and economic determinants of regional variation in the returns to scale of the matching function non linearities are found in the partial adjustment process of unemployment outflows and a negative coefficient on vacancies in some years moreover increasing returns to scale in job matching are found locally returns to scale are found to be negatively correlated to the share in employment in services and to outmigration positively correlated to the employment share in industry the unemployment rate and various measures of ac

reconciling the wage curve and the phillips curve the wage curve is the negative relationship that links wage levels to the unemployment rate it fits accurately with modern non competitive labour market models but goes against a phillips curve modelling because the latter ties wage growth to the unemployment rate in this article we present a comprehensive review of these non competitive models highlighting recent contributions that try to eliminate the possible gap that exists between the concepts of the wage curve on the one hand and the phillips curve on the other copyright blackwell publishers ltd 2005

an evaluation of active and passive labour market policy this paper reports results of an empirical study on the effectiveness of labour market policy data from austria france germany great britain sweden and the united states are used to apply a simultaneous equation model with wages and employment being the endogenous variables in order to explain employment the amount of unemployment benefits per unemployed passive labour market policy and payment for wage subsidies and training per employed and unemployed person active labour market policy are used in addition to real wages and output wages and output have their expected impact on total employment it turns out that passive labour market policy has a negative and active labour market measures a positive effect on the number of persons employed

the swiss recipe conservative policies ain t enough the swiss case jean pierre danthine and jean christian lambelet the success of the swiss economy relies on a blend of conservative policies cooperative labour relations and a geographically diversified economic structure the lesson that switzerland offers other countries is a microeconomic supply side one with little evidence for any particular macroeconomic recipe is the swiss experience really an economic success in terms of growth the swiss record may look poor but inflation is very low the unemployment rate is and has always been at very low levels but there was a massive reduction of the foreign labour force in the early 1970s while the guest worker story is part of the explanation there is much more to it three key factors characterize switzerland first macroeconomic policies are not actively used fiscal policy focuses more on balancing the budget than on counteracting business cycles monetary policy is preoccupied with a stable growth path for its chosen target although short run policy is pragmatic rather than rigid second the labour market is best described as a vast number of bilateral monopolies mostly at the firm level bargaining is therefore cooperative and this is reinforced by the legal threat of binding arbitration finally the industrial structure is geographically well diversified this makes job search and mobility relatively costless it also means that local or regional pressures for subsidies or macroeconomic support are weak with little temptation to deviate from the principle of non intervention

deficit announcements and interest rates despite the fact that the most theoretical analyses with the notable exception of the ricardian equivalence approach indicate that increased deficits cause interest rates to rise the empirical evidence is at best inconclusive 1 in this note the relationship between interest rates and deficits is examined with the announcement effect methodology which has not previously been used in this context we find evidence of a positive relationship between unanticipated announcements of the projected federal government deficit and interest rates in an efficient market information about any determinant of interest rates should be quickly incorporated into observed rates thus when information about the size of the deficits is released a relatively quick impact on interest rates can be anticipated more specifically if an increase in the deficit is in fact associated with higher interest rates then an unanticipated announcement of a larger deficit should lead to a response in financial markets which increases interest rates this paper provides evidence on the announcement effects of information on the deficit the advantage of the announcement effect approach is that it precludes the necessity of specifying a structural model for interest rates 2 projections of current and future federal government deficits are made on a regular basis by both the office of managementand budget omb and the congressional budget office cbo and receive wide attention in the financial press these projections provide data that are related to the change in interest rate on government securities from the day before the announcement to the end of the announcement day the macroeconomic hypothesis underlying this investigation is simply that an increase in the current or future deficit leads to an increase in yields on government securities in anticipation of higher levels of debt financing in a rational expectations framework an announcement of higher future deficits will lead to a current increase in interest rates in anticipation of future financing thus the examination of announcement effects enables us to substantiate a relationship between interest rates and deficits without encountering the econometric problems of reduced form modeling section i begins with a description of the data this is followed by a discussion of the methodology in section ii section iii presents the empirical results this is followed by our conclusions in section iv

the swedish third way an assessment of the performance and validity of the rehn meidner model the swedish third way an assessment of the performance and validity of the rehn meidner model

the overvaluation of purchasing power parity abstract recent panel studies of purchasing power parity have reported strong evidence of mean reversion in real exchange rates however these studies fail to control for cross sectional dependence in the data this failure has dramatic consequences raising the significance level of tests with a nominal size of 5 percent to as much as 50 percent it is shown in this paper that controlling for cross sectional dependence no evidence against the random walk null can be found in panels of up to 64 real exchange rates this finding cannot be attributed to low power as there is ample power in panels of this size to reject the unit root null

an introduction to the wage curve en conomists and policymakers are interested in understanding the forces that determine the level of unemployment and the level of wages this paper describes an empirical discovery made with the help of international microeconometric evidence covering more than a dozen nations about a link between these two variables the connection can be portrayed on a graph with the level of unemployment on the horizontal axis and the level of wages on the vertical axis then the wage curve as shown in figure 1 is a downwardsloping locus this relationship tells us that holding others things constant if a region has a rise in unemployment in a particular year those who live there will have a fall in their wages in that year what does this curve mean how in a field where fully controlled experiments are almost impossible could there be any convincing scientific basis for this wage curve what is the relationship between the wage curve and a phillips curve other than that the curve of figure 1 looks like a phillips curve with the vertical axis mislabeled how does the wage curve fit into existing economic knowledge and is the empirical finding consistent with competitive theory this paper sketches answers to these kinds of questions the discussion draws on our book the wage curve blanchflower and oswald 1994 where the points raised here are investigated more fully it also rests upon work done by other economists whose work is listed in the paper and the bibliography

mind the gap please the changing nature of entry jobs in britain we examine wages in jobs taken by those out of work entry jobs and the characteristics of the individuals who fill them there are large entry wage gaps relative to other jobs more importantly real entry wages have fallen by around 20 log points relative to all other jobs since 1979 one quarter of this decline is accounted for by differences in individual and job characteristics and around 40 from an unexplained fall in the position of entry jobs in the wage distribution that entry wages differ from the stock of all wages should be incorporated into labour supply modelling

a semi parametric estimator for revealed and stated preference data an application to recreational beach visitation abstract we present a semi parametric approach for jointly estimating revealed and stated preference recreation demand models the discrete factor method dfm allows for correlation across demand equations and incorporates unobserved heterogeneity our model is a generalized negative binomial with random effects the random effect is composed of a discrete representation of unobserved heterogeneity and a factor loading that translates the heterogeneity measure into a demand effect our empirical application is to beach recreation demand in north carolina statistical evidence supports our dfm specification which imposes less restriction on model dispersion and incorporates unobserved heterogeneity in a flexible manner elasticity estimates are smaller than those derived from models with parametric specifications for unobserved heterogeneity and welfare estimates are slightly larger and less precise while parametric models clearly dominate if the specification of unobserved heterogeneity is correct the semi parametric dfm provides a flexible alternative in cases where mis specification is a potential problem

improving environmental valuation estimates through consistent use of revealed and stated preference information abstract environmental valuation data from stated and revealed preference methods are integrated into a unified model of preferences for environmental quality improvement that identifies the use and nonuse components of the total value estimate this articulates clearly what parts of the total value estimate come from each type of data and permits tests of whether estimated preferences satisfy weak complementarity between the environmental good of interest and related private goods the statistical advantages of using more information for the valuation problem are exploited while retaining flexibility to identify value estimates from any individual method of analysis

inflation and the uk labour market inflation is endemic in britain aside from the odd year inflation in britain has been higher than the average of the oecd countries for the last forty years this is as true for the anti inflationary 1980s as for the inflationary 1970s and the libertarian 1960s in the light of this fact we look at the problem of inflation both in general terms and in the british context furthermore we shall consider inflation from a particular point of view namely that of the labour market although it would perhaps be more apt to describe the viewpoint as the supply side

what drives spreads in the euro area government bond market spreads between euro area government bond yields are related to short term interest rates which are in turn related to market liquidity to cyclical conditions and to investors incentives to take risk in theory lower interest rates are associated with lower degrees of risk aversion and smaller government bond spreads empirically the eurosystem s short term interest rates are positively related to those spreads which our econometric model finds to include significant and policy relevant default risk and liquidity risk components simone manganelli and guido wolswijk

unemployment in britain male unemployment in britain has risen from around 2 per cent in the 1950s to around 17 per cent in 1985 see figure 1 the figures are for male unemployment because there is no consistent series for women 1 even more remarkably unemployment has fallen in only three years out of the last twenty 1973 1978 and 1979 to account for this we need a model that explains both changes in the natural or non accelerating inflation rate of unemployment nairu and deviations from it we use a three equation supply side model centred on the labour market this has two main features the first concerns the determination of employment in the short run the labour demand function that we use cuts through the fruitless debate now raging especially in europe as to whether current unemployment is classical or keynesian according to the classical view employment is too high because real wages are too high according to the keynesian view real wages are not binding and unemployment is high because the product market does not clear with prices too high relative to nominal demand the whole debate is set in the framework of perfect competition yet in perfect competition prices are set by impersonal forces and it is not clear what could possibly stop prices clearing the market it is much more reasonable to think of prices as being set by imperfectly competitive firms existing prices being the best they can think of given the demand they face in this context firms demand for labour will depend on both the real product wage and the level of real aggregate demand this is the demand function we estimate and it conforms both to common sense and to the data however this does not imply that employment can be made to grow without limit by pumping up real demand for in the medium term when price surprises are eliminated our model determines three variables employment real wages and real demand on the basis of three equations an employment equation a price equation and a wage equation thus in the medium term there is a natural level of employment and corresponding to this a natural level of real aggregate demand the second key feature of our model concerns the medium term determination of unemployment in the medium term the planned mark up of wages over prices in wage settlements must be consistent with the mark up of prices over wage costs in employers pricing behaviour for if wage setters try to set real product wages higher than is consistent with employers pricing behaviour this generates ever increasing inflation thus the key to understanding unemployment in the medium term is the behaviour of wage setters if events occur that push them towards too high real wages then unemployment has to rise to offset these influences we shall call these influences wage pressure variables or push factors and they are clearly crucial in understanding unemployment the variables here include the social security system employment protection

short and long run behaviour of long term sovereign bond yields we assess the short and long run behaviour of long term sovereign bond yields in oecd countries using a dynamic panel approach to reflect financial and economic integration given the existence of cross country dependence regarding sovereign yields and its determinants we resort to simulation and bootstrap methods results based on the common correlated effect estimator of pesaran and on panel error correction models to sort out short and long run fiscal developments show that in addition to common movements in sovereign yields investors also consider country differences arising from specific factors inflation budgetary and current account imbalances real effective exchange rates and liquidity

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

job matching temporary public employment and equilibrium unemployment abstract the paper presents a theoretical analysis of the macroeconomics effects of temporary public employment programs relief jobs the framework is a matching model where wages are determined by nash bargains between individual firms and workers public employment programs have a direct job placement effect which tends to reduce unemployment there is also an effect on wage pressure the direction of this effect hinges on whether the programs are aimed at increasing unemployment outflow of reducing unemployment inflow a policy targeted at unemployment outflow has in general ambiguous effects on equilibrium unemployment since the job placement effect and the wage effect work in opposite directions by contrast a policy targeted at unemployment inflow will always reduce unemployment since the job placement effect is reinforced by the induced wage moderation

long term unemployment hysteresis and the unemployment vacancy relationship a regional analysis jones d r and manning d n 1992 long term unemployment hysteresis and the unemployment vacancy relationship a regional analysis reg studies 26 17 29 in this paper we investigate the unemployment vacancy uv relationship in the ten standard regions of great britain in particular we test the hypothesis of hysteresis in the unemployment rate and consider the importance of long term unemployment in the hysteresis mechanism previous work has demonstrated the importance of long term unemployment in empirical models of the aggregate uv relationship in the regions of britain there is considerable heterogeneity both in the measured uv relationship and in the relative importance of long term unemployment the nature of this heterogeneity is considered in this paper jones d r et manning d n 1992 le chomage de longue duree l hysterese et le rapport chomage offres d emploi une analyse regionale reg studies 26 17 29 cet article etudie le rapport chomage offres d emploi c o dans les dix zo

selected works of michael wallerstein centralized bargaining and wage restraint the literature on corporatism has presented much evidence associating highly centralized systems of collective bargaining with wage restraint and relatively successful macroeconomic performance in addition centralized bargaining is associated with relatively small wage differentials this paper presents a model of the impact of centralized wage setting on both real wages and relative wages the central assumption is that the centralization of wage setting at the national level unites unions who are complements in production since a wage increase for one group of workers negatively affects the welfare of other workers who are complements in production centralized wage setters choose wages below the equilibrium of decentralized wage setting it is also shown that if the union confederation maximizes a utilitarian welfare function with equal weights centralized wage setting decreases wage dispersion while low paid workers clearly gain from centralized bargaining high paid workers may prefer that bargaining be decentralized

active labor market policies job matching and the czech miracle abstract a common explanation of low unemployment rates in the czech republic cr is the stance of active labor market policies almps in particular the extensive use of almp instruments and an effective delivery system using a large panel of quarterly data from employment office districts we estimate the effects of almps on the job matching process in the cr in doing so we address potential endogeneity in the provision of resources to district labor offices we continue to find a small but statistically significant effect of almp expenditures job creation and program intakes on outflows from unemployment into employment

real wage determination and labour market policies the swedish experience it is a common view that labor market programs reduce unemployment and restrain wages by increasing the competition for jobs the swedish case is often advanced as a blueprint to follow this article questions the conventional wisdom on the swedish labor market policies it finds empirical evidence in favor of the hypothesis that job creation and training programs weaken the incentives for wage restraint as a consequence it appears likely that labor market programs have strong crowding out effects on regular employment copyright 1991 by royal economic society

testing steady state implications for the nairu estimates of the nairu are usually derived either from a phillips curve or from a wage curve this paper investigates the correspondence between the operational nairu concepts and the steady state of a dynamic wage price model we derive the parameter restrictions that secure that correspondence the full set of restrictions can be tested by econometric analysis of the wage price system and this method is demonstrated for norwegian data a set of necessary conditions can be tested from estimated wage curves alone existing international evidence from empirical wage equations are reinterpreted in light of these conditions

more powerful panel data unit root tests with an application to mean reversion in real exchange rates unit root tests seeking mean or trend reversion are frequently applied to panel data we show that more powerful variants of commonly applied tests are readily available moreover power gains persist when the modifications are applied to bootstrap procedures that may be employed when cross correlation of a rather general sort among individual panel members is suspected copyright 2004 john wiley sons ltd

the unemployment rate and the business cycle in britain an aggregate and regional analysis jones d manning n and stevenson m 1994 the unemployment rate and the business cycle in britain an aggregate and regional analysis reg studies 28 591 604 it has been suggested that if the business cycle is to be explained then its behaviour should be related to a non linear dynamic process not unlike a limit cycle the time irreversibility exhibited by post war unemployment data is not untypical of a pattern generated by such a non linear structure such a possibility could have important implications for economic policy in certain cases non linearities make forecasting extremely hazardous if not impossible as base line measurement errors cause prediction errors to accumulate at an exponential rate equally worrying is that fundamentally mistaken policy can arise when linear specifications are used to approximate non linear relationships the present paper tests for non linearities in the dynamics of regional unemployment in britain appealing to the idea of a regime switching process we u

combining revealed and stated preference data to estimate the nonmarket value of ecological services an assessment of the state of the science this paper reviews the marketing transportation and environmental economics literature on the joint estimation of revealed preference rp and stated preference sp data the rp and sp approaches are first described with a focus on the strengths and weaknesses of each recognizing these strengths and weaknesses the potential gains from combining data are described a classification system for combined data that emphasizes the type of data combination and the econometric models used is proposed a methodological review of the literature is pursued based on this classification system examples from the environmental economics literature are highlighted a discussion of the advantages and disadvantages of each type of jointly estimated model is then presented suggestions for future research in particular opportunities for application of these models to environmental quality valuation are presented

the beveridge curve in europe new evidence using national and regional data the beveridge curve depicts the empirical negative relationship between job vacancy rate and unemployment rate and reflects the efficiency of the job matching process movements along a fixed downward sloping beveridge curve are associated with cyclical shocks while shifts of the curve arise from structural factors that alter the matching efficiency between job vacancies and unemployed workers national and regional data on job vacancies and unemployment are combined to estimate the beveridge curves of five european countries and their regions focusing on the period 1975 to 2004 i also analyse whether shifts in european beveridge curves are due to changes in the composition of the unemployed pool labour market rigidities or cyclical and structural shocks the empirical evidence suggests that changes in labour market rigidities long term unemployment as well as cyclical shocks are responsible for outward shifts in european beveridge curves i also find evidence of nonlinearities in the relation betw

yield spreads on emu government bonds government bond spreads we provide evidence that the movements in yield differentials between euro zone government bonds explained by changes in international risk factors as measured by banking and corporate risk premiums in the united states are more pronounced for bonds issued by italy and spain liquidity factors play a smaller role so policies meant to increase financial market efficiency do not appear sufficient to deliver a seamless bond market in the euro area the risk of default is a small but important component of yield differentials movements which signal market perceptions of fiscal vulnerability impose market discipline on national fiscal policies and may be reduced only by further convergence in debt ratios lorenzo codogno carlo favero and alessandro missale

active labour market policies in germany do regional labour markets benefit abstractthis article examines on a regional level whether active labour market policies almp improve the matching process to take the fact of heterogeneous search effectiveness during programme

unemployment labour markets and structural change in eastern europe labour markets in eastern europe michael burda unemployment is a major concern in the transforming economies of central and eastern europe the modern flow approach to labour markets suggests both that unemployment is an important component of the transformation process and that the labour market institutions adopted will influence the rate of unemployment in the long run to date eastern european countries exhibit considerable divergences in several of these institutions especially in unemployment benefit systems collective bargaining structures and active labour market policies an aggregate matching function is successfully estimated for data from czech and slovak employment offices emerging labour markets in the east function not so differently from those in the west the implied dynamics make both big bang and benign neglect unattractive strategies for transformation a mixed bang is more appropriate quantitative evidence about the effects on unemployment of different labour market institutions in oecd countries is used to make long term projections of equilibrium rates of unemployment in central and eastern europe given the labour market institutions now in place there with the possible exception of the czech republic high unemployment is likely to be pervasive and persistent

heterogeneous workers economic transformation and the stagnancy of transitional unemployment abstract in an environment of intense structural change being unemployed conveys a bad signal a simple model is developed which accounts for the stagnancy of the unemployment pool in transitional economies in spite of major worker reallocation occurring in these countries the model predicts that the tightening of unemployment benefits can hardly boost outflows to jobs once mass unemployment has built up as there are at this stage too many low productivity workers in the pool the implications of the model are consistent with evidence on gross job flows wage differentials and the effects of the tightening of unemployment benefit systems in eastern europe

relative prices and the demand for labour in british manufacturing the existence of an aggregate demand for labour schedule derived from profit maximization of the individual firm and giving a negative relationship between the labour capital ratio and the real wage is central to most traditional theoretical macroeconomics even though such a relationship is typically not embodied in macroeconomic models but beginning with the work of dunlop 1938 and tarshis 1939 the negative relationship could not be found in the data a more modern reference is bodkin 1969 this evidence led naturally to disequilibrium analysis notably that of barro and grossman 1971 more recently sargent 1978 has attempted with some success to rehabilitate the demand for labour schedule by showing that costly adjustment of the workforce obscures the current relationship between the wage and labour demand while leaving it essentially intact that paper and the related one by neftci 1978 was criticized by geary and kennan 1979 because it had used retail prices to represent output prices and they showed that for a number of countries employment could not be explained satisfactorily by the real product wage however geary and kennan failed to allow for the simultaneous effect of the real prices of raw materials and capital services in this paper we shall see that allowing for the effects of other relative prices notably the price of inputs relative to output and the real interest rate the real wage has a powerful but slow acting negative effect on the demand for labour the long run elasticity is about 2 and the mean lag is over 18 months we also find that the price of inputs has a long run elasticity of about 2 and that high values of the real interest rate have a powerful depressant effect on the level of employment in manufacturing the most striking implication for policy of our analysis is that measures of demand output money government spending do not have a significant influence on manufacturing employment controlling for the effects of relative prices thus government macroeconomic policy can affect the level of employment in manufacturing if and only if it can affect relative prices

monetary compensations in climate policy through the lens of a general equilibrium assessment the case of oil exporting countries this paper investigates the compensations that major oil producers have claimed for since the kyoto protocol in order to alleviate the adverse impacts of climate policy on their economies the amount of these adverse impacts is assessed through a general equilibrium model which endogenizes both the reduction of oil exportation revenues under international climate policy and the macroeconomic effect of carbon pricing on middle east s economy we show that compensating the drop of exportation revenues does not offset gdp and welfare losses because of the time profile of the general equilibrium effects when considering instead compensation based on gdp losses the effectiveness of monetary transfers proves to be drastically limited by general equilibrium effects in opened economies the main channels of this efficiency gap are investigated and its magnitude proves to be conditional upon strategic and policy choices of the middle east this leads us to suggest that other means than direct monetary compensating transfers should be discussed to engage the middle east in climate policies

a panel bootstrap cointegration test this paper proposes a bootstrap test for the null hypothesis of cointegration in panel data the test is general enough to allow for dependence both within and between the cross sectional units and is shown to work well in small samples

job reallocation in two cases of massive adjustment in eastern europe summary this paper uses worker level data to characterize economy wide job creation and job destruction during periods of massive structural adjustment we contrast the gradualist czech and the rapid estonian approach to the destruction of the communist economy and assess their experience in light of selected theories of reallocation with frictions we find that gradual job destruction combined with job creation support allows extensive reallocation to concur with low unemployment drastic job destruction on the other hand need not slow down job creation as long as unemployment benefits are kept very low

labour market policies and unemployment in the oecd unemployment policies richard jackman christopher pissarides and sawas savouri the massive increase in unemployment throughout the oecd since the early 1970s has led governments in many countries to introduce or to expand labour market policies such as training schemes employment subsidies public works or schemes of counselling or assistance in job search such programmes have the objective of reducing unemployment by improving the workings of the labour market after a description of these programmes this article proposes a framework based on the relationship between unemployment and vacancies or beveridge curve within which the rise in unemployment can be analysed and the effects of policies and of institutions examined this framework helps to identify the main factors which have affected the unemployment and vacancy rates in 14 of the main oecd countries over the period 1970 88 the main results are that while corporatism remains the institutional feature with the biggest single impact in sustaining low unemployment rates labour market policies also have had a significant and well defined effect on unemployment which appears large relative to the budgetary costs of the programmes

fiscal policy and interest rates in europe the appetite for fiscal discipline has been steadily declining among most industrial countries in the past fiscal profligacy would have been punished by markets with higher interest rates and in some cases also exchange rate depreciation however in post emu europe exchange rate markets no longer discipline the fiscal behaviour of national governments perhaps more crucially even the interest rate punishment to fiscal indiscipline is highly uncertain with academic opinions being quite divided on this issue this paper takes a close look at the link between fiscal policy and interest rates in the european context the key finding is that an expansionary fiscal policy in one emu member will have an effect both on its spreads and on the overall level of interest rates for the currency union as a whole with the second effect however being quantitatively much more significant this suggests that there are indeed substantial spillovers through the interest rate channel among fiscal policies of member countries to limit countries incentive to run expansionary fiscal policies a set of rules like those embedded in the stability and growth pact is then needed some weak evidence is also found that after emu interest rate spillovers seem to be more significant for high debt countries with unsustainable fiscal policies reflecting perhaps market concerns about a possible sovereign bail out or the impact of financial distress there may be a case then for imposing tighter rules on high debt countries riccardo faini

migration and imperfect labor markets theory and cross country evidence from denmark germany and the uk we investigate the labor market effects of immigration in denmark germany and the uk three countries which are characterized by considerable differences in labor market institutions and welfare states institutions such as collective bargaining minimum wages employment protection and unemployment benefits affect the way in which wages respond to labor supply shocks and hence the labor market effects of immigration we employ a wage setting approach which assumes that wages decline with the unemployment rate albeit imperfectly we find that the wage and employment effects of immigration depend on wage flexibility and the composition of the labor supply shock in germany immigration involves only moderate wage but large unemployment effects since immigrants are concentrated in labor market segments with low wage flexibility the reverse is true for the uk and denmark

stock flow matching and the performance of the labor market we estimate outflow equations for vacancies and unemployed workers in britain departing from the stock based analysis of matching in two ways first we deal with the temporal aggregation problem that arises when discrete time data are used to describe continuous time processes second we allow for a stock flow matching mechanism in which the stock of traders on one side of the market matches with the flow of traders on the other side our estimates are in line with the predictions of stock flow matching in terms of higher exit rates of flows and of matching combinations between labor market stocks and flows furthermore employer search effectiveness did not seem to decline between the 1960s and the 1990s nevertheless some deterioration in worker search effectiveness is detected however less severe than that implied by previous stock based work

willingness to pay for quality improvements should revealed and stated preference data be combined abstract in this article we propose theoretically consistent welfare measurement of use and nonuse values for an improvement in environmental quality with revealed and stated preference data an analytical model based on the comparative static analysis of the variation function that describes the relationship between recreation demand and dichotomous choice contingent valuation models is estimated our results show that revealed and stated data should not be combined under the same assumed preference structure unless the two decisions imply the same change in behavior induced by the quality change in addition our results indicate scope effects in willingness to pay measures estimated with stated preference data

wage rigidity and unemployment in oecd countries real wage rigidity is often blamed for causing unemployment in the wake of adverse real shocks like changes in productivity or the terms of trade likewise nominal wage rigidity is blamed for causing unemployment in the wake of adverse nominal shocks like falls in nominal demand 1 however there has been relatively little systematic discussion of how these concepts should be defined some authors e g sachs 1979 have defined real wage rigidity as the opposite of nominal wage rigidity with the us nominally rigid and europe really rigid 2 the rigidity of european real wages has then been used to explain why europe has experienced a greater increase in unemployment since 1973 than the us but in this discussion real wage rigidity has not been measured in a way which would in fact predict how much unemployment would result from a given real shock the discussion has focused on the degree of nominal inertia in the system but the unemployment cost of real shocks does not depend primarily on the degree of nominal inertia but rather on the effect of unemployment in the phillips curve

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

are labour markets in the new member states sufficiently flexible for emu abstract new member states nms coming from central planning are often advised against early euro adoption because of their rigid labour markets but are labour markets so rigid in these countries we argue in this paper that this is not the case labour market institutions are no more rigid than among current emu members whilst wage bargaining institutions are actually better equipped for microeconomic wage flexibility than in the eu 15 nms also achieved substantial reallocation of jobs and workers in the transition to markets display relatively large job turnover rates and are reducing their regional mismatch the view that nms have rigid labour markets is fuelled by the low job content of growth in the region but there is evidence that the latter is related to productivity enhancing job destruction in the aftermath of prolonged labour hoarding reduced form employment equations estimated in this paper also suggest that tight fiscal policies rather than being harmful to job creation may actually improve the employment performance of the region our interpretation of this result is that loose fiscal policies weaken the confidence of investors and crowd out private employment growth through generous pay rises to civil servants

margins concentration unions and the business cycle theory and evidence for britain abstract a number of recent studies have examined the cyclical relationship between price cost margins concentration and unions u s data has concluded that unions reduce margins margins vary over the cycle and concentration unionisation and the cycle interact in their effect on margins however there is almost no theory to account for these results we propose a simple theory that assumes only that there is overhead labour present at the firm this produces theoretical predictions that can explain these results and discriminate between existing theories we present results of our own using u k panel data and show similar findings to the u s

hysteresis and the earnings of immigrants in the united states labour market the paper analyses the role of hysteresis in explaining the slow wage convergence between certain immigrant groups and native workers using the 1990 integrated public use microdata samples ipums the analysis reveals that past earnings history in the country of origin has a relatively smaller effect on post migration earnings when compared to past earnings history in the us in addition the paper suggests that the earnings history in the country of origin is more productive in the us labour market for immigrants from advanced economies as compared to those from less developed countries in particular we find that us labour market does not value the past earnings history of mexican immigrants as high as that of other ethnic groups with similar socioeconomic characteristics across successive cohorts

wage setting and the tax system theory and evidence for the united kingdom abstract this paper analyses the effects of a non linear tax system on wage bargaining the main conclusions are an increase in the marginal income or payroll tax rate reduces the pre tax wage in the isoelastic case an increase in the average tax rate increases the pre tax wage by more than the tax increase and a measure of the progressivity of the tax system residual income progression is a sufficient measure of the effect of the tax system on wage pressure empirical evidence is presented to support these propositions and the predictions of the model regarding the effect of recent changes to the u k tax system on the distribution of earnings discussed

the efficient estimation of econometric models with rational expectations the efficient estimation of econometric models with rational expectations by the substitution method usually entails the use of a non linear simultaneous equations estimator and hence is not very attractive computationally it is shown that for a wide class of problems efficient estimates can also be obtained with standard estimation methods if instead an errors in variables approach is used for many other problems although not providing fully efficient estimates because rationality is not imposed the errors in variables method will still have a strong appeal because otherwise it uses all of the structural information in the model unlike the substitution method when an incomplete information set is used it guarantees consistent estimates and it is easy to compute

an investigation into the power of insiders in wage determination abstract this paper is concerned with the role of insider forces in wage determination various union and non union models of wage behaviour are considered and they imply that wages are a convex combination of internal and external factors certain union models also imply a degree of hysteresis data on fourteen british production industries reveal that i insider forces are important ii their importance is directly related to both union power and the degree of monopoly in the product market iii the state of the aggregate labour market is also important and iv hysteresis effects arising from insider power are only significant in a small minority of sectors

the beveridge curve a survey important progress has been made in economists understanding of the beveridge curve from its measurement to its expression in canonical labor market models yet enduring puzzles remain chief among these are the empirical role of vacancies in the recruitment process the amplitude comovement and persistence of cyclical unemployment vacancy dynamics and the sources of lateral shifts in the beveridge curve the synthesis of these themes identifies several priorities for ongoing research including the role of entry costs into vacancy creation in shaping beveridge dynamics the cyclicality of search intensity both off and on the job and its relation to participation and job to job transitions the theory and measurement of mismatch and the sources of hysteresis in unemployment flows

labour market reforms in transition economies several lessons can be drawn from the natural experiments of central and eastern european countries with labour market policies two of them are particularly relevant also for oecd countries first it is not wise to reduce the duration of unemployment benefits when the length of unemployment spells are on the rise unless i unemployment is still low and there is the administrative capacity to implement active labour market policies on a wide scale or ii there are income support schemes of the last resort in place and an administration capable of cost effectively enforcing work tests for those falling off unemployment benefit compensation rolls the second and perhaps more positive lesson in the light of the above is that it is possible to transform institutions and create an efficient policy delivery mechanism within a short time span copyright 1997 by oxford university press