Rigid labour markets with trade and capital mobility: theory and evidence

Abstract We develop a multi‐country model with imperfect labour markets to study the effect of labour market frictions on bilateral trade flows. We use a framework that allows for goods trade and capital mobility and show that labour market imperfections exert opposite effects in the absence of capital mobility (the short run) and its presence (the long run), respectively. In the short run, a higher degree of labour market rigidity decreases the value of total trade, but increases the share of intra‐industry trade for a country that is larger than its trading partner. The reverse effects are observed when capital is allowed to cross country borders. Using data on unemployment and income distribution for 23 OECD countries, we compute the central parameter in our theoretical model that describes the degree of labour market rigidity. We use this new empirical concept to provide evidence for our theoretical findings by means of reduced‐form regressions as well as simulation results of a calibrated general equilibrium model.     

Nonlinearities in emerging stock markets: evidence from Europe's two largest emerging markets

Recent developments in time series analysis allow proper modelling of nonlinearities in economic and financial variables. A growing body of research was dedicated to investigation of potential nonlinearities in conditional mean of many economic and financial variables, mainly concentrating in developed economies. However, nonlinearities in financial variables in developing economies have not been fully examined yet. In this article we investigate potential nonlinearity and cyclical behaviour of stock returns in Europe's two largest emerging stock markets, mainly in the Greek and Turkish stock markets. Specifically, we use STAR family models, which allow to model nonlinearities in the conditional mean, for modelling monthly returns on stock exchange indices of the Athens Stock Exchange and Istanbul Stock Exchange. Although we find no nonlinearity in conditional variance, we do find strong evidence in favour of nonlinear adjustment of stock returns. It is found that allowing for nonlinearity in conditional mean results in a superior model and provides good out-of-sample forecasts, which contradicts to efficient market hypothesis.     

Imperfect competition in agricultural markets: evidence from Ethiopia

Drawing upon unique transaction-level data from rural Ethiopia, this paper tests for general forms of imperfect competition among rural wholesale traders. These are key to the grain distribution system as they purchase from farmers and perform interregional trade. Tests show that traders in a typical source market engage in imperfectly competitive behavior in purchasing from farmers, driving down the price paid to farmers approximately 3%. In contrast, there is no conclusive evidence of imperfect competition among traders in the larger, more centrally located market studied. Thus, efficiency losses due to market structure are likely to be greatest in markets which also have poor road links and lesser volumes of marketed grain.     

Training opportunities in monopsonistic labour markets

This paper studies the empirical relationship between the extent of monopsonistic power observed in occupational labour markets and the training opportunities available to workers in those markets; using data from the American National Longitudinal Survey of Youth of 1979. The results reveal a positive and significant association between monopsony power and training availability. The estimated association is found to be stronger for individuals with a college degree, with longer tenure in their jobs, and higher wages. These results are consistent across several econometric specifications that control for time, occupation, and individual fixed effects.     

Economic reforms and labour markets: policy issues and lessons from Chile

Over the last twenty years sweeping reforms have deeply transformed the labour market in Chile. A visible outcome has been the reduction of Chile's rate of unemployment from 'European' to 'US' levels. Even though the political context makes this experiment special, are there economic lessons to be learnt? This paper concentrates on reforms to job security, on the decentralization of the wage bargaining process, and on the reduction in payroll taxes. It concludes that the reduction of payroll taxes (within the context of the social security reform), and the decentralization of bargaining increased labour market flexibility and contributed to the reduction of unemployment. On the other side, the analysis suggests that the reform on job security had no significant effect on the aggregate rate of unemployment.     

Globalisation and local labour markets

This paper begins with a review of the literature on the labour market’s impact of globalisation. An interesting case-study is provided by the province of Brescia, an industrial area in Northern Italy, where both de-localisation and immigration have been two important means of reducing the pressure of labour demand on the locally scarce human resources. The conclusion is that, in order to preserve competitive positions in the long run, it is worthy to consider the qualitative consequences, e.g. the indispensable changes in the structure of production, rather than focusing on the quantitative effects on domestic employment. This paper was presented at the International Conference on “Developments in Economic Theory and Policy, Institutions and European Integration”, Bilbao, 15–17 July, 2004. It is part of a wider research: see the Working Paper by Albertini and Marelli (2003). The sections prepared by S.Albertini, referring to organisational change and human resources management implications, are not included in this final paper. I am grateful to anonymous referees for helpful comments.     

Linkages in international stock markets: evidence from a classification procedure

In this article, we propose a new approach to evaluate the predictable components in stock indices using a boosting-based classification technique, and we use this method to examine causality among the three main stock market indices in the world during periods of large positive and negative price changes. The empirical evidence seems to indicate that the Standard & Poors 500 index contains incremental information that is not present in either the FTSE 100 index (Financial Times Stock Exchange Index) or the Nikkei 225 index, and that could be used to enhance the predictability of the large positive and negative returns in the three main stock market indices in the world. This in turn would suggest a causality relationship running from the Standard & Poors 500 index to both the FTSE 100 and the Nikkei 225 indices.     

Information and transparency in wholesale electricity markets: evidence from Alberta

We examine the role of information transparency in Alberta’s wholesale electricity market. Using data on firms’ bidding behavior, we analyze whether firms utilize information revealed in near real-time through the Historical Trading Report (HTR), which is released 10 min after each hour and contains a complete (de-identified) list of every firms’ bids into the wholesale market from the previous hour. We demonstrate that firms are often able to identify the offers of specific rivals by offer patterns adopted by those firms. For one of these firms, these patterns are associated with higher offer prices. This is consistent with allegations by Alberta’s Market Surveillance Administrator that firms may be utilizing unique bidding patterns to reveal their identities to their rivals to elevate market prices. We show that certain firms respond to rival offer changes with a lag consistent with responding to information revealed through the HTR, and that they respond differently to different firms, suggesting that they are able to infer identification.     

Housing deprivation and health status: evidence from Spain

Living in inadequate housing conditions not only supposes a failure of a basic functioning. It also has effects on other essential aspects of well-being such as health. This study questions to what extent living in poor housing conditions can determine individuals’ health status once the possible influence of other factors is controlled for. By estimating a logistic model with individual effects and a housing deprivation index based on a latent variable model, we reach a number of relevant conclusions concerning the relationship between these two different dimensions of multidimensional well-being. We find a negative effect of housing deprivation on the individuals’ health, both when housing conditions are introduced in a disaggregated manner in the model and when they are combined in a latent variable.     

Explaining divorce rate determinants: new evidence from Spain

This article examines the main determinants of divorce rates in Spain for the period 1995 to 2010. According to the results, the so-called Express Divorce Law (passed in 2005) seems to be positively associated with divorce rates in the short term. Income level and growth, female employment rate, and the proportion of foreign population are also positively related to divorce rates. However, as expected, the percentage of conservative vote seems to have a negative impact.     

Ageing, labour markets and well-being

This keynote speech draws three broad lessons to turn the challenges of population ageing into chances: Lesson number one is that the quantity effects of adding more labour into our ageing economies are very large. To exploit them, one has to use the entire spectrum of labour market policies: earlier labour market entry, later retirement age, higher female labour force participation, and lower unemployment. Lesson number two is that there is a positive and enforcing effect of pension reform. A pension regime that alleviates the tax burden of the younger generation creates higher productive capacity. The third lesson is on behavioural effects. Some strengthen reform but they are dominated by opposition effects, such as taking advantage of loopholes, withdrawal of labour supply, or simple within-household substitution. Negative behavioural effects can be minimised by informing people better about the chances and challenges of population ageing, and by de-mystifying false beliefs about ageing.     

Co-movement and spillovers: empirical evidence from BRIC equity markets

A higher degree of co-movement and spillover effects among different asset classes undermine portfolio diversification benefits. In this regard, the present study attempts to capture dynamic co-movement and return-volatility spillover effects among the most promising emerging equity markets, i.e. Brazil, Russia, India and China in a multivariate framework by employing VAR-ABEKK and VAR-DCC-AGARCH (1,1) models. To further comprehend the behaviour of the correlation coefficients during the global financial crisis period (2007–2009), heat map and Markov regime switching model (two regimes with a switch at ‘mean’ level only) have been used. The results report that the BRIC equity markets do not share a common stochastic trend in the long run. There is strong evidence of market shocks to volatility, volatility to volatility and negative shocks to volatility spillover effects among the BRIC markets. Overall, the BRIC markets are partially integrated with each other, thereby making them stronger investment candidates.     

Unemployment and labour force participation in Spain

This article examines the relationship between the unemployment rate and the labour force participation rate in Spain. Cointegration analysis is performed for aggregate, male and female time-series. Results suggest that there is no a long-run relationship between the two variables for the aggregate and male cases. However, the findings support a long-run relationship between the two variables for the female time-series. Thus, the unemployment invariance hypothesis is supported in the two former cases but not in the latter.     

Total work time in Spain: evidence from time diary data

Using detailed time-use data from 2002–03 and 2009–10 for Spain, we analyse changes in the time-allocation decisions of the Spanish population, with a focus on the time devoted to total work. Consistent with prior literature, we document that the concept of ‘iso-work’ (e.g. the time devoted to total work by gender is equal) does not hold in societies with stringent gender roles, such as Spain. Women devote more time to total work than men, and this difference has increased throughout the period studied by 2 hours per week. The relative increase in total work for women compared to men can be explained by a relative increase in market work of 8 hours per week, coupled with a relative decrease in nonmarket work of 6 hours per week, which have led Spanish women to devote, relatively, 2 fewer hours to leisure per week in 2009–10, compared to 2002–03. We propose social norms as a potential explanation of these empirical findings. By uncovering how individuals allocate their time inside and outside the market over a period of time, our results may improve our understanding of the dynamics of economic change and welfare.     

Health status and labour market outcome: Empirical evidence from Australia

This paper uses eight waves of Australia Household, Income and Labour Dynamics data to study the issues of state dependence and the short‐run and long‐run response to health shocks on the labour market. We consider six alternative panel data binary dependent variable models with different ways of modelling labour market dynamics and individual heterogeneity. We find that the key results with regard to labour market dependence and the impacts of health shocks are sensitive to model specification and pooling of male and female samples with differences as large as sixfold. Specification analysis is conducted and favours the dynamic fixed effects logit model for separate male and female samples. Methods for evaluating dynamic response paths to a one‐time health shock for binary outcomes are also suggested and results are presented.     

Feminization of labour and profit rates: evidence from OECD countries

The article examines the effect of the feminization of labour on profit rates and capacity utilization by employing an indirect and two-stage least squares models for 21 OECD countries during the 1970–2008 period. Findings show that higher women’s labour force participation rates and gender wage gap lead to higher profit rates.     

Maternal labour supply and childhood obesity in Canada: evidence from the NLSCY

Abstract.  This paper investigates the socioeconomic factors affecting childhood overweight and obesity in Canada using data from the National Longitudinal Survey of Children and Youth. In particular, I attempt to address the issue of whether an increase in the mother's work intensity is associated with an increase in the risk of the child's becoming overweight or obese. I also attempt to evaluate the causality of this relationship and the mechanisms that might facilitate this link. The results suggest that an increase in the mother's work intensity when she first returned to work in the period after the child's birth and before the child started school is associated with an increase in the risk of the child's becoming overweight or obese later in childhood. Conditional on the mother returning to work in the period between the child's birth and the start of school for the child, a 10-hour increase in the number of hours worked per week when the mother first returned to work is associated with an increase in the probability that the child later becomes overweight or obese that is in the range of 2.5 to 4 percentage points.     

Volatility spillovers and macroeconomic announcements: evidence from crude oil markets

The paper applies an event study methodologyaims to investigate the macroeconomic announcements effects on Standard&Poor’s500 and oil prices. Our results provide evidence for a significant impact of the US macroeconomic news on oil prices. This impact is split into two components, namely the direct effect (common response) and indirect effect (volatility transmission). Altogether our results show that the volatility transmission is bidirectional. Not only a significant volatility transmission from the oil market to the US stock market is revealed, but also a high volatility transmission is recorded from the oil market to the stock market especially after the release of consumption indicators.