The distributive and welfare effects of product and labour market deregulation

This paper studies the effects of product and labour market deregulation on wage inequality and welfare. By constructing an analytically tractable model in which the level of product market competition and the wages are endogenously distributed among sectors, I show that deregulation in goods market has mixed effects on inequality: the wage variance and the Gini index are lower, but the ratio of the highest over the lowest wage paid in the economy increases. Moreover, deregulation in labour markets raises the aggregate level of employment and the average real wage but reduces the welfare of trade unions in sectors with a low level of competition.     

Industry Dynamics and Competition from Low‐Wage Countries: Evidence on Italy

This article analyses the effect of competition from low‐wage countries on domestic activity, using data on 230 Italian manufacturing sectors between 1995 and 2007. It finds that low‐wage import penetration is negatively related to employment and other measures of activity. The effect is significantly smaller in more skill, capital and R&D‐intensive sectors and in more vertically differentiated sectors. There is also evidence of significant effects of low‐wage competition through inter‐industry linkages: employment is negatively related to low‐wage import penetration in downstream sectors but positively related to low‐wage import penetration in upstream sectors.     

Flexibility bites back: the multiple and hidden costs of flexible employment policies

Flexible labour markets are increasingly regarded as the answer to a wide spectrum of labour market and societal challenges from creating jobs to reducing segmentation and welfare dependency, improving public finances and supporting workforce diversity and innovation. The contention is that, contrary to these claims, flexible labour markets generate fundamental contradictions and unsustainable long‐term trends. The jobs miracle is exaggerated and based on low productivity jobs, outsiders often lose most from competition, claimants must work flexibly but still secure a full‐time wage, low‐wage employment is shrinking the fiscal base, jobs are not being adjusted to accommodate workers' changing needs and capacities and the disposable labour model is undermining long‐term productivity.     

Intra‐European labour migration and low‐wage competition—comparing the Danish and Swedish experiences across three sectors

The article compares how low‐wage competition and labour migration from EU11 Member States affect industrial relations and working conditions for natives and migrants in three sectors (transport, cleaning and agriculture) in Denmark and Sweden. The analysis shows how already vulnerable sectors with below‐average union density and collective agreements—especially geographical dispersed sectors—are strongly affected.     

The Turnover‐Reducing Effects of the Minimum Wage may Harm the Economy

This article surveys the literature on the effects of the minimum wage and argues that the observed reduction in turnover rates is not necessarily desirable. If a curvilinear relationship exists between firm productivity and turnover, the effects of the minimum wage on reducing turnover may create a distance between the actual turnover rate and the optimal rate. Consequently, even if we accept the proposition that minimum wages have little impact on employment, they may reduce productivity or job growth in sectors not directly affected by the minimum wage.     

The Labour Market Effects of Increases in Social Insurance Premium: Evidence from Japan

Exploiting heterogeneous variations in labour cost increases due to Japan's 2003 social insurance premium reform as a natural experiment, we estimate the impacts of the increased social insurance premiums on employment, working hours and payroll costs. Using the difference‐in‐differences method with establishment fixed effects, we find that firms reduce the number of employees and increase average annual earnings from longer working hours in response to an exogenous increase in labour costs without productivity gains. Firms manage to pay for this increase in the average wage paid to the remaining workers by reducing the number of employees to keep total payroll costs unchanged. In contrast, since social insurance premiums are shared equally between employees and employers, firms pay the remaining half premiums that they are imposed with. Sub‐sample analyses show that firms adhering to a labour hoarding policy did fire many workers taking advantage of the 2003 reform. This may indicate that the reform provided a good excuse to cut employment in firms that had been forced to comply with a labour hoarding policy even in an over‐employment situation, which is more likely in sectors and countries where dismissals are rigorously regulated.     

Wages,employment, labour turnover and the accessibility of local labour markets

In this paper, we extend a dynamic efficiency wage model to the case of multiple local labour markets that interact through migration. Firms are concerned about turnover costs. The quitting behaviour of workers is a function of local labour market conditions, non-wage income and the costs and benefits of migration to other local labour markets. A synthetic micro sample of 20,302 observations from the 1986, 1991 and 1996 New Zealand Censuses of Population and Dwellings provides evidence supporting the theory. Across subgroups, the wages of workers with relatively inelastic local labour supply and/or lower geographical mobility are relatively more responsive to changes in the local employment rate. The evidence is consistent with the notion that local employers engage in monopsonistic competition with respect to the employment of such workers.     

Certified and uncertified skills and productivity growth performance: Cross-country evidence at industry level

We analyse the relationship between human capital and productivity growth using a five-country multi-industry dataset together with a measure of human capital which accounts for both certified skills (educational qualifications) and uncertified skills acquired through on-the-job training and experience. We find evidence of positive human capital effects on growth in average labour productivity, particularly when using our composite human capital measure. We also find some tentative evidence that multi-factor productivity (MFP) growth is positively related to the use of high-skilled labour. However, externalities of this kind are largely confined to industries which make intensive use of university graduates.     

Technology catching-up and regulation in European regions

This paper analyses the effects of the intensity of regulations in the product and labour markets on the growth of total factor productivity (TFP) for 121 European regions. A technological catch-up model is estimated for the period 1995–2007. We use the spatial lag of X (SLX) model to capture possible spatial interactions across spatial units. Our empirical findings show that lower levels of regulation are associated with higher TFP growth. Lower barriers to entrepreneurship and lower bureaucratic costs have a positive effect on productivity growth. Corruption raises operational costs, distorts the allocation of resources and negatively affects innovation activities, thereby reducing TFP growth. Further liberalization in the labour market (in terms of hiring and firing regulation, working hours regulation and employment protection legislation) has a significant positive effect on the growth of TFP. In addition, both regional technological and regional human capital have a positive impact on the TFP growth in European regional economies.     

The effect of minimum wage hikes on employment: Evidence from regional panel data from Romania

Minimum wage hikes aim to increase the income of low-wage workers and improve their labour market participation. However, there are concerns that large increases may reduce employment, especially in countries where minimum wages increased quickly and whose competitiveness depends, at least partly, on low production costs. This study examines the employment effect of large increases in the minimum wage in Romania between 2008 and 2016. It uses regional (NUTS III) data and dynamic panel methods. The results do not support the hypothesis that minimum wage hikes reduce employment. They are robust to the use of different econometric methods, plausible variations of the specification and definitions of the key variables. Moreover, the results suggest insignificant effects even for low wage, less developed or high unemployment regions.     

Economic Structure and Local Growth: France, 1984–1993

For 52 industry sectors and 42 services sectors, this paper tests how the local economic structure (local sectoral specialization and diversity, competition, average size of plants, and total employment density) affects the 1984–1993 employment growth of 341 local areas. These areas entirely and continuously cover the French territory. The impact of the local economic structure differs in industry and services. In industrial sectors, local total employment density, competition, and plant size always reduce local growth. Sectoral specialization and diversity have a negative impact on growth, but also increase the growth of a few sectors. Service sectors always exhibit negative specialization effects and positive diversity effects. Competition and plant size have a negative impact and density a positive one, but exceptions are observed for some sectors.     

Adjusting to the national minimum wage: constraints and incentives to change in six low‐paying sectors

Interest in the national minimum wage (NMW) includes not only its direct impact on employment and wages, but also its indirect impact on organisational performance resulting from a reorientation of employer behaviour with regard to employment practices and product market competition. Drawing on data from small firms in six low‐paying sectors, this article identifies three key constraints that have undermined the possible effect of the NMW in generating a virtuous cycle between employment practices and product market approach. These constraints relate to product market conditions, employer norms and labour market institutions (especially training).     

Temporary contracts and labour productivity in Spain: a sectoral analysis

This paper analyses the impact on sectoral labour productivity growth caused by the increase in the use of temporary employment contracts in Spain over the period 1987–2000. With this aim, we estimate a production function model in which effective labour is represented by the shares of permanent, temporary and self-employed workers. Results suggest that productivity growth has been slowed down by the use of temporary contracts for regular jobs and that this has not been affected by compositional changes in activity over the period. However, this effect has only been detected in the manufacturing and energy sector, in contrast to low-technology low-human capital sectors like construction and hospitality.     

Labour productivity and employment in Australian manufacturing SMEs

This paper examines the relationship between labour productivity and employment in Australian manufacturing small and medium enterprises (SMEs). The results indicate that labour productivity of SMEs varies substantially between industries within the manufacturing sector, but on average labour productivity for manufacturing SMEs increased at a faster rate than that of large manufacturing enterprises across all industries. All manufacturing industries except one recorded employment growth during the period under study. However like labour productivity growth, employment growth also varies across industries within the manufacturing sector. Yet the study could not establish any definite relationship between labour productivity growth and employment. This finding is consistent with some previous studies.     

Convergent and divergent country trends in coordinated wage setting and collective bargaining in the public hospitals sector

Drawing on the findings of research in the public hospitals sector in five European countries 1 —France, Germany, the Netherlands, Norway and the UK—this article assesses the character of change in wage setting and collective bargaining. It demonstrates the diversity of national arrangements by comparing key characteristics: (i) the bodies of collective representation (unions, professional associations and employer bodies); (ii) the degree of integration with the wider public sector framework; (iii) coordination (or competition) with the private hospitals sector; and (iv) the practice of à la carte provisions within individual hospitals. Despite national varieties of wage setting and collective bargaining, each country sector faces similar tensions—most notably the opposition between public (labour market) rules and health (product market) rules, and pressures to segment or integrate employment conditions by labour force group. By examining the nature of change in institutions for wage setting and collective bargaining in each country, the article contributes to our understanding of the extent of coordination and change of public sector wage setting and describes three scenarios: fragmentation (Germany); continuity (France and the Netherlands); and reconstruction (the UK and Norway).     

Wage Formation,Regional Migration and Local Labour Market Tightness*

Empirical studies of regional wage formation and interregional migration routinely include the regional unemployment rate as indicator of local labour market tightness. However, these studies are usually motivated by economic theories that emphasize transition probabilities between unemployment and employment, and the unemployment rate is an imperfect proxy for these probabilities. We use a large micro data set to compute estimates of the rate of outflow from unemployment for 90 Norwegian travel‐to‐work areas. The outflow rates perform better than traditional measures of regional labour market tightness in panel data analyses of regional wages and interregional migration.     

Dynamics of Trade Integration and Technological Convergence

The issue of the impact of trade on economic performance and labour markets has been intensively discussed in recent literature on trade liberalization and globalization, where the debate was mainly about identifying the relative impact of trade and technology. The bulk of the existing literature in this area employs, almost without exception, a static Heckscher-Ohlin framework that seems not to be a suitable tool for analysing the ongoing dynamics. This paper presents a dynamic multi-sectoral framework with heterogenous labour to explore the issue of trade liberalization and sectoral catching-up in productivity levels. The model is basically an input-output framework with Schumpeterian features; the latter are modelled as the impact of transitory rents that result from uneven productivity growth and technological catching-up upon the price and quantity systems of the trading economies. Relative productivity and wage rate dynamics across sectors determine the comparative costs and the dynamics of trade specialization. In the Appendix, the equilibrium solutions of the model are derived.     

Labour market oligopsonistic competition: The effect of worker immobility on wages

We suggest that firms in a local labour market may be able to exploit worker mobility costs and offer immobile workers wages that are lower than their marginal product. If so, the ability of employers to exploit worker immobility in setting wages would decline in the competitiveness of the local labour market. We test this intuition using a measure of individual mobility costs and measures of local labour market competition. Our findings suggest that worker immobility causes substantial wage variation across workers in small, weakly competitive markets, and in occupations where wages are individually bargained.     

Wage trends and policies in China: dynamics and contradictions

This article considers the central dilemmas of wage policies in state socialist economies. It reviews the pre-1978 Chinese low-wage and high employment policy and details the development of Chinese wage policies during the 1980s. The dynamics and contradictions which have resulted in inflation, declining labour productivity, falling real wages and social tensions are analysed.     

The economic impact of migration: productivity analysis for Spain and the UK

Over the past 20?years labour has become increasingly mobile and whilst employment and earnings effects in host countries have been extensively analysed, the implications for firm and industry performance have received far less attention. This paper explores the direct economic consequences of immigration on host nations?? productivity performance at a sectoral level in two very different European countries, Spain and the UK. Whilst the UK has traditionally seen substantial immigration, for Spain the phenomenon is much more recent. Our findings from a growth accounting analysis show that migration has made a negative contribution to labour productivity growth in Spain and a negative but negligible contribution in the UK. This difference is driven by a positive impact from migrant labour quality in the UK. This finding broadly holds across all sectors, but we note considerable variation in magnitudes. Labour productivity growth has a neutral contribution from migrant labour in construction and personal services in the UK, whilst in every case in Spain the effect is negative, most strongly in agriculture. Using an econometric approach to production function estimation we observe a positive long term effect on total factor productivity from migrant workers in the UK and a negative effect in Spain. Our findings suggest that either the UK is better at assimilating migrants or is more selective in terms of who is permitted to migrate.