Relation between growth and unemployment in a model with labor-force participation and adverse labor institutions

Based on labor search models with an exogenous labor force, existing papers have found a negative relation between long-run economic growth and unemployment. Motivated by the fact that the labor force participation has changed substantially across OECD countries, this paper revisits the long-run relation by taking account of endogenous labor-force participation. We find that, via the effects on employment, changes in labor market institutions may increase or decrease long-run economic growth. Moreover, depending upon the effects on the labor force and employment, these labor market institutions may increase or decrease unemployment rates in the long run. Thus, changes in labor market institutions lead to a non-monotone relation between long-run economic growth and unemployment that is consistent with the data.     

The Galor–Weil model revisited: A quantitative exercise

The long-run growth model of Galor and Weil [Galor, O., Weil, D., 2000. Population, technology, and growth: From Malthusian stagnation to the demographic transition and beyond. American Economic Review 90, 806–829] is examined quantitatively. We first give parametric forms to some functions which were only given on general form in the original article. We then choose numerical parameter values in line with calibrations of related long-run growth models, and with data. Finally, we simulate the model. We find, inter alia, that the time paths for population, and other variables, display oscillatory behavior: they move in endogenous cycles. As the economy transits from Malthusian stagnation to modern growth these oscillations die out. This is consistent with population growth rates fluctuating considerably in historical data, but having stabilized in modern economies. We also show that these cycles are not an artifact of the two-period life setting: allowing adults to live on after the second period of life with some probability does not make the oscillations go away. Rather, the cycles are driven by fertility being proportional to per capita income minus the parental subsistence requirement. When population is large, and per capita incomes close to subsistence, fertility is therefore sensitive to changes in population levels.     

Access to infrastructure and women’s time allocation: Implications for growth and gender equality

Improved access to infrastructure is commonly viewed as a critical step to increase women’s labor force participation and promote economic growth in developing countries. This positive relationship is first established in a basic gender-based, overlapping generations model with collective households and congestion costs. The model is then extended to account for endogenous gender bias in the market place and women’s bargaining power, as well as fertility choices and rearing time. Numerical experiments, based on a calibrated version of the extended model, show that increased access to infrastructure may induce women to devote more time to child rearing – in line with the model’s predictions and some of the empirical evidence – thereby mitigating the increase in time allocated to market work. As a result, it may weaken the benefits of increased female labor force participation in terms of reduced gender bias in the market place, improved women’s bargaining power in the family, and higher growth rates in the long run.     

Demographic transition and industrial revolution: A macroeconomic investigation

All industrialized countries have experienced a transition from high birth rates, land-based production and stagnant standards of living to low birth rates and sustained income growth. To develop a better understanding of these economic and demographic transformations and the link between them, we construct a general equilibrium framework merging the Hansen and Prescott [Hansen, Gary D., Prescott, Edward C., 2002. Malthus to Solow. American Economic Review 92 (4), 1205–1217] model of structural change with the Barro and Becker [Barro, Robert J., Becker, Gary S., 1989. Fertility choice in a model of economic growth. Econometrica 57 (2), 481–501] model of fertility choice. We find that when the historical changes of youth mortality and sector-specific productivity are introduced into the model, parameterized to capture key moments of 17th century England, it does remarkably well at generating the long-run features of economic and demographic development of England.     

中国人口转变与经济增长的实证分析

本文从现代协整理论出发,研究了中国人口转变、实际工资与实际产出之间的长期动态均衡关系及信忠传导机制。结果表明:在出生率、婴儿死亡率、实际人均工资、实际 GDP 之间,至少存在单向的 Granger 因果关系;对数序列均为非平稳Ⅰ(1)序列。长期来看,死亡率的降低将导致出生率的降低。此外,还证明了出生率与死亡率均为经济系统的内生变量。     

Employment and Productivity Growth in Europe and North America: The Impact of Labor Market Institutions

In this paper, we examine long-run employment and productivity growth in the major economies of North America and Europe from 1960 to the early 1990s. We develop a model in which output growth is determined by the growth of aggregate demand, and the relative contributions of employment and productivity growth to the growth of output depend on country specific labor market institutions. We find that institutions that promote collective bargaining, employment security and social protection have roughly equal and opposite effects on employment growth (negative) and productivity growth (positive), giving rise to an inverse relationship between these variables. The welfare implications of this finding are that labor market deregulation could result in more work and greater inequality and insecurity for workers, without significantly increasing the rate of economic growth.     

Economic-demographic interactions and the impact of investments in population control

The interaction between economic and demographic factors in the Philippines was examined, analyzing the effects of investment in fertility control on the birthrate, population size, and such economic variables as gross national product (GNP), wage rate, and family income. A family planning model that was constructed and is used to project population program cost and births prevented is grafted to and simulated with a larger economic/demographic model. The simulation results are anayzed. The economic demographic model to which the family planning subsystem was grafted is a modified version of the model constructed by Encarnacion et al. (1974). It is basically a neoclassical model, a closed economy in which the real wage rate is determined by the intersection of the demand and supply of labor. The demand for labor is derived from a Cobb-Douglas production function on the assumption that labor is paid the value of its margin product, and the labor supply is determined by age and sex specific labor force participation rates and population. Capital accumulation is influenced by population size through its effect on government and private consumption expe nditures. Fertility rate is determined by duration of marriage and the level and distribution of family incomes. The model was used to develop projections from 1970 through 2000. Results show that the effects on per capital income and real wage rate seem significant, yet family income appears largely unaffected and the effect on the traditional investment to output ratio (I/Y) seems minimal. One of the outcomes of the projection without family planning is that, if the economy were to depend solely on its own savings, the average annual rate of growth of gross national product (GNP) would be only about 4.32%, which is less than the historical growth rate of 6% and the present government longterm target of 8%. The result suggests that foreign investments and loans would have to play an increasingly important role in the economic growth of the Philippines unless the gross domestic investment of GNP ratio is increased substantially. Aggregate output is reduced due to a relatively smaller labor force. Thus, it is suggested that if population control programs are accompanied by an increase in the labor participation rate, particularly of women, the payoffs from family planning may be larger. Closer examination of the nature of the payoffs from the family planning program would reveal that they basically stem from the decrease in the number of persons sharing in national output and not from increased production and saving. The observation suggests that population control does not necessarily lead to more rapid economic growth defined as sustained increase in total output.     

中国未来不同生育水平下的经济增长后果比较研究

对中国未来90年不同生育水平下的经济增长后果进行了人口-经济动态模拟。在生育水平过低导致劳动力减少过快、人口老龄化过重、劳动负担加重的情况下,将使经济增长大大放缓;而较高的生育水平下,虽然经济增长速度略快,但是人均GDP增长速度慢于中方案生育水平下的经济增长,并且人均GDP水平也具有较大差异。完善当前生育政策,使生育水平稳定在1.9-2.0之间,如此人口在本世纪缓慢地减少也将有利于我国的经济增长和人均生活水平的提高。同时,在低生育水平下,依靠劳动增加和资本积累的粗放型经济增长将不复存在,经济发展方式转变是必然选择,技术创新、技术进步将是未来经济增长首要源泉。     

Smooth transition trends and labor force participation rates in the United States

This paper employs smooth transition trend models to investigate the long-run time series behavior of quarterly US labor force participation rates. In particular, we examine whether long-run growth in labor force participation rates can be modeled by smooth transitions between states rather than as abrupt mean level changes or as a stochastic trend. Smooth transitions permit for non-instantaneous adjustment of individual workers to changes associated with economic events or general labor market conditions. We employ unit root testing procedures with alternatives characterized by stationary fluctuations around one or two smooth transitions in linear trend. We examine labor force participation rates by gender- and age-specific groups. The results indicate that all female and most male participation series are better characterized as stationary processes that undergo transitional deterministics.     

Endogenous growth cycles—Arrow's learning by doing reconsidered

A two-sector growth model is presented in which human capital is acquired through learning by doing. It is shown that, for both the competitive situation and the social optimum, endogenous growth cycles may be the outcome. Concerning the economic prerequisite for persistent oscillations we detect a bunching of investment at nearby dates leading economic variables to overshoot the long-run steady state values. This clustering of investment, for its part, may be caused by adjacent complementarity with respect to the stocks or by a sufficiently strong external effect of investment on the marginal product of physical capital or on the opportunity costs of investment.     

人力资本、基础研究与经济增长

本文构建了一个经济增长模型 ,将知识划分为应用技术和基础科学知识两类 ,探讨了基础研究在经济增长中的基础性地位 ,得到如下三点结论 :第一 ,经济的长远增长率和基础科学知识的长远增长率成正比 ;第二 ,决定基础科学知识长远增长率的最终变量为经济体中的人力资本存量 ;第三 ,基础科学知识的非排他性决定了政府在经济增长中可以大有作为。     

LONG‐RUN GROWTH AND WELFARE EFFECTS OF TAX REFORM

This paper introduces an endogenously‐determined fertility rate into a Romer‐type endogenous growth model and, accordingly, investigates the effects on fertility, economic growth and social welfare of a revenue‐neutral tax reform that involves switching from an income tax to a consumption tax. We show that, in a departure from the existing literature, tax reform could be harmful, rather than favourable, to both growth and welfare, due to an endogenous fertility rate. We also conduct a simple numerical analysis to investigate under what conditions the negative effect on growth and welfare occurs.     

Trade liberalization and economic growth: a case study of Iran

We estimate the impact of trade liberalization and physical and human capital accumulation on Iran’s economic growth during the period 1959?2007. Using co-integration techniques and a vector error correction model, we find a unique long-run relationship between economic growth and its major determinants. These determinants include the physical and human capital stock, the labor force, real non-oil exports, and import tariffs. In addition, the short-term error correction dynamics analysis suggests that trade liberalization has a significant long run positive role in dynamic of growth. Our results support the view that the integration of the Iranian economy with the world economy is undoubtedly welfare improving.     

Demographic change,human capital accumulation and R&D‐based growth

Employing an overlapping generations model of R&D‐based growth with endogenous fertility and education decisions, we examine how demographic changes induced by an increase in life expectancy influence the long‐run growth rate of the economy. We demonstrate that life expectancy, when relatively low (high), positively (negatively) affects economic growth. This paper also compares the growth implications of child education subsidy policies (i.e., policies for enhancing basic education) and child rearing subsidy policies (i.e., pro‐natal policies) and demonstrate that while the child education subsidies consistently foster economic growth, child rearing subsidies may negatively affect economic growth.     

Social classes,demographic transition and economic growth

This paper analyzes the role of the demographic transition in the emergence of sustained economic growth, and shows that these two processes are related. Unlike previous contributions which have focused on the importance of human capital, this paper suggests that capital accumulation, and the existence of different social classes may provide an alternative explanation for the observed pattern of output, fertility rates and wages during the 19th century. The framework presented shows that during the first phase of industrialization, a decline in capital–labor ratio reduces the wage rate and increases the dependency of the family unit on child labor, increasing fertility rates. However, in later phases the increase in the capital–labor ratio, due to the saving of the business elite, reduces the necessity of child labor bringing about the demographic transition.     

资源约束条件下长期经济增长的动力机制--基于内生增长理论模型的研究

文章通过将存量有限且不可再生的自然资源引入生产函数,构建了一个产品种类扩张型的四部门内生增长模型。首先,通过对模型的市场均衡分析,给出了平衡增长路径的经济增长率以及均衡解存在的一个充分性条件,系统地探讨了在人口增长、自然资源不断耗竭的约束条件下内生技术进步促进长期经济增长的动力机制;其次,通过对平衡增长路径进行比较静态分析,讨论了各经济变量以及经济环境参数的变化对稳态增长率的影响效应及其作用机制,并给出其经济学解释;最后是综合结论及政策涵义。     

Ageing,government budgets,retirement, and growth

We analyze the short and long-run effects of demographic ageing – increased longevity and reduced fertility – on per-capita growth. The OLG model captures direct effects, working through adjustments in the savings rate, labor supply, and capital deepening, and indirect effects, working through changes of taxes, government spending components and the retirement age in politico-economic equilibrium. Growth is driven by capital accumulation and productivity increases fueled by public investment. The closed-form solutions of the model predict taxation and the retirement age in OECD economies to increase in response to demographic ageing and per-capita growth to accelerate. If the retirement age was held constant, the growth rate in politico-economic equilibrium would essentially remain unchanged, due to a surge of social-security transfers and crowding out of public investment.     

Factor substitution and labor market friction in the United States: 1948–2010

We re-estimate the capital-labor elasticity of substitution and the biased factor-augmenting technological progress using a system approach for the aggregate U.S. economy from 1948 to 2010. Due to (i) the significant impacts of labor market dynamics on economic growth and (ii) the fundamental tension between the short-run data that are available and the long-run parameter that is required in the estimation process, we incorporate labor market friction into a supply-side system to re-estimate these important growth parameters and to explore their sensitivity to the incorporation of labor market friction. Our estimation obtains a significantly smaller-than-unity elasticity of substitution. This result is consistent with labor input measured along the extensive and intensive margin, and in both competitive and imperfect labor markets. Technological progress tends to be purely labor-augmenting, with the average growth rate around 2% per year. These findings are robust to alternatively constructed data sets and different estimation strategies.     

Health status and labor force participation: evidence for urban low and middle income individuals in Colombia

This paper analyzes the relationship between individual health status and labor force participation using the first wave of the Colombian Longitudinal Survey. The empirical modeling strategy accounts for the presence of potential endogeneity between these two variables. The results show that there is a positive relationship between health and labor force participation in both directions, indicating that better health is likely to lead to a higher probability of participation in the labor market, but also that individuals who participate in the labor market are more likely to report better health. Interesting differences are uncovered when comparing the results by gender and/or age groups. For instance, for younger females, health status and higher education positively affect the probability of labor participation, whereas having children under the age of 5 and being married reduce their probability of participation. Our findings also highlight the importance of public policy to guarantee good health conditions of the population which could also have a positive impact on labor productivity and consequently on long-run economic growth.     

The labor-force participation of married women in the Soviet Union: a household cross-section analysis

Approximately 80% of women in the Soviet Union ages 15-54 years are employed outside the home. To identify the impact of demographic and economic variables on the high rate of labor force participation among Soviet women, data from an income survey of 1016 2-parent families of emigrants to Israel were analyzed. It was hypothesized that differences in participation rates among Soviet women correspond to differences in other sources of family income, wage rates and market conditions, level of education, and family household conditions, with response to changes in economic variables mediated by the role played by persuasion and social pressure in encouraging women to participate. Overall, 89.3% of the women in the sample were labor force participants. Nonparticipants were, as expected, from families with higher levels of other income. The personal qualifications of nonworking wives were considerably lower than those of working wives, with nonworking wives averaging 9.4 years of schooling compared with 13.2 years for working wives. Offered wages for working wives averaged 69 kopecks/hour in contrast to 40-50 kopecks/hour for nonworking women. A maximum-likelihood functional estimation of participation rates whoed significant coefficients for family income (negative), expected wages and education (positive), and residence in a large city (positive). The coefficients for residence in a medium-sized city, existence of a private plot, presence of nonworking men in the household, occupational status of the husband, and total number of children were insignificant. The supply of hours of work was backward-bending. The results suggest that Soviet women reach the decision to participate in the labor force through consideration of the same factors as their counterparts in nonsocialist countries. The analysis further indicates that, at present levels of fertility and exogenous conditions, the participation rate in the Soviet Union will not decrease. However, policies designed to raise the fertility level, including better facilities for children and more support for women who leave the labor force to raise young children, could ease labor force participation among soviet women.