Labour market characteristics and profitability: An econometric analysis of Hugarian exporting firms, 1986-951

This paper follows through an aspect of microeconomic restructuring in Hungary during the transition period. This restructuring brought about substantial changes in the behaviour of all economic agents. Our study combines labour market and corporate financial information to explore the effect of the quality of labour employed on the profitability of the firm. The quality of labour is measured as that portion of wage differentials that cannot be explained by a standard human capital model. The profitability of Hungarian exporting firms can be explained by economic factors during transition. In addition the quality of labour, export share, wage and bank costs, payables, receivables, foreign ownership, inventories, amortization and equity are all significant explanatory variables.     

Channels of restructuring in privatized Czech companies1

The main contribution of this paper to the literature on restructuring in the transition economies of Central and Eastern Europe is the analysis of productivity‐growth effects for different channels of restructuring. It examines a panel of 737 voucher‐privatized Czech companies in the first years after the transfer of ownership (between 1993 and 1998). The results indicate that asset sales and employee incentives serve as restructuring channels through which productivity of the privatized companies increases. The analysis also indicates that capital expenditures, labour shedding and CEO replacements are not significantly correlated to productivity growth. Furthermore, the analysis suggests that the availability of bank loans is positively associated with productivity growth, but not for less profitable firms. This provides some evidence in support of soft budget constraints accommodated via bank lending.     

Foreign Direct Investment and Enterprise Restructuring in Central Europe

Foreign direct investment is at the forefront of economic policy decisions in Central Europe, as it is expected to accelerate enterprise restructuring and aid in the successful transition to a market economy. This paper contains a panel data study of the effects of FDI in 11 different manufacturing sectors within three Central European economies: Hungary, Poland and the Czech Republic. We find evidence that FDI has increased labour productivity levels in most manufacturing sectors. We are able to differentiate between sectors with a high elasticity of substitution between labour and capital and those that are inelastic. We have also presented evidence to support the theory that the impact on labour productivity is predominantly due to the intangible assets introduced by foreign firms, rather than simply the fixed capital investment associated with FDI.     

Social Justice and Varieties of Capitalism: An Immanent Critique

This article emphasises how labour codes of conduct mediate a series of complex and evolving power relations that span the politics of consumption through to the politics of production. It argues that codes of conduct not only reflect an uneven division of labour – in which firms are stratified in size, productivity and labour conditions – but actively shape it. Using examples drawn from light-manufacturing industries in China, it illustrates how labour codes of conduct feed into these processes of uneven development. In their reaction to the implementation of codes of conduct across global supply chains, some Chinese suppliers at the higher tiers of industrial structure have sought to substitute capital for labour as a way to increase productivity beyond abusive labour conditions. Simultaneously, many smaller firms at lower tiers that are reliant on cut-throat forms of discounting have evolved elaborate schema of falsifying code of conduct processes and reports. Finally, mid-tier firms tend to display a strategically partial degree of compliance. Code provisions that empower workers to self-organise are commonly undermined because such trends threaten the very political basis upon which the restructuring the global division of labour over the past four decades has been predicated.     

The optimality and overuse of labour in Estonian manufacturing enterprises*

Transition economies need labour market flexibility for successful restructuring and reallocation of the labour force, and for coping with the requirements of the European Monetary Union. In this paper we apply a novel approach to the issue of labour market flexibility in transition countries by studying the optimality and efficiency of labour usage in Estonian manufacturing enterprises. We employ a dynamic model in which both the long‐run optimal level of employment and the speed at which actual employment is adjusted to the optimal are modelled as functions of several variables. Firm‐level panel data of 1995–99 were used. The results showed that in the long run, employment responds most strongly to wages, followed by value added and capital stock. The speed of adjustment, labour use optimality and efficiency all show much greater variations over firms than over time. In the course of time, both labour‐saving technical change and an increase in the efficiency of labour usage occur. On average, there is shortage of labour compared to firms’ own optimal level, along with overuse of labour compared to best‐practice technology. Capital seems to be a binding constraint on the development of employment in the Estonian labour market.     

Grain and sunflower on Russian farms in 2001: how efficient is crop production?

An unusually detailed sample of large farms in Rostov, Ivanovo and Nizhny Novgorod regions of Russia in 2001 allows microeconomic examination of the production of grain and sunflower crops on Russian farms. Farms are found to have some excess capital and labour, but not land and other types of capital. New operators are found to be more efficient than other farms thought they do not necessarily produce more output. Neither rural infrastructure, location nor specialisation has a clear impact on farm efficiency. How workers are paid is found to be a potential short‐term method for improving farm efficiency that would not involve major farm restructuring.     

Post-privatisation Enterprise Restructuring

Post-privatisation restructuring of former state-owned enterprises (FSOEs) encompasses both shorter-run 'defensive' actions and longer-run 'strategic' measures. Restructuring involves changes in corporate governance, organisational structure, management, labour, capital, technology, output and sales. Various performance indicators may measure the results of restructuring, but care is required in the selection and interpretation of indicators. In the restructuring of FSOEs foreign strategic investors have many advantages over domestic investors. The study includes examples from experience in the Czech Republic, Hungary and Poland.     

政策协同视角下的中央企业重组与国有资本配置效率*

基于深化国企改革的政策协同视角，本文系统地考察了中央企业重组对国有资本配置效率的影响及作用机制。研究发现，中央企业重组能够长期性地改善国有资本效益，并且这一结果在不同重组方式下存在差异。机制检验表明，中央企业重组是通过降低成本、提高效率而非加剧市场垄断来提高国有资本效益的。进一步检验表明，深化国企改革，尤其是国有企业分类改革和改组组建国有资本投资、运营公司试点能够对中央企业重组起到政策协同效应。最后，中央企业重组还能够通过退市清算、产权转让等形式促使国有资本淘汰落后产能、化解过剩产能，同时布局重要行业并聚焦主业。本文的研究结论不仅及时回应了国企重组特别是央企重组效果及必要性的重要关切，而且为深入推进国企改革提供了有益启示。     

A cost function analysis of import demand for Nigeria

The article uses a translog cost function to examine the substitution relations among capital, labour and imports. The results show that capital has a substitute relation with domestic labour and import. However, labour and import have complementary relationship. The implication of this finding is that liberalization policies, if pursued vigorously, could impart positively on the demand for labour. In addition, it suggests that economic growth could be enhanced through trade liberalization.     

STUBBORNLY PERSISTENT FACTOR MIGRATIONS WITH RAPID INTERNATIONAL ECONOMIC CONVERGENCE*

A model of persisting labour and capital migrations is proposed which relies on capital installation adjustment costs. Labour and capital markets are supposed internationally integrated with free factor movements imposing a 'law of one price' on the gross return to each factor. The development of infrastructure and other capital projects however is accompanied by adjustment costs that create a divergence between the gross and net returns to capital. This makes it optimal to accumulate capital only gradually. Thus, although there is rapid international economic convergence because returns on traded assets and labour are internationally determined, labour and capital immigrations persist. The consistency of this model with some stylised facts of experience is examined using data for four high factor immigration economies from 1870–1991.     

Unemployment, Wage Developments and the Economic Policy Mix in Europe

The paper considers the importance of wage formation for the policy mix in Europe. When monetary policy is committed to price stability, unit labour costs are a crucial factor in achieving this objective. Traditional Phillips curve or modern NAIRU models focus on labour market flexibility to achieve coherent wage developments because they take a short run perspective where the capital stock is fixed. However, in a long term perspective, the capital stock adjusts to profit opportunities which depend on the portfolio choices of investors which in turn are influenced by monetary policy. The time path of the price level depends then on a trend that is set by unit labour costs and a mean reverting profit mark-up that is dependent on capital costs. Monetary policy can become growth-supporting, if unit labour costs remain consistent with the central bank's price objective.     

New measures of factor productivity in Australia: a Sato approach

This article derives new results of the Elasticity of Substitution (ES) between capital and labour and factor productivity for Australia, an economy which experienced major economic reform that substantially increased the flexibility of its labour, product and capital markets throughout the 1980s and 1990s. It employs a Sato production function specification which has unique properties that enable the estimation of capital–labour substitution elasticity and changing marginal productivities through time. These estimates reveal that the substitution elasticity and labour productivity in Australia rose significantly from the mid-1960s and remained elevated during the economic reform period. A novel contribution of this article is the depiction of Australia's production isoquants to convey how combining labour and capital to produce real Gross Domestic Product (GDP) has changed over recent decades.     

The effects of corruption on the human capital accumulation process: Evidence from Vietnam

This study aims to identify the effects of corruption on the human capital accumulation process in Vietnamese provinces/cities. I employ labour quality assessments of firms as a proxy for human capital and divide human capital accumulation into the following two processes: an educational process and a process through which educational outcomes and worker training transform into labour quality. The estimation results have some notable implications for the Vietnamese context. Corruption has both negative and positive effects on human capital. On the one hand, corruption reduces the positive effect of local government spending on educational achievements and worsens labour quality. On the other hand, the prevalence of corruption in provinces/cities increases the advantages of local schools in the competition to obtain funds from the central government; hence, corruption enhances educational achievements in those regions. The results of this study indicate that corruption adversely affects human capital overall.     

Optimal Factor Income Taxation in the Presence of Unemployment

According to conventional wisdom internationally mobile capital should not be taxed or should be taxed at a lower rate than labour. An important underlying assumption behind this view is that there are no market imperfections, in particular that labour markets clear competitively. At least for Europe, which has been suffering from high unemployment for a long time, this assumption does not seem appropriate. This paper studies the optimal factor taxation in the presence of unemployment which results from the union-firm wage bargaining both with optimal and restricted profit taxation when capital is internationally mobile and labour immobile. In setting tax rates the government is assumed to behave as a Stackelberg leader towards the private sector playing a Nash game. The main conclusion is that in the presence of unemployment, the conventional wisdom turns on its head; capital should generally be taxed at a higher rate than labour.     

Energy and capital: substitutes or complements? Some results for the UK industrial sector

This paper investigates the substitutability or complementarity possibilities between capital, labour and energy in the UK industrial sector, with particular attention to the captial-energy relationship. It is found, using the translog-cost-function approach, that capital and labour as well as energy and labour are substitutes. However, capital and energy are found to be complements.     

Income Shifting within a Dual Income Tax System: Evidence from the Finnish Tax Reform of 1993*

Dual income tax systems can suffer from income that shifts from progressively taxed labour income to capital income, which is taxed at a lower, flat rate. This paper empirically examines the 1993 Finnish dual income tax reform, which radically reduced the marginal tax rates on capital income for some, but not all, taxpayers. We measure how overall taxable income and the relative shares of capital income and labour income reacted to the reform. We find that the reform led to a small positive impact on overall taxable income, but part of the positive response was probably offset by income shifting among the self‐employed.     

村庄重构中的社会资本情境与个体选择行为分析

从传统向现代的转型过程中,传统社会资本的逐渐消解与现代社会资本的不完全成长构成了当前中国农村社会资本的结构断裂性情境。由于受到社会资本的情境性限制,村民在村庄重构过程中的个体选择行为表现为一种经济理性与从众心理相结合的非理性选择,导致作为主体的农民在村庄重构中集体失语。培育农村现代社会资本成为解决当前村庄重构中农民利益保护的重要途径,也是社会资本对自身情境性限制的工具性超越。     

THE EFFECTS OF FIRM BOUNDARY AND FINANCING CONSTRAINTS ON UTILITY COSTS: THE CASE OF MUNICIPALLY OWNED ELECTRICITY DISTRIBUTION UTILITIES

ABSTRACT: A number of studies have examined costs and potential for scale and scope economies in electricity distribution; however, few if any, have examined this area in terms of the unique constraints associated with municipal ownership or historical and regulatory constraints associated with former municipal ownership. This paper focuses on 19 distribution‐only municipally owned utilities for a ten‐year period (1988–97). Distortions from variable outputs but largely fixed inputs are minimized. The data used were collected specifically to assess productivity, cost, and efficiency performance and include value‐based capital inputs and service prices. Outputs include energy conveyed and number of connections; inputs include capital, system losses, labour, and materials. We examine the effect of using third‐party financing (e.g., connection charges), with its inherent principal‐agent problems, on utility costs, as well as the effect of shared services and multi‐utility output (e.g., electricity and water). A translog total cost function is estimated. Our findings suggest significant returns to scope but also significant increases in costs associated with the use of third‐party financing. The results also suggest scale diseconomies. Shared outputs, which have been greatly restricted or eliminated under restructuring, may have provided larger, and now lost, economies than the scale returns blindly pursued by some through restructuring or incented/forced mergers or divestitures. Finally, it is clear that third‐party financing can raise costs; such financing is widely used among utilities providing electricity, gas, water, and telecommunications, and should be closely scrutinized.     

Population ageing,time allocation and human capital: A general equilibrium analysis for Canada

This study explores the long-term impact of population ageing on labour supply and human capital investment in Canada, as well as the induced effects on productive capacity. The analysis is conducted with a dynamic computable overlapping generations model where in the spirit of Becker [Becker, Gary (1965), A theory of the allocation of time, The Economic Journal, Vol. 75, pp. 493–517.] and Heckman [Heckman, James (1976), A life-cycle model of earnings, learning and consumption, The Quarterly Journal of Economics, Vol. 84, pp. 511–544], leisure has a quality-time feature and labour supply and human capital investment decisions are endogenous. The role of human capital in the growth process is based on the framework used by Mankiw et al. [Mankiw, N. Gregory, Romer, David and Weil, David N. (1992), A contribution to the empirics of economic growth, Quarterly Journal of Economics, Vol. 107, no. 2, pp. 407–437]. The paper indicates that population ageing creates more opportunities for young individuals to invest in human capital and supply more skilled labour at middle age. Consequently, the reduction in labour supply of young adults initially lowers productive capacity and exacerbates the economic costs of population ageing. However, current and future middle-age cohorts are more skilled and work more, which eventually raises productive capacity and significantly lowers the cost of population ageing. Finally, these results suggest that the recent increase in the participation rate of older workers might be the beginning of a new trend that will amplify over the next decades.     

New forms of labour contract and labour flexibility in Russia

This paper assesses the claims that employment in the new Russian private sector relies heavily on informal and unregistered labour agreements and that the violation of existing labour law by new private employers is driven by their need for more flexible working arrangements.
The paper shows that these claims are unsupported on every count. The new private sector does not rely heavily on informal or illegal forms of employment and there is no evidence that it uses labour more flexibly, in any of the usual senses of the term, than the traditional sectors of the economy. The conclusion is that there is no economic justification for the systematic violation of the existing labour legislation. It is suggested, therefore, that enforcement of the existing law is a precondition for its effective reform in those areas in which it might be a barrier to restructuring.