Fiscal policy in a small open economy with cross-border labor mobility

The large and stable inflow of workers’ remittances through formal financial channels to developing countries prompted authorities to harness fiscal resources from this flow. This paper develops a macro-dynamic model of a small open economy with cross-border labor mobility emphasizing fiscal policy. The flow of remittances is the result of a household’s optimizing decision to migrate. We examine the macroeconomic responses to fiscal policies. First, we show that an economy with international migration is more resilient to demand shocks resulting from fiscal contraction. Second, the short-run association between remittances and domestic output depends on the sources of the shocks. Third, our results indicate that the equilibrium impact of a tax on remittances can be expansionary and welfare-improving when an economy is initially close to full employment. The presence of utility-enhancing government expenditure and a potential negative externality from over-allocation of labor abroad (over migration) justify the presence of distortionary taxes.     

Entrepreneurship in post‐conflict transition1

We examine new self‐employment entry and its viability in Bosnia and Herzegovina, using a rich household survey for the years 2001–2004. We find that wealthier households are more likely to engage in viable self‐employment and create employment suggesting an important role for financing constraints. Specifically, although having an existing bank relationship is not significantly related to the entry decision, it is positively related to the survival for new entrepreneurs and their employment creation. We also find a non‐linear relationship between remittances and entry in that individuals not receiving remittances are more likely to enter self‐employment; but, if they do receive them, the likelihood of starting a business increases in the fraction of wealth received from domestic remittances. Finally, people working in the informal sector are more likely to become viable entrepreneurs, particularly those provided with loans from micro‐credit organizations. These findings support the perception of the informal sector as an incubator for formal self‐employment in the early years of transition.     

Labour market institutions in open economy: Sectoral reallocations,aggregate adjustments,and spillovers

We introduce frictional unemployment in a multiworker heterogeneous firm model with a dynamic matching process, one‐ and two‐sector equilibria, and international markets. A change in labour market policies transforms the share of exporters and affects average productivity. The closure of equilibrium with or without sectoral arbitrage plays an important role in generating macro‐level outcomes for employment subsidies. Unemployment benefits, on the other hand, make unemployment and openness rise, independently of sectoral reallocations. We also find that simultaneous implementation of labour market policies remove potential gain in the trade share, and, when it comes to unemployment benefits, may even be detrimental.     

Patterns of manufacturing employment change within multinational enterprises 1977–1981

The extent of job loss has ensured a high level of interest in the corporate strategies of large firms in the UK. This study examines the employment record of a sample of leading UK-based multinational enterprises over the period 1977–81. In contrast with multinational enterprises from other nations, the UK companies were unique in combining significant domestic employment reduction with considerable overseas employment creation. While the pattern of employment change did not support the hypothesis of a direct substitutability of overseas for domestic production and employment it was consistent with a decline in the locational advantage of the UK.     

CRIME AND POVERTY: A SEARCH‐THEORETIC APPROACH*

Numerous studies document that criminal activity is positively related to unemployment and negatively related to educational attainment levels within given communities. We study this phenomenon in the context of a search‐equilibrium model, in which agents choose between formal employment and pursuing crime‐related activities (theft). Prior to their “occupational choices,” agents undertake costly schooling, raising their productivity. Crime acts, in essence, as a tax on human capital by affecting the probability that a worker's earnings (possessions) are subsequently appropriated. There are multiple equilibria. High crime, low levels of educational attainment, long spells of unemployment, and poverty are correlated across them.     

Back to Basics: Remittances in the Keynesian Macroeconomic Framework

This paper examines a remittance multiplier based on the short-run Keynesian equilibrium approach and shows how income may be affected by remittance inflows. We explore this through the equilibrium in the goods and money markets, where remittances can affect both consumption and the demand for real money balances. We present this simple theoretical model utilizing a standard Keynesian framework. The short-run Keynesian equilibrium approach provides insight into how remittances affect output and income, and its potential multiplier effects. The model used is indicative of a positive relationship between the marginal propensity to consume out of remittances and the multiplier. The framework also shows that remittances will have a greater impact if its marginal propensity to consume is greater than that for standard disposable income.     

外来者劣势与海外并购企业的生产率提升

海外并购已成为新兴经济体企业对外投资和实现国际化扩张的重要战略选择。外来者劣势是中国企业海外并购活动面临着的诸多困难之一。“外来者”身份会对企业并购后的整合与生产率提升这一关键问题产生负面影响,化解负面影响需作深入的细化研究。选取2008-2015年中国上市企业共计197起海外并购事件,以制度距离、文化距离以及地理距离分别作为外来者劣势中合法性缺失和信息不对称的替代变量,分析外来者劣势对海外并购企业生产率提升的作用机制。结果显示,合法性缺失导致的外来者劣势对海外并购企业的生产率提升有显著负影响,但信息不对称对生产率的影响并不显著。调节效应检验结果表明,国内投资能显著弱化制度距离和文化距离引致的外来者劣势对海外并购企业生产率的负影响,国际化经验和出口能克服制度距离带来的合法性问题,但对文化距离带来的合法性缺失的弱化效果并不明显。     

Too Much Monitoring, Not Enough Performance Pay

This paper endogenises the internal organisation of competitive firms in a simple general equilibrium framework. The options are monitored teams, unmonitored teams motivated by collective performance pay, and self-employment. The choice of incentive scheme depends on market price and also affects price through its influence on output. As more people opt for self employment, pecuniary externalities increase the pressure on the rest to follow suit and Pareto rankable multiple equilibria arise. The conditions for a competitive equilibrium to be constrained efficient are restrictive and everyone may gain from policies limiting monitoring and self employment and from the imposition of entry taxes.     

Picking “Lemons” or Picking “Cherries”? Domestic and Foreign Acquisitions in Norwegian Manufacturing*

We compare the performance in employment, wages and productivity for domestic plants acquired by new domestic and foreign owners. Prospective foreign owners pick large, high‐wage, high‐productivity plants, while new domestic owners choose average performers of above‐average size. Employment, labour productivity, and total factor productivity decline in domestic acquisition targets before acquisitions; only wages recover afterwards. Employment, wages and labour productivity increase after foreign acquisitions. The sample selection introduced by long‐term comparisons and a focus on unique events introduces a downward bias into the results for domestic acquisitions and an upward bias for the foreign acquisitions.     

Macroeconomic determinants of remittances: evidence from Romania

Given the globalization of the labour market and the promotion of free movement for work, young people are looking for employment opportunities from at least two perspectives – professional careers and socio-economic benefits from employment. In developing countries, such as Romania, the labour market is less attractive, which has led to profound, numerical and structural imbalances, due to external mobility for work. Both new generations of graduates and young people aged up to 40 years, decide to work abroad as a more beneficial individual solution, i.e. remittances. The purpose of this paper is to examine the macroeconomic determinants of remittances to Romania, in order to substantiate public policies on diaspora, to adjust employment policy on the national labour market by promoting incentives to create decent, youth-friendly jobs. Using panel data model we selected several variables with potential influence on remittances level. The results demonstrate that traditional influence’s factors as distance, migration routes diaspora concentration or unemployment rate are, at present, less important than wage gap or tax rate at least for developing origin countries.     

Equilibrium migration with invested remittances: The EECA evidence

This paper analyzes international migration when migrants invest part of their income in their country of origin. We show that a non-total migratory equilibrium exists. Exogenous shocks, such as an increase in migrant income, lead to an increase in optimal invested remittances per migrant, and a higher wage in the country of origin. Yet the net effect on the equilibrium number of migrants is positive. Hence, in equilibrium, emigrants' optimal invested remittances and number of migrants are positively related. We use data from twenty five countries in Eastern Europe and Central Asia in 2000 to test for this implication of our model. OLS and bootstrap estimates reveal a positive elasticity of the number of migrants with respect to estimated invested remittances per migrant in the range of [0.3; 0.7].     

Multiplicity of Cournot Equilibria and Involuntary Unemployment

In an overlapping generations model with Cournot competition on the goods market it is shown that a continuum of stationary states and perfect foresight trajectories exists with unemployment at arbitrary low wages. Decisive for this is the influence that different forecast functions have on the objective demand curve, even though they are consistent with perfect foresight. With an example it is shown that simple adaptive and constant memory forecast rules generate such unemployment equilibria. The corresponding temporary equilibrium dynamics may display stable unemployment and unstable full employment equilibria.Journal of Economic LiteratureClassification Numbers: D43, D51, E24     

Slow Growth,Trade Liberalisation and the Mexican Disease: A medium-term macroeconomic model with an application to Mexico

The purpose of this paper is to analyse Mexico's medium-term macroeconomic outlook, from the vantage point of the country's recent development. The analysis is carried out within a formal model for the determination of the rates of employment and inflation under conditions of external and internal balance. In equilibrium, the real wage and the rates of employment and inflation depend inter alia on the level of labour productivity, the ratio of foreign debt to domestic output, and the foreign trade regime. Econometric tests based on Mexican data support the model's basic postulates and, in addition, reveal the presence of structural change, linked to trade reform, in the trade balance and the manufactures' productivity growth equations. The macroeconomic implications of such parameter changes are discussed with the help of the analytical model developed.     

A new model of equilibrium involuntary unemployment

Summary. We show that equilibrium involuntary unemployment emerges in a multi-stage game model where all market power resides with firms, on both the labour and the output market. Firms decide wages, employment, output and prices, and under constant returns there exists a continuum of subgame perfect Nash equilibria involving unemployment and positive profits. A firm does not undercut the equilibrium wage since then high wage firms would attract its workers, thus forcing the undercutting firm out of both markets. Full employment equilibria are payoff dominated by unemployment equilibria, and the arguments are robust to decreasing returns.Received: 21 May 2001, Revised: 15 April 2003, JEL Classification Numbers: D43, E24.Correspondence to: Leo KaasWe thank an anonymous referee, Woojin Lee, Klaus Ritzberger and seminar participants in Konstanz, Manchester, Milan, Prague, Vienna, and Warwick for helpful comments. Financial support from the Economic and Social Research Council (UK) under grant L138251030 and from the Manchester School Visiting Fellowship Scheme is gratefully acknowledged.     

Return Migration and Occupational Change

Return migrants exhibit a high tendency for self-employment over waged employment. Using cross- sectional data from Pakistan, the paper explores the determinants of this choice. Retirement from the domestic labor market is not a reason for opting for self-employment. The preference for non-farm self-employment is a two-period process of self-selection. Migrants who expect to switch occupation to non-farm self-employment upon return save more from high transitory overseas income than do their counterparts. Upon return, savings become a significant factor in the choice of self-employment over waged employment. International migration and return have little influence on the choice of farm self-employment.     

Labor market structure and offshoring

We consider a two‐country, two‐sector model in which a firm’s offshoring decision depends on labor market rigidities that impose additional costs on the firm. Firms endogenously choose their organizational form considering their productivity level and organizational costs. The costs generated by labor market frictions play a key role in determining the benefits of each organizational structure, and thus helps determine the conditions under which a firm decides to offshore. There are three different types of equilibria depending on the relative levels of the domestic and foreign labor market costs and the price of the intermediate input. In all equilibria, a relative rise in the domestic labor market cost increases the share of firms that offshore, while decreasing domestic integration. Furthermore, an economy with offshoring has a higher welfare level and a lower unemployment rate than it would under autarky.     

The relationship between remittances and macroeconomic variables in times of political and social upheaval: Evidence from Tunisia's Arab Spring

If Tunisia is hailed as a success story with its high rankings on economic, educational, and other indicators relative to other Arab countries, the popular 2011 uprisings underscored the fragility of its main economic pillars, including those of tourism and foreign direct investment. This paper examines the economic impact of migrants’ remittances, which are expected to exhibit relatively countercyclical behaviour during periods of intense upheaval. This study is novel in its methodological approach, which is used to pinpoint the dynamic effects of remittances on key macroeconomic variables within an unstable framework. The analysis reveals that the effect of remittances on Tunisia's economy has varied over time. Prior to the Arab Spring, remittances had a short‐term negative influence on economic growth, varying effects on domestic investment and positive impacts on consumption. In considering the post‐Arab uprisings, positive and strong impacts of remittances on growth and consumption are found in the long run while negative and moderate investment effects of remittances are shown over the short and medium term.     

International oligopoly,barriers to outsourcing and domestic employment

In this paper we analyze the impact of barriers to outsourcing on domestic employment in an oligopolistic context. We show that although an outsourcing tax makes domestic labour cheaper, its employment effect is ambiguous due to strategic considerations. Analyzing international policy interdependence, we also show that, although a unilateral tax (subsidy) by a country must raise its domestic employment, this may be counterproductive in a Nash policy equilibrium. Finally, both a credit crisis and increased product differentiation tend to worsen the employment effects of an outsourcing tax. Our central findings are robust to both Bertrand and Cournot modes of competition.     

Microeconomic uncertainty and macroeconomic indeterminacy

We propose a stylized intertemporal macroeconomic model wherein the combination of decentralized trading and microeconomic uncertainty (taking the form of privately observed and uninsured idiosyncratic shocks) creates an information problem between agents and generates indeterminacy of the macroeconomic equilibrium. For a given value of the economic fundamentals, the economy admits a continuum of equilibria that can be indexed by the sales expectations of firms at the time of investment. The Walrasian equilibrium is one of these possible equilibria but it is reached only if firms are optimistic enough. With a weaker degree of optimism, equilibrium output, employment and real wages will be lower than in the Walrasian equilibrium. Moreover, the range of possible equilibria will depend positively on the wage elasticity of the labour supply and on the magnitude of the information problem between buyers and sellers (in our case, the variance of the idiosyncratic shocks).Stochastic simulations performed on a calibrated version of the model show that pure demand expectation shocks may generate business cycle statistics that are not inconsistent with the observed ones.     

The productivity-wage and productivity-employment nexus: a panel data analysis of Indian manufacturing

This article investigates the long-run relationship between labour productivity and employment, and between labour productivity and real wages in the case of the Indian manufacturing sector. The panel data set consists of 17 two-digit manufacturing industries for the period 1973–1974 to 1999–2001. We find that productivity-wages and productivity-employment are panel cointegrated for all industries. We find that both employment and real wages exert a positive effect on labour productivity. We argue that flexible labour market has a significant influence on manufacturing productivity, employment and real wages in the case of Indian manufacturing.