The relationship between entrepreneurship and unemployment: Is Portugal an outlier?

The present paper examines the relationship between entrepreneurship, as measured by the variation in business ownership rates, and unemployment in Portugal in the period from 1972 to 2002. It concludes that Portugal has been a relative outlier in regard to the effects of entrepreneurship on unemployment when compared with the OECD average. Although the nature of entrepreneurship may be different in the Portuguese case, due to a high proportion of “micro-businesses” created for subsistence which have little impact on growth and employment, this factor does not seem to be the primary reason for the observed discrepancies. The differences between observed levels of unemployment for Portugal and those predicted by a model based on OECD data seem to be mostly associated with macroeconomic fluctuations associated with European business cycles and EU “cohesion” funding, as well as with adjustment costs to new technology adoption which lead to productivity slowdowns, thus increasing the time lag for the effect of entrepreneurship on employment beyond the OECD average.     

The effects of the new communications media on employment

The post-World War II economic growth happened in a context of significant productivity gains in the industrial sector and an increasing demand for services, where productivity gains remained quite low. This explains the strong expansion of employment in the tertiary sector relatively to the industrial sector. In the 1970s, this growth pattern reached a crisis point: in most Western economies, productivity gains lagged in the industrial sector while no visible changes occurred in productivity in the service sector.With the more widespread use of data processing and the emergence of new communication media, this trend showed signs of reversal. Information handling activities showed considerable productivity gains, rivaling those previously seen in industry. And the spur for technical progress, once limited to the industry, appears to have spread to the services and information sector.With respect to employment, this tendency could lead to a reduction in employment in the tertiary sector. So the new technologies would come about at the worst possible moment, with all time high unemployment rates in Western economies.So it is not surprising to see the current temptation to delay the process, or to adopt a so called “two-speed growth strategy”: the strongest productivity gains would be enhanced in the traded sector (mostly the industrial sector) where foreign competition is most prevalent; and the resulting cost on employment would be offset by maintaining low productivity levels in the protected sector which, to the present, has typically been the services sector.The present analysis takes a more optimistic stand-point on the net effect of technical progress on employment. The authors focus on the interplay between productivity in the exposed sector and productivity in services, with emphasis on the necessity for decreasing unit costs in the protected sector, enabling the traded sector to remain competitive.     

Trade, technology, and unemployment: the role of endogenous skill formation

Abstract .  This paper analyses trade in an asymmetric  2 × 2 × 2  world, where the two countries ('Europe' and 'America') differ in their preferences towards wage inequality. Fair wage considerations compress wage differentials in both countries. European workers are more averse to wage inequality, and Europe is characterized by lower wage differentials and higher unemployment. Allowing for endogenous skill formation, the effects of a globalization shock, global technological change, and a change in the educational capital stock on skill premia and employment levels are derived. In contrast to a model with exogenous factor supplies, international wage and unemployment differentials are affected by global shocks.     

Measuring the New Economy: An International Comparative Perspective

The advances made in the production and use of information and communication technology (ICT) during the past decades may have potentially large effects for long term economic growth. Indeed the substantial acceleration in real GDP growth in many OECD countries, but in particular in the United States, during the second half of the 1990s has led to suggestions that a "new economy" has emerged. In this new economy the old economic rules were supposed to have become invalid. For example, traditional concerns about the limits of maximum production capacity might disappear as the marginal costs of producing ICT goods and services are virtually nil. Moreover, the trade-off between inflation and unemployment could be reduced due to a more efficient inventory management.     

Efficiency-Wage Unemployment and Intersectoral Wage Differentials in a Heckscher–Ohlin Model

The paper analyzes a Heckscher–Ohlin (HO) model with efficiency-wage unemployment (henceforth HOe model). We show that all HO results have close HOe analogues. Additionally, conditions are derived under which immigrants might not only find employment for themselves but also raise employment for natives. Moreover, we analyze the ranking of countries with respect to their rate of unemployment, showing that this ranking may be reversed as countries move from autarky to trade. All results are clearly linked to factor intensities and the pattern of intersectoral wage differentials.     

Contagion effects of national innovative capacity: Comparing structural equivalence and cohesion models

The effective promotion of national innovation performance is a crucial component of national innovation policy. This study examines network contagion effects of national innovative capacity via the international diffusion of embodied and disembodied technology by two different social network models: the cohesion model, based on diffusion by direct communication, and the structural equivalence model, based on diffusion by network position similarity. This investigation then utilizes data of 42 countries during 1997 to 2002 to empirically examine their network relationship. The analytical results demonstrate that international technology diffusion influences national innovation performance through contagion effects, but that the international similarity of national innovative capacity performance is more accurately predicted by network position than by interactions with others; and this study result provides a new perspective for science and technology policy makers.     

Employment,output and the choice of techniques: The trade-off revisited

In this paper we explore the choice of techniques issue in a dual economy model with unemployment in the urban sector. Conventional wisdom suggests that developing societies attempting to modernize and transform backward sectors into advanced ones do so by choosing labor-intensive technologies to avoid rising unemployment. We analyze the effect of labor-intensive technology on (a) the level of urban unemployment, and (b) the relationship between the levels of urban employment and unemployment. We show under quite reasonable conditions that choosing a labor-intensive technology will actually aggravate the unemployment problem. We also show that the nature and pattern of the trade-off between modernization and employment are crucially dependent on the existing agricultural technology.     

Is trade liberalization a solution to the unemployment problem?

This paper examines how trade liberalization affects the growth rate of sectoral employment in developed and developing countries. The estimation results imply that trade openness in the form of higher trade volumes has not been successful in generating jobs in developing countries. The overall weak, negative employment response to trade volumes may be explained by the negative output response to trade openness in these countries. Our estimates also indicate that higher trade volumes have adverse effect on industrial employment in developed countries. Moreover, while they have positive effect on employment in industry and services in developing countries, trade barriers have adverse effect on employment growth in services for developed countries. Our overall results imply that while trade barriers have relatively little adverse effects and/or in some case a positive effect on employment both in developing and developed countries, higher trade volumes have an adverse effect on industrial employment in developed economies. Thus, trade openness is not in itself a solution to the unemployment problems of developing countries and yet it has not been the prime factor to blame for the lower employment levels in developed countries.     

THE IMPACT OF TFP GROWTH ON STEADY‐STATE UNEMPLOYMENT*

Theoretical predictions of the impact of total factor productivity (TFP) growth on unemployment are ambiguous, and depend on the extent to which new technology is embodied in new jobs. We evaluate a model with embodied and disembodied technology, capitalization, and creative destruction effects. In econometric estimates with a panel of industrial countries we find a large negative impact of TFP growth on unemployment, which implies that embodied technology and creative destruction play no role in the steady‐state dynamics of unemployment. Capitalization effects explain some of the estimated impact but a part remains unexplained.     

EMPLOYMENT PROTECTION AND THE NON‐LINEAR RELATIONSHIP BETWEEN THE WAGE‐PRODUCTIVITY GAP AND UNEMPLOYMENT

This paper studies the relationship between the wage‐productivity gap and the unemployment rate in OECD countries between 1985 and 2007. In particular, we investigate whether differences in the employment protection across countries affect the link between these two variables. We show that the elasticity of unemployment with respect to the wage‐productivity gap is non‐linear and that it switches from a positive to a negative value with stricter employment legislation. From a theoretical point of view, we argue that this result is related to a set of labor market reforms introduced in many OECD countries, which affected the relative strictness of institutions.     

Experts,firms, consumers or even hard data? Forecasting employment in Germany

In this article, we forecast employment growth for Germany with data for the period from November 2008 to November 2015. Hutter and Weber (2015) introduced an innovative unemployment indicator and evaluated the performance of several leading indicators, including the Ifo Employment Barometer (IEB), to predict unemployment changes. Since the IEB focuses on employment growth instead of unemployment developments, we mirror the study by Hutter and Weber (2015). It turns out that in our case, and in contrast to their article, the IEB outperforms their newly developed indicator. Additionally, consumers’ unemployment expectations and hard data such as new orders exhibit a high forecasting accuracy.     

经济新常态下就业困难群体失业趋势研究*

本文探讨了宏观经济运行新特征对就业困难群体失业的影响。研究发现城镇失业与平均工资显著正相关,与财政支出、一年期贷款利率和平均受教育年限显著负相关,与经济增长率和全要素生产率等无显著相关性。“4050”人员、刚毕业大学生和青年农民工是三类重点困难群体,失业趋势呈现长期失业加重、失业转就业难度增大和短期失业淤积。本文建议将“就业困难群体就业比较充分”作为就业工作的重要目标,多措并举,妥善应对新常态下的失业问题。     

Episodes of unemployment reduction in rich,middle-income and transition economies

This paper studies the incidence and determinants of episodes of drastic unemployment reduction, defined as swift, substantial, and sustained declines in unemployment. We identify 43 episodes over a period of nearly 3 decades in 94 rich, middle-income and transition countries. Unemployment reductions often coincide with an acceleration of growth and an improvement in macroeconomic conditions. Episodes are much more prevalent in countries with higher levels of unemployment and, given unemployment, are more likely in countries with better regulation. An efficient legal system that enforces contracts expeditiously is particularly important for reducing unemployment. The results imply that while employment is largely related to the business cycle, better regulation reduces likelihood of high unemployment and facilitates a more rapid recovery in the event unemployment builds up.     

The consequences of labor market flexibility: Panel evidence based on survey data

We introduce a new data set on hiring and firing restrictions for 21 OECD countries for the period 1984-1990. The data are based on surveys of business people in the countries covered, so the indices we use are subjective in nature. Controlling for country and time fixed effects, and using dynamic panel data techniques, we find evidence that increasing the flexibility of the labor market increases both the employment rate and the rate of participation in the labor force. A conservative estimate suggests that if France were to make its labor markets as flexible as those in the US, its employment rate would increase 1.6 percentage points, or 14% of the employment gap between the two countries. The estimated effects are larger in the female than in the male labor market, although both groups seem to have similar long-run coefficients. There is also some evidence that more flexibility leads to lower unemployment rates and to lower rates of long-term unemployment. We also find evidence consistent with the hypothesis that inflexible labor markets produce “jobless recoveries” and introduce more unemployment persistence.     

Technological innovation governance for winning the future

Both developed and developing worlds today face significant economic crises. For winning their future, all countries will have to boost their capacity to innovate. Since technological innovation has now become the mantra for employment generation through growth of exported goods and to ensure sustained economic growth, current national technological innovation capacity governance policies need to be grounded on four basic pillars: (1) adopting an actionable taxonomy of technological system components utilized by enterprises operating in the fiercely competitive global marketplace; (2) relying on greater public-private partnership for targeted specialization in emerging technology industries; (3) complementing research-university-linked incubators with metropolis-based innovation hotspots; and (4) mandating a prioritized choice criteria function for technological innovation project funding. Why these pillars are important and how to strengthen national technological innovation capacity building-blocks are described in this essay on the basis of lessons learned from studies in many Asian developing countries and some developed countries of the world.     

R&D investments and corporate cash holdings

This paper presents evidence about how research and development (R&D) expenditures affect corporate cash holdings in European country groups that differ in their innovation capacity. In theory, one can expect intangible investments such as R&D to result in higher cash stocks than fixed investments, particularly because intangible capital is less suitable as collateral for obtaining external funds. The relationship can be expected to be particularly strong in innovative countries. These countries carry out a relatively high proportion of cutting-edge R&D, which tends to be particularly risky and may be associated with substantial gestation lags before becoming productive. These features tend to increase firms' precautionary cash holdings. To investigate this issue in a European context, we examine different groups of countries that are clustered based on differences in their innovative capacity. Our estimation results confirm a positive relation between changes in R&D investment and changes in cash holdings, whereas changes in fixed investment do not appear to be related to changes in cash positions. The impact of changes in R&D on cash tends to be higher for country groups characterized by a high level of innovative capacity than for countries with moderate levels of innovative capacity. However, the differences across country groups are less pronounced than expected.     

Capital Accumulation and Unemployment: A Tale of Two "Continents"

In contrast to much recent work regarding the causes of European unemployment, in this paper we emphasize the importance of capital accumulation. But unlike the few previous studies which have examined the relationship between capital accumulation and unemployment, we argue that what matters for the evolution of employment (and the unemployment rate) is not the absolute growth rate of a country's capital stock, but its evolution relative to other countries' capital stock. The empirical validity of the above statement is demonstrated for almost all OECD countries using quarterly time-series data for the period 1961–1995. More detailed evidence is also presented for Germany, Japan and the United Kingdom.     

Equipment Investment and the Relative Demand for Skilled Labor: International Evidence

The effects of equipment investment on relative wages and employment of skilled labor are estimated. The basic hypothesis is that such effects are positive, because of the presence of either equipment–skill complementarity or skill advantage in technology adoption. Using a panel data set for a wide range of countries, the relative wage and relative employment of skilled workers are regressed on lagged investment in machinery and other relevant variables. The results indicate a positive and strong effect of machinery investment on the relative demand for skilled labor, with the relative wage responding much sooner and for a much shorter time than relative employment. Journal of Economic Literature Classification Number: E24.     

Capital Stock, Unemployment and Wages in the UK and Germany

This paper is concerned with the view that capital formation is an important variable in the determination of unemployment and wages in Germany and the UK. Adverse demand shocks affect employment and investment. When shocks reverse, unemployment may not fall to previous levels due to insufficient capital. The empirical results show that unemployment has risen in the last twenty years in both countries due to insufficient investment. Policies that are aimed at stimulating investment may have a permanent effect on unemployment in Germany and the UK.     

Analysis of wage flexibility across the Euro Area: evidence from the process of convergence of the labour income share ratio

This article analyses wage flexibility as a factor in the unemployment rate across 12 Euro Area countries. We use extensive evidence pertaining to the countercyclical behaviour of the labour income share ratio to estimate its equilibrium value in the long run. This measure is calculated using a hybrid New Keynesian Phillips curve. Additionally, by using spatial econometrics, we can incorporate into the study the interdependence in the inflation among the countries. As a result, we identify countries that might see an improvement in their employment rates by improving their wage flexibility. We also identify countries with high unemployment that is not a consequence of a lack of wage flexibility.