CROSS SUBSIDIZATION AND TELECOMMUNICATIONS SECTOR WAGES

ABSTRACT 1 : This study has examined wage determination in the presence of cross‐subsidization of firms in the telecommunications industry. How variations in cross subsidies received, via the separations mechanism used in the industry, influence some firms to pay a greater level of wages is assessed. The firms studied have been almost the entire population of local exchange carriers in the US telecommunications industry between 1995 and 2000. The analysis has established that firms which are able to obtain greater cross‐subsidies, on average, in fact pay higher wages and the elasticity of the relationship is quite high. The study is the first of its kind assessing the relationship between an important regulatory variable that measures a ubiquitous process, such as cross subsidization, and the impact on employee wages.     

INFLOW OF FOREIGN CAPITAL AND TRADE LIBERALIZATION IN A MODEL WITH AN INFORMAL SECTOR AND URBAN UNEMPLOYMENT

Abstract.  The paper has made an attempt to analyse the effects of liberalized trade and investment policies on welfare and open unemployment in a developing economy in terms of a three sector Harris-Todaro type general equilibrium model. Following empirical evidence it is assumed that there is wage rigidity in urban sectors, which leads to the simultaneous existence of open unemployment and an urban informal sector in the migration equilibrium. The paper deserves special attention for its interesting results which are completely opposite to those generated by the standard Harris-Todaro model.     

MIGRATION, UNEMPLOYMENT, AND WAGES: THE CASE OF THE CALIFORNIA SAN JOAQUIN VALLEY

The California San Joaquin Valley labor market appears to be at odds with basic economic principles in the sense that despite higher unemployment rates and lower wages, it has continually attracted an influx of in‐migrants, domestic and international. By examining county‐level data for the last two decades, the analysis in this paper is built around two main questions. First, in what proportion does local employment growth reduce local unemployment, increase labor force participation and attract outsiders who will likely take the newly created jobs? Second, to what extent regional migration rates respond to regional relative wages and unemployment differentials? Both questions aim to gain a better understanding of the San Joanquin Valley labor market and the migrants’ decisions to move there, which might shed light in the design and implementation of development policies aimed at reducing unemployment. Results provide evidence that market forces alone are insufficient to correct regional unemployment disparities. Three main findings are offered. First, in‐migrants workers fill most of the newly created jobs. Second, migration seems unresponsive to the unemployment level but responsive to changes in farm income. Third, migration is sensitive to government‐based benefits, property crime rates and housing prices. (JEL R11, R23, R58)     

THE RELATIONSHIP BETWEEN CAPITAL STOCK, UNEMPLOYMENT AND WAGES IN NINE EMU COUNTRIES

The focus of this paper is to investigate the importance of the capital stock in the determination of wages and unemployment in a range of EMU countries and to compare the results across countries. A time‐series analysis is conducted in the case of nine euro area countries, which were selected solely on the basis of data availability and consistency: Austria, Belgium, Finland, France, Germany, Italy, Ireland, the Netherlands and Spain. The paper begins with a short review of the literature on capital stock and unemployment, before it deals with the theoretical model. This is followed by estimation and testing of the theoretical model put forward, using both time‐series and panel data. The results are supportive of the main hypothesis of the paper: capital stock is an important determinant of unemployment and wages in the countries considered for the purposes of the paper.     

COMPARING FEDERAL AND PRIVATE‐SECTOR WAGES WITHOUT LOGS

I use Current Population Survey data from 2005 through 2010 to compare the wages of federal employees and workers in the private sector who have similar observable characteristics. The distribution of wages differed drastically between the federal and private sectors. In particular, I find that federal employees with no more than a high school diploma earned 21% more, on average, than their private‐sector counterparts, whereas those with a professional degree or doctorate earned 23% less. Overall, the average of federal wages was about 2% higher than the average wage of similar private‐sector workers. Other researchers have found larger differences because they used log‐linearized models, which result in comparisons of geometric means. I show that arithmetic means are more relevant in the context of the relationship between a government's compensation policy and its budget. The discrepancy between differences in arithmetic and geometric means occurs because the wages of federal employees were much less dispersed than those of employees with similar characteristics in the private sector. (JEL J31, J38, J45)     

THE RELATIONSHIP BETWEEN UNEMPLOYMENT AND UNFILLED VACANCIES IN GREAT BRITAIN: AN EXTENDED JOB-SEARCH, LABOUR TURNOVER VIEW

This paper develops a model of the equilibrium unemploymentvacancy relationship, drawing upon concepts in the job searchlabour turnover literature, and uses that model to explain recent shifts in the uv curve for Great Britain. The analysis involves two stages: the estimation of a dynamic employment adjustment equation, and then the solution of the estimated form for the implicit, equilibrium uv relationship at different points in time. In this approach it is possible to attribute shifts in the uv curve to various exogenous factors such as the movement in real wages relative to productivity, external competitiveness, mismatching between jobs and workers, and the replacement ratio.     

THE DRIVING FORCES BEHIND THE FALLING LABOUR SHARE AND PERSISTENT UNEMPLOYMENT IN JAPAN

Like in most advanced countries, the labour income share in Japan has been falling since the mid‐1970s. However, in contrast to other advanced economies, Japan experienced an exceptional recessive period in the 1990s and 2000s, with the rate of unemployment rising to a historical maximum of 5.5% in 2002, to persist above 4% in subsequent years. In the present paper, we examine the main causes behind the paths followed by the labour income share and the unemployment rate during the post‐1997 crisis period (1997–2002) and the transition years that followed (2002–2009). We do so by estimating a multi‐equation macro model that allows us to look separately at the various components of this particular labour market: wages, output, and employment. Our main finding is that the fall in the labour share can be attributed to the changes that took place within the labour relations system (the weakening of unions mainly) and that the surge in unemployment can be altogether ascribed to the distorting effects of the sizeable and increasing public debt.     

THE INTERNATIONAL DEMONSTRATION EFFECT AND THE DOMESTIC DIVISION OF LABOUR: A SIMPLE MODEL

Abstract.  The implications of the international demonstration effect (IDE) for the development of underdeveloped economies have long been studied and debated. Yet few formal analyses exist in the literature, especially regarding its implications for the growth of domestic markets and the division of labour in developing economies. We offer an analysis of endogenous specialization under the IDE, the first of its kind, showing that, far more complicated than the scenario held by conventional wisdom, the IDE makes more difficult the emergence of the market underpinning the domestic division of labour, but facilitates the expansion of the market once it has been developed.     

ESTABLISHMENT DYNAMICS,VACANCIES, AND UNEMPLOYMENT: A NEOCLASSICAL APPROACH

This article introduces and analyzes a Walrasian model of worker flows, job flows, vacancies, and unemployment. Calibrating the model to U.S. data, the article finds that all variables comove with output quite well but that they fluctuate too little. However, the failure is not as bad as in “Shimer's puzzle.” Interestingly, the article also finds that introducing establishment dynamics into the model, while realistic, is irrelevant for understanding unemployment and vacancy fluctuations: The business cycles of the model with establishment dynamics are virtually the same as those of a version with a representative firm.     

TRADE,WAGES, AND PRODUCTIVITY

We develop a general equilibrium monopolistic competition model in which wages, productivity, consumption diversity, and markups respond to trade integration. We structurally estimate the model and simulate the impacts of removing all trade barriers generated by the Canada–U.S. border. Firm selection gets tougher by 8.09% in Canada and by 0.80% in the United States. Markups that consumers face, which are central to welfare, fall by up to 12.11% in Canadian provinces and by up to 2.82% in U.S. states. However, changes in markups measured at the firm level are ambiguous, thus providing a different piece of information.