Structural Reforms and Labour‐market Outcomes: International Panel‐data Evidence

This paper explores the impact of structural reforms on a comprehensive set of macro‐level labour‐market outcomes, including the unemployment rate, the average wage index, and overall and female employment levels and labour force participation rates. Together, these outcome variables capture the overall health of the labour market and the aggregate welfare of workers. Yet, to our knowledge, there seems to be no other comprehensive empirical investigation in the existing literature of the impact of structural reforms at the cross‐country macro‐level on labour‐market outcomes other than the unemployment rate. After documenting the average trends across countries in the labour‐market outcomes up to 10 years on either side of each country's structural reform year, we run fixed‐effects ordinary least squares and instrumental variables regressions to account for the likely endogeneity of structural reforms to labour‐market outcomes. Overall, the results suggest that structural reforms lead to positive outcomes for labour. Redistributive effects in favour of workers, along the lines of the Stolper‐Samuelson effect, may be at work.     

Beachtlicher Erfolg der Hartz-III-Reform

The Hartz reforms of the labour market constitute an important turning point in the evolution of the labour market in Germany. While the reforms consisted of four parts, it was especially the reform of the unemployment benefit system — the Hartz IV reform — that led to a strong response in the public and the media. Andrey Launov and Klaus Wälde demonstrate that the Hartz III reform of the German public employment agency (the ‘Bundesagentur für Arbeit (BA)’), that took place one year earlier, was much more successful in reducing unemployment. The reorganisation or the BA accounts for around 20% of the reduction of unemployment between 2005 and 2008. By contrast, the Hartz IV reform can account for only 5% of this reduction.     

Germany’s stake in exchange rate stability

The position taken by politicians and important pressure groups in Germany concerning EMU will depend to a large extent on its labour market implications—and thus on the (perceived) impact of exchange rate variability on employment and unemployment. Most economists would assume this impact to be minor. The purpose of this paper is to show that this presumption might be wrong.     

An explanation of share tenancy in terms of unemployment,social norms and power

Due to persistent unemployment, peasant families in developing countries tend to employ more labour on the leased in land plots than a capitalist would. In labour surplus societies, therefore, landlords may earn higher surplus from leasing out land than from self-cultivation. By endogenising disguised unemployment this paper shows that greater power and unity of landlords and conservative social norms may explain the persistence of share tenancy in developing economies.     

Tariffs,Efficiency Wages and Unemployment

The present model embeds a model of intra-industry trade into a labour market, which is characterised by efficiency wages. It is shown that tariff protection of the import competing, home produced brands, may cause the equilibrium unemployment rate to shoot up and instead of protecting the sector may cause it to contract. This is possible when elasticity of demand is high and firms have less market power and thus, protectionist effect of tariffs may get completely reversed.     

The Unemployment Effects of Proposed Changes in Social Security's “Normal Retirement Age”

This paper identifies and analyzes an inherent conflict between some proposed U. S. Social Security reform measures, which would encourage delayed retirement decisions, and the objective of minimizing the economy's unemployment rate. Using recent demographic trends in the age composition of the U.S. labor force, the study suggests that such proposed U.S. Social Security reform measures may actually increase the economy's unemployment rate. It concludes that measures to encourage older workers would relieve labor market pressures (while also helping the Social Security system) if and only if unemployment was persistently near the non-accelerating inflation rate of unemployment (NAIRU). However, in an economy with above NAIRU unemployment, which has been the case most often in recent years, the opposite Social Security policy logic would apply. JEL Classification H557     

Labour market policies in the western industrialised countries

The longer the high levels of unemployment continue in western countries the greater is the discussion about a policy aimed at reducing unemployment which is independent of general counter-cyclical and growth policies. What type of labour market policy measures have been adopted up to now in these countries?     

Youth unemployment

Youth unemployment has been on the rise since the beginning of the crisis in 2008. Even more troublesome is the dramatic rise in the number of youth not in employment, education or training, which has led to widespread concerns about the impact on social cohesion and fears of a “lost generation”. Given the extreme differences in youth unemployment levels among member states, it is clear that no single labour market policy will be appropriate throughout the EU. There may, however, be opportunities for mutual learning on how to combat youth unemployment. This Forum explores youth unemployment in the EU via case studies of England, Belgium, Spain, Poland and Ireland. It also examines Germany’s dual vocational training system as one potential solution.     

How and how far to liberalize a developing economy with informal sector and factor market distortions

Whether a liberalizing developing economy should implement the entire WTO-prescribed package, and to what extent this is expedient, are two important questions, especially because the available empirical evidence suggests that developing countries have been facing substantial adjustment costs in their endeavour to implement trade and investment reform. The present paper makes a humble effort to provide answers to the above questions in terms of a three-sector general equilibrium model with informal sectors. Welfare implications of three liberalization policies: inflow of foreign capital, tariff reduction and labour market reform, have first been analysed in a full-employment framework. Later, the paper has been extended into a Harris?–?Todaro framework with an urban informal sector and capital market distortion. We have shown that welfare consequences of a tariff reform and/or a policy of deregulating the labour market crucially depend on the presence and magnitude of foreign capital in the economy. It is argued here that unless a proper choice among different prescribed policies, compatible with the internal institutional, technological and trade-related characteristics, is made, drastic implementation of reform measures may produce counterproductive results for the welfare of the relevant country.     

Labour market policies in the western industrialised countries

The longer the high levels of unemployment continue in western countries the greater is the discussion about a policy aimed at reducing unemployment which is independent of general counter-cyclical and growth policies. What type of labour market policy measures have been adopted up to now in these countries?

     

Ökonomische Wurzeln des Populismus

Increasing populism in developed Western countries such as Germany can be traced to various causes, including economic ones. In these countries, advancing globalisation and technological progress lead to labour market and income effects that have had a negative impact on certain groups of people (wage reduction, increase in the risk of unemployment). The fear of such developments — whether justified or unfounded — results in the desire for political decisions that push back the catalysts of these economic developments. Therefore, international trade with low-wage countries and labour saving technological progress in particular often breed populist parties.     

Efficiency wages,unemployment and international factor movements

This paper examines the implications of unemployment resulting from efficiency wages for international factor movements in a standard Heckscher-Ohlin model where the relative size of the endowments of skilled and unskilled workers and the efficiency wage induced unemployment level in the unskilled labour market are simultaneously determined given the population, supply of capital and its distribution in the economy. Capital in the economy is used only to train individuals for the skilled labour market, where workers are fully employed. It is shown that the optimum labour inflow in the market with domestic distortion and the optimum capital inflow are always positive because they reduce the severity of distortion by raising employment and income for the residents. The income and employment of foreigners also increase. Under this situation the optimum labour or capital outflow on the other hand is always zero. These conclusions directly contradict the result obtained for international factor movements in the presence of exogenously determined unemployment.     

Perspektiven zum Bürgergeld

Wirtschaftsdienst - The Hartz IV labour market reform in 2005 triggered a substantial reduction in unemployment in Germany. At the same time, it reduced social welfare for the long-term unemployed...     

Contracts,the Spot Market Wage and Unemployment Benefits

This paper presents a model of the labour market with a contract and a spot market sector. Contracts are binding and enforceable, but unemployed contract workers are free to work in the spot market. The contracting wage is shown to be constant across states. A non‐trivial result shows that the spot market wage is increasing with product price. An increase in product price has an ambiguous effect on contract employment. An increase in unemployment benefits increases the contracting sector wage whilst stabilizing the spot market wage, and may have ambiguous effects on unemployment.     

Something unforeseeable happened? Natural rate theory and economic crisis

“Natural rate theory” — the application of the efficient market hypothesis to labour markets — has guided economic policy since the 1970s and laid the foundations for the design of major European institutions in the 1990s. Unfettered markets were declared to be stable, and consequently public policies and regulations were regarded as distortions. This led to a division of labour in which central banks were responsible only for price stability, governments for labour market reforms and unions for low wages. The European discussion focused almost exclusively on labour market reforms to reduce unemployment. Against the background of the recent dramatic drop in economic activity, this paper confronts natural rate theory with actual economic trends and argues that the predictions of the theory hardly fit the facts.     

Occupational Transitions and Corporate Responsibility in Layoffs: A European Research Project (SOCOSE)

One of the most prominent aspects of the present labour markets is an increase in occupational transitions. Employees experience insecurity to a much larger degree than ever before. Under these circumstances, the questions of blame and responsibility – for job-loss or unemployment –, so far much too readily focused on the individual, have to be re-considered. Transitions will also have to be framed by company based or labour administration interventions.This situation forms the entrance to the scientific evaluation that is central to the SOCOSE project. It aims at the formulation of an integrated European model for outplacement/replacement counselling. Thus, transparency will be added to the process of dismissal from the perspective of the individual employees, and they are assisted in re-entering the labour market at an early stage. This form of guidance will prevent long-term unemployment or might else prevent unemployment completely.The SOCOSE project started with a European comparison of existing outplacement interventions. The main focus, however, is the perspective of the individual that has been dismissed or is facing possible dismissal and his or her evaluation of this process. Crucial to this evaluation is the aspect of justice or fairness.First Results of this comparison across countries are presented, and the ongoing empirical studies are outlined on the basis of an exemplary case.     

From Social Pacts to Productivity Boards

Market solutions can be a way for small deregulated states like the Baltics to grow, but they are not a viable path for the EMU area as a whole or for the larger countries like France, Germany or Italy. As most of the challenges have to be addressed at the national level only, an interaction of flexible institutions (as the social pacts were) in coordination with developing European institutions (like a European unemployment scheme) can offer a more stable environment for growth.     

EMU calls for comprehensive labour market reform

The debate about European monetary union has so far been dominated by questions of fiscal convergence, the adequate conversion exchange rate and the stability of the Euro. Relatively little attention has been given to the labour market effects although labour market performance will be crucial for the long-term success or failure of EMU. The following article deals with the interrelationship between EMU and labour market flexibility in Euroland.     

Can labour market institutions mitigate the China syndrome? Evidence from regional labour markets in Europe

This paper investigates how labour market regulations alter the adverse impact of rising import competition from China in European local labour markets between 1997 and 2006. The paper constructs measures of regional exposure to Chinese imports based on previous literature and on regional labour market frictions exploiting involuntary labour reallocations. Taking into account the endogeneity of import competition and its interaction with labour market regulations, the paper finds that regions more exposed to the rise of China have suffered from a reduction in manufacturing employment shares. This shock grows larger with regional labour market frictions; hence, it exacerbates the impact of trade shock on employment. Moreover, the paper finds that employment in public services, and not in construction or private services sector, absorbed the negative shock to the manufacturing sector. The unemployment rate, the labour force participation rate and wages in all sectors are unresponsive to import competition from China.     

Abbau der Langzeitarbeitslosigkeit: Der Weg ist steinig und schwer

The German labour market has recently performed well. But the persistence of unemployment is still considerable. The outflows from long-term unemployment into employment have not significantly increased in recent years. This is due to various individual risks of the long-term unemployed, such as low education, low qualification, old age and weak health. Analyses show that previous reductions in long-term unemployment levels were attained by lowering new inflows. These findings indicate that comprehensive early prevention measures are needed. In addition, more individualised and thorough employment services are required.