Real wages,investment and employment: New evidence from West German sectoral data

Real Wages, Investment and Employment: New Evidence from West German Sectoral Data. — Non-separable capital adjustment costs imply that investment directly affects the demand for labour and therefore justify not only the lagged dependent variable but also the presence of investment expenditures or Tobin’s valuation ratio Q in labour demand estimation. On this basis, the authors estimate a very parsimonious specification of demand for blue-collar workers in a panel of 32 West German industries. They find much larger short-run real wage employment elasticities than previous research, and robustly significant positive effects of investment or Tobin’s Q on labour demand.     

Trade, capital mobility, and the German labour market

Trade, Capital Mobility, and the German Labour Market. — This paper sets up three structural variants of a general equilibrium model of a small open economy with three sectors (exportables, importables, non-tradables) and three factors (internationally mobile capital and immobile skilled and unskilled labour) in order to analyse the employment and wage effects of globalisation shocks. The model is numerically implemented for West Germany in 1980 on the base of input-output tables and employment data from a random sample of social security accounts. Overall this study indicates that the globalisation process does not have strong effects on unemployment and/or the wage differential in West Germany.     

An empirical analysis of the unit labor cost-product price relation in the U.S. economy

This article tests for cointegration between unit labor costs and the level of product prices in four sectors of the U.S. economy: the aggregate business sector, the nonfinancial corporate sector, durable manufacturing, and nondurable manufacturing. A finding of cointegration for most specifications supports the existence of long-run labor market equilibrium for producers and suggests estimation of error-correction models to examine the dynamic relationships. In every sector except nondurable manufacturing, error-correction model estimates indicate there is a mutual feedback relationship between unit labor costs and prices. Controlling for deviations from full employment, oil price shocks, and the Nixon wage and price controls, the results also provide evidence of significant nominal wage indexation in U.S. labor markets. Throughout the economy there appears to exist both effective neoclassical wage and price adjustment mechanisms to maintain labor market equilibrium and short-run rigidities which may contribute to deviations from full employment outcomes.     

Cross‐Country Evidence on Labor Market Institutions and Young Adult Employment through the Financial Crisis

I develop and analyze a set of cross‐country facts regarding employment and wage setting institutions over the decade surrounding the 2008 financial crisis. Among long‐industrialized countries, young adult employment declined more than prime age employment over this time period. I show that differences in countries' wage setting institutions strongly predict variations in the magnitude of declines in young adult employment. Both unconditionally and conditional on changes in macroeconomic conditions, young adult employment declined 5 percentage points less in countries where wage setting is driven by collective bargaining arrangements than in countries with statutory wage floors. Evidence on the evolution of legislated minimum wage rates and of an asymmetry in the relationship between growth and young adult employment suggest an important role for a standard “wage rigidity” mechanism.     

The value-added tax reform and labor market outcomes: Firm-level evidence from China

The tax incentives designed to stimulate firm investment may have a large and unexpected impact on labor market outcomes. Using a comprehensive data set on Chinese manufacturing firms during the period 1998–2007 with a difference-in-differences approach, we examine the impact of the value-added tax reform in 2004 on the firm-level labor market outcomes. We find that firms in eligible industries and pilot regions (treated firms) enjoying lower costs of purchasing fixed assets under the reform tended to increase capital investment and reduce employment simultaneously relative to firms that did not have tax incentives (the control firms). Compared with the control firms, the treated firms became more capital intensive but had declines in labor share in value added and average wage. We also find that the employment adjustment is associated with increase in the share of skilled workers in terms of engineers and technicians, but not workers with a college degree or higher.     

Product market competition, unemployment and income disparities

Product Market Competition, Unemployment and Income Disparities. — We discuss how promoting competition in product markets affects unemployment and wage differentials. We examine a general equilibrium model with real wage rigidities in labor markets and market power in product markets. We illustrate how more intense competition reduces unemployment. A decrease of markups would induce an increase of real wages if real wages were flexible. This enables the employment of more low-skilled people above a real reservation wage. More intensive competition, however, widens wage and income differences between low-skilled and high-skilled workers. Differences of income distributions across countries could also be caused by differences in the intensity of product market competition.     

Investment in education in developing nations: Policy responses when private and social signals conflict

In most developing countries the net private benefit of higher education exceeds its net social benefit because education-related wage differentials are excessive and the beneficiaries of higher education are subsidized. The resulting political pressures seem to favor investment in education over the creation of employment opportunities. A more balanced allocation of investment may require the revision of basic policies dealing with wage determination, the incidence of educational costs and the role of private sector education. The aim should be narrow the gap between private and social signals and thus reduce excess private demand for higher education.     

Population trends,employment levels,economic performance,and income evolution in East and West Germany since unification

Between 1989 and 1996, former East Germany experienced a population loss of more than 1 million inhabitants as hundreds of thousands of East Germans moved to former West Germany. Population growth in East Germany sank dramatically, since 1995, however, since 1995, this trend has been reversed and today more children are born than in the preceding year.The number of gainfully employed East Germans shrank between 1989 and 1993 by 3.5 million. Job loss hit female employees, who in East Germany prior to 1989 formed a part of the job force in proportion to their number, especially hard. In 1994 and 1995, employment increased in the East German states, but job growth did not extend into 1996 as economic growth, which sustained a process of “catching up” with West Germany, failed to maintain its dynamism.Economic performance disparity between East and West Germany is very large. Although productivity increased significantly in former East Germany, wage costs outran productivity growth. Per capita income in East Germany in 1991 was 49 percent of per capital income in West Germany and as of 1994 per capita income had reached 66 percent of its West German equivalent.     

Nominal Wage Contracts, Adjustment Costs and Real Persistence of Monetary Shocks

This paper describes a model in which monetary shocks have persistent real effects. Starting from the limited participation model of Christiano (1991) with capital adjustment costs as suggested by Dow (1995) it is confirmed that costs of equipment installation and restrictions on consumer portfolio choices alone cannot account for the observed effects of monetary policy. However, after introducing nominal wage contracts as a third friction, the model generates real effects of monetary shocks. It is shown that these real effects are highly persistent for a realistic size of adjustment costs and strongly autocorrelated money growth shocks which are typical for Europe.     

Re-examination of wage, employment, and hours adjustments: what is crucial for differences in the adjustments?

Manufacturing wage, employment, and hours adjustments are significantly different among developed countries, typically between Japan and the US. The problem of explaining the differences is closely related to that of what effect the extent of wage flexibility has on labor market adjustments. However, prevailing theories are invalid or incomplete for explaining the differences. The differences in the adjustments cannot be unrelated with institutional features of the labor market. Indeed, the extent of wage flexibility depends on the differences in the institutional features. Using a new model with such an idea, this paper theoretically re-examines the cause of the differences in the adjustments. The crucial causes are the characteristics of wage flexibility as well as the differences of the institutional features. The characteristics are that wage adjustment is discontinuous, infrequent, and has a lower limit in comparison with changes in demand.     

外资企业选址与企业生产率

本文利用Grossman-Helpman-Szeidl（2006）模型研究了外资企业在发展中国家内部的选址决策,模型表明：效率高的企业偏向选址于固定成本高可变成本低的地方,效率低的企业偏向选址于固定成本低可变成本高的地方。同时各个地区的效率空间会被运输成本所压缩。由于中国东部、中西部与东南亚国家之间劳动力工资以及固定投资成本的结构差异,高效率的企业会选址于印尼、菲律宾、越南三国,效率处于中间的企业会选址于中国中西部以及中国东部,效率最低的企业会选址于马来西亚、泰国两国。随后本文用2004-2013年Bvd亚太企业母公司层面面板数据验证了企业因效率不同而导致的选址差异。最后本文分析了双边自由贸易区对企业选址的效率空间的影响,研究表明双边自由贸易区对中国中西部的影响大于对中国东部的影响。     

Restrictive immigration policy in Germany: pains and gains foregone?

Many European countries restrict immigration from new EU member countries. The rationale is to avoid adverse wage and employment effects. We quantify these effects for Germany. Following Borjas (in Q J Econ CXVIII(4):1335–1374, 2003), we estimate a structural model of labor demand, based on elasticities of substitution between workers with different experience levels and education. We allow for unemployment which we model in a price-wage-setting framework. Simulating a counterfactual scenario without restrictions for migration from new EU members countries in Germany, we find moderate negative wage and employment effects for incumbent foreigners, but positive effects for natives. Our results indicate that for the native German population as a whole the immigration restrictions are not welfare enhancing.     

Brewing projects in developing countries: Technology, costs and employment

Recently established industries in developing countries are often criticized for high costs and low employment-generation, and a coincidence is sometimes supposed, given low wage rates, between minimization of costs and substantial direct employment creation. Analysis of alternative technologies reveals this supposition to be largely unfounded, as far as lager brewing is concerned, over a wide range of developing country circumstances; but a set of low-cost, labour-intensive techniques is suggested as approximately meeting requirements both for low costs and for equitable distribution of employment and income opportunities.     

On expectations‐driven business cycles in economies with production externalities: A comment

Eusepi (2009, International Journal of Economic Theory 5, pp. 9–23) analytically finds that a one‐sector real business cycle model may exhibit positive co‐movement between consumption and investment when the equilibrium wage‐hours locus is positively sloped and steeper than the household’s labor supply curve. However, we show that this condition does not imply that expectations‐driven business cycles will emerge in Eusepi's model. Specifically, a positive news shock about future productivity improvement leads to an aggregate recession whereby output, employment, consumption and investment all fall in the announcement period.     

Trade liberalization and the wage gap: the role of vertical linkages and fixed costs

This paper studies the labor market impacts of trade liberalization, and specifically tariff reductions, with a focus on the wage gap between skilled and unskilled workers in presence of vertical linkages in the fixed costs of production. To that purpose, we develop and empirically test a monopolistic competition model with variable elasticity of substitution and labor differentiated by skill level, where skilled workers are the residual claimants of savings on imported inputs. Consistently with the model predictions, we find that a 10% reduction in tariffs implies on average a 3.8% increase in the wage gap. In addition, the same level of tariff reduction is expected to lower unskilled employment in domestic production by 3.3%, which is partially offset by an expansion of unskilled employment in the export segment of production. These results are obtained matching detailed international trade data with World Input–Output Tables and EU KLEMS data on country-sector wage by skill level on 17 OECD countries from 1996 to 2005.     

Skill compression, wage differentials, and employment: Germany vs the US

Germany's more compressed wage structure is widely viewed asthe main cause of the German-US difference in employment andunemployment, but part of the compression is due to Germanyhaving a narrower distribution of skills than the US. Even adjustedfor skills, however, we find that Germany has a more compressedwage distribution than the US. But relatively little of theUS-German employment difference can be attributed to the compressedwage distribution. We find that jobless Germans have nearlythe same skills as employed Germans and look more like averageAmericans than like low skilled Americans, which runs counterto the wage compression hypothesis. Given these patterns, thepay and employment experience of low skilled Americans is apoor counterfactual for assessing how reductions in pay mightaffect jobless Germans.     

城镇有效就业影响因素研究——基于广东省1978—2005年的实证

广东省城镇就业量决定模型的定量估计结果表明,资本投入和实际工资是引起广东省城镇有效就业人数增加的两大主要因素。资本投入有利于就业人数的增加,而实际工资上涨对就业人数增加有抑制作用;市场化程度提高对广东省城镇有效就业影响不显著,但会有正作用;保持工资的适当增长幅度是促进就业的有效手段。     

The Manpower Law of 2003 and its implementing regulations: Genesis,key articles and potential impact

This paper reviews Indonesia's Manpower Law 13/2003 and related regulations, against a backdrop of slow employment growth, business concerns about the legislation and government attempts to change it in 2006. The paper focuses on severance rates and dismissals, short-term contracts and out-sourcing, and minimum wages, also briefly discussing other articles, and comparing the law with those in neighbouring countries. It suggests that certain articles have contributed to significantly higher wage costs and reduced flexibility in the management of labour in Indonesia's formal sector, even though compliance is by no means universal within the private sector. Key provisions, especially large increases in severance rates, and needs criteria imposed for the purpose of setting minimum wages, are also out of step with labour market policies in other developing countries. Circumstantial evidence suggests that these measures have adversely affected the investment climate and damaged prospects for a recovery in employment.     

Location Choice and Employment Decisions: A Comparison of German and Swedish Multinationals

Using data on German and Swedish multinational enterprises (MNEs), this paper analyzes determinants of location choice and the degree of substitutability of labor across locations. Countries with highly skilled labor strongly attract German but not necessarily Swedish MNEs. In MNEs from either country, affiliate employment tends to substitute for employment at the parent firm. At the margin, substitutability is the strongest with respect to affiliate employment in Western Europe. A one percent larger wage gap between Germany and locations in Central and Eastern Europe (CEE) is associated with 760 fewer jobs at German parents and 4,620 more jobs at affiliates in CEE. A one percent larger wage gap between Sweden and CEE is associated with 140 fewer jobs at Swedish parents and 260 more jobs at affiliates in CEE. JEL no. F21, F23, J21, J23     

The impact of foreign direct investment in China on employment adjustments in Taiwan: Evidence from matched employer–employee data

Using a unique matched employer–employee dataset on Taiwanese manufacturing, we examine the impact of foreign direct investment in China on domestic employment adjustments controlling for firm and worker heterogeneity as well as for potential endogeneity of firms’ expansion in China. Our findings suggest that workers employed at firms with higher levels of investment in China are more likely to leave the firm, compared with workers at firms with zero or lower levels of investment in China. We provide evidence that foreign expansion in China decreases worker employment security at parent companies, particularly for low-skilled workers. Employment adjustments through employer-to-employer transitions are found to be highly associated with wage losses, with the strongest wage effects for low-skilled workers who shift employment between industries. Moreover, we find no evidence that FDI in China contributes to skill upgrading at parent companies.