The disintegrating Canadian labour market? The extent of the market then and now

Abstract.  Analysis of real wages for three occupations in 13 Canadian cities for 1901–50 suggests Canada had a national labour market at least until 1950. However, analysis of real wages for 10 Canadian cities for 1971–2000 yields little evidence favouring integration of Canada's regional labour markets. The apparent lack of labour market integration reflects a weakness of an approach that assumes markets are in equilibrium. Unemployment rates after 1970 suggest that some regional markets may be characterized by excess labour supply. Analysis of relative provincial unemployment rates yields evidence consistent with local labour force adjustment to changing labour market conditions. JEL classification: E24, J61     

On the validity and identification of long-run restrictions for a cointegrated system

The identification approach suggested in Blanchard and Quah [1989 The dynamic effects of aggregate supply and demand disturbances. Am. Econ. Rev. 79:655–673] and King et al. [1991 Stochastic trends and economic flucuations. Am. Econ. Rev. 81:819–840] makes use of the long-run properties of structural disturbances. This paper provides economic underpinning for the use of long-run identifying restrictions by showing formally its validity for the class of exogenous growth models under certain conditions. This paper also obtains the minimum number of restrictions, in addition to the long-run restrictions, required for the identification of structural disturbances in a co-integrated system.     

Structural change,specialization and regional labour market performance: evidence for the UK

While structural change and regional differences in the pattern of employment specialization are widely perceived to be significant factors in accounting for disparities in the labour market performance of regions in the United Kingdom, there have been relatively few recent attempts to gather detailed evidence on this issue. The current study aims to fill this gap by examining the effects of structural change and associated changes in the pattern of employment specialization on three key indicators of regional labour market performance: the rate of employment growth, the unemployment rate and the rate of nonemployment. The findings indicate that while industry structure has statistically significant effects on regional labour market performance, the quantitative significance of these effects is relatively small.     

Working time and labour demand in Finnish manufacturing: short-run and long-run effects

The effect of changes in the standard working time on employment and average hours is studied using pooled data from five Finnish manufacturing industries. The model is an error correction model, which makes it possible to separate short-run, reductions in standard hours increase employment. There is evidence that the long run effect of working time on employment has changed over time. In the 1970s reductions in hours have had positive long-run employment effects, but in the 1980s the positive short-run impact has been neutralized in the long run. Changes in standard hours do not influence the utilization rate of labour, which is defined as the ratio of overtime hours to standard hours. In the short run, the utilization rate is influenced by output changes.     

Caste discrimination in the Indian urban labour market: An econometric analysis

This paper uses Degree Holders and Technical Personnel Survey of India to examine the wage gap between Non-Scheduled Castes/Tribes(NSC) and Scheduled Castes/Tribes(SC/ST). Separate wage equations, corrected for selection bias, are estimated for NSC and SC/ST. The parameter estimates of the wage equations were decomposed into ‘endowment’ and ‘treatment’ components using the familiar Oaxaca Decomposition Method. A separate account was also made to analyze the interaction between occupational attainment and the wage differential using the extended decomposition method. The main conclusion from the econometric results are: (a) the endowment difference is higher and discrimination causes 15 per cent lower wages for SC/ST as compared to NSC; (b) the discrimination coefficient is negative in the public sector whereas it is positive in the private sector; (c) intraoccupational wage effects dominate. The higher endowment difference in developing countries like India implies that the pre-market discriminatory practice with respect to education, health and nutrition are more crucial than labour market discrimination. (JEL: J3)     

Career concerns in a simple experimental labour market

We experimentally investigate a simple version of Holmström's career concerns model in which firms compete for agents in two consecutive periods. Profits of firms are determined by agents’ unknown ability and the effort they choose. Before making second-period wage offers firms are informed about first-period profits. In a different treatment firms additionally learn the abilities of agents. Theory suggests high first-period equilibrium effort in the hidden ability treatment but no effort elsewhere. However, we find that effort tends to be higher in the revealed ability treatment and therefore conclude that transparency does not weaken, but strengthen career concerns incentives.     

Contractual restrictions on insider trading: a welfare analysis

Summary. This paper analyzes the welfare effects of permitting firms to negotiate contractually the right to allow corporate insiders to trade shares in the firm on private information. A computational framework is employed to (i) analyze formally the effects of insider trading on managerial investment choice, the informational efficiency of stock prices, and the welfare of all investor types; and (ii) examine the effectiveness of various compensation schemes (such as stock and insider trading rights) to mitigate conflicts of interest between managers and shareholders. I show that shareholders will typically choose not to grant insider trading rights to managers. This decision is socially optimal. Received: September 23, 2000; revised version: December 12, 2000     

The macroeconomic effects of fiscal policy in Portugal: a Bayesian SVAR analysis

With a new quarterly dataset we estimate a Bayesian Structural Autoregression model and a Fully Simultaneous System approach to analyze the macroeconomic effects of fiscal policy. Results show that positive government spending shocks, in general, have a negative effect on real GDP; lead to “crowding-out” effects of private consumption and investment; have a persistent and positive effect on the price level and a mixed impact on the average financing cost of government debt. Explicitly considering the government debt dynamics in the model is also important. A VAR counter-factual exercise confirms that unexpected positive spending shocks create relevant “crowding-out” effects.     

Comparable worth in a decentralized labour market: the case of Ontario

Abstract.  We document the application of pro‐active pay equity legislation to the private sector of the Canadian province of Ontario in the early 1990s. We report substantial lapses in compliance among smaller firms where the majority of men and women work. We also find that the pay equity law had no effect on aggregate wages in female jobs or on the gender wage gap. This experience provides unique perspectives on (1) the tensions between the workings of a decentralized labour market and the principles of comparable worth and (2) the obstacles to its extension to the private sector. JEL classification: J7, J3     

Employers' recruitment behaviour and vacancy duration: an empirical analysis for the Dutch labour market

The functioning of labour markets from a demand-side perspective is examined. In particular, the determinants of vacancy duration are studied in the context of a model of employers' search behaviour. A model for the choice of the recruitment strategy at the start of the search process and the corresponding recruitment duration is developed in which allowance is made for different patterns of duration dependence for each recruitment strategy. This model is applied to data on employers' search behaviour in the Dutch labour market. It is found that employers prefer advertisements as the first recruitment channel when applicants are required to have work experience. Moreover, employers prefer to start searching via the labour exchange office when jobs in the secondary segment of the labour market have to be filled. It is also found that - when advertisements are used as the first recruitment strategy - employers need some time to acquire a pool of applicants and to select candidates from this pool. It is interesting as a contrast that applicants seem to be evaluated rather quickly if employers start searching via informal contacts.     

Postwar slowdowns and long-run growth: a Bayesian analysis of structural break models

Using Bayesian methods, we re-examine the empirical evidence from Ben-David, Lumsdaine, and Papell (Empir Econ 28:303–319, 2003) regarding structural breaks in the long-run growth path of real output series for a number of OECD countries. Our Bayesian framework allows the number and pattern of structural changes in trend and variance to be endogenously determined. We find little evidence of postwar growth slowdowns across countries, and smaller output volatility for most of the developed countries after the end of World War II. Our empirical findings are consistent with neoclassical growth models, which predict increasing growth over the long run. The majority of the countries we analyze have grown faster in the postwar era as opposed to the period before the first break.     

International trade,technological shocks and spillovers in the labour market: a GVAR analysis of the US manufacturing sector

We empirically analyse the response of labour market related variables in the US manufacturing sector to various shocks, notably to trade openness and technology, as well as examining spillovers from industry-specific labour market shocks. The econometric approach involves an application of the recently developed Global Vector Autoregression methodology of Dées et al. (2007 Helbling, T, Jaumotte, F and Sommer, M. 2006. How has globalization affected inflation?. IMF World Economic Outlook, April: 97–134.  [Google Scholar]) to 12 manufacturing industries over the period 1977–2003. The framework allows us to analyse the response of a standard set of labour-market related variables (employment, real compensation, productivity and capital stock) to exogenous factors (a sector-specific measure of trade openness, a common technology and oil price shock), along with industry spillovers using specific measures of manufacturing-wide variables for each sector. Generalized impulse responses indicate that increased trade openness negatively affects real compensation, has negligible employment effects and leads to higher labour productivity. These impacts, however, are relatively weaker than those induced by technology shocks, with the latter positively and significantly affecting both real compensation and employment. There is also evidence of positive spillovers across industries from sector-specific employment and productivity shocks. Impact elasticities suggest strong intra-sectoral linkages for employment and capital stock formation, contrasting with weak linkages for what concerns real compensation and productivity.     

Sick pay reforms and health status in a unionised labour market

We theoretically analyse the effects of sick pay and employees' health on collective bargaining, assuming that individuals determine absence optimally. If sick pay is set by the government and not paid for by firms, it induces the trade union to lower wages. This mitigates the positive impact on absence. Moreover, a union may oppose higher sick pay if it reduces labour supply sufficiently. Better employee health tends to foster wage demands. If the union determines both wages and sick pay, we identify situations in which it will substitute wages for sick pay because adverse absence effects can be mitigated.     

Unemployment durations of job losers in a labour market in transition

Slovakia is one of the Central European countries in transformation from a centralized command system to a decentralized market economy. This paper studies the labour market position of Slovak job losers. Using data from labour force surveys we analyse exit rates out of unemployment. We find that male, young, higher educated job losers in districts with low unemployment rates have substantially shorter unemployment durations than their counterparts. There is evidence that for some job losers it is very hard to find a new job.     

Filling vacancies: an empirical analysis of the cost and benefit of search in the labour market

This paper investigates empirically the factors that affect the cost–benefit ratio of employers’ search. The empirical analysis is based on a small Dutch data set containing individual information on filled vacancies. It is found that firms that use advertisements during recruitment are sensitive to labour market conditions; their search cost per applicant rises (drops) in tight (slack) labour markets because of the diminished ability of advertisements to generate applicants in tight labour markets. Furthermore, it is found that the high search cost incurred by posting identical vacancies is more than compensated for by the benefits from having a larger flow of applicants.     

Evaluating innovation and labour market relationships: the case of Italy

In this paper the link between labour market flexibility andinnovation is analysed paying particular attention to the differenttechnological regimes of economic activities and the differentgeographical areas of the Italian economy. A dynamic panel dataspecification is used to assess the endogenous relationshipbetween patents, included as a proxy for innovation, and jobturnover and wages, which represent labour market indicators.Our results show that higher job turnover only has a significantand negative impact on patent activities in regional sectorsof Northern Italy, while blue and white collar wages have beengenerally found to have a positive and significant impact oninnovation.     

Literacy and labour market outcomes: self-assessment versus test score measures

This paper looks at the determinants of literacy and the relation between literacy and labour market outcomes while focusing on comparisons of self-assessment versus test score measures of literacy. The test score measure performs considerably better than the self-assessments when literacy is treated as an outcome variable in terms of the overall fit of the model and the specific coefficient estimates, with the self-assessments sometimes actually generating wrongly signed parameters. The test score measure also performs much better as an explanatory variable in the employment models, with the self-assessment variable generating significant underestimates of the effects of literacy on the probability of being employed. Finally, the test score is also superior in the income models, although the self-assessment measure is at least a reasonably good performer in this regard, suggesting that the main results reported in much of the existing literature (based on such measures) should perhaps be taken as good representations of the true underlying relationships.     

The NAIRU reconsidered: why labour market deregulation may raise unemployment

According to the mainstream theory of equilibrium unemployment, persistent unemployment is caused mainly by ‘excessive’ labour market regulation, whereas aggregate demand, capital accumulation and technological progress have no lasting effect on unemployment. We show that the mainstream non‐accelerating inflation rate of unemployment (NAIRU) model is a special case of a general model of equilibrium unemployment, in which aggregate demand, investment and endogenous technological progress do have long‐term effects. It follows that labour market deregulation does not necessarily reduce steady‐inflation unemployment. Theoretically, if the decline in real wage growth claims owing to deregulation is smaller than the ensuing decline in labour productivity growth and in the warranted real wage growth, then in that case steady‐inflation unemployment may increase. Empirical evidence for 20 Organisation for Economic Cooperation and Development (OECD) countries (1984–1997) indicates that the impact of labour market deregulation on OECD unemployment is zero, and possibly negative (causing a higher rate of unemployment).     

Illicit drug use and labour market achievement: evidence from the UK

This study, using data from the British Crime Survey (BCS), examines the effect of drug use on occupational achievement. It starts by attempting to overcome the identification problem that results from the limited set of drug use questions presented in the BCS. Taking this into account, and allowing for the endogeneity of drug use in equations for unemployment and labour market outcomes, that a mild positive association with ‘soft’ drugs and occupational achievement is observed that diminishes with age. This relationship holds for males but not for females. In contrast, it is also found that past use of ‘hard’ drugs significantly increases the likelihood of current unemployment, although it appears to be unrelated to occupational success, conditional on achieving employment.