Unemployment accounts and employment incentives

We explore the far-reaching implications of replacing current unemployment benefit (UB) systems by an unemployment accounts (UAs) system. Under the UAs system, employed people are required to make ongoing contributions to their UAs and the balances in these accounts are available to them during periods of unemployment. The government is able to undertake balanced-budget interpersonal redistributions among the UAs. At the end of their working lives, people could transfer the remaining balances on their UAs into their pensions.We present an analytical framework to analyse the incentive effects of UAs and calibrate our model for the high high-unemployment countries of Europe. Our results suggest that this policy reform would significantly change people's employment incentives and could achieve reductions in unemployment without reducing the level of support to the unemployed.     

The beneficial effects of generous unemployment benefits on profits and employment

Theories of the labor market generally predict that high unemployment benefits put upward pressure on wages, thus diminishing the profitability of employing labor and exacerbating unemployment. It remains to be explained why firms agree to contribute to generous schemes (replacement rates for general schemes in Europe and US are in the range 50–85%) that they are often willing to supplement (with sector- or firm-specific schemes that may involve even 100% replacement and long benefit duration). An answer can be found by including in the shirking–efficiency wage model, the hypotheses that workers are risk-averse and that those discharged for misconduct are not eligible to benefits. It is then optimal for risk-neutral firms (and for employment) to introduce an insurance scheme with full income coverage and with a duration limited only by the workers' participation constraint (there is no trade-off between level and duration of benefits). The more difficult it is to detect and fire shirkers, the higher is the rent workers enjoy above the competitive wage and the longer is the benefit duration consistent with the participation constraint. This result can be interpreted as a complementarity between the strictness of employment protection legislation (EPL) and the duration of benefits, which seems to conform with broad patterns observed in primary vs. secondary employment and in continental Europe vs. Anglo-Saxon countries.     

Inequality,unemployment, and endogenous growth in a political economy with a minimum wage

This paper presents development of an endogenous growth model with heterogeneous households and political determination of the minimum wage. We investigate the interaction of inequality, unemployment, and economic growth. First, the arguments in this paper show that a positive correlation exists between inequality and unemployment, Second, the interaction between inequality and economic growth is shown to be a positive relation if high inequality pertains in a society. It is a negative relation if low inequality pertains.      

Employment effects of stabilization policies

This paper studies the effects of a stabilization program based on a reduction in the devaluation rate in an optimizing model with capital controls, minimum wages for unskilled labor, an informal sector, and public production of intermediate inputs. Perfect mobility across sectors of the unskilled labor force prevents the emergence of unemployment for that category of labor, but skilled unemployment prevails in equilibrium. The analysis highlights the role of endogenous labor market segmentation in assessing the wage and employment effects of stabilization policies.     

International commodity taxation in the presence of unemployment

In this paper, we evaluate the impact of commodity tax competition on welfare and employment under the destination and origin principles, when the labor market is imperfectly competitive owing to a binding fixed wage. Our main finding is that commodity taxation causes an employment externality whose signs may be opposite under the two principles. While tax competition leads to inefficient tax rates under both principles, we also prove that the origin principle guarantees lower unemployment and higher welfare when the fixed wage is high. Finally, we show that the employment externality still exists in a standard union model of wage determination.     

Tariffs,trade and unemployment in a disequilibrium model: issues and policies

This paper studies the disequilibrium transition process engaged by increased openness to trade, and the effect of institutions, market behaviors and economic policies on that transition. The issue is analyzed with a simple two country (north and south), two goods model, amended in order to take into account the time dimension of both the production and the decision processes. Investigating the consequences of a tariff decrease by means of numerical simulations, we show to what extent wage and price setting, and the degree of tightness of monetary policy affect the outcome of the disequilibrium process. The main result is that capturing the gains associated with international trade requires market behaviors and economic policies, which are rather different from what is usually prescribed.

The fading 1990s in Japan: Driving forces behind the unemployment upsurge

This paper sheds new light on the causes of the unemployment upsurge in Japan during the “fading 1990s”, an unprecedented period of structural crisis. We estimate a labor market model and identify the main macroeconomic determinants of labor demand and labor supply decisions in the last decades. We then conduct dynamic simulations and assess the relative contribution of these determinants to the evolution of unemployment from 1990 to 2002. Beyond the leading role exerted by the decline in productivity growth, we find the active and expansionary measures undertaken by the government had an overall negative effect on the labor market.     

再分配倾向的决定:对既有文献的考察

本文对再分配倾向决定领域的既有文献进行详尽考察,认为从内在动力角度来理解各种决定因素才是根本,归纳提炼了再分配倾向决定的四大动机:经济利益动机、风险规避动机、公平信念动机和声誉理想动机。再分配倾向决定的四大动机通过不尽相同的理论逻辑机制和多种实证影响因素对人们的再分配倾向产生影响,四大动机的框架为实证研究中的因素筛选提供了有力的工具。对于该领域进一步的研究,本文提出应用实验手段的重要性,并应注意宏观变量对再分配倾向的内生性影响。     

Conceptualizing Un employment in a Period of Atypical Em ployment: A Critical Realist Perspective

An adequate conceptualization and measurement of unemployment should express the reality of employment. Designing theoretical concepts that adequately express reality requires appropriate methodological foundations. This paper uses critical realism to demonstrate that the deductive method encourages the construction of theoretical concepts in such a way as to reduce the multidimensional, qualitative reality of employment and unemployment to the quantitative, single dimension of variables, whereupon they cease to be adequate expressions of the reality they are designed to investigate. Part-time employment is used to exemplify atypical employment and to illustrate how the latter differs from typical employment in a number of dimensions, most of which are qualitative in nature.     

Redistributive policies with heterogeneous social preferences of voters

There is growing evidence on the roles of fairness and other-regarding preferences as fundamental human motives. Call voters with fair preferences, as in Fehr and Schmidt (1999), fair-voters. By contrast, traditional political economy models are based on selfish-voters who derive utility solely from “own” payoff. In a general equilibrium model with endogenous labor supply, a mixture of fair and selfish voters choose optimal policy through majority voting. First, we show that majority voting produces a unique winner in pairwise contests over feasible policies (the Condorcet winner). Second, we show that a preference for greater fairness leads to greater redistribution. An increase in the number of fair voters can also lead to greater redistribution. Third, we show that in economies where the majority are selfish-voters, the decisive policy could be chosen by fair-voters, and vice versa. Fourth, while choosing labor supply, even fair voters behave exactly like selfish voters. We show how this apparently inconsistent behavior in different domains (voting and labor supply) can be rationalized within the model.     

Finance and unemployment: new panel evidence

The effect of credit market imperfections on unemployment is largely investigated in the context of financial crises. This paper shifts the focus toward financial development and structure in a panel of advanced and developing countries. Some important findings emerge. Unemployment increases with financial development and concentration in banking markets but decreases with market orientation, the effect is stronger in magnitudes for young workers than female ones. More rigid market regulation increases unemployment. These findings are particularly pronounced for countries with higher income, better developed financial sectors, lower income inequality, greater trade openness, higher democracy, and common-law systems.     

Business regulation and labor market performance around the world

Using data from 74 industrial, developing and transition countries for the years 2000–2003, this paper analyzes empirically whether and to what extent anticompetitive business regulations affect the performance of the labor market. According to the regression results, they appear to increase unemployment rates and lower employment rates. It seems that they particularly worsen the employment situation of young people. Our results are robust to variations in specification.      

Union games: technological unemployment

Summary. Given a production economy, we define union games by considering strategic behavior of the suppliers of factors. We refer to the Nash equilibria of this game as union equilibria. We analyze situations where the unemployment of factors is supported as a union equilibrium. The degree of unemployment depends on technological conditions. This allows us to model a source of unemployment which differs from the usual sources provided in the literature. We state a limit result that demonstrates that, as the market power of unions decreases, the corresponding sequence of union equilibria converges to the Walrasian equilibrium, that is, to full employment of factors. We also provide some examples that illustrate the main results.Received: 21 October 2004, Revised: 14 December 2004, JEL Classification Numbers: D51, C72. Correspondence to: Emma Moreno-GarcíaE. Moreno acknowledges financial support from the Research Grant BEC2000-1388-C04-01 (Ministerio de Ciencia y Tecnología and FEDER). G. Fernández de Córdoba and E. Moreno acknowledge financial support from the Research Grant SA091/02 from Junta de Castilla y León. We are indebted to C. Alós-Ferrer, C. Pita, D. Anisi, J. A. Ortega, F. Jimeno, J. P. Torres-Martínez, M. Steinert and C. Hervés for helpful comments and insights. We are particularly grateful to T. Kehoe and an anonymous referee for suggestions that improved this paper.     

Classical and Keynesian unemployment in Austria

The labor market in a macroeconometric model of Austria is used to determine the natural unemployment rate, full-employment (F.E.) output, and the F.E. real wage for 1966–92. Gaps between actual and F.E. variables are examined analytically and historically. Observed unemployment is decomposed into natural, hidden, classical, and Keynesian components. Classical unemployment is associated with the real wage gap, while Keynesian unemployment depends on the output gap. A rise in the natural rate is found to account for almost all of the increase in unemployment between 1966–74 and 1975–81, but an increase in Keynesian unemployment is the major factor in the rise of unemployment between 1975–81 and 1982–92. A fiscal shock to the complete model is found to increase real GDP for a year or two, reducing Keynesian unemployment without an appreciable rise in classical unemployment; the wage gap is eventually increased, however, producing a modest rise in classical unemployment.A lengthier version of this paper was presented at the Annual Meeting of the Austrian Economic Association, Graz, April 14–16, 1993. The generous finacial support of the Jubiläumsfonds of the Austrian National Bank for the research of which this paper is a part is gratefully acknowledged.     

Local content requirements and urban unemployment

Local content requirements (LCRs) are extensively employed in many developing countries that intend to develop the domestic intermediate good sectors as well as the final good sectors. This article investigates the effects of LCRs on the domestic intermediate-good-producing sector, urban unemployment, and welfare.     

Renewable energy and unemployment: A general equilibrium analysis

Using a three-sector general equilibrium model, the impact of renewable electricity support policies on the rate of equilibrium unemployment is analyzed. In a simple two-factor version of the model, the paper shows analytically that renewable electricity support policies lead to an increase in the rate of unemployment. A numerical analysis is conducted with an expanded three-factor model. In this version, most scenarios analyzed also lead to an increase in equilibrium unemployment. However, the paper identifies conditions in which renewable energy support policies can decrease the rate of equilibrium unemployment. In particular, when the elasticity of substitution between capital and labor is low, when capital is not mobile internationally, and when the labor intensity of renewable generation is high relative to conventional generation, renewable electricity support policies may reduce the rate of equilibrium unemployment. The model is parameterized to represent the US economy, such that the magnitudes of quantities can be observed. Although there is some variation in the results depending on parameters, the findings suggest in general that reducing electricity sector emissions by 10% through renewable electricity support policies is likely to increase the equilibrium unemployment rate by about 0.1–0.3 percentage points.     

Redistribution policy: A European model

Following the rationale for regional redistribution programs described in the official documents of the European Union, this paper studies a simple multicountry model built around two regions: a core and a periphery. Technological spillovers link firms' productivity within each of the two regions, and each country's territory falls partly in the core and partly in the periphery, but the exact shares vary across countries. In line with the official view of the European Union, we find that the efficient regional allocation requires both national and international transfers. If migration is fully free across all borders, the optimal redistribution policy results from countries' uncoordinated policies. However, if countries have the option of setting even imperfect border barriers, then efficiency is likely to require coordination on both barriers and international transfers (both of which will be set at positive levels). The need for coordination increases as the Union increases in size.     

Long-term unemployment, the invention of 'hysteresis' and the misdiagnosis of structural unemployment in the UK

This paper investigates the empirical basis for the belief thatunemployment makes people less ‘employable’, andthat the existence of a pool of long-term unemployed peopleis therefore in itself a barrier to full employment. Drawingon data for Great Britain from the 1940s to the present day,it shows that this idea has arisen through misinterpretationsof the statistical evidence. The resulting policies, besidesdiverting resources from the demand-side programmes appropriateto the true situation of structural unemployment, appear tohave created a problem of the kind they were intended to address,by encouraging unemployed people to move onto sickness benefits.     

Jobs specialization versus unemployment: more on the productivity effect of unemployment benefits

We use the Marimon and Zilibotti (Econ J 109: 266–291, 1999) circle model and we endogenize the choice of the degree of specialization of jobs. We show that an increase in unemployment benefits not only reduces the mismatch of talents (as in Marimon and Zilibotti), but it also raises the degree of specialization of jobs. This reinforces the productivity enhancing effects of unemployment benefits.      

Strategic prospective for the implementation of employment policies in the Azores

This article explains how a far-off autonomous region of Portugal lying 2700 km from Brussels decided to approach its future, notably labor. The government in the Azores applied strategic prospective, and two of its methods, MICMAC and MACTOR,¹ at three key moments in the implementation of employment policies. While providing background on Azorean public policy and the broader European context, the author describes three cases, which deal primarily with education, qualifications and mobility. Interestingly, the results of decisions made on the basis of the prospective exercises can already be measured. This underscores the real efficiency of the policies adopted and the importance of the European policies of mobility, notably within the scope of Eurodyssey, a program of professional mobility of the Assembly of European Regions, that is now led by the Azores.