Strategic Innovation with Complete and Incomplete Labour Market Contracts

In a model of strategic R&D competition between two firms that negotiate with independent unions we show that: (i) incomplete labour market contracts may Pareto-dominate complete labour market contracts (ii) even when complete contracts Pareto-dominate incomplete contracts, economies can get stuck in the incomplete contract equilibrium. These conclusions provide additional strategic reasons why complete labour market contracts may not be used—even if they were feasible. We propose two testable predictions to discriminate between complete and incomplete contracts: (i) the variance of wages is lower with complete contracts; (ii) the variance of employment is higher under complete contracts.     

Labour Market Inefficiency and Frictional Unemployment in Australia and its States: A Stochastic Frontier Approach

This paper provides estimates of labour market inefficiency and the frictional unemployment rate for Australia and its States over the period January 1978 to December 1997. These estimates are derived from parametric statistical models of employment growth in which technical inefficiencies are accounted for. The mean estimate of the (technically efficient) frictional unemployment rate for Australia over the sample period is S3 per cent of the labour force. Technical inefficiency in the labour market matching process is significant and contributes around 13 per cent to the mean steady-state (naturaľ) unemployment rate. Investigation of the factors explaining the levels of inefficiency suggests that inefficiencies vary countercyclical, are related to which political party is in power and the time of year and that only Western Australia and Queensland have exhibited a significant decline in inefficiency over the period.     

Self-Enforcing Labour Contracts and Macroeconomic Dynamics

To properly account for the dynamics of the key macroeconomic variables, researchers incorporate various internal propagation mechanisms in their models. In general, these mechanisms implicitly rely on the assumption of a perfect equality between the real wage and the marginal product of labour. This paper features a micro-founded model of a limited-commitment firm, and derive endogenous dynamic labour contracts that produce a different linkage between the real wage and the marginal product of labour. The risk-sharing between the entrepreneur and the worker, both faced with enforcement problems, provides a different type of propagation mechanism. I investigate the dynamic properties of this endogenous rigidity in relation to the initial bargaining power of each agent.      

Task-Based Segmentation of Rural Labour Contracts: Theory and Evidence

The paper examines the theoretical and empirical validity of task-based segmentation of rural labour contracts in seasonal agriculture. Regular labour is hired to perform tasks that are difficult to supervise for which casual labour is not incentive-compatible, and a regular wage above the reservation wage ensures no shirking in these tasks. It is argued that there is a hoarding cost of regular labour which is the cost when productivity is low during the slack season. This implies that minimization of supervision costs necessitates the employment of regular labour in certain tasks, but enhances hoarding cost. Results from the ICRISAT villages in India suggests that daily regular wages are lower than daily casual wages, adjusted by the probability of unemployment. Estimates of a tobit selection model suggest that (a) task characteristics are not significant even among the farms hiring regular labour, (b) larger employment-intensive farms tend to hire more regular labour irrespective of the choice of crop, and (c) there is a significant substitutability between regular and family labour. These results seem to question the very basis of task-based segmentation and strengthen the hoarding cost argument: farms hiring regular labour use it indiscriminately in both non-monitorable and monitorable tasks and, if possible, they may substitute family labour for regular labour with a view to minimizing hoarding cost.     

Displacement Effects of Active Labour Market Policy: The Youth Labour Market in Finland

In 1994 the number of workers participating in active labour market programmes in Finland was 299,000. On average there where 125,000 workers in these programmes at any one time, the average length of participation in a programme being about 5 months. In relation to the 2.5 million-strong Finnish labour force, these figures are proportionally large. In 1994 the total expenditure on unemployment amounted to 6.7 per cent of GNP of which the share spent on active labour market programmes was about 25 per cent. The study investigates the displacement effects of active labour market programmes in the youth labour market in Finland. The two age groups analysed are 15-19-year-olds and 20-24-year-olds. The results, based on a VAR analysis of quarterly data from the period 1981.1-1995.2, suggest that the displacement effects of job-creation programmes may be substantial. The study cannot, however, provide any robust estimates of the likely size of such displacement effects on youth employment in Finland. This revised version was published online in July 2006 with corrections to the Cover Date.     

Market Rigidities and Labour Market Flexibility: An International Comparison

The effects of product and labour market rigidities on labour market dynamics are analysed using a panel of two-digit ISIC level data for seven OECD countries. As expected, employment protection was found to slacken labour market flows. Centralized wage bargaining also reduced the degree of job turnover, although a priori the effect of centralized wage bargaining on labour market flexibility is not clear. Industry subsidies have a positive impact on job reallocation by increasing job creation. The labour market dynamics are also compared in detail for two economies regarded as extremes in terms of regulations, the U.S. and Norway.     

Income Tax Evasion in a Unionised Labour Market

Labour market outcomes can depend on tax evasion since the returns from working are affected by the amount of taxes paid. In this paper, unionised workers are assumed to select the income which they declare. The rational trade union takes this decision into account. It is shown that the employment effects of a linear income tax are not altered qualitatively by tax evasion if the fine for evasion is a function only of the evaded tax. Moreover, the consequences of changes in the tax enforcement system are determined by the ability to choose evasion activities optimally. The existence of unrestricted tax evasion opportunities lowers wages.     

Ethnicity and Job Tenure in a Segmented Labour Market: The Case for New Zealand

The labour market experience of 1984–1992 turned on end the prevailing notion of 'personal security' within New Zealand, founded as it was upon guaranteed employment (and full-employment in the aggregate). This study examines, in a systematic fashion and within a dynamic setting, why job tenure varied consistently over this period between two ethnic groups, the first comprised of European/Pakeha workers, and the second New Zealand Maori and Pacific Islanders.
Econometric analyses of total, voluntary and involuntary separations indicate that the low relative job security of Maori/Pacific Islanders cannot be attributed solely to differential attributes that, on the one hand represent such individuals' gender/age distribution, qualifications, and conditions of employment, and on the other provide controls for the relative competitive positions of their employers. Rather, other factors, such as worker segmentation, are likely operative within the New Zealand labour market, conditions that, on net, work to the disadvantage of non-Europeans.     

The Spanish Labour Market: Reforms and consequences

The institutional design of the Spanish labour market has been subjected, during the last three decades, to permanent pressure fuelled by two beliefs. On the one hand, by the assumption that a higher degree of flexibility would help to reduce unemployment; on the other, by the assumption that such increased flexibility would also help to reduce inflation rates and, consequently, the inflation gap between Spain and the rest of the European countries. The recent history of the Spanish labour market is, therefore, the history of the reforms implemented to increase the flexibility in such a market. The aim of this paper is, firstly, to describe the main features of these reforms, showing the measures implemented in order to increase the flexibility in the labour market and, secondly, to show the degree of flexibility reached in the labour market. Finally, we will briefly analyse the macroeconomic consequences of these reforms.     

The Labour Market and Inequality

Newspoll reported in 2000 that by a margin of 70 to 28 per cent, Australians would prefer the gap between rich and poor to get smaller rather than have the nation's overall wealth grow as quickly as possible. This article examines the reasons for the increase in the dispersion of earnings, and changes in unemployment and workforce participation, which are central to this concern about inequality. The major finding is that the widening dispersion of earnings and changes in labour force status are principally due to changes in the structure of labour demand in favour of more skilled jobs. The article then considers what this changing job mix implies for policy directed to maintaining income inequality.     

Efficiency and Equality in the Labour Market

I review theoretical arguments suggesting that certain labourmarket institutions can be justified for economic efficiencyreasons. In models with intrinsic market failures, "rigidities"like employment protection legislation and institutional wagecompression may push the economy closer to the efficient frontier.I discuss recent empirical evidence on income inequality, povertyand income mobility in OECD countries, and I conclude that thewelfare states of Northern Europe score relatively well on allcounts. Finally, I discuss labour market reforms that may improveefficiency without violating European voters' preference forequality.(JEL H30, J30, J50)     

The Czech Labour Market in Transition: Evidence from a Micro Study

In contrast to the other countries in eastern and central Europe, unemployment has so far increased only modestly in the Czech Republic. Results are reported from a panel survey of a sample of initially unemployed workers in the industrial centre of Ostrava, interviewed in three rounds during 1993. Results are reported regarding the wage in the former job, the reservation wage, the wage in a new job and the minimum acceptable wage in another job for those who have become employed during the panel study. Finally, results from estimating a hazard function for leaving unemployment are reported.     

Compulsory Superannuation and Labour Market Responses

Compulsory contributions to superannuation have significant second round effects on labour market outcomes. The effects of employer, employee and government contributions are compared and contrasted for markets with different degrees of wage flexibility. With a flexible wage, the market wage adjusts to offset most of the initial effects of the superannuation levies. However, compulsion means that many employees perceive the present value of the future retirement income to be less than the levy. The levies as a form of tax on labour lead to lower overall remuneration for employees and lower employment     

劳动力市场规模与企业社会保险缴费比例

作为企业经营成本的重要部分,过重的社会保险缴费负担直接降低了中小企业的参保意愿和缴费水平。这使得工业企业缴费水平可能低于政策缴费率,也导致不同企业之间实际缴费率存在差异,而且社会保险缴费可能增加了企业经营活动的负担。解决这些问题不仅有助于理解企业社会保险缴费的内在动机,而且有助于社会保险征收制度的顶层设计,并为供给侧结构性改革的"降成本"提供理论依据和实践参考。文章尝试研究这些问题,基于利润最大化框架,系统考察了劳动力市场规模与企业社会保险缴费比例的逻辑关系。理论分析表明,给定企业社会保险缴费具有改善劳动生产率和增加财务困境风险的双重作用,最优社会保险缴费比例应满足边际收益等于边际成本。伴随着劳动力市场规模扩张,再就业搜寻成本和工资构成中的解雇风险补偿下降,企业社会保险缴费引致的边际成本越小,均衡状态的最优社保缴费比例趋于向上调整。文章以行业就业容量衡量劳动力市场规模的计量结果显示,劳动力市场规模增加会显著提升企业社会保险缴费比例,并集中体现于行业内而非行业间,而且在高融资约束企业、高失业成本企业和民营企业更为凸显。进一步,企业社会保险缴费比例提升会显著降低其经营绩效,即成本效应占据主...     

Flexicurity Labour Market Performance in Denmark

Unemployment is at a low and stable level in Denmark. This achievementis often attributed to the so-called flexicurity model combiningflexible hiring and firing rules for employers with income securityfor employees. Whatever virtues this model may have, a low andstable unemployment rate is not automatically among them sincethe basic flexicurity properties were also in place during the1970s and 1980s where high and persistent unemployment was prevalent.Labour market performance has changed due to a series of reformsduring the 1990s, the main thrust of which was a shift froma passive focus of labour market policies to a more active focuson job search and employment. The policy tightened eligibilityfor unemployment benefits and their duration as well as introducedworkfare elements into unemployment insurance and social policiesin general. Thereby, policy makers attempted to strengthen theincentive structure without taking resort to general benefitreductions. We argue that the workfare policies have playedan important role running primarily via motivation/threat andwage effects. However, active labour market policies are resourcedemanding, and although the workfare reforms have improved costeffectiveness, there is still an issue as to whether the resourcesgoing into active labour market policies are used efficiently.(JEL codes: J30, J40, J60, H53)