Looking for the workforce: the elderly,discouraged workers,minorities, and students in the Baltic labour markets

This paper looks at the evolution of the labour markets in Estonia, Latvia, and Lithuania since the beginning of transition until 2003, with a particular focus on labour force participation. How did labour supply in the Baltic countries respond to changes in minimum wages, unemployment benefits and retirement regulation? Do the marked differences in labour market policies between the countries result in different patterns of participation? What are the obstacles to and driving forces of participation? We find that relative contribution of participation and demographic trends to the dynamics of the labour force varied substantially both over the years and across the three countries. Participation, in turn, has been shaped by sometimes complicated interactions between schooling decisions of the youth, retirement, policy changes, and external shocks. Resulting differences in trends and patterns are quite substantial, indicating that there is a room for increasing participation in each of the countries. Panel data analysis of determinants of participation and discouragement based on labour force survey data suggests that increasing after-tax real minimum wage has significant positive effects on participation and reduces discouragement in Lithuania. In Estonia, by contrast, a positive effect of minimum wage on participation is found only for teenagers of both genders and for young males. We do not find any evidence that partner’s wage has a negative effect on participation. Ethnic minorities, especially females, in all three Baltic countries are less likely to be in the labour force, other things equal.     

Growth,unemployment and labour market institutions: evidence from a cross-section of EU regions

The responsiveness of unemployment to growth is an issue of ongoing political and academic interest. Economic growth is supposed to be the key to increase labour demand and reduce unemployment. Departing from Okun's law, most research on the unemployment intensity of growth has focused on national disparities and the role of labour market institutions. Empirical evidence at the regional level is scarce. We investigate differences in regional labour market responsiveness and their potential determinants for a cross section of European regions. The data set covers the NUTS 2 regions in the EU15 for the period 1980 to 2002. Following a spatial modelling approach interaction among neighbouring labour markets is taken into account. Our findings point to substantial differences in labour market effects of output growth among European countries and regions. Both national labour market institutions and regional characteristics, such as structural change explain a significant part of these disparities.     

European women: why do(n’t) they work?1

To increase labour market participation is a major challenge currently faced by the EU, and attracting women into the labour force appears as a promising avenue to do so. Therefore, a clear understanding of what the factors influencing the evolution of female participation rates are in Europe is essential for a successful design of policy measures aiming at increasing participation rates. This article provides empirical evidence on the role that institutions have played in determining participation rates of women in the European labour markets. Our findings discard any doubt on the influence of institutions on women's participation in Europe. The strictness of labour market institutions negatively affects female participation rates. We also find that institutional features aimed at reconciling motherhood with professional life such as maternity leave schemes and part-time work favour participation rates of prime-age women. Additionally, fertility rates and education enrolment have been relevant for the evolution of participation rates during the sample period considered for prime-age and young females, respectively, while cohort effects drive the developments of older females.     

Discouraged workers in developed countries and added workers in developing countries? Unemployment rate and labour force participation

Changes in the unemployment rate can have differing impacts on the labour force participation rate depending on the strength of the added worker effect and the discouraged worker effect. This paper documents the differences in the relationship between the unemployment rate and the labour force participation rate across a panel of developing countries and OECD countries. We employ a system GMM approach to control for and to establish the bi-directional causality between unemployment and labour force participation. We find that the discouraged worker effect does dominate in developed countries, while dominance of the added worker effect in developing countries leads to an increase in labour force in the face of rising unemployment.     

Corruption and Age

In recent years the topic of corruption has attracted a great deal of attention. However, there is still a lack of substantial empirical evidence about the determinants of corruption. The major aim in the paper is to investigate empirically the correlation between age and justifiability of corruption. We use data on eight Western European countries from the World Values Survey and the European Values Survey that span the period from 1981 to 1999 to distinguish between an age effect (the changing attitudes of the same cohort over time) and a cohort effect (the differences in attitudes among similar age groups in different time periods). The results suggest that there is a strong age effect and no cohort effect.     

Fertility and the puzzle of female employment in the Middle East and North Africa

Female labour force participation rates across the Middle East and North Africa (MENA) region have remained low for over four decades even though, in the same period, women's education rapidly increased and fertility rates substantially decreased. This study provides a better understanding of this surprising phenomenon by testing whether the number of children affects the mother's labour supply (using twins at first birth as an instrumental variable.) Despite a strong first stage, it does not find statistically significant effects in the second stage, even in the combined sample of over 100,000 observations. This non‐result, however, does not rule out that fertility affects women's employment in these countries. But it rejects impacts larger than 0.09. Similar twin‐studies in the United States found effects between 0.12 and 0.31. The paper discusses the implications of this result in understanding the puzzle of female participation in MENA and in designing policies to increase women's employment.     

On the relationship between female labour force participation and fertility in G7 countries: evidence from panel cointegration and Granger causality

This article examines the relationship between the female labour force participation rate and total fertility rate for the G7 countries from 1960 to 2006 using panel unit root, panel cointegration, Granger causality and long-run structural estimation. The article’s main findings are that the female labour force participation rate and total fertility rate are cointegrated for the panel of G7 countries; that long-run Granger causality runs from the total fertility rate to the female labour force participation rate and that a 1% increase in the total fertility rate results in a 0.4% decrease in the female labour force participation rate for the G7 countries.     

Evaluating the effects of investment in information and communication technology

Most of the studies on the consequences of information and communication technology (ICT) have been focused on US aggregate data. In contrast to these studies, this paper empirically assesses the industrial effect of ICT investment on three key variables – real output, employment, and labour productivity – in some European Union-15 (EU-15) countries and the USA using panel-vector autoregression models. An increase in ICT investment is positive for the economies of these countries, giving rise to larger growth in real output, employment, and labour productivity at the industrial level. The pattern of responses to changes in ICT investment is quantitatively diverse across most of the EU-15 countries studied and in the two types of industries considered (i.e. ICT-intensive and less intensive industries). Moreover, the positive impact on labour productivity in ICT-intensive industries is larger after the mid-1990s, with the USA being the most positively affected country.     

The macroeconomic determinants of private equity investment: a European comparison

A strong private equity (PE) market is a cornerstone for commercialization and innovation in modern economies. However, substantial differences exist in the relative amounts raised and invested in PE across European countries. We investigate the macroeconomic determinants of PE investment in Europe, focusing on the comparison between Central and Eastern European (CEE) and Western European countries. Our estimations are based on a data set running from 2001 to 2011 that covers 16 countries. Applying robust estimation techniques, we identify a ‘robust’ set of determinants of PE activity in both regions. We find similarities as well as differences in the driving forces of PE investments in Western European and CEE countries. Our results suggest that economic activity, the inflation rate, equity market capitalization, unit labour costs, the unemployment rate as well the the institutional and legal environment are significant determinants of PE activity.     

Can OECD Countries Afford Demographic Change?

This article provides new calculations on the effects of demographic change on living standards in all 30 OECD countries using the latest demographic projections up to 2050 from the United Nations, World Population Prospects, 2004 Revision. The calculations include several potential dividends that could offset, at least in part, the costs of a lower working age population share. The effects of demographic change calculated here are mechanical in that there is no explicit optimising behaviour. In the worst case scenario, which assumes zero potential dividends and no increase in labour force participation rates, the negative effect of demographic change on living standards among OECD countries over the whole period from 2006 to 2050 ranges from zero to 28 per cent, with an average over all countries of 15.5 per cent. In the best case scenario the average effect is zero. About half of the difference between the best and worst case scenarios is accounted for by higher labour force participation and about half by the potential dividends from demographic change.     

The Effects of Disability on Labour Force Status in Australia

Using the Australian Bureau of Statistics 1998 Survey of Disability, Ageing and Carers, this study examines the effects of disability on four labour market outcomes: not in the labour force, unemployed, part‐time employed and full‐time employed. The detailed information on health available in the dataset also facilitates investigation of the dependence of effects on the characteristics of the disability, including severity, impairment type and age of onset. Disability is found to have substantial effects on labour force status, on average acting to decrease the probability of labour force participation by one‐quarter for males and one‐fifth for females. For males, the decrease in fulltime employment accounts for almost all of the decrease in labour force participation associated with disability; for females, disability has negative effects on both full‐time and part‐time employment. Analysis of disability characteristics shows that adverse effects on labour force status are increasing in the severity of the disability and are also worse for those with more than one type of impairment and for those who experience disability onset at older ages. There is evidence that the adverse effects of disability are lower for males who completed their education after the onset of the disability.     

The trend in female labour force participation: what can be expected for the future?

This study investigates the increase in the labour force participation rate of women. We estimate a binary age–period–cohort model for a sample of Dutch women born between 1925 and 1986. The results indicate that the increasing level of education and the diminishing negative effect of children have played an important role. Moreover, we find important unobserved cohort effects for pre-1955 generations, which is in line with results of studies on social norms. It is shown that the growth in female participation is likely to slow down in the near future, as such cohort effects are not relevant for younger generations.     

The impact of electricity prices on foreign direct investment: evidence from the European Union

We examine the impact of electricity price variation on net FDI (%GDP) inflows in countries of the European Union. We use panel data of 27 EU countries for a period of 2003 – 2013. We show that electricity prices of south-western and north-eastern EU countries did not converge to one price until now. Dynamic panel data analysis using system GMM shows that besides unit labour costs, tax rates and competitive disadvantage in secondary education, also higher electricity prices reduce countries’ ability to attract FDI. The immediate effects are statistically significant across both sub-regions analysed: in the short run, a 10% increase in electricity prices leads to a decrease in net FDI inflows as a share of GDP by 0.4 percentage points for the south-western and 0.33 for the north-eastern region. In the long run, the response is 0.60 percentage points for south-western and 0.48 for north-eastern regions. Policies should aim at reducing electricity market price differences on the European level through investment in transborder transmission capacity; reductions in FDI, when environmental policy increases after-tax electricity prices, should be countered by other tax reductions as well as harmonization of property rights, absence of corruption and labour market regulations at best-practice level.     

UNEMPLOYMENT AND THE PRODUCTIVITY SLOWDOWN: AN EFFCIENCY WAGE PERSPECTIVE

Many OECD economies suffered a productivity slowdown beginning in the early 1970s. However, the increase in unemployment that followed this slowdown was more pronounced in European economies relative to the USA. In this paper we present an efficiency wage model, which enables us to identify two basic channels through which the productivity slowdown can affect workers' effort incentives. Predictions of the model are consistent with the different trends in unemployment across countries over this period in the face of a similar slowdown in productivity. We also demonstrate how the link between growth and unemployment depends upon labour market institutions in such a way that we can reconcile the mixed empirical results observed in the literature.     

Labour market institutions and labour market performance

This paper studies the relationship between labour market institutions and policies and labour market performance using a new and unique dataset that covers the countries of Eastern Europe and Central Asia, which in the last two decades experienced radical economic and institutional transformations. We document a clear trend towards liberalization of labour markets, especially in the countries of the former Soviet Union, but also substantial differences across the countries studied. Our econometric analysis implies that institutions matter for labour market outcomes, and that deregulation of labour markets improves their performance. The analysis also suggests several significant interactions between different institutions, which are in line with the idea of beneficial effects of reform complementarity and broad reform packages.     

Age dependency and labour productivity divergence

This study finds strong empirical evidence in favour of the hypothesis that the age composition of population matters for labour productivity growth. We applied the fixed effects panel model using data on a large number of countries over the period 1980–2010. Our results suggest that higher age dependency not only directly impacts negatively on labour productivity but also modifies the impact of other determinants of labour productivity. Child dependency has a more adverse effect on labour productivity than old age dependency. We specifically find that the marginal effects of gross capital formation, information and communication improvement, and labour market reforms are significant at lower levels of age dependency. However, the marginal effect of savings on labour productivity is high at a high level of age dependency. The impact of age dependency varies between developed and developing economies. Diversity in the size and nature of age dependency across regions and different income groups help to explain the labour productivity differential across them.     

Do the French pension reforms increase re-employment of older unemployed workers?

ABSTRACT

The sustainability of Social Security financing has pushed authorities to reform their policy to increase the labour market participation of older workers. While most of the studies have focused on the consequences of pension reform on retirement decisions, we analyse the effects of two French pension reforms, which increased the period of contribution and the minimum retirement age, on transitions out of unemployment and into employment with a difference-in-differences approach. We find that both retirement reforms have positive effects on the re-employment of older unemployed workers. The pension reforms are also accompanied by an increase of the transitions into inactivity. The results suggest that the reforms have delivered significant effects by reducing the unemployment of older workers.     

NON-WAGE LABOUR COSTS, POLICY UNCERTAINTY AND LABOUR DEMAND – A THEORETICAL ASSESSMENT

Labour costs in various European countries have reached a record high in recent years. The topic of non‐wage labour costs is therefore increasingly being discussed among and between the political parties because non‐wage labour costs are likely to have major negative effects on employment. We follow the real options approach, which allows us to investigate the value to a firm of waiting to adjust labour when the firm's wage and non‐wage costs are stochastic and adjustment costs are sunk. Simulation exercises show that the interaction between hiring and firing costs, non‐wage labour costs and uncertainty can have important ramifications for employment dynamics.     

Fertility,Taxation and Family Policy*

Historically, there is clear evidence of an inverse relationship between female labour supply and fertility. However, the relationship across countries is now positive. Countries like Germany and Italy, with the lowest fertility, also have the lowest female participation rates. This paper analyses the extent to which this can be explained by public policy, in particular taxation and the system of child support. The results suggest that countries which have individual rather than joint taxation, and which support families through child care facilities rather than child payments, are likely to have both higher female labour supply and higher fertility.     

Taxes,female labour supply and household income: differences between the Netherlands and the Federal Republic of Germany

The article investigates the effect of taxes and social premiums on female labour supply and household income. A comparison is made between labour supply and household income between the Netherlands and the Federal Republic of Germany in 1992. A discrete choice model for labour supply is used in which taxes and social premiums are implicitly incorporated. As male labour supply is highly inelastic an individual, male chauvinist model is used. The estimated models are used to simulate the effect of the differences in the tax and social premium system on the differences in labour supply and income between both countries. The results indicate that labour force participation is higher the more individualized the system. The German system leads to a lower tax burden compared to the Dutch system. It is concluded that differences in the tax and social premium system between both countries have hardly any influence on the differences in the inequality of net household labour income. There is evidence that the German system leads to a slightly more unequal distribution of household income. It is also concluded that although the tax and social premium system does influence labour supply and income, it can be doubted whether these effects are substantial.