Output–employment relationship across employment status: evidence from Turkey

This paper investigates output–employment relationships across different employment statuses and formal versus informal employment divisions for Turkey. Even if we fail to find a long-run relationship between aggregate output and total employment, there are long-run relationships between the aggregate output with all of the formal employment statuses. A further investigation for short-run relationships reveals no statistically significant relationships between aggregate output and total employment and between aggregate output and casual employment but there is a significant short-run relationship between aggregate output and total regular employment. Thus, a sustainable economic growth policy should aim to create formal and regular employment.     

A paradigm shift from production function to production copula: statistical description of production activity of firms

The heterogeneity of economic agents is emphasized in a new trend in macroeconomics. Accordingly, the new emerging discipline requires one to replace the production function, one of the key ideas in conventional economics, by an alternative that can take explicit account of the distribution of firms' production activities. In this paper we propose a new idea referred to as a production copula; a copula is an analytic means for modeling the dependence among variables. Such a production copula predicts the value added by firms with given capital and labor in a probabilistic way. It is thereby in sharp contrast to the production function, where the output of firms is completely deterministic. We demonstrate the empirical construction of a production copula using financial data of listed Japanese firms. Analysis of the data shows that there are significant correlations among capital, labor and value added, and confirms that the values added are too widely scattered to be represented by a production function. We employ four models for the production copula, that is trivariate versions of Frank, Gumbel and survival Clayton and non-exchangeable trivariate Gumbel. The latter was found to be the best.     

Inventory Shocks and the Great Moderation

Why did the volatility of U.S. real GDP decline by more than the volatility of final sales with the Great Moderation in the mid‐1980s? One explanation is that firms shifted their inventory behavior toward a greater emphasis on production smoothing. We investigate the role of inventories in the Great Moderation by estimating an unobserved components model that identifies inventory and sales shocks and their propagation in the aggregate data. Our estimates provide no support for increased production smoothing. Instead, smaller transitory inventory shocks are responsible for the excess volatility reduction in output compared to sales. These shocks behave like informational errors related to production that must be set in advance and their reduction also helps explain the changed forecasting role of inventories since the mid‐1980s. Our findings provide an optimistic prognosis for a continuation of the Great Moderation, despite the dramatic movements in output during the recent economic crisis.     

Output,employment and inventories under general excess supply

The paper examines how the results of the Barro-Grossman (1971, 1976) model are modified when inventories are added to their framework. As inventories are introduced, the demand for labor becomes sensitive to the real wage even when there exists general excess supply, and it becomes less sensitive to aggregate demand than in the Barro-Grossman model. A cut in real wage can increase output and employment in this same framework a result that runs counter to the conclusion in the existing Keynesian literature. The demand multiplier comes out to be weaker than in the no-inventory case.     

No significant service gap between west Germany and the USA

Conclusions The analyses show that a significant “services gap” does not exist between west Germany and the USA. Such a gap is not even evident in the area of low-skill service activities, such as in catering, once the marginal employment relations — the importance of which is understated by the official statistics — are included. This finding invalidates the empirical basis for economic policy proposals for an expansion of employment in service branches as a way out of the employment crisis. It is evident that a solution to Germany's current employment problems can only be found in a strategy that increases the scope for employment at the macro-economic level, i.e. irrespective of sectoral developments and whatever the implications of this for the distribution of the various types of activity. Having said this, the heavy bias in the output structure of the German economy in favour of industrial output suggests that an additional employment potential does exist in services, especially personal services.     

The brevity and violence of contractions and expansions

Early studies of business cycles argued that contractions in economic activity were briefer (shorter) and more violent (rapid) than expansions. This paper systematically investigates this claim and in the process discovers a robust new business cycle fact: contractions in employment are briefer and more violent than expansions but we cannot reject the null of equal brevity and violence for expansions and contractions in output. The difference arises because employment typically lags output around peaks but they coincide in their troughs. We discuss the performance of existing business cycle models in accounting for this fact, and conclude that none can fully account for it. We then show that a business cycle model with asymmetric adjustment costs on employment and a choice of when to scrap old technologies can account for the business cycle fact both qualitatively and quantitatively.     

Inventories, employment and hours

This paper develops a model that integrates inventory and labor decisions. We extend a model of inventory behavior to include a detailed specification of the role of labor input in the production process, distinguishing between employment, hours and effort per worker. We estimate jointly the Euler equations for inventories and employment, a labor compensation schedule, and an hours requirement function with the cross-equation restrictions imposed. The econometric results shed light on several important topics, including the shape of the marginal cost of output, the role of labor hoarding as an explanation of pro-cyclical productivity, and the persistence of inventory stocks.     

Inventories,rational expectations,and the business cycle

The simplest macroeconomic models in which markets clear instantaneously, and expectations are rational preclude the existence of ‘business cycles’, that is, of serially correlated deviations of output from trend. This paper studies one of several mechanisms that can be used to make these so-called ‘new-classical’ models produce business cycles; the mechanism is the gradual adjustment of inventory stocks. Two macroeconomic models of inventory holdings are formulated. Both imply, first, that current output should be a decreasing function of the stock of inventories and, second, that inventories, once perturbed from equilibrium levels, should adjust only gradually. These two features are then embedded into an otherwise standard macroeconomic model in which markets clear instantaneously and expectations are rational. Two principal conclusions are reached. First, disturbances such as unanticipated changes in money will set in motion serially correlated deviations of output from trend. Second, if desired inventories are sensitive to the real interest rate, then even fully anticipated changes in money can affect real variables.     

Intermediate inputs and sectoral comovement in the business cycle

The post-war US business cycle is characterized by positive comovement of employment and output across sectors. It has been argued that multi-sector growth models are inconsistent with this observation when changes in relative productivities are the main source of fluctuations. We suggest that the input-output structure of an economy, in particular the pervasive use of intermediate inputs, can induce positive comovement in sectoral employment and output following changes in relative productivities. We calibrate a model of the US economy for the durable and nondurable goods producing sectors, and show that sectoral employment and output move together if intermediate inputs are used in production. The model is also consistent with the observation that the relative price of nondurable goods is procyclical.     

The stylized facts about the behavior of manufacturers' inventories and backorders over the business cycle: 1959–1980

Recent theoretical work has highlighted the role of inventories in propagating business cycles. This paper attempts to provide an empirical foundation for current and future research on the role inventories play in business cycles. The evidence presented here indicates that inventories and backorders are major variables in predicting output fluctuations. Further, the evidence is that disaggregating inventories by stage-of-fabrication is important in predicting output. In concert with previous findings, our results suggest that disaggregated inventories ought to be a component of models of the business cycle.     

Economic behaviour of the firm and prevention of occupational injuries

In this paper an economic model of the firm's behaviour is presented, examining the interrelationship between prevention activities and employment level. A competitive firm with a fixed capital stock is considered. Two decisions must be made: the level of employment of homogeneous workers (L) and the level of prevention activities (I). Although many simplifying assumptions are adopted, the impact of wage rate and compensation level on both decision variables is sign ambiguous. Moreover the case where injured workers are irreplaceable is more difficult than its counterpart with perfect substitutability.     

An international comparison of scale economies in banking: Evidence from Turkey

In this article economies of scale are examined for Turkish banks. The literature on economies of scale in depository institutions is substantial. Yet, virtually all published articles have examined production/costs using data for developed countries, such as the United States, Canada, and Israel. Here we examine data from a country that has an economic system vastly different in terms of per capita productivity. Despite the differences, the results are similar across countries in that we find no significant evidence of economies of scale at output levels near the sample mean. This suggests that the conclusion from examining banks in developed countries—that a bank does not have to be large in order to be competitive from a cost perspective—holds in a less developed country.     

Rational expectations and the smoothing properties of inventories of finished goods

This paper formulates and estimates a dynamic rational expectations equilibrium model of inventories of finished goods and employment of labor. The view that the primary role of inventories of finished goods is to act as a buffer stock in the face of fluctuating demand is examined. Both the model and estimation results indicate that this is the case because of differences in the costs involved for firms in changing their inventory stocks and labor force. In addition to providing some new evidence on the behavior of inventories of finished goods and employment, the paper illustrates a technology for maximum-likelihood estimation of structural parameters under the hypothesis of rational expectations.     

International comparison of industrial development in the European context — the problems

Conclusion The index of production enables us to analyse current developments in the countries considered in the cyclical context, the information on real value added that is available for these branches of industry not being sufficiently up to date. In 1999, the division of labour within industry and between industry and the services sector changed, both nationally and in the international context. There was a rise in the nominal and the real ratios of intermediate input. Our conclusion is that, at least in some branches, the structural changes between 1995 and 1999 were of greater importance in Germany than in the other countries. In view of such structural changes the index of production cannot adequately reflect the dynamic of these branches in an international comparison. Different developments in the real ratios of intermediate input and divergent real developments in value added that are evident in the statistics are partly the result of the different methods of price deflation used in the countries and branches considered. The real value added gives a distorted picture of the development in output in these branches in the individual countries. The development in the index of production probably overstates the dynamic of German industry compared with industry in the other countries considered for the period on which this article is based, while understating the trend in value added. It follows from this that the indicators designed to measure output in economic sectors are not enough to give a realistic picture of the trend in output in branches of industry for international comparison. More information, e.g. the trends in employment and investment, also needs to be taken into account.     

Dynamic fiscal policies and unemployment in a simple endogenous growth model

This paper analyzes the growth and employment effects of dynamic fiscal policies in an overlapping generations model with endogenous growth and imperfect labour markets. With balanced-budget policies, the modelled closed economy grows at a constant rate which is higher, the lower are the labour tax rate and the unemployment rate. Constant-flow budget policies are not feasible, while government Ponzi games are feasible only if economic agents have implausibly high savings rates. Furthermore, while constant-stock fiscal policies are sustainable, an increase in the debt-to-capital ratio is accompanied by higher taxes, a rise in unemployment and lower economic growth. JEL Classification E24 · J51 · H63 · O41     

The Determination of Fair Profits for the Property-Liability Insurance Firm

Single period and dynamic valuation models in continuous time, under certainty and uncertainty, are developed for a property-liability insurance contract to determine the “fair” (competitive) premium and underwriting profit. The intertemporal stochastic model assumes that the claim frequency and the price index of claim settlements are functions of a set of underlying state variables which follow a multivariate Wiener process. The competitive premium is shown to be proportional to the claim frequency and the price index for claim settlements at the time the policy is issued. The factor of proportionality varies directly with the claim settlement rate and the length of coverage, and inversely with the risk-adjusted real interest rate on the dollar-valued claim rate.     

How Bad Is Unemployment in Tunisia? Assessing Labor Market Efficiency in a Developing Country

Tunisia's unemployment rate has been among the highest in theworld for almost two decades. This article claims that sucha high rate reflects measurement problems rather than labormarket inefficiency. After discussing the reasons why unemploymentrates may not be comparable across countries and reviewing thetools that are available to analyze unemployment in a specificcountry, the article provides four pieces of evidence to substantiateits claim. Two of them relate to the criteria used in Tunisiato measure unemployment and the way these criteria have changedover time. Two use records on the number of active job seekersand vacancies as reported to the official employment agency.Together, this body of evidence suggests that unemployment hasdeclined steadily over time and remains an issue for first-timejob seekers only.      

Constructing the Economy: The Role of Construction Sector in India’s Growth

On empirically examining the importance of construction sector in propelling economic growth rate in India, the study has found that in the presence of the dominant influence of capital stock, the impact of the construction sector gets blurred or neutralized. Once capital stock is dropped from the model, the construction sector emerges as a significant determinant of economic growth, while other financial variables such as interest rate and non-food bank credit including the financial liberalization dummy do not play significant roles in economic growth. However, from an investigation of the impact of the construction sector on economic growth through the channel of employment, it is seen that the construction sector might be impacting the growth rate through increasing employment and thereby increasing the aggregate output in the economy.     

Kondratiev waves and the future of British cities

This article argues that the connections between long waves of economic change and the growth and decline of particular cities are very complex. Three elements of this complexity are extracted. First, it is argued that the Schumpeterian view that innovation per se usually causes economic growth is probably wrong. Second, that innovations connected with information technology (IT) need to be considered in terms of their production, intermediate use and final consumption; and that their production is not likely to cause a major economic upswing in the British economy in general or in many particular cities. Finally, some information-technology-related employment growth is the result of the decentralization of intermediate uses often concerned with routine clerical or administrative work.