Wage indexation,migration, and unemployment

This article sets up a two-goods model with wage indexation and migrants. A dual labor market is introduced where the domestic workers receive an indexed wage while migrants receive a market-determined wage. The traded sector may be assumed to be unionized while the non-traded goods sector is non-unionized giving rise to flexible wages. This provides an example of segmentation and wage indexation. The wage indexation creates unemployment in the traded sector and the segmentation allows this unemployment to persist. The main results obtained are: sector-specific migration of labor may raise domestic welfare, while with capital accumulation such migration necessarily raises the relative price of the non-traded goods, leading to structural adjustment.     

Managerial capital,occupational choice and inequality in a global economy

This study proposes a simple theory of trade with endogenous firm productivity, occupational choice and income inequality. Individuals with different managerial talent choose to become entrepreneurs or workers. Entrepreneurs enhance firm productivity by investing in managerial capital. The model generates three income classes: low‐income workers facing the prospect of unemployment, middle‐income entrepreneurs managing domestic firms and high‐income entrepreneurs managing global firms. Trade liberalization policies raise unemployment and improve welfare. A reduction in per‐unit trade costs raises top incomes and generates labour‐market polarization. A reduction in fixed exporting costs has an ambiguous effect on top incomes and personal income distribution. Policies reducing labour‐market frictions or the costs of managerial‐capital acquisition create more jobs and improve welfare. The income distributional effects of labour‐market policies depend on which policy is implemented.     

Revenue Recycling and the Welfare Effects of Road Pricing

This paper explores the interactions between taxes on work-related traffic congestion and pre-existing distortionary taxes in the labor market. A congestion tax raises the overall costs of commuting to work and discourages labor force participation. The resulting welfare loss in the labor market can easily exceed the Pigouvian welfare gain from internalizing the congestion externality. However, if congestion tax revenues are used to reduce labor taxes, the net impact on labor supply is positive, and this can raise the overall welfare gain from the congestion tax by around 100 percent. Nonetheless the optimal congestion tax still equals the Pigouvian tax.
JEL classification R 41; H 21; H 23     

Cash Transfers to the Poor and the Labor Market: An Equilibrium Analysis

This paper studies the effects of cash transfers to the poor on the labor market. This is investigated in a matching model with endogenous labor market participation and job destruction. Depending on their productivity, workers might want to stay in the job, become unemployed, or leave the labor market; in addition, workers out of the labor force might decide to search for a job. Cash transfers are introduced to all agents with income below a given level. Two qualitative results are found: (i) The size of cash transfers has a negative effect on the employment rate, but an ambiguous effect on the unemployment rate; and (ii) the coverage of this welfare program has a positive effect on the employment rate, and an ambiguous effect on the unemployment rate. The numerical simulations also show that: (i) if the government target is to reduce inequality and poverty, the more efficient policy is to increase the level of benefits instead of increasing the eligibility of the program; (ii) compared with a welfare program that condition eligibility to labor market participation, the “unconditional” cash transfer program has a stronger impact on inequality and poverty, but with a reduction in labor market participation and output.     

Increased Input Supplies,Government Size,Welfare and Trade in the Presence of Increasing Returns

This paper examines the impact of exogenous changes in the supply of primary factors of production on the relative size of government and welfare in the context of a model where increasing returns are present in the production of an intermediate good. It is shown that an increase in the supply of labor (capital) increases the relative size of government if the share of labor is large (small) in the public sector as compared to the private sector. An increase in the supply of capital increases welfare but the impact of an increase in the supply of labor cannot be unambiguously determined. In the context of a North-South model, the paper also considers the pattern of trade. It is shown that North will export capital-intensive intermediate goods to the South. Received September 13, 2001; revised version received June 1, 2002 Published online: February 17, 2003 I am indebted to Professor Bob Catley and two anonymous referees for invaluable comments and suggestions. However, responsibility of any remaining errors or omissions is mine alone.     

Time zones,shift working and international outsourcing

We build a trade model with two identical countries located in different time zones and one sector with intermediate differentiated goods produced in two successive stages. We introduce shift working disutility that raises night wage and firms that “virtually” outsource foreign labor. We found that firms only outsource if outsourcing costs are relatively low and shift disutility is high. When outsourcing occurs, it generates the highest level of welfare among production modes. Intermediate values of shift working disutility generate the lowest level of welfare. Outsourcing and domestic labor are substitutes at the firm level and complements at the economy level.     

Aid,non‐traded goods,and growth

Abstract We examine the effects of foreign aid in a small recipient country with two traded goods, one non‐traded good, and two factors. Learning by doing and intersectoral knowledge spillovers contribute to endogenous growth. We obtain two main results. First, a permanent increase in untied aid raises (or lowers) the growth rate if and only if the non‐traded good is more capital intensive (or effective labour intensive) than the operating traded good. Second, a permanent increase in untied aid raises welfare if the non‐traded good is more capital intensive than the operating traded good; otherwise, it may raise or lower welfare.     

A DYNAMIC MODEL OF TOURISM, EMPLOYMENT AND WELFARE: THE CASE OF HONG KONG

Abstract.  The present paper uses a dynamic open-economy model with wage indexation to examine the impact of tourism on employment and welfare. Both short-run and long-run situations are analysed. It is well known that tourism converts non-traded goods into tradable goods. An increase in the demand for a non-traded good raises its relative price, which results in an expansion of the non-traded sector at the expense of the traded goods sector. This output shift raises labour employment in the short run. However, in the long run, the higher relative price leads to higher wages, resulting in a negative impact on labour employment. If the output effect is dominant, the expansion in tourism raises employment and welfare. However, under realistic conditions tourism may lower both labour employment and welfare due to rising costs. These results are demonstrated by simulating a dynamic model for the case of Hong Kong.     

The macroeconomic impact of foreign labour influx into the industrialized nation state and the complementary policies

This paper makes a numerical assessment on the macroeconomic impact of foreign labor influx into the industrialized nation state allowing free trade in goods but imposing an immigration quota on labor, and then explores the complementary policies for the impact of foreign labor influx. One of the main findings is that immigration itself brings welfare gains only if prices are flexible, but a skill-biased intake policy can bring a much larger welfare gain. The complementary policy options to boost welfare gains by immigration increase are monetary expansion, adopting foreign components more, and influencing foreign demand for intermediate goods indirectly by inviting foreign direct investment. For these policies to cope, the destination country should try to correct the market structure so that prices can be flexible.     

To integrate with a high- or low-wage country: That is the question

This paper considers the question of whether a country with the intermediate capital–labor ratio is better off forming a free trade area with the higher or lower wage country. Typical analyses of gains from trade ignore the effects of free trade on factor prices. When Europe forms a free trade area with a high-wage economy, the equalized wage rises and rent declines, while the price of the importable declines. Workers unambiguously benefit, but integration has an ambiguous effect on capitalists. However, consumers as a whole benefit from the integration and workers can more than offset the losses of the capitalists. On the other hand, Europe's integration with a low-wage economy raises rent but lowers the wage and the price of the labor-intensive good. Accordingly, capitalists unambiguously benefit, but integration has an ambiguous effect on workers. Again, welfare of all consumers rises and the capitalists can more than offset the losses of workers.     

The welfare effects of entry: the role of the input market

In a successive Cournot oligopoly, we show the welfare effects of entry in the final goods market with no scale economies but with cost difference between the firms. If the input market is very concentrated, entry in the final goods market increases welfare. If the input market is not very concentrated, entry in the final goods market may reduce welfare if the entrant is moderately cost inefficient. Hence, entry in the final goods market is more desirable if (1) the input market is very concentrated or (2) the cost difference between the incumbents and the entrant is either very small or very large. It follows from our analysis that entry increases the profits of the incumbent final goods producers if their marginal costs are sufficiently lower than the entrant’s marginal cost.     

影响非正规就业安全性的因素分析

非正规就业作为多种就业形式之一在促进中国经济增长、缓解日益严重的就业压力方面起着越来越重要的作用。但同时在当下劳动力市场中非正规就业的安全性却受到了严峻的挑战。影响非正规就业安全性的主要因素表现为非正规就业者贫乏的社会资本以及本身偏低的人力资本存量、强资本弱劳工的社会格局;歧视性的政策惯性;不完善的劳动力市场以及缺位的社会服务体系。     

Migration Policy in a Small Open Economy with a Dual Labor Market

The paper uses a two–sector efficiency–wage model to analyze the consequences of immigration for a small open economy with a dual labor market. Immigrants are characterized by an (exogenous) return probability. Legal regulations impose preferential hiring of natives or "old" immigrants. As a result, there is sectoral segregation between natives and immigrants, leading to discrimination of the type equal pay for equal work,but unequal "work." In the short run (with sector–specific capital), immigration has a positive first–order impact on natives' welfare if migration policy favors segregation through high return rates or restrictive hiring practices ("guest–worker system"). In the long run, its effect is only determined by factor intensities (2 ¥ 2 model). Finally, the improved integration of migrants yields efficiency gains and improves aggregate welfare of all residents.     

Consumption aspirations in dirty and clean goods and economic growth

This paper builds a two-sector, two-factor environmental model in which agents optimally choose the clean and dirty goods in order to display their social status. In contrast to the conventional notion, we show that greater social aspirations in consumption regardless of either clean or dirty goods have an ambiguous impact on growth, depending on whether the production of conspicuous goods is relatively labor- or capital-intensive, whether the production of conspicuous goods generates more or fewer emissions, and whether labor supply is or is not responsive to social status seeking. By connecting two conflicting aspects of consumer preference involving social aspirations and environmental concerns, our analysis offers a novel explanation for the environmental Kuznets curve and a theoretical support for the empirical possibility of a negative employment-growth relationship and the so-called Green New Deal. Our welfare analysis shows that social comparisons in consumption may increase, rather than decrease, social welfare. The Pigovian tax may only be socially sub-optimal in the two-sector economy because it is unable to completely correct the distortion caused by consumption externalities.     

Who gains from capital market integration? Tax competition between unionized and non‐unionized countries

The welfare effects of capital market integration are examined under a model of tax competition with two asymmetric countries. The asymmetry is expressed through the labour market: one country has a perfect labour market whereas the other country's labour market is unionized. Our results indicate that the welfare effects of capital market integration differ depending on whether governments are active or passive in attracting capital. In the absence of active governments, capital market integration benefits the country with a competitive labour market whereas it harms the unionized country. Capital market integration benefits both countries if governments are active and compete for mobile capital using taxes/subsidies.     

Soviet theories of economic demography: a survey

At this time Soviet demographic scientists maintain the position that population problems may in fact exist temporarily under socialism but that the planning principle will allow society to resolve population problems, through the use of the administrative, moral, and economic levers (subsidies, government policies, propaganda, education) emphasized by Urlanis (1974) and others. For planners to deal effectively with population management, the determinants of fertility and labor force participation must be established. The foundations of Soviet theories of human capital and fertility were laid by several writers. For the sake of simplicity, these are referred to as the Urlanis-Strumilin model, named after 2 pioneer researchers in Soviet demography and manpower economics. The formulations are based upon the writings of Strumlin (1964) and Urlanis (1974), supplemented by writings of numerous other Soviet researchers. Although their models avoid neoclassical terms such as marginal utility and income and price elasticities, they clearly employ these concepts. The Urlanis-Strumilin model, reduced to its basic elements, is a direct household utility maximizing model. The husband and wife, the household decision makers, must select optimal levels of child "quantity," child "quality," leisure, their own human capital (further education and training), and other goods. The Soviet theory recognizes that an increase in household income will increase relatively the demands for income elastic goods. The model postulates that the demand for child quality is inversely related to the price of children. The price of children is the opportunity cost of children, the major element of which is the income foregone by the mother in the course of childbearing and childrearing. The child quantity demand schedule has elastic and inelastic portions. The marginal utility of the 1st child is great. The marginal utilities of higher order children decline substantially. Families with at least 1 child can make substitutions between having more children and raising the quality of children already born. The question is what does the model predict will happen to fertility with economic development. The positive income effect will be limited as increased income is channelled into child quality and other superior goods rather than child quantity. The Urlanis-Strumilin model of labor supply assumes that the household allocates its time among market employment, household production. The model shows that the effect of children on female labor supply is not ambiguous. The presence of young children raises the value of home services and lowers long run market wages, thereby reducing female market labor supply. According to the model, the socialist state can manipulate labor supplies through several channels. It can reduce the value of home services by providing market substitutes. Soviet writers recognize the linkages between labor supply and fertility without formalizing the simultaneous relationship. The comparative statics of the Soviet model are essentially the same as those of the neoclassical model: an increase in "costs" of children will have, at best, a small positive impact on fertility.     

Strategic Rivalry With Spillovers Within Segmented Versus Integrated Markets

We consider a two-stage game with firms investing in R&D in the first stage while competing [a] la Cournot in the second stage. The firms are located in two countries, which are either segmented or integrated. R&D spillovers occur between firms located in the same country as well as between firms located in different countries.

We first examine the consequences of market integration on the impact of national and international R&D spillovers on innovative efforts, effective R&D, profits and total welfare. Comparing the resulting equilibrium levels, we subsequently conclude that market integration always leads to higher R&D investments and output if international R&D spillovers are limited, while the welfare consequences are ambiguous. Finally, we also analyze the welfare maximization problem of a ‘constrained social planner who can only decide on the level of R&D spillovers.     

Welfare Effects of Different Public Expenditures and Taxes in the Netherlands

This paper explores the welfare effects of public consumption, income transfers and public investment financed through different types of taxes. One surprising result is that, contrary to public consumption goods, public capital goods do not necessarily become less attractive if distortionary taxes, rather than lump-sum taxes, are necessary to finance them. The numerical simulations reveal that the net welfare effects of public investments in the Netherlands are typically positive if financed through lump-sum taxes or distortionary taxes on labor. However, if a source-based capital tax is adopted to finance public investments, the overall welfare effect may be negative.     

Nutritional efficiency wages and child labor

This paper formally analyzes the incidence of child labor by employing an overlapping-generations general-equilibrium model of a small open economy. An individual's ability determines whether or not he/she becomes a skilled worker. The supply side of the economy is composed of two sectors: a modern sector that produces a homogeneous good using skilled labor and physical capital; and an agrarian sector that produces a traditional good using unskilled adult labor, child labor, and land. An increase in foreign direct investment and improvements in education reduce the incidence of child labor. Emigration of skilled (unskilled) workers reduces (raises) the supply of child labor, while trade sanctions reduce the demand for child labor. Child wage subsidies have an ambiguous effect on the incidence of child labor while education subsidies are effective in reducing the incidence of child labor. Simulation analysis is used to investigate the welfare effects of the aforementioned policies.     

A welfare economic analysis of labor market policies in the Harris–Todaro model

This paper presents a welfare economic analysis of the benefits of various labor market policies in the Harris–Todaro labor market model. The policies considered are a policy of modern sector job creation, which I call modern sector enlargement (MSENL); a policy of rural development, which I call traditional sector enrichment (TSENR); and a policy of wage limitation in the urban economy, which I call modern sector wage restraint (MSWR). First, I analyze the inequality effects of these policies. I then perform two welfare economic analyses, the first based on summary measures of labor market conditions (total labor earnings, unemployment, inequality of labor incomes, and poverty rates) and the second based on dominance analysis in the labor market, in both cases assuming that the costs are borne elsewhere. The results of the welfare analyses are compared, and it is shown that TSENR unambiguously increases welfare in the labor market using both approaches, the other policies yield ambiguous results, and no policy is unambiguously welfare-decreasing.