Unionization,market structure,and economic growth

This article investigates the macroeconomic effects of unionization in a Schumpeterian growth model with an endogenous product market structure and a unionized labor market. The endogeneity of the market structure and the trade unionism of the labor market interact and jointly determine the equilibrium unemployment, firm size, number of firms, economic growth, and distribution of income between workers and firms. We show that unionization governs the distribution of income between workers and firms and the unemployment rate, but it does not give rise to any growth effect on the economy. In addition, unionization discourages potential entrants and hence decreases the equilibrium number of firms. These results echo the empirical observation in the sense that unionization raises unemployment and alters the distribution of income between workers and firms, but it does not give rise to a significant, real impact on the firms’ investment and the economy‐wide growth.     

R&D,unemployment, and labor market policies

This paper studies the effects of labor market policies on R&D activities and unemployment. I develop a search and matching model in which firms’ R&D decisions are endogenously determined. The model demonstrates that more intensive labor market policies that protect workers reduce the levels of R&D activities. This study offers a theoretical framework to understand the relationship between R&D activities, labor market policies, and unemployment which is discussed in empirical studies.     

Unionization,Unemployment, and Growth in Korea: A Cointegration Approach

Thanks to numerous empirical research studies, a general consensus has been reached on the effects of labor unionization on the economy such as unemployment and economic growth (GDP). However, most of the previous research examines the effects of labor unionization on the U.S. and U.K. labor markets using multiple regression models. By applying different statistical tools (multivariate cointegration analysis and vector error correction model) to Korean data, this paper finds: (1) there is a long-run equilibrium linkage among unionization, unemployment and economic growth; and (2) unionization unidirectionally and significantly Granger-causes unemployment and economic growth.     

Long-Run Economic Performance and the Labor Market

This article uses a simple variation of the Solow model to study the interrelations between economic growth and the labor market. We show, both analytically and empirically, that income and capital per worker in the steady state depend positively on flexibility of the labor market; that the steady-state unemployment rate depends positively on the rate of population growth and the productivity growth rate and negatively on the savings rate and flexibility of the labor market; and, finally, that labor market flexibility affects convergence toward steady state.     

Regional disparities and the Italian NAIRU

In this paper we estimate the Italian NAIRU using annual datafor the period 1951-96. We find evidence consistent with aggregatewage setting in Italy depending only on the rate of unemploymentprevailing in the Northern and Central areas of the country.There is evidence supporting the presence of a long-run cointegratingrelationship among unemployment in the Northern and Centralareas, the tax wedge, the real interest rate and a measure ofunion power. The response of unemployment to exogenous shocksis sluggish, suggesting that persistence is an important featureof the Italian labor market.     

A Cointegration Model of Age-Specific Fertility and Female Labor Supply in the United States

Cointegration methods suitable for estimation and testing with nonstationary data are applied to U.S. time-series data on age-specific fertility rates, female labor force participation rates, women's wages, unemployment rates and educational attainment, and male relative incomes. Likelihood ratio tests indicate the existence of two cointegrating relations that are identified as a fertility equation and a labor supply equation, respectively. Estimated long-run relations are consistent with economic models of fertility and female labor market behavior, and these results are robust across both age-groups and several alternative model specifications.     

Jobless Recovery: A Time Series Look at the United States

We use vector auto regression models controlling for log differences in gross domestic product (GDP), the unemployment rate, and changes in the unemployment rate to show that following a recession, the rate of decrease in the unemployment rate significantly slowed over time. Controlling for GDP growth rates, we find two structural breaks indicating weaker recoveries in the unemployment rate over time, i.e. recoveries that are increasingly jobless. The first break is in 1959, and the second is in 1984 coinciding with the usual timing of the Great Moderation. Using the 7.85% unemployment rate at the end of 2012 and assuming average annual recovery growth of 2%, the structural breaks imply an additional two full years are necessary to return to a historical long-run average of 5.5%. We empirically explore possible causes proposed in the literature including industry composition, participation rates and social benefits. Demographic shifts in the labor force and changing industry composition appear to be the strongest contributors to jobless recovery.     

Sectoral shifts and rates of profit

Summary In this paper the role of the capital market is analysed onthe base of a dynamic two-sector model of a closed economy. The way in which the allocation of investment is related to sectoral differences in the rate of profit and to diverging sectoral capital needs as well, turns out to be of great importance for the whole economy. Conclusions are drawn with regard to the long-run equality of profits after an initial disturbance. The role of the capital market is analysed too in connection with the functioning of sectoral labour markets. As far as unemployment and differing sectoral unemployment rates are concerned, the importance of the labour markets is obviously overwhelming. On that base it is possible to make some remarks on macroeconomic and sectoral investment policies with regard to employment.     

IS THERE A TRADE-OFF BETWEEN EMPLOYMENT AND GROWTH?

This paper investigates how unemployment and the long-run growthrate influence each other in steady state. It builds on Pissaridesbut Ramsey preferences are introduced, influencing the interestrate. A central finding is that there is a trade-off betweensuccessful growth and unemployment if one considers direct changesin the growth rate, but when the changes are indirect, whatis good for growth is also good for employment. Thus to increaseboth growth and the employment rate, the policy implicationseems to be that one should improve incentives (lower capitaltax or unemployment benefits) rather than subsidize R&Dincentives.     

Racial differences in the feminization of poverty

The feminization of poverty refers to female householders and their children becoming an increasing percentage of the poor population. After examining effects of race on poverty of female-headed households from 1959 to 1989, this study investigates statistical relationships among female poverty, economic and labor market conditions, and transfer payments (specifically AFDC) by means of the Granger causality test over the period from 1966 to 1988. This study reinforces the plausible assumption that policies which would lower the unemployment rate of females and would increase real economic growth could be expected to reduce the number of poor female households.     

Rural-Urban Wage Differentials,Unemployment, and Efficiency Wages: An Open Economy Policy Analysis

This paper analyzes the desirability of various policies designed to counteract the distorting nature of an equilibrium rural-urban wage differential in a small, open, two-sector economy with urban unemployment. A dual labor market model with an efficiency wage in the urban sector and urban unemployment is analyzed for the distributional and national output effects of an urban wage subsidy, an urban production subsidy, and a tariff on the urban good. While a small subsidy or tariff raises the value of national output, redistribution effects may limit the viability of intervention. However, subsidies can also be Pareto improving policies.     

Fluctuations in Unemployment and Industry Labor Markets

Throughout the 1990s, and particularly in the mid- to late-1990s, the Japanese employment situation went from bad to worse. We investigate the causes of rising unemployment in Japan, using data on individual workers from the “Special Survey of the Labor Force” between 1988 and 1999. This research focuses on the effect of labor market segmentation by industry on labor flows. Our findings reveal that unemployment in the construction industry and, more recently, in the service industry has contributed greatly to the national unemployment rate. We also find that most successful job transfers occur within the same industry, even though workers may experience some periods of unemployment. Finally, our results show that labor market conditions in each industry affect the probability that a worker will fall into unemployment as well as the probability that an unemployed worker will find new employment. These findings suggest that the Japanese labor market is segmented by industry and this segmentation contributed to the worsening unemployment in Japan. J. Japan. Int. Econ., December 2001, 15(4), pp. 437–464. Department of Economics, Dokkyo University, 1-1 Gakuen-cho, Soka-shi, Saitama 340-0042, Japan; Graduate School of Economics, Nagoya University, Furo-cho, Chikusa-ku, Nagoya, 464-8601, Japan. © 2001 Elsevier Science (USA).Journal of Economic Literature Classification Numbers: J63, J64.     

Labor market deregulation and globalization: empirical evidence from OECD countries

This paper empirically investigates the influence of globalization on various aspects of labor market deregulation. I employ the data set by Bassanini and Duval (2006) on labor market institutions in OECD countries and the KOF index of globalization. The data set covers 20 OECD countries in the 1982–2003 period. The results suggest that globalization did neither influence the unemployment replacement rate, the unemployment benefit length, public expenditures on ALMP, the tax wedge, union density nor overall employment protection. In contrast, protection of regular employment contracts was diminished when globalization was proceeding rapidly. In fact, domestic aspects, such as unemployment and government ideology are more important determinants of labor market institutions and deregulation processes in OECD countries than globalization. For this reason, working conditions of unskilled workers are not likely to deteriorate and the jobs of unskilled workers are not likely to disappear in the course of globalization. All this is, of course, not to insinuate that globalization has any benign influence on labor market institutions.     

The link between unemployment and labor force participation rates in Japan: A regional perspective

This paper explores the co-integrating relationship between unemployment and the labor force participation rate in Japan from a regional perspective. The univariate co-integration tests indicate that the “no co-integration” hypothesis cannot be rejected in Northern-Kanto, Hokuriku and Kyusyu. Because the univariate co-integration approach might suffer from low power we employed a panel version of the co-integration test recently developed by Westerlund (2006) that also considers the possibility of multiple structural breaks in the level of individual co-integrating equations. The test results lend support for an overwhelmingly long-run relationship between the two variables across regions. Accordingly, this finding is not in line with the unemployment invariance hypothesis. As a result a nationally orientated employment policy aimed at improving the unemployment and labor force participation rates might be preferred over a region-specific employment policy in Japan.     

A model of industrial hollowing-out of neighboring countries by the economic growth of China

Our model is a multi-sectoral version of Romer's variety expansion model that reveals the presense of industrial hollowing-out. The basic idea of the model is similar to that of Lucas [Lucas, Robert E., Jr. 1993, “Making a Miracle.” Econometrica 61, p. 273–302.]. An increase in (external) social experience capital through learning by doing raises labor productivity. It also increases the social capacity to adopt more technology-intensive goods. The model provides the following implications: First, even though the economic growth of China raises the exports of low-level technology goods from neighboring countries to China in the short run, this can lower their future growth potential by lowering the accumulation of social experience capital. Second, without increasing social capacity to adopt more technology-intensive goods, those countries can experience industrial hollowing-out, lower equilibrium wage rates, and a higher unemployment rate. Third, as with conclusions garnered by standard geography models, both a huge market size and very low-level wages in China imply a continuation of discontinuous and lumpy loss of jobs and sectors. In this context, various policies to raise social capacity, besides retraining programs and unemployment safety nets, should be provided by the government to avoid industrial hollowing-out and to allocate labor efficiently.     

Empirical analysis of urban youth unemployment in Ethiopia

Lack of adequate jobs and long unemployment duration becomes a challenge for urban youth in Ethiopia. This study empirically examines youth unemployment and its determinants in urban Ethiopia. It aims to examine the incidences and durations of youth unemployment and their determinant factors. In addition to logistic regression model, a nonparametric Kaplan–Meier survival analysis and Cox proportional hazards model are used. The results indicate that both the incidence and duration of youth unemployment is higher in urban Ethiopia. The hazards model shows that the hazard rate of leaving unemployment are significantly related to individual characteristics such as age and educational level of the youth, and labor market factors such as experience and job market information. Gender and regional disparities are observed. Young women exit unemployment much slower than men and the exit rate increases with age. Big and relatively more urbanized regions have a higher incidence and longer duration of unemployment spells than the small regions. Finally, based on the results, the study suggests that there is a need to adopt target policies that will promote skills and employment opportunities for the youth. Providing entrepreneurship training and startup capital to encourage youth to create rather than seek jobs is critical in this regard.     

Bringing Unemployed Back to Work: Effective Active Labor Market Policies

We present a theoretical analysis of different types of active labor market policies in the context of a search-matching model. We find that labor market training is effective in bringing down unemployment while public employment services and subsidized jobs are not effective at all. This theoretical finding is confirmed in an explorative empirical analysis using data from 20 OECD countries.     

Jobs with different wage determination mechanisms, social efficiency and unemployment

The purpose of this paper is to construct a theoretical framework for the labor market, which is composed of a variety of jobs with different wage determination mechanisms. We identify an equilibrium in which some firms post a wage and others bargain with workers. This paper shows that the proportion of firms adopting wage bargaining in a decentralized equilibrium is below the socially optimal level. We identify policies to increase this proportion and to improve social efficiency. Furthermore, we examine the impact of those policies on unemployment. The results of this study will determine the direction of employment policy on the labor market with various employment styles.     

Does the recent success of some OECD countries in lowering their unemployment rates lie in the clever design of their labor market reforms?

In recent years some OECD countries were successful in loweringthe unemployment rate substantially while other countries werenot. In this paper we investigate to what extent successfulcountries implemented a comprehensive set of institutional reforms.We present a theoretical framework to investigate the relationshipbetween unemployment and labor market institutions (LMI) suchas labor taxes, unemployment benefits, employment protection,union bargaining power and (de)centralization of bargaining.In our empirical analysis of data over the period 1960–99of 17 OECD countries we show that particular combinations ofLMI are responsible for low unemployment rates.     

Financial market integration,exchange rate policy,and the dynamics of business and employment in Korea

We study the consequences of different degrees of international financial market integration and exchange rate policies in a calibrated, medium-scale model of the Korean economy. The model features endogenous producer entry into domestic and export markets and search-and-matching frictions in labor markets. This allows us to highlight the consequences of financial integration and the exchange rate regime for the dynamics of business creation and unemployment. We show that, under flexible exchange rates, access to international financial markets increases the volatility of both business creation and the number of exporting plants, but the effects on employment volatility are more modest. Pegging the exchange rate can have unfavorable consequences for the effects of terms of trade appreciation, but more financial integration is beneficial under a peg if the economy is subject to both productivity and terms of trade shocks. The combination of a floating exchange rate and internationally complete markets would be the best scenario for Korea among those we focus on.