Labor market institutions and firms’ location choices

The paper evaluates the empirical effects of labor market institutions (LMI) on foreign direct investment (FDI) decisions using an individual dataset describing French firms’ expansion strategies in OECD countries over 1992–2002. First, we provide evidence that labor market institutions do matter in location decisions. Precisely, we show that labor market rigidity significantly reduces the country’s attractiveness for foreign investors. Yet, the effect is of limited magnitude compared to FDI determinants related to the country’s market potential or supply access. Second, we go deeper in the precise role of various LMI dimensions. In line with the literature, we find that stringent employment protection laws have a dampening effect on the location probability. Besides, we show that this is not the only dimension that matters. In particular, we find that the generosity of the unemployment benefit system plays a significant negative role on the country’s attractiveness, even once the role of employment protection is controlled for.     

A MODEL OF GENERAL TRAINING, BANKING, AND LABOR TURNOVER

Conventionally, models of general training assume perfect capital markets; as a result, workers smooth their consumption stream through borrowing. In these models general training has no effect on labor turnover. I develop a model of general training where workers have diminishing marginal utility from consumption, capital markets are imperfect, and a firm cannot monitor the match quality with another firm of a worker who quits. It is shown that in the absence of a surplus effect from training, raising the level of general training steepens the worker's wage profile for reasons associated with consumption smoothing and labor turnover. However, with the surplus effect, results may be ambiguous.     

Expansionary Fiscal Contractions? Evidence from Panel Data

We examine the ability of the expansionary fiscal contraction (EFC) hypothesis to explain the performance of OECD economies during fiscal crises. We find some limited evidence in its favour: if public consumption is reduced in response to a fiscal crisis (as defined by a high level of debt), private consumption does seem to increase. However, the size of the effect is smaller than that typically found in other studies. Furthermore, the increase in private consumption is usually not sufficient to offset the direct effect of a reduction in public consumption on output—fiscal contractions are not literally expansionary.     

Identification of simultaneous equation models with measurement error

This paper establishes identification conditions for a simultaneous equation model in which some of the exogenous variables are measured with error. It is assumed that observational information is confined to the covariance matrix of the observed variables and that prior information on the structural coefficients and error variances takes the form of zero restrictions. The primary result is an easily-applied assignment condition for checking whether or not there are an adequate number and variety of prior restrictions to identify the structural parameters.     

Workperformance,interests, powers and environment: The case of cyclical slowdowns in a Hungarian factory

Sociologists and psychologists, and economists have tended to stress different causes of fluctuations in productivity: the first have emphasized non-economic factors, the second, stressed imperfections of the incentive system. The article tests these views on the basis of a close investigation of production and labour relations in a factory of the Hungarian railway equipment industry.     

Indexation of UNCTAD core commodity prices by buffer stocks or export quotas?: A comparison of the benefits for two developing economies

General equilibrium models are used to study the resource allocative and income implications for the Ivory Coast and Kenya of indexation of agricultural commodity prices. Two indexation methods are investigated, (i) buffer stock transactions, and (ii) export quota entitlements. The results suggest that there are efficiency losses associated with the buffer stock option which reduce the GDP gains below that indicated by the pure terms of trade gains. Efficiency gains associated with the export quota method however result in GDP increases above those indicated by the pure terms of trade gains.