Horizontal mismatch and vocational education

ABSTRACT

Recent literature suggests that vocational education and training (VET) provides individuals with smoother transitions into the labour market but lower wages over the lifecycle, compared to general education. A possible mechanism explaining lower wages is horizontal mismatch, defined as a mismatch between the type of qualifications acquired by individuals and those required for their current job. Some studies have found higher mismatch wage penalties when individuals’ education is more specific, suggesting higher penalties for workers with VET. Therefore, we analyse horizontal mismatch in Switzerland, the country with the highest proportion of firm-based VET in the OECD. We use two measures from the Swiss Household Panel that cover different aspects of horizontal mismatch. While we find sizable mismatch wage penalties in OLS estimations, effects are small or insignificant in fixed-effects regressions. This holds for workers with vocational and general education background alike. We conclude that VET is more transferable than often assumed. We finish with recommendations on concept and methods for future analyses of horizontal mismatch.     

Financial integration and exchange rate determination: a Brazilian case study

This paper investigates the impact on exchange rate determination of two recent changes in developing and emerging countries’ financial integration: first, the rising volume and heterogeneity of short-term portfolio flows; second, foreign investors’ increased exposure to domestic rather than foreign currency assets. In its analysis of Brazil, the paper shows that both changes have potentially destabilizing implications for the exchange rate and may create the risk of self-feeding bubble dynamics leading to large and sudden swings in exchange rates. The results have important implications for the regulation of international capital movements and choice of exchange rate regime.     

Subordinated Financial Integration and Financialisation in Emerging Capitalist Economies: The Brazilian Experience

This paper analyses the recent changes in financial practices and relations in emerging capitalist economies (ECEs) using the example of Brazil. It argues that in ECEs these financial transformations, akin to the financialisation phenomena observed in Core Capitalist Economies (CCEs), are fundamentally shaped by their subordinated integration into a financialised and structured world economy. To analyse this subordinated financialisation, the paper draws on the framework of international currency hierarchies. It shows by means of two specific processes how the existence of a hierarchic international monetary system has changed the financial behaviour of domestic economic agents, and with it the structure of the financial system. The first process highlights the phenomenon of reserve accumulation and the changing behaviour of domestic banks. The second points to ECEs’ sustained external vulnerability and its impact on the operations of Brazilian non-financial corporations. The paper also shows that not only were these financial transformations shaped by ECEs’ subordinated financial integration, but also that it was these financialisation tendencies themselves which contributed to cementing existing hierarchies and further deepened existing asymmetries between ECEs and CCEs.     

THE SCOPE FOR NON‐PROFIT OBJECTIVES IN A MIXED OLIGOPOLY UNDER INTERNATIONAL COMPETITION

We ask how the scope for non‐profit objectives in a state‐owned enterprise (SOE) in a mixed oligopoly changes because of competition from firms in another country. There is no change if costs and demand are given, unless the trade partner is a low‐cost country. However, the scope for non‐profit objectives is limited by the country's relative size if wages are market‐clearing and if workers and firms are stationary, because of reduced competitiveness caused by higher real wage rates. The total surplus is then not affected by the actions of the SOE. International trade does not otherwise reduce the scope for its non‐profit objectives if workers and firms are mobile, but productivity differences might require restrictions in order to avoid a complete relocation of the workforce in either country.