Sources of Job and Worker Flows: Evidence from a Panel of Regions

Abstract. This study explores the structure and the dynamics of regional job and worker flows. The measures of job and worker flows are related to economic fluctuations, demographic factors and industry structure by employing the data of 85 Finnish regions over the period 1988–97. It is shown that labour market dynamics differ markedly between regions. As in previous analyses of linked employer–employee data, job and worker flows are shown to behave cyclically. In addition, the results indicate that observable differences in regional productivity, in‐migration, demographics and industry structure help to explain the prevailing disparities in regional labour markets.     

Do Foreigners Cushion Native Jobs? The Case of European Regions in the 1990s

Abstract. This paper investigates whether foreigners cushion native labour during the phases of the economic cycle. The theoretical model, based on the work of Blanchard and Katz (Brookings Papers on Economic Activity 0(1): 1–75, 1992), assumes that foreigners supply labour with a higher wage elasticity than natives. The empirical analysis, based on an unbalanced panel of 161 European regions during 1988–97, shows that following a labour demand shock the variability of native employment growth is lower the higher the proportion of foreign citizens in the local labour force. These results suggest that foreigners absorb some of the effects of the shock, shielding natives from its full impact. The analysis also reveals that the main channel mediating this ‘cushioning’ effect is the inter‐regional migration of foreign workers, followed (as a far distant second) by their higher/lower unemployment rates.     

The prospect for petrochemicals—merger and rationalization?

The petrochemical industry is an international industry subject to global competition by regional blocks. This aspect must always be borne in mind when considering the industry's future. As far as producing base chemicals is concerned, oil is likely to remain a major feedstock for many years to come. That is not to say that it will not become increasingly short and for this and other production reasons closer links are likely to be developed between chemical manufacturers and oil producers and refiners—be they countries or companies. With escalating energy and labour costs there must be a greater concentration on increasing production efficiency and reducing process costs. The industry must be prepared to employ the latest technology whenever possible and there will be continuing development of more sophisticated chemical products and applications. There may well be the emergence in Western Europe of more distinct speciality and commodity chemical producers with rationalization occuring by specialization rather than broadening mergers.     

Tax Structure and Female Labour Supply: Evidence from Ireland

How great an effect does the structure of income taxes have on female labour supply? This issue is investigated using a discrete‐choice static labour supply model for married couples in Ireland. The model incorporates fixed costs of working and simultaneously explains participation decisions and preferred hours of work. The model is estimated using data from the 1994 wave of the Living in Ireland Survey. Simulations examine the labour supply effects of introducing greater independence in the tax treatment of married couples, compared with an income‐splitting system, and alternative forms of tax cuts.     

Labour Legislation and Institutional Aspects of the Brazilian Labour Market

Abstract. This paper analyses the structure of the Brazilian Labour Code (CLT), the changes introduced since its approval in 1943, emphasizing the new Federal Constitution of 1988, the costs of labour and of dismissals for employers, the structure of union organizations, the regulation of collective bargaining and capital labour conflicts, and the process of wages determination. We also analyze the evolution of strike activity, and the evolution of wage differentials and functional distribution of income between profits and wages in industry in the last 15 years.     

How Much Does Hiring and Firing Cost? Survey Evidence from a Sample of Italian Firms

We analyse the Italian labour market, which is typically considered to be highly regulated. We focus on the costs imposed on firms by the institutional environment in which they operate, and on the adjustment strategies that they pursue as a result. We have followed two complementary approaches: the analysis of the development of the laws relating to hiring and firing, together with a set of interviews of 61 manufacturing firms. This also allows us to quantify the extent of turnover costs on the total labour costs. Hiring costs, which include recruiting and training, range between 2.0 and 2.6 months of labour costs; firing costs range from less than half a monthly labour cost to 20 months of labour costs in cases of conflict.     

Male–Female Labour Market Participation and Wage Differentials in Greece

This paper is an empirical study of the development of labour market participation and wage differentials between males and females in Greece between 1988 and 1994. There is little known about the position of women in the Greek labour market. This paper uses survey data generated by the Greek National Statistical Service. The decision to engage in paid employment and the resulting remuneration are studied using selectivity–corrected earnings estimations. Oaxaca and Ransom decompositions and counterfactual analysis show that the adverse treatment of female labour market participation is the largest identifiable reason why the wage gap is there and why it increased between 1988 and 1994.     

Labour‐market Institutions and Macroeconomic Shocks

Abstract. Macroeconomic shocks and labour‐market institutions jointly determine employment growth and economic performance. The effect of shocks depends on the nature of these institutions and the effect of institutional change depends on the macroeconomic environment. It follows that a given set of institutions may be appropriate in one epoch and not in another. We derive a dynamic model of labour demand in which the effect of firing costs on labour demand depends on the macroeconomic environment: when the level of macroeconomic activity is expected to drop and/or the trend rate of productivity growth is small, a rise in firing costs affects mainly (and adversely) the hiring decision and not the layoff decision. This makes firing costs harmful to employment when it may appear most appropriate. In contrast, firing costs can raise employment during periods of high growth and positive shocks. Our hypothesis is supported by empirical results using OECD data.     

Trade and Labour Markets: Vertical and Regional Differentiation in Italy

The labour market misfortunes of the less skilled and rapid growth of international trade in manufactured goods with less advanced countries are linked by the paradoxical observation that trade theorists are in the forefront of those denying the importance of trade in income distribution. This paper analyses this conclusion by stressing the importance of vertical differentiation of trade flows and regional differentiation of skills in order to identify labour market effects of trade integration. Vertical and regional differentiation in trade and labour markets are analysed for a country, Italy, where these two elements seem to play a crucial role. The results show a likely displacement effect on unskilled labour due to trade flows with less advanced countries. Given the characteristics of Italian trade and labour markets, a stronger trade‐induced displacement effect on demand for unskilled labour takes place in the North of the country. Thus the vertical differentiation in Italian intra‐industry trade is a warning against understating the effect of trade on labour markets if product heterogeneity is not adequately considered. The regional differentiation of skill intensity is another warning against understating the effect of trade on labour markets whenever cross‐sectoral effects and the change in relative specialization are not adequately considered.     

Subjective Measures of Employment Opportunities and Interregional Migration

Abstract. Empirical studies of interregional mobility routinely use regional unemployment differentials to characterize economic incentives to move between regions. In this paper, we present a new regional labour market indicator computed from survey data in which respondents are asked to evaluate local employment opportunities in their resident municipality and surroundings. The subjective measures of satisfaction with local employment opportunities have positive and significant impact on interregional migration flows, also when controlling for traditional measures of regional labour market conditions, including the regional unemployment rate. Contrary to most European studies, we find that regional labour market conditions have a strong effect on interregional migration flows.     

Taxes and Women in the Labour Force in a Southern European Country: The Case of Portugal

On looking at the female labour supply in Europe, it is immediately noticed that there is a large variation among countries. One possible explanation for this fact is that different countries have different tax policies, leading to variations in incentive and costs. This has been investigated in papers such as that of Gustafsson (1992a,b) for countries such as Germany and Sweden. The same exercise has been performed by the present authors for a low-income, southern European country, Portugal, which has one of the highest rates of female participation (out of line with neighbouring countries). Female labour supply does not seem to be very sensitive to fiscal policies, as those policies have only a small influence on the take-home wage. This result appears to be independent of the fact that the female labour supply shows a higher elasticity to wages than that which has been reported for other countries. The present authors also show that Portuguese women contribute a much larger proportion of family earnings than do their counterparts in Sweden and Germany, and that the Portuguese fiscal system is rather neutral. Further studies with data from other countries are needed in order to shed more light on the issue of tax harmonization.     

A Structural Approach to the European Labour Market

The structure of the European labour market is highly differentiated by geo-graphical area. If the 1992 integration is likely to induce short-medium term adjustment effects on employment, these will mostly affect regional labour markets. Negative adjustments will follow different distribution patterns, probably exacerbating current regional disequilibria. On the other hand, still little known are the geographical features of the European economic, social and production structures. Although many studies have recently concentrated on the analysis of local labour markets, few of them have addressed the issue of Community regions. Through multivariate and cluster analyses of structural data on regional labour markets, the paper offers a confirmation of the explanatory power of local market analysis, as applied to the European area. The structural features of each elementary area are captured by three factors only that allow the construction of a coherent classification of EEC regions in four major clusters. This classification is used to identify the “weak areas” that, after a reconsideration in unified terms of European cooperation policies, should be the object of new development interventions.     

Labour Policy in the Federal Republic of Germany: Challenges and Concepts

ABSTRACT: This paper describes how German labour policy, both employment policy and active labour market policies, has developed between 1974 and 1987. Government intervention for full employment in a welfare state, a cooperative system of industrial relations, an active labour market policy, and a comparatively efficient system of vocational and adult education did not prevent the loss of full employment in 1974. But persistent labour market slack until today has not fundamentally changed the climate of relative political and social calm. The basic concepts, programmes and specific measures of labour policies pursued in the FRG are surveyed with special reference to their costs and effects on employment and the structure of unemployment. The challenges to labour policy stem from three complete business cycles around a slightly falling trend in employment and the bad prospectives of the German labour market until the year 2000. Four major measures of labour market policy now reduce registered unemployment by about 400,000 in the mid 1980s. Total costs of unemployment amounting to 57 billion DM per year offer financial alternatives to create jobs and to reduce working hours. Finally, actual proposals under discussion in Germany are examined in order to combat unemployment in a determined commitment to full employment immediately.     

Labour Market and Decentralized Decision-making: An Institutional Approach

The persistent failure in the labour market is due to uncertainty and asymmetric information, and relies on a reconsideration of the bargaining process. This process is not generated by individual action but rather by the behaviour of social groups and institutions in which State intervention can immprove the efficiency in matching demand and supply. In this framework we will discuss the ways by which institutional decentralization can be implemented in a labour market characterized by deep regional differences and by long-term unemployment persistence as in Italy. The main conclusion is that this policy option better fits the active labour policies. In fact the actual aim of such supply-side policies is to reduce the regional and skill mismatches and therefore it needs a substantial involvement of local public agencies.     

Cost accounting in manufacturing: dawn of a new era

Abstract

Advances in the technology of manufacturing planning, control and operation have made conventional cost accounting practices not only obsolete but dangerous. As a portion of total factory cost, direct labour costs have declined dramatically due to improved quality materials, fewer interruptions, automation and robotics. Overhead costs, conversely, have increased greatly and the fixed components now predominate. Charts of accounts contain many trivial items and lack those now considered very important. This article presents the needed revisions.     

Wage Dispersion and Equilibrium Search Models: Some Evidence from Italy

This paper provides a structural estimation of an equilibrium search model with on‐the‐job search and heterogeneity in firms' productivities using a sample of Italian male workers. Results indicate that arrival rates of offers for workers are higher when unemployed than when employed and firms exploit their monopsony power when setting wages. As a result, workers earn far less than their marginal product. The model is then used to study regional labour market differentials in Italy. Wide variation in frictional transition parameters across areas helps to explain persistent unemployment and wage differentials.     

Temporary Contracts,Employment Protection,and Collective Bargaining

This paper examines the effect of employment protection in a matching model with endogenous job destruction, collective bargaining, and two types of employment contracts. Using this framework, we show that (i) the impact on job creation and job destruction caused by reducing the firing costs associated with temporary jobs depends on the labour unions' bargaining strength and the gap in firing costs between contracts; (ii) reducing the firing costs associated with permanent jobs unambiguously decreases equilibrium unemployment if labour unions have strong bargaining power; and (iii) the impact caused by the firing costs differs between collective and individual bargaining.     

Efficiency Wage,Fixed Employment Costs,and Dual Labour Markets

The standard efficiency wage‐based explanation of labour market dualism hinges on the existence of differences in monitoring across sectors. The paper proposes fixed employment costs as an alternative source of wage differentials for homogeneous workers. It shows that firms with larger fixed costs pay higher wages in order to elicit more effort from their workers, and tend to have higher capital/labour ratio and labour productivity. The model generates both involuntary unemployment and involuntary confinement in the secondary sector: high effort–high wage jobs are preferred to low effort–low wage jobs and either are preferred to unemployment. The proposed framework can also account for the various types of treatment of marginal jobs in primary sector firms envisaged by Doeringer and Piore (Internal Labour Markets and Manpower Analysis, 1971). In particular, an increase in fixed costs beyond a certain level may induce primary sector firms to restructure, segment production, and enter the secondary sector, thus converting their jobs into secondary jobs. From a welfare point of view, we cannot state in general the desirability of subsidizing fixed employment costs; however, we show that an employment subsidy financed by a wage tax is able to increase employment with no loss in terms of production.     

Facts and Theories of the Italian Labour Market (1970-1985): A Time Series Analysis of Wages,Employment and Prices

ABSTRACT: ln this paper an attempt is made to determine whether observed patterns of intertemporal variability in a number of Italian labour market characteristics are consistent with the predictions forthcoming from three prominent models of aggregate labour market behaviour. The behavioral models included in the analysis are: a) intertemporal substitution labour supply, b) staggered wage contracts, and c) intertemporal labour demand with adjustment costs. The empirical results provide relatively more support for the validity of the adjustment cost model.     

Regional Labour Market Adjustment: Are Positive and Negative Shocks Different?

This paper analyses regional labour market adjustment in the Finnish provinces during 1971–96. It investigates the interrelations of employment, unemployment and labour force participation to examine how a change in labour demand is adjusted to. The study questions the usual assumption that positive and negative shocks evoke similar adjustment processes. Instead, we test for the possibility that the effects of positive and negative shocks are asymmetric. The analysis reveals that there is little asymmetry in the adjustment to region‐specific labour demand shocks, but adjustment to total (region‐specific plus common component) shocks displays more asymmetry. The region‐specific component of a labour demand shock has short‐lived effects on unemployment and participation, and its effect on employment is very small but permanent [persistent?]. Initially, most of the fall in employment is absorbed by the unemployment and participation rate, but after a few years migration plays a larger role in the adjustment process.