Is Imperfect Competition in the Product Market Relevant for Labour Markets?

Recent research in macroeconomics emphasises the importance of imperfect competition in the product market for labour market outcomes. We investigate one aspect of this issue by specifying a dynamic labour demand model where firms face different degrees of competition in the product market and test its predictions for 299 US manufacturing industries. We find that the long-run equilibrium level of industry employment as well as the speed of labour demand adjustment decreases with market power. Our results imply that imperfect competition in the product market explains part of the observed labour market rigidities and also sheds new light on two “stylized facts” in industrial organisation, the observation of procyclical movements in productivity and price–cost margins in concentrated industries.     

From the Marginal Equilibrium to the Generational Paradigm. Microeconomic Behavior in a Dynamic Model of Social Equilibrium

ABSTRACT: The purpose of this paper is to formulate an initial hypothetical framework describing microeconomic behavior of labour market agents in a dynamic model of social equilibrium. To this end we outline an alternative hypothesis concerning the process of determination of labour demand and of the allocation of employment requirements on a generational basis. Reformulating the microeconomic model to consider labour as a quasi-fixed factor, comparable to a population, and which follows a biological, more than a mechanical logic, the paper assigns primary roles to careers and dual markets, the first-job market, and factors of asynchrony and social control mechanisms. At the same time, the generational determinants of the supply of labour are identified, together with the processes of identification and selection between labour demand and supply. On the basis of these considerations the concept of the generational paradigm is brought into the analysis. This paradigm designates the set of determinants of labour supply and demand behavior that are functions of time, of social and institutional variables, and of the technical and organizational structure of production. The paper ends with an initial thesis that the working of the generational paradigm is a crucial factor in the overall social equilibrium.     

Employment Spells and Previous Labour Market History

ABSTRACT: In this paper the author analyses the influence of the past labour market history of an individual on the length of employment spells he will experience. Most empirical works emphasize the so called Markov model, which implies that the probability of an individual changing state depends only on the state currently occupied. Using data on the labour market histories of a sample of unemployed persons, we specify and estimate a reduced form model where job separation rates arc a function of the entire labour market history and of variables related to personal characteristics and labour market conditions. The empirical analysis supports the claim that transition probabilities are related to past labour market history.     

Labour Policy and Determinants of Employment and Wages in a Developing Economy with Labour Shortage

Using data from a sample of 1,099 workers, this paper investigates the determinants of employment and wages for workers in the United Arab Emirates. The paper further examines the wage distribution and the decomposition of the wage gap between the public and the private sectors. Results of the study are consistent with the dual labour market theory and indicate that the labour market in the United Arab Emirates is segmented based on sectors (public versus private) and types of workers (nationals versus non‐nationals). The study concludes with a discussion of the implication of these findings for the effectiveness of labour and economic policy.     

The Determinants of Contract Strikes: A Microeconometric Analysis

ABSTRACT: This paper explores the determinants of contract strikes using micro-data referred to a regional economic system (the Veneto region). An effort is made to build up suitable variables to test the hypothesis that strikes are the outcome of an exchange with asymmetric information. The results obtained with a logit model validate the implications of this theory: strikes turn out more likely when a firm is in low state, the industry labour market is tight, and the union is unable to get information from management. Other significant findings are the dependence of strike action on the workforce composition, the industry and location in which the firm operates, its kind of property and productive processes, and the season in which the bargaining takes place.     

Evaluating the Dynamic Effects of Active Labour Policies in Italy

Abstract. This paper analyses whether active labour market policies (ALMPs) have differing effects on unemployment and employment dynamics according to the particular region in which they are implemented. To this end, it analyses alternative theoretical and econometric models thought to capture the possible effects of active labour market policies on labour force dynamics. The econometric methodologies implemented are the generalized method of moment (GMM) and the panel vector autoregression (P‐VAR). The evidence yielded by the GMM models suggests that the effects of different ALMPs on unemployment are dissimilar across the Italian regions. It follows that some active programmes are likely to have a greater effect in the South than in the North. The results of the P‐VAR models estimated are synthesized by impulse response analysis and forecast error variance decomposition. The impulse response analysis suggests that an increase in total ALMP gives rise to: (i) a decrease in the unemployment rate; and (ii) a significant increase in labour force participation. More interestingly, the results obtained from the error variance decomposition analysis show that unemployment movements are not driven by shocks in the ALMPs and that, especially in the northern regions, atypical contracts shocks account for a substantial portion of unemployment dynamics.     

Gender Differences in Transitions from Unemployment: Micro Evidence from Finland

Abstract. This paper examines gender differences in labour market transitions in Finland. The empirical analysis carried out using multinomial logit model is based on a 1996 sample of unemployed people. The results indicate that female labour market position is inferior to male and that female labour market outcomes are more responsive to family‐related background characteristics. Previous unemployment is observed to be particularly scarring on male labour market position. According to the results education improves female labour market position significantly. Higher education diminishes gender differences in the labour market and is therefore a particularly equalizing factor.     

A Stock-Flow Model to Analyse and Forecast Labour Market Variables

ABSTRACT: In confronting problems of employment and unemployment, students of the labour market, and economists in general have focused mainly on the determination of the level of such variables. Much less attention has been paid to such questions as: how many persons have entered the area of employment and the labour force in various time periods, and how many have exited; their sex and age distribution; and the determinants of the level and structure of flows amongst the various labour market conditions. Yet it appears superfluous to underscore the relevance of such questions. To illustrate, suffice it to recall that in Italy, the present level of employment is essentially the same today as it was in 1961‘; but this has not prevented whole generations of young people from 'stably’entering the employment area, albeit with varying degrees of difficulty in different periods. As for the numerous statistical surveys of labour market flows in a range of countries, and as for the works of job search theorists², it should be observed that such surveys and analyses essentially concern conjunctural phenomena. Consequently, these authors have paid no attention to the distinction between short-run turnover and generational turnover, or to the extremely singular characteristics of the statistical data on flows. An attempt to construct labour market models that present an integrated version of the 'structural’aspects of the market in terms of stock and flows is therefore lacking. The present study sets forth various objectives and is divided into two parts. In the first, an analysis of several controversial terminological aspects of the concepts of stock and flow is presented, and an attempt is made to point out those theoretical structures which have been responsible for the long-prevailing neglect of the labour market flows, particularly long-run flows. Then the problem of defining the concepts of short-run and generational turnover will be confronted in light of an analysis of the statistical methods used in the surveys; finally, a methodology for measuring generational flows is proposed. In the second part of the paper a model based on generational flows, as previously defined, will be presented together with a computational procedure capable to produce long run estimates of alternative scenarios of labour demand and supply and of the structure of employment by sex and age. A brief summary of some of the empirical results obtained applying our model and forecasting procedure to the Italian labour market will also be discussed in the final part of the paper.     

Hazard Analysis of Unemployment Duration by Gender in a Developing Country: The Case of Turkey

There is little evidence on unemployment duration and its determinants in developing countries. This study is on the duration aspect of unemployment in a developing country, Turkey. We analyse the determinants of the probability of leaving unemployment for employment or the hazard rate. The effects of the personal and household characteristics and the local labour market conditions are examined. The analyses are carried out for men and women separately. The results indicate that the nature of unemployment in Turkey exhibits similarities to the unemployment in both the developed and the developing countries.     

Permanent Disadvantage or Gradual Integration: Explaining the Immigrant–Native Earnings Gap in Sweden

Theoretical explanations suggest that wage differentials between immigrant and native workers are generated either by differences in the acquisition of human capital or by various forms of exclusion of immigrants from fair labour market rewards. We evaluate the labour quality and labour market discrimination hypotheses by using a large sample of Swedish employees in 1995. Our findings show that labour market integration is relatively unproblematic for immigrants from Western countries, whereas immigrants from other countries, especially from Africa, Asia and Latin America, face substantial obstacles to earnings progress when entering the Swedish labour market. For the latter group of countries, extensive controls for general and country‐specific human capital reduce the earnings differentials. However, the remaining gap is of a non‐trivial magnitude. Thus, the labour quality hypothesis accounts for a part of the observed native–immigrant wage gap, but the remaining differentials can be interpreted in terms of labour market discrimination.     

Transitions in the Labour Market: Discouragement Effect and Individual Characteristics

The present work analyses the unemployment gender gap in Italy for the period 2004–11. We present a methodology for decomposing the natural rate of unemployment, thus defining it in terms of equilibrium labour market flows between the aggregate states of the labour market (Employment, Unemployment, Inactivity). In addition, we offer estimates of the determinants of the unemployment gender gap to pinpoint the relative role of individual characteristics and structural factors in determining this difference.     

Labour Market Structures,Labour Market Policy and Wage Formation in the OECD

This paper investigates why the incentive to moderate wages in an environment of rising unemployment differs so strongly among the OECD countries. In the first part we develop an insider-outsider bargaining model in which the wage results from a confrontation of the insiders' wage claims and the employer's wage offer. The second part of the paper empirically tests the model's predictions for the determinants of wage flexibility. The degree of centralization of wage bargaining, the extent of active labour market policy and the characteristics of the unemployment benefit system are shown to be relevant determinants.     

Supply and Price of Childcare and Female Labour Force Participation in the Netherlands

Abstract. The childcare market has been emerging in the Netherlands since the first Child Care Stimulation Act in 1990. The Dutch government has chosen to increase availability and share the costs of childcare between government, employers and parents. We estimate the determinants of Dutch women's decisions to participate in the labour market and the use of paid childcare in 1995. Furthermore, we estimate the effect of the price of childcare on female labour supply. We discuss whether the route that is taken by the Dutch government regarding childcare leads to smaller dead weight losses than in Sweden.     

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.     

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.     

Zukunftstrends und ihre Implikationen für das Coaching

Future trends and its implications for coaching In this theoretical work the author analyzes the current personal requirements in labour and its psychological impact to individuals, taking a psycho-sociological perspective. Focusing the employee who nowadays has to act like an entrepreneur, this bears a new personal strain: to establish his or her value and bring it to the market. This changed view is contrasting the traditional labour relations and its psychological effects should be supported by coaching in the future.     

Firm‐sponsored Apprenticeship Training in Germany: Empirical Evidence from Establishment Data

This paper investigates the determinants of firm‐sponsored apprenticeship training empirically using German firm‐level data. The hypotheses for this study are based mostly on recent theoretical models about the financing of apprenticeship training which take labour market imperfections (e.g. mobility costs, asymmetric information, and wage floors) into account. Applying the usual probit, tobit, and truncated regression models, some empirical evidence is found supporting the relevance of active or passive poaching. Moreover, the results reveal some differences in the training behaviour of West and East German firms.     

Demographic Influences on the OECD Labour Market: Is there a problem? Are there solutions?*

Abstract. This paper is concerned with the possible economic effects of the demographic movements expected to emerge in the OECD area over the next 30 years. It is argued that the labour and product market implications of the changing population size and ageing are not as worrying as conventional wisdom believes, especially if counterbalancing economic policies are implemented. The most negative effect will probably concern a potential productivity slowdown, but ageing might also have some positive side-effects; implying, for example, declining youth unemployment.     

The Principal Statistical Sources for the Labour Market in Italy

ABSTRACT: The state of disequilibrium which the labour market in Italy (as in all the major industrialised countries) presents, has been the centre of debate in political and economic circles for many years now. How should this disequilibrium be interpreted, considering the complexity of the phenomena found in the labour area? Can they be modeled into global explanatory schemas of general economic theory? The authors believe the complexity of these phenomena can neither be ignored nor simplified, but accepted as a distinguishing feature of the labour market, and thus have to be interpreted on the basis of numerous and often contradictory control variables. This paper hence outlines the principle sources of Italian labour market data available, in order to provide a rational and critical guide to interpreting the available indicators. The sources examined are both institutional (the ISTAT and Ministry of Labour surveys) and private (the employers associations of Confindustria, Assolombarda and Federmec-canica). The paper outlines the areas covered, the methodology, and the qualities and drawbacks that these surveys present.     

The Pace of Job Creation and Destruction,Cyclical Shocks and Employment Dynamics

This paper investigates (un)employment dynamics in response to labour demand shocks using a small empirical flow model for the labour market in The Netherlands. The model explicitly takes account of the propagation of shocks through the various duration classes of unemployment and allows for duration dependence in the state of unemployment. A sensitivity analysis shows that 1. congestion in the matching process due to the increase in the pace of job creation and destruction may have substantial effects on (un)employment dynamics; 2. the effects depend very much on the initial pace of labour market dynamics and they are larger when the initial pace is low; 3. the labour market may be out of its equilibrium for quite a long time after a shock occurs; 4. fluctuations in the pace of job creation and destruction only lead to unemployment persistence in the model when the escape probability from long term unemployment is zero; otherwise, the economy returns to its original equilibrium, albeit with long adjustment lags in the case that the initial pace of structural change and/or the escape probability for long term unemployed is low.