Negative Real Balance Effects in the Presence of Involuntary Unemployment

We examine positive or negative real balance effect (or so-called Pigou effect) by falls in the nominal wage rate and the prices of the goods in situations where there is involuntary unemployment using a three-generations overlapping generations model with childhood period and pay-as-you go pension system for the older generation consumers. We will show that if the net savings of the younger generation consumers are larger than their debts due to consumption in their childhood period, there exists positive real balance effect and the employment increases by a fall in the nominal wage rate; on the other hand, if the net savings of the younger generation consumers are smaller than their debts, there exists negative real balance effect and the employment decreases by a fall in the nominal wage rate

Wage and employment decisions in the Russian economy : an analysis of developments in 1992

The authors analyze changes in the Russian labor market in 1992. They focus on the path of wages and employment in a context of partial price liberalization and considerable ambiguity about government and central bank policy. Under the former Soviet economy, the firm was the bedrock of the centrally planned system. The relaxation of centralized controls did not result in substantial employment losses partly because of the implicit moral economy of the system and partly because of continuing constraints on wages. In 1992, the wage structure and employment levels in the economy's state sector exhibited surprising stability, reflecting the system's immense inertia. Despite announced regime changes, at the end of 1992 the number of jobseekers was no more than 1.5 percent of the labor force. But significant changes have been made: wage and employment decisions have been widely liberalized; some restraints on labor mobility have been removed; changes have also been made in ownership title; and there has been some expansion in the private sector, as yet largely concentrated in services. These substantive changes are important for future expectations about entitlements to jobs and incomes, but the changes remain restricted and the sources of these restrictions imply significant economic costs. The underpinning of the current stagflation is the inability to break the soft budget constraint on state firms and to impose realistically a systematic, transparent set of constraints on the firms'financing demands. This has combined with the firms'continuing ability to exercise market power alongside weak controls on wage claims. Employment transitions have been dominated by high levels of quits at the base of the skill structure. Involuntary separations have been limited, involving mostly women and white collar workers. Firms commonly provide de facto unemployment compensation to workers in the form of minimum wage payments with little or no work requirement. There is evidence of some increase in the proportion of laid-off workers among the unemployed, but firms seem to prefer hoarding labor in light of uncertainty about policy, firm, or product-specific market prospects. Wages have been more volatile. Wages initially bore almost all of the adjustment costs, but have shown mild recovery thereafter. Lax monetary policy and decentralized insider power, giving rise to relative employment stability and real wage rigidity, are powerful ingredients for hyperinflation.Economic Theory&Research,Environmental Economics&Policies,Health Monitoring&Evaluation,Banks&Banking Reform,Municipal Financial Management

Mapping Varieties of Industrial Relations: Eurofound\u27s Analytical Framework Applied

Eurofound’s 2016 report Mapping key dimensions of industrial relations identified four key dimensions of industrial relations: industrial democracy, industrial competitiveness, social justice, and quality of work and employment. This report builds upon that earlier study, developing a dashboard of 45 indicators to assess how and to what extent the conceptual framework of these key dimensions can be applied at national level. The indicators were tested across the Member States by Eurofound’s Network of European Correspondents and show reasonable accuracy when used to map the predominant features and trends of the national industrial relations systems. The study confirms that a dashboard of indicators that can accurately measure and summarise the complex reality of industrial relations across the EU is a valuable tool for comparative research and a useful instrument for supporting policymakers, social partners and stakeholders. The report sets out a range of options for further developing this conceptual approach

Unemployment and labor market dynamics in Russia

The past 15 months have seen the beginning of structural change in Russia but a failure of the economy to stabilize. The balance sheet, conclude the authors suggests that a return to centralized control remain almost impossible, but the dencentralization that has occurred contain many undesirable features. In framing their analysis, the authors draw on aggregate data and firm-level data from the first-round results of a 1992 survey covering 41 firms in the Moscow region. The survey results suggest that the greater autonomy of firms has facilitated the exploitation of market power while failing to dampen the demand for easy credit from the budget or banking system. For the most part, demand has been satisfied, enabling firms to meet current wage claims and, to a lesser degree, sustain output levels. Buoyant nominal profits can be traced either to pricing behavior derived from market power or to transfers or subsidies channeled through the fiscal monetary system. This in turn has artificially sustained the revenue side of the government accounts. Official employment was no more than 1 percent of the labor force by the end of 1992, but evidence on the importance of marginal unemployment indicates that the underlying pass-through into open unemployment will be great. By the third quarter of 1992, this"augmented"unemployment rate approached 4 percent of the labor force. Even so, the authors observe non-trivial outflows from unemployment to jobs and in some regions to jobs in the private or collective sector. In Russia, outflows to state sector jobs dominate. Survey evidence shows considerable turnover in the state sector and resilient hiring. Much of the churning in labor markets seems to be through voluntary separations and job transitions. Net changes to employment have been limited, and have involved mostly ancillary or clerical staff. The authors discern a core or membership rule dominating Russian firms'decisions which it would be dangerous to assume will be maintained. They interpret it as a holding strategy in a complex game the firms have been playing with government. Lack of a credible reform program has weakened any impulse toward large-scale restructuring of firms. Wages have been more volatile and have regional dispersion, but the authors predict no large consistent shift in relative wages. Rather the wage path has probably been governed by current streams and additional transfers, and then set consistent with the stable employment rule. The path of wages over 1992 is clearly associated with changes in Russia's monetary and fiscal stance and allied institutional features.Environmental Economics&Policies,Economic Theory&Research,Banks&Banking Reform,Markets and Market Access,Access to Markets

Implementing a Double Dividend: Recycling Ecotaxes Towards Lower Labour Taxes

In this paper we follow the tradition of applied general equilibrium modelling of the Walrasian static variety to study the empirical viability of a double dividend (green, welfare, and employment) in the Spanish economy. We consider a counterfactual scenario in which an ecotax is levied on the intermediate and final use of energy goods. Under a revenue neutral assumption, we evaluate the real income and employment impact of lowering payroll taxes. To appraise to what extent the model structure and behavioural assumptions may influence the results, we perform simulations under a range of alternative model and policy scenarios. We conclude that a double dividend –better environmental quality, as measured by reduced CO2 emissions, and improved levels of employment– may be an achievable goal of economic policy.double dividend, tax recycling, ecotaxes

A family affair: job loss and the mental health of spouses and adolescents

Examines the impact of involuntary job loss on the mental health of family members. Abstract This study examines the impact of involuntary job loss on the mental health of family members. Estimates from fixed-effects panel data models, using panel data for Australia, provide little evidence of any negative spillover effect on the mental health of husbands as a result of their wives\u27 job loss. The mental well-being of wives, however, declines following their husbands\u27 job loss, but only if that job loss results in a sustained period of non-employment or if the couple experienced financial hardship or relationship strain prior to the husband\u27s job loss. A negative effect of parental job loss on the mental health of co-resident adolescent children is also found, but appears to be restricted to girls

Public infrastructure and private sector profitability and productivity in Mexico

This paper specifies a microeconomic model to estimate the impact of investment in public infrastructure on private industrial profitability. Empirical results based on time series data for 34 industries characterize the Mexican industrial structure as having involuntary unemployment, deficient product demand, declining productivity growth, increasing returns to scale, and short run excess capital capacity. Aggregate technological change over the period studied has been capital using and labor saving.Both labor and capital are underused in the short run. This disequilibrium has high efficiency costs that may be undermining Mexico's international competitiveness. Therefore, new capital investment in the public sector is not recommended at this time and should be undertaken only to rectify any identified constraints imposed by the inadequacy of infrastructure in the private employment of private factors.Economic Theory&Research,Environmental Economics&Policies,Banks&Banking Reform,Public Sector Economics&Finance,Inequality

Unemployment Insurance Savings Accounts in Latin America: Overview and Assessment

The unemployment protection systems that exist in most Latin American economies are generally considered inadequate in terms of providing insurance to workers. They may also encourage stratified labor markets and impose barriers to the employee’s mobility and the firm's adjustment to changing labor market conditions. In addition, some of these systems involve high administrative and monitoring costs and may create additional adverse effects that induce higher unemployment rates and longer duration of unemployment and promote informal labor markets. Recently, research effort and policy interest has turned to Unemployment Insurance Savings Accounts (UISAs) as an alternative to traditional systems of unemployment insurance. UISAs are schemes of individual mandatory savings. Therefore, they smooth income over an individual's life cycle rather than pooling unemployment risk over the total working population at a point in time. This form of unemployment insurance diminishes the moral hazard problems associated with traditional insurance methods. However, it presents problems of its own. First, it is questionable that these systems provide adequate protection against unemployment risk. Additionally, their effects on the promotion of informal labor markets and their administrative costs are yet to be determined. Finally, the effectiveness as a form of unemployment insurance depends critically upon the performance and credibility of the financial institutions managing the funds. This paper examines the experience of Latin American countries that use UISAs, with the hope of highlighting the problems of the system and identifying areas for future theoretical and empirical work. The overall effect of UISAs depends on a vast array of specific country characteristics and program parameters. The way the system is implemented, existing labor regulation, the extent of the informal economy and the scope for collusive behavior greatly influence the success of these programs. This calls for a more extensive research effort in the area.unemployment insurance, moral hazard, severance pay, Latin America, labor markets

The Italian Wage Curve. The Effects of the Recent Labour Market Reforms.

The Italian Wage Curve. The Effects of the Recent Labour Market Reforms The paper examines some effects of the recent reforms aimed at increasing flexibility in the Italian labour market. It shows their incapability to respond to the “inclusion” problem which still characterises the country. New temporary low-skill jobs were created but the reforms have neither enforced industrial competitiveness nor increased productivity. Far from solving the problems of a dual economy, de-regulation of Italian labour market has reinforced them and has concurrently eroded civil rights thereby making a departure form standards of health and morality. Excessive turnover of workers and firms is a major obstacle to human capital accumulation. A hostile territory produces social inequality, poverty and under- consumption that severely compromises growth. Key words: Labor and Demographic Economics; Wages, Compensation and Labor Costs; Wage Level and Structure; Wage Differentials JEL Classification: J, J3, J31 Final version received May 200

Unemployment insurance savings accounts in Latin America : overview and assessment

The unemployment protection systems that exist in most Latin American economies are generally considered inadequate in terms of providing insurance to workers and are prone to generate stratified labor markets. Recently, research effort and policy interest has turned to Unemployment Insurance Savings Accounts (UISAs) as an alternative to traditional systems of unemployment insurance. UISAs are schemes of individual mandatory savings that smooth income over an individual's life cycle time rather than pooling unemployment risk over the total working population at a point in time. Although this form of unemployment insurance diminishes the moral hazard problems associated with traditional insurance methods, it presents problems of its own. First, it is questionable that these systems provide adequate protectionagainst unemployment risk. Additionally, their effects on the promotion of informal labor markets and their administrative costs are yet to be determined. Finally, the effectiveness as a form of unemployment insurance depends critically upon the performance and credibility of the financial institutions managing the funds. This paper examines the experience of Latin American countries that use UISAs, with the hope of highlighting the problems of the system and identifying areas for future theoretical and empirical work. In conclusion, the overall effect of UISAs depends on a vast array of specific country characteristics and program parameters. The way the system is implemented, existing labor regulation, the extent of the informal economy and the scope for collusive behavior greatly influence the success of these programs. This calls for a more extensive research effort in the area.Labor Markets,,Labor Policies,Access to Finance,Banks&Banking Reform