What Have Two Decades of British Economic Reform Delivered?

Beginning in 1979 with the newly electted Thatcher Government and continuing under successive Conservative and Labour Governments, the United Kingdom has embarked on a two-decade-long experiment in economic reform. We present evidence that the reform process has succeeded in making the UK more market-friendly than its European competitors. In fact, by the 1990s Britain ranked near the top of the league tables for freedom of markets, in some cases even ahead of the United States. To evaluate the effects of these reforms we compare trends in macroeconomic outcomes in the UK relative to the US, Germany, and France. During the 1980s and 1990s Britain halted the relative declines in GDP per capita and labour productivity that had characterized earlier decades, and partially closed the gap in income per capita with France and Germany. These gains were mainly attributable to relative rises in employment and hours. Unlike its EU competitors, Britain was able to achieve high employment-population rates with rising real wages for workers. The case that the change in economic performance can be credited to market-oriented reforms is harder to prove. Nevertheless, based on our own macro-level analyses, and micro-level evidence from several companion studies, we conclude that economic reforms contributed to halting the nearly century-long trend in relative economic decline of the UK relative to its historic competitors, Germany and France.

Why Not Africa?

Various arguments have been used to explain Sub-Saharan Africa's economic decline. We find that a stress on investments in education as a prerequisite for more rapid growth is misplaced; that greater openness is far from sufficient to insure economic progress; that income inequality and urban bias are not so extreme as to foreclose prospects for more rapid growth and poverty alleviation; and that the constraints imposed by Sub-Saharan Africa's human and physical geography are not core explanations for the regions poor performance. If African countries can establish an institutional environment that enables individuals to gain the rewards of their investments, the alleged barriers to the region's growth should prove surmountable.

Economic Development and the Timing and Components of Population Growth

This paper examines the relationship between population growth and economic growth in developing countries from 1965 to 1985. Our results indicate that developing countries were able to shift their labor force from low-productivity agriculture to the higher-productivity industry and service sectors, and to increase productivity within those sectors, despite the rapid growth of their populations. We also find that at given rates of population growth, income growth is related to the time path of population growth and that population growth due to high birth and death rates is associated with slower income growth than population growth due to relatively low birth and death rates. Hence, the timing and components of population growth are important elements in the process of economic development.

The Legacy of Communist Labor Relations

This paper contrasts International Social Science Programme (ISSP) surveys for Hungary, supplemented with related survey data for East Germany, Poland, and Slovenia, with ISSP data for Western countries, to examine the extent to which workers in traditionally communist societies differ in their attitudes toward work conditions, wage inequality, the role of unions and the role of the state in determining labor market outcomes. We find sufficiently marked differences in responses between Hungary and the other previously communist countries and in Western countries to suggest that communism left an identifiable common legacy in the labor area. The citizens of former communist countries evince a greater desire for egalitarianism, are less satisfied with their jobs, and are more supportive of state interventions in the job market and economy than Westerners. These differences suggest that the move to a market economy will be marked by considerable 'social schizophrenia' due to an attitudinal legacy of their communist past.

The "Youth Problem": Age or Generational Crowding?

This paper attempts to distinguish between two alternative views of the labor market problems faced by young workers in a number of industrialized countries in the 1970s and early 1980s. The first view is that the low relative earnings and high unemployment rates experienced by these workers were largely "age" related. Although this view carries the implication that the problems will disappear for recent youth cohorts as they grow older, it also implies that the problems will be "handed over" to successive waves of youth cohorts as they enter the labor market. The second view is that the labor market problems of recent youth cohorts are a consequence of their large size. This view has very different implications since generational crowding can permanently or temporarily depress the economic position of large cohorts but need not have an adverse effect on later waves of smaller youth cohorts. On the basis of a multicountry empirical analysis of patterns ofcohort size, earnings, unemployment, and the distribution of young workers across industries, we have four main sets of findings to report. First, the baby-boom was not uniformly experienced across OECD economies - in terms of either its timing or magnitude. While some countries, such as Canada, the U.S., and Belgium had large increases in the youth share ofthe population from 1965 to 1980, others, notably Japan and Switzerland, had large decreases. Second, our empirical results indicate that large cohort size tends to have a negative effect on the "expected relative earnings" of the cohort, where expected relative earnings is defined as the product of the earnings and the employment-to-labor force ratio of a young cohort relative to the same product for an older cohort. There is, moreover, a marked trade-off betweenthe relative earnings effect and the relative employment effect with large cohort sizes reducing relative earnings in some countries and reducing reiative employment in others. Third, at least for the U.S., the relatively low wages and high unemployment of the "unlucky cohorts" tend to converge to the patterns that would have resulted had the cohorts been more "normal" in size, with the convergence occurring within a decade or so. Fourth, our results show that baby-boom cohorts were absorbed inthe U.S. and other OECD economies quite evenly across a wide range of industries. This finding contradicts the popular belief that large youth cohorts were absorbed primarily through expansion of those industries that have been traditionally youth-intensive.

Population Growth, Labor Supply, and Employment in Developing Countries

The economies of the less developed countries are about to face perhaps the greatest challenge in their histories: generating a sufficient number of jobs at reasonable wages to absorb their rapidly growing populations into productive employment. In terms of absolute magnitude, this challenge has no precedent in human history. In some respects, this challenge is also unprecedented in terms of its nature, given, on the one hand, the limited availability of natural resources in many countries and, on the other hand,the widespread availability of advanced technology.This paper examines the nature and magnitude of the principal effects of population growth on labor supply and employment in the developing economies of the world. On the supply side of labor markets, we discuss key features of the interrelations between population growth and the labor force. These include the lags between population growth and labor force participation; the independent effects on labor supply of accelerated population growth due to changes in fertility, mortality, and migration; patterns and trends in labor force participation rates; and gender differences in labor supply behavior. On the demand side, we describe and analyze the nature of labor markets in developing economies and attempt to identify the key factors that condition their labor absorption capacity. Descriptive statistics on the characteristics of developing country labor markets and on the relationships between population growth, labor supply, employment shifts, and growth of output per worker are presented and discussed.The key result of our analysis is that, despite the unprecedented magnitude of population growth and the existence of imperfections in labor markets, developing economies tended to shift between 1960 and 1980, from low-productivity agriculture to the higher productivity service and industrial sectors and, albeit with some exceptions, to raise real income per capita. With respect to their prospects for the remainder of this century, we also conclude that Malthusian disasters will not necessarily be the result of forecasted population growth, provided the developing economies can generate human and physical capital investments of comparable relative magnitudes to the past two decades. However, on the basis of past history, the middle-income developing countries are likely to perform better in this respect than the low-income countries, some of whom may need considerable help if they are to absorb increased population while shifting labor to more productive sectors and raising output per worker.