Do Market Pressures Induce Economic Efficiency?: The Case of Slovenian Manufacturing, 1994-2001

The Slovenian transition represents a slow but steady liberalization of constraints on competition. Using a unique longitudinal data set on all manufacturing firms in Slovenia over the period 1994-2001, this study analyzes how firm efficiency changed in response to changing competitive pressures, holding constant firm attributes. Results show that the period was one of atypically rapid growth of total factor productivity (TFP) relative to levels in OECD countries, and that the rise in firm efficiency occurs across almost all industries and firm types: large or small; state or private; domestic or foreign-owned. Changes in firm ownership type have no impact on firm efficiency. Rather, competitive pressures that sort out inefficient firms of all types and retain the most efficient, coupled with the entry of new private firms that are at least as efficient as surviving firms, prove to be the major source of TFP gains. Market competition from new entrants, foreign-owned firms, and international trade also raise TFP in the industry. Results strongly confirm that market competition fosters efficiency.http://deepblue.lib.umich.edu/bitstream/2027.42/40007/3/wp621.pd

Male-female differences in labor market outcomes during the early transition to market : the case of Estonia and Slovenia

The authors analyze changes in women's relative wages, using social security data from Slovenia (1987-92) and a retrospective survey of Estonia's labor force (1989-94). Estonia adopted liberal labor market policies. Slovenia took an interventionist approach. Nevertheless, relative wages for women rose in both countries. Actually, real wages fell for both men and women, but women lost less than men did. Certain factorfavored women: 1) Returns to human capital rose during the transition. 2) Relative labor demand shifted toward predominantly female sectors (health, education, financial services, retail trade) and away from traditionally male sectors (agriculture, manufacturing, mining, transportation). 3) Women with low wages had a disproportionate incentive to exit the labor market, especially in Estonia. Women were less mobile across jobs in both countries, however, so men disproportionately filled new jobs in expanding sectors. Women who remained employed had higher average education levels. Women's relative immobility will tend to reduce their early relative gains. Their relative wages will also continue to fall if their share of the expanding sectors continue to fall.Labor Policies,Health Monitoring&Evaluation,Banks&Banking Reform,Public Health Promotion,Environmental Economics&Policies,Banks&Banking Reform,Municipal Financial Management,Labor Standards,Health Monitoring&Evaluation,Environmental Economics&Policies

Winners and losers in transition : returns to education, experience, and gender in Slovenia

The authors identify winners and losers in Slovenia's economic transition by tracing changes in returns to education, experience, and gender and changes in wage inequality from 1987 to 1991. They find the following. Relative wages and employment rose for the most educated and fell for the least educated, in all industries. Relative wages and employment rose with years of work experience until pensionable age. At pensionable age, relative wages increased very rapidly and relative employment was greatly reduced. Using pension policies to encourage early retirement drastically reduced the supply of very experienced workers. Either the policy caused firms to bid up wages for workers of pensionable age to keep them from retiring, or it caused a selection process in which only the highest-paid workers remained in the workforce. Regardless, the pension policy has proved to be costly, and early retirements did not make room forthe youngest workers but for those just under pensionable age. Women gained relative to men in both wages and employment primarily because they occupy education and industry groups less adversely affected by the transition, not because of economywide reductions in discrimination against women. Increasing returns to education and experience contributed to wage inequality, but the variance in wages also increased for individuals with identical skills. Big changes in relative wages should signal future reallocation of labor toward more productive, higher-paying sectors. Setting minimum wages, fixing ranges of pay, and indexing wages to inflation did not prevent increases in wage variation from occuring. Wage minimums did not appear to have an effect, presumably because inflation reduced real minimum wages so quickly that most workers were paid above the minimums. In Slovenia, policy changes are reflected in labor market outcomes. Disabling the tax-transfer policy from relatively profitable to relatively unprofitable firms and eliminating worker referendums on wage scales removed mechanisms that tended to compress wage variation. Greater demand for skilled workers also reflected both the economywide need to cope with uncertainty and such industry-specific factors as reduced labor demand, especially in less skill-intensive industries. The results in Slovenia contrast sharply with those in eastern Germany. Eastern German workers have had decreasing returns to education and experience. But it is not clear how relevant the eastern German experience is to other transitional economies because of western Germany's efforts to alleviate problems. More similar to the authors'findings are the results of Flanagan (1993) on the Czech Republic, which show increasing returns to education but decreasing returns to experience. In some respects, Slovenia is atypical because it is richer and more western in orientation than other transitional economies. However, economies could learn from the experience in Slovenia because Slovenia also had social ownership, full employment coupled with substantial hidden unemployment, and an egalitarian wage structure. And Slovenia has introduced labor market reform and experienced social dislocations similar to those in other transitional European economies.Municipal Financial Management,Economic Theory&Research,Environmental Economics&Policies,Banks&Banking Reform,Health Monitoring&Evaluation

An Evaluation of the State of Iowa Revenue Forecasts, 1995 – 2017

A critical task in establishing the State of Iowa budget is to project available tax revenue. The 2017 fiscal year was characterized by tax revenues that did not live up to predictions, leading to midyear cuts in planned government expenditures and tapping into reserves. That experience raises the question of whether the Iowa state government revenue forecasts are faulty. Are revenue shortfalls avoidable through improved forecasts or are occasional shortfalls inevitable with even the best statistical predictions? I will show that the Iowa government revenue forecasts pass the standard tests of unbiasedness and rationality, meaning that they are not obviously flawed. However, policies that have increased the proportion of tax revenues that are refunded are making our tax system less efficient. Moreover, forecasts of net tax revenue have become less reliable, leading to increased likelihood of revenue shortfalls and midyear cuts in planned government services

Firing cost and firm size : a study of Sri Lanka's severance pay system

Consistent with its focus on social policies, Sri Lanka has devoted significant attention to worker protection. One of the main pillars of its worker protection policy is the Termination of Employment of Workman Act (TEWA) introduced in 1971. The act aims to limit unemployment by raising the cost of layoffs. The act requires that each layoff of a covered worker, whether individual or as a part of a mass layoff, must be approved by the government. Until recently, the government also decided on a case-by-case basis the level of severance pay the firm had to pay to the laid off workers. Since its introduction, critics have argued that the TEWA's non-transparent, discretionary, and costly regulations discourage employment growth, hinder reallocation of labor from inefficient firms to more profitable sectors, slow the introduction of new technologies, and increase unemployment. Defenders including trade unions and the government argue that on the contrary, severance pay promotes longer-lasting employment relationships that improve incentives for training and enhance cooperation and trust between employers and workers. The paper is organized as follows: section two provides an institutional background, highlighting the intensions of the TEWA at its introduction, and it's the provisions and procedures. Section three presents the theoretical framework and formulates hypotheses to be empirically tested. Section four describes the data and the identification strategy devised to identify the employment effects of TEWA. Section five presents the empirical results based on the estimation of the multinomial model of employment growth of firms. Section six concludes witha summary and policy recommendations.Labor Markets,Microfinance,Labor Policies,Emerging Markets,Small Scale Enterprise

How does working as a child affect wage, income, and poverty asan adult?

The authors use a unique data set on adult earnings in Brazil to study how child labor affects adult earnings through its impacts on work experience, years of schooling, and human capital attained per year of schooling. Adding up these positive and negative effects, their empirical findings suggest that adults who entered the labor market before age 13 earn 20 percent less per hour, have 26 percent lower incomes, and are 14 percent more likely to be in the lowest two income quintiles. Overall, child labor raises the probability of being poor later in life by 13 percent to 31percent. These magnitudes are large. On the other hand, while child labor reduces the productivity of schooling, the net effect of an additional year of schooling on adult wages is still positive, even if the child works while in school. Consequently, policies which delay dropping out of school, even as the child works, appear to be effective at mitigating adult poverty. This report is a promising first step toward a better understanding of the theoretically ambiguous impact of early labor market entry on lifetime labor market outcomes and the dynastic poverty traps discussed below.

Changing patterns of child labor around the world since 1950 : the roles of income growth, parental literacy, and agriculture

Using country-level data, this report lays out the broad stylized facts regarding the relationship between child labor and per capita GDP, adult literacy, and the share of agriculture in the economy. The relationship between child labor force participation and per capita income is convex and stable over time. The implication is that as a country develops, child labor will decrease, but at a decreasing rate. At some point, further reductions in child labor may require more than just increasing per capita income. Child labor also is affected by the perceived return to child time in the labor market relative to child time in school. The strength of demand for child labor is highly correlated with the share of agriculture in the economy. Parental perception of the importance of education is highly correlated with the parents'own education. A 10 percent decrease in agriculture's share of GDP, decreases child labor by about 20 percent. A 10 percent decrease in adult illiteracy also decreases child labor by 20 percent. In Latin America, all three of these factors have contributed to decreases in child labor since 1950. Increases in per capita income have lowered the child labor participation rate by 2.9 percentage points. The reduction in adult illiteracy was responsible for a 4.2 percentage point reduction in child labor participation and reductions in agriculture's share of production, lowered child labor by an additional 1.2 percentage points. It is possible that income redistribution may lead to lower incidence of child labor, even if increases in average income will not. However, child labor is still found even at the upper end of the income distribution in Latin America. Consequently, income transfer programs alone will not eliminate child labor.

DERIVING EMPIRICAL DEFINITIONS OF SPATIAL LABOR MARKETS: THE ROLES OF COMPETING VERSUS COMPLEMENTARY GROWTH

Rural communities compete with each other for firms, but their residents often commute large distances to work. Consequently, rural communities can benefit from economic growth occurring as much as 50 miles away. Data on county population growth shows that counties benefit from growth one or two counties away.Labor and Human Capital,