A Short Play on the Idea of Laffer Curve in Transition Economies

Very strong emotions have accompanied the idea of the Laffer Curve from the very beginning. This simple analysis does not try to solve the discussion. The author has constructed the (TBI-Tax Burden Index), a special measure of taxes. The special feature of this measure is that it tries to take into account both tax rates and tax ceilings while measuring the average taxation. The ensuing analysis gives us some evidence of the presence of some kind of the Laffer-like relationship in countries analysed. It shows that the Laffer Curve for these three countries can be bell shaped. On the other hand this relationship does not seem to play an important role in determining budget revenues in these countries. It seems that differences in revenues among countries are more the result of other factors specific to each country. Therefore, even if the main objective of a government is to maximize revenues, it should not pay to much attention to this issue, it would do much better trying to make tax system as simple as possible, minimizing both incentives and possibilities for tax evasion and tax avoidance.Laffer Curve, transition economies

An attempt to measure the trends in shadow employment in Poland

This paper presents the results of an attempt to use the combined results of the dedicated survey performed by CASE in 2007 and Polish LFS data in order to: (a) analyze the development of the shadow employment in Poland in years 2003-2008 and, (b) analyze the transition probabilities in and out of shadow employment. The estimated share of shadow workers in total employment in Poland in years 2003-2008 was increasing until 2006 and then started to decrease in the years 2007 and 2008. Other results are in line with one of the main conclusions of the CASE study from 2007 suggesting that shadow employment is more a way of coping with lack of other employment opportunities than an equivalent or even superior alternative to any legal employment contracts. On the other hand those who enter shadow employment are more active part of the group having problems with finding full time/open term employment. They are much more inclined to cope with their situation by entering some form of self-employment than to stay passive and depend on social assistance.Labor Markets,Labor Policies,Labor Standards,Work&Working Conditions,Labor Management and Relations

Tax wedge, labor market and the shadow economy - examples of Russia and Ukraine

In Russia and Ukraine around 30-40% of total employment is located outside the registered economy. This has negative yet important consequences both for public finances and related individuals. The former suffer from lower tax incomes, the latter lack access to important elements of the social security system. Any future policies designed to curb shadow employment in either of these two countries should aim to broaden general employment opportunities for unskilled workers.Shadow employment, Russia, Ukraine

Analysis of cross-country differences in the shape of the age-wage relationship with an attempt to tackle age-productivity differences within the EU

As the process of population ageing in Europe carries on and the retirement age increases, the relationship between age and productivity becomes more and more important. One can be afraid that as the average age of the working individual goes up, the average level of productivity growth will go down, resulting in decreasing competitiveness of European economies. Our expectation is that due to serious differences in labor market structures between New Member States (NMS) (including current candidates) and the EU15, the former are the first order candidates to experience higher than average productivity costs of ageing in the near future. In this paper, one tries to examine this hypothesis. The research strategy in this study has been based on the assumption that, in general, wages are correlated with productivity on the individual level and, as such, can be used as a proxy for productivity. Such an assumption is quite risky and can be easily criticized. Hence, based on the results of earlier studies, our main empirical analysis is limited to groups of workers for which one can expect that correlation between productivity and wages is still substantial. It seems, that taking all the caveats in mind, the results of our analysis show that the relative productivity of older workers in the NMS is lower than in EU15.labour market, wages, productivity, ageing

Innovation, Labour Demand and Wages in Poland. Some Introductory Results Using Micro-macro Data

There is a large body of literature on the relationship between innovations and employment at the firm level, with most of the results indicating positive effects. Thus far, this kind of analysis has not been performed for Poland and it seems to be an important and interesting field for research. On the other hand, there is some empirical evidence that developments in the Polish labour market are at least partially driven by the Skill Biased Technical Change (SBTC) process. This paper tries to fill in this gap by looking at three dimensions of the relationship between innovations and employment in Poland: innovations and job creation, innovations and the skill structure of employment innovations, and wage formation. The results of the analysis indicate that there is a weak but positive relationship between the level of innovations and the probability of job creation. However, we have not been able to prove that innovations have any effect on the skill structure of labour demand in Poland. We have however found a positive and statistically significant relationship between the level of innovations and skill-biased wage changes. The results indicate that innovations positively influence the wages of skilled workers while they negatively influence the wages of the unskilled.innovation, employment, wages, Poland

Oil Money vs. Economic Crisis: The Case of Azerbaijan

The effect of the global financial crisis on Azerbaijan’s economy is closely related to the country’s strong dependence on oil exports. The local economy was mostly affected by a drop in oil prices and not so much by outflows of foreign capital and reduced investment.financial crisis, oil industry, Azerbaijan

Future EMU Membership and Wage Flexibility in Selected EU Candidate Countries

This paper attempts to evaluate wage rigidity related to risks of increased size and volatility of unemployment after the candidate countries enter the EMU. Such evaluation is done through the study of past labour market adjustment mechanisms and, in particular, the role played by the exchange rate movements and independent monetary policy. The paper examines some institutional and structural characteristics of candidate countries labour markets that could influence the wage elasticity. The analysis indicates that generally nominal wages are not flexible in candidate countries. Inflationary surprises and nominal exchange rate movements have an effect on the adjustment, especially during the Russian crisis. On the other hand fast productivity growth creates the environment in which unit labour can adjust to unfavourable labour market outcomes through moderation of real wage dynamics despite nominal stickiness. The paper indicates possible fields of further in-depth research in this area.labour market, unemployment, European Monetary Union, EU enlargement, EMU enlargement, wage flexibility

The Effects of Migration and Remittances in Rural Moldova

Remittances in Moldova reach 36% of GDP, hence they constitute an essential part of the Moldovan economy. The most visible characteristic of remittances is their unequal distribution. The analysis applying the standard Lorenz Curve proves that 75% receiving households gets only 25% of total amount being sent to the country. The way remittances are distributed does not seem to be random. Higher amounts go in general to younger and more educated households. Remittances strongly influence the economic potential of households, especially if they are high enough. They often constitute the main source of households' income, but they not discourage the members of receiving households from economic activity. It indicates that migration and working abroad is the manifest of economic activity, on the other hand it suggest that lack of employment opportunities in the country is an important reason for migration. Those who obtain remittances tend to have higher share of investments in their total household spending. Significant share of remittances for all groups is spent on education - the basic investment increasing the future competitiveness. In rural areas remittances are much more often used to improve the quality of farms than to start running other businesses. It seems that lack of infrastructure and good governance is the main reason for which educated and young emigrants sending significant amounts of money do not decide to invest them in entrepreneurial activities. Eradicating these impediments for local development should be become a highest priority.Moldova, migrations, remittances, labor market, welfare, rural areas