Human Capital Mobility II

Migration from poorer to richer countries can produce a vicious circle from a gap in real wages through a gap in human capital causing a gap in productivity causing a gap in real wages again. This circle can be linked with another one (based on the effective wage theory) connecting the level of real wages to the prices of non-tradables. Lower wages impact through lower demand on lower prices of non-tradables. Having once lower prices of non-tradables and thus lower wages paid in the non-tradables sector, the real wages in the tradables sector and the general real wages as well are pulled to a lower level. Both circles influence the process of convergence of the Central and East European Countries (CEEC) to the European Union (EU). In this paper, we show different possibilities for the model specification of this basic mechanism, to cover different links between human capital migration to the real wage (equations 4a, b) and different possibilities for human capital formation in the old EU members (equations 5a-e). We show results of parameters’ estimation and some illustrations of model’s dynamics. In conclusions, we discuss where problems with parameters’ estimation may come from and show where farther changes in model’s specification could be done.human capital; mobility; estimation; dynamics

Convergence of the Czech Republic towards the EU (in comparison with other candidate countries)

Regresní analýza reálné konvergence a jejího vztahu k nominální konvergenci ukazuje, že Česká republika je obou případech odlehlým pozorováním, když vykazuje jak nižší růst, tak nižší cenovou hladinu, než by odpovídalo její úrovni reálného důchodu na hlavu podle konceptu- konvergence, respektive Balassa-Samuelsonova efektu. Co se týká plnění Maastrichtských kritérií konstatujeme relativně dobrou pozici ČR s výjimkou rozpočtových deficitů. Vzhledem existujícím apreciačním tlakům zdůrazňujeme důležitost správného nastavení centrální parity při vstupu do ERM2 a budoucího výkladu kurzového kritéria, stejně jako fakt, že účast v ERM2 by měla být omezena na minimum (tj. 2 roky). Ekonometricky testujeme konvergenci inflace za použití ADF testů stacionarity, jak pro jednotlivé časové řady, tak pro panelová data (metoda Levin, Lin). Konvergenci inflace mezi kandidátskými státy a k EU interpretujeme v první řadě jako odeznívání transformačního šoku. Ve srovnání s dřívějšími pracemi konstatujeme snižování rychlosti konvergence, což je v souladu s touto hypotézou. Konvergence inflace znamená uzavírání inflačního kanálu cenové konvergence, která v BS efektu plyne z procesu reálné konvergence.Regression analysis of real convergence and its relation to nominal convergence reveals, that the Czech Republic is an outlier in both cases, growing slower and having lower prices, than it should with its level of real GDP per capita according to the concept of - convergence and Balassa-Samuelson effect, respectively. As for the Maastricht criteria, we state a relatively solid performance of the Czech Republic with the exception of government deficits. Because of existing appreciation pressures, we emphasize the importance of correct central parity setting at the moment of entering the ERM2 and of future interpretation of the exchange rate criterion. We argue that participation in ERM2 should be minimized in time (2 years). We use econometric methods (ADF tests of stationarity) to test for convergence of inflation, both in a univariate time series and panel data setting (method Levin, Lin). We interpret convergence among candidate countries and towards the EU first of all on the grounds of initial transformation shock. Convergence speed has been reduced, which is in line with this hypothesis. Finally, inflation convergence means closing of the inflation differentials channel of price level convergence, that in the BS effect follows from the process of real convergence.Institut ekonomických studiíFakulta sociálních vě

Wage risk and the skill premium

The skill premium has increased significantly in the United States in the last five decades. During the same period, individual wage risk has also increased. This paper proposes a mechanism through which a rise in wage risk increases the skill premium. Intuitively, a rise in uninsured wage risk increases precautionary savings, thereby boosting capital accumulation, which increases the skill premium due to capital-skill complementarity. Using a quantitative macroeconomic model, we find that the rise in wage risk observed between 1967 and 2010 increases the skill premium significantly. This finding is robust across a variety of model specifications.The ADEMU Working Paper Series is being supported by the European Commission Horizon 2020 European Union funding for Research & Innovation, grant agreement No 649396

Wage risk and the skill premium

The skill premium has increased significantly in the United States in the last five decades. During the same period, individual wage risk has also increased. This paper proposes a mechanism through which a rise in wage risk increases the skill premium. Intuitively, a rise in uninsured wage risk increases precautionary savings, thereby boosting capital accumulation, which increases the skill premium due to capital-skill complementarity. Using a quantitative macroeconomic model, we find that the rise in wage risk observed between 1967 and 2010 increases the skill premium significantly. This finding is robust across a variety of model specifications.The ADEMU Working Paper Series is being supported by the European Commission Horizon 2020 European Union funding for Research & Innovation, grant agreement No 649396

Wage risk and the skill premium

The skill premium has increased significantly in the United States in the last five decades. During the same period, individual wage risk has also increased. This paper proposes a mechanism through which a rise in wage risk increases the skill premium. Intuitively, a rise in uninsured wage risk increases precautionary savings, thereby boosting capital accumulation, which increases the skill premium due to capital-skill complementarity. Using a quantitative macroeconomic model, we find that the rise in wage risk observed between 1967 and 2010 increases the skill premium significantly. This finding is robust across a variety of model specifications.The ADEMU Working Paper Series is being supported by the European Commission Horizon 2020 European Union funding for Research & Innovation, grant agreement No 649396

Wage risk and the skill premium

The skill premium has increased significantly in the United States in the last five decades. During the same period, individual wage risk has also increased. This paper proposes a mechanism through which a rise in wage risk increases the skill premium. Intuitively, a rise in uninsured wage risk increases precautionary savings, thereby boosting capital accumulation, which increases the skill premium due to capital-skill complementarity. Using a quantitative macroeconomic model, we find that the rise in wage risk observed between 1967 and 2010 increases the skill premium significantly. This finding is robust across a variety of model specifications.The ADEMU Working Paper Series is being supported by the European Commission Horizon 2020 European Union funding for Research & Innovation, grant agreement No 649396