Unionism and Peer-Referencing

This study assesses the 'fair-wage-effort' hypothesis, by examining (a) the relationship between relative wage comparisons and job satisfaction and quitting intensions, and (b) the relative ranking of stated effort inducing-incentives, in a novel dataset of unionised and non-unionised European employees. By distinguishing between downward and upward-looking wage comparisons, it is shown that wage comparisons to similar workers exert an asymmetric impact on the job satisfaction of union workers, a pattern consistent with inequity-aversion and conformism to the reference point. Moreover, union workers evaluate peer observation and good industrial relations more highly than payment and other incentives. In contrast, non-union workers are found to be more status-seeking in their satisfaction responses and less dependent on their peers in their effort choices The results are robust to endogenous union membership, considerations of generic loss aversion and across different tenure profiles. They are supportive of the individual egalitarian bias of collective wage determination and self-enforcing effort norms.

Revisiting the Dollar-Euro Permanent Equilibrium Exchange Rate: Evidence from Multivariate Unobserved Components Models

We propose an alternative approach to obtaining a permanent equilibrium exchange rate (PEER), based on an unobserved components (UC) model. This approach offers a number of advantages over the conventional cointegration-based PEER. Firstly, we do not rely on the prerequisite that cointegration has to be found between the real exchange rate and macroeconomic fundamentals to obtain non-spurious long-run relationships and the PEER. Secondly, the impact that the permanent and transitory components of the macroeconomic fundamentals have on the real exchange rate can be modelled separately in the UC model. This is important for variables where the long and short-run effects may drive the real exchange rate in opposite directions, such as the relative government expenditure ratio. We also demonstrate that our proposed exchange rate models have good out-of sample forecasting properties. Our approach would be a useful technique for central banks to estimate the equilibrium exchange rate and to forecast the long-run movements of the exchange rate.

Life-Cycle, Effort and Academic Inactivity

It has been observed that university professors sometimes become less research active in their later years. This paper models the decision to become inactive as a utility maximising problem under conditions of uncertainty and derives an age-dependent activity condition for the level of research productivity. The model implies that professors who are close to retirement age are more likely to become inactive when faced with setbacks in their research while those who continue research do not lower their activity levels. Using data from the University of Iceland, we find support for the model’s predictions. The model suggests that universities should induce their older faculty to remain research active by striving to make their research more productive and enjoyable, maintaining peer pressure, reducing job security and offering higher performance related pay.

Measuring the Euro-Dollar Permanent Equilibrium Exchange Rate using the Unobserved Components Model

This paper employs an unobserved component model that incorporates a set of economic fundamentals to obtain the Euro-Dollar permanent equilibrium exchange rates (PEER) for the period 1975Q1 to 2008Q4. The results show that for most of the sample period, the Euro-Dollar exchange rate closely followed the values implied by the PEER. The only significant deviations from the PEER occurred in the years immediately before and after the introduction of the single European currency. The forecasting exercise shows that incorporating economic fundamentals provides a better long-run exchange rate forecasting performance than a random walk process.

Educational spillovers and parental migration

Impacts of parental emigration on educational outcomes of children and, in turn, the children’s influence on peers are theoretically ambiguous. Using novel data I collected on migration experiences and timing, family background and school performance of lower secondary pupils in Poland, I analyse empirically whether children with parents working abroad (PWA) influence school performance of their classmates. Migration is mostly temporary in nature, with one parent engaging in employment abroad. As many as 63% of migrant parents have vocational qualifications, 29% graduated from high school, 4% have no qualifications and the remaining 4% graduated from university. Almost 18% of all children are affected by parental migration and, on average, 6.5% of pupils in a class have a parent abroad. Perhaps surprisingly, estimates suggest that pupils benefit from the presence of PWA classmates. PWA pupils whose parents graduated from high school exert the biggest positive impact on their classroom peers. Further, classmates are differently affected by PWA children; those who themselves experienced migration within the family benefit most. This positive effect is likely driven by the student level interactions or increased teachers’ commitment to classes with students from migrant families.