Business diplomacy: the compass rose of foreign markets

With transnational corporations (TNCs) around the world today numbering over 60,000 and more than 800,000 affiliates working abroad, it is easy to understand how modern day international business could have transformed into a major global player serving at the axis of politics, social and environmental responsibility. Additionally, with accountability to a large variety of both public and private stakeholders, all exerting significant power and influence, today’s global corporate structure is reinventing modern international relations, and in some cases, dominating it. (Muldoon 2005) This transformative nature of globalization today can also serve as a source of friction among this growing chorus of players and is bringing irreversible change to these relationships and how they impact and influence business around the world. (Muldoon 2005) From the largest to the smallest international corporation seeking to expand into new international markets, the challenges that come with corporate ambition can mean the difference between success and failure and they find a home at the intersection of international relations, diplomacy and economics. To successfully navigate these challenges, especially in emerging economies, a company must now factor in more than just the “bottom line” and address complex issues that include human rights differences, environmental regulations, labor rights and values of each country. (Henisz, 2014) Combined with modern-day mobility achieved through technology and the Internet, corporations today have a great capacity to reach targeted audiences and establish a presence, but it is this same technology that also allows for immediate response to any corporate action. This constant, 24-hour news cycle, where everyone is made to be a real-time reporter through social media, has created a situation that demonstrably necessitates the ability to not only 3 respond immediately, but also to have real-time understanding of the challenges faced by a corporation as it looks toward global expansion. International Business Diplomacy, or simply Business Diplomacy as it will be referred to in this paper, combines all of these nuanced factors into a relatively new discipline that offers companies looking to expand into new markets, guidelines and directives so that they can more strategically map corporate direction, limit risk and achieve their objectives. This paper will examine the history of diplomacy and how the concept of statecraft became intertwined with the increasing globalization of business. Following a scholarly examination of how modern Business Diplomacy came into being, and the unique challenges that come with its application, particularly the liabilities needed to be overcome, this paper will apply the concept to the Brazilian aerospace manufacturer Embraer, tracking its strategic emergence from a small, regionally focused aircraft producer to global leader in the regional and executive jet market platforms. It will then examine Embraer’s entrance into the Chinese market, where the company suffered from several missteps and eventually had to refocus its business model from commercial to executive jets. Finally, as globalization continues to “emancipate international business from its institutional and social constraints,” (Muldoon 2005) this paper will address how the relatively new and emerging discipline of Business Diplomacy is continuing to mature and grow in stature and influence through the proposition of a new challenge or “liability” that corporations must also overcome as they expand into new markets. Through the analysis of Embraer in China, this paper will introduce the Liability of Governance to the lexicon of Business Diplomacy and propose specific steps that a company can undertake to avoid it.

Stochastic foundations of dynamic trade and labor market models

This dissertation consists of three self-contained papers that are related to two main topics. In particular, the first and third studies focus on labor market modeling, whereas the second essay presents a dynamic international trade setup.rnrnIn Chapter "Expenses on Labor Market Reforms during Transitional Dynamics", we investigate the arising costs of a potential labor market reform from a government point of view. To analyze various effects of unemployment benefits system changes, this chapter develops a dynamic model with heterogeneous employed and unemployed workers.rn rnIn Chapter "Endogenous Markup Distributions", we study how markup distributions adjust when a closed economy opens up. In order to perform this analysis, we first present a closed-economy general-equilibrium industry dynamics model, where firms enter and exit markets, and then extend our analysis to the open-economy case.rn rnIn Chapter "Unemployment in the OECD - Pure Chance or Institutions?", we examine effects of aggregate shocks on the distribution of the unemployment rates in OECD member countries.rn rnIn all three chapters we model systems that behave randomly and operate on stochastic processes. We therefore exploit stochastic calculus that establishes clear methodological links between the chapters.

Asset Pricing with Heterogeneous Agents, Incomplete Markets and Trading Constraints

The consumption capital asset pricing model is the standard economic model used to capture stock market behavior. However, empirical tests have pointed out to its inability to account quantitatively for the high average rate of return and volatility of stocks over time for plausible parameter values. Recent research has suggested that the consumption of stockholders is more strongly correlated with the performance of the stock market than the consumption of non-stockholders. We model two types of agents, non-stockholders with standard preferences and stock holders with preferences that incorporate elements of the prospect theory developed by Kahneman and Tversky (1979). In addition to consumption, stockholders consider fluctuations in their financial wealth explicitly when making decisions. Data from the Panel Study of Income Dynamics are used to calibrate the labor income processes of the two types of agents. Each agent faces idiosyncratic shocks to his labor income as well as aggregate shocks to the per-share dividend but markets are incomplete and agents cannot hedge consumption risks completely. In addition, consumers face both borrowing and short-sale constraints. Our results show that in equilibrium, agents hold different portfolios. Our model is able to generate a time-varying risk premium of about 5.5% while maintaining a low risk free rate, thus suggesting a plausible explanation for the equity premium puzzle reported by Mehra and Prescott (1985).

What Is Known about Testing for Discrimination: Lessons Learned by Comparing across Different Markets

The paper provides a fairly comprehensive examination of recent empirical work on discrimination within economics. The three major analytical approaches considered are traditional regression analysis of outcomes, paired testing or audits, and finally analysis of performance where higher group performance suggests that a group has been treated disfavorably. The review covers research in the labor, credit, and consumption markets, as well as recent studies of discrimination within the legal system. The review suggests that the validity of interpreting observed racial differences as discrimination depends heavily on whether the analysis is based on a sample that is representative of a population of individuals or households or based on a sample of market transactions, as well as the analyst?s ability to control for heterogeneity within that sample. Heterogeneous firm behavior and differentiated products, such as those found in labor and housing markets, also can confound empirical analyses of discrimination by confusing the allocation of individuals across firms or products with disparate treatment or by ignoring disparate impacts that might arise based on that allocation.

Land and labor reallocation in pre-modern Japan : a case of a northeastern village in 1720-1870

In agricultural societies, adjusting land and labor according to changes of labor endowment that result from family life cycle events is premised on making full use of resources for each farming household and for the economy as a whole. This paper examines how and how well households in pre-modern Japan reallocated land and labor, using a population register covering 150 years from 1720–1870 for a village in the Tohoku region. We find that households reacted to equalize their production factors; land-scarce households tended to acquire or rent-in land and out-migrate their kin members, while land-abundant households tended to release or rent-out land, in-migrate kin members, or employ non-kin members. Estimates suggest that more than 80% of the surplus or deficit area of land was resolved if the household rented or "sold" land. We discuss a potential underlying mechanism; namely, that the village's collective responsibility for tax payment (murauke) motivated both individual households and the village as a whole to reallocate land and labor for the efficient use of resources.

A multi-scale analysis of transforming agricultural markets in the context of globalization: implications for natural resources, food prices and rural poverty in Latin America

Vivimos una época en la que el mundo se transforma aceleradamente. La globalización está siguiendo un curso imparable, la población mundial así como la población urbana siguen creciendo, y en los países emergentes los ingresos promedios aumentan, resultando en un cambio también acelerado de las dietas y hábitos alimentarios. En conjunto esos factores están causando un aumento fundamental de la demanda de alimentos. Junto con la apertura de los mercados agrícolas, estos procesos han provocado un crecimiento del comercio internacional de alimentos durante la última década. Dado que muchos países de América Latina están dotados de abundancia de recursos naturales, estas tendencias han producido un crecimiento rápido de las exportaciones de bienes primarios desde América Latina al resto del mundo. En sólo 30 años la participación en el mercado agrícola de América Latina casi se ha duplicado, desde 10% en 1980 a 18% en 2010. Este aumento del comercio agrícola ha dado lugar a un debate sobre una serie de cuestiones cruciales relacionadas con los impactos del comercio en la seguridad alimentaria mundial, en el medio ambiente o en la reducción de la pobreza rural en países en desarrollo. Esta tesis aplica un marco integrado para analizar varios impactos relacionados con la transformación de los mercados agrícolas y los mercados rurales debidos a la globalización y, en particular, al progresivo aumento del comercio internacional. En concreto, la tesis aborda los siguientes temas: En primer lugar, la producción mundial de alimentos tendrá que aumentar considerablemente para poder satisfacer la demanda de una población mundial de 9000 millones personas en 2050, lo cual plantea grandes desafíos sobre los sistemas de la producción de alimentos. Alcanzar este logro, sin comprometer la integridad del medio ambiente en regiones exportadoras, es un reto aún mayor. En este contexto, la tesis analiza los efectos de la liberalización del comercio mundial, considerando distintas tecnologías de producción agraria, sobre unos indicadores de seguridad alimentaria en diferentes regiones del mundo y sobre distintos indicadores ambientales, teniendo en cuenta escalas diferentes en América Latina y el Caribe. La tesis utiliza el modelo “International Model for Policy Analysis of Agricultural Commodities and Trade (IMPACT)” – un modelo dinámico de equilibrio parcial del sector agrícola a escala global – para modelar la apertura de los mercados agrícolas así como diferentes escenarios de la producción hasta el año 2050. Los resultados del modelo están vinculados a modelos biofísicos para poder evaluar los cambios en la huella hídrica y la calidad del agua, así como para cuantificar los impactos del cambio en el uso del suelo sobre la biodiversidad y los stocks de carbono en 2050. Los resultados indican que la apertura de los mercados agrícolas es muy importante para mejorar la seguridad alimentaria a nivel mundial, sin embargo, produce también presiones ambientales indeseables en algunas regiones de América Latina. Contrastando dos escenarios que consideran distintas modos de producción, la expansión de la tierra agrícola frente a un escenario de la producción más intensiva, se demuestra que las mejoras de productividad son generalmente superiores a la expansión de las tierras agrícolas, desde un punto de vista económico e ambiental. En cambio, los escenarios de intensificación sostenible no sólo hacen posible una mayor producción de alimentos, sino que también generan menos impactos medioambientales que los otros escenarios futuros en todas sus dimensiones: biodiversidad, carbono, emisiones de nitratos y uso del agua. El análisis muestra que hay un “trade-off” entre el objetivo de alcanzar la sostenibilidad ambiental y el objetivo de la seguridad alimentaria, independiente del manejo agrícola en el futuro. En segundo lugar, a la luz de la reciente crisis de los precios de alimentos en los años 2007/08, la tesis analiza los impactos de la apertura de los mercados agrícolas en la transmisión de precios de los alimentos en seis países de América Latina: Argentina, Brasil, Chile, Colombia, México y el Perú. Para identificar las posibles relaciones de cointegración entre los índices de precios al consumidor de alimentos y los índices de precios de agrarios internacionales, sujetos a diferentes grados de apertura de mercados agrícolas en los seis países de América Latina, se utiliza un modelo simple de corrección de error (single equation error correction). Los resultados indican que la integración global de los mercados agrícolas ha dado lugar a diferentes tasas de transmisión de precios en los países investigados. Sobre todo en el corto plazo, las tasas de transmisión dependen del grado de apertura comercial, mientras que en el largo plazo las tasas de transmisión son elevadas, pero en gran medida independientes del régimen de comercio. Por lo tanto, durante un período de shocks de precios mundiales una mayor apertura del comercio trae consigo más inestabilidad de los precios domésticos a corto plazo y la resultante persistencia en el largo plazo. Sin embargo, estos resultados no verifican necesariamente la utilidad de las políticas comerciales, aplicadas frecuentemente por los gobiernos para amortiguar los shocks de precios. Primero, porque existe un riesgo considerable de volatilidad de los precios debido a cambios bruscos de la oferta nacional si se promueve la autosuficiencia en el país; y segundo, la política de proteccionismo asume el riesgo de excluir el país de participar en las cadenas de suministro de alto valor del sector agrícola, y por lo tanto esa política podría obstaculizar el desarrollo económico. Sin embargo, es indispensable establecer políticas efectivas para reducir la vulnerabilidad de los hogares a los aumentos repentinos de precios de alimentos, lo cual requiere una planificación gubernamental precisa con el presupuesto requerido disponible. En tercer lugar, la globalización afecta a la estructura de una economía y, por medios distintos, la distribución de los ingreso en un país. Perú sirve como ejemplo para investigar más profundamente las cuestiones relacionadas con los cambios en la distribución de los ingresos en zonas rurales. Perú, que es un país que está cada vez más integrado en los mercados mundiales, consiguió importantes descensos en la pobreza extrema en sus zonas rurales, pero a la vez adolece de alta incidencia de pobreza moderada y de desigualdad de los ingresos en zonas rural al menos durante el periodo comprendido entre 2004 y 2012. Esta parte de la tesis tiene como objetivo identificar las fuerzas impulsoras detrás de estas dinámicas en el Perú mediante el uso de un modelo de microsimulación basado en modelos de generación de ingresos aplicado a nivel los hogares rurales. Los resultados indican que la fuerza principal detrás de la reducción de la pobreza ha sido el crecimiento económico general de la economía, debido a las condiciones macroeconómicas favorables durante el periodo de estudio. Estos efectos de crecimiento beneficiaron a casi todos los sectores rurales, y dieron lugar a la disminución de la pobreza rural extrema, especialmente entre los agricultores de papas y de maíz. En parte, estos agricultores probablemente se beneficiaron de la apertura de los mercados agrícolas, que es lo que podría haber provocado un aumento de los precios al productor en tiempos de altos precios mundiales de los alimentos. Sin embargo, los resultados también sugieren que para una gran parte de la población más pobre existían barreras de entrada a la hora de poder participar en el empleo asalariado fuera de la agricultura o en la producción de cultivos de alto valor. Esto podría explicarse por la falta de acceso a unos activos importantes: por ejemplo, el nivel de educación de los pobres era apenas mejor en 2012 que en 2004; y también las dotaciones de tierra y de mano de obra, sobre todo de los productores pobres de maíz y patata, disminuyeron entre 2004 y 2012. Esto lleva a la conclusión de que aún hay margen para aplicar políticas para facilitar el acceso a estos activos, que podría contribuir a la erradicación de la pobreza rural. La tesis concluye que el comercio agrícola puede ser un importante medio para abastecer una población mundial creciente y más rica con una cantidad suficiente de calorías. Para evitar adversos efectos ambientales e impactos negativos para los consumidores y de los productores pobres, el enfoque debe centrarse en las mejoras de la productividad agrícola, teniendo en cuenta los límites ambientales y ser socialmente inclusivo. En este sentido, será indispensable seguir desarrollando soluciones tecnológicas que garanticen prácticas de producción agrícola minimizando el uso de recursos naturales. Además, para los pequeños pobres agricultores será fundamental eliminar las barreras de entrada a los mercados de exportación que podría tener efectos indirectos favorables a través de la adopción de nuevas tecnologías alcanzables a través de mercados internacionales. ABSTRACT The world is in a state of rapid transition. Ongoing globalization, population growth, rising living standards and increasing urbanization, accompanied by changing dietary patterns throughout the world, are increasing the demand for food. Together with more open trade regimes, this has triggered growing international agricultural trade during the last decade. For many Latin American countries, which are gifted with relative natural resource abundance, these trends have fueled rapid export growth of primary goods. In just 30 years, the Latin American agricultural market share has almost doubled from 10% in 1980 to 18% in 2010. These market developments have given rise to a debate around a number of crucial issues related to the role of agricultural trade for global food security, for the environment or for poverty reduction in developing countries. This thesis uses an integrated framework to analyze a broad array of possible impacts related to transforming agricultural and rural markets in light of globalization, and in particular of increasing trade activity. Specifically, the following issues are approached: First, global food production will have to rise substantially by the year 2050 to meet effective demand of a nine billion people world population which poses major challenges to food production systems. Doing so without compromising environmental integrity in exporting regions is an even greater challenge. In this context, the thesis explores the effects of future global trade liberalization on food security indicators in different world regions and on a variety of environmental indicators at different scales in Latin America and the Caribbean, in due consideration of different future agricultural production practices. The International Model for Policy Analysis of Agricultural Commodities and Trade (IMPACT) –a global dynamic partial equilibrium model of the agricultural sector developed by the International Food Policy Research Institute (IFPRI)– is applied to run different future production scenarios, and agricultural trade regimes out to 2050. Model results are linked to biophysical models, used to assess changes in water footprints and water quality, as well as impacts on biodiversity and carbon stocks from land use change by 2050. Results indicate that further trade liberalization is crucial for improving food security globally, but that it would also lead to more environmental pressures in some regions across Latin America. Contrasting land expansion versus more intensified agriculture shows that productivity improvements are generally superior to agricultural land expansion, from an economic and environmental point of view. Most promising for achieving food security and environmental goals, in equal measure, is the sustainable intensification scenario. However, the analysis shows that there are trade-offs between environmental and food security goals for all agricultural development paths. Second, in light of the recent food price crisis of 2007/08, the thesis looks at the impacts of increasing agricultural market integration on food price transmission from global to domestic markets in six Latin American countries, namely Argentina, Brazil, Chile, Colombia, Mexico and Peru. To identify possible cointegrating relationships between the domestic food consumer price indices and world food price levels, subject to different degrees of agricultural market integration in the six Latin American countries, a single equation error correction model is used. Results suggest that global agricultural market integration has led to different levels of price path-through in the studied countries. Especially in the short-run, transmission rates depend on the degree of trade openness, while in the long-run transmission rates are high, but largely independent of the country-specific trade regime. Hence, under world price shocks more trade openness brings with it more price instability in the short-term and the resulting persistence in the long-term. However, these findings do not necessarily verify the usefulness of trade policies, often applied by governments to buffer such price shocks. First, because there is a considerable risk of price volatility due to domestic supply shocks if self-sufficiency is promoted. Second, protectionism bears the risk of excluding a country from participating in beneficial high-value agricultural supply chains, thereby hampering economic development. Nevertheless, to reduce households’ vulnerability to sudden and large increases of food prices, effective policies to buffer food price shocks should be put in place, but must be carefully planned with the required budget readily available. Third, globalization affects the structure of an economy and, by different means, the distribution of income in a country. Peru serves as an example to dive deeper into questions related to changes in the income distribution in rural areas. Peru, a country being increasingly integrated into global food markets, experienced large drops in extreme rural poverty, but persistently high rates of moderate rural poverty and rural income inequality between 2004 and 2012. The thesis aims at disentangling the driving forces behind these dynamics by using a microsimulation model based on rural household income generation models. Results provide evidence that the main force behind poverty reduction was overall economic growth of the economy due to generally favorable macroeconomic market conditions. These growth effects benefited almost all rural sectors, and led to declines in extreme rural poverty, especially among potato and maize farmers. In part, these farmers probably benefited from policy changes towards more open trade regimes and the resulting higher producer prices in times of elevated global food price levels. However, the results also suggest that entry barriers existed for the poorer part of the population to participate in well-paid wage-employment outside of agriculture or in high-value crop production. This could be explained by a lack of sufficient access to important rural assets. For example, poor people’s educational attainment was hardly better in 2012 than in 2004. Also land and labor endowments, especially of (poor) maize and potato growers, rather decreased than increased over time. This leads to the conclusion that there is still scope for policy action to facilitate access to these assets, which could contribute to the eradication of rural poverty. The thesis concludes that agricultural trade can be one important means to provide a growing and richer world population with sufficient amounts of calories. To avoid adverse environmental effects and negative impacts for poor food consumers and producers, the focus should lie on agricultural productivity improvements, considering environmental limits and be socially inclusive. In this sense, it will be crucial to further develop technological solutions that guarantee resource-sparing agricultural production practices, and to remove entry barriers for small poor farmers to export markets which might allow for technological spill-over effects from high-value global agricultural supply chains.

Exposure to Chinese imports andlocal labor market outcomes. An Analysis for Spanish provinces

In the period 1999-2007 Spanish imports from China multiplied by six, making that Asian country the fourth largest supplier to the Spanish economy. In this paper, we analyse whether this massive increase in imports impacted on the labour markets of Spanish provinces to differing degrees, due to differences in their initial productive specialization. Our results show that Spanish provinces with a higher exposure to Chinese imports experienced larger drops in manufacturing employment as a share of the working-age population. However, this reduction was compensated for by increases in non-manufacturing employment.

Land, Labour and Capital Markets in European Agriculture: Diversity under a Common Policy. CEPS Paperback. October 2013

Well-functioning factor markets are an essential condition for the competitiveness and sustainable development of agriculture and rural areas. At the same time, the functioning of the factor markets themselves is influenced by changes in agriculture and the rural economy. Such changes can be the result of progress in technology, globalisation and European market integration, changing consumer preferences and shifts in policy. Changes in the Common Agricultural Policy (CAP) over the last decade have particularly affected the rural factor markets. This book analyses the functioning of factor markets for agriculture in the EU-27 and several candidate countries. Written by leading academics and policy analysts from various European countries, these chapters compare the different markets, their institutional framework, their impact on agricultural development and structural change, and their interaction with the CAP. As the first comparative study to cover rural factor markets in Europe, highlighting their diversity − despite the Common Agricultural Policy and an integrated single market − Land, Labour & Capital Markets in European Agriculture provides a timely and valuable source of information at a time of further CAP reform and the continuing transformation of the EU's rural areas.

Key Issues in Agricultural Labour Markets: A Review of Major Studies and Project Reports on Agriculture and Rural Labour Markets. Factor Markets Working Paper No. 20, February 2012

This paper provides a synthesis of the empirical literature on the key issues in agricultural and rural labour markets since 1960s, drawing mainly upon studies from the United States and the European Union, but also including relevant material from developing countries. The contribution of this meta-analysis lies in its unique structure as it covers the main research questions which have been addressed in the literature and includes the most cited papers from the American Journal of Agricultural Economics, Journal of Agricultural Economics, European Review of Agricultural Economics, Agricultural Economics as well as other reports and EU funded projects. Each research question is accompanied by tabular summaries which classify the individual studies according to the methodology and the variables employed. The heterogeneous conditions across countries, the different research questions and methodologies, and the type of data employed, have sometimes led to conflicting results. Nonetheless, by comparing the results it is possible to assess the significance and the direction of the determinants of rural labour allocation and its adjustments, and thus contribute to a better understanding on the functioning of rural labour markets. Lastly, by recognising the importance of the institutional framework, the paper provides useful policy insights.

Supply and Demand Side Limitations Affecting the Structure of Agriculture and the Rural Economy. Factor Markets Working Paper No. 21, February 2012

The paper criticises the neo-classical assumptions of perfect factor markets and of complete information, which constitute central elements in labour market theory. Based on literature review and on economic reports from transition economies, as well as developing countries and more advanced economies, this deliverable focuses on the structural impediments and imperfections which often characterise rural labour markets and which may prevent an efficient allocation of labour. According to empirical studies, transactions costs and rigidities hinder the well-functioning of labour markets and constrain labour adjustments. The paper attempts to classify the various limitations of rural labour markets from both supply and demand side, although the distinction is not always clear-cut as some problems occur on both sides. The identification of these issues is extremely important as it allows us to highlight the inefficiencies and the failures in labour markets and to understand their impact on labour allocation. In this context, market intervention is desirable and the paper provides particular support for rural development policies such as investments in human capital. Lastly, labour institutions can play a key role in promoting the well functioning of labour markets, thus it is fundamental that they are well in place.

Defining an Institutional Framework for the Labour Market. Factor Markets Working Paper No. 24, February 2012

This paper describes a conceptual framework for the empirical analysis of farmers’ labour allocation decisions. The paper presents a brief overview of previous farm household labour allocation studies. Following this, the agricultural household model, developed by Singh, Squire and Strauss (1986), which has been frequently applied to the study of labour allocation, is described in more depth. The agricultural household model, the theoretical model to be used in this analysis, is based on the premise that farmers behave to maximise utility, which is a function of consumption and leisure. It follows that consumption is bound by a budget constraint and leisure by a time constraint. The theoretical model can then be used to explain how farmers decide to allocate their time between leisure, farm work and off-farm work within the constraints of a finite time endowment and a budget constraint. Work, both farm and off-farm, provides a return to labour which in turn relaxes the budget constraint allowing the farm household to consume more. The theoretical model can also be used to explore the impact on government policies on labour allocation. It follows that subsidies that decrease commodity prices, such as reductions in intervention prices, mean that farmers have to work more (either on or off the farm) to maintain income and consumption levels. On the other hand, income support subsidies that are not linked to output or labour, such as decoupled subsidies, are a source of non-labour income and as such allow farmers to work less while maintaining consumption levels, known as the wealth effect.

The Institutional Framework of the Labour Market. Factor Markets Working Paper No. 25, February 2012

Following the identification of relevant labour market characteristics in Deliverable 9.1 (Factor Markets Working Paper No. 25), a survey was designed and implemented across the participant countries in the Factor Markets project. These survey results are detailed in this paper, Deliverable 9.3. The focus is of the survey, which was completed with the assistance of project partner teams, included, employment market, labour legislation, wage-setting mechanisms, unions, taxation and social benefits, education and training, labour mobility and general features of agriculture. Based on the questions posed and the responses received in the survey, in broad terms the agricultural labour market characteristics in the countries under study are not as heterogeneous as one might anticipate. Some of the differences, such as minimum rates of pay, are common to sectors other than agriculture also. There is a notable lack of a regional pattern to the labour market characteristics, i.e. no strong evidence of a north/south or east/west divide. Moreover, the labour market characteristics of one country are not necessarily a good indicator of the labour market characteristics of neighbouring countries.

Labour Supply Curves for EU Member and Candidate States: An applied general equilibrium analysis. Factor Markets Working Paper No. 26, June 2012

This paper introduces a more sophisticated modelling of the labour market functioning of the European member and candidate states through the introduction of labour supply curves in an applied general equilibrium model. A labour supply curve offers a middle way in labour supply modelling, sitting between the two commonly adopted extremes of spare capacity and full employment. The first part of the paper outlines the theoretical foundation of the labour supply curve. Real world data is then used to derive labour supply curves for each member state, along with Croatia and Turkey. Finally, the impact of the newly specified labour markets on the results of an illustrative scenario involving reform of the common agricultural policy is explored. The results of computable general equilibrium analysis with the labour supply curve confirm the theoretical expectation that modelling the labour supply through an upwards-sloping curve produces results that lie between the extremes of spare capacity of the labour factor and fully employed labour. This specification captures a greater degree of heterogeneity in the labour markets of the member and candidate states, allowing for a more nuanced modelling of the effects of policy reform, including welfare effects.

Does the Common Agricultural Policy Reduce Farm Labour Migration? Panel data analysis across EU regions. Factor Markets Working Paper No. 28, July 2012

This paper deals with the determinants of labour out-migration from agriculture across 149 EU regions over the 1990–2008 period. The central aim is to shed light on the role played by payments from the common agricultural policy (CAP) on this important adjustment process. Using static and dynamic panel data estimators, we show that standard neoclassical drivers, like relative income and the relative labour share, represent significant determinants of the intersectoral migration of agricultural labour. Overall, CAP payments contributed significantly to job creation in agriculture, although the magnitude of the economic effect was rather moderate. We also find that pillar I subsidies exerted an effect approximately two times greater than that of pillar II payments.

The Labour Allocation Decisions of Farm Households: Defining a theoretical model. Factor Markets Working Paper No. 31, October 2012

This paper presents a theoretical model for the analysis of decisions regarding farm household labour allocation. The agricultural household model is selected as the most appropriate theoretical framework; a model based on the assumption that households behave to maximise utility, which is a function of consumption and leisure, and is subject to time and budget constraints. The model can be used to describe the role of government subsidies in farm household labour allocation decisions; in particular the impact of decoupled subsidies on labour allocation can be examined. Decoupled subsidies are a labour-free payment and as such represent an increase in labour-free income or wealth. An increase in wealth allows farm households to work less while maintaining consumption. On the other hand, decoupled subsidies represent a decline in the return to farm labour and may lead to a substitution effect, i.e., farmers may choose to substitute non-farm work for farm work. The theoretical framework proposed in this paper allows for the examination of these two conflicting effects.