Labour market trends and implications of regional integration

Includes bibliography

Evaluating policies to improve total factor productivity in four large Latin American countries

Includes bibliography.

Aspects of recent developments in the Latin American and Caribbean labour markets

This article presents three stylized facts that characterized the evolution of labour markets in Latin America and the Caribbean in the period 2003-2012 and represented breaks from previous trends. It is argued that these changes have to do with the economic and production context and the political and institutional framework. We show how the magnitude and patterns of economic growth impact on the nature of job creation, especially on shifts within and between economic sectors and the various segments of different productivity levels. We emphasize how changes in labour institutions have contributed to the evolution of labour indicators and, lastly, look at recent advances and persistent weaknesses in labour performance, as well as a number of risks to the continuity of recent favourable labour trends.

Has Low Productivity Constrained Competitiveness of African Firms? : Comparison of the Firm Performances with Asian Firms

It has been argued that poor productive performance is one of critical sources of stagnation of the African manufacturing sector, but firm-level empirical supports are limited. Using the inter-regional firm data of the garment industry, technical efficiency and its contribution to competitiveness measured as unit costs were compared between Kenyan and Bangladeshi firms. Our estimates indicated that there is no significant gap in the average technical efficiency of the two industries despite conservative estimation, although unit costs greatly differ between the two industries. Higher unit cost in Kenyan firms mainly stems from high labour cost, while impact of inefficiency is quite small. Productivity accounts little for the stagnation of garment industry in several African countries.

Productivity and Credit Constraints: Firm-Level Evidence from Propensity Score Matching. Factor Markets Working Paper No. 3, September 2011

Drawing on a unique, farm-level panel dataset with 37,409 observations and employing a matching estimator, this paper analyses how farm access to credit affects farm input allocation and farm efficiency in the Central and Eastern European transition countries. We find that farms are asymmetrically credit constrained with respect to inputs. Farm use of variable inputs and capital investment increases up to 2.3% and 29%, respectively, per €1,000 of additional credit. Our estimates also suggest that farm access to credit increases total factor productivity up to 1.9% per €1,000 of additional credit, indicating that an improvement in access to credit results in an adjustment in the relative input intensities on farms. This finding is further supported by a negative effect of better access to credit on labour, suggesting that these two are substitutes. Interestingly, farms are found not to be credit constrained with respect to land.

Identifying Factor Productivity from Micro-data: The case of EU agriculture. Factor Markets Working Paper No. 34, January 2013

The classical problem of agricultural productivity measurement has regained interest owing to recent price hikes in world food markets. At the same time, there is a new methodological debate on the appropriate identification strategies for addressing endogeneity and collinearity problems in production function estimation. We examine the plausibility of four established and innovative identification strategies for the case of agriculture and test a set of related estimators using farm-level panel datasets from seven EU countries. The newly suggested control function and dynamic panel approaches provide attractive conceptual improvements over the received ‘within’ and duality models. Even so, empirical implementation of the conceptual sophistications built into these estimators does not always live up to expectations. This is particularly true for the dynamic panel estimator, which mostly failed to identify reasonable elasticities for the (quasi-) fixed factors. Less demanding proxy approaches represent an interesting alternative for agricultural applications. In our EU sample, we find very low shadow prices for labour, land and fixed capital across countries. The production elasticity of materials is high, so improving the availability of working capital is the most promising way to increase agricultural productivity.

Off-farm Labour Decision of Italian Farm Operators. Factor Markets Working Document No. 61, August 2013

This paper analyses the factors affecting off-farm labour decisions of Italian farm operators. Using micro-level data from the Farm Business Survey (REA) over the pre- and post-2003 CAP reform periods, we investigated the impact that operator, family, farm and market characteristics exert on these choices. Among other things, the paper focuses also on the differential impact of those variables for operators of smaller and larger holdings. The main results suggest that operator and family characteristics have a significant impact on the decision to participate in off-farm work more for smaller than for bigger farms. By contrast, farm characteristics are more relevant variables for bigger farms. In particular, decoupled farm payments, by increasing the marginal productivity of farm labour, lower the probability of working off the farm only in bigger farms, while coupled subsidies in pre-reform years do not have a significant impact on labour decisions. Finally, we show that, after accounting for the standard covariates, local and territorial labour market characteristics generally have a low effect on off-farm work operators’ choices.

FDI and the labour market: a review of the evidence and policy implications

This paper presents a series of results concerning the labour-market impact of inward foreign direct investment (FDI) in the UK. The paper demonstrates that one of the crucial impacts of FDI is to increase wage inequality and the use of relatively more skilled labour in the domestic firms. This result is found to be a combination of two effects. First, the entry by a multinational enterprise (MNE) increases the demand for skilled workers in an industry or region, thus increasing wage inequality. Second, technology spillovers occur from foreign to domestic firms. As a result of these spillovers, relative demand for skilled workers increases in the domestic firms, further contributing to aggregate wage inequality and skill upgrading. The paper also considers how FDI impacts upon skill shares by productivity differentials between foreign and domestic firms. Finally, the policy implications of this are discussed, from the perspective of regional development, and the likely effectiveness of attracting FDI to reduce structural unemployment.

Technology flows, outsourcing and productivity:an analysis of UK trade and FDI

By engaging in trade and foreign direct investment (FDI) with foreign partners, a country can access the R&D and related knowledge stocks of other countries (by accident or by design) and so benefit from those stocks of knowledge at a cost lower than that which would be incurred by developing the knowledge internally. This should lead to beneficial ‘spillover’ effects on the productivity of domestic firms. However, the literature on technology spillovers from trade and FDI is ambiguous in its findings. This may in part be because of the assumption in much of the work that trade and FDI flows are homogeneous in their determinants and thus in their effects. We develop a taxonomy of trade and FDI determinants based on R&D intensity and unit labour cost differentials, and test for the presence of spillovers from inward investment and imports on an extensive sample of UK manufacturing plants. We find that both trade and FDI have measurable spillover effects, but the size of these effects varies depending on the technological and labour cost differentials between the UK and its trading partners. There is therefore an identifiable link between the determinants and effects of trade and FDI which the previous literature has not explored. We also find that absorptive capacity matters for spillovers from FDI, but not from trade. Overall, these findings suggest that the productivity effects of FDI are largely restricted to plants with high absorptive capacity, while the productivity effects of imports occur largely among higher-technology plants regardless of their absorptive capacity.

Multinational firms, productivity and employment

Over the last three decades foreign direct investment (FDI) has become the most visible driver of globalisation. It has grown faster than world output and international trade and now reports world annual flows exceeding 1,000 billion US dollars. In this period, Germany has undergone significant changes in order to play an important role in the globalisation process. Apart from being a member state of the European Union (EU) whose key feature is the free flow of trade, investment and labour, the re-unification of East and West Germany in 1990 has been a significant development. This in effect has meant that East Germany as well as other Eastern European nations opened up to foreign investment for the first time. In this period, Germany has attracted in excess of 10 per cent of inward FDI into the EU and invested around 15 per cent of all FDI in the EU. This thesis explores empirically the potential impact of FDI on firms operating in and investing from Germany over a ten year period. Using panel data at the firm-level it concentrates on three areas relating to FDI. Firstly, it considers whether foreign-owned firms are more productive than German multinational firms and German non-multinational firms. Secondly, the thesis considers the impact of German investments abroad on domestic productivity. Finally, employment effects emanating from outward high-tech FDI are estimated for the leading OECD (Organisation of Economic Co-operation and Development) countries, namely Germany, Belgium, France, the Netherlands, Sweden, the United Kingdom and Japan. The findings of the first analysis indicate that while foreign-owned firms are generally more productive than German non-multinationals, there is no clear cut difference between foreign-owned firms and German multinationals. These differences would not have been uncovered, had the analysis compared foreign firms with all domestic firms. Equally, location within Germany is also important, as this productivity gap is more pronounced for firms which are located in the Eastern states. The findings of the second analysis suggest that engaging in outward FDI has an overall positive effect on the parent firm's productivity at home. Finally, results of the third analysis show that an expansion of high-tech offshoring activities by OECD multinationals (MNEs) is not associated with any reduction in employment at home.

Technology flows, outsourcing and productivity:an analysis of UK trade and FDI

The literature on technology spillovers from trade and FDI is ambiguous in its findings. This may in part be because of the assumption in much of the work that trade and FDI flows are homogeneous in their determinants and thus in their effects. We develop a taxonomy of trade and FDI determinants based on R&D intensity and unit labour cost differentials, and test for the presence of spillovers from inward investment and imports on an extensive sample of UK manufacturing plants. We find that both trade and FDI have measurable spillover effects, but the sign and extent of these effects varies depending on the technological and factor cost differentials between the recipient and host economies. There is therefore an identifiable link between the determinants and effects of trade and FDI which the previous literature has not explored.

Technology flows, outsourcing and productivity:an analysis of UK trade and FDI

The literature on technology spillovers from trade and FDI is ambiguous in its findings. This may in part be because of the assumption in much of the work that trade and FDI flows are homogeneous in their determinants and thus in their effects. We develop a taxonomy of trade and FDI determinants based on R&D intensity and unit labour cost differentials, and test for the presence of spillovers from inward investment and imports on an extensive sample of UK manufacturing plants. We find that both trade and FDI have measurable spillover effects, but the sign and extent of these effects varies depending on the technological and factor cost differentials between the recipient and host economies. There is therefore an identifiable link between the determinants and effects of trade and FDI which the previous literature has not explored.