Narrow Results

Income inequality has increased sharply in higher income and in many lower income countries. Theories attributing this to bifurcation of labor markets in higher income countries are examined. Some theorists attribute this bifurcation primarily to technical change with influence from globalization. Others take an opposite viewpoint. A contrasting view presented here is that globalization is strongly linked with technological change. More significantly even if globalization increases economic efficiency and growth in globalizing countries, it can raise income inequality and reduce social welfare in such countries. International fiscal competitiveness may, it is argued, contribute to income inequality and make all nations worse off. Trends in public social expenditure and in taxation receipts in higher income countries, including Singapore, are examined to determine the extent of empirical support for the theory.

Using a services firm-level dataset for Singapore, we find that different services industries have different industry dynamics with regards to work-permit foreign workers (FWs). In the retail industry, higher FW use is associated with lower firm-level profitability. This suggests that greater industry consolidation through tighter FW allocation could improve overall productivity in the sector. On the other hand, greater FW use in the hotel industry is associated with higher firm-level productivity. This suggests that FWs represent a critical input that supports more productive firms in this tradable sector. Hence, for this sector, FW policy should be more accommodative.

This paper discusses how Singapore's labor market policies since independence have been molded by the state-driven, foreign investment-led, export-oriented, manufacturing-focused development model the country has followed over the past fifty years. The literature we review shows that high GDP growth has been achieved through factor accumulation rather than productivity increase, a strategy of extensive growth that has now run into diminishing returns as well as political, social and resource constraints. Prolonged heavy dependence on imports of foreign labor and skills to attract foreign investment has contributed to low, declining and even negative productivity growth, with low real GDP growth in recent years. In response, the government is pursuing renewed economic restructuring, limiting foreign labor inflows, targeting investments more selectively, and promoting productivity and innovation, so far with uncertain results. This paper suggests that Singapore should let market forces propel the economy toward services, domestic consumption and regional trade, led by domestic private enterprise. But the retreat from established state industrial and social policies will be difficult.

We present cross-country evidence suggesting that agricultural credits have a positive impact on agricultural productivity. In particular, we find that doubling agricultural credits generates around 4–5% increase in agricultural productivity. We use two different agricultural production measures: (i) the agricultural component of GDP and (ii) agricultural labor productivity. Employing a combination of panel-data and instrumental-variable methods, we show that agricultural credits operate mostly on the agricultural component of GDP in developing countries and agricultural labor productivity in developed countries. This suggests that the nature of the relationship between agricultural finance and agricultural output changes along the development path. We conjecture that the development of the agricultural finance system generates entry into the agricultural labor market, which pushes up the agricultural component of GDP and keeps down agricultural labor productivity in developing countries; while, in developed countries, it leads to labor-augmenting increase in agricultural production. We argue that replacement of the informal credit channel with formal and advanced agricultural credit markets along the development path is the main force driving the labor market response.

Using longitudinal data from the German Socio-Economic Panel (GSOEP), this paper investigates how pro-active time-use (e.g., in sports/arts/socializing) relates to subjective well-being of the unemployed and their probability of finding a new job. Allowing for a variety of socio-demographic and -economic observed characteristics, we find that pro-activity is negatively associated with the well-being loss upon unemployment. That is, the negative unemployment shock on their well-being is mitigated through various stress-reducing activities including, in particular, art participation, socializing, going on trips and visiting a church. We also find that the probability of returning to the labor market later is positively associated with pro-activity during the unemployment period. The results are robust to various checks including estimators, measures and individual personality characteristics which can correlate with time-use activities.

In this paper, we present an agent-based, evolutionary, model of output- and labor-market dynamics. Firms produce a homogeneous, perishable good under constant returns to scale using labor only. Labor productivities are firm-specific and change stochastically due to technical progress. The key feature of the model resides in an explicit microfoundation of the processes of : (i) matching between firms and workers, (ii) job search, (iii) wage setting, (iv) endogenous formation of aggregate demand, and (v) endogenous price formation. Moreover, we allow for a competitive process entailing selection of firms on the basis of their revealed competitiveness. Simulations show that the model is able to robustly reproduce Beveridge, Wage and Okun curves under quite broad behavioral and institutional settings. The system generates endogenously an Okun coefficient greater than one even if individual firms employ production functions exhibiting constant returns to labor. Monte Carlo simulations also indicate that statistically detectable shifts in Okun and Beveridge curves emerge as the result of changes in institutional, behavioral, and technological parameters. Finally, the model generates sharp predictions about how system parameters affect aggregate performance (i.e. average GDP growth) and its volatility.

Was economic growth in East Asia jobless? An analysis of Okun's Law in eight countries between 1997 and 2011 suggests that it was not. However, there is considerable variation across countries. Generally, the effect of growth on employment magnifies in more flexible labor markets. Yet even under tight labor regulation, economic growth affects employment, especially in its composition. Agricultural employment moves counter-cyclically, as opposed to nonagricultural employment. The effect is particularly pronounced in periods of economic crisis, suggesting that agriculture serves as a shock-absorber for workers laid off in the industrial sector. Isolating nonagricultural employment reveals a stronger relationship between growth and job creation.

This paper uses survey data from Chinese Household Income Project (CHIP) to document wages and returns to education for a large number of cities during China's economic transition. Between 1988 and 1995, average real wages and returns to education increased, yet their spatial dispersions across cities widened dramatically. While market-oriented reforms should help equalize returns to human capital across regions, there was no sign of significant wage convergence in Chinese cities during this period. I argue that coordinated reforms in pension systems, housing markets, hukou registration, and local government behavior are imperative for improving the integration of local labor markets in China.

Little evidence exists on the effects of foreign direct investment (FDI) on local communities in the United States, despite evidence that U.S. communities actively bid against each other for FDI. We use detailed county-level panel data from South Carolina across 5-year intervals from 1980 through 1995 to investigate the effect of foreign manufacturing plants on local labor markets and on the level and distribution of local government budgets. We find that foreign investment raises local real wages much more than does domestic investment, but lowers per capita county-government expenditures and redistributes monies away from public school expenditures.

This chapter provides a sketchy description of three decades of social changes in China since 1978. The economic reform has re-configured the basic institutional make-ups of state socialist China: the household registration system (hukou), the work unit system (danwei), and the cadre-worker status distinction in the urban labor force. The changes of these intermediate institutions not only reflect social structural changes per se, but also serve as the keys to understanding the dynamic social life in China. Based on government statistics and other scholars' research, the paper highlights the impact of the changes and continuities of these institutions on individuals' life chances and social stratification in contemporary China.