JOB CHAINS AND WAGE CURVES: WORKER MOBILITY AND MARSHALLIAN SURPLUSES IN EVALUATING REGIONAL EMPLOYMENT GROWTH*

ABSTRACT In theory, new regional jobs yield two distinct sources of welfare gains to workers: (1) mobility gains achieved by workers as they move up job chains and (2) traditional Marshallian surpluses enjoyed by all workers as labor markets tighten. In the past, we have argued that the second channel is likely to be small relative to the first. This paper integrates a chain model (using PSID job change data) with a modified‐Marshallian model based on “wage curves” (estimated from CPS data) to formalize and test that argument. High wage jobs with modest wage–unemployment elasticities show Marshallian effects only 10 percent to 20 percent the size of mobility effects. Low wage jobs with somewhat higher elasticities show Marshallian effects from 40 percent to 70 percent the size of mobility effects.     

Spatial variations and clustering in the rates of youth unemployment and NEET: A comparative analysis of Italy,Spain, and the UK

We investigate the “determinants” of spatial variations in youth unemployment and NEET rates, and the presence of spatial clusters, for Italy, Spain and the UK. We aggregate Labour Force Survey data for the period 1993–2018 to a “regional” level. We find that youths are sensitive to aggregate labor market conditions and a discouraged worker effect. In the UK and Spain, temporary jobs are more likely to be preferred to part-time jobs, whereas in Italy the opposite occurs. There is evidence of spatial clustering of youth unemployment and NEET rates. We discuss the implications for place-based regional and labor market policies.     

The Impact of a Customs Union with the European Union on Internal Migration in Turkey

Abstract The impact of the recent Customs Union (CU) agreement between Turkey and the European Union on internal migration is studied using an intra‐industry trade Computable General Equilibrium (CGE) model with intersectoral capital mobility under two alternative specifications for the labor market: the traditional Harris‐Todaro approach and the existence of a “wage curve” in the urban sector. Under both specifications, the numerical results show that the CU is welfare enhancing and causes a reduction of the urban‐rural wage gap as suggested by theoretical studies. At the same time, it leads to rural‐to‐urban migration and raises the capital rent, results that are counter intuitive with respect to the dual economy literature. Furthermore, the rise in formal labor demand and the migration response to the CU have not resulted in an increase in urban unemployment (i.e. the “Todaro paradox”), but rather to a fall in the unemployment pool. The study also shows that the Bhagwati‐Srinivasan proposal of maximizing welfare by uniformly subsidizing the entire labor market is impracticable, especially if the high wage union sector can negotiate employment conditions.     

SPATIAL HETEROGENEITY AND THE WAGE CURVE REVISITED*

ABSTRACT Most “wage curve” studies ignore the geography of local labor markets. However, when a local labor market is in close proximity of other labor markets, a local shock that increases unemployment may not lead to lower pay rates if employers fear outward migration of their workers. Hence, the unemployment elasticity of pay will be greater, the more isolated the local labor market is. Wages are also expected to be higher in regions that interact strongly with other regions. These hypotheses are confirmed by means of an estimation of wage curves with data for 327 regions of western Germany over the period 1990–1997.     

Wage Effects of Unemployment Duration and Frequency

This paper analyzes the wage effects of unemployment duration and frequency for different regional labor market situations in The Netherlands using a simultaneous equations approach. The main finding is that unemployment duration has a significant negative effect and the frequency of unemployment a significant positive effect on wages in the core regions with relatively low unemployment rates. In the periphery with relatively high unemployment rates no significant effects of unemployment duration and frequency are found. It is argued that in the core regions unemployment duration is primarily viewed as a personal indicator of low productivity whereas in the periphery it is attributed to the situation in the regional labor market.     

Migration,Frictional Unemployment,and Welfare‐Improving Labor Policies*

Abstract. Studies have suggested that there exists job search and recruiting friction in urban areas. This paper constructs a two‐sector (rural and urban) model involving this factor and investigates how it affects migration and what the optimal policies should be. An analysis shows that frictional urban unemployment brings about intersector wage differentials and that an economy almost always has distortion in the absence of government intervention. Tax and subsidy policies that remove the distortion are explored. Setting urban wages appropriately is also shown to attain the optimum. Finally, we explore the criterion to judge whether changing urban wages as a policy, such as the minimum wage law, enhances social welfare.     

The Effect of Job Advertising Policies on Interregional Labor Migration

A simulation model of a multiregional labor migration process is developed. Information about employment conditions in alternative regions is transmitted in a combination of three channels. The adopted emission policies directly control the amount of information available to potential migrants which, in turn, determines the potential migrant's perception of the level of welfare in the other regions. The effect of several different advertising policies on migration streams is examined. Employers can pursue a number of policies designed to maximize their return. Other agencies adopt policies that facilitate the matching process between unemployed workers and vacant jobs. Results are presented for a number of simulation experiments.     

Undocumented Immigration and Host‐Country Welfare: Competition Across Segmented Labor Markets*

Abstract. In this paper's model, undocumented workers are endogenously sorted into secondary labor markets. When further illegal immigration occurs, some new migrants follow their fellows into already migrant‐dominated jobs, lowering migrant wages and raising real incomes of host‐country labor and capital. Some submarkets switch from employing legal workers to employing migrants, lowering demand for and wages of legal workers. Undocumented immigration is Pareto‐improving when enforcement reserves primary‐sector jobs for legal workers. Pareto‐dominant policies target the number of migrant‐dominated submarkets, not the number of migrants. This appears consistent with U.S. enforcement practices. The effects of deportations, employer sanctions, and amnesties are explored.     

DISGUISED,URBAN UNEMPLOYMENT AND WELFARE IN A GENERAL EQUILIBRIUM MODEL WITH SEGMENTED LABOR MARKETS*

ABSTRACT This paper integrates the theory of segmented labor markets with the Ranis-Fei model of dualism to analyze two types of unemployment; disguised unemployment in the rural sector and urban unemployment. The major results obtained are (1) sector-specific accumulation in the urban area may raise unemployment and lower welfare and (2) sector-specific accumulation in the rural sector always raises welfare but increases disguised unemployment. These results highlight the importance of regional resource allocation and the role of the agricultural sector in reducing urban unemployment.     

Understanding Public Support for Time Limits and Other Welfare Reforms

This article presents results of a reanalysis of data from a survey of New York residents regarding that state's welfare system and proposed welfare reform. The data danger from most previous studies of public opinion about welfare because questions were asked about a range of specific welfare reform options, such as various time limits, eligibility restrictions, and work requirements, that are key features of the new federal welfare law. Specifically, the analysis explores the extent to which public support for these reforms can be explained by self interest factors, political qualification, and beliefs regarding the poor, social rights, and the welfare system. White these variables have been found to be important in prior research, they provide a somewhat less consistent explanation of support for specific features of the new welfare system in the United States.     

WAGES,RENTS, UNEMPLOYMENT,AND THE QUALITY OF LIFE: A CONSISTENT THEORY‐BASED MEASURE

Combining a spatial equilibrium model with a search‐matching unemployment model, this paper analyzes the willingness to pay for regional amenities and the regional quality of life when wages, rents, and unemployment risk compensate for local amenities and disamenities. The results are compared with those obtained from the Rosen‐Roback approach. We demonstrate that the traditional approach gives too much weight to the wage differential if search frictions are significant. Furthermore, the paper confirms that the wage curve is negatively sloped for quasi‐linear utility. Specifically, the wage rate increases and the unemployment rate decreases in response to an increase in the amenity level if the amenity is marginally more beneficial to producers than to consumers.     

Urban bound migration and rural investment: the case of Mexico

The authors investigate an agriculturally based policy for improving rural incomes and for retarding the rural-urban migration flow. The production of agricultural goods is characterized by a production function in which output increases with increases in agricultural labor inputs, capital, public infrastructure, land, and technology. Differences among regions in agricultural technology will reflect regional differences in education, the institutionalized form of productive organization, and differences in access to technological information channeled through more technically advanced cities. To pick up the effect of out-migration changes in state agricultural labor supply and upon agricultural output, the state's agricultural out-migration rate is included together with the agricultural labor force. The gross migrant flow between 2 locations is hypothesized to depend upon a set of variables influencing the individual's perception of the economic rate of return to be gained by moving, a set of variables reflecting the individual's propensity to relocate, the labor displacement effects of investments, and the at risk population at 1 location available to migrate. It is also taken into account that individuals differ in their response to information about origin and destination wage differentials and that individuals may or may not perceive a new ecnomic gain from migration but may base the decision on other considerations. Results of a statistical analysis using data from the Mexican census of population for 1960 and 1970 are: 1) size of the rural labor force was negatively associated with agricultural wages, contrary to expectations; 2) small farmers have benefited from the expansion of irrigation in Mexico; and 3) higher urban wages attract migration, and higher growth rate of agricultural income retards rural-urban migration. With respect to the 1950-60 decade both agricultural income and rural out-migration impacts could have been substantial but both the impact on local urban growth and on the rate of in-migration to the primate city would have been slight.     

The Effectiveness of Jobs Reservation: Caste,Religion and Economic Status in India

This article investigates the effect of jobs reservation on improving the economic opportunities of persons belonging to India's Scheduled Castes (SC) and Scheduled Tribes (ST). Using employment data from the 55^th NSS round, the authors estimate the probabilities of different social groups in India being in one of three categories of economic status: own account workers; regular salaried or wage workers; casual wage labourers. These probabilities are then used to decompose the difference between a group X and forward caste Hindus in the proportions of their members in regular salaried or wage employment. This decomposition allows us to distinguish between two forms of difference between group X and forward caste Hindus: ‘attribute’ differences and ‘coefficient’ differences. The authors measure the effects of positive discrimination in raising the proportions of ST/SC persons in regular salaried employment, and the discriminatory bias against Muslims who do not benefit from such policies. They conclude that the boost provided by jobs reservation policies was around 5 percentage points. They also conclude that an alternative and more effective way of raising the proportion of men from the SC/ST groups in regular salaried or wage employment would be to improve their employment‐related attributes.     

TheConvergence of the Italian Regions and Unemployment: Theory and Evidence

We explore the links between the halt of the convergence process of Italian regions at the beginning of the 1970s and the increase in regional unemployment dispersion. We consider a neoclassical exogenous growth model with an imperfect labor market and show that during the transitional dynamics the imperfections of the labor market negatively influence the output growth rate. In particular, the model implies that centralized bargaining is likely to set a national minimum wage that is too high with respect to the labor productivity of the less developed regions, resulting in a negative impact on their per capita output growth. We test the implications of the model on a regional panel data set using the GMM framework. Both our market distortion measure and the unemployment rate are found to significantly lower the growth rate of per capita output.     

Welfare and the Discriminating Public: Evaluating Entitlement Attitudes in Post-Communist Europe

Although post-communist Europe retains elements of its socialist past, public opinion shows discernment in its welfare preferences. This analysis of post-communist social welfare attitudes finds that post-communist societies are selective in their support for social policies. First, welfare preferences center on two underlying realms: government responsibility and government spending; and second, welfare opinions and beliefs are not uniform across several social policies. Although many of the conclusions highlight the selective nature of these preferences, the example of the support for unemployment benefits points to how the transition from communist-era welfare states to capitalist-led assistance continues to influence public opinion in these countries.     

The peasantariat and politics: migration,wage labor,and agriculture in Botswana

This article examines Botswana's wage labor migration in terms of 2 reigning theories: 1) as a dichotomy between traditional and modern society, with workers viewing agriculture as an alternative to more desirable wage employment; or 2) as a subordination of colonial society to capitalist society, with workers drawn from the resulting underdeveloped and impoverished areas and divorced from their agricultural potential. Approximately 90% of Botswanan households have a wage worker; less than 1/4 of households rely on the agricultural economy alone. 80% of the population works in agriculture in some way, but agriculture contributes only 35% of total rural income. Over 50% of households are below the poverty level, and most must rely on a variety of income sources for subsistence. 68% of rural households (Botswana is 84% rural) have absent wage earners while 45% have 1 or more wage earners present. Absent wage earners work mainly in unskilled and semi-skilled jobs in Botswanan towns (44%) and villages (22%), and lands and cattlepost locations (5%) in South African mines (19%), and other jobs in South Africa (8%). Individuals with low socioeconomic status tend to migrate to South Africa; those with higher status move to Botswanan towns. Working for wages has become customary for most Botswanans. This article undermines conventional development theories by showing the close interweaving of the modern and traditional societies, and arguing that traditional retention of communal land rights and cattle ownership served the capitalistic system by becoming the basis for wage earning; previous income source (agriculture) did not disappear, but their use was altered. South African mining returns to the Botswanan government since 1965 largely benefited a growing petty-bourgeois class and marginally improved the life styles of the peasant labor class. Botswana's development depends on the relationship between the peripherial laboring class and the dominating petty-bourgeois and its internal structure.     

Iranian Youth in Times of Economic Crisis

Young people play an important role in shaping Iran's politics but have only a marginal role in its economy. Youth (ages 15–29) are more than one-third of the country's population and are better educated than the generation they are replacing, while accounting for more than two-thirds of the unemployed. Demographics have thrown the marriage market out of balance, with a “shortage of men” of about 25 percent, while economic pressures have reduced the ability of youth to get married and form families. The higher education system has expanded to absorb ever greater numbers of youth but because education quality is low this has not helped in reducing unemployment. The demographic pressures have amplified since 2008 when the economy entered a period of stagnation. The economic crisis has hit Iran's youth particularly hard, especially those from lower economic backgrounds because the country's rigid formal labor market preserves jobs for older workers. The record number of youth entering the labor market has to wait longer for a regular job or has to take up part-time and informal jobs. In either case, their difficulties in marriage and family formation are intensified.     

Child Poverty in the American States: The Impact of Welfare Reform,Economics, and Demographics

This article identifies the predictors of child poverty rates at the state level before and after the adoption and implementation of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996. The analysis shows that the most important state‐level factors that influence child poverty rates are demographics, the health and viability of the state economy, and often the generosity, inclusiveness, and quality of state welfare programs. States with large numbers of black citizens, and those that score highest on infant mortality, teen births, births to unmarried women, children living with a parent without a high school degree, and children living with a single parent have the highest rates of child poverty. Child poverty rates are lowest in states that suffer less unemployment, and in wealthier states. States that score higher on per capita personal income, tax revenues, and taxable resources have lower child poverty rates. While specific “tough” welfare policies adopted by some states seem to have no impact on child poverty rates, we tested for the first time a sophisticated measure of the overall quality of state welfare programs. The analysis reveals that the global quality of a state's welfare programs is often an independent predictor of child poverty. States with the most generous, inclusive, and supportive welfare programs have done the best job of lowering and containing child poverty.     

RURAL–URBAN MIGRATION AND UNEMPLOYMENT: THEORY AND POLICY IMPLICATIONS*

ABSTRACT We develop a regional model where, in the city, unemployment prevails because of too high (efficiency) wages, while, in the rural area, workers are paid at their marginal productivity. We characterize the steady‐state equilibrium and show that it is unique. We then consider two policies: decreasing urban unemployment benefits and subsidizing urban employment. We find that decreasing the unemployment benefit in the city creates urban jobs and reduces rural–urban migration since new migrants have to spend some time unemployed before they can find a job in the city. On the other hand, raising employment subsidies increases urban employment but may also increase urban unemployment because it triggers more rural–urban migration. In this respect, the employment subsidy policy can backfire by raising rather than reducing urban unemployment.     

Neoliberalism and the Economic Utility of Immigration: Media Perspectives of Germany's Immigration Law

Abstract: Germany's new immigration law, which took effect in 2005, was hotly debated over a period of four years. This paper follows the debate on the law through the newsprint media, examines the representation of immigration as an economic utility, and investigates the contents of this economic‐utility perspective of immigration in light of neoliberal restructuring in Germany. The analysis focuses on 609 articles sampled from five major German daily newspapers published between July 2001 and August 2005. A discourse analysis suggests that the newsprint media represented immigration on the one hand as an economic necessity to replenish the labor market and ensure the international competitiveness of key industrial sectors. On the other hand, immigration was depicted as an economic liability that raises unemployment rates and burdens the public welfare system. Although the media emphasized the economic necessity of immigration, the final law does not permit any significant immigration of labor. The paper resolves this contradiction by situating media discourse in a wider context of neoliberal reforms and European Union expansion.