Theory of public goods (W.H. Oakland). Incentives and the allocation of public goods (J.-J. Laffont). The economics of the local public sector (D.L. Rubinfeld). Markets, government, and the "new" political economy (R. Inman). Income maintenance and social insurance (A.B. Atkinson). The theory of cost-benefit analysis (J. Dreze, N.H. Stern). Pareto efficient and optimal taxation and the new new welfare economics (J.E. Stiglitz). Tax incidence (L. Kotlikoff, L. Summers).

Handbook of Public Economics

Unemployment is at a low and stable level in Denmark. This achievement is often attributed to the so-called flexicurity model combining flexible hiring and firing rules for employers with income security for employees. Whatever virtues this model may have, a low and stable unemployment rate is not automatically among them since the basic flexicurity properties were also in place during the 1970s and 1980s where high and persistent unemployment was prevalent. Labour market performance has changed due to a series of reforms during the 1990s, the main thrust of which were a shift from a passive focus of labour market policies to a more active focus on job search and employment. The policy tightened eligibility for unemployment benefits and their duration as well as introduced workfare elements into unemployment insurance and social policies in general. Thereby policy makers attempted to strengthen the incentive structure without taking resort to general benefit reductions. We argue that the workfare policies have played an important role running primarily via motivation/threat and wage effects. However, active labour market policies are resource demanding, and although the workfare reforms have improved cost effectiveness, there is still an issue as to whether the resources going into active labour market policies are used efficiently.

Flexicurity – Labour Market Performance in Denmark

Since the seventies problems in the labor market have presented a serious challenge to policy markers. Unemployment tends to rise in a downturn but barely falls in the upswing. Each year the manufacturing sector sheds jobs, and unemployment is on the increase, even when the economy expands. Nonetheless, the close link between the labor market and the goods market has not been broken. The false impression that employment changes are rather independent of output changes arises basically for one reason: every year there are technical and organizational innovations which raise productivity; therefore, the economy must expand by 2 percent just to preserve the number of jobs in the economy. In the manufacturing sector the pressure to rationalize is particularly great. To sustain the level of employment, output needs to grow by 4½ percent per year. Since this is rarely the case, employment in manufacturing has been falling for many years; this trend is likely to continue into the future. Over the last two decades nothing has changed with regard to the tight relationship between economic growth and employment. The employment intensity of growth has not diminished; in other words: given the same rate of economic growth, productivity advances are just as high as in earlier periods. To be sure, the manufacturing sector has been characterized by a surge in productivity over the last two years, but this phenomenon reflects the recession rather than a long-term trend. The battle against unemployment is rendered difficult not so much by the acceleration in productivity growth, but by the relatively low long-term growth and the high increase in labor supply. If economic growth can be accelerated by 1 percentage point, employment will rise by 0.4 percentage point (some 12,000 persons). The effect of increases in the labor supply has often been underestimated: even though the average age of retirement has fallen rapidly, the supply of persons active in the labor market has risen by at least 1 percent per year over the last fifteen years, with almost half of the increase due to the inflow of foreign workers. Therefore, a rate of economic growth of 3 percent would be needed to stabilize the rate of unemployment in the long term. This relation certainly also reflects structural imbalances. The rise in unemployment has been especially pronounced in manufacturing. In the service sectors and in the construction industry many new jobs were not filled with the unemployed but with people from the "hidden reserve" and from abroad. The steep rise in labor supply explains why unemployment has changed so little, even though employment has reached higher and higher levels. To lower unemployment, higher economic growth or a reduced increase in the labor supply is needed. The possibilities of reducing unemployment through an increase in the labor intensity of growth are, as recent experience shows, rather limited.

Growth and Unemployment

The Real Effects of European Monetary Union

If hours can be freely varied within jobs, the effect on hours of changes in preferences for those who do change jobs should be similar to the effect on hours for those who do not change jobs. Conversely, if employers restrict hours choices, then changes in preferences should affect hours more strongly when the job changes than when it does not change. For a sample of married women we find that changes in many of the labor supply preference variables produce much larger effects on hours when the job changes.

Labor Supply, Hours Constraints and Job Mobility

Explaining cross-country differences in current accounts is difficult. While pay-as-you-go pensions reduce the need to save for retirement, contributions to capital-funded pensions are saved for future consumption. An overlapping-generations analysis shows that capital-funded pensions increase net foreign assets holdings. With a multi-pillar system whose capital-funded part accounts for 18% of pensions, the Austrian current account balance would be 1 percentage point of gross domestic product (GDP) higher than with pure pay-as-you-go pensions in 20 years. By comparison, the Austrian current account surplus averages 1.8% of GDP. Empirically, I find that the current account of high-income countries increases with the coverage and replacement rates of capital-funded pensions.

The long run influence of pension systems on the current account

As life expectancy increases and fertility declines, population aging puts pressure on the financing of welfare states in Europe and other developed countries. Given that immigrant workers are younger than the domestic population, a continuous flow of immigrants reduces the old-age dependency ratio and improves financing. Existing general equilibrium estimates of the public finance contribution of migration, performed with different models, are not comparable across countries and sometimes differ even in sign. We use the same overlapping-generations model with a detailed representation of institutions and labor market activity to provide comparable estimates of the impact of immigration on public finance in four European countries. We find that future projected immigration flows are equivalent to 14.3 % points labor income taxes in Austria, 7.3 points in Germany, 6.2 points in the UK and 1.7 points in Poland in 2060. These differences are due to the projected volume of immigration and institutional setups, among other factors. For comparable volumes of immigration, future flows have largest impact in Germany and smallest in the UK.

/pdf/cross-country-differences-in-the-contribution-of-future-489wvklc72.pdf

Cross-country differences in the contribution of future migration to old-age financing

Die AusBildung bis 18 (AB18) stellt ein zentrales Reformvorhaben der osterreichischen Bildungs-, Jugend- und Arbeitsmarktpolitik dar mit der Zielsetzung, dass alle Jugendlichen einen schulischen oder beruflichen Abschluss auf der Sekundarstufe II erreichen. Unterschiedliche Themen und Fragestellungen, die fur die Umsetzung der AB18 von groser Relevanz sind, wurden in einer Kooperation zwischen IHS und oibf bearbeitet. Mehrere Forschungsmodule sind spezifischen jugendlichen Zielgruppen gewidmet, die aufgrund von Benachteiligungen besonderer Unterstutzung bei der Fortsetzung ihrer Bildungskarriere bedurfen. Andere Module beziehen sich auf unterstutzende Angebote in- und auserhalb des Bildungssystems. Zwei Module widmen sich ubergreifenden Fragen: Eines dem fruhen Bildungsabbruch, seinen Ursachen, Konsequenzen und Moglichkeiten der Gegensteuerung, das andere der Frage nach dem (makrookonomischen) Nutzen des Programms.
Zusammenfassend zeigt sich als einer der grosen Vorzuge der AB18, dass es sich dabei nicht einfach nur um eine simple Verlangerung der Schulpflicht um weitere drei Jahre handelt. Es ist im Kontext der AB18 moglich, der Ausbildungspflicht auch durch einen Besuch beispielsweise von Masnahmen der Erwachsenenbildung, der beruflichen Integration oder der Arbeitsmarktforderung nachzukommen. Damit im Zusammenhang steht oft auch eine Variation des Settings sowie des padagogisch-didaktischen Ansatzes. Anstelle eines “more of the same” eroffnet dieser Ansatz alternative Moglichkeiten, einen Abschluss zu erlangen.
Ein zweites innovatives Element der AB18 kann in dem Umstand festgemacht werden, dass es sich dabei nicht um die Etablierung eines weiteren Sondersystems bzw. Kompensationsangebots handelt, worin traditionell die Starke (aber auch Einseitigkeit) osterreichischer Interventionssysteme liegt, sondern vom Ansatz her sowohl 1) Pravention als auch 2) Intervention und 3) Kompensation umfasst.
Ein dritter zentraler Punkt liegt in der Kooperation, Vernetzung und Zusammenarbeit. Die Kooperation aller AkteurInnen, die zusammenarbeiten, um gemeinsam ein Ziel zu erreichen, stellt eine Gelingensbedingung der AB18 dar. Um Kooperation und gemeinsames Engagement zu etablieren, ist es jedoch zwingend, Partikularinteressen zu uberwinden. Dies impliziert zumindest auf Ebene der grosen Stakeholder einen Abschied vom Denken in Finanztopfen, einen Abschied von der Differenzierung in eigene und fremde Zielgruppen, einen Abschied von eng interpretierten Zustandigkeiten und Mandaten, die grenzziehend wirken und zugleich Nicht-Zustandigkeiten und Nicht-Mandate etablieren. Vielmehr sollte an diese Stelle ein gemeinsames und kooperatives Bestreben treten, der Problemlage entgegenzuwirken, um den Erfolg der AB18 sicherzustellen.

AusBildung bis 18. Wissenschaftliche Begleitung der Implementierung und Umsetzung des Ausbildungspflichtgesetzes

This document is the final report for a background paper for the ECA Old-Age Insurance report, using a General Equilibrium approach to analyze aging and pension reforms in two countries from the Europe and Central Asia region, Poland and Slovakia. Compared to the second interim report, this document adds analysis for some additional reforms, sensitivity analysis and policy implications. Low fertility and increases in life expectancy lead to aging of the population. As the number of young active households is growing less rapidly (or even shrinking) than old households prone to retirement, the financing of pension systems is a challenge when these systems are based on the pay-as-you-go scheme. All developed countries rely to some extent on pay-as-you-go schemes. The basic challenge of pension financing created by population aging is common to many developed countries . The challenge confronted by countries in the ECA region may however be larger, for several reasons. In particular, high participation in informal markets decreases government revenue, adding to immediate pension financing difficulties. Using an expanded overlapping generations model with endogenous retirement decisions with formal and informal sectors, simulation predicts that aging would increase social security deficits by more than 5% of GDP by 2100. Among the various reforms considered, cuts in pension benefits are the most successful at containing the deficits if the sole goal of reforms is financial sustainability. Increases in retirement age may be preferable if additional goals are considered. Targeting a decrease in informality alone may not help to decrease the deficit in the long run because gains in revenues are offset by the increase in pension payments.;

Aging, informality and public finances in Poland and Slovakia: A general equilibrium approach, background paper for the ECA Old-Age Insurance World Bank report ; Final Report ; Study on behalfof The World Bank

This paper develops a general equilibrium model with safe and risky jobs where unemployment is concentrated in a highly productive but volatile sector. Frictional unemployment arises in the process of job creation, firing and retraining for alternative employment. The paper derives an optimal welfare policy which combines the design of the tax schedule with three pillars of the `flexicurity' model. The optimal policy is characterized by (i) a progressive wage tax schedule; (ii) a wage subsidy to re-employed workers; (iii) unemployment insurance benefits; (iv) job protection to contain firing; and (v) active labor market policy to facilitate labor reallocation.

https://www.econstor.eu/bitstream/10419/113212/1/VfS_2015_pid_727.pdf

Flexicurity and Job Reallocation

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