Thirteenth Annual NBER-CEPR-TCER Conference
The NBER held its Thirteenth Annual NBER-CEPR-TCER conference, on the topic of unemployment, in Tokyo on December 15 and 16. Yoshio Higuchi, Keio University; Takeo Hoshi, TCER and University of California, San Diego; and Sadao Nagaoka, TCER and Hitotsubashi University, organized the program and chose these papers for discussion:
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Blanchflower studies the labor markets of 21 Eastern European countries using survey data on over 200,000 individuals for 1990-7. Using a variety of attitudinal measures, he finds that East Europeans report being less contented than their West European counterparts. Men, the young, the most educated, students, and the employed, particularly the self-employed, most strongly support the changes that have occurred in Eastern Europe. Support for market reforms actually dropped from the early 1990s to the mid-1990s; by 1997, it had risen somewhat but not returned its high levels of the early 1990s. Generally, job satisfaction levels in Eastern Europe are lower than in Western Europe, but the gap has closed slightly.
Using retrospective data on work experiences for youth in Japan, Genda and Kurosawa find that the labor market conditions when the workers first entered the laborforce after leaving school have a significant and lasting impact on the employment experiences of workers in their teens and twenties. An increase in the unemployment rate at the time of labor market entry reduces the probability of getting full-time regular jobs and raises the probability of workers leaving employers because of lower quality job matches. The vocational guidance or recommendations that future workers receive at school can be effective in raising job match quality, though. Finally, the adverse effect of the initial unemployment rate on job opportunities is observed most profoundly among female college graduates.
Abowd, Kramarz, Margolis, and Troske compare the French and U.S. pay systems. They find that for France, individual characteristics and establishment effects explain more of the variability in compensation than in the United States. The relationship between individual and establishment compensation and firm performance--including value-added per worker, sales per worker, and profit per unit of capital--exhibits important similarities and differences between the two countries. In general, higher paid workers--either because of individual characteristics or establishment effects--are employed in firms that are more productive. In France, higher pay as a result of enterprise heterogeneity is associated with higher profitability. In the United States, it is associated with lower profitability.
Kandel and Pearson compare HR policies in Japan and the United States and model the trade-off between the flexibility to adjust the labor force and the higher productivity that stems from a firm's commitment to its employees. They assume two types of employment contracts: a permanent contract, which precludes dismissal at will and a temporary contract, with higher labor cost per unit of output, which allows the flexibility to adjust the firm's labor force during downturns in demand. The results of their model are consistent with the stylized facts in the literature. Also, after estimating the value of flexibility for a firm, they suggest that adopting long-term contracts in the "wrong" environment can significantly reduce the firm value.
Using survey data and field research, Kato shows that, despite popular rhetoric on "the end of lifetime employment" (or implicit long-term employment contracts for the regular workforce) in Japan, the celebrated practice endures. Specifically, he finds little evidence for any major decline in the job retention rates of Japanese employees from the period prior to the burst of the bubble economy in the late 1980s to the post-bubble period. Instead, large firms in Japan have been doing everything they can to avoid laying off workers. However, the measured job retention rates may overstate the importance of long-term employment in recent years. Finally, Kato finds that the burden of downsizing appears to fall disproportionately on young workers and on middle-aged workers with shorter tenure.
The development of the unemployment rate differs substantially among OECD countries. Belot and van Ours investigate to what extent these differences are related to labor market institutions. In their analysis, they use data from 18 OECD countries over the period 1960-94 and show that the way in which institutions interact is important.
Through the 1990s, the Japanese employment situation grew steadily worse. Abe and Ohta investigate the causes of this increasing unemployment using individual data on male workers over the 12 years from 1988 to 1999. The authors find that the declining inflow probabilities in the construction, service, and manufacturing industries greatly affected the deteriorating state of the macro-unemployment rate. They also find that fluctuations in the unemployment rate depend a great deal on the crowding effect in unemployment. One reason for this strong crowding effect is that unemployed people seek employment in the same industry, and movement across industries is difficult. Finally, although the recent advancements in technology cannot explain it, the inflow probability for less educated and part-time workers and for people who are not working improved in the late 1990s.
These papers will appear in a special edition of the Journal of Japanese and International Economies.