Labor Markets and Social Security

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1 Labor Markets and Social Security

2 Springer-Verlag Berlin Heidelberg GmbH

3 John T. Addison. Paul J. J. Welfens Editors Labor Markets and Social Security Issues and Poliey Options in the V.S. and Europe With 56 Figures and 52 Tables Second Edition, Springer

4 Professor Dr. Peter Buxmann. Luis Martin Diaz Freiberg University of Technology Chair of Information Systems LessingstraBe 45, Freiberg, Germany Professor Dr. Wolfgang Konig. Markus Fricke University of Frankfurt Institute of Information Systems MertonstraBe 17, Frankfurt, Germany Dr. Franz Hollich SAP AG. Global Custom Development Projects Dr. Sascha Weber SAP AG. Development GBU Manufacturing NeurottstraBe 17,69190 Walldorf, Germany SAP, SAP SEM, SAP SEM/BA, SAP BW, SAP Logo, R/2, R/3, BAPI, Management Cockpit, mysap, mysap.com as well as other products and services of SAP and the correspondent logos are trademarks or registered trademarks of SAP AG in Germany and in several other countries ali over the world. All other products mentioned are trademarks or registered trademarks of their respective companies. EVA'" is a registered trademark of Stern Stewart & Co. HTML and XML are trademarks or registered trademarks of W3C"', World Wide Web Consortium, Massachusetts Institute of TechnoIogy. Oros'" and ABC Technologies'" are registered trademarks of ABC Technologies, Inc. Microsoft"', WINDOWS"', NT"', Access"', Excel"', Word"', PowerPoint'" and SQL Server'" are registered trademarks of Microsoft Corporation. Powersim'" is a registered trademark of Powersim Corporation. ISBN DOI / ISBN (ebook) Bibliographic information published by Die Deutsche Bibliothek Die Deutsche Bibliothek lists this publication in the Deutsche Nationalbibliografie; detailed bibliographic data available in the internet at http.//dnb.ddb.de This work is subject to copyright. All rights are reserved, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilm or in any other way, and storage in data banks. Duplication of this publication or parts thereof is permitted only under the provisions of the German Copyright Law of September 9, 1965, in its current version, and permission for use must always be obtained from Springer-Verlag. Violations are liable for prosecution under the German Copyright Law. springeronline.com Springer-Verlag Berlin Heidelberg 200X, 2004 Originally published by Springer-Verlag Berlin Heidelberg New York in 2004 Softcover reprint ofthe hardcover 2nd edition 2004 The use of general descriptive names, registered names, trademarks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. Cover design: Erich Kirchner, Heidelberg SPIN / Printed on acid-free paper

5 Table of Contents Introduction 1 John T Addison and Paul J.J. Welfens A. International Trade and the Position of European Low Skilled Labour 13 Marion Jansen 1. Introduction Trade Pattems in the European Vnion Trade and the Demand for Low Skilled Labour Trade with Countries Having Abundant Low Skilled Labour Trade among Similar, Industrialised Countries Empirical Evidence of the Effect of Trade on the Demand for Low Skilled Labour Trade and the Increased Substitutability of Workers across Borders Trade and Investment in Skills Summary and Perspectives 31 B. EU Enlargement, Migration and the Labour Market: A Tentative Assessment 35 Karl Pichelmann 1. East-west Migration Flows: Setting the Stage Enlargement Migration Scenarios for A BriefLook Behind the Aggregate Numbers 51 4.Summary 54 C. Structural Unemployment in Europe: A Bird's-Eye View 57 Karl-Heinz Paque 1. Introduction Stylised Facts and Evidence Stylised Interpretations Genesis ofthe Evil Persistence of the Evil Future of the Evil: Speculative Thoughts Ideas on Policy 73 Comments on: Structural Unemployment in Europe - A Bird's-Eye View 79 Manfred Teutemann D. Alternative Subsidies for Low-Wage Employment 83 Jiirgen Jerger and Alexander Spermann 1. Introduction Background Comparing Different Tax and Transfer Systems 87

6 VI Labor Markets and Social Security 3.1 A Conceptual Framework Labour Market Equilibrium in the Status Quo Labour Market Effects of a Targeted NIT Solution Alternative Reform Proposals EITC BTP Conc1usions 96 Comments on: Alternative Subsidies for Low-Wage Employment 101 Lioba Trabert E. Short- and Long-Term Unemployment: A Discrete Duration Model with Time-Varying Covariate Effects 105 iohn T. Addison and Pedro Portugal 1. Introduction Model Specification Data Findings Conc1usions 115 Appendix 116 F. Sectoral Employment Elasticities in Germany 119 Klaus LObbe 1. Introduction Growth and Employment in a Long-Term Perspective - Some Simple Findings The Position of the Federal Republic of Germany in the International Competitive Order Changes of the Sectoral Structure in Western Germany European Comparisons of Sectoral Structure International Comparison of Macroeconomic and Sectoral Employment Thresholds Formal Framework Results for Selected Industrial Countries in Total Results for Selected Sectors in the Federal Republic of Germany on the European Level Conclusions 141 Appendix 142 Comments on: Sectoral Employment Elasticities in Germany 145 Hans ioachim Schalk

7 Table of Contents VII G. New Firms and Creating Employment 149 David B. Audretsch 1.lntroduction The Job Generation Debate Why Does It Matter? The Evidence Economic Welfare Implications A Theory of Corporate Downsizing A Theory of Entrepreneurship Policy Implications Conc1usions 171 Comments on: New Firms and Creating Employment 179 Joachim Wagner H. Job Creation in the European Information Society 183 Wolfgang Seufert 1. Information Society and Employment - New Jobs or More Jobs? The Information Occupations and the Labor Force Production of Information Goods and Sectoral Growth ICT, Productivity Gains and Macroeconomic Growth Summary 196 Comments on: Job Creation in the European Information Society 199 Paul J.J. Welfens 1. Maastricht - Implications of a Centralized Monetary and Currency Policy for Employment in Europe 203 Ansgar Belke 1.lntroduction European Monetary Union as an Instrument to Discipline Wage Policy? European Monetary Union as an Impediment to More Employment? Political Dependence ofthe European Central Bank? Lack of Integration in an Incentive-Orientated Political Union? Lack of Operationalization and Ability to Carry Through the Convergence Criteria? Wage Leveling, Inelastic Labor Demand and Lack of the Exchange Rate Instrument Employment Impacts of Social and Politic al Union Social Protocol Employment Impacts of Social Union Employment Impacts of Political Union A European System of Fiscal Equalization Employment Impacts of a European Financial Policy 227

8 VlIJ Labor Markets and Social Security 5. Criticism of EMU by the Unions 6. Summary and Outlook Comments on: Maastricht - Implications of a Centralized Monetary and Currency Policy for Employment in Europe 243 Thomas Rhein J. Towards Full Employment and Growth in the European Union 247 Paul J.J. Welfens 1. Introduction: Unemployment and Growth in a European Perspective Labor Market Problems in the EU Deve10pments in West European Labor Markets Causes and Types of Unemployment Barriers to Exit as Barriers to Entry Theory of Full Employment Degree of Centralized Bargaining, Intra-EU -Trade and the Share of Investment Goods Unemployment and Growth: Macroeconomic vs. Structural Approaches Macroeconomic Approach Dynamic Two-Sector Approach Policy Options for Growth and Full Employment Reform ofthe Unemployment Insurance System How to Achieve Economic Growth Summary and Policy Conclusions 288 Appendix 1: Link Between Wage Setting and Future Income 291 Appendix 2: Rate of Product Innovation and the Non-tradable Sector 292 Appendix Appendix Appendix Comments on: Towards Full Employment and Growth in the European Union 299 Claus Schnabel K. Optimal Unemployment Insurance in a Federation 303 Helge Sanner 1. Introduction Formal Analysis Specification and Comparison of the Models Conclusions 314 Appendix 316

9 Table of Contents IX L. Employment and Wage EtTects of Social Security Financing - An Empirical Analysis of the West German Experience and Some Policy Simulations 319 Viktor Steiner 1.lntroduction Previous Related Studies Econometric Model Specification ofwage and Employment Equations Wage Equation Labour Demand Equation Estimation Results Integration Tests Wage Equations Labour Demand Equations Policy Simulations Conclusion 339 Data Appendix 340 M. Economic EtTects of Continuous Training 345 Lutz BellmannlUte Leber 1. Introduction Eamings Inequality and Unemployment in the U.S. and in Europe and the Role of Continuous Training Relative Shifts in Demand and Supply of Labor Institutions and Their Effects on Eamings Distribution and Unemployment Company Training Public Training Training and Unemployment - The Macroeconomic Level Training, Income and Employment - The Microeconomic Level Continuous Training and Firms' Performance Conclusions 359 Appendix 361 N. Social Security Reforms in Europe 367 BentGreve 1. Introduction Why a Crisis - And Will It Continue? A Short Empirical Description of Historical Developments since Change in Labour Market Policies - A Qualitative Assessment Change in Policies for the Elderly - Especially Pensions Summing Up 378

10 x Labor Markets and Social Security List of Figures List of Tables List of Contributors Index

SAP Excellence. Series Editors: Professor Dr. Dr. h.c. mult. Peter Mertens Universität Erlangen-Nürnberg. Dr. Peter Zencke SAP AG, Walldorf

SAP Excellence. Series Editors: Professor Dr. Dr. h.c. mult. Peter Mertens Universität Erlangen-Nürnberg. Dr. Peter Zencke SAP AG, Walldorf SAP Excellence Series Editors: Professor Dr. Dr. h.c. mult. Peter Mertens Universität Erlangen-Nürnberg Dr. Peter Zencke SAP AG, Walldorf Jörg Thomas Dickersbach Characteristic Based Planning with mysap