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41. Functional Specialisation and Working Conditions in Europe

Author:
Sandra Leitner, Roman Stöllinger, and Zuzana Zavarská
Publication Date:
05-2023
Content Type:
Working Paper
Institution:
The Vienna Institute for International Economic Studies (WIIW)
Abstract:
Specialisation in value-chain functions is one of the new phenomena introduced by global value chains (GVCs). This report investigates the effects of functional specialisation on labour markets in fabrication and R&D activities as the two polar cases of value-chain functions, whereby the former is associated with factory economies, while the latter is characteristic of headquarter economies. More precisely, a metric similar to revealed comparative advantage is used to study the effect of relative functional specialisation on wages and non-wage working conditions. In line with the GVC literature emphasising power relations and organisational aspects of production networks, we are able to identify differentiated effects for functional specialisation patterns on wages in EU member states at the industry level across time. While relative functional specialisation in fabrication tends to hold back wages, functional specialisation in R&D has a positive effect on wage progression, controlling for labour productivity, GVC participation and numerous labour supply- and labour demand-side factors. The use of a constructed ‘sharp’ instrument allows giving these results a causal interpretation. Conversely, both functional specialisation measures are found to improve some non-wage working conditions, namely workers’ physical environment and their work intensity, which is evidence against a potential ‘race to the bottom’ effect of functional specialisation along GVCs. The effect is stronger for relative specialisation in fabrication than for relative specialisation in R&D.
Topic:
International Trade and Finance, Labor Issues, Foreign Direct Investment, European Union, Labor Market, Value Chains, and Wages
Political Geography:
Europe

42. Employment transitions with high unemployment and a small informal sector: Examining worker flows during normal and recessionary periods in South Africa

Author:
Shakeba Foster
Publication Date:
04-2023
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
This paper examines employment transitions in the South African labour market. Using the Post-Apartheid Labour Market Series, it analyses flows between the formal sector, informal sector, and unemployment, paying specific attention to how these flows differ during recessions. It explicitly considers heterogeneity within the informal sector by separately accounting for wage employment and self-employment as well as upper-tier and lower-tier informal sector segments. Transition probabilities are estimated using dynamic discrete choice models, and the extent to which transitions affect changes in real wages is estimated using a linear model. The results provide evidence of heterogeneity within the informal sector and segmentation between wage employment and self-employment. They also show a lag in the employment impacts following a recession. Finally, the paper provides suggestive evidence that the upper-tier segment of the informal sector acts as a buffer during recessionary periods by absorbing labour that would otherwise be unemployed or relegated to precarious lower-tier informal employment.
Topic:
Employment, Labor Market, Informal Economy, and Recession
Political Geography:
Africa and South Africa

43. Labour Market Flows and Gender Differentials in Urban Unemployment Over the Pandemic

Author:
Paaritosh Nath
Publication Date:
05-2023
Content Type:
Working Paper
Institution:
Centre for Sustainable Employment, Azim Premji University
Abstract:
Utilising data from the Periodic Labour Force Survey, we estimate quarterly changes in urban labour market flows over the period 2018 to 2022 and the impact on unemployment rates for men and women. Our analysis provides non-intuitive explanations for established findings as well as pointing out important questions for further study. Both men and women’s unemployment rates have reduced in 2022 compared to 2018, showing rapid reductions following the high levels reached during the lockdown. Women’s unemployment rates have consistently been higher than men throughout this period. The gap between men and women’s unemployment rates reduced during the lockdown, but have shown signs of increasing since 2021, even as unemployment rates have fallen. For women, flows from the labour force to non-participation play a larger role in explaining changes in unemployment rates as compared to men. Flows from the labour force to non-participation, however, have reduced since the pandemic, providing an explanation as to why labour force participation rates have increased, namely, women staying for longer in the labour force rather than more women entering it. Despite rising labour force participation rates, the gender gap in unemployment rates have risen, in contrast to developed economies.
Topic:
Urban, Unemployment, COVID-19, Labor Market, and Gender
Political Geography:
South Asia, India, and Global Focus

44. Spatial Wage Inequality in North America and Western Europe: Changes Between and Within Local Labour Markets 1975-2019

Author:
L. Baluz, P. Bukowski, M. Fransham, A. Lee, and M. López Forero
Publication Date:
08-2023
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
The rise of economic inequalities in advanced economies has been often linked with the growth of spatial inequalities within countries, yet there is limited comparative research that studies the relationship between national and subnational economic inequality. This paper presents the first systematic attempt to create internationally comparable evidence showing how different countries perform in terms of geographic wage inequalities. We create cross-country comparable measures of spatial wage disparities between and within similarly-defined local labour market areas (LLMAs) for Canada, France, (West) Germany, the UK and the US since the 1970s, and assess their contribution to national inequality. By the end of the 2010s, spatial inequalities in LLMA mean wages are similar in Canada, France, Germany and the UK; the US exhibits the highest degree of spatial inequality. Over the study period, spatial inequalities have nearly doubled in all countries, except for France where spatial inequalities have fallen back to 1970s levels. Due to a concomitant increase in within-place inequality, the contribution of places in explaining national wage inequality has remained fairly constant over the 40-year study period, except in the UK where we document a significant increase. Whilst common global social, economic and technological shocks are important drivers of spatial inequality, this variation in levels and trends of spatial inequality opens the way to comparative research exploring the role of national institutions in mediating how global shocks translate into economic disparities between places.
Topic:
Inequality, Labor Market, and Wages
Political Geography:
Europe and North America

45. The Labor Market Effects of Disability Benefit Loss

Author:
Anikó Bíró, Cecília Hornok, Judit Krekó, Dániel Prinz, and Ágota Scharle
Publication Date:
09-2023
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
Disability benefits are costly and tend to reduce labor supply. While spending can be contained by careful targeting, correcting past flaws in eligibility rules or assessment procedures may entail welfare costs. We study a major reform in Hungary that reassessed the health and working capacity of a large share of beneficiaries. Leveraging age and health cutoffs in the reassessment, we estimate employment responses to loss or reduction of benefits. We find that among those who left disability insurance due to the reform 58% were employed in the primary labor market, 6% participated in public works and 36% were out of work without benefits in the post-reform period. The consequences of leaving disability insurance sharply differed by pre-reform employment status. 81% of beneficiaries who had some employment in the pre-reform year worked, while only 33% of those without pre-reform employment did. The gains of the reform in activating beneficiaries were small and strongly driven by pre-reform employment status. This points to the importance of combining financial incentives with broader labor market programs that increase employability.
Topic:
Health, Employment, Economy, Disability, Fiscal Policy, Insurance, Labor Market, and Welfare State
Political Geography:
Europe and Hungary

46. Regional Development and Internal Migration Aspects of Structural Transformation: A Case Study of Senegal

Author:
Askar Mukashov
Publication Date:
10-2023
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
This study investigates regional development and internal migration dynamics within the context of modern structural transformation in Sub-Saharan Africa. We develop a regionalized Computable General Equilibrium model that incorporates regionalized production, endogenous interregional migration, and distinct migrant households. Using this model, we simulate the structural transformation of Senegal as a case study. Our findings demonstrate that agricultural stagnation, exacerbated by global climate change, underlies the economic underperformance of rural regions and amplifies regional income disparities. Furthermore, our analysis shows that outmigration from stagnating rural provinces to a more developed capital region positively influences overall economic growth and mitigates regional income inequality. Nevertheless, these effects are limited, and a proactive approach to addressing income inequality across the nation's regions would require supporting agriculture, as it represents a more equitable policy than promoting nonagricultural sectors in both rural and capital regions.
Topic:
Climate Change, Migration, Economic Growth, Labor Market, and Regional Development
Political Geography:
Africa

47. Exposure to War and Its Labor Market Consequences over the Life Cycle

Author:
Sebastian T. Braun and Jan Stuhler
Publication Date:
02-2023
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
With 70 million dead, World War II remains the most devastating conflict in history. Of the survivors, millions were displaced, returned maimed from the battlefield, or spent years in captivity. We examine the impact of such wartime experiences on labor market careers and show that they often become apparent only at certain life stages. While war injuries reduced employment in old age, former prisoners of war postponed their retirement. Many displaced workers, particularly women, never returned to employment. These responses are in line with standard life‐cycle theory and thus likely extend to other conflicts.
Topic:
History, Displacement, World War II, Welfare, Prisoners of War, and Labor Market
Political Geography:
Europe and Germany

48. Regulating platform work: How will this impact migrant workers?

Author:
Tommaso Grossi and Andreina De Leo
Publication Date:
05-2023
Content Type:
Working Paper
Institution:
European Policy Centre (EPC)
Abstract:
Migrant workers in the platform labour market are vulnerable to double exploitation. First, as platform workers, they cannot enjoy the protections that employment law provides. Second, they can be subject to exploitation due to their migration and residence status, especially if undocumented. This Discussion Paper analyses the impact of the European Commission’s proposed Directive on improving the working conditions and rights of platform migrant workers. The proposed Directive's positive impact will likely be restricted by migrant employees' bargaining strength and non-EU platform workers' well-founded fears of reprisal. Therefore, targeted improvements to the proposed framework are needed to remove the structural barriers faced by migrant workers when accessing the labour market. This Paper offers six recommendations on how to move forward: Strike the right balance between retaining flexibility for genuine self-employed platform workers and enhancing protection through reclassification. Guarantee transparency and ensure non-discrimination in algorithmic management. Introduce effective measures against the risk of subcontracting and ensure the liability of subcontracting chains. Facilitate the involvement of civil society organisations with specific expertise on migrants’ rights as well as trade unions involved in defending the rights of platform workers to enhance the enforcement of rights and protections. Put in place binding measures to establish ‘firewalls’ for platform migrant workers who lodge complaints in the context of inspections by the labour authorities. Promote better access to the labour market for migrant workers and consider regularisation channels for undocumented migrants as the most effective way to prevent or fight exploitation.
Topic:
Employment, Labor Market, Migrant Workers, and Exploitation
Political Geography:
Europe

49. The Responsibility of Business to Respect Human Rights

Author:
Özlem Zıngıl
Publication Date:
11-2023
Content Type:
Policy Brief
Institution:
Turkish Economic and Social Studies Foundation (TESEV)
Abstract:
This brief provides a frame of reference and recommendations on the responsibility of business to respect human rights, based on the UN Guiding Principles on Business and Human Rights and current examples.
Topic:
Human Rights, United Nations, Business, Accountability, Transparency, and Labor Market
Political Geography:
Turkey and Middle East

50. Environmental Migration and Labor Market

Author:
Young-ook Jang
Publication Date:
07-2023
Content Type:
Policy Brief
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
This report highlights the significant impact of climate change on migration patterns and the need for Korea to prepare for the influx of climate migrants. While natural disasters have historically caused population displacement, the effects of climate change-induced slow-onset changes, such as rising sea levels and droughts, are increasingly evident. Environmental migration disrupts social, labor, and industrial structures in sending and receiving countries, particularly through labor migration, which affects wages, employment rates, production costs, commodity prices, and business cycles. The study by Jang et al. (2022) investigates regional patterns of environmental migration and the potential labor market implications. Although Korea is currently unaffected, it is projected to experience an increase in climate migrants in the near future, as Southeast Asian and South Asian countries facing climate and environmental challenges contribute significantly to Korea's migrant population. The report emphasizes the importance of understanding the socio-economic characteristics of potential migrants to develop appropriate policies to mitigate the negative impacts of this anticipated influx. By proactively addressing these challenges, Korea can better prepare for the future dynamics of climate-induced migration and its impact on society, labor markets, and industrial sectors.
Topic:
Climate Change, Environment, Migration, and Labor Market
Political Geography:
Asia and South Korea