Reduce Labor Supply Research Articles

Study on the Dynamic Relationship Between Social Security Expenditure, Population Aging and Economic Growth

As the global wave of aging accelerates, China has entered a notable phase of moderate aging. This profound demographic shift has not only reshaped the population composition of society but also posed severe challenges to the driving force of economic development and the carrying capacity of the social security system. This paper delves into the intricate and interdependent relationship network among population aging, social security expenditures, and economic growth. The research finds that the aging process directly impacts the potential and speed of economic growth by reducing labor supply and increasing labor costs. Conversely, the strength of economic growth serves as the cornerstone, determining the financial adequacy and sustainability of the social security system, which in turn indirectly influences the welfare protection level for the aging population. Therefore, the core strategy for addressing the challenges of aging lies in stimulating the vitality and potential of economic growth to provide a solid economic foundation for the social security system. Simultaneously, it is necessary to meticulously design social security policies to ensure that expenditures meet the reasonable needs of the elderly population while avoiding excessive fiscal shocks to stability.

Impact of Population Aging on the Japanese Economy

With ongoing economic and social development, the level of aging is deepening, making population aging a common challenge for many countries worldwide. Japan, in particular, has become the country with the most severe population aging issue. As the problem of population aging in Japan intensifies, this study analyzes the various factors contributing to this phenomenon. On this basis, the study examines the core economic impacts of population aging on Japan, focusing on three main areas: the labor market, consumption patterns, and fiscal expenditure. Specifically, it discusses the constraints on economic growth due to reduced labor supply and skill loss, the effects of changes in elderly consumption patterns on market demand, and the challenges posed by increased pension and healthcare expenditures to public finances. Subsequently, this paper summarizes the key strategies adopted by the Japanese government to address population aging, including pension system reforms, promotion of elderly employment, comprehensive social security coverage, and improvements in community-based long-term care services. The research on the impact of population aging on Japan's economy and the analysis of Japan's response strategies provide valuable insights for other countries, including China, in addressing the challenges of population aging and improving social security systems.

A DYNAMIC ANALYSIS OF THE IMPACTS OF A CONSUMPTION TAX INCREASE AND A PRODUCTIVITY SHOCK: CALIBRATED FOR THE BRAZILIAN ECONOMY

Objective: Analyze the effects of high consumption tax on key macroeconomic variables. Method: The analysis employs both a Dynamic General Equilibrium (DGE) model and a Dynamic Stochastic General Equilibrium (DSGE) model, calibrated to the Brazilian economy. The models simulate the impact of an increase in the consumption tax on key macroeconomic variables and the impact of a productivity shock in an economy with and without taxation, respectively. Results and Discussion: The results show that an increase in the consumption tax leads to a gradual decline in the capital stock and a sharp reduction in labor supply. Furthermore, productivity shocks have weaker positive effects on investment, output, consumption, and the capital stock in an economy with high taxation compared to one without it. The discussion emphasizes the importance of these findings in understanding the trade-offs between taxation and economic activity. Research Implications/Value: The findings suggest that effective allocation of tax revenues—such as investments in infrastructure, education, and technology—is essential to mitigate the negative impacts of consumption taxes on economic performance and foster long-term productivity and growth.

Assessment of the impact of Long COVID on labour market participation and potential economic effects in the EU

Abstract This paper estimates the economic cost of long COVID through its direct impacts on the labour market. The direct implications of long COVID for affected individuals concern their capacity to work, and their productivity at work. Some individuals might continue to work, but at a lower productivity level, some might reduce their hours worked, including as a result of temporary absences, and some might stop working at all. To the best of our knowledge, so far, no study has explicitly addressed the impact of long COVID on the EU labour market. The present paper provides a tentative assessment using available estimates from surveys, clinical follow-up studies and model simulations of the prevalence of long COVID. This tentative approach yields an estimated negative impact on labour supply of 0.2-0.3% in 2021 and 0.3-0.5% in 2022. In person-equivalents, this means long COVID would have reduced labour supply by 364,000-663,000 in 2021 and by 621,000-1,112,000 in 2022, combining the effect of lower productivity, higher sick leaves, lower hours, and increased unemployment or inactivity. The lower bound of this range is close to a recent estimate put forward for the US (Abraham & Rendell, 2023). Available labour market data suggest a mixed picture when it comes to the impact of long COVID. Overall, the possible role of long COVID in the rising trend in sick leave, disability and activity-limiting health factors, warrants careful monitoring going forward, due to its potential impact on labour supply and labour productivity, and on public finances through increased social benefits, pensions, health care and long-term care expenditure.

The Effect of Inheritance Receipt on Labor Supply: A Longitudinal Study of Japanese Women

Abstract This study examines the effect of inheritance receipt on labor supply, exploring the empirical issues associated with inheritance expectations, informal caregiving, and liquidity constraints. The literature has not examined the possibility that ignoring the labor supply increase associated with the termination of caregiving can lead to an underestimation of the decrease in labor supply after inheritance. Based on a dataset of Japanese women, we found that inheritance decreased labor supply, primarily through changes in the extensive margin, particularly for recipients in their 50s and under 40 years of age with children. Unlike labor supply, household expenditures hardly change after an inheritance. Furthermore, unanticipated inheritances reduce labor supply compared to anticipated inheritances. Additionally, controlling for the termination of caregiving responsibilities resulted in a 25 % larger estimate of the wealth effect of inheritance receipt on labor supply. Finally, pre-inheritance liquidity constraints have no effect on changes in labor supply.

The public health and economic burden of long COVID in Australia, 2022-24: a modelling study.

To estimate the number of people in Australia with long COVID by age group, and the associated medium term productivity and economic losses. Modelling study: a susceptible-exposed-infected-recovered (SEIR) model to estimate the number of people with long COVID over time following single infections, and a labour supply model to estimate productivity losses as a proportion of gross domestic product (GDP). Australia, 2022-2024. Estimated number of people infected with severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2) during 2022-2023 (based on serosurvey data) who have longCOVID, 2022-2024, by age group; estimated GDP loss during 2022 caused by reduced labour supply attributable to long COVID. Our model projected that the number of people with long COVID following a single infection in 2022 would peak in September 2022, when 310 341-1 374 805 people (1.2-5.4% of Australians) would have symptoms of long COVID, declining to 172 530-872 799 people (0.7-3.4%) in December 2024, including 7902-30 002 children aged 0-4 years (0.6-2.2%). The estimated mean labour loss attributable to long COVID in 2022 was projected to be 102.4million (95% confidence interval [CI], 50.4-162.2 million) worked hours, equivalent to 0.48% (95% CI, 0.24-0.76%) of total worked hours in Australia during the 2020-21 financial year. The estimated mean GDP loss caused by the projected decline in labour supply and reduced use of other production factors was $9.6 billion (95% CI, $4.7-15.2 billion), or 0.5% of GDP. The estimated labour loss was greatest for people aged 30-39 years (27.5 million [95% CI, 16.0-41.0 million] hours; 26.9% of total labour loss) and people aged 40-49 years (24.5 million [95% CI, 12.1-38.7 million] hours; 23.9% of total labour loss). Widespread SARS-CoV-2 infections in Australia mean that even a small proportion of infected people developing long COVID-related illness and disability could have important population health and economic effects. A paradigm shift is needed, from a sole focus on the immediate effects of coronavirus disease 2019 (COVID-19) to preventing and treating COVID-19 and treating long COVID, with implications for vaccine and antiviral policy and other mitigation of COVID-19.

The Global Economic Recovery From COVID-19 Vaccinations

The analysis examines the COVID-19 pandemic’s economy-wide global effects, assessing the impact on gross domestic product (GDP) through reduced labor supply and productivity in diverse sectors. Utilizing a Computable General Equilibrium model from the Global Trade Analysis Project database, the results highlight the pronounced influence on Light and Heavy manufacturing due to disrupted global supply chains. The vaccination’s effectiveness in economic recovery is emphasized, indicating increased labor participation and productivity. The study underscores vaccine disparities among developing nations, affecting global economic resurgence. Overall, it stresses the interconnectedness of COVID-19’s impact on national GDP, the manufacturing sectors, and the crucial role of vaccination in driving economic activity and global recovery.

Take-up and labor supply responses to disability insurance earnings limits

In most disability insurance programs beneficiaries lose some or all of their benefits if they earn above an earnings threshold. While intended to screen out applicants with high remaining working capacity, earnings limits can also distort the labor supply of beneficiaries. We use a reduction in the earnings limit in Hungary to evaluate this trade-off and examine screening and labor supply responses. We find that the policy changed selection into the program modestly but reduced labor supply on the intensive margin significantly. These findings suggest that the earnings threshold should be higher.

Defamilization? Not for everyone. Unequal labour-market participation among informal caregivers in Europe

Growing care dependencies among the elderly due to population ageing in Europe challenge the labour-market participation of informal caregivers. While familiarized care regimes incentivize family caregiving by providing many cash-for-care-benefits, resulting in reduced labour supply, defamiliarized care regimes allocate more public spending to care infrastructure, alleviating the care responsibilities placed on family members. At the same time, care provision on the micro-level is distributed unequally across gender, age, and socioeconomic status. The question then emerges: Does the labour-market participation of informal caregivers vary between and within countries depending on the social-expenditure policy of welfare states? To answer this research question, a multilevel design was used, employing SHARE data and macro-indicators from OECD and Eurostat databases. The results reveal higher probabilities of labour-market participation for informal caregivers in general when social expenditures on formal care infrastructure are higher. However, labour-market participation was observed as being unequally distributed among the heterogeneous group of persons with and without caregiving duties. Women and individuals of lower socioeconomic status did not benefit from social expenditures in the same way as their counterparts, leading to lower levels of labour-market participation.

Hospital Queues, Patient Health, and Labor Supply

Long waits for health care raise concerns about the consequences of delayed treatment. We use variation in queue congestion to estimate effects of wait time for orthopedic surgery. We do not find that longer wait times lead to increased health care utilization. However, we do find persistent reductions in labor supply: long waits increase medium to long-term work absences and permanent disability receipt. Effects are driven by individuals who are on sick leave at referral. Our results are consistent with patterns of state dependence, where extended periods of temporary disability while awaiting treatment create persistent barriers to returning to work. (JEL I11, I12, I18, J22)

The local economic impacts of mega nuclear accident: A synthetic control analysis of Fukushima

The economic impacts of mega accidents are complex, and accurately quantifying these impacts poses a formidable challenge. Traditional methods often fall short in capturing the extensive consequences of such infrequent disasters, which may go beyond immediate damages to include long-term economic disruptions and indirect costs. This study sheds a light on the economic aftermath of the Fukushima nuclear disaster. Utilizing the synthetic control method (SCM), our analysis reveals a significant, albeit temporary, downturn in the economic performance of the affected region. Specifically, the prefectural per capita income of Fukushima declines by up to 14.4% in the two years following the disaster. This decrease is linked to the composition of Fukushima's GDP and a reduction in labor supply. Our findings demonstrate the effectiveness of SCM as a potent tool for performing counterfactual analyses of mega accidents, offering essential insights into their economic impacts and the pathways to recovery.

Labor supply and M&A in the audit market

Using labor supply shocks from the 150-Hour Rule, I find that a reduction in the labor supply of accountants increases audit firms' mergers and acquisitions (M&A) and the audit market concentration. These M&A deals connect audit firms serving clients in the same states and lead to greater industry specialization of the merging firms. Although both small and large auditors generally engage in labor supply–driven M&A deals, large audit firms’ engagement in M&A is restricted to markets with a tight supply of accounting labor. Attenuations of the labor supply restrictions tend to limit the heightened M&A activities and mitigate the rise in the audit-market concentration from the 150-Hour Rule. I conclude that labor supply reductions affect the boundaries of audit firms, potentially changing the structure of the entire audit market.

Inequality, Taxation, and Sovereign Default Risk

Income inequality and worker migration significantly affect sovereign default risk. Governments often impose progressive taxes to reduce inequality, which redistribute income but discourage labor supply and induce emigration. Reduced labor supply and a smaller high-income workforce erode the current and future tax base, reducing government’s ability to repay debt. I develop a sovereign default model with endogenous nonlinear taxation and heterogeneous labor to quantify this effect. In the model, the government chooses the optimal combination of taxation and debt, considering its impact on workers’ labor and migration decisions. Income inequality accounts for one-fifth of the average US state government spread. (JEL D31, F34, H21, H23, H74, J61, R23)

Causes and Effect of Out-Migration in Rural Areas of Benue State, Nigeria

The study assessed the effect of out-migration from rural settlements in Benue State, Nigeria. The objective of the study was to examine the causes, effect and control of migration in rural settlements of the study area. A total of 1202 respondents were selected from rural communities in 5 Local Government Area of the State. The study used multi-stage sampling technique involving purposive, simple random, judgement and snowball sampling techniques in selecting the communities and the respondents. Data were obtained via questionnaire. Frequencies and percentages were used for data analysis while tables were used for data presentation. The study found that 60.1% of the respondents are male. Most of the respondents (23.7%) are within age 50-54 years. Majority of the respondents are married (79.8%) and have households that have migrated to other places in Nigeria and beyond. The major causes of migration include unemployment (99.8%), inadequate educational institutions (97.2%), village hardship and crises (69.2%), lack of social amenities (6.7%) and insecurity/crises in rural areas. The major effect of out-migration includes reduction in labour supply, increased in demand for labour (97.1%), high cost of labour (99.8%), decreased in farm size (99.5%), decreased in productivity (99.7) and decreased in income (99.7%) in rural areas. Migration also causes low social economic growth and development in rural areas. The study recommends some major strategies for making the rural areas attractive to minimise youth migration in the State. These includes mechanization of agriculture, establishing agro-based industries, creating employment opportunities, provision of social amenities and ensuring adequate security of life and properties in rural areas of the State.

The redistributive effects of size-dependent childcare policies

Governments often adopt policies to reduce the cost of childcare for working families, but those can distort the allocation of resources. We develop and calibrate a general equilibrium model with firm and household heterogeneity and study the case of Chile, where firms with more than 19 female employees must provide childcare. We find that removing this policy would increase welfare on average by 2.3% of consumption equivalent units over their lifetime. However, the removal would not translate into increases in GDP, in part because of a reduced labor supply. Instead, the main effects of the policy are redistributive, shifting resources away from females towards males. The policy reduces welfare for most females, and these losses are decreasing in income. In particular, low-education single females, who do not rely on a second wage, would gain up to 20% in consumption equivalent units by removing the policy. We propose that alternative childcare financing options would be preferred. Specifically, financing childcare through labor taxes would increase aggregate welfare by over 13%, with the largest gains accruing to single, low-education mothers.

Are Institutions Improving the Contribution of Remittances to Economic Growth? A Panel Data Analysis

This paper is to test the hypothesis that better governance can improve the response of remittances on economic growth. Using panel data for 12 Middle East and North Africa (MENA) countries over the period of 2002 to 2020, the various estimates were carried out by the system generalised method of moments (GMM) method to examine the problem of endogeneity, and unobserved heterogeneity. The results indicate that migrant remittances have a direct negative link to economic growth due to it being mainly used for consumption. This increases the likelihood of dependency, which leads to the reduction of labour supply. The joint relationship between the governance composite index, and remittances, may moderate this negative effect on economic growth. However, considering the individual dimensions of governance, this shows that only the interaction between remittances and the control of corruption gives a positive and significant impact. The interaction between remittances and the five other governance quality indicators appears to be negative and insignificant. This shows that political instability, ineffective government, and poor regulatory quality encourages money transfer through informal channels that thwart economic growth in MENA countries.

Slowing Workforce Growth: Predicting Labour Trends and Investigating Perspectives of Mature Workers and Women With Caregiving Responsibilities

The labour force is experiencing an increased proportion of mature workers, alongside a slowdown in the number of young entrants joining the workforce. Many organisations will need to adapt their workforce management strategies to cushion the reduced labour supply in the workforce. This paper explores the implication of this demographic development by utilising a multimethod approach to examine current and future trends in the labour market as well as the key factors that can influence the decisions to remain in the labour market for mature workers and women with caregiving responsibilities. Forecasting methods were applied to explore how various demographic scenarios could impact specific industries. We found that the labour market is generally expected to recover based on the forecasted increase in the job vacancy-to-unemployment ratio and fall in the unemployment rate. At the industry level, however, the manufacturing industry is expected to experience some headwinds in employment growth, which is expected to be weak, while the construction industry is expected to see a decline in employment growth. Finally, job vacancies across all industries are expected to decline over time. From the qualitative study, we found mature workers and women with caregiving responsibilities face challenges such as having limited and unequal access to employment, facing skills gap barriers, and struggling to balance between their personal commitment and professional demands. By addressing the unique needs of mature workers and women with caregiving responsibilities, organisations can adopt successful workforce management strategies to cultivate a diverse and inclusive workplace.

Public sector employment rigidity and macroeconomic fluctuation: A DSGE simulation for China.

Public sector employment in China has exhibited pronounced non-cyclical characteristics, with a recruiting scale and wage level showing limited responsiveness to economic fluctuations. The allure of civil service jobs in China has seen a significant resurgence post-COVID-19, with an observable increase in demand among educated job seekers for stable government positions amid growing economic uncertainties. This study investigates the implications of public sector employment rigidity on macroeconomic stability using a dynamic stochastic general equilibrium (DSGE) model integrated with search and matching (S&M) theory. Simulations incorporating alternative government job policies reveal that non-cyclical public employment exacerbates macroeconomic cyclical fluctuations. The low elasticity of public sector wages with respect to corporate wages fosters stable expectations among workers regarding the future value of government jobs, increasing the perceived value of the current state of unemployment. This leads job seekers to voluntarily remain unemployed, reducing labor supply to firms. Meantime, it preserves workers' bargaining power with firms, reinforcing wage stickiness and undermining the stabilizing role of price adjustments in employment. Hypothetical scenario analyses indicate that adopting a pro-cyclical wage policy for the public sector can mitigate the obstacles of wage cuts for firms, stimulate the creation of new jobs during economic downturns, and consequently reduce the magnitude and duration of rising unemployment rates. In contrast, maintaining a non-cyclical public sector wage may not prevent a continuous rise in unemployment or a worsening economic situation, even with expanded sector recruitment. This finding holds significant relevance in the context of the post-COVID era characterized by an economic slump and employment tension, providing theoretical support for establishing a transparent and flexible wage adjustment mechanism in the public sector that is linked to market conditions.

Remittances and economic growth: a blessing for middle-income countries, ineffective for low-income countries

PurposeThis study investigates the impact of international remittances on the economic growth of remittance-receiving countries, using data from 113 developing countries between 1990 and 2015.Design/methodology/approachThe authors used a novel approach to address the potential endogeneity of remittances. The authors estimated bilateral remittances and use them to create weighted indicators of remittance-sending countries, which the authors then use as instruments for remittance inflows to remittance-receiving countries.FindingsThe results indicate that while remittances have a positive impact on economic growth in developing countries with high human capital, they do not contribute to growth in developing countries with low human capital. The authors also examined the channels through which remittances affect growth. The findings suggested that remittances do not impact labor supply in developing countries with high human capital, but they reduce labor supply in countries with low human capital. Additionally, remittances increase investment in physical capital in developing countries with high human capital, but they do not have an effect on investment in developing countries with low human capital.Originality/valueThe authors investigated the impact of remittances on economic growth using a novel approach to address the endogeneity of remittances. Additionally, the authors examined the different indirect channels through which remittances can impact economic growth, such as their effect on labor supply and investment.

The Economic Impact of Canada's Aging Population

Canada is a country with an aging population, especially in cities with small populations, such as Winnipeg and Yukon. The aging population trend is a double-edged sword, as it has both benefits and drawbacks. The downside is that it leads to a number of economic problems, including a reduced workforce and increased health care costs, while the upside is that it can boost demand for specific services, such as nursing homes and hospitals. Specifically, the paper aims to examine the factors that contribute to Canada's aging population trend and its effect on the workforce in these cities, including the retirement of baby boomers and declining birth rates. Also, it investigated the economic implications of an aging population, such as reduced labor supply and increased healthcare and insurance costs. Additionally, assessing the impact of population aging on these urban emerging industries and identifying potential policy solutions to mitigate the negative economic impact of population aging are presented in detail to provide readers with a clear framework. It can be inferred that the aging population trend in Canada is a complex issue that has both benefits and drawbacks. While it may boost demand for specific services, such as nursing homes and hospitals, it can also lead to a decline in the labor supply, increased healthcare costs, and challenges for emerging industries in smaller cities. It is important to study the impact of Canada's aging population trends on the economy to inform policy decisions aimed at promoting economic growth and stability in the face of demographic change.