Relative Labour Costs Research Articles

Offshore Production and Business Cycle Dynamics with Heterogeneous Firms

Cross-country variation in production costs encourages the relocation of production facilities to other countries, a process known as offshoring through vertical foreign direct investment. I examine the effect of offshoring on the international transmission of business cycles. Unlike the existing macroeconomic literature, I distinguish between fluctuations in the number of offshoring firms (the extensive margin) and in the value added per offshoring firm (the intensive margin) as separate transmission mechanisms. The firms' decision to produce offshore depends on the firm-specific level of labor productivity, on fluctuations in the relative cost of effective labor, and on the fixed and trade costs of offshoring. The model replicates the procyclical pattern of offshoring and the dynamics along its two margins, which I document using data from U.S. manufacturing and Mexico's maquiladora sectors. Offshoring enhances the synchronization of business cycles, and dampens the real exchange rate appreciation generated by aggregate productivity differentials across countries.

Offshore Production and Business Cycle Dynamics with Heterogeneous Firms

Cross-country variation in production costs encourages the relocation of production facilities to other countries, a process known as offshoring through vertical foreign direct investment. I examine the effect of offshoring on the international transmission of business cycles. Unlike the existing macroeconomic literature, I distinguish between fuctuations in the number of offshoring firms (the extensive margin) and in the value added per offshoring firm (the intensive margin) as separate transmission mechanisms. The firms decision to produce offshore depends on the firm-specific level of labor productivity, on fuctuations in the relative cost of effective labor, and on the fixed and trade costs of offshoring. The model replicates the procyclical pattern of offshoring and the dynamics along its two margins, which I document using data from U.S. manufacturing and Mexico s maquiladora sectors. Offshoring enhances the synchronization of business cycles, and dampens the real exchange rate appreciation generated by aggregate productivity differentials across countries.

Costs Associated With Changes in Antidepressant Treatment in a Managed Care Population With Major Depressive Disorder

Costs Associated With Changes in Antidepressant Treatment in a Managed Care Population With Major Depressive Disorder

A quantitative real-time PCR assay for the identification and enumeration of Alexandrium cysts in marine sediments.

Harmful algal blooms (HABs) are a global problem that affects both human and ecosystem health. One of the most serious and widespread HAB poisoning syndromes is paralytic shellfish poisoning, commonly caused by Alexandrium spp. dinoflagellates. Like many toxic dinoflagellates, Alexandrium produces resistant resting cysts as part of its life cycle. These cysts play a key role in bloom initiation and decline, as well as dispersal and colonization of new areas. Information on cyst numbers and identity is essential for understanding and predicting blooms, yet comprehensive cyst surveys are extremely time- and labor-intensive. Here we describe the development and validation of a quantitative real-time PCR (qPCR) technique for the enumeration of cysts of A. tamarense of the toxic North American/Group I ribotype. The method uses a cloned fragment of the large subunit ribosomal RNA gene as a standard for cyst quantification, with an experimentally determined conversion factor of 28,402±6152 LSU ribosomal gene copies per cyst. Tests of DNA extraction and PCR efficiency show that mechanical breakage is required for adequate cyst lysis, and that it was necessary to dilute our DNA extracts 50-fold in order to abolish PCR inhibition from compounds co-extracted from the sediment. The resulting assay shows a linear response over 6 orders of magnitude and can reliably quantify ≥10cysts/cc sediment.For method validation, 129 natural sediment samples were split and analyzed in parallel, using both the qPCR and primulin-staining techniques. Overall, there is a significant correlation (p<0.001) between the cyst abundances determined by the two methods, although the qPCR counts tend to be lower than the primulin values. This underestimation is less pronounced in those samples collected from the top 1 cm of sediment, and more pronounced in those derived from the next 1-3 cm of the core. These differences may be due to the condition of the cysts in the different layers, as the top 1cm contains more recent cysts while those in the next 1-3cm may have been in the sediments for many years. Comparison of the cyst densities obtained by both methods shows that a majority (56.6%) of the values are within a two-fold range of each other and almost all of the samples (96.9%) are within an order of magnitude. Thus, the qPCR method described here represents a promising alternative to primulin-staining for the identification and enumeration of cysts. The qPCR method has a higher throughput, enabling the extraction and assay of 24 samples in the time required to process and count 8-10 samples by primulin staining. Both methods require prior expertise, either in taxonomy or molecular biology. Fewer person-hours per sample are required for qPCR, but primulin staining has lower reagent costs. The qPCR method might be more desirable for large-scale cyst mapping, where large numbers of samples are generated and a higher sample analysis rate is necessary. While the qPCR and primulin-staining methods generate similar data, the choice of counting method may be most influenced by the practical issue of the different relative costs of labor and materials between the two methods.

AN EVALUATION OF DAVID RICARDO’S THEORY OF COMPARATIVE COSTS: DIRECT AND INDIRECT CRITIQUES

Following Smith’s advocacy of free trade and competition, David Ricardo attempts to strengthen his theory of absolute advantage, which excludes from international trade countries which have no advantages over others, by eliminating this weakness. To do so, Ricardo introduces to the economics literature a theory of comparative cost advantage which includes countries that do not have absolute advantages in international trade. In Ricardo’s framework, these countries can still gain from free trade. We present direct and indirect critiques which reveal that their advocacy of free trade is questionable. In our direct critiques we find that Ricardo’s attempt is questionable for the following reasons. First, the scale of production of cloth in Portugal and that of wine in England equal 1 even though there is no reason to believe that two countries have the same scale of production for two different commodities. Second, it is argued that his theory is incomplete because it is based on particular numbers, does not determine the terms of trade, and does not take into account the unintended curtailment of demand in both countries, which in turn can make trade non-beneficial for both countries. In our indirect critiques, first we argue that Ricardo assumes the equality between the relative price and relative labor cost of two commodities even though they are different. Second, it is shown that the outcome of complete specialization in his theory prevents a country from specializing in the production of a commodity that could generate for itself a substantial profit in the long run, locking the country out of industrialization. We then point out that Samuelson who supports Ricardo’s theory to some extent does not consider in his proof the possible destruction of the domestic industry in the case of free trade, even though this might make domestic consumers worse off and also lock a country out of industrialization.

An Evaluation of David Ricardo's Theory of Comparative Costs: Direct and Indirect Critiques

Following Smith's advocacy of free trade and competition, David Ricardo attempts to strengthen his theory of absolute advantage, which excludes from international trade countries which have no advantages over others, by eliminating this weakness. To do so, Ricardo introduces to the economics literature a theory of comparative cost advantage which includes countries that do not have absolute advantages in international trade. In Ricardo's framework, these countries can still gain from free trade. We present direct and indirect critiques which reveal that their advocacy of free trade is questionable. In our direct critiques we find that Ricardo's attempt is questionable for the following reasons. First, the scale of production of cloth in Portugal and that of wine in England equal 1 even though there is no reason to believe that two countries have the same scale of production for two different commodities. Second, it is argued that his theory is incomplete because it is based on particular numbers, does not determine the terms of trade, and does not take into account the unintended curtailment of demand in both countries, which in turn can make trade non-beneficial for both countries. In our indirect critiques, first we argue that Ricardo assumes the equality between the relative price and relative labor cost of two commodities even though they are different. Second, it is shown that the outcome of complete specialization in his theory prevents a country from specializing in the production of a commodity that could generate for it a substantial profit in the long run, locking the country out of industrialization. We then point out that Samuelson who supports Ricardo's theory to some extent does not consider in his proof the possible destruction of the domestic industry in the case of free trade, even though this might make domestic consumers worse off and also lock a country out of industrialization.

Strategische Implikationen einer geringen Fertigungstiefe für die Automobilindustrie

Der Beitrag nimmt die von Hans-Werner Sinn suggerierte makroökonomisch geprägte Feststellung, eine geringe Fertigungstiefe sei Ausdruck einer verminderten Wettbewerbsfähigkeit der deutschen Industrie, die sich exemplarisch am Branchenbeispiel der Automobilindustrie nachvollziehen lasse, zum Anlass einer Analyse der Fertigungstiefe in der Automobilindustrie. Geringe Fertigungstiefen sind in dieser Branche unter bestimmten Bedingungen Ausdruck von Wettbewerbsstärke. Zielsetzung der vorliegenden Analyse ist die Herausarbeitung strategisch empirischer Entscheidungskriterien, die zu niedriger bzw. hoher Fertigungstiefe in der Automobilindustrie führen. Aus betriebswirtschaftlicher Perspektive ergibt sich anhand des Wertschöpfungsverständnisses, der branchenspezifischen Empirie und der bekannten theoretischen Erklärungsansätze einer niedrigen Fertigungstiefe, eine vielschichtige unternehmensstrategische Behandlung der Fertigungstiefe.

Estimation of the Mortality Risk of Surgical Intensive Care Patients Based on Routine Laboratory Parameters

Background: In established risk score models the collection and documentation of clinical data is time-consuming, causes labor-related costs, and is dependent on the examiner. Material and Methods: Based on low-cost laboratory parameters that are routinely measured at admission to the intensive care unit, a new score was developed (n = 271, study sample) and validated in an independent group of patients (n = 283, validation sample). Parameters were selected by a stepwise logistic regression analysis. This new score was compared to established risk models (APACHE II, SAPS II). Results: Mean age was 61.3 ± 1.2 years (study sample) and 63.1 ± 1.1 years (validation sample), respectively. In-hospital mortality was 24.7% (67/271, study sample) and 23.3% (66/283, validation sample). The following parameters were used to build the new score called Dense Laboratory Whole Blood Applied Risk Estimation (DELAWARE): alanine aminotransferase, C-reactive protein, cholesterol, creatine kinase MB, leukocytes, potassium, thrombocytes, triglycerides, and age. The areas under the curves were 0.853/0.813 (study sample/validation sample). In the study sample DELAWARE correlated with APACHE II (r = 0.586) and SAPS II (r = 0.614; p < 0.001), respectively. Conclusions: A general admission risk score for surgical intensive care patients solely based on quality controlled low-cost routine laboratory parameters is feasible.

A laboratory-based risk score for medical intensive care patients

Established general risk score models for intensive care patients incorporate several clinical and laboratory data. However, the collection, documentation and classification of clinical data are time-consuming, incur labor-related costs, and are dependent on the experience of the examiner. Therefore, in the present study a general score for medical intensive care patients based solely on routine laboratory parameters is presented. Parameter selection was performed using stepwise logistic regression analysis. The maximum likelihood estimate of variable influence on mortality provided a relative weighting for each variable. The new score was compared to two established risk models (Acute Physiology And Chronic Health Evaluation II, APACHE II; and Simplified Acute Physiology Score II, SAPS II). The study included 528 medical intensive care patients with a mean age of 65.4+/-0.7 years. The in-hospital mortality was 16.5% (87/528). Multiple logistic regression analysis revealed eight parameters with significant prognostic power: alanine aminotransferase, cholesterol, creatinine, leukocytes, sodium, thrombocytes, urea, and age. These parameters were used to build a new laboratory score called Critical Risk Evaluation by Early Keys (CREEK). The area under the receiver operating characteristics curve was 0.857 (0.814-0.900). Pearson correlation analysis showed significant correlation between CREEK and APACHE II (r=0.550) and SAPS II (r=0.516; p<0.001; n=387). The areas under curve of the APACHE II and the SAPS II were 0.869 and 0.874, respectively. We show that a general risk score for medical intensive care patients on admission based solely on routine laboratory parameters is feasible. The quality of risk estimation using CREEK is comparable to established risk models. Furthermore, this new score is based on quality controlled low-cost laboratory parameters that are routinely measured on admission to the intensive care unit. Therefore, no additional costs are involved.

In this issue

In this issue

Causes of Growth and Decline in Mexico’s Maquiladora Apparel Sector

Under the North American Free Trade Agreement (NAFTA) beginning in 1994, the maquiladora sector was the dynamic manufacturing sector in Mexico, and its apparel subsector was especially so, more than quadrupling in employment from December 1993 to July 2000. Yet NAFTA’s influence on apparel employment is hard to find in a careful time series econometric analysis. Instead, much of employment growth is explained for 1980 to the present by changes in US demand as measured by real US gross domestic product or by real US apparel spending, by US/Mexico relative labor cost as proxied by the real peso‐dollar exchange rate, and by the relaxation of quotas on US apparel imports from Mexico in 1988–1990. In equations including these variables, tests for a structural break at the time of NAFTA find an effect which is either insignificant or else quite small and in some models negative. Possible explanations for this surprising result are discussed, along with the implications for cost–benefit analysis of free trade agreements.

Description and search labor for information retrieval

AbstractSelection power is taken as the fundamental value for information retrieval systems. Selection power is regarded as produced by selection labor, which itself separates historically into description and search labor. As forms of mental labor, description and search labor participate in the conditions for labor and for mental labor. Concepts and distinctions applicable to physical and mental labor are indicated, including the necessity of labor for survival, the idea of technology as a human construction, and the possibility of the transfer of human labor to technology. Distinctions specific to mental labor, particularly between semantic and syntactic labor, are introduced. Description labor is exemplified by cataloging, classification, and database description, can be more formally understood as the labor involved in the transformation of objects for description into searchable descriptions, and is also understood to include interpretation. The costs of description labor are discussed. Search labor is conceived as the labor expended in searching systems. For both description and search labor, there has been a progressive reduction in direct human labor, with its syntactic aspects transferred to technology, effectively compelled by the high relative costs of direct human labor compared to machine processes.

Human capital accumulation in an open labour market: Ireland in the 1990s

Large-scale investment in education in Ireland began in 1967 and has led to a dramatic increase in the relative supply of skilled labour over the past four decades. Furthermore the supply of labour in Ireland is traditionally highly elastic through migration, which in the 1990s was predominantly high-skilled. This combination of rising education levels and an open labour market meant that employment and incomes rose rapidly in the 1990s, while Ireland still maintained a strong competitive position in terms of relative labour costs. In this paper we develop a new macro-economic framework to formally analyse these mechanisms. We estimate a small structural model of the Irish labour market, separately identifying high-skilled and low-skilled labour. We find that this model captures key characteristics of the Irish labour market in the 1990s.

Workforce Planning for a Global Automotive Economy

Globalization of the automotive industry continues to accelerate as offshore manufacturers and suppliers open production facilities in North America, and North American companies invest overseas and throughout the North American Free Trade Agreement (NAFTA) region. But perhaps the most compelling reason to globalize is to reduce costs that would otherwise trickle down to consumers (as higher prices) and shareholders (as reduced profits). Pressure to rein in costs has become fierce in the last few years, spurred by the ever-increasing market share of leaner Japanese companies. With labor-related costs among the highest that companies incur in normal business operations, outsourcing labor has become a popular financial fix as automakers call on both contract labor and their suppliers to take on more of the production involved in bringing a vehicle to market. And as overseas workers in both blue- and white-collar positions become better educated and more skilled technically, the popularity of offshoring is increasing.

Why does China protect its labour‐intensive industries more?*

AbstractChina's tariff structure favours labour‐intensive sectors, and this is at odds with traditional theory of comparative advantage. The paper argues that tariffs in China are a mechanism for protecting technology‐backward domestic – especially state‐owned enterprises (SOEs) from competition technology‐advanced foreign enterprises producing in China. With relatively integrated labour markets and cross‐firm technology differences, SOEs’ subsistence is supported by subsidized credit and limited access of foreign firms’ local production to tariff‐protected domestic markets. Labour market integration and capital subsidies increase the relative cost of labour in SOEs compared to their foreign competitors, hurting more domestic firms in industries that use labour more intensively. Restrictions to FIEs’ (foreign‐invested enterprises) access to tariff‐protected product markets, which protect more labour‐intensive industries, compensate for the greater cost disadvantage of SOEs in labour‐intensive sectors.

Cost Distribution of Orthotopic Liver Transplantation: Single-Center Analysis under DRG-Based Reimbursement

Costs of orthotopic liver transplantation (OLT) are influenced by multiple factors. Surgeons must be interested in determining the probability of meeting the projected cost averages. Costs of procedures, labor, drugs and pharmaceuticals, materials, and overhead costs of infrastructure were calculated during the primary stay in 38 consecutive patients undergoing OLT at a single center. Endpoint of cost aggregation was discharge from acute care. Costs per patient were grouped to plot the cost density distribution function. Mean cost of OLT was 49,000. Costs showed a large variation, ranging from 18,000 to 189,000 per case. Most patients were grouped in the G-DRG-A01C split (n=31), which characterizes the least resource consumptive split. Costs of OLT were not normally distributed. There was a left-skewed beta-distribution of costs. Labor-related costs were responsible for the largest cost fraction (mean 42.9%), whereas drugs and medication accounted for 24.9% on average. Most patients could be transplanted within cost groups below 50,000. The marked cost heterogeneity after OLT suggests that primarily medical comorbidities are of relevance for extraordinary resource consumption. A minimum number of transplants should be performed in single institutions to improve chances to financially counterbalance higher costs of individual cases under DRG-based reimbursement. Small programs have to bear increased risks of financial distortion. The asymmetry of cost distribution after OLT should be taken into account in future reimbursement regulations.

The shift team formation problem in multi-shift manufacturing operations

This paper addresses the problem of assigning operators to teams that work in 1-, 2-, or 3-daily-shift systems. The problem was motivated by, and illustrated with a case situation encountered in Dutch manufacturing industry. The problem addressed forms an extension of cell formation problems which are currently in the phase of addressing labor-related issues in cell design. A generalized goal problem formulation is presented to address multiple, conflicting objectives covering cross-training of workers, ensuring adequate levels of labor flexibility and minimizing labor-related costs. The proposed solution procedure consists of two phases. In the first phase, shift systems, in which applicable machines and the sizes of each shift team are identified. The next phase deals with assignment of operators to various teams and identification of specific cross-training needs for various workers. This phase involves the use of interactive goal programming. The methodology is illustrated by a numerical example derived from the case situation.

THE PURCHASING POWER PARITY THEORY AND RICARDO'S THEORY OF VALUE

In this paper the Purchasing Power Parity (PPP) theory and its criticisms are analysed. The majority of studies show that in most cases, the PPP indicator is not a good predictor for nominal exchange rate changes, nor a good indicator of relative competitiveness between countries. Instead, orthodox and non-orthodox economists use relative labour costs to represent real exchange rates. This has interesting implications for the currently accepted price determination theory. In turn, this also allows us to use a Ricardian model as developed by Pasinetti to calculate the ratio of real, vertically integrated unit labour costs between countries as a real exchange rate determination theory and as a sectoral relative competitiveness indicator as well. Copyright 2004, Oxford University Press.

Agent Recruitment Planning in Knowledge-Intensive Call Centers

The key ingredient in a call center’s operational efficiency is labor. Agent turnover remains a major concern for call centers. The top three reasons for turnover are low salary, lack of career path, and burnout. On average, it costs about $10 to a call center for each call, and the cost to bring on a new agent is more than $6,000. The author treats call centers as knowledge-intensive operations that are characterized by extensive knowledge required for each agent, combines control theory and chance-constrained programming in a model for workforce planning that allows for agent learning, and derives steady state workforce levels for different knowledge groups within the call center to minimize total labor-related costs. The objective is to meet stochastic demands with a desired service level. The author applies his model to an actual call center situation in the high-tech industry with adjusted data and discusses the managerial implications.

Size and efficiency in African manufacturing firms: evidence from firm-level panel data

Three dimensions of the performance of firms in Ghana's manufacturing sector are investigated in this paper: their technology and the importance of technical and allocative efficiency. We show that the diversity of factor choices is not due to a nonhomothetic technology. Observable skills are not quantitatively important as determinants of productivity. Technical inefficiency is not lower in firms with foreign ownership or older firms and its dispersion across firms is similar to that found in other economies. Large firms face far higher relative labour costs than small firms. If these factor price differentials could be levelled out, substantial gains thorough improvements in allocative efficiency would be possible.