Unemployment Of Unskilled Labour Research Articles

Education, Lack of Complementary Investment and Underemployment in an Open Economy

In many developing economies rate of unemployment is increasing with skill accumulation and thereby leading to underemployment. Our paper offers to look at skill formation as a demand side problem not as a traditional supply side problem and also how skill formation or education affects unemployment among the remaining uneducated. We have developed a general equilibrium model of a small open developing economy incorporating skill formation, unemployment of unskilled labour in the formal sector and an informal sector which absorbs unemployed workers at a flexible wage rate. In this set up greater education for a group may generate educated unemployment within the group and increase unemployment of the uneducated outside the group leading to underemployment through the expansion of the informal sector. Both effects are due to shortage of complementary investment in production activities. Our theoretical findings are motivated by existing empirical evidence and a fresh empirical exercise undertaken using panel data of 32 countries.

Incorporating Unemployment into the GTAP Model

This paper documents the development of a labor module that incorporates job-search frictions, to introduce unemployment into the standard GTAP model. In this approach, unemployed individuals must search for a job opening and firms that want to hire must search for a worker to fill the job. To illustrate the potential value of a GTAP model with frictional unemployment, the impacts of a 25 percent increase in U.S. tariffs on metal products (e.g., ferrous and non-ferrous metals) are simulated. While employment of skilled and unskilled labor increases in the U.S. metals sector, employment of both types of labor declines in U.S. manufacturing and services sectors. These decreases in employment offset the increase in the metals sector, leading to a 0.8 percent increase in the unemployment of unskilled labor and a 1.5 percent in the unemployment of skilled labor. These increases would translate to a 0.1 percent point increase in the unemployment rate in the U.S. labor market. A potential barrier to wider use of a the GTAP model with unemployment is the availability of job separation or turnover rate data in regions other than the United States. In the example simulation, job turnover rates, and thus the initial levels of matched labor in the non-U.S. regions are assumed to be the same as for United States.

Labour-market institutions, (un)employment, wages, and growth: theory and data

ABSTRACTWe analyse the implications of labour-market institutions on wage inequality in favour of skilled labour, on relative unemployment of unskilled labour, and on the economic growth rate in two clusters resulting from 27 OECD countries: Cluster 1, closely related with the Anglo-Saxon model, and Cluster 2, dominated by the Continental-European model. By linking the unskilled wage to the skilled one in Cluster 2, due to the indexation of social benefits to per-capita income, we accommodate the observed paths of the three variables in both clusters between 1991 and 2008: Cluster 1 presents a higher wage inequality in favour of skilled labour, a lower unemployment of the unskilled labour, and a better economic growth rate.

Impact of National Rural Employment Guarantee Scheme in India on Rural Poverty and Food Security

A study based on regional and micro level household data was taken up to inquire in to the impacts of a national rural employment guarantee scheme (NREGS) in India. Studies in four sample districts in predominantly rainfed areas, which benefited from the scheme for the last six years indicated that the scheme attempted to address the core issue of rural unemployment of unskilled labor in earth works related to natural resource management. Primarily the rural labor obtained seasonal employment, but the resource poor farmers also participated in the Scheme more so in states like Maharashtra. The study findings indicated that the seasonal migration of rural labor has come down significantly due to the opportunities of employment provided under the scheme. The share of NREGS employment was up to one-third of wage days in some of the study districts. Similarly the contributions of income to the family from the wages of participation in the scheme were in the range of 12 to 33 per cent across the districts. These additional incomes were used by the rural households primarily for food security, education of dependents, health care and debt repayment. Wherever, the there were surpluses beyond these expenses, the households acquired durable assets and created amenities in the households. The negative fall out of the Scheme, albeit at a low scale, especially from the farming point of view is that there was abnormal rise in the wage rates. The scheme thus is a revolutionary one with broad spectrum impact on the rural milieu of India.

Emigration, unemployment and welfare – The role of non-traded sector

In this paper we examine the consequences of skilled versus unskilled labor migration on the welfare of remaining residents (RR) in an economy characterized by unemployment of unskilled labor. It is established that emigration of unskilled workers necessarily raises both the level of employment and the welfare of RR. However, this result need not hold when skilled workers emigrate freely. In obtaining these results we emphasize the critical significance of the non-traded sector in an economy.

Foreign Capital Inflow, Skilled-Unskilled Wage Inequality and Unemployment of Unskilled Labour in a Fair Wage Model

This paper has developed a three-sector general equilibrium framework that explains unemployment of both skilled and unskilled labour. Unemployment of unskilled labour is of the Harris-Todaro (1970) type while unemployment of skilled labour is caused due to the validity of the FWH in the high-skill sector. There are two types of capital one of which is specific to the primary export sector while the other moves freely among the different sectors. Inflows of foreign capital of either type unambiguously improve the economic conditions of the unskilled working class. However, the effects on the skilled-unskilled wage inequality and the extent of unemployment of both types of labour crucially hinge on the properties implied by the efficiency function of the skilled workers.

Foreign capital inflow, skilled–unskilled wage inequality and unemployment of unskilled labour in a fair wage model

This paper has developed a three-sector general equilibrium framework that explains unemployment of both skilled and unskilled labour. Unemployment of unskilled labour is of the Harris–Todaro (1970) type while unemployment of skilled labour is caused due to the validity of the FWH in the high-skill sector. There are two types of capital one of which is specific to the primary export sector while the other moves freely among the different sectors. Inflows of foreign capital of either type unambiguously improve the economic conditions of the unskilled working class. However, the effects on the skilled–unskilled wage inequality and the extent of unemployment of both types of labour crucially hinge on the properties implied by the efficiency function of the skilled workers.

Foreign Capital, National Welfare and Unemployment in a Fair Wage Model

The paper develops a three-sector general equilibrium model that can explain simultaneous existence of unemployment of both skilled and unskilled labour. The unemployment of unskilled labour is explicated in terms of rural-urban migration mechanism while that of skilled labour is shown using the ‘fair wage hypothesis’. The paper finds that foreign direct investment (FDI) in the primary export sector improve both national welfare and urban unemployment problem of unskilled labour while the consequences of foreign capital flows into the import-competing sector and high-skill export sector are ambiguous. The paper justifies the desirability of FDI flow in the primary export sector from the perspective of both unemployment and social welfare.

Economic Recession and Informal Sector Workers

The paper develops a three-sector specific factor model with Harris-Todaro type unemployment to examine the consequences of economic recession in the skilled sector on the informal sector workforce. It finds that while a decrease in the price of high-skill commodity raises both the informal (rural) sector wage and unemployment of unskilled labour, a drop in emigration of skilled labour produces exactly the opposite effects. The effects of these policies on the welfare of unskilled workers in terms of the welfare measure of Sen (1974) have also been studied. The paper recommends a protectionist policy to the unskilled labour-intensive sector for protecting the interest of the vulnerable section of the working population.

Need for Tariff Protection in the Liberalized Trade Regime and Quest for an Appropriate Tariff Structure for a Developing Economy

Developing countries have been facing substantial adjustment costs in their endeavor in implementing trade reform. To lessen the adjustment costs of trade reform and to diffuse political support for protection a uniform tariff policy has often been recommended. The present paper examines the effectiveness of this policy in terms of a 3 x 4 specific factor full-employment structure reasonable for a developing economy. It shows that whether a symmetric tariff structure would be able to protect all the import-competing sectors crucially depends on the economy's trade pattern. The paper is then extended to include Harris-Todaro type unemployment of unskilled labour to show that the sector using a specific factor should be protected if protection of all the import competing sectors is not feasible.

International Migration of Skilled Labour, Welfare and Unemployment of Unskilled Labour: A Note

The present paper makes an attempt to examine theoretically the impact of emigration of skilled labour from developing countries on the level of welfare of the non-migrants and the level of urban unemployment of unskilled labour in a three sector Harris-Todaro model. The analysis suggests that in a reasonable production structure for a developing economy a brain drain of skilled labour raises urban unemployment of unskilled labour. The paper also shows that an emigration of skilled labour may raise the welfare of the non-migrants in a tariff-distorted economy if it imports the specialized manufacturing product or the labour-intensive good. However, if the economy imports the traditional manufacturing product, the welfare of the non-emigrating workers is likely to deteriorate.

Skill Formation and Wage Inequality: A Theoretical Analysis

The paper is purported to analyze the impact of skill formation on the skilled-unskilled wage inequality using a few variants of the HOS-type framework. It shows that the effect of skill formation on the wage inequality depends crucially upon the technologies of production of the economy and institutional nature of the markets for unskilled labour. In the extreme case when all unskilled labour markets are distorted any attempt of skill formation unequivocally accentuates the wage gap and may increase the level of unemployment of unskilled labour. These results point out that the empirical evidence as found in Beyer, Rojas and Vergara (1999) and the World Development Report (1995) that skill formation has contributed in reducing the skilled-unskilled wage gap in some developing countries lack solid theoretical bearing. The paper suggests that institutional reform programs, designed for the removal of labour market distortions, should be given high priority along with skill improvement measures to improve the skilled-unskilled wage inequality in the developing countries.

Short-Run Consequences of Trade Liberalization: A Computable General Equilibrium Model of Zimbabwe

The elimination of import controls represents a challenging adjustment process for any economy. The mechanisms are investigated by the use of an economy-wide model of Zimbabwe. A benchmark version assumes import rationing and protection of domestic markets in an economy with unemployment of unskilled labor. Rather than modeling trade liberalization as a decrease in tariffs, we view it as a regime shift, requiring a new model closure. Compared with previous computable general equilibrium studies of trade liberalization, the analyses includes two expansionary channels, intermediate imports and savings response. It is shown that a combined consumption boom, short-run contraction, and growing trade deficit are likely, due to drop of savings and demand switching to foreign goods.