Labour market effects of flexicurity from a regional
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LABOUR MARKET EFFECTS OF FLEXICURITY FROM A REGIONAL PERSPECTIVEAYOLT J. DE GROOT & J. PAUL ELHORST
151E603E Haruki SAIJO
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Research question
•Could Danish flexicurity model be also successful in other European countries if they applied the whole policies?
→ almost same question as the theme of my graduation thesis
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Research question• Basic knowledge to understand this topic
About Flexicurity
About Danish model
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Research question• Basic knowledge to understand this topicAbout flexicurity
Government
Employers LaboursDismiss easily
Low em
ploym
ent
protec
tion
Unemployment
benefitActive labour market
policy
Find new job easily
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Research question• Basic knowledge to understand this topicAbout Danish model
Flexicurity was remarkably successful in Denmark.
The Golden Triangle the degree of employment protection legislation→ historically low government expenditure on active labour market → high government expenditure on unemployment benefit → high
Plus Danish uniqueness historically, the spirit of welfare large cost → from high taxation
To copy Danish model is difficult
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Answer• Could Danish flexicurity model be also successful in other
European countries if they applied the whole policies?
• Other European countries such as the Netherlands can permanently,lower its unemployment rate by 1.47 increase its participation by 2.08Increase employment growth rates by 1.05
If they copy Danish model,
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Data and Methodology• Data → regional data (why?)
To deal with regions equally
Most research is limited to national data.
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Data and Methodology• Methodology
Blanchard-Katz model (established in 1992)Relationship among unemployment rate, participation rate, and
employment growth
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Data and Methodology• Methodology
Modification → put the three factors of Danish model (Golden Triangle: UB, ALMP, and EPL)
UB influences unemployment rate (higher → less eager to find job)EPL influences employment growth (its effect is still vague.)ALMP influences in two ways.
To the unemployed → unemployment rate (negative)To non-labour force → participation rate (positive)
Recursive model
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Data and Methodology• Methodology
It should be modified because…..Employment growth → Unemployment rate, Participation rate
(recursive model) → The shock to labour supply side is not consideredThey should be determined at the same time.(simultaneous model)
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Result• Result (recursive model)
Problem → ALMP is negative in participation rateMulticollinearity (u[-1] and u, p[-1] and p)
e[-1] and e → small
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Result• Result (simultaneous model)• Drop off some factors to avoid multicollinearity.
u[-1] from participation patep[-1] from unemployment rateu[-1] and p[-1] from employment growth
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Result• Result (simultaneous model)• Drop off some factors to avoid multicollinearity.• ALMP is no longer significantly negative.
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Data and Methodology 2• Use the Dutch 2001 regional averages for the
u[-1], p[-1], e[-1], EPL, UB, and ALMP
1. With the estimated coefficients from recursive model2. With the estimated coefficients from simultaneous
model
• While u[-1], p[-1], and e[-1] are not changed, EPL, UB, and ALMP change to the level of Denmark model.
• Put them into the equation with the coefficients to get the altered number.
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Result 2• The result from recursive model
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Result 2• The result from simultaneous model
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Result 2• The author concludes that
The result from simultaneous is more realistic than that from recursive model.
• The reason is …… participation rate immediately increases if ALMP increases in the result from simultaneous model.
R S
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Result 2• This difference is from … the difference of the effect of ALMP on participation rate
• The effect of ALMP on participation rate should not be negative.
• The author used the result from simultaneous model for the conclusion.
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Result 2• Other European countries such as the Netherlands can permanently,lower its unemployment rate by 1.47 increase its participation by 2.08Increase employment growth rates by 1.05
It would be successful to some extent.
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Implication • The possibility to use the data of Japan instead.
I already have data, but it is not regional.I have to take it into consideration to deal with social or cultural
difference.
• This thesis is limited to using the Dutch data.
• The obstacle against applying Danish model: cost, the history of welfare.
• Modify the equation more to adopt it to other countries
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Thank you for your listening