Download Powerpoint Presentation John Fitzgerald

The Belated Irish Success
Introduction
"Historiography" of the Tiger
The Cartoon Version of Supply and Demand
Logarithms and the Labour Market!
Possible Answers - 1
Walsh
ƒ Demography, FDI etc., fiscal reform
Ruane, Barry
ƒ FDI
Harmon et al.
ƒ Education
O'Rourke
ƒ Mechanism of convergence
Possible Answers - 2
McAleese - Openness (EFC and CJH)
Lane
Labour share falling
Murphy - It never happened!
The Fairy Godmother (Godparent) view
Giavazzi et. al. EFC - see Bradley & Whelan
Honohan & Walsh- The last word
Barry – FDI, FDI, FDI, FDI, …..
Candidates
First order issues:
ƒ
ƒ
ƒ
ƒ
Openness & EU
Human capital
Demography
FDI
Second order issues:
ƒ
ƒ
ƒ
ƒ
Fiscal policy,fiscal reform, deregulation
Monetary policy
Partnerhip and policy consensus
Structural Funds
Openness
Freeing of Trade - FDI
ƒ Affects demand for labour
ƒ See effects in labour market
Migration
ƒ Increases elasticity of labour supply
ƒ Wider cultural effects
Learning from others' experience
Labour Supply
Natural Increase
Female Participation
Migration
Human Capital
Replacement Rate
Birth Rate
Total Fertility Rate by Education
Population Structure 2002
90-94
80-84
70-74
Age
60-64
50-54
40-44
30-34
20-24
10-14
0-4
0
50000 100000 150000 200000 250000 300000 350000
Female Labour Force Participation
Population aged 20 to 64
90
80
Primary
70
60
Inter
50
Leaving
40
Third
30
20
10
1988
1990
1989
1992
1991
1994
1993
1996
1995
1998
1997
2000
1999
2001
Source: Labour Force Survey micro data
Female Labour Force Participation
90
80
70
%
60
50
40
30
20
10
0
20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64
1988
2001
Female Labour Force Participation
90
80
70
%
60
50
40
30
20
10
0
15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64
Ireland, 2001
EU, 2000
Immigration
20
0
-20
-40
-60
1955
1960
1965
1970
1975
1980
1985
1990
1995
2000
Education of Emigrants
2002
1999
1996
1993
1990
1987
1984
1981
1978
1975
1972
1969
1966
1963
1960
1957
1954
1951
1948
1945
Thousands
Net Emigration
Cumulative Total for previous 15 years
600
500
400
300
200
100
0
-100
Population who have resided abroad
% of Population, 1996
40
35
30
25
20
15
10
5
Under 25
30-34
40-44
50-54
60-64
70-74
25-29
35-39
45-49
55-59
65-69
Other
75+
Third Level
Source: CSO Census of Population
Educational Attainment, 30-39
Educational Attainment
Sectoral Human Capital
Unemployment Rate
Population aged 20 to 64
30
Percentage
25
20
15
10
5
0
1988
1990
1992
1994
1996
1998
2000
1989
1991
1993
1995
1997
1999
2001
Primary
Junior
Leav ing
Third
Total
Source: Labour Force Survey micro data
Labour Supply
Avaerage annual Increase
percentage points
1990-95
1995-00
2000-05
2005-10
2010-15
3.5
3
2.5
2
1.5
1
0.5
0
-0.5
Natural Increase
Male Participation
Female Participation
Migration
Replacement Rate
Skilled Labour
Effects of increase in supply
Returns to Education - All Employees
Demand for Labour
FDI
Shifting world demand for skilled labour
Competitiveness
US Manufacturing FDI Flows
Relative Wage Rates
Skilled Labour
Effects of increase in supply and demand
Unskilled Labour
S2
S1
Wage rate
w2
w1
w0
D0
L1 L0 L2
D1
Employment
Relative Wage Rates
Earnings Dispersion,
Ireland 1987-2000
hourly earnings
1987 1994
Top/bottom
4.2
decile
4.7
1997 2000
4.8
3.7
Enabling Factors

Sound Public Finances
Speed of adjustment
The EU Structural Funds
 Social Partnership

Fiscal policy Indexation 1974-2000
GNP
20
15
10
%
5
0
-5
-10
-15
1974
1979
1984
1989
GDPE
GNP
1994
1999
Fiscal Stance
Stimulus is positive
4
% of GNP
2
0
-2
-4
-6
-8
1975
1979
1983
1987
1991
1995
1999
CSF 1989-93 and 1994-1999
Addition to level of GNP, percentage points
5
4
3
1994-99
1989-93
2
1
20
10
20
05
20
00
19
95
19
90
0
Ireland in the Medium Term
•
•
•
•
Potential to Outperform Neighbours to 2010
Supply Constraints still Relevant
Short-term – Problems
Vulnerabilities
GNP Forecasts
12
10
8
6
4
2
0
2000
2001
Nov-02
2002
2003
2004
MTR Benchmark
2005
2006
2007
MTR Slowdown
Average Growth of GNP
Relative GNP
Demographics
Dependency ratio
Convergence in output per head
Convergence in output per worker
Economic Dependency
Investment as a Share of GNP
30
%
25
20
15
199
1
0
99
2
5
00
2
0
00
2
5
01
Ir e
Ge
l a nd
r ma ny
Participation Rates:
Migration:
Output:
Labour Demand:
Demand for skilled and unskilled labour:
- Little substitution between skilled and unskilled
Wage rates:
Skilled labour market, fixed UR:
Skilled wage rate flexible,
changes to clear the market
Unemployment Rate
Labour Supply:
Population:
Shock the Model
Objective:
ƒ To see how skilled and unskilled labour markets
are affected by different factors
Lower FDI, Lower Growth
Lower Human Capital
ƒ Educational Attainment Frozen at 1980
ƒ No migration
No Migration
Elasticity of 0.525 - Doris, 1999
1 : NH/POPH = 9.1+0.525*LOG(WH/PC)-.0049*TYEAR
2 : NL/POPL = -.44+0.525*LOG(WL/PC)-.21*LOG(RUP/WL)-.012*UR
Kearney, 1998
3 : M = -432+289*(1-UR(-1)/100)/(1-UR_UK(-1)/100)+
1362*W*(1-tax_IRL)/PC/(W_UK*(1-tax_UK)/PC_UK)20*D78+22*D90
Elasticity wrt US imposed as 1 (LR)
4 : LOG(GNP) = -3.5-.018*LOG(W/W_UK)+.0016*TYEAR+
(1-.85)*LOG(GDP_USA)+.85*LOG(GNP(-1))
7 : LOG(L/GNP) = 17.8-.51*LOG(W/PC)-.0098*TYEAR
8 : LOG(LH/LL) = -113.5+.057*TYEAR
Lower FDI, Effect on GDP
Lower FDI, Effect on Wage Rates
Lower FDI, Effect on Immigration
Lower FDI, Effect on Unemployment
Educational Attainment
Unchanged Educational Attainment
Lower Human Capital - GDP
Lower Human Capital - Wage Rates
Lower Human Capital - Unemployment
Effects of Net Immigration, 1996-99
Skilled Labour Supply
Skilled Wage Rates
GNP
Total Employment
Unemployment rate
%
%
%
%
%
3.2
-4.7
1.5
3.2
-0.7
Immigration Reduced by 10k
Immigration Reduced by 10k
Immigration Reduced by 10k
Immigration Reduced by 10k
Immigration Reduced by 10k
Conclusions
Growth predciated on openness
Human Capital contributed 1% a year
FDI ?
Return from FDI and Human Capital enhance
one another