The Belated Irish Success Introduction Historiography of the
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 §Mc. Aleese - 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, …. .
Candidates §First order issues: ƒ ƒ Openness & EU Human capital Demography FDI §Second order issues: 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
Female Labour Force Participation
Female Labour Force Participation
Female Labour Force Participation
Immigration
Education of Emigrants
Net Emigration
Population who have resided abroad
Educational Attainment, 30 -39
Educational Attainment
Sectoral Human Capital
Unemployment Rate
Labour Supply
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 S 2 S 1 Wage rate w 2 w 1 w 0 D 0 L 1 L 0 L 2 D 1 Employment
Relative Wage Rates
Earnings Dispersion, Ireland 1987 -2000
Enabling Factors n Sound Public Finances è Speed of adjustment The EU Structural Funds n Social Partnership n
Fiscal policy Indexation 1974 -2000
Fiscal Stance
CSF 1989 -93 and 1994 -1999
Ireland in the Medium Term • • Potential to Outperform Neighbours to 2010 Supply Constraints still Relevant Short-term – Problems Vulnerabilities
GNP Forecasts
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
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*D 78+22*D 90 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 10 k
Immigration Reduced by 10 k
Immigration Reduced by 10 k
Immigration Reduced by 10 k
Immigration Reduced by 10 k
Conclusions §Growth predciated on openness §Human Capital contributed 1% a year §FDI ? §Return from FDI and Human Capital enhance one another
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