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The Belated Irish Success. Introduction  "Historiography" of the Tiger  The Cartoon Version of Supply and Demand  Logarithms and the Labour Market!

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Presentation on theme: "The Belated Irish Success. Introduction  "Historiography" of the Tiger  The Cartoon Version of Supply and Demand  Logarithms and the Labour Market!"— Presentation transcript:

1 The Belated Irish Success

2 Introduction  "Historiography" of the Tiger  The Cartoon Version of Supply and Demand  Logarithms and the Labour Market!

3 Possible Answers - 1  Walsh ƒDemography, FDI etc., fiscal reform  Ruane, Barry ƒFDI  Harmon et al. ƒEducation  O'Rourke ƒMechanism of convergence

4 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, …..

5  First order issues: ƒOpenness & EU ƒHuman capital ƒDemography ƒFDI  Second order issues: ƒFiscal policy,fiscal reform, deregulation ƒMonetary policy ƒPartnerhip and policy consensus ƒStructural Funds Candidates

6 Openness  Freeing of Trade - FDI ƒAffects demand for labour ƒSee effects in labour market  Migration ƒIncreases elasticity of labour supply ƒWider cultural effects  Learning from others' experience

7 Labour Supply  Natural Increase  Female Participation  Migration  Human Capital  Replacement Rate

8 Birth Rate

9 Total Fertility Rate by Education

10 Population Structure 2002

11 Female Labour Force Participation

12

13

14 Immigration

15 Education of Emigrants

16 Net Emigration

17 Population who have resided abroad

18 Educational Attainment, 30-39

19 Educational Attainment

20 Sectoral Human Capital

21 Unemployment Rate

22 Labour Supply

23 Replacement Rate

24 Skilled Labour Effects of increase in supply

25 Returns to Education - All Employees

26 Demand for Labour  FDI  Shifting world demand for skilled labour  Competitiveness

27 US Manufacturing FDI Flows

28 Relative Wage Rates

29 Skilled Labour Effects of increase in supply and demand

30 w1w1 w1w1 L1L1 Unskilled Labour D1D1 L2L2 w2w2 S2S2 w0w0 L0L0 D0D0 S1S1 Wage rate Employment

31 Relative Wage Rates

32 Earnings Dispersion, Ireland

33 Enabling Factors n Sound Public Finances è Speed of adjustment n The EU Structural Funds n Social Partnership

34 Fiscal policy Indexation

35 Fiscal Stance

36 CSF and

37 Ireland in the Medium Term Potential to Outperform Neighbours to 2010 Supply Constraints still Relevant Short-term – Problems Vulnerabilities

38 GNP Forecasts

39 Average Growth of GNP

40 Relative GNP

41 Demographics  Dependency ratio  Convergence in output per head  Convergence in output per worker

42 Economic Dependency

43 Investment as a Share of GNP

44 Participation Rates: Migration: Output:

45 Labour Demand: Demand for skilled and unskilled labour: - Little substitution between skilled and unskilled

46 Wage rates: Skilled labour market, fixed UR: Skilled wage rate flexible, changes to clear the market

47 Unemployment Rate

48 Labour Supply: Population:

49 Shock the Model  Objective: ƒTo see how skilled and unskilled labour markets are affected by different factors  Lower FDI, Lower Growth  Lower Human Capital ƒEducational Attainment Frozen at 1980 ƒNo migration  No Migration

50 1 : NH/POPH = *LOG(WH/PC)-.0049*TYEAR 2 : NL/POPL = *LOG(WL/PC)-.21*LOG(RUP/WL)-.012*UR 3 : M = *(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 4 : LOG(GNP) = *LOG(W/W_UK)+.0016*TYEAR+ (1-.85)*LOG(GDP_USA)+.85*LOG(GNP(-1)) 7 : LOG(L/GNP) = *LOG(W/PC)-.0098*TYEAR 8 : LOG(LH/LL) = *TYEAR Elasticity of Doris, 1999 Kearney, 1998 Elasticity wrt US imposed as 1 (LR)

51 Lower FDI, Effect on GDP

52 Lower FDI, Effect on Wage Rates

53 Lower FDI, Effect on Immigration

54 Lower FDI, Effect on Unemployment

55 Educational Attainment

56 Unchanged Educational Attainment

57 Lower Human Capital - GDP

58 Lower Human Capital - Wage Rates

59 Lower Human Capital - Unemployment

60 Skilled Labour Supply %3.2 Skilled Wage Rates %-4.7 GNP %1.5 Total Employment %3.2 Unemployment rate %-0.7 Effects of Net Immigration,

61 Immigration Reduced by 10k

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66 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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