Özlem Onaran

Jobless Growth in the Central and East European Countries: A Country-Specific Panel Data Analysis of the Manufacturing Industry

This paper estimates a labor demand equation based on the panel data of the manufacturing industries in the Central and East European countries of Czech Republic, Hungary, Poland, Slovakia, Slovenia, Lithuania, Bulgaria, and Romania. It tests the effect of domestic factors (wages and output) and international factors (exports, imports, and foreign direct investment, or FDI) on employment during the era of posttransition recovery. The findings indicate that employment does not respond to wages in more than half the cases. The output elasticity of labor demand is mostly positive, but low; in a number of cases, employment is completely delinked from output. An impressive speed of integration to the European economic sphere through FDI and international trade has not prevented job losses in the manufacturing industry. There are very few cases of positive effects, but insignificant effects of trade and FDI dominate the findings, with some evidence of negative effects as well.

Wage share, globalization and crisis: the case of the manufacturing industry in Korea, Mexico and Turkey

The aim of this paper is to analyze the changes in the wage share in the manufacturing industry in Mexico, Turkey and Korea in the era of globalization. The focus is on the one hand on the effects of globalization on the wage share, which is measured by the effects of international trade and FDI intensity of the economy. On the other hand, the process of opening up has been accompanied by major currency crises in most developing countries in the last decade, which has affected the wage share through exchange rate depreciation and economic recession. The paper develops a Post‐Keynesian conflicting claims model for an open economy under the pressure of globalization, and an equation for the wage share is estimated for each country using the Seemingly Unrelated Regression method. The results show that both recessions and nominal depreciations have a clear and lasting negative effect on the manufacturing wage share in all countries, whereas the effect of openness, in particular international trade depends on industrial policy structure. Increased export intensity leads to a decline in the manufacturing wage share in Turkey and Mexico, but has no significant effect in Korea. The positive expectations from FDI are also not materialized in any of the three countries.

Are Married Women in Turkey More Likely to Become Added or Discouraged Workers

The purpose of this study is to examine the labour market outcomes of married couples to find out which of the added and discouraged worker effects is dominant in urban Turkish families. Using household labour force survey and province-level data from 1988 and 1994, we look for evidence regarding the dependency of the labour force participation decisions of wives and the employment status of their husbands. On yearly and pooled samples of married couples in their prime ages, bivariate probit estimates indicate that the two decisions are negatively correlated. However, the correlation is found to be statistically significant only in the economic crisis year of 1994. We interpret this finding to mean that the added worker effect dominates the discouraged worker effect.

Rethinking wage policy in the face of the Euro crisis: Implications of the wage-led demand regime

Ten years after its introduction, the Euro is in an existential crisis. The crisis is the outcome of economic policies that have aimed at labour market flexibility and financial integration. This paper argues, firstly, that the aggregate demand regime in the Euro area is wage led. While an increase in wages (other things equal) does have a negative effect on investment and on net exports, it does have a positive effect on consumption. As the Euro area is a relatively closed economy, the consumption effect overpowers the investment effect and the export effect. Secondly, we argue that in the Euro area two growth models have emerged: a credit-led and an export-led model. These have given rise to the imbalances that are at the heart of the Euro crisis. Wage flexibility has proven insufficient to prevent these imbalances. Thirdly, we advocate a system of coordinated wage bargaining that aims at wages rising in line with productivity growth and a substantially upward-revised inflation target. If the project of European economic integration is to survive, it needs a drastic change in direction. An important building block of this redirection is a rethinking of the role of wage policy.

Income distribution and growth: a global model

This paper estimates the effects of a change in the wage share on growth at global level in the G20 countries. A decrease in the wage share in isolation leads to lower growth in the euro area, Germany, France, Italy, the UK, the US, Japan, Turkey, and South Korea, whereas it stimulates growth in Canada, Australia, Argentina, Mexico, China, India, and South Africa. However, a simultaneous decline in the wage share in all these countries leads to a decline in global growth. Furthermore, Canada, Argentina, Mexico, and India also experience negative effects on growth when they decrease their wage share along with their trading partners. The results indicate that the global decline in labour share has had significant negative effects on growth.

Measuring wage flexibility: the case of Turkey before and after structural adjustment

This article presents an empirical analysis of wage flexibility in the formal private sector in Turkey. The analysis is based on a wage bargaining model that links the nominal wage demands to labour market conditions, which are proxied by the rate of unemployment; productivity improvements; and price expectations. The model is estimated on the basis of panel data of the formal private manufacturing industry; and changes in the wage setting mechanism as the country shifts from an import substituting industrialization strategy to an export-oriented growth regime are discussed. This debate is particularly important in terms of its policy implications, and is relevant to current international discussions of the role of labour markets during structural adjustment. In most economic policy discussions, unemployment is assumed to be a labour market rigidity problem. The results of this article, however, suggest that increased flexibility of wages leaves little room for such arguments. In the light of these findings, the prospect of wage rigidity becomes immaterial, and a focus on the structural problems of the economy, which are outside the labour market, becomes central.

Do Low Wages Stimulate Investment? An analysis of the relationship between distribution and investment in Turkish private manufacturing industry

This study analyses the relative impact of profitability and demand on accumulation in Turkish private manufacturing industry on the basis of the theoretical framework outlined by Marglin & Bhaduri (1990). The main motivation behind this analysis is to shed light on the demand aspects of the slowdown in accumulation in the manufacturing industry despite the increase in profitability during the structural adjustment episode. For this purpose, the ratio of investment to value-added is estimated as a function of the profit share and an accelerator term, namely the growth rate of value-added, using panel data for the 26 industries of the private manufacturing sector. The results show that investment is not responsive to the profit share, whereas growth has a consistent positive impact. This result is significant in explaining the inability of pro-capital income policies to stimulate manufacturing investments throughout the export-promotion era. The export boom maintained by the use of the existing capacity rather than by new investments shows the limits of export demand to compensate for the fall in domestic consumption out of wages. The results make a strong case against the argument that profitability enhances accumulation. Evidence shows that it is not possible to enhance accumulation and long-term potential for growth simply based on promoting profitability, without paying attention to the demand aspects.

The Effect of Foreign Affiliate Employment on Wages, Employment, and the Wage Share in Austria

This paper estimates the effects of outward Foreign Direct Investment (employment in affiliates abroad) on employment, wages and the wage share in Austria using panel data for the period 1996–2005. There is evidence of significant negative effects of FDI on both employment and wages, and consequently on the wage share. The results are not limited to workers in low-skilled sectors. The negative employment effect is mainly due to the rise in employment in the foreign affiliates in Eastern Europe. The negative wage effects originate from affiliate employment in both Eastern Europe and the developed countries in the industrial sector, but FDI in Eastern Europe has positive wage effects in the services sector due to possible scope effects.

The crisis of capitalism in Europe, West and East

There are three dimensions to the current, unprecedented global crisis of capitalism: economic, ecological, and political.… Let us look first at the economic dimension, which will be our main concern in this article. Capitalism is facing a major realization crisis—an inability to sell the output produced, i.e., to realize, in the form of profits, the surplus value extracted from workers’ labor. Neoliberalism can be viewed as an attempt initially to solve the stagflation crisis of the 1970s by abandoning the “Keynesian consensus” of the “golden age” of capitalism (relatively high social welfare spending, strong unions, and labor-management cooperation), via an attack on labor. It succeeded, in that profit rates eventually recovered in the major capitalist economies by the 1990s This article can also be found at the Monthly Review website , where most recent articles are published in full. Click here to purchase a PDF version of this article at the Monthly Review website.

Do Profits Affect Investment and Employment? An Empirical Test Based on the Bhaduri-Marglin Model

In this study, a Kaleckian-Post-Keynesian macroeconomic model, which is an extended version of the Bhaduri and Marglin (1990) model, serves as the starting point. The merit of a Kaleckian model for our purposes is that it highlights the dual function of wages as a component of aggregate demand as well as a cost item as opposed to the mainstream economics, which perceive wages merely as a cost item. Depending on the relative magnitude of these two effects, Kaleckian models distinguish between profit-led and wage-led regimes, where the latter is defined as a low rate of accumulation being caused by a high profit share. Are actual economies wage-led or profit-led? Current orthodoxy implicitly assumes that they are profit-led, and thus supports the neoliberal policy agenda. The purpose of the paper is to carry this discussion into the empirical terrain, and to test whether accumulation and employment are profit-led in two groups of countries. We do so by means of a structural vector autoregression (VAR) model. The model is estimated for USA, UK and France to represent the major developed countries, and for Turkey and Korea to represent developing countries. The latter are chosen since they represent two different export-oriented growth experiences. The results of the adjustment experiences of both countries are in striking contrast to orthodox theory, however they also present counter-examples to each other in terms of their ways of integrating into the world economy.