1 longitudinal analysis and the scottish economy david bell scotecon university of stirling
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1
Longitudinal Analysis and the Scottish Economy
David Bell
Scotecon
University of Stirling
2
Key Issues in Scottish Economic Performance
• Economic Growth– Entrepreneurship– Population Decline– Skills– Economic Inactivity
• Widening role for economic analysis in policies under control of Scottish Parliament
• Can longitudinal data enhance the evidence base for policy?
3
Longitudinal Data and the Scottish Economy
• At present role is limited because ….– Relatively few longitudinal data sources– Scottish sample often small– Not much expertise in the use of such data
4
Key Longitudinal Datasets
• Individual/Household Based– BHPS– Cohort Studies– NES– Census
• But what about firms?– Futureskills Scotland Skills Surveys– IDBR
5
Don’t put all your eggs in the longitudinal basket!
• Reliance on longitudinal data should be limited• Has some advantages
– Controls for unobserved heterogeneity – Permits event modelling
• But also disadvantages– More susceptible to measurement error
– It does not answer the “evaluation problem”– Small samples may limit modelling approach and
hence usefulness– The past not necessarily a good guide to the future
6
Use a Variety of Data Sources and Methods(in the Scottish context)
• Reconciling different results from different datasets is a useful means of understanding the datasets
• Replication in other datasets suggests results are more robust
• As does confirmation by other methods
7
Two Examples
• Public Sector Wages
• Relative Returns to Education in Scotland and Rest of Great Britain
8
Public Sector Wages - The Context
• Public sector pay accounts for the majority of spending under the Barnett formula
• Pay plays an important role in attracting, retaining and motivating public sector staff
• Public sector rewards influence private sector labour markets
• Growing pressure for reform
9
The Public Sector Premium
• Why do public sector employees earn more?– Compensating differentials– Efficiency wages– Bargaining structures
10
The Public Sector Premiumin Great Britain
WageSectorPrivateMean
WageSectorPublicMean
Source: Labour Force Survey
11
“Explained” and “Unexplained” Components of the Public-Sector Premium
• Differences in mean pay may simply reflect differences in skill levels, education, experience etc.
• Use regression to “net out” these effects – these are the “explained” components of the public sector premium
• What remains is the “unexplained” component
12
Explained and Unexplained Components of Public Sector Premium
0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
Males England
Males Scotland
FemalesEngland
FemalesScotland
Diff
ere
nce
in (
Ln
) W
ag
es
Unexplained
Explained
Source: Labour Force Survey
13
Spatial Sensitivity by Public Sector Bargaining GroupRelative to Private Sector Comparator
0 0.1 0.2 0.3 0.4 0.5 0.6
Civil Service (Inland Revenue)
Local Authority Single status
Teachers
Nurses
Royal Mail manual
NHS Professionals Whitely B
NHS Ambulance
Police
NHS Admin & clerical
University manual*
Prison Officers*
NHS Ancillaries
Fire Service
NHS Doctors & Dentists
Source: New Earnings Survey
14
Does the Premium Vary by Location in the Wage Distribution?
-10% -5% 0% 5% 10% 15% 20%
malesEngland
malesScotland
femalesEngland
femalesScotland
malesEngland
malesScotland
femalesEngland
femalesScotland
25
th p
erc
en
tile
75
th p
erc
en
tile
Source: Labour Force Survey
15
But What About Individual Experiences in Moving Between Sectors?
• Model based on Holtz-Eakin & Rosen analysis of the impact of self employment on earnings
),,(21 ttttttt PublicPXfPublicPPP
16
Moving between sectors(compared with staying in the private sector)
UK
-2
0
2
4
6
8
10
12
public/public public/private private/public
10th percentile
25th percentile
50th percentile
75th percentile
90th percentile
Source: New Earnings Survey
17
Moving between sectors(compared with staying in the private sector)
Greater London
-5
0
5
10
15
20
public/public public/private private/public
10th percentile
25th percentile
50th percentile
75th percentile
90th percentile
Source: New Earnings Survey
18
Moving between sectors(compared with staying in the private sector)
Scotland
-2
0
2
4
6
8
10
12
public/public public/private private/public
10th percentile
25th percentile
50th percentile
75th percentile
90th percentile
Source: New Earnings Survey
19
Returns to Qualifications
• Are the returns to Scottish qualifications different from returns to English qualifications?
• Does the Scottish educations system as a whole perform better than the English system?
• Sources: Labour Force Survey, NCDS
20
Coefficient t statisticOther Higher Education -0.19 -40.6A Level -0.37 -87.6GCSE, O Levels -0.46 -103.4Other Quals -0.57 -87.5
(omitted category is degree qualification)Quals in Scotland 0.14 8.1
Higher Education in Scotland -0.08 -5.7Highers in Scotland -0.08 -6.3O Levels in Scotland -0.11 -7.8Other Quals in Scotland -0.08 -3.4
Works in London 0.29 80.0Works in Scotland -0.01 -1.4
(omitted category is works in Rest of England)
Quals in Scotland, Works in London -0.05 -1.4Quals in Scotland, Works in Scotland -0.14 -7.7
(omitted category is works in Rest of England)
n = 162204F = 1784.32R2 = 0.3813
Other controls, gender tenure tenure2, age left education,Industry, marital status, number of children, size of workforce, year dummies
21
Returns to Qualification by Region of Work(Relative to Lowest Quals working in Rest of England)
-20%
0%
20%
40%
60%
80%
100%
120%
Rest ofEngland
London Scotland Rest ofEngland
London Scotland
Quals in England Quals in Scotland
Per
cent
Degree
Other Higher Education
A Level
GCSE, O Levels
Other Quals
22
Using NCDS to Estimate Returns to Education
• Not a large enough sample to construct separate Scottish estimates
• Not many movements between Scotland and England to separate out labour market from qualification effects
• But much better controls for ability and family background etc.
• Dummy for whether educated in Scotland or not is insignificant
23
Returns to Qualification by NVQ Level(relative to the unqualified)
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
1 2 3 4 5
Source: NCDS
24
Conclusions
• Longitudinal analysis can aid our understanding of key processes in the Scottish economy
• Absence of longitudinal data on firms is an important omission
• Relevant sample sizes tend to be small
• Can play a useful supporting role.
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