LABOUR MARKET EFFECTS OF FLEXICURITY FROM A REGIONAL PERSPECTIVEAYOLT J. DE GROOT & J. PAUL ELHORST

151E603E Haruki SAIJO

Research question

•Could Danish flexicurity model be also successful in other European countries if they applied the whole policies?

→ almost same question as the theme of my graduation thesis

Research question• Basic knowledge to understand this topic

About Flexicurity

About Danish model

Research question• Basic knowledge to understand this topicAbout flexicurity

Government

Employers LaboursDismiss easily

Low em

ploym

ent

protec

tion

Unemployment

benefitActive labour market

policy

Find new job easily

Research question• Basic knowledge to understand this topicAbout Danish model

Flexicurity was remarkably successful in Denmark.

The Golden Triangle the degree of employment protection legislation→ historically low government expenditure on active labour market → high government expenditure on unemployment benefit → high

Plus Danish uniqueness historically, the spirit of welfare large cost → from high taxation

To copy Danish model is difficult

Answer• Could Danish flexicurity model be also successful in other

European countries if they applied the whole policies?

• Other European countries such as the Netherlands can permanently,lower its unemployment rate by 1.47 increase its participation by 2.08Increase employment growth rates by 1.05

If they copy Danish model,

Data and Methodology• Data → regional data (why?)

To deal with regions equally

Most research is limited to national data.

Data and Methodology• Methodology

Blanchard-Katz model (established in 1992)Relationship among unemployment rate, participation rate, and

employment growth

Data and Methodology• Methodology

Modification → put the three factors of Danish model (Golden Triangle: UB, ALMP, and EPL)

UB influences unemployment rate (higher → less eager to find job)EPL influences employment growth (its effect is still vague.)ALMP influences in two ways.

To the unemployed → unemployment rate (negative)To non-labour force → participation rate (positive)

Recursive model

Data and Methodology• Methodology

It should be modified because…..Employment growth →　 Unemployment rate, Participation rate

(recursive model)　　→ The shock to labour supply side is not consideredThey should be determined at the same time.(simultaneous model)

Result• Result (recursive model)

Problem → ALMP is negative in participation rateMulticollinearity (u[-1] and u, p[-1] and p)

e[-1] and e → small

Result• Result (simultaneous model)• Drop off some factors to avoid multicollinearity.

u[-1] from participation patep[-1] from unemployment rateu[-1] and p[-1] from employment growth

Result• Result (simultaneous model)• Drop off some factors to avoid multicollinearity.• ALMP is no longer significantly negative.

Data and Methodology 2• Use the Dutch 2001 regional averages for the

u[-1], p[-1], e[-1], EPL, UB, and ALMP

1. With the estimated coefficients from recursive model2. With the estimated coefficients from simultaneous

model

• While u[-1], p[-1], and e[-1] are not changed, EPL, UB, and ALMP change to the level of Denmark model.

• Put them into the equation with the coefficients to get the altered number.

Result 2• The result from recursive model

Result 2• The result from simultaneous model

Result 2• The author concludes that

The result from simultaneous is more realistic than that from recursive model.

• The reason is …… participation rate immediately increases if ALMP increases in the result from simultaneous model.

R S

Result 2• This difference is from …　 the difference of the effect of ALMP on participation rate

• The effect of ALMP on participation rate should not be negative.

• The author used the result from simultaneous model for the conclusion.

Result 2• Other European countries such as the Netherlands can permanently,lower its unemployment rate by 1.47 increase its participation by 2.08Increase employment growth rates by 1.05

It would be successful to some extent.

Implication • The possibility to use the data of Japan instead.

I already have data, but it is not regional.I have to take it into consideration to deal with social or cultural

difference.

• This thesis is limited to using the Dutch data.

• The obstacle against applying Danish model: cost, the history of welfare.

• Modify the equation more to adopt it to other countries

Thank you for your listening