EC-IILS Joint Discussion Paper Series

These papers have been prepared by the International Institute for Labour Studies (IILS) within the framework of the joint project “Addressing European labour market and social challenges for a sustainable globalization”, which has been carried out by the European Commission (EC) and the International Labour Organization (ILO). The discussion paper series provides background information and in-depth analysis for two concluding synthesis reports that summarize the main findings of the project.
  1. EC-IILS Joint Discussion Paper Series No. 1

    Financial Crises: A review of Literature

    There is a robust modern literature on financial crises that policy makers in newly affected countries can potentially draw from. The existing literature has yet to fully account for the large size of the crises and the long run effects, but still there are a number of findings that may help guide policy in the context of the current crisis. This paper is an attempt to draw the main lessons from this literature, with a special focus for the macro-economic impact of financial crises.

  2. EC-IILS Joint Discussion Paper Series No. 2

    Case study of past crises: Lessons learned from the Republic of Korea

    This paper examines the effects and implications of a number of measures and reforms undertaken by the Republic of Korea during the 1997 crisis. In particular, in some cases reforms and programme introductions laid the groundwork for the government’s current response to mitigating the labour market effects of the crisis. In other instances, reforms while initially successful have created distributional considerations where risks of job loss are unevenly distributed.

  3. EC-IILS Joint Discussion Paper Series No. 3

    Case study of past crises: Lessons learned from Argentina

    The main objective of this paper is to discuss and analyze whether the effectiveness of past policy efforts have played a role in the positive performance of Argentina during the 2008 crisis. The paper suggests that although the origins of past and current crises are different in nature and scope, the ability to respond in an efficient and effective manner in the 2008 crisis is tied very much to the country’s previous experiences – in fact, the groundwork for many of the current programmes and measures was laid during the previous crisis and subsequent government reforms.

  4. EC-IILS Joint Discussion Paper Series No. 4

    Determinants of global imbalances: Economic, institutional and social factors that shape the global economy

    This paper offers an enriched analysis of underlying determinants of current account positions. In particular, it focuses on the interactions between current account imbalances and changes in labour supply, capital account liberalization, income inequality and social policies. Given the global nature of the phenomenon, the analysis presented here is based on broad country coverage, accounting for country heterogeneity. In order to cover long-run trends, the analysis presented here dates back to the 1980s or – in case of data limitations – to the early 1990s. The two novelties of our analysis are that (i) we include wage share measures as an important determinant to current account balances and (ii) we add income inequality measures such as the Gini coefficient and household poverty measures into our regression analysis.

  5. EC-IILS Joint Discussion Paper Series No. 5

    A Review of Global Fiscal Stimulus

    In response to the global financial and economic crisis that started in 2008, countries around the world embarked on an unprecedented level of intervention with aims to keeping the economy buoyant and stop a full-scale assault on the labour market. Although world economic growth returned to positive territory, a number of labour market challenges persist. At the same time, massive public spending, depressed economic activity, and reduced revenue are causing considerable fiscal pressure. As such, policy makers are urged to bring public expenditures under control, including scaling back programmes introduced as part of stimulus measures. The aim of this paper is threefold: first it gives an overview of the global stimulus spending; second it examines their effectiveness; and third, it presents a snapshot of recent fiscal consolidation measures.

  6. EC-IILS Joint Discussion Paper Series No. 6

    How to deal with the job crisis?

    The aim of this note is to present an overview of the current understanding of the role of fiscal policy in promoting an employment recovery, taking into account different labour market characteristics such as segmentation and different wage bargaining institutions. Specifically, the note discusses the resilience of economies with segmented labour market. Regarding fiscal policy, it demonstrates that wage bargaining institutions that also include hours worked in their bargaining process typically leads to improved employment outcomes, despite the fact that output and real wages are reacting in a similar fashion. Finally, the note discusses the importance of targeted active labour market policies in promoting employment creation: When such policies specifically increase search effort of the unemployed, their effectiveness is multiplied in comparison to a general spending increase that gets diluted in the economic system.

  7. EC-IILS Joint Discussion Paper Series No. 7

    Dual labour markets with search costs

    General equilibrium models with non-competitive labour market accounting for the dynamics of wages and employment have become increasingly used. For the most part, however, these general equilibrium models have been applied to advanced economies while the case of developing economies with dual labour market has been mainly addressed in partial equilibrium framework. This paper models an economy with an informal labour market along the line of the search and matching framework and revisits three main issues. The first issue is the dynamics of the informal sector over the business cycle. The second issue is the impact of informality on economic volatility. A third issue is the extent to which the interaction between dual labour markets modifies the standard properties of search models.

  8. EC-IILS Joint Discussion Paper Series No. 8

    Active labour market policies, search costs and positive fiscal multiplier

    This paper discusses the efficiency of fiscal intervention. In particular, this paper models a new instrument for fiscal policy, active labour market policies, and identifies a new transmission channel for fiscal policy, the labour market. In the model below, active labour market policies play a key role in supporting new jobs, by easing the matching process between searching workers and firms with job vacancies. For that purpose, the traditional matching function is extended to incorporate labour market spending. The Cobb-Douglas matching function is now made of three elements: searching workers, vacancies and active labour market spending. There are ambivalent transmission channels. Fiscal spending crowds out private consumption and investment in line with the Ricardian properties associated with intertemporal optimizing private agents. The increase in the interest rate following fiscal expansion also affects negatively the discounted value of an additional match and reduces the incentive for firms to hire an additional worker. Labour market spending however improves the functioning of the labour market and increases the rate of matching.

  9. EC-IILS Joint Discussion Paper Series No. 9

    Collective bargaining, hours vs jobs and the fiscal multiplier

    The current economic crisis has led several governments to conduct discretionary fiscal expansion to foster aggregate demand. The question of the effectiveness of fiscal policy has attracted an increasing interest within academic circles. A new body of literature on fiscal policy, making use of dynamic stochastic general equilibrium (DSGE) models, has recently emerged. In this paper, we aim at contributing to this new literature with a particular focus on the effects of expansionary fiscal policy on the labour market. In particular, we focus on the following three questions: (i) What are the effects of an increase in government spending on economic activity? (ii) How do changes in the labour input, induced by the rise in government spending, adjust along its two margins (hours of work per employed worker and employment) ? (iii) Is the choice of the bargaining scheme important for the propagation of government spending shocks to key labour market variables?

  10. EC-IILS Joint Discussion Paper Series No. 10

    Defining "green": Issues and considerations

    The paper involves in the discussion about proper “green” definitions and attempts to give meaning to the terms “green economy”, “green policy” and “green job” for the purposes of the joint EC-ILO study. The paper goes beyond a direct application to the study by providing a review and a discussion of the various definitions of “green” that have been suggested by governments, organizations and the policy literature. Similarities and problems are elaborated and some conclusions on how to move forward are derived.