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The Belated Irish Success

The Belated Irish Success. Introduction. "Historiography" of the Tiger The Cartoon Version of Supply and Demand Logarithms and the Labour Market!. Possible Answers - 1. Walsh Demography, FDI etc., fiscal reform Ruane, Barry FDI Harmon et al. Education O'Rourke

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The Belated Irish Success

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  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 • Demography, FDI etc., fiscal reform • Ruane, Barry • FDI • Harmon et al. • Education • O'Rourke • Mechanism 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. Candidates • First order issues: • Openness & EU • Human capital • Demography • FDI • Second order issues: • Fiscal policy,fiscal reform, deregulation • Monetary policy • Partnerhip and policy consensus • Structural Funds

  6. Openness • Freeing of Trade - FDI • Affects demand for labour • See effects in labour market • Migration • Increases elasticity of labour supply • Wider 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. Female Labour Force Participation

  13. Female Labour Force Participation

  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. Unskilled Labour S2 S1 Wage rate w2 w1 w1 w0 D0 D1 Employment L1 L0 L2

  31. Relative Wage Rates

  32. Earnings Dispersion, Ireland 1987-2000

  33. Enabling Factors • Sound Public Finances • Speed of adjustment • The EU Structural Funds • Social Partnership

  34. Fiscal policy Indexation 1974-2000

  35. Fiscal Stance

  36. CSF 1989-93 and 1994-1999

  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: • To see how skilled and unskilled labour markets are affected by different factors • Lower FDI, Lower Growth • Lower Human Capital • Educational Attainment Frozen at 1980 • No migration • No Migration

  50. Elasticity of 0.525 - Doris, 1999 1 : NH/POPH = 9.1+0.525*LOG(WH/PC)-.0049*TYEAR 2 : NL/POPL = -.44+0.525*LOG(WL/PC)-.21*LOG(RUP/WL)-.012*UR Kearney, 1998 3 : M = -432+289*(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 Elasticity wrt US imposed as 1 (LR) 4 : LOG(GNP) = -3.5-.018*LOG(W/W_UK)+.0016*TYEAR+ (1-.85)*LOG(GDP_USA)+.85*LOG(GNP(-1)) 7 : LOG(L/GNP) = 17.8-.51*LOG(W/PC)-.0098*TYEAR 8 : LOG(LH/LL) = -113.5+.057*TYEAR

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