pattern of growth and employment l.
Download
Skip this Video
Loading SlideShow in 5 Seconds..
Pattern of growth and employment PowerPoint Presentation
Download Presentation
Pattern of growth and employment

Loading in 2 Seconds...

play fullscreen
1 / 41

Pattern of growth and employment - PowerPoint PPT Presentation


  • 160 Views
  • Uploaded on

Pattern of growth and employment. A case study of Argentina UMKC, May 2006. Job creation is not independent of the pattern of growth. Which sectors explain the overall growth How do they generate employment How much they contribute to overall growth How do they affect other macro indicators.

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about 'Pattern of growth and employment' - mahlah


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
pattern of growth and employment

Pattern of growth and employment

A case study of Argentina

UMKC, May 2006

job creation is not independent of the pattern of growth
Job creation is not independent of the pattern of growth
  • Which sectors explain the overall growth
  • How do they generate employment
  • How much they contribute to overall growth
  • How do they affect other macro indicators
chenery decomposition
Chenery decomposition
  • Decomposes growth in three components:
    • Domestic demand
    • Import substitution
    • Export lead growth
  • Source: Taylor L. and R. Vos [2000] Balance of Payments Liberalization in Latin America: Effects on Growth, Distribution and Poverty UNDP
the algebra
The algebra
  • X=GDP
  • D=C+I+G+M (domestic demand)
  • S=aggregate supply (local production plus X+Mcif)
  • E= exports FOB
  • a=PBI/S
the example of the us 2005 1996
GDP 05 11,131

GDP 96 8,328.9

Exp 05 1193

Exp 96 843.4

Imp 05 1825.2

Imp 96 923

Employment 05: 141.7

Employment 96: 126.7

Unemp. 96: 7,236

Unemp. 05: 7,591

Contribution to growth

DD 2762.52 (110%)

ISI -542.71 (-22%)

Exp 288.68 (12%)

GDP growth: 30%

Emp. Growth: 11.9%

Employment/Growth elasticity: 0.39

The example of the US 2005-1996
slide6

The example of the US 2005-1998

  • GDP 05 11,131
  • GDP 98 8747
  • Exp 05 1193
  • Exp 98 955.5
  • Imp 05 1825.2
  • Imp 98 1115.0
  • Employment 05: 141.7
  • Employment 98: 137.6
  • Unemp. 98: 6,210
  • Unemp. 05: 7,591
  • Contribution to growth
  • DD 2,303 (105%)
  • ISI -310.76 (-14%)
  • Exp 192.70 (9%)
  • GDP growth: 27.3%
  • Emp. Growth: 2.3%
  • Employment/Growth elasticity: 0.108
sectoral growth and employment source kostzer and mazorra 2003
Sectoral growth and employment (source: Kostzer and Mazorra 2003)
  • Using the I-O matrix and the open Leontieff model 5 scenarios were simulated
  • Overall GDP growth target 4%
  • Each sector increases value added in 2%
  • The leading sectors of the strategy have to grow in order to achieve the overall 4%
  • Benchmark scenario: all sectors 4% employment index 100
the scenarios
The scenarios
  • 1: Massive consumption
  • 2: Conspicuous consumption
  • 3: Traditional exports
  • 4: Non traditional exports
  • 5: Construction (housing and infrastructure)
scenario 1 massive consumption
Scenario 1: massive consumption
  • Industries involved = 31
  • of VA in those industries = 5,5%
  • of consumption= 6,6% - in total 4,6%
  • Rise of imports = 2,3%
  • Rise of employment in the involved industries 5,5% - total 4.0%
  • Index of job creation = 109,0
scenario 2 conspicuous consumption
Scenario 2: conspicuous consumption
  • Industries involved = 10
  • Rise of VA in those industries = 9,5%
  • Rise of consumption= 11,5% - in total 4,5%
  • Rise of imports = 7,3%
  • Rise of employment in the involved industries 10.1% - total 3.8%
  • Index of job creation = 102,4
scenario 3 traditional exports
Scenario 3: Traditional Exports
  • Industries involved = 16
  • Rise of VA in those industries = 11,2%
  • Rise of exports in the sector 23% - total 12.4%
  • Rise of imports = 2.6%
  • Rise of employment in the involved industries 9.2% - total 3.5%
  • Index of job creation = 95,3
scenario 4 non traditional exports
Scenario 4: non traditional exports
  • Industries involved = 31
  • Rise of VA in those industries = 9,2%
  • Rise of exports in the sector 60% - total 14.8%
  • Rise of imports = 3.1%
  • Rise of employment in the involved industries 7.8% - total 3.5%
  • Index of job creation = 95,2
scenario 5 construction and infrastructure
Scenario 5: construction and infrastructure
  • Industries involved = 1
  • Rise of VA in those industries = 10,2%
  • Rise of investment= 11,0% - in total 9,5%
  • Rise of imports = 2.4%
  • Rise of employment in the involved industries 10.2% - total 3.9%
  • Index of job creation = 106.6
results of the simulation

Results

E 1

E 2

E 3

E 4

E 5

# of sectors involved in the strategy

31

10

16

31

1

Yearly increase on the component involved

6.6%

11.5%

23.0%

60.0%

11.0%

Job creation per year %

4.0%

3.8%

3.5%

3.5%

3.9%

Index of job creation. Base homogeneous 4%=100

109.0

102.4

95.3

95.2

106.6

Employment multiplyier

1.46

1.48

1.63

1.62

1.52

Results of the simulation
exchange rate and employment

Exchange rate and employment

From Frenkel, R. and L. Taylor [2006]

Real exchange rate, monetary policy and employment. DESA working paper No. 19

influential channels of rer on employment
Influential channels of RER on employment
  • Macroeconomic channel
    • RER determines levels of economic activity and employment in the short run
  • Development channel
    • RER affects economic growth and the speed of job offerings
  • Labor intensity channel
    • RER defines the labor content in economic processes
macroeconomic channel
Macroeconomic channel
  • Depreciated RER increases net exports (X-M) increasing the competitiveness of local firms
    • This does not necessarily implies export lead growth, but also import substitution
  • Consequently, higher demand for local activities with higher gdp and employment
  • These effects depend on the economic and social structure of the country
  • This channel operates when there is excess capacity and unemployment
  • These effects must offset the contractionary effects of devaluations stated by Krugman and Taylor 1979
development channel
Development channel
  • High RER is similar to a proactive industrial policy
    • As long as it does not affect strategic investment
    • Domestic industrial production bias
    • This works better in the framework of globalization and free trade
  • Rodrik (2003) Competitive RER generates initial conditions for a growth process and the appropriate institutions for that process in the long run.
    • It is an easy instrument that can be applied overnight
    • An externally oriented economy generates the learning process necessary to develop businesses
    • The main problem can be the financial deregulation
the labor intensity channel
The labor intensity channel
  • RER induces the tradable sector, mainly goods production
  • But induces a technological choice with more labor content and less imported capital and inputs
  • Goods production have more linkages with other sectors
  • Goods production tend to operate in non competitive markets (Rima) with oligopolistic structures, while services in competitive markets
credit and employment in argentina source filippo kostzer and schlesser 2004

Credit and employment in Argentina (source: Filippo, Kostzer and Schlesser 2004)

Credit rationing with unlimited supply of money

DANIEL KOSTZER

UMKC April 2006

objective of the presentation
Objective of the presentation
  • How did we started with the research
  • Study of the relationship between loans to firms and employment
    • Development of the Argentinean banking system
    • Stylized facts and aspects of the mechanics behind the financial sector
    • Microeconomic rationality of agents
    • The role of the state in this context
  • Is there any novelty to contribute to PK theory of credit?
some notes on the banking system during the 90 s
Some notes on the banking system during the 90´s
  • Currency board => convertibility
  • Central bank passive actor
  • International banks as lenders of last resort
  • Trans-national banks
    • Banks to finance firms to…
    • Banks to finance … banks
assumptions and stylized facts 1
Assumptions and stylized facts (1)

FIRM BEHAVIOUR

  • Finance new fixed investment with retained profits
  • Working capital has two sources
    • Inputs: suppliers credit
    • Wages: over drafting and collaterals
  • Inventories evolution define the short run productive requirements
assumptions and stylized facts 2
Assumptions and stylized facts (2)

BANK BEHAVIOUR

  • They had no limitations in order to get the money for loans
    • Inflows plus deposits
  • The are price takers for deposits and price setters for loans
  • Validate productive projects in relation to the macro assessments with inventories as collateral
the macro evolution diagram
The macro evolution diagram
  • Expansionary phase with joint growth of employment and loans
  • Stagnation of employment with inertia of loans
  • Stagnation of loans with employment redution
  • Contraction of both loans and employment
reasons for the discrepancy
Reasons for the discrepancy
  • Inertia of loans at the beginning of the crisis
    • The misalignment between the rise of loans and the rise of production/employment shows a “short-circuit” in the process of capital reproduction
    • How can if employment stagnates loans continue rising? (other uses)
    • This process anticipates a future decline in GDP, loans and employment (recessive spiral)
nothing more misleading than the obvious s h
Nothing more misleading than the obvious (S. H.)

Induced crowding out ?

  • Crowding out induced by banks
  • Do not affect private loans
  • Private loans are redirected to consumption and to the state
  • The state is not responsible of the reallocation of loans and the crisis
excess demand or excess supply of productive loans
Excess demand or excess supply of productive loans?
  • Since there are almost no restrictions to bring money into the economy, supply is always there.
  • Since there is no crowding out, there is no excess demand for loans
  • Total assets growth all the time
  • The rise of non-performing loans increases interest rate (Credit Rationing?)
  • Customers that yesterday had loans they do not today => excess supply of loans
the emergence of the crisis
The emergence of the crisis
  • Investment needs concrete incentives, based on sales and aggregate demand
  • Financial investment and savings do not imply productive investment nor economic growth
  • Reduction on public expenditures do not correct the problems. ¡¡¡!!!???
conclusions 1
Conclusions (1)
  • Our main hypothesis that loans are a function of employment and aggregate demands seems to be valid
  • Financial savings (money in the banks) is not sufficient condition for economic growth
  • Does not matter who is the lender of last result
conclusions 2
Conclusions (2)
  • Against the general wisdom, credit rationing only accelerated the crisis
    • State expenditures did not displaced firms from credit market, they were already out
    • Orthodox adjustment is based on a wrong diagnosis (less G does not imply less interest rate)
    • Real variables were affected before financial variables