Increasing labor income and real unit labor costs in Brazilian agrobusiness

This study analyzes the interactions between per worker labor income (PWLI), labor productivity, real unit labor costs, and the relationship between relevant employee (IPCA) and employers (GDP deflators) prices, specifically focusing on Brazilian agrobusiness. For that purpose, labor productivities of the entire agrobusiness sector and its segments were calculated from 2004 through 2015. We found that the gap between agrobusiness sector deflators and the IPCA did not play a preponderant role to mitigate the effect of PWLI growth of 3.81% annually on real unit labor cost (CURT), which only increased 0.21% annually. In turn, CURT was contained by productivity gains, boosted mainly by agriculture. Without this productivity growth, CURT would have increased at 3.7% annually, thus making unviable the observed simultaneous gains for employers and employees in the Brazilian agrobusiness sector. The result for the primary agrobusiness segment should be highlighted. Even with an annual increase of 4.07% in PWLI, the 7.24% annual growth in productivity implied on an average annual reduction in CURT (-2.56%); without this significant productivity growth, the same increase in PWLI would have boosted CURT by 4.7% annually.

Confidence as a Driver of Private Investment in Selected Countries of Central America

This paper argues that structural weaknesses may make private investment particularly sensitive to business confidence relative to other traditional investment drivers and global shocks. It gauges the importance of confidence over recent years in selected countries in Central America, including Costa Rica, the Dominican Republic, El Salvador, and Guatemala. Using a vector error correction model to carry out the empirical work, a system representing global activity and the domestic economy, including a set of investment drivers (interest rates, unit labor costs, and confidence) is analyzed. The findings suggest that confidence has been, on average, the most important driver of investment in these countries, exceeded only by global factors. Since confidence, arguably, can be influenced by policymakers’ decisions, structural reforms to improve the business climate and reduce uncertainty play an important role in promoting investment and economic growth.

A Note on Relative Prices and Income Distribution over the US Business Cycle: 1857–2009

This paper investigates the relation between relative prices and the income distribution by examining variations in output and prices occurred over thirty-three US business cycles from 1857 to 2009. Using a broad database, the author shows that average relative prices in twenty-seven industries of the US economy presented a remarkably smaller variation than the corresponding variation in output levels, profits and wages. These time-series results, although not conclusive, may provide additional empirical evidence of the Ricardian claim that even relative market prices in an industrial economy are strongly dominated by the correspondent integrated unit labor costs and that changes along a wage-profit schedule will play only a secondary role in their determination. JEL classifications: E11, E32

Temporary Agency Work and Firm Performance: A Replication Study with Extensions

The authors analyze the nexus between temporary agency work (TAW) and firm performance. Compared to Hirsch and Mueller (2012, The Productivity Effect of Temporary Agency Work: Evidence from German Panel Data. Economic Journal 122 (562): F216-F235) and Nielen and Schiersch (2014, Temporary Agency Work and Firm Competitiveness: Evidence from German Manufacturing Firms. Industrial Relations 53: 365–393), the authors support a concave relationship between the TAW share and productivity, but find a convex relationship between the TAW share and unit labor costs, instead of a u-shape. Moreover, a new finding is that the correlation between the TAW share and profitability is only moderate.

Labor Regulations and the Cost of Corruption: Evidence from the Indian Firm Size Distribution

In this paper, we estimate the costs associated with an important suite of labor regulations in India by taking advantage of the fact that these regulations apply only to firms above a size threshold. Using distortions in the firm size distribution together with a structural model of firm size choice, we estimate that the regulations increase firms' unit labor costs by 35%. This estimate is robust to potential misreporting on the part of firms and enumerators. We also document a robust positive association between regulatory costs and exposure to corruption, which may explain why regulations appear to be so costly in developing countries.

Mexico and China in the US manufacturing market: An empirical analysis

<p>This paper conducts a disaggregated comparative analysis of China’s and Mexico’s export dynamism in the US manufacturing market over the period 1994-2015 and, against this backdrop, it estimates a panel data econometric model showing the impact of key variables on Mexico’s export performance across manufacturing subsectors of different technology categories. Export performance is measured in terms of import market shares in the US and numerous econometric issues are addressed to produce a plausible model. In addition to capturing some heterogeneity among different manufacturing subsectors, this study shows that: (i) a depreciation of the real exchange rate calculated for each subsector worsens (rather than improves) Mexico’s export performance, which is likely due not only to the high import content of Mexican manufacturing exports, but also to the increasing weight of the private sector’s external liabilities; (ii) a fall in domestic unit labor costs has a positive impact on Mexico’s export performance, which highlights the importance of raising labor productivity faster than wages; and (iii) a reduction in US unit labor costs deteriorates Mexico’s export performance. In this context, the empirical evidence leads to clear-cut policy recommendations to raise export performance and thus economic growth.</p>