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Applied Economics
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The applied economics of labour: introduction and overview

Mark P. Taylora
a
Dean, Warwick Business School, University of Warwick, Coventry, CV4 7AL, UK

Online publication date: 25 January 2011

To cite this Article Taylor, Mark P.(2011) 'The applied economics of labour: introduction and overview', Applied
Economics, 43: 4, 387 — 388
To link to this Article: DOI: 10.1080/00036846.2011.555957
URL: http://dx.doi.org/10.1080/00036846.2011.555957

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 Applied Economics, 2011, 43, 387–388

Editorial

The applied economics of labour:

introduction and overview
Mark P. Taylor
Editor, Applied Economics Series
Dean, Warwick Business School, University of Warwick, Coventry, CV4
7AL, UK
E-mail: mark.taylor@wbs.ac.uk

We provide an introduction and overview to the seven applied financial

studies making up this special theme on labour. The studies cover a wide
range of topics, and employ a variety of applied techniques across a range
of countries.
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In the first article of this themed issue, Lechner and
Vazquez-Alvarez analyse the individual effects of
becoming disabled on key aspects of labour market
outcomes in Germany. They use data collected by the
German Socio Economic Panel (1984–2002). This
data is organized such that the potential problems for
such an estimation that may arise from disability not
being a random event are considerably reduced. They
use matching methods and they discover a reduction
of individual employment chances of about 9 to 13%.
They find that the level depends on the degree of
disability. They also find no statistically significant
evidence for a reduction in income or an increase in
unemployment due to disability.
In their contribution, Dupuy and Fernández-
Kranz use microdata for 35 countries over the
period 1985 to 1994 and 1994 to 2002 and find that
labour market institutions are traditionally associated
with more compressed wage structures and a higher
family gap. Furthermore their results indicate that
these policies reduce the price effect of having
children but aggravate the human capital loss due
to motherhood. There is also evidence that policies
that help women to continue in the same job after
childbirth decrease the family gap. Indeed of all the
countries studied, mothers in Southern Europe suffer
the biggest family gap which their analysis indicates is
due to the bad combination of labour market policies
in these countries. The results are robust to specifica-
tion changes and indicate that the main reason for
mothers to lag behind other women in terms of
earnings is the loss of accumulated job market
experience caused by career breaks around childbirth.
The authors of the third article use a survival
model to investigate the transition from higher
education to the French labour market. Barros,
Guironnet and Peypoch analyse how long former
university students stay unemployed, while searching
for employment after leaving French higher educa-
tion. They use cox duration models to account for
the proportional hypothesis. The major finding is
that the worker’s recruitment is based more on the
choice of the faculty of initial training than the
educational level attainment. The results will be
helpful in individual job search and policy-makers
in education.
Amable, Demmou and Gatti provide new evidence
on the linkages between various forms of market
regulation and joblessness and its components,
unemployment and inactivity. They suggest the one
crucial contribution of this article is the analysis of
the interdependence across Product Market
Regulation (PMR) and labour markets regulation
(Employment Protection Legislation (EPL)).

Applied Economics ISSN 0003–6846 print/ISSN 1466–4283 online ß 2011 Taylor & Francis 387
http://www.informaworld.com
DOI: 10.1080/00036846.2011.555957
 388
With the help of a dynamic fixed effect model with an
interaction term, they estimate the marginal impact of
EPL and PMR at different levels of the other
interacted variable. To cope with problems related
to the inclusion of timeinvariant institutional vari-
ables in fixed effect models, they present results of
regressions based on a new procedure, specifically
designed to treat slowly changing variables. The
authors also build time-series data to account for the
annual evolution of EPL, and use new data for
unemployment insurance net replacement rates.
Results include evidence of a positive (negative)
effect of EPL (PMR) on employment performance
as well as of substitution, rather than complementar-
ity, between the two forms of regulation.
In the next study we move to Spain. Nicolini
examines the evolution of labour productivity across
Spanish regions during the period from 1977 to 2002.
Nicolini applies the kernel technique, and estimates
the effects of the transition process on labour
productivity and its main sources. Results show that
Spanish regions experienced a major convergence
process in labour productivity mostly driven by
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human capital in the 1977–1993 period. Conversely,
the dynamics of investment in physical capital appear
to be neutral with respect to the transition dynamics
of labour productivity. Finally, from 1995 to 2002, no
dynamic processes seemed to have taken place.
Spanish regions exhibit a persistent relative position
with established convergence clubs: the human
capital effect is less important and the investment in
physical capital seems not to have a triggering effect
on labour productivity growth.
M. P. Taylor
Chongvilaivan and Hur investigate the linkages
among outsourcing activities, labour productivity
and wage inequality for skilled and unskilled
labour by employing a primal approach that
involves estimating a nested constant elasticity of
substitution production function. They use six-digit
North American Industry Classification System US
manufacturing industries from 2002 to 2005. First,
they find that general outsourcing and international
outsourcing have a skill-biased impact on labour
productivity. However, the skill-biased impact of
general outsourcing on labour productivity is larger
than that of international outsourcing. Second,
they find that the wage gap between skilled and
unskilled labour, which is defined as their marginal
productivity gap, can be better explained by general
outsourcing than by international outsourcing. They
conclude that these two results imply that the wage
inequality of US manufacturing industries during
2002–2005 was mainly due to the skill-biased labour
productivity effect of general outsourcing rather than
that of international outsourcing.
The final article tests whether there is evidence of
compression of morbidity using Health and
Retirement Study (HRS) data and analyses the effects
of this on the labour supply of older people. Laura
Romeu Gordo finds that younger cohorts suffer less
from functional problems than older cohorts at given
ages. Furthermore, instrumentalized disability has a
negative effect on labour force participation.
According to the cohort analysis and the multivariate
analysis, Gordo concludes that individuals will be
able to work longer because of the delay in the onset
of disability problems.