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Abstract:
The multivariate technique of factor analysis is used to combine several indicators of economic integration and international transactions into a single measure or index of globalization. The index is an alternative to the simple measure of openness based on trade, and it produces a ranking of countries over time for 23 OECD countries. Ireland is ranked as the most globalized country during the 1990's, while the UK was at the top during the 1980's. Some of the most notable changes in the rankings are the decline of the US, Canada, and to a lesser extent Japan. Norway also receives a lower ranking. There are notable improvements in the ranking for Finland, Italy, Portugal, Spain and Sweden. For Portugal and Spain the changes seem to follow EU membership in the mid 1980's.

Globalization Index, Factor Analysis, OECD

Abstract:
This is a dramatic title but after all this is a dramatic story. The total collapse of a country's financial system and in the wake its currency is no small matter. This is the story of the Icelandic banking crisis: An unprecedented event that occurred in Iceland the last days of September and the first of October 2008. At the time of writing, it looks as this is going to be the most costly financial crisis for a sovereign industrialized country ever. The estimated direct cost that the public will be responsible for is today estimated to be around 85% of the country's GDP. This short paper gives an account of the events the lead to the collapse, discusses how it was handled, and what the future holds for the country.

Financial Crisis, Iceland

Abstract:
Despite substantial increases in longevity, the age of retirement in the industrialized countries has steadily fallen throughout most of the 20th century. In 13 OECD countries, the employment-population ratio of 55-64-year-old males fell by an average of more than 12 percentage points between 1979 and 1998. Similarly, labor force participation rates for those 65 and above have fallen significantly. The economic cost of the low labor market participation, in terms of lost output, benefit payments, and lower tax base is substantial. However, part of the cost of low labor market participation is cyclical or structural and, hence, separate from the costs of early retirement. This paper develops a simple framework to assess the specific costs of early retirement and applies it using data from the OECD countries.

Early retirement, labor supply/demand, foregone output

Abstract:
Despite substantial increases in longevity, the age of retirement in the industrialized countries has steadily fallen throughout most of the 20th century. In 13 OECD countries, the employment-population ratio of 55-64-year-old males fell by an average of more than 12 percentage points between 1979 and 1998. Similarly, labor force participation rates for those 65 and above have fallen significantly. The economic cost of the low labor market participation, in terms of lost output, benefit payments, and lower tax base is substantial. However, part of the cost of low labor market participation is cyclical or structural and hence separate from the costs of early retirement. This paper develops a simple framework to assess the specific costs of early retirement and applies it using data from the OECD countries.

Early retirement, labor supply/demand, foregone output

Abstract:
Most industrialized countries are struggling with reforming their retirement income systems. The systems have mainly been based on public pay-as-you-go plans but as the systems have become mature they have increased the fiscal burden of nations and become an inadequate device for financial insurance for the old. Consequently, almost all the European countries will need either to prefund their retirement liabilities or reform their retirement systems to reduce or restrict benefits. There is already a significant volume of supplementary pensions in Europe; about 25 per cent of the labor force is covered and more than 2 trillion ECU of funds are under management. The proposed EU occupational pensions directive provides a framework for the growth of some of these supplementary pensions in EU Member States. This paper identifies and discusses ten important economic issues in the design and implementation of supplementary pensions systems.

Pension reforms, supplementary pensions, Europe

Abstract:
Most industrialized countries are struggling with reforming their retirement income systems. The systems have mainly been based on public pay-as-you-go plans but as the systems have become mature they have increased the fiscal burden of nations and become an inadequate device for financial insurance for the old. Consequently, almost all the European countries will need either to prefund their retirement liabilities or reform their retirement systems to reduce or restrict benefits. There is already a significant volume of supplementary pensions in Europe; about 25 per cent of the labor force is covered and more than 2 trillion ECU of funds are under management. The proposed EU occupational pensions directive provides a framework for the growth of some of these supplementary pensions in EU Member States. This paper identifies and discusses ten important economic issues in the design and implementation of supplementary pensions systems.

Pension reforms, supplementary pensions, Europe

Abstract:
Despite substantial increases in longevity, the age of retirement in the industrialized countries has steadily fallen throughout most of the 20th century. In France, for instance, the employment-population ratio of 55-64 year-old males fell from 74% in 1970 to 38.5% in 2000. In most other OECD countries, labor force participation rates for those 65 and above have fallen significantly. The economic cost of low labor market participation, in terms of lost output, benefit payments, and lower tax base is substantial. However, part of the cost of low labor market participation is cyclical or structural and hence separate from the costs of early retirement. This paper develops a simple framework to assess the specific costs of early retirement and applies it using data from the OECD countries. More significantly, we find that the costs associated with early retirement are projected to rise considerably in the next ten years from 7.6% of output in 2003 to 9.1% of output in 2010. This projected rise in the costs of early retirement over the course of the rest of the decade is slightly larger than the percentage point rise in the costs of early retirement over the twenty year period from 1982 to 2003. The projected rise in costs over the course of the next decade is largely due to population ageing, whereas the rise in costs over the past twenty years was primarily due to lower labor force participation of older workers.

Early Retirement, Labor Supply/Demand, Foregone Output

Abstract:
Empirical studies of per capita income convergence across countries have proliferated in the past decade. The purpose of this paper is to build upon that literature by examining demographic, rather than economic, convergence. In this paper, we examine whether fertility rates have been converging across countries. Our results indicate that fertility rates are indeed converging both absolutely and conditionally. Furthermore, the dispersion of fertility rates also seems to be falling, indicating the presence of sigma convergence. A simple model is presented which suggests that this might be an artifact of transitional effects of later childbearing, rather than a slowdown of long-run fertility rates.

Abstract:
This paper introduces the age structure of the population into the analysis of medium term unemployment swings. We incorporate age-related features into the Shapiro-Stiglitz shirking model and find that the observed age pattern of unemployment can be explained in terms of the model. Moreover, we find that changes in the age composition of the population - in particular the ageing of the baby-boom generation - has caused OECD wide unemployment to be 50 basis points lower than what it currently is. The magnitude of his effect varies between countries though but it is never larger than 140 basis points (France and Italy). More importantly, the age effect on the labour participation rate is considerable - the rates would have fallen by almost 5 percent point more than observed in the OECD if the baby-boom generation had not come of age. There is also a statistical relationship between several macroeconomic shocks and demographic factors. In particular, the larger the share of working-age individuals, the higher is the ratio of investment to GDP, and the higher the share of the 25-34 year old cohort, the greater the rise in stock prices in recent years.

Unemployment, age-stucture, G7

Abstract:
The withdrawal of older workers from the labor force creates a variety of economic challenges, including an increase in unused production capacity. Costs due to early retirement measured in terms of forgone output averaged 6.3 percent of potential gross domestic product in the OECD in 1998. These costs, which vary greatly from country to country, are highest in Hungary (15.9 percent of potential output) and lowest in Iceland (0.5 percent). These differences are important for policy makers to the extent that their causes are rooted in economic policy and structure rather than in cultural and environmental factors. In light of these costs, this paper attempts to summarize and discuss alternative theories on why people retire early and how early retirement programs came about, in order to understand better the roots of the problem.

Participation rates, early retirement, foregone output

Abstract:
This paper looks at the importance of scale economies - defined in terms of the benefits from innovation - from both a theoretical and an empirical perspective. We argue that one can only gauge the degree of scale economies at the industry level by taking account of the degree of specialization - hence the reliance on international trade - as well as the size of an economy. We show that in Iceland specialization in fishing results in a sector which ranks 13th in the world, hence belying the small size of the population and the overall economy. Not surprisingly, the bulk of R&D in Iceland is focused on providing this industry with an ever-expanding range of inputs, resulting in a high rate of growth of GDP - as well as a high standard of living in the country as a whole - in comparison with other OECD economies.

Economies of scale, R&D, Icelandic economic history

Abstract:
Medium- to long-term changes in unemployment appear to be closely correlated with medium- to long-term changes in private investment. This becomes a puzzle once we abandon the Keynesian framework as an explanation for medium-term movements in unemployment and replace it with the natural-rate framework of Friedman and Phelps. It also opens up the possibility that factors affecting private saving and investment may impinge directly on the natural rate of unemployment. One such factor is the age structure of the population. We explore these possibilities and find a surprisingly robust medium- to long-run relationship between investment and unemployment both over time and across countries.

investment, unemployment, age-structure

Abstract:
This paper introduces state-owned enterprises into an endogenous-growth model with an expanding variety of inputs. It shows that, if state firms are less efficient than private firms in organizing labor and also in adopting new technology, the rate of innovation and, hence, also the rate of growth of output will be lower in the long run, ceteris paribus, because the rate of innovation is adversely affected. The model is tested on cross-section data for about 75 industrial and developing countries over the period 1978-92. We find that the size of state-owned sector is inversely related to total factor productivity and economic growth.

Abstract:
Aid flows are included into the standard cross-country catch-up relation. Robustness of the result is tested by changing time periods and by adding extra variables. The main results are: Absolute convergence and absolute aid effectiveness are both rejected. While conditional convergence is accepted, conditional aid effectiveness is found to be weak. The two relations are largely independent. However, aid has a clear activity effect in the short run. Finally, we try to divide the countries into an A-group where aid is effective and a B-group where it harms. Several criteria of division were explored, but none were very successful - the most satisfactory is the one that divides countries according to their level of development.

Convergence, growth, development aid effectiveness

Abstract:
The national-income account identity and the life-cycle theory of
consumption together imply that the current account should be a function of the age structure. A country with a high proportion of young and retired should have current account deficits. Using a panel of 84 countries, we find empirical support for this hypothesis.

Abstract:
This paper extends the literature on the Dutch disease by showing how natural resources can reduce secondary-sector employment and investment through channels involving labor-market externalities and exchange-rate volatility. We then look at data from Iceland - which is one of few OECD countries that may have a serious problem of this sort - and look for evidence supporting our hypotheses. We find a clear effect of primary sector output and its volatility on real wages. Moreover, high real wages are shown to impede investment and employment in the secondary sector.

Dutch disease, exchange-rate volatility

Abstract:
The trend in most of the industrialized counties is in the direction of decreasing labor force participation of older workers. The steady withdrawal of workers from the workforce at a younger age suggests that retirement income is gradually increasing and/or that older workers are increasingly being forced out of the labor market. Regardless of whether early retirement can be traced to the labor supply or the labor demand side of the labor market, it constitutes a withdrawal of resources from production, a lowered tax base, and an increased burden on pension and fiscal systems. This paper identifies and discusses alternative theories on why people retire early.

Early retirement, labor supply/demand, foregone output

Abstract:
A fundamental problem for an economy based on a common property resource is the absence of a market to trade the resource. This implies that private costs are below social costs. This paper investigates possible government interventions that correct for such distortions in a neoclassical growth model with a production externality in harvesting. The model predicts that the welfare of the representative household increases considerably when a Piguovian tax is implemented. The policy that replicates the command optimum is highly complex and changes over time. On the other hand, a large share of the maximum welfare increase is internalized by introducing a constant quantity tax, suggesting that the potential of such policies is high.

Resource Based Growth, Resource Rent, Problem of the Commons

Abstract:
Externalities caused by human capital accumulation have taken up considerable space in theoretical work on economic growth. However, less attention has been paid to this externality in traditional growth accounting exercises. This paper takes up the issue of growth accounting, suggesting a framework for quantifying human-capital externalities and illustrating it empirically using data from the five Nordic countries. Four sources of growth are identified, i.e., capital accumulation, labor force growth, and total factor productivity growth (TFP), where the traditional TFP measure is split into a part explained by human-capital formation and an unexplained part. By doing this I am able to attribute between 12 percent and 33 percent of growth in the Nordic countries to human capital investment.

Growth accounting, externalities, human capital, TFP

Abstract:
This paper diagnoses the symptoms of the Dutch disease in a two-sector stochastic endogenous growth model. A productive, low skill-intensive primary sector causes the currency to appreciate in real terms, thus hampering the development of a high skill-intensive secondary sector and thereby reducing growth.

Abstract:
Some channels through which increased inflation tends to reduce economic growth, and vice versa, are studied within a simple model incorporating money into an optimal growth framework with constant returns to capital. The model includes the potential impact of inflation on (a) saving through real interest rates (or uncertainty), (b) the income velocity of money, (c) the government budget deficit through the inflation tax and tax erosion, and (d) efficiency in production through the wedge between the returns to real and financial capital.The effect of inflation on growth is estimated using the random-effects panel model applied to two sets of unbalanced panel data side by side, from the Penn World Tables and from the World Bank, covering 170 countries from 1960 to 1993. The cross-country links between inflation and growth are economically and statistically significant and robust.

Abstract:
A fundamental problem for an economy based on a common property resource is the absence of a market to trade the resource. This implies that private costs are below social costs. This paper investigates possible government interventions that correct for such distortions in a neoclassical growth model with a production externality in harvesting. The model predicts that the welfare of the representative household increases considerably when a Piguovian tax is implemented. The policy that replicates the command optimum is highly complex and changes over time. On the other hand, a large share of the maximum welfare increase is internalized by introducing a constant quantity tax, suggesting that the potential of such policies is high.