Sunday, January 21, 2007

Mark Thoma's blog: Economist's view


Is Mark Thoma's Economist's view on your daily reading list? If not, it should be. It points to some of the best economics writing. Let me steal a couple of links from Mark:

Hal Varian (2003): Who benefits from increased productivity? [via]: Gains from trade or technology initially tend to accrue to owners of capital. When a company fires a computer programmer and shifts the job to India, the company captures the difference in wages. [...]

... [T]he controversy over trade and technology is not about whether or not they are good things -- of course they are -- but about who will capture their benefits and who will bear their costs.

The second one is about helping displaced workers, and do read Mark's commentary that comes at the end:

The Economist: In the shadow of prosperity: f labour markets are efficient in the rich country the displaced workers should find new jobs, but their wages will probably fall. Although the country overall gains handsomely, these people are often worse off. Hence the case for redistributing some of trade's gains and compensating the low-skilled losers. ...

One study suggests that, during the 1980s-90s, 65% of manufacturing workers in America who lost their jobs to freer trade were employed two years later, but most took a pay cut. A quarter suffered pay losses of more than 30%. ...

How much to spend? Nonetheless, help for displaced workers has always been modest compared with the gains from trade. ... The United States spends around $1 billion a year on helping trade-displaced workers. But the economy overall, by one estimate, gains $1 trillion a year from freer trade. ...

In that Economist article, the an alluring Danish model makes an appearance:

As a result, it may be better to focus on policies which improve job prospects for all workers. In Europe, Denmark has led the way. The Danish system of “flexicurity” appears to offer the best of both worlds: dynamic labour markets and low unemployment coupled with generous support for those who lose their jobs. ...

Employers hire and dismiss people at will. Around a quarter of the workforce is unemployed at some point in any year. But the jobless enjoy generous welfare benefits while they look for work, around 80% of their previous wage on average. To ensure this does not deter people from finding new jobs, the Danes oblige the unemployed to be trained and to look diligently for work. ...

But Denmark's approach has evolved over decades and cannot easily be copied. Besides, it is extremely expensive. ... Denmark ... spends more than 5% of GDP on the unemployed, including almost 2% of GDP on its “active” training and job-search programmes. ...

1 Comments:

  1. gaddeswarup said...

    Abi,
    I came across Mark Thoma's name somewhere in your posts and am a regular reader now. Though Mark Thoma sometimes bristles at criticism of traditional ecomomics, he gives lots of links and there is at least a start of discussion on many topics. While many Indian blogs seem to be sold on free markets, Mark Thoma gives space to dissenting voices and references. I like the site.