VAM-Velferd, arbeid og migrasjon

In a recent study on the effects of immigration on wages in Norway we find that previous results in Our Project based on macro data is quite robust when using microdata. The main finding that immigration has had a negative effect on Norwegian wages. In Our study we find that immigration can be considered as an exogenous variable for the estimated parameters in the wage equations. In a recent study we focus on the role of labour market institutions for the employment rate. Employment protection legislation (EPL) is one of the institutional factors that has been most studied theoretically and empirically.The hypothesis that receives most support from our results is that a higher benefit replacement ratio (jointly with long benefit duration BD is associated with a lower employment rate. Robust methods question the result of a negative effect of taxes on employment. In contrast to the weak and somewhat narrow evidence of effects of institutions stand the statistically and numerically strong evidence of large and long-lasting effects of macroeconomic shocks. The implication for policy is that activity regulation policies is important also when the focus is on the employment rate. Fiscal and monetary policies can potentially reduce the cost of negative shock in the form of both increased unemployment and inactivity rates. The results of our investigation are also supportive of the view that the ongoing demographic transition in many countries represents a drag on the employment rate. To counteract that effect, new reforms, policies or institutional changes may have to be introduced if it is desirable to counteract secular decline in the employment rate.

Norwegian labour markets are increasingly integrated with labour markets elsewhere in Europe. The EU-enlargement in 2004 led to high growth in immigration and only a few other small European countries had higher immigration than Norway. In 2001 monetary policy switched from exchange rate to inflation targeting. Many believe that this might change the structure of wage bargaining. Have these two recent institutional changes affected wage formation in Norway, and if so, what are the consequences for fiscal sustainability? Our project proposal consists of three parts. The first topic focuses on changes in labour market institutions, the consequences for the wage formation and distribution. The topic relates to the system of wage bargaining in Norway. Historically, it has given profitability in sectors producing tradables a predominant role in establishing a norm for wage growth in the economy. This may be one of the reasons why Norway has retained a highly compressed wage structure compared to many other countries. We will investigate to what extent increased labour mobility or other shifts in regulations and policies have led to, or will lead to changes in the functioning of the labour market in Norway. The second topic focuses on another important determinant of future fiscal sustainability of welfare state; the labour supply of elderly workers. Increased labour supply of older workers may in addition to increased tax income and lower pension burden, also affect the skill composition of the overall workforce as we hypothesize that mostly older workers with tertiary education will supply labour. Only with a deep understanding of these issues it is possible to more precisely anticipate the fiscal burden of future pension commitments and activate the correct policy to encourage increased participation rates. The third part studies the consequences for fiscal sustainability of these issues using a large scale econometric model incorporating the results above.