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VAM-Velferd, arbeid og migrasjon

Labor market inclusion and labor productivity

Alternative title: Inkludering og produktivitet i arbeidsmarkedet

Awarded: NOK 12.0 mill.

Policies for economic growth are guided by two aims: i) to enhance productivity per unit of labor, and ii) to ensure maximum utilization of the accessible labor resources. There is a potential tradeoff between these two objectives. Productivity per unit of labor can be improved by laying off the least productive workers, whereas full employment – including persons with limited work capacity – can hardly be achieved without dragging down productivity per unit down. This project provides an analytical framework for analyzing labor productivity both from a private/firm perspective and from a social efficiency perspective in order to i. facilitate a characterization of firms in terms of their private and social contribution to value added, ii. provide tools for improving cost-benefit-analyses of already implemented and/or considered market reforms or reorganizations, and iii. assess the origins of any conflicts between private and social efficiency, and provide guidance to how they can be minimized. The project is a cooperation between the Frisch Centre and Statistics Norway, and consists of four work packages: The first will develop a method for estimating the opportunity cost of used and unused labor resources in the economy, with a focus on marginal labor. Administrative register data will be used to estimate individuals’ expected contribution to value creation unconditional on current labor market status. The second will examine how employment patterns and the opportunity cost of labor are affected by labor demand shocks and large economic fluctuations. The third work package will study the impacts of public management strategies with a focus on their effects on overall labor market participation. Finally, the fourth work package will examine the expected influence of automation and digitalization, and in particular seek to identify the types of workers that are under risk of being crowded out by new technologies.

Policies for economic growth are guided by two aims: i) to enhance productivity per unit of labor, and ii) to ensure maximum utilization of the accessible labor resources. There is a potential tradeoff between these two objectives. Productivity per unit of labor can be improved by laying off the least productive workers, whereas full employment – including persons with limited work capacity – can hardly be achieved without dragging down productivity per unit down. This project provides an analytical framework for analyzing labor productivity both from a private/firm perspective and from a social efficiency perspective in order to i. facilitate a characterization of firms in terms of their private and social contribution to value added, ii. provide tools for improving cost-benefit-analyses of already implemented and/or considered market reforms or reorganizations, and iii. assess the origins of any conflicts between private and social efficiency, and provide guidance to how they can be minimized. The project will develop a method for estimating the opportunity cost of used and unused labor resources in the economy, with a focus on marginal labor. We then plan to use this (and other) tools to examine the consequences of various technological, market, and political shocks to the labor market, and how institutional characteristics affect the consequences of such shocks with respect to labor market inclusion. We focus on technological progress embedded in digitalization and automation, imported shocks to the economy, and effects of outsourcing and privatization of public services.

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Funding scheme:

VAM-Velferd, arbeid og migrasjon