The Belated Irish Success

Introduction"Historiography" of the TigerThe Cartoon Version of Supply and DemandLogarithms and the Labour Market!

Possible Answers - 1WalshDemography, FDI etc., fiscal reformRuane, BarryFDIHarmon et al.EducationO'RourkeMechanism of convergence

Possible Answers - 2McAleese - Openness (EFC and CJH)Lane-Labour share fallingMurphy - It never happened!The Fairy Godmother (Godparent) viewGiavazzi et. al. EFC - see Bradley & WhelanHonohan & Walsh- The last wordBarry FDI, FDI, FDI, FDI, ..

First order issues:Openness & EUHuman capitalDemographyFDISecond order issues:Fiscal policy,fiscal reform, deregulationMonetary policyPartnerhip and policy consensusStructural FundsCandidates

OpennessFreeing of Trade - FDIAffects demand for labourSee effects in labour marketMigrationIncreases elasticity of labour supplyWider cultural effectsLearning from others' experience

Labour SupplyNatural IncreaseFemale ParticipationMigrationHuman CapitalReplacement Rate

Birth Rate

Total Fertility Rate by Education

Population Structure 2002

Female Labour Force Participation

Female Labour Force Participation

Female Labour Force Participation

Immigration

Education of Emigrants

Net Emigration

Population who have resided abroad

Educational Attainment, 30-39

Educational Attainment

Sectoral Human Capital

Unemployment Rate

Labour Supply

Replacement Rate

Skilled LabourEffects of increase in supply

Returns to Education - All Employees

Demand for LabourFDIShifting world demand for skilled labourCompetitiveness

US Manufacturing FDI Flows

Relative Wage Rates

Skilled LabourEffects of increase in supply and demand

w1w1L1Unskilled LabourD1L2w2S2w0L0D0S1Wage rateEmployment

Relative Wage Rates

Earnings Dispersion, Ireland 1987-2000

Enabling FactorsSound Public FinancesSpeed of adjustmentThe EU Structural FundsSocial Partnership

Fiscal policy Indexation 1974-2000

Fiscal Stance

CSF 1989-93 and 1994-1999

Ireland in the Medium TermPotential to Outperform Neighbours to 2010Supply Constraints still RelevantShort-term ProblemsVulnerabilities

GNP Forecasts

Average Growth of GNP

Relative GNP

DemographicsDependency ratioConvergence in output per headConvergence in output per worker

Economic Dependency

Investment as a Share of GNP

Participation Rates:Migration:Output:

Labour Demand:Demand for skilled and unskilled labour:- Little substitution between skilled and unskilled

Wage rates:Skilled labour market, fixed UR:Skilled wage rate flexible, changes to clear the market

Unemployment Rate

Labour Supply:Population:

Shock the ModelObjective:To see how skilled and unskilled labour markets are affected by different factorsLower FDI, Lower GrowthLower Human CapitalEducational Attainment Frozen at 1980No migrationNo Migration

1 : NH/POPH = 9.1+0.525*LOG(WH/PC)-.0049*TYEAR2 : NL/POPL = -.44+0.525*LOG(WL/PC)-.21*LOG(RUP/WL)-.012*UR3 : M = -432+289*(1-UR(-1)/100)/(1-UR_UK(-1)/100)+ 1362*W*(1-tax_IRL)/PC/(W_UK*(1-tax_UK)/PC_UK)- 20*D78+22*D90

4 : LOG(GNP) = -3.5-.018*LOG(W/W_UK)+.0016*TYEAR+ (1-.85)*LOG(GDP_USA)+.85*LOG(GNP(-1))

7 : LOG(L/GNP) = 17.8-.51*LOG(W/PC)-.0098*TYEAR 8 : LOG(LH/LL) = -113.5+.057*TYEARElasticity of 0.525 - Doris, 1999Kearney, 1998Elasticity wrt US imposed as 1 (LR)

Lower FDI, Effect on GDP

Lower FDI, Effect on Wage Rates

Lower FDI, Effect on Immigration

Lower FDI, Effect on Unemployment

Educational Attainment

Unchanged Educational Attainment

Lower Human Capital - GDP

Lower Human Capital - Wage Rates

Lower Human Capital - Unemployment

Skilled Labour Supply %3.2 Skilled Wage Rates %-4.7 GNP %1.5 Total Employment %3.2 Unemployment rate %-0.7Effects of Net Immigration, 1996-99

Immigration Reduced by 10k

Immigration Reduced by 10k

Immigration Reduced by 10k

Immigration Reduced by 10k

Immigration Reduced by 10k

ConclusionsGrowth predciated on opennessHuman Capital contributed 1% a yearFDI ?Return from FDI and Human Capital enhance one another