Category: Economics

Why does Switzerland have a low unemployment rate?

…is a question from Really Curious.  Here are some data, but right now it is at 3.1%.  I see a few factors:

1. The Swiss have few ZMPers, so their natural rate is fairly low to begin with.

2. The Swiss do not have the same kind of welfare state and labor legislation that you find say in France, which also lowers their natural rate, and which makes adjustment to negative shocks easier.  Unemployment benefits are not so generous and they pretty much force you to try to find work again.

3. In the past the Swiss have managed their immigration policy in accord with the domestic unemployment rate.  For instance if unemployment was rising they would send some Italian guest workers back home.  Immigration into Switzerland is now so substantial, however, and integrated into so many sectors, that this procedure has lost its potency.

4. Swiss jobs are relatively permanent, compared to the United States.  You will note that #4 interacts with #3; immigration is by no means always or even usually zero-sum with respect to the jobs in a country, but it can be for some well-defined pockets of manufacturing jobs in Switzerland.

5. The Swiss central bank does not hesitate to engage in sophisticated schemes of quantitative easing when an appreciating exchange rate is squeezing their export industries or they otherwise face unpleasant macroeconomic situations.

Here is a JSTOR piece on said question.  Here is a good paper on the overall topic (pdf).  I have never seen a good paper on why the Swiss unemployment rate rose somewhat in the early 1990s, falling again in 1996 or so I believe, but MR readers can help us out here.  I also do not have knowledge of exactly how the Swiss calculate their unemployment rate, though it is unlikely that the difference in rates is a mere statistical artifact.

Economist Michael Clemens, my colleague at the Center for Global Development, suggests that four out of five Haitians who have escaped destitution have done so by leaving the country.

That is from Charles Kenny, here is more.

As a small test, Zingales looked at the 150 most-downloaded papers that had been done on executive pay. He found that papers supporting high pay for top executives were 55 percent more likely to be published in prestigious economic journals. They were also much more likely to be cited in other papers.

Here is more.  This is considered evidence for the “capture” of economists.  Here is another article on the new code of ethics.  It will hurt researchers who work in finance.  From Olaf Storbeck, here is more, an interview with Gerald Epstein.  Here is coverage from David Warsh.  Here is coverage from The Chronicle.  How many people will basically just stop publishing in the top journals?

Robert J. Barro writes:

Italy could have a new lira at 1.0 to the euro. If all the euro-zone countries followed this course, the vanishing of the euro currency in 2014 would come to resemble the disappearance of the 11 separate European moneys in 2001.

In the meantime, doesn’t every euro — a few sticky grannies aside — leave the Italian banking system?  Presumably the new lira is not pegged at 1-to-1 forever.  Switching out of lira/euros in Italian banks, before the inevitable depreciation, would offer a short-run rate of return of at least thirty percent, maybe more.  Or if such a peg holds, and can be enforced, and is seen as credible, isn’t it just like the euro?  (Do they deflate their economy by thirty percent or more to validate the exchange rate?)  The difference being, of course, that with a separately marked currency it would be easier for Italy to leave the eurozone, which is one reason why a 1-to-1 peg would not be seen as eternally credible.  I don’t see how this transition works; am I missing some segment of Barro’s argument?

By the way, the switch to the euro was easier for a few reasons.  People believed the national currencies would become stronger (certainly for Italy), not weaker, and there were few doubts about the solvency of various banking systems.  That said, the switch to the euro did give rise to unsustainable capital flows into the weaker countries and that is not working out well either.

Squatting at a makeshift shrine with joss sticks burning beside her, Granny Leung starts bashing a manlike paper cut-out with a pair of sandals.

“I beat you little people, I’m sending you away!” chants the 76-year-old woman, one of the last practitioners in Hong Kong of the ancient Chinese ritual of “da siu yan”, or “beating the petty little people”.

Granny Leung performs her mysterious incantations in the bustling shopping district of Causeway Bay. And business is booming.

For as little as HK$50 ($6), Leung claims she can curse her customers’ enemies and reverse their bad luck by burning paper offerings and hitting paper figures with shoes.

Believers say the ritual can help to drive away evil spirits in general, or a specific nemesis such as a hated neighbour, a business competitor or a love rival.

…Each bout takes about 30 minutes, depending on how tough the villains are and how many times Leung needs to beat them until they are gone.

Another stage of the ritual involves feeding pig lard to paper tigers, which represent malignant beings, so they are full and will not bother people.

Here is more and for the pointer I thank Daniel Lippman.

“Poland is the European superpower of coffin production,” says Zbigniew Lindner…

One way to claw out market share is to rely on girlie calendars of the type usually associated with car parts companies – deflating the solemnity normally associated with the trade. Another is to compete fiercely on price, particularly in the cost-conscious German market…

Now his sights are set on grabbing a larger share of the domestic market, where Polish coffin makers have until recently had a hard slog. One reason is that Poland used to have the highest death benefits in the EU – about €1,350 – which prompted people to plump for more luxurious and expensive Italian coffins. Indeed, the Italian reputation was so strong that the Polish government imported coffins from there to bury the victims of the 2010 airline disaster that killed the president and many other senior officials.

“Most Polish politicians don’t realise what kinds of companies have arisen in Poland and how well they are doing,” says Mr Lindner.

That could change following the government’s decision last year to cut the subsidy by a third – a deficit-fighting idea that has made the bereaved more cost conscious about the price of coffins.

A look at the actuarial tables shows Mr Lindner that death rates will peak by 2040, with more than 1m Germans a year dying as baby boomers shuffle off this mortal coil.

“Somebody has to make those extra coffins and I want it to be us,” he says. “I have plans to turn this into a really big company.”

The article is here, and I thank Adam Sebba for the pointer.