2. Research question
•Could Danish flexicurity model be also
successful in other European
countries if they applied the whole
policies?
→ almost same question as the theme
of my graduation thesis
4. Research question
• Basic knowledge to understand this topic
About flexicurity
Government
Employers Labours
Dismiss easily
Find new job easily
5. Research question
• Basic knowledge to understand this topic
About Danish model
Flexicurity was remarkably successful in Denmark.
The Golden Triangle
the degree of employment protection legislation→ historically low
government expenditure on active labour market → high
government expenditure on unemployment benefit → high
Plus Danish uniqueness
historically, the spirit of welfare
large cost → from high taxation
To copy Danish model is
difficult
6. Answer
• Could Danish flexicurity model be also successful in other
European countries if they applied the whole policies?
• Other European countries such as the Netherlands can
permanently,
lower its unemployment rate by 1.47
increase its participation by 2.08
Increase employment growth rates by 1.05
If they copy Danish
model,
7. Data and Methodology
• Data → regional data (why?)
To deal with regions equally
Most research is limited to national data.
9. Data and Methodology
• Methodology
Modification → put the three factors of Danish model
(Golden Triangle: UB, ALMP, and EPL)
UB influences unemployment rate (higher → less eager to find job)
EPL influences employment growth (its effect is still vague.)
ALMP influences in two ways.
To the unemployed → unemployment rate (negative)
To non-labour force → participation rate (positive)
𝑢 = 𝛽11 𝑢 −1 + 𝛽12 𝑝 −1 + 𝛽13 𝑒 −1 + 𝛽14 𝑒 + 𝛽15 𝑈𝐵 + 𝛽16 𝐴𝐿𝑀𝑃
𝑝 = 𝛽21 𝑢 −1 + 𝛽22 𝑝 −1 + 𝛽23 𝑒 −1 + 𝛽24 𝑒 + 𝛽25 𝐴𝐿𝑀𝑃
𝑒 = 𝛽31 𝑢 −1 + 𝛽32 𝑝 −1 + 𝛽33 𝑒 −1 + 𝛽34 𝐸𝑃𝐿
Recursive
model
10. Data and Methodology
• Methodology
It should be modified because…..
Employment growth → Unemployment rate, Participation rate
(recursive model)
→The shock to labour supply side is not considered
They should be determined at the same time.(simultaneous model)
𝑢 = 𝛽11 𝑢 −1 + 𝛽12 𝑝 −1 + 𝛽13 𝑒 −1 + 𝛽14 𝑝 + 𝛽15 𝑒 + 𝛽16 𝑈𝐵 + 𝛽17 𝐴𝐿𝑀𝑃
𝑝 = 𝛽21 𝑢 −1 + 𝛽22 𝑝 −1 + 𝛽23 𝑒 −1 + 𝛽24 𝑢 + 𝛽25 𝑒 + 𝛽26 𝐴𝐿𝑀𝑃
𝑒 = 𝛽31 𝑢 −1 + 𝛽32 𝑝 −1 + 𝛽33 𝑒 −1 + 𝛽34 𝑢 + 𝛽35 𝑝 + 𝛽36 𝐸𝑃𝐿
11. Result
• Result (recursive model)
Problem → ALMP is negative in participation rate
Multicollinearity (u[-1] and u, p[-1] and p)
e[-1] and e → small
12. Result
• Result (simultaneous model)
• Drop off some factors to avoid multicollinearity.
u[-1] from participation pate
p[-1] from unemployment rate
u[-1] and p[-1] from employment growth
𝑢 = 𝛽11 𝑢 −1 + 𝛽12 𝑝 −1 + 𝛽13 𝑒 −1 + 𝛽14 𝑝 + 𝛽15 𝑒 + 𝛽16 𝑈𝐵 + 𝛽17 𝐴𝐿𝑀𝑃
𝑝 = 𝛽21 𝑢 −1 + 𝛽22 𝑝 −1 + 𝛽23 𝑒 −1 + 𝛽24 𝑢 + 𝛽25 𝑒 + 𝛽26 𝐴𝐿𝑀𝑃
𝑒 = 𝛽31 𝑢 −1 + 𝛽32 𝑝 −1 + 𝛽33 𝑒 −1 + 𝛽34 𝑢 + 𝛽35 𝑝 + 𝛽36 𝐸𝑃𝐿
13. Result
• Result (simultaneous model)
• Drop off some factors to avoid multicollinearity.
• ALMP is no longer significantly negative.
14. Data and Methodology 2
• Use the Dutch 2001 regional averages for the
u[-1], p[-1], e[-1], EPL, UB, and ALMP
1. With the estimated coefficients from recursive model
2. With the estimated coefficients from simultaneous
model
• While u[-1], p[-1], and e[-1] are not changed, EPL, UB,
and ALMP change to the level of Denmark model.
• Put them into the equation with the coefficients to get the
altered number.
17. Result 2
• The author concludes that
The result from simultaneous is more realistic than that from
recursive model.
• The reason is …… participation rate immediately
increases if ALMP increases in the result from
simultaneous model.
18. Result 2
• This difference is from …
the difference of the effect of ALMP on participation rate
• The effect of ALMP on participation rate should not be
negative.
• The author used the result from simultaneous model for
the conclusion.
19. Result 2
• Other European countries such as the
Netherlands can permanently,
lower its unemployment rate by 1.47
increase its participation by 2.08
Increase employment growth rates by 1.05
It would be successful to some extent.
20. Implication
• The possibility to use the data of Japan instead.
I already have data, but it is not regional.
I have to take it into consideration to deal with social or cultural
difference.
• This thesis is limited to using the Dutch data.
• The obstacle against applying Danish model: cost, the
history of welfare.
• Modify the equation more to adopt it to other countries