Overhead labour and bounded substitutability
SummaryIn this paper we argue that due to the presence of quasi-fixed overhead labour, the aggregate short-run production function of the industry has the property of bounded substitutability. That is, when employing overhead labour, the industry will only be able to earn a positive quasi-rent for a bounded interval of aggregate labour intensity.
The distribution approach to the aggregation of production functions
We shall argue below that the distribution approach to the aggregation of production functions provides an useful framework to analyse the production structure of an economy and enhances our understanding of it. The distribution approach was initiated by Houthakker (1956), elaborated by Johansen (1972) and extented by Sato (1975). Apart from summarising the main features of the distribution approach developed by these authors in a consistent framework, we also add new insights. Some of these insights stem from our earlier research, e.g. the interpretation of the aggregate short-run production function and the estimation of the capacity distribution. However, the extension of the analysis to economy-wide aggregation has not been presented before. The same holds for the role capital plays according to the distribution approach in both the short-run and in the long-run production function.An important feature of the distribution approach is that the production structure of an economy is seen as the result of both management decisions and technological possibilities. Moreover, the approach enables us to identify production units and their production functions at any desired micro level. As a consequence, the influence of technological change on the production structure can be analysed extensively. The same holds for changes in output prices and factor prices, through their influence on management decisions.
Labour Law in a Globalising World
At the opening of the 21st century it is clear that increasing globalisation will remain one of the most important long term influences on the evolution of the international economy and international political structures. The controversial nature of globalisation is self-evident from the increasing intensity of antiglobalisation demonstrations at meetings of international bodies such as the World Trade Organisation. While the actual nature of globalisation, the direction in which it will take the world and the costs and benefits that will result are still contestable, it is clear that the main, and certainly the most effective, drivers are economic. Nations are primarily concerned to set in place structures that promote the free movement of capital including the freedom of multinational companies to locate and relocate around the world, and to promote free trade in goods and services. While non-economic values such as environmental protection and social and labour rights are not excluded from the debates setting these structures in place, they are largely marginal to it. One symbol of this marginalisation is that the ILO, unlike the World Bank, IMF and OECD, does not enjoy observer status at the WTO in spite of the rhetoric of concern for such rights from member states of the Organisation. As McCrudden and Davies explain,1 this exclusion is the result of a major and continuing division between developed and developing countries within the WTO that in the 1990s prevented agreement on any tangible measures in the Marrakesh agreements and that has continued to block subsequent progress. The stark divisions between these groups became even more apparent at the Singapore Ministerial meeting in 1996 when an invitation to the head of the ILO to speak was withdrawn. The only tangible result was a weak statement to the effect that members agreed that labour standards should be upheld but that this should be done through the ILO and not the WTO. The suspicion of developing countries that any link between trade and labour standards will lead to increased protectionism is almost certainly justified. Experience within the WTO to date provides little reason for developing countries to have any great faith in the undertakings of the developed world. Developing countries have seen the promises of movement toward freer trade that might benefit them fade into the distance while at the same time the undertakings they entered into are increasingly used to their disadvantage.2