Background information

Some articles include "background information" boxes that provide further details on concepts, economic, scholarly, or technical terms, or on the historical background to an argument. All background information terms and concepts are brought together here in an alphabetized list—with direct links back to the corresponding article.

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  • Marriage laws in France contrasted with those in the US

    In the US, the legal implications of marriage and of its dissolution in case of divorce or death are the same for a common law marriage and a regular marriage. For instance, in a community property law state, marital assets will be considered community property whether the marriage is a regular marriage or a common law marriage.

    France offers its citizens different ways of entering into a committed cohabiting relationship, with different implications for the dissolution of the union and the distribution of assets. Since 1999, the French have been able to choose between marriage and civil union (“pacte civil de solidarité”). Civil union is equivalent to marriage with respect to most economic and financial implications for the couple. However, children born in a civil union do not have all the same rights as children born to a married couple. Furthermore, it is also easier to end a civil union unilaterally than it is in the case of divorce for a marriage.

    In addition, France and some other European countries offer their citizens a choice at the time of marriage on the legal regime governing assets between community property and separation of assets. The default regime for marriage is community property, which is limited to assets acquired during the marriage. Since 2007, the default for civil union is separation of assets.

    French surveys collect data on respondents’ choice of legal regime as well as some other marriage outcomes of interest. In contrast, no US survey asks residents of common law marriage states whether they are married under common law or regular marriage. Thus, findings based on analyses of French data are not only valuable in and of themselves but also because they may be able to reinforce interpretations of the effects of common law marriage in the US.

    Source: Rault, W., and E. Bailly. “Are heterosexual couples in civil partnerships different from married couples?” Population & Societies 497 (2013): 1–4.

  • Measures of fat and obesity

    The body mass index (BMI) provides a common measure to clinically classify weight status for adults. Alone however, it is not an accurate measure of obesity, particularly for males, because it does not distinguish muscle from fat. In addition, in most data sets the BMI is calculated from self-reported height and weight, which may be systematically misreported. The BMI is calculated thus:

    BMI = weight (kg)/height² (meters).

    An adult with a BMI between 25 and 29.9 is considered overweight. An adult with a BMI of 30 or higher is considered obese.

    Waist circumference is a measure of central obesity, or the deposition of excess adiposity around the center of the body. It has at least two advantages over the BMI. It is a stronger predictor of morbidity and mortality, and it is a measure of fatness that is visible to others and that might be interpreted by employers, customers, or co-workers as an unattractive physical attribute that could lead to discrimination against people who are obese.

    Fat-free mass and body fat are two other measures for assessing obesity. Fat-free mass includes everything in the body—skin, bones, organs, muscles—except the fat. Body fat excludes everything in the body except the fat.

  • Measuring childhood obesity

    Scientists maintain that obesity should be defined as excess body fat, not weight, because it is excess fat that is associated with disease (Sweeting, 2007). More than 20–30% body fat is harmful, with cut-offs depending on sex, age, ethnicity, and the distribution of fat. Intra-abdominal or visceral fat is generally more harmful than fat in other locations.

    Of the methods used to measure body fat, density-based methods, including air displacement plethysmography, are the gold standard. Other accurate methods include computerized tomography, magnetic resonance imaging, and bioelectrical impedance. All these methods are expensive and require trained field staff. Anthropometric methods such as skinfold measurements, waist circumference, or waist–hip ratio are less accurate but also less expensive and easier to measure in the field.

    Often, what is actually measured is not obesity but whether a child is overweight (excess weight in relation to height), which can be measured by the body mass index (BMI). BMI—calculated as weight (kg)/height (m)—is the most used indicator of being overweight because it is inexpensive and easy to measure.

    However, BMI is problematic, particularly in children, in that it varies strongly according to sex and age. As a result, the significance of any particular BMI is more difficult to determine in children and adolescents. BMI also measures fat-free weight, meaning that individuals with the same BMI can have different amounts of body fat. Moreover, self-reports of height and weight are systematically biased—especially when reported by parents—leading to over- and under-estimation of BMI, especially at the end points (being thin or overweight; Himes, 2009).

    In adults, the BMI cut-off points for when being overweight becomes detrimental are associated with a morbidity risk that is well established. This information is lacking for children. For that reason, growth charts are used when defining a benchmark BMI distribution according to sex and age. This benchmark population was established in the “pre-obesity epidemic” era and remains in use today as a reference population. A growth chart is a visual presentation of a growth reference. Individuals can be plotted on the chart and their measurements expressed as centiles indicating a child’s BMI by age and sex. The growth references determine whether a child is obese, overweight, or normal weight. For example, a child who crosses the 95th centile line for their age and sex would be categorized as obese. Well-known examples of growth charts are the Center for Disease Control growth charts for the US and the International Obesity Task Force growth charts based on six countries and used in international contexts.

    Source: Himes, J. H. “Challenges of accurately measuring and using BMI and other indicators of obesity in children.” Pediatrics 124:S1 (2009): S3–S22; Sweeting, H. N. “Measurement and definitions of obesity in childhood and adolescence: A field guide for the uninitiated.” Nutrition Journal 6:1 (2007): 32.

  • Measuring corruption

    Corruption is a complex phenomenon, and definitions differ widely throughout the literature. These factors make it difficult to measure corruption on a single scale. Different indices of corruption include the following.

    • The Corruption Perceptions Index provided by Transparency International measures the degree to which the public perceives corruption to exist among politicians and officials. Corruption estimates range from 0 (totally corrupt) to 10 (not corrupt).

    • The Worldwide Governance Indicators provided by the World Bank consist of an aggregated indicator summarizing information on six dimensions of governance: voice and accountability, political stability/absence of violence, government effectiveness, regulatory quality, rule of law, and control of corruption. This index ranges from –2.5 (totally corrupt) to 2.5 (not corrupt).

    • Finally, the International Country Risk Guide provided by the Political Risk Services (PRS) Group, originally developed to project long-term risks for international business planning, includes expert-based ratings on corruption within a country’s political system. The index measures the extent to which senior government officials are likely to demand payments, and the extent to which illegal payments are generally expected throughout lower levels of government in return for import and export licenses, exchange controls, tax assessment, policy protection, or loans. Each country is given a score from 0 to 6, where 6 indicates no corruption and 0 indicates the highest level of corruption.

    Source: Ariu, A., and P. Squicciarini. “The balance of brains: Corruption and high skilled migration.” EMBO Reports 14:6 (2013): 502–504.

  • Measuring emigration

    Counting the number of emigrants is challenging, because sending countries typically do not keep detailed records on emigrants. Two data sources have been used to count the number of emigrants:

    Data from the receiving countries. Most studies rely on emigration data compiled from censuses in receiving countries since every emigrant is also an immigrant. To the extent that immigration is measured correctly, emigrants can be measured by demographic group. This procedure works well for large migration waves with few destinations. For example, more than 90% of Mexican emigrants go to the US, enabling Mexican emigrants to be computed from US census data. If emigrants go to many destination countries, measuring their numbers through immigration records becomes very noisy.

    Survey data with information on emigration. In some countries, notably Mexico and Poland, surveys collect information on emigrants from close relatives or neighbors of emigrants. These surveys usually offer very detailed individual information, but the sample sizes are limited, and they do not include entire families that emigrate.

  • Measuring entrepreneurship

    Entrepreneurship rates: The number of entrepreneurs as a percentage of total employment; the number of entrepreneurs is often proxied by the number of self-employed persons (see below).

    Entrepreneurship entry rates: The number of new firms or ventures that enter a particular industry or market.

    Total early-stage entrepreneurial activity (TEA) rate: The Global Entrepreneurship Monitor (GEM) surveys adults between 18 and 64 and defines the total early-stage entrepreneurial activity rate as the sum of the nascent entrepreneurship rate and the new business ownership rate. Nascent entrepreneurs are individuals involved in setting up a business; new business owners are owner-managers of firms that are younger than 3.5 years.

    Self-employment refers to a situation where an individual works for him- or herself instead of working for an employer. In labor market research, self-employment is often used as a proxy for entrepreneurship. This approximation may be considered justified or not depending on the definition and type of entrepreneurship considered (see below). Critics argue that entrepreneurship is not only about working for oneself, but is also about pursuing a profitable business opportunity and taking high personal and financial risks.

    Types of entrepreneurship: several established entrepreneurship typologies exist, including:

    • Opportunity vs necessity entrepreneurs (entrepreneurs who start their business because they see a profitable business opportunity vs entrepreneurs who start their business out of necessity)

    • Innovative vs imitative entrepreneurs (entrepreneurs with goods or services that are new to customers vs entrepreneurs with goods or services that are identical or very similar to what is already available in the market)

    • Low- vs high-growth entrepreneurs (entrepreneurs with low growth potential/ambitions vs entrepreneurs with high growth potential/ambitions)

    • Formal- vs informal entrepreneurship (entrepreneurs who have registered a business vs. entrepreneurs who have not registered a business)

    • Low-technology vs high-technology entrepreneurship (entrepreneurship in low-technology vs entrepreneurs in high-technology sectors)

    • Social- vs for-profit entrepreneurship (entrepreneurs who are primarily motivated by solving social problems vs entrepreneurs who are primarily motivated by earning profit).

  • Measuring the openness of an economy

    One would think that identifying an open economy would be easy, but when it comes to trying to explain the effects of openness this is not so. The most common measure is to consider the ratio of exports plus imports to GDP. This is clear, but has the huge problem that it is clearly likely to respond to, as well as influence, the level of employment—if employment increased for some extraneous reason, output would increase and so, too, in all probability would exports. Thus, in carrying out research on the effects of openness researchers have to resort to other measures that are less likely to show such sensitivity.

    One such is the average tariff, which is again nice and clear. However, if you use a simple unweighted average, you are applying the same weight to the tariff on shoelaces as to that on passenger cars. If, however, you decide to weight the tariffs by the value of imports they apply to you get a bias, because, holding everything else the same, the higher the tariff, the lower the imports. (Imagine an infinite tariff; it would allow no imports and so get a zero weight in this calculation.) Besides, lots more affects openness than tariffs: non-tariff barriers, the volatility of the exchange rate, the quality of the ports and customs, etc.

    A compromise measure used quite frequently is a qualitative measure which counts an economy as closed if any of the following applies: it has average tariff rates higher than 40%; its non-tariff barriers cover on average more than 40% of imports; it has a socialist economic system; it has a state monopoly of major exports, or its black-market premium exceeds 20%. This is rich, but clearly entails a number of arbitrary thresholds and makes no allowance for what, say, socialist governments or export monopolists actually do.

    While in many cases all these various indicators of openness will tell the same story, the difficulties of measuring openness should caution us against relying on the precise magnitudes that researchers claim for the effects of openness.

  • Mechanisms by which unions can affect wages

    Direct

    • Bargaining on behalf of covered employees for increased wages.

    • Bargaining on behalf of covered employees to maintain wages.

    Indirect

    • Influence on other outcomes for covered employees, for example “voice” → higher tenure → firm-specific human capital investments (Freeman and Medoff, 1984).

    • Threat of unionization raises wages in the non-union sector (Rosen, 1969).

    • Job losses in union sector, resulting in excess labor supply to non-union sector.

    Freeman, R. B., and J. L. Medoff. What Do Unions Do? New York: Basic Books, 1984.

    Rosen, S. “Trade union power, threat effects and the extent of organization.” Review of Economic Studies 36 (1969): 185–196.

  • Medical marijuana laws

    In the US, medical marijuana laws (MMLs) remove state-level penalties for using, possessing, and cultivating medical marijuana. Patients are required to obtain approval or certification from a doctor, and doctors who recommend marijuana to their patients are immune from prosecution. MMLs allow patients to designate caregivers, who can buy or grow marijuana on their behalf.

    MMLs give suppliers to the medicinal market some protection against prosecution, and allow patients to buy medical marijuana without fear of being arrested or fined. Because it is prohibitively expensive for the government to ensure that all marijuana ostensibly grown for the medicinal market ends up in the hands of registered patients, it is likely that some is diverted to the illegal market. Moreover, the majority of MMLs allow patients to register as medical marijuana users based on medical conditions that cannot be objectively confirmed (e.g. chronic pain and nausea).

    Historically, marijuana was officially recognized in the US as a medicinal drug from 1850 until 1942. By 1936 its recreational use had been banned in all US states, and the following year the Marihuana Tax Act effectively discontinued its use in medicine. In 1970, marijuana was listed under Schedule I of the Controlled Substances Act, a category reserved for drugs which have “high potential for abuse” and “no currently accepted medical use.”

    In 1996, California passed legislation decriminalising the use, possession, and cultivation of medical marijuana, and provided immunity from prosecution for physicians who recommended the use of medical marijuana to patients. Since then, 22 other states and the District of Columbia have legalized the use of medical marijuana; however, it remains classified as a Schedule I drug by the US federal government.

    Source: Anderson, D. M., B. Hansen, and D. I. Rees. “Medical marijuana laws, traffic fatalities, and alcohol consumption.” Journal of Law and Economics 56:2 (2013): 333–369.

  • Micro-level data versus macro- and meso-level data

    Micro-level data are data collected on individual companies or at an even more dis-aggregated level, such as the individual, office, store, or factory. Countries with recently available microdata include Chile, China, Colombia, Denmark, France, Ghana, India, Indonesia, Spain, Turkey, the UK, and the US, among others. Microdata are often collected through surveys or interviews, or come from governmental administrative systems and registers. They can be distinguished from macro-level data and—even though often not clearly—from meso-level data.

    Macro-level data are generally described as either aggregated or system-level data. Aggregated data are composed by combining information about characteristics of lower-level units, for instance properties of individuals, they typically include unemployment statistics, demographics, and gross domestic product. Hence, aggregated data are not measures of inherent higher-level properties but summaries of the properties of lower-level units. In contrast, system-level macro data measure characteristics of higher-level units directly, for example the properties of states and political systems. These data cannot be dis-aggregated to lower-level units and usually form political indicators such as institutional variables or regime indicators.

    Meso-level data describe data on collective and cooperative actors such as commercial companies, organizations, and political parties. Sometimes the distinction between meso-, micro-, and macro-level data is not completely clear, so the distinction is often only between micro- and macro-level data.

    Source: The MacroDataGuide, NSD. Online at: http://www.nsd.uib.no/macrodataguide/macro_data.html

  • Middle school and high school in the US

    In the US, middle school typically begins in grade 6, when students are around 11 years old, and lasts for three years. Most US students move to a high school when they reach grade 9, typically at age 14. Students graduate high school when they successfully complete grade 12.

  • Millennium Development Goals (MDGs)

    In 2000, a meeting took place at the United Nations (UN) between leaders of virtually all countries. They agreed on ambitious development goals to eradicate poverty and also to improve human well-being by reducing illiteracy, hunger, discrimination, unsafe drinking water, and degraded environments.

    The eight Millennium Development Goals (MDGs) are:

    1 Eradicate extreme poverty and hunger.

    2 Achieve universal primary education.

    3 Promote gender equality and empower women.

    4 Reduce child mortality.

    5 Improve maternal health.

    6 Combat HIV/AIDS, malaria, and other diseases.

    7 Ensure environmental sustainability.

    8 Develop a global partnership for development.

    Each goal is set with measurable targets, the majority of which are benchmarked for the period 1990–2015 and promise measurable improvements by the end of 2015. Progress is measured through a set of 21 time-bound targets and 60 indicators.

    Member States of the UN are now defining Sustainable Development Goals (SDGs), which will form the foundation of the post-2015 development agenda, continuing the work on the MDGs.

    Source: United Nations. The Millennium Development Goals Report 2014.

  • Minimum wages and job security rules

    1. Minimum wages

    The underlying concept of the minimum wage is to set a universal floor. While a single national rate is most common, some countries have different regional, industrial, occupational, or age-related minimums. Some types of workers can be completely excluded—agricultural and domestic labor, the self-employed, and family enterprise workers are common examples.

    2. Job security rules

    Job security rules, also known as employment protection legislation, refer to regulations governing the initiation and termination of employment contracts. These rules determine the degree of job security by restricting the ability of employers to hire workers on an explicitly non-permanent basis or by making dismissal costly. The stringency of these rules can range from protective (restrictions on non-permanent contracts and limited employer dismissal rights) to flexible (unrestricted non-permanent contracting and minimal limits on dismissal).

    Source: Betcherman, G. “Labor market regulations: A review of the literature.” World Bank Research Observer (April 2014).

  • Monopsonistic wage discrimination

    The origins of monopsonistic wage discrimination, or “Robinsonian discrimination,” lay in Joan V. Robinson’s (1969, first edition in 1933) influential Economics of Imperfect Competition. In this book, Robinson not only presented the first coherent analytical framework for imperfectly competitive labor markets, but she was also the first to propose the term “monopsony” for the demand-side counterpart of a monopoly, that is, a market with a single buyer. What is more, in applying the insights of her framework, Robinson was the first to explain gender wage discrimination from employers’ striving to maximize profits in imperfectly competitive labor markets.

    As Robinson demonstrates, if women are less driven by wages when deciding on whether to supply labor to a single employer than men, employers possess more wage-setting power over their female workers and can increase their profits by paying lower wages to them, all else being equal. Monopsonistic wage discrimination thus provides an economic explanation of gender wage differentials that persist, even after accounting for differences in worker productivity (stemming from worker or workplace characteristics). Since monopsonistic wage discrimination against women (or other groups of workers) is profitable for employers, it is likely to be widespread and to persist in the long term. In contrast to the conventional “taste-based” approach to employer discrimination (Becker, 1971, first edition in 1957), Robinsonian discrimination is not rooted in employer prejudices against women, and is thus likely to prevail, even if prejudices against them were to fade.

    Source: Becker, G. S. The Economics of Discrimination. 2nd edn. Chicago, IL: University of Chicago Press, 1971; Hirsch, B. Monopsonistic Labour Markets and the Gender Pay Gap: Theory and Empirical Evidence. Heidelberg: Springer, 2010; Robinson, J. V. The Economics of Imperfect Competition. 2nd edn. London: Macmillan, 1969.

  • Moral hazard in financial markets

    Moral hazard arises when one party to a transaction (e.g. the borrower) takes more risks because the other party (e.g. the lender) bears the cost of those risks.

  • Motives for saving

    Consumption smoothing refers to behaviors that reduce fluctuations in consumption relative to fluctuations in income. Economists believe that people make trade-offs based on the marginal utility of consumption, which is high when the level of consumption is low. Moving consumption from a high-income period to a low-income period increases the marginal utility of that consumption. For example, farmers receive most of their income immediately after harvest, and very little at other times of the year. They can use savings as one strategy to ensure that they are able to consume about the same amount throughout the year. Liquid savings accounts or commitment accounts can be used for consumption smoothing when changes in income over time are predictable.

    Precautionary savings are rainy-day funds to help people cope with unanticipated expenses. Since the timing and amount needed for these expenses is unknown, commitment savings accounts are not effective tools for precautionary savings.

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  • Narcotic effect of arbitration

    According to Wirtz (1963), the narcotic effect of arbitration is when “bargainers turn to arbitration as an easy and habit-forming release from the…obligation of hard, responsible bargaining.” In other words, the use of arbitration procedures has an addictive effect and increases the tendency of negotiators to rely on using such procedures in the future.

    However, there may exist a negative narcotic effect: There comes a point when bargainers become unhappy with using arbitration procedures—due to the awards being disappointing or due to the initial novelty of the arbitration procedure wearing off—and so dispute rates fall (Bolton and Katok, 1998).

    Source: Bolton, G. E., and E. Katok. “Reinterpreting arbitration’s narcotic effect: An experimental study of learning in repeated bargaining.” Games and Economic Behavior 25 (1998): 1–33.

    Wirtz, W. “Address before National Academy of Arbitrators.” Daily Labor Report 23 (1963): F1-F4.

  • Nascent entrepreneurship

    A nascent entrepreneur is someone who, during the preceding 12 months, has done something tangible to start a new firm, expects to own at least part of this new firm, and has not paid wages for more than three months (Reynolds et al., 2005). Nascent entrepreneurship comes in four flavors:

    Opportunity—Sees a profitable business opportunity and wants to become independent or have more income.

    Necessity—Is out of work or has just lost a job and has little choice but to start a business venture.

    Innovative— Produces goods or services that are new to customers and does not expect strong competition.

    Imitative—Produces goods or services that are identical or very similar to what is already available in the market and expects strong competition.

    Source: Reynolds, P., N. Bosma, E. Autio, S. Hunt, N. de Bono, I. Servais, P. Lopez-Garcia, and N. Chin. ‘‘Global entrepreneurship monitor: Data collection design and implementation 1998–2003.’’ Small Business Economics 24:3 (2005): 205–231.

  • National Longitudinal Survey of Youth–1979

    The National Longitudinal Survey of Youth–1979 is a longitudinal project that follows the lives of a sample of American youth born between 1957 and 1964. The cohort originally included 12,686 respondents aged 14–22 when first interviewed in 1979; after two subsamples were dropped, 9,964 respondents remain in the eligible samples. Data are now available from Round 1 (1979 survey year) to Round 25 (2012 survey year).

    Source: http://www.bls.gov/nls/nlsy79.htm

  • Natural experimental designs

    Natural experimental designs or difference-in-differences methods are increasingly used to evaluate the consequences of policy changes when a randomized controlled trial cannot be set up. These designs—also used in the natural sciences—depend on establishing a control group, such as workers within a geographic boundary that is not affected by the policy change, and a treatment group of similar workers within another geographical boundary that is affected by the policy change. The causal effect of the treatment is determined by comparing before and after outcomes (for example, in employment) in the treatment group with those in the control group. In the analyses of effects of the US minimum wage, treatment and control groups are defined along state borders between states that introduced minimum wages at different times. The identification then stems from comparing employment and poverty before and after introduction of the minimum wage, using states not affected by the introduction as the control group.

  • Net worth

    Net worth is a measure of an individual or family’s net economic position. It is defined as the difference between total gross assets and liabilities. Assets include both financial assets, such as transaction accounts, stocks, bonds, and retirement accounts, and nonfinancial assets, such as real estate, vehicles, and business equity. Liabilities can include credit card debt, mortgages, car loans, and student loans. Measuring changes in net worth over time provides insight into changes in overall financial well-being.

    Source: Bricker, J., L. J. Dettling, A. Henriques, J. W. Hsu, K. B. Moore, J. Sabelhaus, J. Thompson, and R. A. Windle. “Changes in U.S. family finances from 2010 to 2013: Evidence from the Survey of Consumer Finances.” Federal Reserve Bulletin 100: 4 (2014): 1–41.

  • New public management

    New public management emphasizes that concepts used in the private sector could also be successfully used in the public sector. Citizens are viewed as customers, and public administrators take the role of managers, who have some degree of discretion and flexibility in achieving output-orientated targets.

  • No-fault and unilateral divorce laws

    No-fault divorce laws allow a court to grant a divorce without requiring the petitioner to provide evidence that the spouse has committed a breach of the marital contract (some form of wrongdoing). No-fault divorce can require mutual consent (both partners must agree) or allow for unilateral divorce (see below).

    Unilateral divorce laws allow one spouse to obtain a divorce without the consent of the other spouse.

  • Normal goods and inferior goods

    A normal good is one for which consumer demand increases when income increases. Examples include buying a new car instead of a used one, ordering a steak instead of a hamburger at a restaurant, or deciding to increase family size. The reverse is true when incomes fall.

    An inferior good is one for which consumer demand decreases when income increases. Examples include buying fewer potatoes and more quinoa or having fewer children so the parent (usually the mother) can maintain the higher paying job.

    Source: InvestingAnswers. Online at: http://www.investinganswers.com/financial-dictionary/economics/inferior-good-1882 [Accessed October 5, 2015].

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  • OECD indicators of employment protection legislation

    Employment protection legislation for workers on regular contracts focuses on the conditions for terminating employment, including required notification and involvement of third parties (such as courts, labor inspectorates, and workers’ councils); notice periods and severance pay; the conditions under which it is permissible to lay off an employee; and the repercussions if a dismissal is found to be unfair. Most countries have additional provisions for collective dismissals. Employment protection also provides a regulatory framework for fixed-term and temporary work agency contracts, the types of work for which these contracts are allowed, and requirements for agency workers to receive the same pay and conditions as equivalent workers.

    Employment protection can be specified in legislation, collective agreements, or individual employment contracts. In practice, it also depends on the interpretation of rules by courts or tribunals and the effectiveness of enforcement. With a few exceptions, information on enforcement is generally scattered, so analysis of the cross-country quantitative measures of the stringency of employment protection is limited to studying the mandatory legislative restrictions governing recruitment and dismissal.

    OECD. Employment Outlook. Paris: OECD Publishing, 2013.

  • Offshoring

    The term offshoring refers to the reallocation of jobs to a different country; this can be either within the same company, or to a different company. This is in contrast to outsourcing, which occurs when a job is moved to a different company, regardless of where it is located.

    Companies typically offshore jobs from industrialized countries to less-developed countries, with the aim of reducing their costs.

    Offshoring can also be said to occur when a company creates new jobs to serve its domestic market, but chooses to locate them overseas. This is despite the fact that the jobs never actually existed in the country where the company is based.

    Offshoring does not correspond precisely to any category of standard international trade data; some offshoring is classified as foreign direct investment (FDI), rather than trade.

    In the US, the National Academy of Public Administration defines offshoring as “firms shifting service and manufacturing activities abroad to unaffiliated firms or their own affiliates.”

    Source: Blinder, A. S. Offshoring: Big Deal, or Business as Usual? CEP Working Paper No. 149, June 2007.

  • Older workers

    Social science research has no standard definition of what constitutes an older worker. Empirical economics refers mostly to adults close to retirement and, therefore, between their early 50s and, at most, their late 60s.

  • Outsourcing and privatization

    Public-sector outsourcing is distinct from privatization. Outsourcing, broadly defined, entails the private-sector provision of public goods or services under procurement contracts or vouchers that offer consumers of public services a choice of private-sector providers. Privatization entails the sale or other transfer of ownership of a public business or entity to a private entity.

  • Overeducation and underemployment

    Overeducation is defined as working at a job that requires less education than the worker has accumulated. Required education is determined in various ways, through surveys of worker perceptions of the years of education needed for their job, analyses of competencies required for specific jobs, and mean or median number of actual years of education of workers in a specific job.

    Underemployment is defined by the International Labour Organization as the underutilization of the productive capacity of the employed population. Underemployed workers tend to work fewer hours than they would like, earn less income, or use their occupational skills incompletely. Thus, overeducation is one possible source of underemployment.