1 longitudinal analysis and the scottish economy david bell scotecon university of stirling
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Longitudinal Analysis and the Scottish Economy
David Bell
Scotecon
University of Stirling
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Key Issues in Scottish Economic Performance
• Economic Growth– Entrepreneurship– Population Decline– Skills– Economic Inactivity
• Widening role for economic analysis in policies under control of Scottish Parliament
• Can longitudinal data enhance the evidence base for policy?
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Longitudinal Data and the Scottish Economy
• At present role is limited because ….– Relatively few longitudinal data sources– Scottish sample often small– Not much expertise in the use of such data
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Key Longitudinal Datasets
• Individual/Household Based– BHPS– Cohort Studies– NES– Census
• But what about firms?– Futureskills Scotland Skills Surveys– IDBR
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Don’t put all your eggs in the longitudinal basket!
• Reliance on longitudinal data should be limited• Has some advantages
– Controls for unobserved heterogeneity – Permits event modelling
• But also disadvantages– More susceptible to measurement error
– It does not answer the “evaluation problem”– Small samples may limit modelling approach and
hence usefulness– The past not necessarily a good guide to the future
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Use a Variety of Data Sources and Methods(in the Scottish context)
• Reconciling different results from different datasets is a useful means of understanding the datasets
• Replication in other datasets suggests results are more robust
• As does confirmation by other methods
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Two Examples
• Public Sector Wages
• Relative Returns to Education in Scotland and Rest of Great Britain
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Public Sector Wages - The Context
• Public sector pay accounts for the majority of spending under the Barnett formula
• Pay plays an important role in attracting, retaining and motivating public sector staff
• Public sector rewards influence private sector labour markets
• Growing pressure for reform
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The Public Sector Premium
• Why do public sector employees earn more?– Compensating differentials– Efficiency wages– Bargaining structures
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The Public Sector Premiumin Great Britain
WageSectorPrivateMean
WageSectorPublicMean
Source: Labour Force Survey
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“Explained” and “Unexplained” Components of the Public-Sector Premium
• Differences in mean pay may simply reflect differences in skill levels, education, experience etc.
• Use regression to “net out” these effects – these are the “explained” components of the public sector premium
• What remains is the “unexplained” component
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Explained and Unexplained Components of Public Sector Premium
0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
Males England
Males Scotland
FemalesEngland
FemalesScotland
Diff
ere
nce
in (
Ln
) W
ag
es
Unexplained
Explained
Source: Labour Force Survey
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Spatial Sensitivity by Public Sector Bargaining GroupRelative to Private Sector Comparator
0 0.1 0.2 0.3 0.4 0.5 0.6
Civil Service (Inland Revenue)
Local Authority Single status
Teachers
Nurses
Royal Mail manual
NHS Professionals Whitely B
NHS Ambulance
Police
NHS Admin & clerical
University manual*
Prison Officers*
NHS Ancillaries
Fire Service
NHS Doctors & Dentists
Source: New Earnings Survey
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Does the Premium Vary by Location in the Wage Distribution?
-10% -5% 0% 5% 10% 15% 20%
malesEngland
malesScotland
femalesEngland
femalesScotland
malesEngland
malesScotland
femalesEngland
femalesScotland
25
th p
erc
en
tile
75
th p
erc
en
tile
Source: Labour Force Survey
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But What About Individual Experiences in Moving Between Sectors?
• Model based on Holtz-Eakin & Rosen analysis of the impact of self employment on earnings
),,(21 ttttttt PublicPXfPublicPPP
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Moving between sectors(compared with staying in the private sector)
UK
-2
0
2
4
6
8
10
12
public/public public/private private/public
10th percentile
25th percentile
50th percentile
75th percentile
90th percentile
Source: New Earnings Survey
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Moving between sectors(compared with staying in the private sector)
Greater London
-5
0
5
10
15
20
public/public public/private private/public
10th percentile
25th percentile
50th percentile
75th percentile
90th percentile
Source: New Earnings Survey
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Moving between sectors(compared with staying in the private sector)
Scotland
-2
0
2
4
6
8
10
12
public/public public/private private/public
10th percentile
25th percentile
50th percentile
75th percentile
90th percentile
Source: New Earnings Survey
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Returns to Qualifications
• Are the returns to Scottish qualifications different from returns to English qualifications?
• Does the Scottish educations system as a whole perform better than the English system?
• Sources: Labour Force Survey, NCDS
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Coefficient t statisticOther Higher Education -0.19 -40.6A Level -0.37 -87.6GCSE, O Levels -0.46 -103.4Other Quals -0.57 -87.5
(omitted category is degree qualification)Quals in Scotland 0.14 8.1
Higher Education in Scotland -0.08 -5.7Highers in Scotland -0.08 -6.3O Levels in Scotland -0.11 -7.8Other Quals in Scotland -0.08 -3.4
Works in London 0.29 80.0Works in Scotland -0.01 -1.4
(omitted category is works in Rest of England)
Quals in Scotland, Works in London -0.05 -1.4Quals in Scotland, Works in Scotland -0.14 -7.7
(omitted category is works in Rest of England)
n = 162204F = 1784.32R2 = 0.3813
Other controls, gender tenure tenure2, age left education,Industry, marital status, number of children, size of workforce, year dummies
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Returns to Qualification by Region of Work(Relative to Lowest Quals working in Rest of England)
-20%
0%
20%
40%
60%
80%
100%
120%
Rest ofEngland
London Scotland Rest ofEngland
London Scotland
Quals in England Quals in Scotland
Per
cent
Degree
Other Higher Education
A Level
GCSE, O Levels
Other Quals
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Using NCDS to Estimate Returns to Education
• Not a large enough sample to construct separate Scottish estimates
• Not many movements between Scotland and England to separate out labour market from qualification effects
• But much better controls for ability and family background etc.
• Dummy for whether educated in Scotland or not is insignificant
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Returns to Qualification by NVQ Level(relative to the unqualified)
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
1 2 3 4 5
Source: NCDS
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Conclusions
• Longitudinal analysis can aid our understanding of key processes in the Scottish economy
• Absence of longitudinal data on firms is an important omission
• Relevant sample sizes tend to be small
• Can play a useful supporting role.