Geographical Characteristics of Responding Firms

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Economic Theory

In general terms, economics can be defined as the study of the choices that we make as we cope with scarcity and the incentives that influence our choices. Economics is split into two major ar-eas of study, microeconomics and macroeconomics. Microeconomics is the study of choices that individuals and businesses make and the way these choices respond to incentives, interact and are influenced by governments. Macroeconomics is defined as the study of the aggregate effects on the national economy and the global economy of the choices that individuals, businesses and governments make (Bade & Parkin, 2004). As this thesis is primarily concerned with productivity, employment and GDP development, macroeconomics is of particular interest

Gross Domestic Product

A country‟s economic performance is an important issue for this thesis, as this performance in-fluences decisions made within a company, regardless of size and composition. To measure the performance of an economy, the concept of Gross Domestic Product (“GDP”) is used. GDP meas-ures the market value of all final goods and services produced within a country at the prices that prevailed in that same year (nominal GDP). As an instrument for the assessment of an econ-omy‟s performance, real GDP is used, a measure that values GDP at constant (historical) prices (Bade & Parkin, 2004). Building on this, recession is defined as “a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, em-ployment, industrial production, and wholesale-retail sales” (NBER, 2003).
A true but easily forgotten truth in economics of which the world has recently been forcefully reminded, is that growth is not an upward-pointing straight line. The development is cyclical, with the modification that the cycle does not follow predictable, fixed (time) patterns (McCraw, 2006), but is a mere simplification of reality. Therefore, today, economic science designs business activities as fluctuating around their long-term growth trend (Friedman and Schwartz, 1963), as opposed to the perception that economic development is truly cyclical. Generally speaking, there are two trends: Periods of recovery and prosperity, marked by an expanding real GDP and peri-ods of relative stagnation or decline, evident through a contraction in real GDP. Put differently, the business cycle is defined as a periodic but irregular up-and-down movement in production and jobs, comprising of two phases, expansion and recession, as well as two turning points, a peak and a trough. Over the business cycle, real GDP fluctuates around potential GDP, the theo- retical value of GDP at full employment. Accompaniments are the inflation rate and the unem-ployment rate, which is of particular interest to this thesis, as employment fluctuations usually match fluctuations in real GDP closely. Employment and GDP are related in that the move-ments of potential GDP and natural unemployment – the unemployment level at full employ-ment – correspond. When the unemployment rate is above the natural unemployment rate, real GDP is below potential GDP and vice versa. Firms have a significant role to play in the compo-sition of GDP. Through production (services included) companies contribute to GDP creation, thus raising it. At the same time, fuelled by the rise in GDP, companies employ more and more people. But naturally, this cycle works in reverse, too. Is the economy contracting, output falls, GDP falls, staff must be let go and unemployment rises. Figure 3 illustrates this relationship graphically.

The Business Cycle

A number of economists have contributed to the study of economic cycles, among which Joseph Schumpeter (1939 & 1942) and Nikolai Kondratieff might be the most prominent and leading advocates. Nikolai Kondratieff contributed to economic science the very concept of the eco-nomic cycle, which he called long waves (Louca, 1999). Joseph Schumpeter, who eventually named the waves Kondratieff waves, picked up the theory and used it in his works (Louca, 1999) and much of Schumpeter‟s fame can be linked to his utilisation of the wave concept. According to Louca (1999) the interest in cyclical waves did not last much beyond the life-times of Schumpeter‟s and Kuznets‟s, another advocate of cyclical developments and was soon to be marginalised by the economics of equilibrium, which is today‟s leading theory within economical science (Louca, 1999). On the other hand, in his essay “Modern prophets: Schumpeter or Keynes” Peter Drucker (1983) argues that “… Schumpeter‟s economic model is the only one that can serve as the starting point for the economic policies we need”. And indeed, recent events, such as the credit crunch and a looming worldwide recession, have brought back the idea of a cyclical business develop-ment to many a mind, “The current crisis reminds us that … the price of the greatly improved long-term performance that only free economies can provide is an ineradicable economic cycle” (Lawson, 2008).

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The Economics of Equilibrium and the Economics of Labour

The prevalent economic theory of today is the economics of equilibrium (Louca, 1999). The idea is that the market forces, supply and demand, will always adjust towards a state of equilibrium. Dating back to the classic economists, Adam Smith (1776) argued that the free market would generate an economic equilibrium through the price mechanism. That is, excess supply would lead to price cuts that decrease the quantity supplied, by reducing the incentive to produce and sell the product and increase the quantity demanded by lowering prices, automatically abolishing the market surplus. Similarly, in a free market, any excess demand (shortage) would lead to price increases, reducing the quantity demanded, as fewer people can afford to consume. It would also lead to an increase in the quantity supplied, as the incentive to produce and sell a product rises. As before, the disequilibrium (here, the shortage) disappears. It should be noted that as with most economic theories, the economics of equilibrium is not undisputed.
Labour economics aims at understanding how the labour market functions in general and how the market forces translate into supply and demand for labour in particular. It attempts to under-stand the pattern of wages, employment and income through study of the interaction between workers (suppliers) and employers (demanders) and the resulting movements in the labour mar-ket. As a result of its affinity with the economics of equilibrium, labour economics is basically the application of microeconomic or macroeconomic techniques onto and subsequent analysis of the labour market. In a microeconomic approach, the centre of attention is on the behaviour of indi-viduals and individual firms in the labour market. Applying a macroeconomic perspective the fo-cus is on the interdependence between the labour market, the goods market, the money market and the foreign trade market and how these interdependencies influence employment levels, par-ticipation rates, aggregate income, GDP and other macro variables. This thesis is mainly con-cerned with individuals and individual firms and therefore, the following subsection will deal with the particularities of microeconomic analysis.

1 Introduction .
1.1 Background
1.2 Problem
1.3 Purpose
1.4 Delimitations
1.5 Definitions
1.6 Thesis disposition .
2 Frame of Reference
2.1 Human Resource Management
2.2 Temporary Work .
2.3 Economic Theory
2.5 The Current Situation and History
2.6 Summary of Frame of Reference .
2.7 Auxiliary Research Questions
2.8 Analytical Mode
3 Method
3.1 Exploratory Quantitative Research .
3.2 Primary Data Collection
3.4 Secondary Data
3.5 Data Manipulation and Analysis
3.6 Research Reliability and Validity
3.7 Problems and weaknesses with chosen method
4 Results and Analysis
4.1 Geographical Characteristics of Responding Firms
4.2 Size Characteristics of Responding Firms
4.3 Empirical Results And Analysis
5 Purpose Analysis
5.1 The effects of the demographic transition
5.2 The effects of the economic slowdown
6 Conclusion
7 Discussion and Future Studies