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on Labour Economics |
| By: | Chaudhuri, Sarbajit; Banerjee, Dibyendu |
| Abstract: | This paper has developed a three-sector general equilibrium framework that explains unemployment of both skilled and unskilled labour. Unemployment of unskilled labour is of the Harris-Todaro (1970) type while unemployment of skilled labour is caused due to the validity of the FWH in the high-skill sector. There are two types of capital one of which is specific to the primary export sector while the other moves freely among the different sectors. Inflows of foreign capital of either type unambiguously improve the economic conditions of the unskilled working class. However, the effects on the skilled-unskilled wage inequality and the extent of unemployment of both types of labour crucially hinge on the properties implied by the efficiency function of the skilled workers. |
| Keywords: | Fair wage hypothesis; skilled labour; unskilled labour; wage inequality; foreign capital; unemployment |
| JEL: | F13 J41 O15 |
| Date: | 2009–08–15 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:18004&r=lab |
| By: | Chaudhuri, Sarbajit |
| Abstract: | The paper develops a three-sector specific factor model with Harris-Todaro type unemployment to examine the consequences of economic recession in the skilled sector on the informal sector workforce. It finds that while a decrease in the price of high-skill commodity raises both the informal (rural) sector wage and unemployment of unskilled labour, a drop in emigration of skilled labour produces exactly the opposite effects. The effects of these policies on the welfare of unskilled workers in terms of the welfare measure of Sen (1974) have also been studied. The paper recommends a protectionist policy to the unskilled labour-intensive sector for protecting the interest of the vulnerable section of the working population. |
| Keywords: | Skilled labour; unskilled labour; economic recession; informal wage; urban unemployment |
| JEL: | F13 J31 |
| Date: | 2009–04–24 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:18033&r=lab |
| By: | Christophe Nordman (DIAL, IRD, Paris); Faly Rakotomanana (INSTAT - DSM, Antananarivo); Anne-Sophie Robilliard (DIAL, IRD, Paris) |
| Abstract: | (english) In this study, we address the issue of gender differences in labour market performances for Madagascar using data from two national household surveys carried out in 2001 and 2005. The data collected in these surveys allow us to measure the gender pay gap at two points in time, and to analyze the determinants of occupational choices across sectors of employment as well as of wages and earnings. Our results show that the average gender wage gap is relatively small and stable over time. Across wage employment sectors, the gender gap appears to be the lowest in the public sector and the highest in the informal sector. In non-farm self-employment, however, the gender earnings gap is much higher and declined between 2001 and 2005. Using full decomposition techniques, we provide evidence that gender specific sectoral location explains a significant share of the gender wage gap in both years. Augmented earnings equations estimates carried out for the non-farm self-employment sector suggest that the gap in this sector is driven by the very unequal distribution of micro-firm attributes between men and women. This results points to a potential source of earnings differential often ignored in the gender gap literature which is access to physical capital by women. _________________________________ (français) Dans cet article, nous analysons les différences de genre en matière de performances sur le marché du travail de Madagascar à l’aide d’enquêtes ménages menées au niveau national en 2001 et en 2005. Grâce à ces deux points dans le temps, nous examinons la dynamique des déterminants de l’allocation sectorielle et de l’écart de gains entre sexes. Nos résultats montrent que l’écart salarial moyen entre sexes est relativement faible et stable entre ces deux périodes. L’écart salarial est le plus faible dans le secteur public et le plus élevé dans le secteur informel. Pour les travailleurs indépendants horsagriculture, l’écart de gains est beaucoup plus élevé et a décliné entre 2001 et 2005, une période de crise économique. A l’aide de décompositions de ces écarts, nous montrons que les différences de localisation sectorielle selon les sexes expliquent une grande part de l’écart de gains pour les deux années. L’estimation de fonctions de gains augmentées de caractéristiques des micro-entreprises des travailleurs indépendants suggère par ailleurs que l’écart de genre dans ce secteur s’explique en grande partie par une répartition inégale entre sexes des attributs des micro-entreprises, en particulier du capital physique. Ce résultat met en évidence une source potentielle de discrimination souvent ignorée dans la littérature, à savoir l’accès au capital physique par les femmes. |
| Keywords: | labour force participation, sectoral allocation, earnings equations, gender wage gap, Madagascar, écart de genre, participation au marché du travail, allocation sectorielle, équations de gains, écart salarial de genre. |
| JEL: | J24 J31 O12 |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:dia:wpaper:dt200908&r=lab |
| By: | Chaudhuri, Sarbajit; Banerjee, Dibyendu |
| Abstract: | The paper develops a three-sector general equilibrium model that can explain simultaneous existence of unemployment of both skilled and unskilled labour. The unemployment of unskilled labour is explicated in terms of rural-urban migration mechanism while that of skilled labour is shown using the ‘fair wage hypothesis’. The paper finds that foreign direct investment (FDI) in the primary export sector improve both national welfare and urban unemployment problem of unskilled labour while the consequences of foreign capital flows into the import-competing sector and high-skill export sector are ambiguous. The paper justifies the desirability of FDI flow in the primary export sector from the perspective of both unemployment and social welfare. |
| Keywords: | Fair wage hypothesis; skilled labour; unskilled labour; national welfare; unemployment. |
| JEL: | F13 J41 F10 O15 |
| Date: | 2009–08–30 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:18005&r=lab |
| By: | Hudson, John; Sessions, John |
| Abstract: | We examine the impact of parental education on the shape of an individual’s experience-earnings profile. A number of factors suggest that parental education will affect the ability of an individual to translate labor market experience into earnings. Our empirical analysis of US data suggests that this is indeed the case. Higher parental education shifts the earnings profile significantly to the left – the profile of individuals with parents who both have 15 years of education peaks at 16 years of experience when their wages are 52% (24%) greater than those whose parents both have only 5 (10) years of education. |
| Keywords: | Parental education; human capital; earnings |
| Date: | 2009–05 |
| URL: | http://d.repec.org/n?u=RePEc:eid:wpaper:14762&r=lab |
| By: | Goh, Soo Khoon |
| Abstract: | This study investigates the relationship between real wages, labor productivity and unemployment in Malaysia at the macroeconomic level, using time-series econometric techniques. The study found a long-term equilibrium relationship between labor productivity and real wages, but that unemployment was apparently unconnected to the system. The results suggested that labor productivity is positively related to real wage in the long run. However, the increase in real wage exceeds the increase in labor productivity causing an increase in unit labor cost. In addition, the study found a positive causal flow from productivity to wages in the short-run supporting the marginal productivity theory. |
| Keywords: | real wages; productivity; Malaysia |
| JEL: | J30 |
| Date: | 2009–08 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:18095&r=lab |
| By: | Ana Maria DIAZ E (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES)) |
| Abstract: | Employers and job seekers rely extensively on job informational networks to fill vacancies or to find a job. The widespread use of job contacts to find work has been largely associated with labor outcomes, such as finding a job or even affecting wages. Some scholars have claimed that informal referrals play a determinant role in reducing informational mismatches between potential employers and job seekers. Although several studies have shown that the use of friends and relatives is correlated with labor outcomes, little is known about the causal effect. In this article, I aim to identify whether there is a causal effect of using informal referrals on two main outcomes: the probability of being employed and hourly wages. I use a large data set from Colombia, the Living Standard Survey 2003, to contrast the results from three main methodologies: standard OLS estimation, propensity-score matching, and instrumental variables. Results suggest that much of the positive effect of using informal referrals on employment reflects the prevalence of informal-sector jobs to be filled through this method rather than a causal effect. On the contrary, the results for hourly wages suggest a negative causal effect of using job informational networks, which is explained by the low-quality/poor matches theory. Yet, this is only true in formal-sector firms. |
| Keywords: | informal referrals, job search methods, employment rates, hourly wages, selec- tion bias, OLS, Propensity-Score Matching, Instrumental Variables, Roy Model |
| JEL: | J21 J24 J31 J64 O17 C14 C14 |
| Date: | 2009–08–17 |
| URL: | http://d.repec.org/n?u=RePEc:ctl:louvir:2009023&r=lab |
| By: | Gonzalo Fernàndez-de-Córdoba (Universidad de Salamanca, Campus Miguel de Unamuno, Salamanca, E-23007 Salamanca, España.); Javier J. Pérez (Banco de España, Alcalá 50, E-28014 Madrid, España.); José L. Torres (Universidad de Málaga, E-29004 Málaga, España.) |
| Abstract: | This paper develops a dynamic general equilibrium model in which the public and the private sector interact in the labor market. Previous studies that analyze the labor market effects of public sector employment and wages have mostly assumed exogenous rules for public wage and public employment. We show that theories that equalize wages with marginal products in the private sector can rationalize the interaction of public and private sector wages when extended to accommodate a non-trivial government sector/public sector union that endogenously determines public employment and wages. Our model suggests a positive correlation between public and private sector wages. Any increase in tax revenues, coupled with the existence of a positive public-private sector wage gap, makes working in the public sector an attractive option. Thus, a positive neutral productivity shock increases public and private sector wages. More interestingly, even a private-sector specific productivity shock spills-over to the public sector, increasing public wages. These facts lend some support to the wage leading role of the private sector. Nevertheless, at the same time, a positive shock to public sector wages would lead to an increase in private sector wages, via the flow of workers from the private to the public sector. JEL Classification: C32, J30, J51, J52, E62, E63, H50. |
| Keywords: | Public wages, public employment, labor market, trade unions. |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20091099&r=lab |
| By: | Carlos Carrillo-Tudela; Eric Smith |
| Abstract: | This paper examines wage dispersion and wage dynamics in a stock-flow matching economy with on-the-job search. Under stock-flow matching, job seekers immediately become fully informed about the stock of viable vacancies. If only one option is available, monopsony wages result. With more than one firm bidding, Bertrand wages arise. The initial and expected threat of competition determines the evolution of wages and thereby introduces a novel way of understanding wage differences among similar workers. The resulting wage distribution has an interior mode and prominent, well-behaved tails. The model also generates job-to-job transitions with both wage cuts and jumps. |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedawp:2009-22&r=lab |
| By: | Ambra Poggi (University of Milan Bicocca and Collegio Carlo Alberto); Jacques Silber (Bar-Ilan University) |
| Abstract: | This paper attempts to combine the analysis of wage (income) polarization with that of wage (income) mobility. Using the polarization index PG recently proposed by Deutsch et al. (2007) it shows that, when taking the identity of the individuals into account (working with panel data), a distinction can be made between a change over time in polarization that is the consequence of "structural mobility" (change over time in the overall, between and within groups inequality) and a change in polarization that is the sole consequence of "exchange mobility" (changes over time in the ranks of the individuals). This approach is then applied to the 1985-2003 Work Histories Italian Panel (WHIP), an employer-employee linked panel database developed by the Italian Social Security administrative sources. The empirical investigation attempts to improve our understanding of labor market segmentation in Italy, whether the groups are defined on the basis of the individual wages or derived from other criteria such as white versus blue collar workers. |
| Keywords: | exchange mobility, Italy, labor market segmentation, polarization, structural mobility, wage inequality. |
| JEL: | D31 J31 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:inq:inqwps:ecineq2009-138&r=lab |
| By: | Andreas Kuhn (Institute for Empirical Research in Economics, University of Zurich, Switzerland); Oliver Ruf |
| Abstract: | We study the monetary compensation for non-fatal accident risk in Switzerland using the number of accidents within cells defined over industry x skill-level of the job and capitalizing on the partial panel structure of our data which allows us to empirically isolate the wage component specific to the employer. Our results show that using accident risk at a lower level of aggregation, using narrower samples of workers, and using the wage component that is specific to the firm all yield higher estimates of risk compensation. Our preferred estimate gives an estimate of about 36,000 Swiss francs per prevented injury per year. |
| Keywords: | Compensating wage differentials, value of a statistical injury, risk measurement |
| JEL: | J17 J28 J31 |
| Date: | 2009–09 |
| URL: | http://d.repec.org/n?u=RePEc:jku:nrnwps:2009_15&r=lab |
| By: | Eric French; Jae Song |
| Abstract: | This paper estimates the effect of the Disability Insurance program on labor supply. We find that 30% of denied applicants and 15% of allowed applicants work several years after a disability determination decision. The earnings elasticity with respect to the after tax wage is 0.8. However, the labor supply of those over age 55, college graduates, and those with mental illness is not sensitive to allowance of benefits. |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedhwp:wp-09-05&r=lab |
| By: | Alessia Matano; Paolo Naticchioni (Dipartimento di Economia, Sapienza University of Rome Italy) |
| Abstract: | Spatial sorting plays an important role in accounting for disparities in average wages among locations. This paper shows that sorting also matters when addressing the relation between spatial externalities and wage distribution, i.e. across workers located at dierent percentiles of the wage distribution. Using Italian employer-employee panel data we can control for individual and firm heterogeneity as well as for unobserved individual heterogeneity by means of quantile fixed eects estimates. After controlling for the sorting of workers the spatial externality impacts dampen along the whole wage distribution and generally remain positive only in the upper tail. As for firm sorting, it becomes uniform along the wage distribution once individual fixed effects are considered. We also point out that the impact of worker sorting is not homogeneous across sectors: along the density dimension it occurs mainly in skill-intensive sectors, while along the specialization dimension it is concentrated in the unskill-intensive sectors. |
| Keywords: | Spatial Externalities, Spatial Sorting, Wage Distribution, Quantile Fixed Effects |
| JEL: | J31 J61 R23 R30 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:des:wpaper:14&r=lab |
| By: | Grip Andries de; Lindeboom Maarten; Montizaan Raymond (METEOR) |
| Abstract: | This paper assesses the impact of a dramatic reform of the Dutch pension system on mental health, savings behavior and retirement expectations of workers nearing retirement age. The reform means that public sector workers born on January 1, 1950 or later face a substantial reduction in their pension rights while workers born before this threshold date may still retire under the old, more generous rules. We employ a unique matched survey and administrative data set comprising male public sector workers born in 1949 and 1950 and find strong ex ante effects on mental health for workers who are affected by the reform. This effect increases as birth dates approach the threshold date. Furthermore, the effects differ in accordance with worker characteristics. Finally, we find that the response of those affected by the reform is to work longer and to save more. |
| Keywords: | labour economics ; |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:umamet:2009045&r=lab |
| By: | Montizaan Raymond; Cörvers Frank; Grip Andries de (METEOR) |
| Abstract: | This paper uses a natural experiment approach to identify the effects of an exogenous change in future pension benefits on workers'' training participation. We use unique matched survey and administrative data for male employees in the Dutch public sector who were born in 1949 or 1950. Only the latter were subject to a major pension reform that diminished their pension rights. We find that this exogenous shock to pension rights postpones expected retirement and increases participation in training courses among older employees, although exclusively for those employed in large organizations. |
| Keywords: | labour economics ; |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:umamet:2009046&r=lab |
| By: | Ted Enamorado; Ana Carolina Izaguirre; Hugo Nopo |
| Abstract: | This paper compares gender wage gaps for Costa Rica, Honduras, Nicaragua and El Salvador from the mid-1990s to the mid-2000s using the non-parametric matching methodology introduced by Ñopo (2008), which allows an analysis not only of average gaps but also their distributions. While a simple comparison of average wages would suggest small or even negative gaps, the wage gap is substantial when workers with comparable human capital characteristics are considered. Although the gender wage gap declined from the mid-1990s to 2000, the gap appears to increase thereafter. The results also indicate that females have access barriers to certain human capital profiles, which contributes to wage gaps. The unexplained component of the gender wage gaps is more pronounced among poorer individuals. In Nicaragua, particularly, these unexplained gaps are negative for those at the lowest extreme of the earnings distribution. |
| Keywords: | Gender, Race, Wage gaps, Central America |
| JEL: | C14 D31 J16 O54 |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:idb:wpaper:4639&r=lab |
| By: | Greg Kaplan |
| Abstract: | This paper examines the relationship between the dynamics of parent-youth living arrangements and labor market outcomes for youths who do not go to college in the United States. The data come from a newly constructed panel data set based on retrospective monthly coresidence questions in the NLSY97. This is the first data set containing information on the labor market circumstances of youths at the time of movements in and out of the parental home. Based on estimates from duration models that allow for unobserved heterogeneity, I find that moving from employment to non-employment increases the hazard of moving back home in a given month by 64% for males and 71% for females. These results suggest that labor market factors play an important role in determining the dynamics of parent-youth living arrangements and that coresidence may be an important way in which insurance against labor market shocks takes place within the family. |
| Keywords: | Labor economics ; Housing |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedmwp:675&r=lab |
| By: | Francesc Ortega (Universitat Pompeu Fabra); Javier G. Polavieja (IMDEA Ciencias Sociales) |
| Abstract: | This paper re-examines the role of labor-market competition as a determinant of attitudes toward immigration. We claim two main contributions. First, we use more sophisticated measures of the degree of exposure to competition from immigrants than previously done. Specifically, we focus on the protection derived from investments in job-specific human capital and from specialization in communication-intensive jobs, in addition to formal education. Second, we explicitly account for the potential endogeneity arising from job search. Methodologically, we estimate, by instrumental variables, an econometric model that allows for heterogeneity at the individual, regional, and country level. Drawing on the 2004 European Social Survey, we obtain three main results. First, our estimates show that individuals that are currently employed in less exposed jobs are relatively more pro-immigration. This is true for both our new measures of exposure. Second, we show that the protection granted by job-specific human capital is clearly distinct from the protection granted by formal education. Yet the positive effect of education on pro-immigration attitudes is greatly reduced when we control for the degree of communication intensity of respondents\' occupations. Third, OLS estimates are biased in a direction that suggests that natives respond to immigration by switching to less exposed jobs. The latter finding provides indirect support for the endogenous job specialization hypothesis postulated by Peri and Sparber (2009). |
| Keywords: | immigration attitudes; labor market; job-specific human capital; communication skills; international migration |
| JEL: | F1 F22 J61 J31 R13 |
| Date: | 2009–10–21 |
| URL: | http://d.repec.org/n?u=RePEc:imd:wpaper:wp2009-14&r=lab |
| By: | Swärdh, Jan-Erik (VTI) |
| Abstract: | This paper focuses on empirical analysis of commuting time changes for workers who relocate residence, relocate job, or combine both residence and job relocation. A large register data set of individuals on the Swedish labor market, including travel times, is studied. Workers are not necessarily seeking to decrease their commuting time when they relocate job and/or residence. In fact, the average commuting time is longer after a relocation than before, thus suggesting that workers trade between a better job, a better residence and commuting time. The paper also presents results from a set of econometric models suggesting that commuting time changes differ substantially with respect to socio-economic characteristics as well as with respect to the part of the distribution of commuting time change that is analyzed. |
| Keywords: | Commuting time; Commuting time changes; Relocations; Register data; Longitudinal; Quantile regression |
| JEL: | C81 R10 R40 |
| Date: | 2009–10–21 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:vtiwps:2009_011&r=lab |
| By: | Bijwaard, G.E. (Erasmus Econometric Institute) |
| Abstract: | In this empirical paper we assess how labour market transitions and out- and repeat migration of immigrants are interrelated. We estimate a multi-state multiple spell competing risks model with four states: employed, unemployed receiving benefits, out-of-the-labour market (no benefits) and abroad. We discuss one-step ahead transitions from all four states and the transition probability, including all intermediate transitions, from employment. Based on the estimated parameters we simulate the labour-migration dynamics for a synthetic cohort to derive relevant economic indicators, e.g. the probability of experiencing an unemployment spell. For the analysis we use data on recent labour immigrants to The Netherlands, which implies that all migrants are (self)-employed at the time of arrival. We find that many migrants leave the country after a period of no-income. Employment characteristics and the country of origin play an important role in explaining the dynamics. The microsimulations of synthetic cohorts reveal that many migrants experience unemployment spells, but ten years after arrival only a few are unemployed. They also indicate that the Credit Crunch will not only increase the unemployment among migrants but also departure from the country. An increase in the number of migrants from the EU accession countries will lead to more dynamics. We do not expect that the recent simplification of the entry of high income migrants will have a lasting effect, as many of those migrants leave fast. |
| Keywords: | migration dynamics;labour market transitions;competing risks;immigrant assimilation |
| Date: | 2009–10–19 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:eureir:1765017016&r=lab |
| By: | Hinks, Timothy |
| Abstract: | This paper is the first to estimate job satisfaction equations in post-Apartheid South Africa. Earnings and relative earnings are both found to contribute to greater job satisfaction. Racial group is also an important predictor of job satisfaction but when interacted with a proxy for affirmative action legislation it is found that black job satisfaction is positively correlated with this legislation whereas coloured and to a lesser extent white job satisfaction is diminished. |
| Keywords: | Job satisfaction; Employment Equity; ordered probit; South Africa |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:eid:wpaper:15956&r=lab |
| By: | Setty, Ofer |
| Abstract: | Monitoring the job-search activities of unemployed workers is a common government intervention. Typically, a caseworker reviews the unemployed worker's employment contacts at some frequency, and applies sanctions if certain requirements are not met. I model monitoring in the optimal unemployment insurance framework of Hopenhayn and Nicolini (1997), where job-search effort is private information for the unemployed worker. In the model, monitoring provides costly information upon which the government conditions the unemployment benefits. In the optimal monitoring scheme, endogenous sanctions and rewards, together with random monitoring, create effective job-search incentives for the unemployed worker. I calibrate the model to the US economy and find that the addition of optimal monitoring to the optimal unemployment insurance scheme decreases the variance of consumption by about two thirds and eliminates roughly half of the government's cost. I also find that compared with the optimal monitoring scheme, US states monitor too much and impose the sanctions over too short a time span. For the US on average, shifting to the optimal monitoring policy would generate savings of about $500 per unemployment spell. |
| Keywords: | Recursive Contracts; Unemployment Insurance; Job Search Monitoring |
| JEL: | H21 J65 J64 D82 |
| Date: | 2009–01–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:18188&r=lab |
| By: | Bart COCKX (Ghent University?Sherppa, Faculty of Economics and Business Administration,; UCLouvain? IRES; IZA, Bonn; CESifo, Munich); Bruno VAN DER LINDEN (FNRS and IRES, UniversitŽ catholique de Louvain ; IZA, Bonn) |
| Abstract: | The current unemployment insurance and employment protection legislation were set up in an economic environment in which relationships between workers and firms were typically lon-lastingand stable. The increasing globalisation of the economy and the rapid technological and organisational changes require more flexibility of both workers and firms leading to career paths which are much more volatile both within and between firms. Current institutions must be therefore urgently reformed to reconcile this new need of more flexibility with that of security for workers. The call for ÓflexicurityÓ is not new, but there is no unanimity on the corresponding institutional model it implies. Rather than proposing a reform on the basis of existing institutions abroad, we propose a reform that is explicitly guided by economic principles. In a nutshell, we propose to transform the bulk of the advance notice payments by a unique lay-off contribution, independently of the type of worker (blue or white-collar) and type of contract (temporary or open°]ended). A severance payment, less important than the lay-off contribution, is due to cover the psychic cost related to dismissal. In order to make the employer accountable for the costs he imposes on society, the lay-off contribution should be made proportional to the cumulative past earnings since the moment that the worker was hired in the firm. This contribution would be used not only to finance a supplement to the current unemployment benefits, but also, as to make the worker more accountable, to finance active labour market policies for the unemployed. Aside of this scheme, it makes sense to generalise the current scheme of temporary unemployment benefits for blue-collar workers to white-collar workers, but only to the extent that one introduces experience rating in the funding, so that again the employers are made accountable for the social costs that they induce by these temporary lay-offs. |
| Keywords: | flexicurity, employment protection, unemployment insurance, active labour market policies, optimal design |
| JEL: | H11 H21 H23 J65 J68 |
| Date: | 2009–05–19 |
| URL: | http://d.repec.org/n?u=RePEc:ctl:louvir:2009024&r=lab |
| By: | Feldmann, Horst |
| Abstract: | Using data on 75 countries for six years in the period 1995 to 2003, this paper analyzes empirically whether and to what extent the quality of the legal system affects the performance of the labor market. According to the regression results, a legal system characterized by a dependent judiciary, biased courts, a lack of intellectual property protection and a lack of integrity increases unemployment and lowers the employment level. The magnitude of the effect seems to be substantial, particularly among young people. |
| Keywords: | employment; legal system; rule of law; unemployment |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:eid:wpaper:15966&r=lab |
| By: | Clémence Berson (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris) |
| Abstract: | The assimilation of immigrants and their children is a burning issue in France. Governments build a large part of their policies on the labor market. The public sector is reputed to integrate minorities better because of its entrance exams and pay-scales. In this paper, a comparison of the public and private sectors shows that second-generation immigrants are not treated equally. Those of African descent are discriminated against in both sectors even though selection issues are controlled for, whereas the wages of those of South European origin are similar to those of the French. |
| Keywords: | Discrimination, wage gap, public and private sectors, France. |
| Date: | 2009–09 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:halshs-00423944_v1&r=lab |
| By: | Nicole Schneeweis; Martina Zweimüller |
| Abstract: | In the Austrian (as well as the German) education system students have to choose between different school tracks at the age of 10. We argue that early tracking creates inefficiencies because the earlier the track choice has to be made, the more it is influenced by factors other than innate ability. Recent evidence suggests that the relative age of a student within a grade is related to his or her achievement, and that this effect is decreasing over grades. Thus, age-related achievement differences probably translate into age-related differences in track choice if track choice has to be made early. In this paper we estimate the effect of observed age on the track choice after grade 4 using register data for a major Austrian city for the period 1984-2006. Since observed age at track choice is endogenous, we exploit the exogenous variation in birth month to identify the causal effect of age. We find a strong and significant positive effect of age on track choice in grades 5-8. Since after grade 8, students again have to make a track choice, we use additional data from PISA 2003 and 2006 to show that the effect is long-lasting in urban areas. Therefore, the education system fails to provide a mechanism that leads to an efficient allocation of students to tracks. |
| Keywords: | Early tracking, school choice, age effect, instrumental variables, birth month |
| JEL: | I21 I28 |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:jku:nrnwps:2009_20&r=lab |
| By: | Efraim Benmelech; Claude Berrebi; Esteban F. Klor |
| Abstract: | The literature on conflict and terrorism has paid little attention to the economic costs of terrorism for the perpetrators. This paper aims to fill that gap by examining the economic costs of committing suicide terror attacks. Using data covering the universe of Palestinian suicide terrorists during the second Palestinian uprising, combined with data from the Palestinian Labor Force Survey, we identify and quantify the impact of a successful attack on unemployment and wages. We find robust evidence that terror attacks have important economic costs. The results suggest that a successful attack causes an increase of 5.3 percent in unemployment, increases the likelihood that the district’s average wages fall in the quarter following an attack by more than 20 percent, and reduces the number of Palestinians working in Israel by 6.7 percent relative to its mean. Importantly, these effects are persistent and last for at least six months after the attack. |
| JEL: | H41 H56 J01 O1 O53 |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:15465&r=lab |
| By: | Karin Mayr; Giovanni Peri (Department of Economics, University of California, Davis, USA) |
| Abstract: | Recent empirical evidence seems to show that temporary migration is a widespread phenomenon, espe- cially among highly skilled workers who return to their countries of origin when these begin to grow. This paper develops a simple, tractable overlapping generations model that provides a rationale for return migra- tion and predicts who will migrate and who returns among agents with heterogeneous abilities. The model also incorporates the interaction between the migration decision and schooling: the possibility of migrating, albeit temporarily, to a country with high returns to skills produces positive schooling incentive effects. We use parameter values from the literature and data on return migration to simulate the model for the Eastern-Western European case. We then quantify the effects that increased openness (to migrants) would have on human capital and wages in Eastern Europe. We find that, for plausible values of the parameters, the possibility of return migration combined with the education incentive channel reverses the brain drain into a significant brain gain for Eastern Europe. |
| Keywords: | Skilled Migration, Return Migration, Returns to Education, Eastern-Western Europe |
| JEL: | F22 J61 O15 |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:jku:nrnwps:2009_19&r=lab |
| By: | Paula Salinas (Universitat de Barcelona); Albert Solé-Ollé (Universitat de Barcelona) |
| Abstract: | Several arguments derived from fiscal federalism theory suggest that decentralization may lead to improved levels of efficiency in the provision of public goods and services. The aim of this study is to examine this hypothesis by evaluating the effects of decentralization on educational outcomes in Spain. These are measured using a survival rate, defined as the ratio between the number of students who enrolled in upper-secondary (non-compulsory) education and the number of students enrolled in the final year of lower-secondary (compulsory) education during the previous academic year. We use a panel data set comprising the 50 provinces of Spain for the years 1978 to 2005, a period that covers the entire process of decentralization. Since education competences were devolved to the regions at different points in time, we can estimate the effects of these reforms by applying the differences-in-differences method and by using the non-decentralized autonomous regions as the comparison group. We find that decentralization in Spain had a positive impact on educational outcomes when pupils on vocational training programmes are not taken into account, and that the richer the region is the more marked the effect becomes. However, this improvement in educational outcomes is achieved at the expense of enrolment in vocational training programmes. These effects might reflect a better match between population preferences and educational policies consequent upon decentralization. |
| Keywords: | Decentralization, Policy Evaluation, Education |
| JEL: | H11 H43 H52 I28 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:ieb:wpaper:2009/10/doc2009-10&r=lab |
| By: | Christophe Nordman (DIAL, IRD, Paris); Anne-Sophie Robilliard (DIAL, IRD, Paris); François Roubaud (DIAL, IRD, Paris) |
| Abstract: | (english) In this paper, we analyse the size and determinants of gender and ethnic earnings gaps in seven West African capitals (Abidjan, Bamako, Cotonou, Dakar, Lome, Niamey and Ouagadougou) based on a unique and perfectly comparable dataset coming from the 1-2-3 Surveys conducted in the seven cities from 2001 to 2002. Analysing gender and ethnic earnings gaps in an African context raises a number of important issues that our paper attempts to address, notably by taking into account labour allocation between public, private formal and informal sectors which can be expected to contribute to earnings gaps. Our results show that gender earnings gaps are large in all the cities of our sample and that gender differences in the distribution of characteristics usually explain less than half of the raw gender gap. By contrast, majority ethnic groups do not appear to have a systematic favourable position in the urban labour markets of our sample of countries and observed ethnic gaps are small relative to gender gaps. Whatever the “sign” of the gap, the contribution of differences in the distribution of individual characteristics varies markedly between cities. Taking into account differences in sectoral locations in the decomposition of gender earnings gaps provides evidence that within-sector differences in earnings account for the largest share of the gender gap and that the differences in sectoral locations are always more favorable to men than to women. By contrast, concerning ethnic earnings gaps, the full decomposition indicates that sectoral location sometimes plays a “compensating” role against observed earnings gaps. Looking at finer levels of ethnic disaggregation confirms that ethnic earnings differentials are systematically smaller that gender differentials. _________________________________ (français) Dans cette étude nous analysons le poids et les déterminants des différentiels de rémunérations entre genre et groupes ethniques dans sept métropoles d’Afrique de l’Ouest (Abidjan, Bamako, Cotonou, Dakar, Lomé, Niamey and Ouagadougou), en mobilisant une base de données unique et parfaitement comparable, provenant des enquêtes 1-2-3 réalisées dans les sept villes en 2001 et 2002. Cette question soulève un certain nombre de questions méthodologiques que nous tentons de traiter en détail, notamment en tenant compte des différences de composition ethnique et de genre entre les secteurs public, privé formel et informel qui sont susceptibles de jouer sur les écarts de revenus. Les résultats mettent en évidence l’existence d’un déficit systématique de rémunération pour les femmes, les caractéristiques des emplois expliquant moins de la moitié de ces écarts. A contrario, les groupes ethniques majoritaires ne semblent pas bénéficier d’une situation avantageuse et les écarts de revenus suivant le groupe ethnique sont relativement faibles par rapport à ceux que l’on observe suivant le genre. Quel que soit le signe de ce différentiel (positif ou négatif), la contribution expliquée par les caractéristiques observées de l’emploi varie très sensiblement d’une ville à l’autre. Les estimations montrent qu’une grande partie de l’écart de revenu selon le genre provient de l’allocation sectorielle, et que cette dernière est toujours défavorable aux femmes. En revanche, dans le cas des écarts suivant le groupe ethnique, la distribution par secteur institutionnel joue parfois de façon positive dans le sens d’une réduction des écarts. Finalement, une désagrégation plus fine des groupes ethniques, au-delà de la partition majoritaire/minoritaire, confirme que l’entrée ethnique est systématiquement moins significative sur les revenus du travail que le genre. |
| Keywords: | earnings equations, gender wage gap, ethnic wage gap, West Africa, Equation de gain, écart de salaire, décomposition, genre, Ethnie, Afrique de l'Ouest. |
| JEL: | J31 J71 O15 O55 |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:dia:wpaper:dt200907&r=lab |
| By: | Luis F. Lopez-Calva (UNDP Regional Bureau for Latin America); Nora Lustig (Tulane University and Center for Global Development) |
| Abstract: | Between 2000 and 2006, the Gini coefficient declined in 12 of the 17 Latin American countries for which data are available. Why has inequality declined? Have the changes in inequality been driven by market forces such as the demand and supply for labor with different skills? Or have governments become more redistributive than they used to be, and if so, why? This paper attempts to answer these questions by focusing on the determinants of inequality in four countries: Argentina, Brazil, Mexico and Peru. The analysis suggests that the decline in inequality is accounted for by two main factors: (i) a fall in the earnings gap between skilled and low-skilled workers (through both quantity and price effects); and (ii) more progressive government transfers (monetary and in-kind transfers). Demographic factors, such as a change in the proportion of adults (and working adults) per household, have been equalizing but the magnitude of their contribution has been small by comparison. In Brazil, Mexico and Peru, the fall in earnings gap, in turn, is mainly the result of the expansion of basic education over the last couple of decades, which reduced inequality in attainment and made the returns to education curve less steep. It also results from the petering out of the unequalizing effect of skill-biased technical change in the 1990s associated with the opening up of trade and investment. In Argentina, the decline in earnings inequality seems to be associated with government policies that without the windfall of high commodity prices will be hard to sustain. |
| Keywords: | Income inequality, Latin America, wage gap, government transfers. |
| JEL: | O15 H53 J48 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:inq:inqwps:ecineq2009-140&r=lab |
| By: | Eva Mörk (IFAU and Uppsala University); Anna Sjögren (IFAU); Helena Svaleryd (IFN) |
| Abstract: | We study the effect of child care costs on the fertility behavior of Swedish women and find that reductions in child care charges influence fertility decisions, even when costs are initially highly subsidized. Exploiting the exogenous variation in child care costs caused by a Swedish child care reform, we are able to identify the causal effect of child care costs on fertility in a context in which child care enrolment is almost universal and the labor force participation of mothers is very high. A typical household planning another child experienced a reduction in expected future child care costs of SEK 106,000 (USD 17,800). This reduction resulted in 3–5 more child births per 1,000 women during an 18 month period, which corresponds to a 4–6 per cent increase in the birth rate. |
| Keywords: | Child Care, Cost of children, Fertility, Quasi-experiment, Difference-in-differences. |
| JEL: | H31 J13 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:ieb:wpaper:2009/10/doc2009-2&r=lab |
| By: | Justina A.V. Fischer (OECD, ELS/SPD, Paris and Universitaet Hohenheim, Stuttgart); Frank Somogyi (KOF Swiss Economic Institute, ETH Zurich, Switzerland) |
| Abstract: | Unionists and politicians frequently claim that globalization lowers employment protection of workers. This paper tests this hypothesis in a panel of 28 OECD countries from 1985 to 2003, differentiating between three dimensions of globalization and two labor market segments. While overall globalization is shown to loosen protection of the regularly employed, it increases regulation in the segment of limited-term contracts. We find the economic one to drive deregulation for the regularly employed, but the social one to be responsible for the better protection of workers in atypical employment. We offer political economy arguments as explanations for these differential effects. |
| Keywords: | Globalization, international trade, integration, employment protection, labor standards, unions, cross-country analysis, panel data analysis |
| JEL: | C33 F15 F16 J81 J83 O57 |
| Date: | 2009–09 |
| URL: | http://d.repec.org/n?u=RePEc:kof:wpskof:09-238&r=lab |
| By: | Dreber, Anna (Institute for Financial Research (SIFR)); Emma , von Essen (Dept. of Economics, Stockholm University); Ranehill, Eva (Stockholm School of Economics) |
| Abstract: | Recent studies find that women are less competitive than men. This gender difference in competitiveness has been suggested as a possible explanation for why men occupy the majority of top positions in many sectors. In this study we explore competitiveness in children. A related field experiment on Israeli children shows that only boys react to competition by running faster when competing in a race, and that only girls react to the gender of their opponent. Here we test if these results carry over to 8-10 year old Swedish children. Sweden is typically ranked among the most gender equal countries in the world, thus culture could explain a potential difference in our results to those on Israeli children. We also introduce two more “female” sports: skipping rope and dancing, in order to study if reaction to competition is task dependent. Our results contradict previous findings in two ways. First, we find no gender difference in reaction to competition in running. In our study, both boys and girls compete. We also find no gender differences in reaction to competition in skipping rope and dancing. Second, we find no clear effect on competitiveness of the opponent’s gender, neither on girls or boys, in any of the tasks. Our findings suggest that the existence of a gender gap in competitiveness among children may be partly cultural, and that the gap found in previous studies on adults may be caused by factors that emerge later in life. It remains to be explored whether these later factors are biological or cultural. |
| Keywords: | competitiveness; gender differences; field experiment |
| JEL: | C93 J16 |
| Date: | 2009–10–19 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:sunrpe:2009_0017&r=lab |
| By: | Jörn H. Block (Erasmus University Rotterdam, Technische Universität München); Lennart Hoogerheide (Erasmus University Rotterdam); Roy Thurik (Erasmus University Rotterdam, EIM Business and Policy Research, Zoetermeer, Max Planck Institute of Economics, Jena) |
| Abstract: | Education is argued to be an important driver of the decision to start a business. The measurement of its influence, however, is difficult since it is considered to be an endogenous variable. This study is the first to account for this endogeneity by using an instrumental variables approach. The effect of education on the decision to become self-employed is found to be strongly positive, much higher than the estimated effect in case no instrumental variables are used. That is, the higher the respondent's level of education, the greater the likelihood that he or she starts a business. Implications for method and practice are discussed. |
| Keywords: | Occupational choice; entrepreneurial choice; education; self-employment; endogeneity; instrumental variables; entrepreneurship |
| JEL: | C35 I20 J24 L26 |
| Date: | 2009–10–13 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:20090088&r=lab |
| By: | Suleiman Abu-Bader (Ben-Gurion University and Center for Research and Regional Development of the Negev); Daniel Gottlieb (Research and Planning Administration, National Insurance Institute and Ben-Gurion University) |
| Abstract: | The socio-economic situation of the Arab-Bedouin population in the Negev is examined in light of the general Israeli Arab population. Based on the Galilee Society's social survey for 2004 Israeli Arab poverty incidence was found to be 52% with nearly two thirds in persistent poverty. Among Bedouins in villages unrecognized by the Israeli government it was nearly 80% with poverty severity about 7 times higher than that of the mainstream Jewish population in Israel, i.e. excluding the – predominantly poor – Jewish ultra-orthodox society. Poverty was calculated according to various definitions. Similarly to international evidence, we found that education, age, family size, employment and occupation of the household head and the number of income earners in the family are important determinants of the probability to be poor. Arab women's student enrollment rates over different generations improved considerably, reducing the education-gap compared to Arab men. Bedouin households, especially in non-recognized villages, were found to have much less access to infrastructure compared to other Arabs, thus forming a significant barrier to women’s participation in the labor force. This also had an adverse indirect effect toward the completion of schooling, thus keeping mothers’ fertility relatively high and reducing education's potentially diminishing effect on poverty. A considerable mismatch between skills and employment was found among Arab academics, thus hinting at discrimination and segregation in their labor market. Considering the various mentioned transmission mechanisms it seems that government intervention in infrastructure may yield a high social return and help interrupt the vicious circle of poverty. |
| Keywords: | Bedouin, Ethnic groups, Israel, poverty, basic needs, relative poverty, food-energy-intake, infrastructure, fertility, education, school-dropout, employment. |
| JEL: | H54 I21 I32 J13 O12 O15 O18 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:inq:inqwps:ecineq2009-137&r=lab |
| By: | Koster Fleur; Grip Andries de; Fouarge Didier (METEOR) |
| Abstract: | This paper focuses on the question whether it is beneficial for firms to invest in the general skills of their workforce or that these training investments merely encourage personnel turnover. We examine two contrary theoretical perspectives on how investments in employee development are related to their turnover behaviour. Estimation results derived from a sample of 2,833 Dutch pharmacy assistants show that participation in general training does not induce the intention of assistants to quit, as predicted by human capital theory. We find that a firm’s investments in general training, significantly contribute to the perceived support in employee development (PSED) among their workforce. Our results also show that PSED is negatively related to the intention of employees to quit the firm. This effect is to a large extent mediated by the job satisfaction of pharmacy assistants. Our findings support the importance of social exchange theory in explaining turnover behaviour as a consequence of personnel development practices. It should be noted, however, that PSED only diminishes the intention to quit for other occupations. |
| Keywords: | labour economics ; |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:umamet:2009050&r=lab |
| By: | Wada, Roy; Herbert, Zahirovic-Herbert |
| Abstract: | Our results show that high-income families place significantly higher value on academic achievement than low-income families. High-income families are also more likely to penalize house price for non-desirable non-academic school quality. This paper uses quantile regression to examine the distribution of demand for school quality. For academic achievement, the average effects as estimated by OLS are biased toward zero due to “aggregation” of families’ willingness to pay. We take advantage of a court-ordered redistricting as a quasi-random assignment of school quality. Subdivision and school fixed-effects are used to control for unobserved characteristics. |
| Keywords: | school quality; demand; house price; quantile regression; hedonic equation |
| JEL: | I2 R2 D1 D4 R5 |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:18078&r=lab |
| By: | Mariana Viollaz (Centro de Estudios Distributivos, Laborales y Sociales (CEDLAS) - Universidad Nacional de La Plata - CONICET); Sergio Olivieri (Centro de Estudios Distributivos, Laborales y Sociales (CEDLAS) - Universidad Nacional de La Plata); Javier Alejo (Centro de Estudios Distributivos, Laborales y Sociales (CEDLAS) - Universidad Nacional de La Plata - CONICET) |
| Abstract: | This paper presents and analyzes a group of statistics which characterize the level and evolution of the labor income polarization in Greater Buenos Aires over the past two decades (1986-2006). The empirical evidence reveals two stages throughout those years: the first one distinguished by an increment of all indices and the second one, by shrinkage of them. Inspecting potential factors which could explain those changes, returns to education surge as the main polarization force in the labor market. Hence, an equalizing distribution of the human capital is a possible alternative for a less polarized labor market. |
| Keywords: | polarization, labor, cohesion, inequality, Argentina, Greater Buenos Aires |
| JEL: | I3 D3 D6 |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:dls:wpaper:0089&r=lab |
| By: | Peter Haan (Max Planck Institute for Demographic Research, Rostock, Germany); Katharina Wrohlich |
| Abstract: | In this paper we develop a structural model of female employment and fertility which accounts for intertemporal feedback effects between the two outcomes. We identify the effect of financial incentives on the employment and fertility decision by exploiting variation in the tax and transfer system which differs by employment state and number of children. To this end we simulate in detail the effects of the tax and transfer system including child care costs. The model provides estimates of structural preferences of women which can be used to study the effect of various policy reforms. In particular, we show that increasing child care subsidies conditional on employment increases labor supply of all women as well as fertility of the childless and highly educated women. |
| Keywords: | employment, fertility |
| JEL: | J1 Z0 |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:dem:wpaper:wp-2009-025&r=lab |
| By: | Eric Smith |
| Abstract: | This paper incorporates assignment frictions and sector-specific training into the Roy model of occupational choice. Assignment frictions represent the extent of the market whereas differences in sector-specific training reflect worker specialization. This framework thus captures Adam Smith's idea that the extent of the market determines the division of labor. The paper demonstrates the way in which the relationship between assignment frictions and specialization affects the level and composition of human capital acquisition, aggregate output, and the distribution of income. Not surprisingly, economywide training, output, and specialization increase as the extent of the market increases. The distribution of these gains, however, is uneven. Within group or residual income, distribution does not converge monotonically as search frictions diminish. Comparisons across groups reveal that these effects can become more pronounced as average income increases. |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedawp:2009-21&r=lab |
| By: | FrŽdŽric DOCQUIER (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES) and FNRS); Abdeslam MARFOUK (UNIVERSITE LIBRE DE BRUXELLES); Sara SALOMONE (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES) and TOR VERGATA UNIVERSITY); Khalid,SEKKAT (UNIVERSITE LIBRE DE BRUXELLES) |
| Abstract: | This paper empirically studies emigration patterns of skilled males and females. In the most relevant model accounting for interdependencies between women and menÕs decisions, we derive the gendered responses to traditional push factors. Females and males do not respond with the same intensity to the traditional determinants of labor mobility and gender-specific characteristics of the population at origin. Moreover, being other factors equal, the female willingness to follow the spouse seems to be much more pronounced with respect to the male one. From a quantitative perspective, our model reveals that skilled women are not more migratory than skilled men internationally, thus rejecting the existence of a genetic or social gender gap in international skilled migration. |
| Date: | 2009–08–17 |
| URL: | http://d.repec.org/n?u=RePEc:ctl:louvir:2009021&r=lab |
| By: | Caroline M. Hoxby |
| Abstract: | This paper shows that although the top ten percent of colleges are substantially more selective now than they were 5 decades ago, most colleges are not more selective. Moreover, at least 50 percent of colleges are substantially less selective now than they were then. This paper demonstrates that competition for space--the number of students who wish to attend college growing faster than the number of spaces available--does not explain changing selectivity. The explanation is, instead, that the elasticity of a student's preference for a college with respect to its proximity to his home has fallen substantially over time and there has been a corresponding increase in the elasticity of his preference for a college with respect to its resources and peers. In other words, students used to attend a local college regardless of their abilities and its characteristics. Now, their choices are driven far less by distance and far more by a college's resources and student body. It is the consequent re-sorting of students among colleges that has, at once, caused selectivity to rise in a small number of colleges while simultaneously causing it to fall in other colleges. I show that the integration of the market for college education has had profound implications on the peers whom college students experience, the resources invested in their education, the tuition they pay, and the subsidies they enjoy. An important finding is that, even though tuition has been rising rapidly at the most selective schools, the deal students get there has arguably improved greatly. The result is that the "stakes" associated with admission to these colleges are much higher now than in the past. |
| JEL: | H75 I2 J24 |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:15446&r=lab |
| By: | Chaudhuri, Sarbajit |
| Abstract: | This note introduces labour market imperfection in an otherwise Heckscher-Ohlin-Samuelson (HOS) model and provides a theory of unionized wage formation. It demonstrates that this framework satisfies the Stolper-Samuelson theorem and the magnification effect and that it is capable of producing certain results which are contrary to the standard HOS and the Corden and Findlay (1975) results. |
| Keywords: | Labour market imperfection; Heckscher-Ohlin-Samuelson model; Corden and Findlay model; Foreign capital; Trade liberalization. |
| JEL: | O17 F21 |
| Date: | 2009–05–20 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:18034&r=lab |
| By: | Susan Dynarski; Jonathan Gruber; Danielle Li |
| Abstract: | The effect of vouchers on sorting between private and public schools depends upon the price elasticity of demand for private schooling. Estimating this elasticity is empirically challenging because prices and quantities are jointly determined in the market for private schooling. We exploit a unique and previously undocumented source of variation in private school tuition to estimate this key parameter. A majority of Catholic elementary schools offer discounts to families that enroll more than one child in the school in a given year. Catholic school tuition costs therefore depend upon the interaction of the number and spacing of a family’s children with the pricing policies of the local school. This within-neighborhood variation in tuition prices allows us to control for unobserved determinants of demand with a set fine geographic group fixed effects while still identifying the price parameter. We analyze this variation by using data on over 3700 school tuition schedules collected from Catholic schools around the nation, matched to restricted Census data that identifies precise location that can be matched to the nearest Catholic school. We find that a standard deviation decrease in tuition prices increases the probability that a family will send its children to private school by one half percentage point, which translates into an elasticity of Catholic school attendance with respect to tuition costs of -0.19. Our subgroup results suggest that a voucher program would disproportionately induce into private schools those who, along observable dimensions, are unlike those who currently attend private school. |
| JEL: | I20 I28 |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:15461&r=lab |
| By: | Alan L. Gustman; Thomas L. Steinmeier; Nahid Tabatabai |
| Abstract: | This paper investigates the effect of the current recession on the near-retirement age population. Data from the Health and Retirement Study suggest that those approaching retirement age (early boomers ages 53 to 58 in 2006) have only 15.2 percent of their wealth in stocks, held directly or in defined contribution plans or IRAs. Their vulnerability to a stock market decline is limited by the high value of their Social Security wealth, which represents over a quarter of the total household wealth of the early boomers. In addition, their defined contribution plans remain immature, so their defined benefit plans represent sixty five percent of their pension wealth. Simulations with a structural retirement model suggest the stock market decline will lead the early boomers to postpone their retirement by only 1.5 months on average. Health and Retirement Study data also show that those approaching retirement are not likely to be greatly or immediately affected by the decline in housing prices. We end with a discussion of important difficulties facing those who would use labor market policies to increase the employment of older workers. |
| JEL: | D31 D91 E21 H55 I3 J14 J26 J32 |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:15435&r=lab |
| By: | Rakesh Basant,Partha Mukhopadhyay |
| Abstract: | We provide a brief but comprehensive overview of linkages between higher education and the high tech sector and study the major linkages in India. We find that the links outside of the labor market are weak. This is attributed to a regulatory structure that separates research from the university and discourages good faculty from joining, which erodes the quality of the intellectual capital necessary to generate new knowledge. In the labor market, we find a robust link between higher education and high-tech industry, but despite a strong private sector supply response to the growth of the high-tech industry, the quality leaves much to be desired. Poor university governance may be limiting both labor market and non-labor market linkages. Industry efforts to improve the quality of graduates are promising but over reliance on industry risks compromising workforce flexibility. Addressing the governance failures in higher education is necessary to strengthen the links between higher education and high tech industry. |
| Date: | 2009–05–05 |
| URL: | http://d.repec.org/n?u=RePEc:iim:iimawp:2009-05-01&r=lab |
| By: | Dwibedi, Jayanta; Chaudhuri, Sarbajit |
| Abstract: | This paper purports to examine the validity of the common belief that in a developing economy the backward agricultural sector should be subsidized as poorer group of the working population are employed in this sector that send their children out to work out of sheer poverty. A three-sector general equilibrium framework with agricultural dualism and child labour has been employed for the purpose of analysis. It finds that a price subsidy policy to backward agricultural sector is likely to aggravate the child labour incidence while a credit subsidy to advanced agriculture may be effective in reducing the gravity of the problem in the economy. The paper, therefore, questions the desirability of assisting backward agriculture for eradicating child labour in the society. |
| Keywords: | Child labour; general equilibrium; agricultural dualism; subsidy policy. |
| JEL: | J13 J10 O17 D10 |
| Date: | 2009–06–15 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:18002&r=lab |
| By: | Cerna, Lucie (Stockholm University Linnaeus Center for Integration Studies - SULCIS) |
| Abstract: | This paper examines changes in Swedish labour immigration policy from early 2000s, but particular attention is paid to recent changes. The new Immigration Law of 2008 liberalised immigration policy and made it more employer-driven. These changes are called by some as ‘slight revolution’. The paper analyses the preferences of three main actors (native high-skilled labour, native low-skilled labour and capital), the coalitions built between them and the institutional constraints in order to explain labour immigration changes. It draws on the examination of media coverage, elite interviews, and labour relations and political representation literature. The paper also provides a first evaluation of the new immigration policy. |
| Keywords: | Labour immigration; labour market relations; political economy; public policy; Sweden |
| JEL: | F50 J50 J60 |
| Date: | 2009–10–28 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:sulcis:2009_010&r=lab |
| By: | Cörvers Frank; Dupuy Arnaud (METEOR) |
| Abstract: | In this paper, we estimate the demand for workers by sector and occupation using system dynamic OLS techniques to account for the employment dynamics dependence across occupations and sectors of industry. The short run dynamics are decomposed into intra and intersectoral dynamics. We find that employment by occupation and sector is significantly affected by the short run intersectoral dynamics, using Dutch data for the period 1988-2003. On average, these intersectoral dynamics account for 20% of the predicted occupational employment. |
| Keywords: | macroeconomics ; |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:umamet:2009048&r=lab |
| By: | Lydia Mechtenberg; Roland Strausz |
| Abstract: | We develop a model to analyze the determinants and effects of an endogenous imperfect transferability of human capital on natives and immigrants. The model reveals that high migration flows and high skill-transferability are mutually interdependent. Moreover, we show that high mobility within a Federation is necessary to attract highly skilled immigrants into the Federation. We study in how far and in what way the European public policy behind the Bologna and the Lisbon Process can contribute to higher mobility in Europe. |
| Keywords: | human capital, migration, transferability, public policy |
| JEL: | D61 H77 I28 |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:hum:wpaper:sfb649dp2009-048&r=lab |
| By: | Kristie M. Engemann; Howard J. Wall |
| Abstract: | The burdens of a recession are not spread evenly across demographic groups. The public and media, for example, noticed that, from the start of the current recession in December 2007 through June 2009, men accounted for more than three quarters of net job losses. Other differences have garnered less attention, but are just as interesting. During the same period, the employment of single people fell at more than twice the rate that it did for married people, while black employment fell at one-and-a-half times the rate that white employment did. To have a more complete understanding about what recessions mean for people, this paper examines the different effects of this and previous recessions on employment experiences across a range of demographic categories: sex, marital status, race, age, and education level. |
| Keywords: | Recessions ; Demography |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlwp:2009-052&r=lab |
| By: | Michle BELOT (OXFORD UNIVERSITY, Nuffield Centre for Experimental Social Sciences (CESS), Nuffield College); Vincent VANDENBERGHE (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES)) |
| Abstract: | This paper evaluates the effects of grade retention on attainment by exploiting a reform introduced in 2001 in the French-Speaking Community of Belgium whereby the possibility of grade retention in grade 7 was reintroduced. It uses the Synthetic Control Method to identify the best possible pre-treatment control. Data come from three waves of the PISA study (corresponding to periods before and after the reform) that contains test scores of representative samples of 15 year-olds. These are used essentially to answer two questions. First, has the 2001 grade repetition reform at least succeeded at filtering out weaker pupils, pupils who would presumably be disadvantaged by being promoted directly to higher grades. This is a minimum condition for grade retention to be justifiable. Second, do these ÒtreatedÓ students achieve better/worse when they repeat (and attend a lower grade) than when they are Òsocially promotedÓ. (and attend the age 15 reference grade 10)? We find significant evidence of positive screening but we fail to demonstrate that those filtered out perform differently under the Ògrade repetitionÓ.regime than under the Òsocial promotionÓregime. |
| Keywords: | Grade retention, educational attainment, synthetic control method |
| JEL: | I20 I28 H52 |
| Date: | 2009–08–17 |
| URL: | http://d.repec.org/n?u=RePEc:ctl:louvir:2009022&r=lab |
| By: | Olivier Thevenon (INED - Institut National d'Etudes Démographiques - INED) |
| Abstract: | The current total fertility rate in France has been increasing over this last ten years and is has reached its highest level since the early 1980s with a rate at 1,98 in 2006. Compared to European standards, this high level of fertility makes France an outlier, in spite of rather similar trends in the transition to adulthood, in partnerships, or in attitudes on birth control or in economic situation (rather low growth, increase in poverty rates). Thus, the French case challenges some of the hypotheses ventured to explain the current low fertility observed in European countries. France's fertility level can be explained by its longstanding family policy, which has changed in-depth since the 1980s to accommodate with women's increasing labour force participation. This policy encompasses a wide range of instruments, based on different actors and motivations, since this policy is aimed to serve different objectives. Despite some ambiguities, family policy seems to have created especially positive attitudes towards 2 or 3 children families in France, and to have bounded the propensity to remain childless. We argue that a key aspect is the favourable context created for the conciliation between work and family through a relatively comprehensive and continuous support over the family life-course. The all set of complementary instruments (financial transfers to large families, parental leave schemes and provision of childcare support) creates a rather secure climate for the decision relating to child bearing. It also explains why the decision to have children or to be in employment is less polarised according to socio-economic status than in other countries. |
| Keywords: | fertility; family policies; France |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-00424832_v1&r=lab |
| By: | Hunt, Karin; Rankin, Neil A.; Schöer, Volker; Nthuli, Miracle; Sebastiao, Claire |
| Abstract: | Mathematics is an important signal used for admission into commerce courses in South African universities. In 2008 the new National Senior Certificate replaced the former Senior Certificate. This new exam no longer had different grades and thus created a structural break in the ability of the mathematics mark to signal preparedness for university. Although the Department of Education provided a “translation” key between the two Certificates, the University of the Witwatersrand (and other universities) admitted many more students in 2009 that met the entry requirements than previously. However, this cohort has lower average test and exam scores than previous years. This suggests that marks obtained for mathematics in the new National Senior Certificate are inflated when compared to the former Senior Certificate. This paper uses similar tests, for two commerce subjects, written by students in 2008 and 2009 to create a comparison between the mathematics marks under the two different certificates. The results suggest that marks in the range of 40-100% for Higher Grade mathematics for the Senior Certificate are now compressed into the 70-95% range for the new National Senior Certificate. This significantly weakens the ability of the school-leaving mathematics mark to signal the ability of students to cope with first year commerce courses. |
| Keywords: | Mathematics; National Senior Certificate; Economics 1; first year; Commerce courses; South Africa |
| JEL: | A22 A20 |
| Date: | 2009–10–22 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:18075&r=lab |
| By: | Grip Andries de; Smits Wendy (METEOR) |
| Abstract: | This paper greatly enriches the discussion on the determinants of lifelong learning of scientists and engineers (S&Es). In our analysis, which is based on a survey among S&Es in the Netherlands, we take account of both formal training and different modes of informal learning. We find that S&Es employed in firms which apply innovative production processes more often participate in formal training and also benefit from the informal learning potential of their jobs. Therefore, public policies that stimulate process innovation also prevent skills obsolescence among S&Es. However, lifelong learning is not triggered in firms with many product innovations. S&Es who are employed in firms which operate on highly competitive markets also participate in formal training less often. The same holds for S&Es employed in small firms, although the latter compensate their lower participation in formal training by more hours of self-teaching. S&Es employed in jobs which require a high level of technical knowledge have more formal training, whereas those employed in jobs which require more general skills are significantly more involved in informal learning. Furthermore, older S&Es with long firm tenures participate in formal training less often and have fewer opportunities for learning in their jobs. Therefore, their competence level is at risk. |
| Keywords: | labour economics ; |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:umamet:2009049&r=lab |
| By: | Jonathan Heathcote; Fabrizio Perri; Giovanni L. Violante |
| Abstract: | We conduct a systematic empirical study of cross-sectional inequality in the United States, integrating data from the Current Population Survey, the Panel Study of Income Dynamics, the Consumer Expenditure Survey, and the Survey of Consumer Finances. In order to understand how different dimensions of inequality are related via choices, markets, and institutions, we follow the mapping suggested by the household budget constraint from individual wages to individual earnings, to household earnings, to disposable income, and, ultimately, to consumption and wealth. We document a continuous and sizable increase in wage inequality over the sample period. Changes in the distribution of hours worked sharpen the rise in earnings inequality before 1982, but mitigate its increase thereafter. Taxes and transfers compress the level of income inequality, especially at the bottom of the distribution, but have little effect on the overall trend. Finally, access to financial markets has limited both the level and growth of consumption inequality. |
| Keywords: | Wages ; Income distribution ; Income ; Consumption (Economics) ; Wealth |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedmsr:436&r=lab |
| By: | Dalila NICET – CHENAF (GREThA UMR CNRS 5113); Eric ROUGIER (GREThA UMR CNRS 5113) |
| Abstract: | Human capital measures (schooling) are poorly significant in explaining growth for developing countries. An explanation is that increases in human capital have no significant effect on growth if this human capital is misallocated and underemployed. In a simple two-sector model of a small open economy, we show that the effect of education on growth is more significant if the country has entered into the structural change that raises the demand for skilled labour. Moreover, we give a special attention to the role of entrepreneurs in the increase in the demand for skills in the modern sector and propose to measure it through the diversification of exports. We then derive an econometric specification from a simple two-sector model of growth with structural change and different levels of skills. From a sample of emerging economies, we provide econometric evidence that the reduction in the traditional share of GDP and a higher diversification of export both have a positive influence on growth rates. We also show that if the drop in traditional activities is to matter for growth, it is not through the skill reallocation from traditional to modern activities whereas export diversification is a factor of higher growth, directly but also through the enhancement of the effect of human capital on the increase of GDP. Then, the point could be that if reallocation of skills is to matter, it is more probably through shifts among the industrial sector, from the older to the newer activities than across sectors, from the traditional to the modern. |
| Keywords: | Human capital, growth, structural change |
| JEL: | C23 O14 O15 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:grt:wpegrt:2009-14&r=lab |
| By: | Tejas A. Desai |
| Abstract: | Both India and the U.S. were once colonies of Great Britain, the world''s first but short-lived global power. And both India and the U.S. ultimately threw off the imperialist yoke. Despite independence, both democracies inherited certain things from Great Britain. Whereas India inherited the English language, parliamentary governance, socialism, and, last but not least, the English educational system; the U.S. inherited the English language, the Judeo-Christian value system, and the .white. racial identity. The English educational system of India was augmented by Soviet-style central planning which resulted in several .Institutes. that have come to dominate higher education in India. Despite being ethnically closer to Great Britain, the U.S. evolved its own system of political governance, and, more important, its own educational system. While American higher education has come to define the .gold standard. for higher education, India still lags considerably behind in higher education. This paper seeks to explain certain cultural differences that may have contributed to this imbalance between the Indian and American higher education systems. |
| Date: | 2009–04–24 |
| URL: | http://d.repec.org/n?u=RePEc:iim:iimawp:2009-04-03&r=lab |
| By: | Thomas Buser (School of Economics, University of Amsterdam) |
| Abstract: | We use fluctuations of female sex hormones occurring naturally over the menstrual cycle or induced by hormonal contraceptives to determine the importance of sex hormones in explaining gender differences in competitiveness. Participants in a laboratory experiment solve a simple arithmetics task first under a piece rate and then under a competitive tournament scheme. Subjects can then choose which compensation scheme to apply in a third round. We find that sex hormones have a strong effect on whether women select into the competitive environment. The observed patterns are consistent with a negative impact especially of progesterone on competitiveness and our results therefore provide a partial biological explanation for gender differences in competitiveness. We consider three possible indirect pathways through which sex hormones could affect competitiveness: via an impact on risk aversion, via an impact on performance, and via an impact on overconfidence. None of these hold up to the data and we conclude that sex hormones have a more direct impact on competitiveness. |
| Keywords: | competitiveness; gender differences; hormones; lab experiment |
| JEL: | C91 C92 J16 |
| Date: | 2009–09–29 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:20090082&r=lab |
| By: | Ankur Sarin; Rekha Jain |
| Abstract: | Using a survey of 1774 users and non-users in 84 slums in three metropolitan cities (Delhi, Ahmedabad and Kolkata), we try to understand the impact of mobiles on their social and economic lives. Urban slum dwellers spend significant amounts on communications, both for a first time acquisition of handset and SIM (nearly 40% of the average household earnings per month), as well as on going expenditure. However, a majority of respondents believe that the use of mobiles has led to an improvement in their economic situation and that these benefits are greater than ownership and usage costs. Mobile also appears to change how slum residents interact with each other. Despite reducing face-to-face interactions, mobile usage is associated with stronger social relationships. In comparing users and non-users, we find differences between users and non-users in terms of income, education and other social characteristics. We also find evidence of hierarchies within households, with women far more likely than men to be only infrequent mobile users or not to have access at all. While cost of a handset is the primary barrier to owning a mobile, non-owners report difficulty in using a mobile, clarity of charges for call-plans and information dissemination as other barriers to ownership. |
| Date: | 2009–03–03 |
| URL: | http://d.repec.org/n?u=RePEc:iim:iimawp:2009-02-05&r=lab |
| By: | Armin Falk; Andreas Kuhn (Institute for Empirical Research in Economics, University of Zurich, Switzerland); Josef Zweimüller |
| Abstract: | It is frequently argued that unemployment plays a crucial role for the occurrence of right- wing extremist crimes. We empirically test this hypothesis using data from Germany. We find that right-wing criminal activities occur more frequently when unemployment is high. The big difference in right-wing crime between East and West German states can mostly be attributed to differences in unemployment. This finding reinforces the importance of unemployment as an explanatory factor for right-wing crime and questions explanations based solely on the different socialization in former communist East Germany and the liberal West German states. |
| Keywords: | Hate crime, right-wing extremism, unemployment, cost of unemployment |
| JEL: | J15 J69 K42 |
| Date: | 2009–09 |
| URL: | http://d.repec.org/n?u=RePEc:jku:nrnwps:2009_16&r=lab |
| By: | David de la CROIX (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES) and CORE); FrŽdŽric DOCQUIER (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES) and National Fund for Scientific Research (Belgium)) |
| Abstract: | Although movements of capital, goods and services are growing in importance, workers movements are impeded by restrictive policies in rich countries. Such regulations carry substantial economic costs for developing countries, and prevent global inequality from declining. Even if rich countries are averse to global inequality, a single country lacks incentives to welcome additional migrants as it would bear the costs alone while the benefits accrue to all rich states. Aversion to global inequality confers a public good nature to the South-North migration of low-skill workers. We propose an alternative allocation of labor maximizing global welfare subject to the constraints that the rich countries are at least as well off as in the current ÒnationalistÓ (or ÒNashionalistÓ) situation. This Òno regretÓ allocation can be decentralized by a tax-subsidy scheme which makes people internalize the fact that as soon as a rich country welcomes an additional migrant, global inequalities are reduced, and everybody in the rich world is better off too. Our model is calibrated using statistics on immigration, working-age population and output. We simulate the proposed scheme on different sets of rich countries. |
| Keywords: | Public Good, Inequality Aversion, Immigration policy |
| JEL: | F22 D58 D6 D7 |
| Date: | 2009–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:ctl:louvir:2009028&r=lab |
| By: | Egon Franck (Institute for Strategy and Business Economics, University of Zurich); Stephan Nüesch (Institute for Strategy and Business Economics, University of Zurich); Jan Pieper (Institute for Strategy and Business Economics, University of Zurich) |
| Abstract: | In this paper, we empirically investigate the performance effect of team-specific human capital in highly interactive teams. Based on the tenets of the resource-based view of the firm and on the ideas of typical learning functions, we hypothesize that team members’ shared experience in working together positively impacts team performance, but at diminishing rates. Holding a team’s stock of general human capital and other potential drivers constant, we find support for this prediction. Implications concerning investment decisions into human capital as well as the transferability of our findings to other contexts are discussed. |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:iso:wpaper:0113&r=lab |
| By: | Martijn Cremers; Roberta Romano |
| Abstract: | This paper examines the impact on shareholder voting of the mutual fund voting disclosure regulation adopted by the SEC in 2003, using a paired sample of management proposals on executive equity incentive compensation plans submitted before and after the rule change. While voting support for management has decreased over time, we find no evidence that mutual funds’ support for management declined after the rule change, as expected by advocates of disclosure. In fact, we find evidence of increased support for management by mutual funds after the change. There is some evidence that firms sponsoring such proposals both before and after the rule change differ from those sponsoring a proposal only before the change. For example, firms are more likely to sponsor a proposal both before and after the rule change if they have higher mutual fund ownership. Such endogeneity could partly explain our findings of increased support after the rule. |
| JEL: | G2 K22 |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:15449&r=lab |
| By: | Pratibha Esther Singh |
| Abstract: | The methodology had two parts - secondary data analysis and a descriptive cross sectional study. Secondary date analysis was carried our using a sample of 1,028 men and 1,028 women in the reproductive ages drawn from the phase-2 RCH survey. The RCH surveys consist of sample sizes adequate at the district level to obtain estimates of reproductive morbidity. The primary data collection for this study was conducted in the Tehri Garhwal district of UA. The sampling frame consisted of all trained Traaditional Birth Attendants (TBAs) in six of nine blocks in the chosen district. Several NGOs have undertaken TBA training in Tehri Garhwal. [WP no. 11] |
| Keywords: | women, reproductive ages, RCH sirveys, birth attendants, TBAs, uttaranchal, child survial, health workers, Indian, morbidity, |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:ess:wpaper:id:2249&r=lab |
| By: | Carlo Altavilla (University of Naples Parthenope, Via Medina, 40 - 80133 Naples, Italy.); Matteo Ciccarelli (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.) |
| Abstract: | This paper explores the role that the imperfect knowledge of the structure of the economy plays in the uncertainty surrounding the effects of rule-based monetary policy on unemployment dynamics in the euro area and the US. We employ a Bayesian model averaging procedure on a wide range of models which differ in several dimensions to account for the uncertainty that the policymaker faces when setting the monetary policy and evaluating its effect on real economy. We find evidence of a high degree of dispersion across models in both policy rule parameters and impulse response functions. Moreover, monetary policy shocks have very similar recessionary effects on the two economies with a different role played by the participation rate in the transmission mechanism. Finally, we show that a policy maker who does not take model uncertainty into account and selects the results on the basis of a single model may come to misleading conclusions not only about the transmission mechanism, but also about the differences between the euro area and the US, which are on average essentially small. JEL Classification: C11, E24, E52, E58. |
| Keywords: | Monetary policy, Model uncertainty, Bayesian model averaging, Unemployment gap, Taylor rule. |
| Date: | 2009–09 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20091089&r=lab |