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on Labour Economics |
| By: | Richard Upward; Peter Wright |
| Abstract: | We estimate the earnings, hours and income effects of job loss (displacement) for a representative sample of UK workers from 1991--2007. We are able to follow workers before and after displacement regardless of their labour market state, and we are able to precisely match displaced workers with observably similar non-displaced workers. We show that job loss is associated with a long-run reduction in income which is mainly due to reductions in monthly pay conditional on employment rather than in employment propensity. Entry into unemployment is very short-lived, and while there is some entry into other labour market states, this does little to compensate for income losses. Total income from welfare payments, including unemployment insurance, retirement income and invalidity benefit reduces losses by only 15% in the first 12 months after job loss, and become even less important as time passes. The lack of a “safety net” means that job loss in the UK has a similar effect to job loss in the US. |
| Keywords: | Job loss, earnings, welfare payments |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:not:notgep:15/10&r=all |
| By: | krolikowski, Pawell (Federal Reserve Bank of Cleveland) |
| Abstract: | Workers who suffer job displacement experience surprisingly large and persistent earnings losses. This paper proposes an explanation for this robust empirical puzzle in a model of search over match-quality with a significant job ladder. In addition to capturing the depth and persistence of displaced-worker-earnings losses, the model is able to match a) separation rates by tenure; b) the empirical decomposition of earnings losses into reduced wages and employment; c) observed wage dispersion; d) the pattern of employer-to-employer transitions after layoff, and e) the degree of serial correlation in separations. |
| Keywords: | Displacement; earnings; search; match-quality |
| JEL: | D83 E24 J63 J64 |
| Date: | 2015–09–08 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedcwp:1514&r=all |
| By: | Gopi Shah Goda; Shanthi Ramnath; John B. Shoven; Sita Nataraj Slavov |
| Abstract: | Despite the large and growing returns to deferring Social Security benefits, most individuals claim Social Security before the full retirement age, currently age 66. In this paper, we use a panel of administrative tax data on likely primary earners to explore some potential hypotheses of why individuals fail to delay claiming Social Security, including liquidity constraints and private information regarding one’s expected future lifetime. We find that approximately 31-34% of beneficiaries who claim prior to the full retirement age have assets in Individual Retirement Accounts (IRAs) that would fund at least 2 additional years of Social Security benefits, and 24-26% could fund at least 4 years of Social Security deferral with IRA assets alone. Our analysis suggests that these percentages would be considerably higher if other assets were taken into account. We find evidence that those who claim prior to the full retirement age have higher subjective and actual mortality rates than those who claim later, suggesting that private information about expected future lifetimes may influence claiming behavior. |
| JEL: | D14 H31 H55 |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:21544&r=all |
| By: | Patrick Hullegie (VU University Amsterdam); Pierre Koning (VU University Amsterdam) |
| Abstract: | In the past two decades the OECD has regularly voiced concern about the labor market exclusion of people with disabilities and about the cost of disability insurance programs. This paper examines whether the fundamental disability insurance reforms that were implemented in the Netherlands have helped or hindered employment opportunities of workers with health problems or disability. An important component of the Dutch reforms was to enhance employer incentives, which was done by making them responsible for paying sickness benefits and by strengthening their sickness monitoring obligations. These employer incentives may stimulate preventive and reintegration activities by firms, thereby improving the employment opportunities of disabled workers. However, the reforms also impose substantial costs on employers when an employee gets sick and may therefore reduce employme nt opportunities of disabled workers. We use data from the Dutch Labor Force Survey and rich administrative data from hospital admission records, social security records, and the municipality registers containing demographic information to examine whether the disability reforms have in fact improved the economic situation for the disabled. On balance, we conclude that the DI reforms implemented by the Dutch government have mainly protected those who already have a job, and may have inadvertently reduced the hiring opportunities of people with a disability. |
| Keywords: | Disability Insurance; employer incentives; policy evaluation |
| JEL: | H53 J14 J18 |
| Date: | 2015–09–11 |
| URL: | http://d.repec.org/n?u=RePEc:tin:wpaper:20150109&r=all |
| By: | Mohrenweiser, Jens; Wydra-Sommaggio, Gaby; Zwick, Thomas |
| Abstract: | This paper addresses the puzzle how employers that invest in general human capital can gain an information advantage with respect to the ability of their employees when training is certified by credible external institutions. We apply an established model from the employer-learning literature and distinguish between two ability dimensions: cognitive and work-related ability. We apply this model to the German apprenticeship system and show that cognitive ability certified by external institutions at that the end of apprenticeship training can be signalled to outside employers. Apprenticeship graduates however cannot signal their work-related ability - measured by a small voluntary bonus paid by the training employer - to the outside market. We therefore show that the information advantage on work-related ability explains that training employers can positively select the apprentices they retain. As a consequence, this information advantage induces employers to invest in certified and transferable human capital. |
| Keywords: | training,employer learning,employer change,adverse selection,asymmetric information |
| JEL: | J24 J31 J62 J63 M52 M53 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:15057&r=all |
| By: | Landeo, Claudia (University of Alberta, Department of Economics); Nikitin, Maxim (National Research University Higher School of Economics) |
| Abstract: | Effective labor relations laws determine the allocation of bargaining power between the parties involved in labor disputes, and hence, influence social welfare. The right to strike, the types of legal strikes, and the right to hire replacement workers are fundamental components of labor relations laws in the public sector. Strikes by public school teachers, which are common in real-world settings, involve particularly high social costs. We theoretically study the social welfare effects of labor relations laws that permit the effective use of replacement teachers in case of strikes. These laws refer to the explicit right to hire replacement teachers and to the prohibition of intermittent strikes. We present a sequential bargaining game of incomplete information. Our model explicitly includes a law component, which captures the impact of effective labor relations laws. We conduct social welfare analysis and demonstrate that these laws reduce bargaining impasse and increase social welfare. |
| Keywords: | Labor Relations Laws; Social Welfare; Bargaining Impasse; Replacement Teachers Laws; Intermittent Strikes Laws; Non-Cooperative Games; Asymmetric Information; Perfect Bayesian Equilibrium |
| JEL: | C72 D82 J52 J58 |
| Date: | 2015–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:ris:albaec:2015_011&r=all |
| By: | Dumas, Christelle |
| Abstract: | Economic shocks have been shown to affect child labor and particularly so when households fail to access credit. This paper endeavours to assess whether access toagricultural labor markets also reduce the impact of shocks on child labor. Using panel data from Tanzania, we confirm that households respond to transitory productivity shocks by changes in child labor, but that (1) child labor increases with increases in rainfall, (2) it increases less when households have access to a labor market and (3) the agricultural labor market seems more efficient than the credit market to smooth rainfall shocks. These findings are consistent with the theoretical model offered in the paper. They highlight that imperfect agricultural labor markets are important determinants of child labor. |
| Keywords: | child labor; labor market imperfections; credit market imperfections; Tanzania |
| JEL: | O12 O13 O15 J13 J43 |
| Date: | 2015–09–07 |
| URL: | http://d.repec.org/n?u=RePEc:fri:fribow:fribow00458&r=all |
| By: | Claire Crawford (Department of Economics, University of Warwick and Institute for Fiscal Studies); Lindsey Macmillan (Department of Quantitative Social Science, Institute of Education, University College London); Anna Vignoles (Faculty of Education, University of Cambridge) |
| Abstract: | The role of education as a potential driver of social mobility has been well established and it is critical that we understand how children from different socio-economic backgrounds fare in the education system. In this paper, we examine the trajectories of initially high- and low-achieving children from lower and higher socio-economic status families from age 7 through to the end of compulsory education (age 16) in England for the first time. This enables us to provide new insights into when initially high attaining poor children fall behind their better-off peers. We show that there are substantial differences in educational attainment by socio-economic background at age 7, and that these differences increase as children move through the education system. Our results indicate that pupils from poor backgrounds who score highly in primary school fall behind their better-off but lower achieving peers during secondary school. These findings are not caused by ''regression to the mean'' (where a child with 'high' or 'low' achievement on any given day may have over- or under-performed relative to their 'true' attainment, meaning that the next time they are tested they will look more like the average individual). This suggests that secondary school may be a critical period to intervene to ensure poor children do not fall behind their better-off peers. We also provide suggestive evidence on the extent to which these patterns can be explained by the types of schools that pupils from different backgrounds attend, and by the differing attitudes and aspirations of the pupils and their families. Our analysis suggests that there is less convergence amongst pupils who attend the same schools. And if all pupils had the attitudes and aspirations of the average pupil, there would be more convergence. While we remain cautious about the implications of these findings, they provide suggestive evidence that schools (or the sorting of pupils into schools) and the attitudes and aspirations held by children from different backgrounds may contribute to the convergence in attainment that we see. |
| Keywords: | Social Mobility; Education Achievement; Regression to the mean |
| JEL: | I20 I24 J13 |
| Date: | 2015–09–09 |
| URL: | http://d.repec.org/n?u=RePEc:qss:dqsswp:1508&r=all |
| By: | Christopher Cotton (Queen's University); Brent R. Hickman (University of Chicago); Joseph P. Price (Brigham Young University) |
| Abstract: | Pre-College human capital investment occurs within a competitive environment and depends on market incentives created by Affirmative Action (AA) in college admissions. These policies affect mechanisms for rank-order allocation of college seats, and alter the relative competition between blacks and whites. We present a theory of AA in university admissions, showing how the effects of AA on human capital investment differ by student ability and demographic group. We then conduct a field experiment designed to mimic important aspects of competitive investment prior to the college market. We pay students based on relative performance on a mathematics exam in order to test the incentive effects of AA, and track study efforts on an online mathematics website. Consistent with theory, AA increases average human capital investment and exam performance for the majority of disadvantaged students targeted by the policy, by mitigating so-called "discouragement effects." The experimental evidence suggests that AA can promote greater equality of market outcomes and narrow achievement gaps at the same time. |
| Keywords: | Contest Theory, Human Capital, Study Effort, Field Experiment, College Admissions, Affirmative Action, All-Pay Auction |
| JEL: | D44 D82 C93 J24 J15 |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:qed:wpaper:1350&r=all |
| By: | Wouter Den Haan (London School of Economics; Centre for Macroeconomics (CFM); Centre for Economic Policy Research (CEPR)); Pontus Rendahl (Univesrity of Cambridge; Centre for Macroeconomics (CFM)); Markus Riegler (Univesrity of Bonn; Centre for Macroeconomics (CFM)) |
| Abstract: | The interaction of incomplete markets and sticky nominal wages is shown to magnify business cycles even though these two features - in isolation - dampen them. During recessions, fears of unemployment stir up precautionary sentiments which induces agents to save more. The additional savings may be used as investments which induces agents to save more. The additional savings may be used as investments in both a productive asset (equity) and an unproductive asset (money). But even a small rise in money demand has important consequences. The desire to hold money puts deflationary pressure on the economy, which, provided that nominal wages are sticky, increases wage costs and reduces firm profits. Lower profits repress the desire to save in equity, which increases (the fear of) unemployment, and so on. This is a powerful mechanism which casues the model to behave differently from both its complete markets version, and a version with incomplete markets but without aggregate uncertainty. In contrast to previous results in the literature, agents uniformly prefer non-trivial levels of unemployment insurance. |
| Keywords: | Keynesian unemployment, business cycles, search frictions, magnification, propogation, heterogenous agents |
| JEL: | E12 E24 E32 E41 J64 J65 |
| Date: | 2015–08 |
| URL: | http://d.repec.org/n?u=RePEc:cfm:wpaper:1521&r=all |
| By: | Tomer Blumkin (BGU); Leif Danziger (BGU); Eran Yashiv (The Eitan Berglas School of Economics, Tel-Aviv University, Israel) |
| Keywords: | Unemployment benefit policy, declining unemployment benefits, productivity distribution, skewness, dispersion |
| JEL: | J64 J65 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:bgu:wpaper:1508&r=all |