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on Labour Economics |
| By: | Mark Gertler; Christopher Huckfeldt; Antonella Trigari |
| Abstract: | Macroeconomic models often incorporate some form of wage stickiness to help account for employment fluctuations. However, a recent literature calls in to question this approach, citing evidence of new hire wage cyclicality from panel data studies as evidence for contractual wage flexibility for new hires, which is the relevant margin for employment volatility. We analyze data from the SIPP and find that the wages for new hires coming from unemployment are no more cyclical than those of existing workers, suggesting wages are sticky at the relevant margin. The new hire wage cyclicality found in earlier studies instead appears to reflect cyclical average wage gains of workers making job-to-job transitions, which we interpret as evidence of procyclical match quality for new hires from employment. We then develop a quantitative general equilibrium model with sticky wages via staggered contracting, on-the-job search, and variable match quality, and show that it can account for both the panel data evidence and aggregate labor market regularities. An additional implication of the model is that a sullying effect of recessions emerges, along the lines originally suggested by Barlevy (2002) |
| JEL: | E32 J3 J64 |
| Date: | 2016–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:22341&r=lab |
| By: | Blumkin, Tomer (Ben Gurion University); Danziger, Leif (Ben Gurion University); Yashiv, Eran (Tel Aviv University) |
| Abstract: | This paper provides a novel justification for a declining time profile of unemployment benefits that does not rely on moral hazard or consumption-smoothing considerations. We consider a simple search environment with homogeneous workers and low- and high-productivity firms. By introducing a declining time profile of benefits, the government can affect the equilibrium wage profile in a manner that enhances the sorting of workers across low- and high-productivity firms. We demonstrate that optimal government policy depends on the dispersion and skewness of the firms' productivity distribution. |
| JEL: | J64 J65 |
| Date: | 2016–05 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp9967&r=lab |
| By: | Bindler, Anna (Department of Economics, School of Business, Economics and Law, Göteborg University) |
| Abstract: | In this paper, I study the relationship between unemployment benefits, labour market conditions and crime in the light of increasing unemployment durations and temporary benefit extensions in the US. First, I find a positive reduced form effect of the benefit extensions on property crime. Second, I explore the mechanisms of the reduced form in an IV model and find that higher unemployment and longer unemployment durations are linked to higher property crime rates. These findings can rationalise the reduced form effect: Longer benefit durations are linked to longer unemployment durations which in turn contribute to increased propensities for criminal activity. |
| Keywords: | Crime; unemployment; unemployment duration; unemployment insurance |
| JEL: | J64 J65 K42 |
| Date: | 2016–06 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:gunwpe:0660&r=lab |
| By: | Martin Halla; Harald Mayr; Gerald J. Pruckner; Pilar Garcia-Gomez |
| Abstract: | The incidence of Cesarean deliveries (CDs) has been on the rise. The procedure’s cost and benefits are discussed controversially; in particular, since non-medically indicated cases seem widespread. We study the effect of CDs on subsequent fertility and maternal labor supply. Identification is achieved by exploiting variation in the supply-side’s incentives to induce nonmedically indicated CDs across weekdays. On weekends and public holidays obstetricians’ are less likely to induce CDs (due tighter capacity constraints in hospital). On Fridays and other days preceding a holiday, they face an increased incentive to induce CDs (due to their demand for leisure on non-working days). We use high-quality administrative data from Austria. Women giving birth on different weekdays are pre-treatment observationally identical. Our instrumental variable estimates show that a non-planned CD at parity one decreases life cycle fertility by almost 17 percent. This reduction in fertility translates into a temporary increase in maternal employment. |
| Keywords: | Caesarean delivery; Caesarean section; fertility; female labor supply |
| JEL: | I12 J13 J11 J22 J21 |
| Date: | 2016–05 |
| URL: | http://d.repec.org/n?u=RePEc:jku:econwp:2016_03&r=lab |
| By: | Baudy, Philipp; Cords, Dario |
| Abstract: | There have been continuous deregulation efforts concerning temporary agency employment in almost all European countries aiming at an increasing flexibility in the European labor markets. This paper theoretically investigates the effects of a legal deregulation of temporary agency employment on wage setting and the employment structure in a unionized economy with labor market frictions. Multiple-worker firms bargain simultaneously with temporary agencies and labor unions to determine the respective labor costs. It is shown that there is a hump-shaped relationship between the degree of legal deregulation of temporary agency employment and the rate of temporary employment used in the production process. Temporary agency employment may even decrease despite its deregulation. Furthermore, regular employment monotonically increases, while individual workers and labor unions suffer from deregulation due to declining wages and a reduction in labor union's utility. |
| Keywords: | Matching Theory,Labor Unions,Temporary Agency Work,Wage-Setting Process |
| JEL: | C78 J51 J21 J31 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:hohdps:062016&r=lab |
| By: | Chun-Hung Kuo (International Univeristy of Japan); Hiroaki Miyamoto (The University of Tokyo) |
| Abstract: | This paper develops a dynamic stochastic general equilibrium model with labor market frictions and nominal wage rigidity. We estimate our model for Japan's economy using Bayesian methods. This allows us to estimate the structural parameters of the Japanese economy, the unobservable shocks and examine their transmission mechanism. We can also study how wage rigidity affects overall model performance. Our analysis demonstrates the importance of including nominal wage rigidity in explaining the Japanese data. We find that while nominal wage rigidity plays only a trivial role in inflation dynamics, it is crucial in determining the response of labor market variables to structural shocks. |
| Keywords: | DSGE models, Bayesian estimation, Labor market search, Wage rigidity |
| JEL: | E24 E32 J64 |
| Date: | 2016–05 |
| URL: | http://d.repec.org/n?u=RePEc:iuj:wpaper:ems_2016_06&r=lab |
| By: | Gabriel Felbermayr; Giammario Impullitti; Julien Prat |
| Abstract: | Wage inequality between similar workers has been on the rise in many rich countries. Recent empirical research suggests that heterogeneity in firm characteristics is crucial to understand wage dispersion. Lower trade costs as well as labor and product market reforms are considered critical drivers of inequality dynamics. We ask how these factors affect wage dispersion and how much of their effect on inequality is attributable to changes in wage dispersion between and within firms. To tackle these questions, we incorporate directed job search into a dynamic model of international trade where wage inequality results from the interplay of convex adjustment costs with firms' different hiring needs along their life cycles. Fitting the model to German linked employer-employee data for the years 1996-2009, we find that firm heterogeneity explains about half of the surge in inequality. The most important mechanism is tougher product market competition driven by domestic product market deregulation and, indirectly, by international trade. |
| Keywords: | Wage Inequality, International Trade, Directed Search, Firm Dynamics, Product and Labor Market Regulation. |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:not:notgep:16/04&r=lab |
| By: | Daniel Borowczyk-Martins (Département d'économie); Etienne Lalé (Department of Economics (University of Bristol)) |
| Abstract: | Employed individuals in the U.S. are increasingly more likely to work part-time involuntarily than to be unemployed. Spells of involuntary part-time work are different from unemployment spells: a full-time worker who takes on a part-time job suffers an earnings loss while remaining employed, and is unlikely to receive income compensation from publicly-provided insurance programs.We analyze these differences through the lens of an incomplete-market, job-search model featuring unemployment risk alongside an additional risk of involuntary part-time employment.A calibration of the model consistent with U.S. institutions and labor-market dynamics shows that involuntary part-time work generates lower welfare losses relative to unemployment. This finding relies critically on the much higher probability to return to full-time employment from part-time work. We interpret it as a premium in access to full-time work faced by involuntary part-time workers, and use our model to tabulate its value in consumption-equivalent units. |
| Keywords: | Involuntary part-time work; Unemployment; Welfare |
| Date: | 2016–06 |
| URL: | http://d.repec.org/n?u=RePEc:spo:wpecon:info:hdl:2441/4f4eu80n0h8r28g6dadlk02mtb&r=lab |
| By: | Ronald Lee |
| Abstract: | Inevitable population aging and slower population growth will affect the economies of all nations in ways influenced by cultural values, institutional arrangements, and economic incentives. One outcome will be a tendency toward increased capital intensity, higher wages, and lower returns on capital, a tendency partially offset when the elderly are supported by public or private transfers rather than assets, and when economies are open, in which case aging will lead to increased flows of capital and labor. Rising human capital investment per child accompanies the falling fertility that drives population aging, and partially offsets slower labor force growth. Research to date finds little effect on technological progress or labor productivity. National differences in labor supply at older ages, per capita consumption of the elderly relative to younger ages, strength of public pension and health care systems, and health and vitality of the elderly all condition the impact of population aging on the economy. Policy responses include increasing the size of the labor force, mainly by raising the retirement age; reducing benefits and/or raising taxes for public transfer programs for the elderly, with concern for dead-weight loss and the fair distribution of costs across socioeconomic classes; investing more in children to increase the quality and productivity of the future labor force; and public programs that promote fertility by facilitating market work for women with children. |
| JEL: | E20 E24 H51 H55 J11 J14 J18 |
| Date: | 2016–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:22310&r=lab |
| By: | Ori Heffetz; Daniel B. Reeves |
| Abstract: | How high is unemployment? How low is labor force participation? Is obesity more prevalent among men? How large are household expenditures? We study the sources of the relevant official statistics—the Current Population Survey (CPS), the Behavioral Risk Factor Surveillance System (BRFSS), and the Consumer Expenditure Survey (CEX)—and find that the answers depend on whether we look at easy- or at difficult-to-reach respondents, measured by the number of call and visit attempts made by interviewers. A challenge to the (conditionally-)random-nonresponse assumption, these findings empirically substantiate the theoretical warning against making population-wide estimates from surveys with low response rates. |
| JEL: | C18 C83 I18 J60 |
| Date: | 2016–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:22333&r=lab |
| By: | Dirk Krueger; Kurt Mitman; Fabrizio Perri |
| Abstract: | The goal of this chapter is to study how, and by how much, household income, wealth, and preference heterogeneity amplify and propagate a macroeconomic shock. We focus on the U.S. Great Recession of 2007-2009 and proceed in two steps. First, using data from the Panel Study of Income Dynamics, we document the patterns of household income, consumption and wealth inequality before and during the Great Recession. We then investigate how households in different segments of the wealth distribution were affected by income declines, and how they changed their expenditures differentially during the aggregate downturn. Motivated by this evidence, we study several variants of a standard heterogeneous household model with aggregate shocks and an endogenous cross-sectional wealth distribution. Our key finding is that wealth inequality can significantly amplify the impact of an aggregate shock, and it does so if the distribution features a sufficiently large fraction of households with very little net worth that sharply increase their saving (i.e. they are not hand-to mouth) as the recession hits. We document that both these features are observed in the PSID. We also investigate the role that social insurance policies, such as unemployment insurance, play in shaping the cross-sectional income and wealth distribution, and through it, the dynamics of business cycles. |
| JEL: | E21 E32 J65 |
| Date: | 2016–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:22319&r=lab |
| By: | Samuel Danthine (CREST - ENSAI); Michel De Vroey (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES)) |
| Abstract: | Our paper analyzes and compares two attempts at integrating unemployment in macroeconomics. The first, due to Diamond, consists in a search model exhibiting multiple equilibria and wherein cycles may be produced. The second is due to Andolfatto and Merz who, more or less simultaneously, constructed models enabling the integration of the matching function into RBC modeling. In the first sections, we present the methodology upon which our paper is based – Leijonhufvud’s decision-tree insight – and briefly describe these three economists’ motivations and the context in which they were working. We continue with recounting the birth and further development of the search paradigm upon which Diamond’s, Andolfatto’s and Merz’s attempts were based. These preliminaries settled we address the heart of the paper, the critical analysis of their respective contributions. Our interest lies specifically in how they made their way in the development of the field. We explain why Diamond’s model, which ambitioned to rival Lucas’s explanation of business fluctuations, did not live up to its author’s expectations. Andolfatto and Merz’s project was less ambitious yet their model became an established component of the RBC program – but at the price of abandoning several constitutive traits of the search approach. |
| Keywords: | Search and Matching models, Diamond, Lucas, Andolfatto, Merz, Real Business Cycle models, Matching function, Unemployment |
| JEL: | B21 B40 D83 E24 J64 |
| Date: | 2016–04–30 |
| URL: | http://d.repec.org/n?u=RePEc:ctl:louvir:2016012&r=lab |
| By: | Jessica Y. Ho; Elizabeth Frankenberg; Cecep Sumantri; Duncan Thomas |
| Abstract: | Exposure to extreme events has been hypothesized to affect subsequent mortality because of mortality selection and scarring effects of the event itself. We examine survival at and in the five years after the 2004 Indian Ocean earthquake and tsunami for a population-representative sample of residents of Aceh, Indonesia who were differentially exposed to the disaster. For this population, the dynamics of selection and scarring are a complex function of the degree of tsunami impact in the community, the nature of individual exposures, age at exposure, and gender. Among individuals from tsunami-affected communities we find evidence for positive mortality selection among older individuals, with stronger effects for males than for females, and no evidence of scarring. Among individuals from other communities, property loss is associated with elevated mortality risks in the five years after the disaster only for those who were age 50 or older at the time of the disaster. |
| JEL: | I10 J10 Q54 |
| Date: | 2016–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:22317&r=lab |
| By: | Eduardo Cavallo; Gabriel Sánchez; Patricio Valenzuela |
| Abstract: | This study explores the relationship between demographic factors and saving rates using a panel dataset covering 110 countries between 1963 and 2012. In line with predictions from theory, this paper finds that lower dependency rates and greater longevity increase domestic saving rates. However, these effects are statistically robust only in Asia. In particular, Latin America, which is a region that has undergone a remarkably similar demographic transition, did not experience the same boost in saving rates as Asia. The paper highlights that the potential dividends arising from a favorable demographic transition are not automatically accrued. This is a sobering message at a time when the demographic tide is shifting in the world. JEL classifications: E21; J10;O16. Key words: Keywords: Demographic dividend, Dependency rates, Saving rates |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:edj:ceauch:324&r=lab |
| By: | Forth, John (National Institute of Economic and Social Research (NIESR)); Bryson, Alex (University College London); George, Anitha (National Institute of Economic and Social Research (NIESR)) |
| Abstract: | Across Europe, there are many differing opinions on whether workplace employee representation should be encouraged or discouraged. Yet there is very little evidence on the variations in workplace employee representation across Europe or the reasons for this. We use a workplace survey covering 27 EU countries to show that its incidence is strongly and independently correlated with the degree of centralization in a country's industrial relations regime and the extent of legislative support. Industry rents are also important in explaining trade union presence, but are unimportant in the case of works councils. Turning to the effects of workplace employee representation, we find support for the exit-voice model – traditionally associated with Anglo-Saxon regimes – whereby worker representation is associated with poorer perceptions of the employment relations climate and with lower voluntary quit rates. |
| Keywords: | trade unions, works councils, employee representation, social dialogue |
| JEL: | J51 J53 J83 |
| Date: | 2016–05 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp9963&r=lab |
| By: | Assaf Razin; Efraim Sadka |
| Abstract: | Federal governance matters. Policy coordination allows the economic union to exercise monopsony power over migrants. Therefore the migration volumes under the policy-competition regime exceed those under the policy-coordination regime. With loose federal governance, competition over low-skilled migrants, who come with no capital, induces the individual member state to raise the provision of social benefit, so as to attract more migrants when starting from the coordination equilibrium. As a result, the social benefits in all other member States must also be raised to keep these migrants at their own economy. This amounts to excessively high income redistribution – a negative fiscal externality. |
| JEL: | F15 H1 J18 |
| Date: | 2016–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:22329&r=lab |