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on Labour Economics |
| By: | David Florian Hoyle (Central Reserve Bank of Peru); Johanna L. Francis (Fordham University) |
| Abstract: | In most modern recessions there is a sharp increase in job destruction and a mild to moderate decline in job creation, resulting in unemployment. The Great Recession was marked by a significant decline in job creation particularly for young firms in addition to the typical increase in destruction. As a result job reallocation fell. In this paper, we explicitly propose a mechanism for financial shocks to disproportionately affect young (typically) smaller firms via credit contracts. We investigate the particular roles of credit frictions versus nominal rigidities in a New Keynesian model augmented by a banking sector characterized by search and matching frictions with endogenous credit destruction. In response to a financial shock, the model economy produces large and persistent increases in credit destruction, declines in credit creation, and an overall decline in reallocation of credit among banks and firms; total factor productivity declines, even though average firm productivity increases, inducing unemployment to increase and remain high for many quarters. Credit frictions not only amplify the effects of a financial shock by creating variation in the number of firms able to produce they also increase the persistence of the shock for output, employment, and credit spreads. When pricing frictions are removed, however, credit frictions lose some of their ability to amplify shocks, though they continue to induce persistence. These findings suggest that credit frictions combined with nominal rigidities are a plausible transmission mechanism for financial shocks to have strong and persistent effects on the labor market particularly for loan dependent firms. Moreover, they may play an important role in job reallocation across firms. |
| Keywords: | Unemployment, financial crises, gross credit flows, productivity |
| JEL: | J64 E32 E44 E52 |
| Date: | 2019–03 |
| URL: | http://d.repec.org/n?u=RePEc:apc:wpaper:142&r=all |
| By: | Randall Akee; Maggie R. Jones |
| Abstract: | Using a novel panel data set of recent immigrants to the U.S. (2005-2007) from individual-level linked U.S. Census Bureau survey data and Internal Revenue Service (IRS) administrative records, we identify the determinants of return migration and earnings growth for this immigrant arrival cohort. We show that by 10 years after arrival almost 40 percent have return migrated. Our analysis examines these flows by educational attainment, country of birth, and English language ability separately for each gender. We show, for the first time, that return migrants experience downward earnings mobility over two to three years prior to their return migration. This finding suggests that economic shocks are closely related to emigration decisions; time-variant unobserved characteristics may be more important in determining out-migration than previously known. We also show that wage assimilation with native-born populations occurs fairly quickly; after 10 years there is strong convergence in earnings by several characteristics. Finally, we confirm that the use of stock-based panel data lead to estimates of slower earnings growth than is found using repeated cross-section data. However, we also show, using selection-correction methods in our panel data, that stock-based panel data may understate the rate of earnings growth for the initial immigrant arrival cohort when emigration is not accounted for. |
| Keywords: | Return Migration, Immigration, Human Capital, Wage Growth, Race, Panel Data. |
| JEL: | J31 F22 J61 J15 |
| Date: | 2019–03 |
| URL: | http://d.repec.org/n?u=RePEc:cen:wpaper:19-10&r=all |
| By: | Katherine Eriksson; Katheryn Russ; Jay C. Shambaugh; Minfei Xu |
| Abstract: | Using data over more than a century, we show that shifts in the location of manufacturing industries are a domestic reflection of what the international trade literature refers to as the product cycle in a cross-country context, with industries spawning in high-wage areas with larger pools of educated workers and moving to lower-wage areas with less education as they age or become “standardized.” We exploit the China shock industries as a set of industries that were in the late-stage product cycle by 1990 and show how the activity in those industries shifted from high-innovation areas to low-education areas over the 20th century. The analysis also suggests that the resilience of local labor markets to manufacturing shocks depends on local industries’ phase in the product cycle, on local education levels, and on local manufacturing wages. The risk of unemployment and detachment from the labor force rises most when a shock hits in areas where an industry already has begun phasing out, wages are high, or education levels are low. The results are consistent with the belief that there are long-term, secular trends in U.S. industrial structure driving the movement of industries, which shocks may mitigate or accelerate. |
| JEL: | F10 F16 F43 |
| Date: | 2019–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:25646&r=all |
| By: | Gorn, A. |
| Abstract: | This study relates the increase in the U.S. top wages to the increasing prominence of headhunters. Headhunters improve the matching between firms and employees via two channels: screening of candidates and passive on-the-job search. I incorporate headhunters in the labor market framework of random search with two-sided heterogeneity. The calibrated model shows that headhunters can account for 35% of the increase in the top 1% wage share and 69% of the increase in the top 10% wage share in the U.S. from 1970 to 2010. I provide supporting cross-country evidence on headhunter hires/fees and top income growth, as well as micro evidence for CEO compensation. |
| Keywords: | wage distribution, top incomes, sorting, on-the-job search, headhunters |
| JEL: | E24 D83 C78 J24 J62 J63 |
| Date: | 2019–03–07 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:1926&r=all |
| By: | Eva Moreno-Galbis (Aix-Marseille Univ., CNRS, EHESS, Centrale Marseille, AMSE & Institut Universitaire de France) |
| Abstract: | Immigrants’ income has been proved to converge to the average native income level with years of residence in the host country. This income assimilation effect is surprisingly not associated with a health improvement. Some emerging studies point towards the role of working conditions as a driver of the counterfactual relation between immigrants’ health and income. Using French data, we first show that, consistently with Viscusi (1978), working conditions are a normal good. An increase in 10% in non-earned income is associated with a decrease by 0.85% in professional injuries and by more than 3.2% in disabilities induced by professional illnesses. Second, we find that while immigrants bear in average worse working conditions than natives, this divergence results from an income divergence effect since for an equivalent non-earned income level there are no significant differences in working conditions between natives and immigrants. Income assimilation of immigrants is associated with an assimilation in working conditions. We conclude then that bad working conditions cannot be blamed for the degradation of immigrants’ health with years of residence in the host country. |
| Keywords: | immigrants, working conditions, income |
| JEL: | A14 J15 J61 J81 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:aim:wpaimx:1908&r=all |
| By: | Albanesi, Stefania |
| Abstract: | This paper builds a real DSGE model with gender differences in labor supply and productivity. The model is used to assess the impact of changing trends in female labor supply on productivity and TFP growth and aggregate business cycles. We find that the growth in women's labor supply and relative productivity contributed substantially to TFP growth starting from the early 1980s, even if it depressed average labor productivity growth, contributing to the 1970s productivity slowdown. We also show that the lower cyclicality of female hours and their growing share in aggregate hours is able to account for a large fraction of the decline in the cyclicality of aggregate hours during the great moderation, as well as the decline in the correlation between average labor productivity and hours. Finally, we show that the discontinued growth in female labor supply after the 1990s played a substantial role in the jobless recoveries following the 2001 and 2007-2009 recession. Moreover, it also depressed aggregate hours and output growth during the late 1990s and mid 2000s expansions and it reduced male wages. These results suggest that continued growth in female hours since the early 1990s would have significantly improved economic performance in the United States. |
| Keywords: | business cycles; female employment; Great Moderation; jobless recoveries; productivity slowdown |
| JEL: | E27 E32 E37 J11 |
| Date: | 2019–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:13578&r=all |
| By: | Andrea Albanese (Luxembourg Institute of Socio-Economic Research, Ghent University, IZA - Institute of Labor Economics); Corinna Ghirelli (Banco de españa); Matteo Picchio (Marche Polytechnic university, Ghent University, IZA - Institute of Labor Economics, GLO - Global Labor Organization) |
| Abstract: | We study how unemployment benefit eligibility affects the layoff exit rate by exploiting quasiexperimental variation in eligibility rules in Italy. By using a difference-indifferences estimator, we find an instantaneous increase of about 12% in the layoff probability when unemployment benefit eligibility is attained, which persists for about 16 weeks. These findings are robust to different identifying assumptions and are mostly driven by jobs started after the onset of the Great Recession, in the South and for small firms. We argue that the moral hazard from the employer’s side is the main force driving these layoffs. |
| Keywords: | unemployment insurance, layoffs, employer–employee moral hazard, differencein-differences, heterogeneous effects |
| JEL: | C31 C41 J21 J63 J65 |
| Date: | 2019–03 |
| URL: | http://d.repec.org/n?u=RePEc:bde:wpaper:1904&r=all |
| By: | Weiske, Sebastian |
| Abstract: | This paper estimates the quarterly flow of migrants to the US working age population using data based on the Current Population Survey (CPS). The dynamic responses to immigration shocks are estimated in a vector autoregression. Immigration shocks, as well as technology shocks are identified through long-run restrictions. The responses to immigration shocks are consistent with standard growth theory. Investment increases, while real wages fall in the short run. Overall, immigration has been of little importance for US business cycles, while investment-specific technology shocks have been a major driver of immigration during the 1990s and 2000s. |
| Keywords: | immigration,business cycles,vector autoregressions,long-run restrictions |
| JEL: | E32 F22 J11 J61 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:svrwwp:022019&r=all |
| By: | Hohenleitner, Ingrid; Hillmann, Katja |
| Abstract: | This comprehensive study on UB-II-sanctions in Germany, applying PSM, presents the ex-post effects of welfare sanctions on several employment states for diverse (sub-)groups of employable welfare recipients. Besides unemployed, we also regard employed, and indirectly affected household members. The monthly updated ATT show the development of the sanction effect over two years. We find sanction effects as highly volatile over time and strongly dependent on individual factors and on circumstances like the timing of the sanction. In total, we suppose tendentially positive effects on the probabilities to enter employment and to exit welfare, at least in the short run. The positive effects tend to work stronger in the short run, and the negative effects tend to work stronger in the medium and long run. Hence, the shorter the time horizons of studies on welfare sanctions are, the more the positive effects are overrated systematically. Especially the frequently occurring cases with strongly negative slopes of cumulated ATT indicate that the early positive effects, mainly driven by people with good labor market perspectives, are at the cost of people with strongly detrimental sanction effects, even in the long run. |
| Keywords: | benefit sanctions,sanction effects,unemployment duration,welfare duration,long-term effects,unemployment benefits,unemployment policy,welfare policy,stratification |
| JEL: | I38 J48 J64 J65 J68 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:hwwirp:189&r=all |
| By: | Adam M. Lavecchia; Philip Oreopoulos; Robert S. Brown |
| Abstract: | We estimate long-run impacts to the Pathways to Education program, a comprehensive set of coaching, tutoring, group activities and financial incentives offered to disadvantaged students beginning in Grade 9. High school administrative records are matched to income tax records to follow individuals up to the age of 28, even when they leave the household or province. We find significant positive effects on persistence in postsecondary education institutions, earnings and employment. Program eligibility increased adult annual earnings by 19 percent, employment by 14 percent and reduced social assistance (welfare) receipt by more than a third. |
| JEL: | I2 I28 J18 |
| Date: | 2019–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:25630&r=all |
| By: | Robert L. Axtell; Omar A. Guerrero; Eduardo L\'opez |
| Abstract: | We develop an alternative theory to the aggregate matching function in which workers search for jobs through a network of firms: the labor flow network. The lack of an edge between two companies indicates the impossibility of labor flows between them due to high frictions. In equilibrium, firms' hiring behavior correlates through the network, generating highly disaggregated local unemployment. Hence, aggregation depends on the topology of the network in non-trivial ways. This theory provides new micro-foundations for the Beveridge curve, wage dispersion, and the employer-size premium. We apply our model to employer-employee matched records and find that network topologies with Pareto-distributed connections cause disproportionately large changes on aggregate unemployment under high labor supply elasticity. |
| Date: | 2019–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1903.04954&r=all |
| By: | Florian Schoiswohl (Department of Economics, Vienna University of Economics and Business) |
| Abstract: | There is a growing literature studying unemployment dynamics by means of worker flow data between labor market states. This paper contributes to this literature stream by analyzing the dynamics of the Austrian unemployment rate applying novel worker flow data for 2005-2016. Our main results can be summarized along two dimensions: First, we show that worker flows between unemployment and inactivity are major determinants of unemployment fluctuations in Austria. Second, we show for the working-age population that the contribution of male worker flows to the overall variation of the unemployment rate is higher, but that this relation turns when it comes to the youth cohort. The gender differences are probably related to the early occupational and educational segregation of young men and women in Austria. The paper concludes by stressing a strong need for further empirical and theoretical research which aims to link structural differences in an economy with different responses to the business cycle. |
| Keywords: | Worker flows, Unemployment dynamics, Gender, Unemployment gap, Austrian labour market, Youth unemployment |
| JEL: | C81 J21 J63 |
| Date: | 2019–03 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwwuw:wuwp282&r=all |