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on Labour Economics |
| By: | Emi Nakamura; Jósef Sigurdsson; Jón Steinsson |
| Abstract: | We exploit a volcanic “experiment” to study the costs and benefits of geographic mobility. We show that moving costs (broadly defined) are very large and labor therefore does not flow to locations where it earns the highest returns. In our experiment, a third of the houses in a town were covered by lava. People living in these houses where much more likely to move away permanently. For those younger than 25 years old who were induced to move, the “lava shock” dramatically raised lifetime earnings and education. Yet, the benefits of moving were very unequally distributed within the family: Those older than 25 (the parents) were made slightly worse off by the shock. The town affected by our volcanic experiment was (and is) a relatively high income town. We interpret our findings as evidence of the importance of comparative advantage: the gains to moving may be very large for those badly matched to the location they happened to be born in, even if differences in average income are small. |
| JEL: | E24 J61 O15 R23 |
| Date: | 2016–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:22392&r=lab |
| By: | Svetlana Pashchenko (University of Surrey); Ponpoje Porapakkarm (National Graduate Institute for Policy Studies) |
| Abstract: | Should asset testing be used in means-tested programs? These programs target low-income people, but low income can result not only from low productivity but also from low labor supply. We aim to show that in the asymmetric information environment, there is a positive role for asset testing. We focus on Medicaid, one of the largest means-tested programs in the US, and we ask two questions: 1) Does Medicaid distort work incentives? 2) Can asset testing improve the insurance-incentives trade-off of Medicaid? Our tool is a general equilibrium model with heterogeneous agents that matches many important features of the data. We find that 23% of Medicaid enrollees do not work in order to be eligible. These distortions are costly: if individuals' productivity was observable and could be used to determine Medicaid eligibility, this results in substantial ex-ante welfare gains. When productivity is unobservable, asset testing is effective in eliminating labor supply distortions, but to minimize saving distortions, asset limits should be different for workers and non-workers. This work-dependent asset testing can produce welfare gains close to the case of observable productivity. |
| Keywords: | means-tested programs, health insurance, Medicaid, asset testing, general equilibrium, life-cycle model |
| JEL: | D52 D91 E21 H53 I13 I18 |
| Date: | 2016–07 |
| URL: | http://d.repec.org/n?u=RePEc:hka:wpaper:2016-016&r=lab |
| By: | Biewen, Martin (University of Tuebingen); Seifert, Stefanie (University of Tübingen) |
| Abstract: | We analyze individual career transitions of men and women in Germany. Our particular focus is on the association of upward, downward and horizontal job changes with individual fertility. In contrast to most of the literature, we focus on potential rather than realized fertility. Based on mixed multivariate proportional hazard models with competing risks, we find a significant negative relationship between the contemporaneous probability of having a child and horizontal career transitions for women, and a positive significant association of the hazard of parenthood with upward career transitions for men. These effects persist if we apply fixed effects panel data models allowing for correlation of individual parenthood hazards with unobserved individual characteristics. Independent of their sources, our results suggest clear gender differences in the relationship between career patterns and potential fertility. |
| Keywords: | career mobility, gender differences, hazard model |
| JEL: | J6 J7 M5 |
| Date: | 2016–07 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp10050&r=lab |
| By: | Baziki, Selva B. (Central Bank of Turkey); Ginja, Rita (Uppsala University); Borota Milicevic, Teodora (Uppsala University) |
| Abstract: | This paper provides new evidence on the reallocation of workers across firms and industries with different technologies in response to increased import competition from developing countries. Using employer-employee matched data for the Swedish manufacturing sector, we find increased assortative matching of workers in ICT (information and communication technologies) intensive industries, that is, high(low)-wage workers sort into high(low)-wage firms. Industries with low ICT intensity do not exhibit these sorting patterns. A labour market matching model explains the increased assortative matching in ICT intensive industries in response to stronger import competition through an increase in the relative demand for qualified workers. |
| Keywords: | wage inequality, employment dynamics, assortative matching, import competition, technological change |
| JEL: | F16 J63 O33 |
| Date: | 2016–07 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp10034&r=lab |
| By: | Valerija Botric (The Institute of Economics, Zagreb); Iva Tomic (The Institute of Economics, Zagreb) |
| Abstract: | The economic and financial crisis that erupted in Europe in 2008 hit some groups of the population harder than others. Young population was among those that experienced the largest increase in unemployment, whereas many of those belonging to the older working-age group, after experiencing a loss of their jobs, were unable to return to employment. Hence, one of the options for both of these groups was to seek self-employment solutions. This paper focuses precisely on transitions into self-employment of these two end-groups among the working-age population in a country that experienced one of the longest and largest setbacks during the recent recession – Croatia. The main goal of the paper is to establish differences in transition to self-employment of the young and the old before and during the crisis by distinguishing between two types of transitions: (i) out of unemployment or “necessity self-employment” and (ii) out of employment or “opportunity self-employment”. The data source used for the analysis is EU LFS. Main results suggest that necessity self-employment is dominant for both groups, and especially so for the old, whereas opportunity self-employment is slightly more pronounced in the case of the young population. However, both necessity and opportunity self-employment have decreased in the crisis period. Decomposition analyses – Fairlie and Blinder-Oaxaca – indicate that the gap between the old and the young has increased in the case of necessity self-employment while it decreased for opportunity self-employment between the two observed periods. Further examination of the characteristics of unemployed youth that became self-employed or employed during the crisis reveals that the only common characteristics that increase both the probability of self-employment as well as the probability of employment are the share of working adults and the share of children within a household. |
| Keywords: | transitions, self-employment, young, old, decomposition, crisis, Croatia |
| JEL: | J60 J21 |
| Date: | 2016–06 |
| URL: | http://d.repec.org/n?u=RePEc:iez:wpaper:1603&r=lab |
| By: | Nico Palesch |
| Abstract: | This report documents the labour market, educational, and economic development outcomes for the Inuit in Inuit Nunangat by examining past and present labour market outcomes and tying these together with developments in the major industries across the four regions of Inuit Nunangat. The current status and future outlook for employment and growth in the dominant sectors of Inuit Nunangat, namely the public sector and mining, are also examined. In addition, the effects of low education, limited skills, high living costs, reduced mobility, and insufficient housing, all common factors of life in Inuit Nunangat, are discussed. Finally, the report makes some broad recommendations for how the crisis in labour market and educational outcomes among the Inuit may be ameliorated, while identifying further areas of study that could help increase the understanding of Inuit Nunangat’s economic performance. |
| Keywords: | Inuit, Inuit Nunangat, Nunavik, Nunavut, Inuivialuit Region, Nunatsiavut, Canada, Education, Labour Market |
| JEL: | E24 J13 J15 N32 J45 O18 O11 O12 I25 |
| Date: | 2016–07 |
| URL: | http://d.repec.org/n?u=RePEc:sls:resrep:1612&r=lab |
| By: | Umut Oguzoglu (Department of Economics, University of Manitoba, and; Institute for the Study of Labor (IZA)); Cain Polidano (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne); Ha Vu (Department of Economics, Deakin University) |
| Abstract: | Governments are responding to fiscal pressures associated with aging populations by increasing the eligibility age for publicly-funded retirement benefits. However, recent studies show large resulting increases in the receipt of disability and unemployment benefits, which raises concern that welfare savings are offset by increased inflows into alternative payments. Using administrative data to examine the impacts of female eligibility age increases in Australia, we find little evidence of this. Instead, most of the increase is because the delay mechanically extends the receipt time of people already on alternative payments. The implication is that fiscal savings are not jeopardized by opportunistic behaviour. |
| Keywords: | Welfare substitution, retirement, aging population |
| JEL: | H53 J26 J01 |
| Date: | 2016–07 |
| URL: | http://d.repec.org/n?u=RePEc:iae:iaewps:wp2016n20&r=lab |
| By: | Nicola Meccheri (Department of Economics and Management, University of Pisa, Italy; The Rimini Centre for Economic Analysis, Italy); Luciano Fanti (Department of Economics and Management, University of Pisa, Italy) |
| Abstract: | This paper analyzes a multiple-stage game in which, at the final stage, two (managerial) firms compete over quantities in the product market. Prior to this stage, firm-specific unions set the workers' wages, while the owners of both firms hire managers and provide them with incentive contracts in order to affect their output decisions. Owners can freely decide to arrange the managerial contract before or after the (non-managerial) wage determination stage. Hence, the endogenous choice of the incentive contract stage is derived. The possibility of multiple (sub-game perfect) equilibria arises, where both owners choose managerial contracts before or after unions' wage setting, crucially depending on unions' preferences. In particular, owners may prefer, quite counter-intuitively, to choose the managerial contract after union wage setting when unions are neither extremely oriented towards employment, nor sufficiently oriented towards wages. |
| Keywords: | managerial delegation, unionized duopoly, endogenous moves |
| JEL: | J51 L13 L21 |
| Date: | 2016–07 |
| URL: | http://d.repec.org/n?u=RePEc:rim:rimwps:16-18&r=lab |
| By: | Kamata, Isao |
| Abstract: | An increasing number of bilateral or plurilateral trade agreements (or regional trade agreements: RTAs) include "labor clauses" that require or urge the signatory countries to commit to maintaining a certain level of labor standards. This paper performs an empirical analysis of the impacts of such labor clauses provided in RTAs on working conditions that laborers in the RTA signatory countries actually face, using macro-level data for a wide variety of countries. The paper first examines the texts of labor provisions in more than 220 effective RTAs and (re-)classifies "RTAs with labor clauses" according to two criteria: (i) the agreement urges or expects the signatory countries to harmonize their domestic labor standards with internationally recognized standards, and (ii) the agreement stipulates the procedures for consultations and/or dispute settlement on labor-condition issues between the signatory countries. Based on this labor-clause RTA classification, the paper estimates the impacts of RTA labor clauses on working conditions in countries with two empirical specifications using the sample covering 136 countries or economies and years from 1995 through 2011. The estimation is extended to takes into account possible lags in the labor-condition effects of labor clauses as well as to consider potential difference in the impacts for countries in different income levels. The empirical results for the four measures of labor conditions (mean monthly real earnings, mean weekly work hours per employee, fatal occupational injury rate, and the number of the ILO's Core Conventions ratified) find no evidence for possible pro-labor-condition effects of RTA labor clauses overall, which should be consistent with the view of economics literature that questions the relevance of linking trade policy with issues in the domestic labor standards. |
| Keywords: | Labor conditions, International trade, International agreements, Regional trade agreements, Labor standards, Labor clauses |
| JEL: | F13 F14 F16 J81 J88 F66 |
| Date: | 2016–07 |
| URL: | http://d.repec.org/n?u=RePEc:jet:dpaper:dpaper609&r=lab |
| By: | Vedunka Kopecna (Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Smetanovo nabrezi 6, 111 01 Prague 1, Czech Republic) |
| Abstract: | The paper contributes to understanding the effects stemming from the public sector employment changes in the Czech Republic and their impacts on the labor market through the lens of a New Keynesian dynamic stochastic general equilibrium model with search and matching frictions. The size of the public sector has been generally expanding over the last decade contrary to many other European countries with the exception of the years 2011 - 2012 when the economic crisis became more evident even in the otherwise financially stable Czech Republic. We model the labor market dynamics across the business cycle and examine the impacts of the varying number of public workers on the labor market variables as private employment, unemployment rate and market tightness as well as on the overall economic growth. We aim at determining whether a portion of unemployment can be explained by either the increased public hiring or shrinking of the number of public employees in the last decade. As the results suggest, in re cessionary times the expansion of the public sector managed to keep the unemployment rate from attaining higher values. However, the following turnover of government size development threw the labor market into a deeper crisis than it would have been if the public sector size had remained unaltered. |
| Keywords: | search and matching frictions, DSGE, labor market, public employment |
| JEL: | E37 J21 J45 J48 J64 |
| Date: | 2016–07 |
| URL: | http://d.repec.org/n?u=RePEc:fau:wpaper:wp2016_13&r=lab |
| By: | Luciano Fanti (Department of Economics and Management, University of Pisa, Italy); Nicola Meccheri (Department of Economics and Management, University of Pisa, Italy; The Rimini Centre for Economic Analysis, Italy) |
| Abstract: | In a managerial duopoly with unionised labour markets, this paper analyses whether owners of firms prefer to decide on incentive contracts for their managers sequentially or simultaneously. When firms compete in quantities, firms' owners can prefer choosing incentive contracts simultaneously or sequentially, depending on the unions' relative bargaining power and the degree of product differentiation. Instead, when firms compete in prices, firms' owners choose incentive contracts sequentially with substitute goods and simultaneously with complement goods. While the result under Bertrand confirms that obtained by the received literature in a framework where labour markets are competitive (non-unionised), the result under Cournot is distinctly different. |
| Keywords: | endogenous timing; managerial contracts; unionised oligopoly |
| JEL: | J33 J51 L13 |
| Date: | 2016–07 |
| URL: | http://d.repec.org/n?u=RePEc:rim:rimwps:16-19&r=lab |
| By: | Jasmin Thomas |
| Abstract: | Nunavik, the northern Québec region of Inuit Nunangat, had stronger labour market performance than the other three Inuit Nunangat regions between 1996 and 2011. For example, Nunavik's employment rate was 54.1 per cent in 2011, while the aggregate employment rate for Inuit Nunangat excluding Nunavik was only 42.9 per cent. Nunavik enjoyed this higher employment rate despite the fact that its Inuit population had, on average, 0.2 fewer years of schooling than Inuit Nunangat as a whole. In this paper, we examine a number of factors that could explain this paradox. Of all the factors examined, (1) public sector job provision and (2) child care availability and cost appear to have the most important impact on Nunavik’s labour market outcomes. First, Nunavik’s public sector, representing two-thirds of the experienced labour force, is a more important component of the overall economy than the public sector in the other three Inuit Nunangat regions, where it represents approximately half of the experienced labour force. Second, due to the implementation of the First Nations and Inuit Child Care Initiative and the Québec Government's family policies in the late-1990s, Nunavik has the greatest availability of child care services and the lowest daily child care fee of the four Inuit Nunangat regions. Both the ample supply of child care and the low cost have contributed to large increases in female labour force participation since 1996 (7.4 percentage points). |
| Keywords: | Nunavik, Inuit, Inuit Nunangat, Child Care, Public Sector, Employment Structure, Macroeconomy, Labour Market, Employment, Unemployment, Canada, Quebec, Cost of Living, Housing |
| JEL: | E24 J13 J15 N32 J45 O18 O11 O12 I25 |
| Date: | 2016–07 |
| URL: | http://d.repec.org/n?u=RePEc:sls:resrep:1613&r=lab |
| By: | Ambra, Poggi |
| Abstract: | By applying a stochastic production frontier approach to the matching process of unemployed and vacancies, this paper provides novel detailed insights into the process of job creation in Spain over the 2006-2012 period. The methodology produces estimates of the relative importance of demand and supply factors for the creation of new jobs, and of regional inefficiencies of job creation. This paper represents a first attempt to test whether a more flexible labour market as designed by the 2010 reform affects the matching efficiencies. We also investigate the possible link existing between local democracy (as factor influencing labour market governance) and inefficiency, handling endogeneity. Results suggest that the matching process was inefficient before the 2008 crisis. Efficiency increased during recession/rebound probably as consequence of policies aims to strengthen the economic system. In particular, the 2010 reform appears to have improved on average the matching efficiencies. Local democracy positively influences efficiency (and the effect is substantially higher when endogeneity in the inefficiency is handled). Despite these considerations, regional disparities in matching efficiencies persisted over time. Therefore, these results support the recommendation of further reducing matching inefficiencies before implementing policies aimed to increase the stock of vacancies at least in regions characterized by persistent inefficiencies. |
| Keywords: | matching functions, regional labour market, stochastic frontier, democracy, endogeneity |
| JEL: | J64 A13 D63 |
| Date: | 2016–07–16 |
| URL: | http://d.repec.org/n?u=RePEc:mib:wpaper:348&r=lab |
| By: | Krueger, Dirk (University of Pennsylvania); Mitman, Kurt (Stockholm University); Perri, Fabrizio (Federal Reserve Bank of Minneapolis) |
| Abstract: | How big are the welfare losses from severe economic downturns, such as the U.S. Great Recession? How are those losses distributed across the population? In this paper we answer these questions using a canonical business cycle model featuring household income and wealth heterogeneity that matches micro data from the Panel Study of Income Dynamics (PSID). We document how these losses are distributed across households and how they are affected by social insurance policies. We find that the welfare cost of losing one’s job in a severe recession ranges from 2% of lifetime consumption for the wealthiest households to 5% for low-wealth households. The cost increases to approximately 8% for low-wealth households if unemployment insurance benefits are cut from 50% to 10%. The fact that welfare losses fall with wealth, and that in our model (as in the data) a large fraction of households has very low wealth, implies that the impact of a severe recession, once aggregated across all households, is very significant (2.2% of lifetime consumption). We finally show that a more generous unemployment insurance system unequivocally helps low-wealth job losers, but hurts households that keep their job, even in a version of the model in which output is partly demand determined, and therefore unemployment insurance stabilizes aggregate demand and output. |
| Keywords: | Great Recession; Wealth inequality; Social insurance; Welfare loss from recessions |
| JEL: | E21 E32 J65 |
| Date: | 2016–07–18 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedmsr:532&r=lab |
| By: | Melanie Schröder; Norma Burow |
| Abstract: | We use a lab-in-the-field experiment to investigate intra-couple labor supply decisions and the division of housework under individual and joint income taxation systems. In order to eliminate problems of endogenous intra-couple time use decisions, we exogenously varied not only the taxation system but also the intra-couple roles of primary and secondary earners. Using work effort as a proxy for labor supply, 62 established couples, both cohabiting and married (124 participants), performed real effort tasks under a piece rate payment system within a given time. Prior to this paid task, couples had to decide upon the allocation of an unpaid task serving as our proxy for housework. In our gender neutral lab, we find tax-effects only on men’s labor supply but not on women’s and no gender differences in the allocation of housework. Instead, the allocation of housework follows a purely economic rationale with the majority of secondary earners taking responsibility. This is even confirmed by a shift to a more egalitarian allocation when individual taxation is applied. However, one result replicates real world findings with married male participants providing more labor supply than cohabiting men and married women less than cohabiting women. This result hinges on the stability of specialization in married couples, which seems to overcome the gender neutral lab. |
| Keywords: | real effort experiment, labor supply, housework, income taxation, household decision making, gender |
| JEL: | H31 D13 C93 J16 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1593&r=lab |