nep-lab New Economics Papers
on Labour Economics
Issue of 2023‒12‒04
nineteen papers chosen by
Joseph Marchand, University of Alberta

  1. Disincentive Effects of Unemployment Insurance Benefits By Andreas Hornstein; Marios Karabarbounis; Andre Kurmann
  2. You'll never walk alone: Unemployment, social networks and leisure activities By Filomena, Mattia; Picchio, Matteo
  3. Matching through Search Channels By Carrillo-Tudela, Carlos; Kaas, Leo; Lochner, Benjamin
  4. Committing to Grow: Privatizations and Firm Dynamics in East Germany By Ufuk Akcigit; Harun Alp; André Diegmann; Nicolas Serrano-Velarde
  5. The Active Role of the Natural Rate of Unemployment during Cyclical Recoveries By Hall, Robert E.; Kudlyak, Marianna
  6. Occupational Trajectories Among Refugees in Austria: The Role of Co-ethnic and Austrian Social Networks in Job Search By Sandra M. Leitner
  7. Promoting gender equality to strengthen economic growth and resilience By Christophe André; Orsetta Causa; Emilia Soldani; Douglas Sutherland; Filiz Unsal
  8. Innovative approaches to tackle long-term unemployment By Sofia Dromundo; Marius Lüske; Michele Tuccio
  9. Theory and Empirics of Short-Time Work: A Review By Natalia Bermudez; Muriel Dejemeppe; Giulia Tarullo
  10. Catalyzing Gender Equality: Foreign MNC Subsidiaries as Agents of Change in Mitigating Wage Discrimination against Women By Kaiser, Ulrich; Grimpe, Christoph; Sofka, Wolfgang
  11. The Labour Market Entry and Integration of Refugees and Other Migrants in Austria By Stefan Jestl; Maryna Tverdostup
  12. The Active Role of the Natural Rate of Unemployment during Cyclical Recoveries By Robert E. Hall; Marianna Kudlyak
  13. Raising the bar: Designing and implementing innovative contracted-out employment services in OECD countries By Matija Vodopivec
  14. The Rapid Response Labor Mechanism of the US-Mexico-Canada Agreement By Chad P. Bown; Kathleen Claussen
  15. The Effect of Schooling on Parental Integration By Ann-Marie Sommerfeld
  16. Survey on Individuals’ Preferences for Employee Entrepreneurship and Mobility (Japanese) By YOSHIDA Yukiko; HONJO Yuji
  17. The Role of Child Gender in the Formation of Parents’ Social Networks By Aristide Houndetoungan; Asad Islam; Michael Vlassopoulos; Yves Zenou
  18. Heterogeneous Returns to Education across Hukou-Migration Subgroups in China By Juan Huang; Weerachart Kilenthong
  19. Unionization of retired workers in Europe By Pyka, Vinzenz; Schnabel, Claus

  1. By: Andreas Hornstein; Marios Karabarbounis; Andre Kurmann
    Abstract: Unemployment insurance (UI) acts both as a disincentive for labor supply and as a demand stimulus which may explain why empirical studies often find limited effects of UI on employment. This paper provides independent estimates of the disincentive effects arising from the largest expansion of UI in U.S. history, the pandemic unemployment benefits. Using high-frequency data on small restaurants and retailers from Homebase, we control for local demand effects by comparing neighboring businesses that largely share the positive impact of UI stimulus. We find that employment in low-wage businesses recovered more slowly than employment in high-wage businesses in labor markets with larger differences in the relative generosity of pandemic UI benefits. According to a labor search model that replicates the estimated employment differences between low- and high-wage businesses, the disincentive effects from the pandemic UI programs held back the aggregate employment recovery by 4.7 percentage points between April and December 2020.
    Keywords: Unemployment Insurance; Disincentive Effects; search and matching models
    JEL: E24 E32 J64 J65
    Date: 2023–11–01
  2. By: Filomena, Mattia; Picchio, Matteo
    Abstract: We analyse how unemployment affects individuals' social networks, leisure activities, and the related satisfaction measures. Using the LISS panel, a representative longitudinal survey of the Dutch population, we estimate the effects by inverse propensity score weighting in a difference-in-differences design in order to deal with unobserved heterogeneity and unbalanced covariate distribution between treated and control units potentially associated with the dynamics of the outcome variables. We find that, after job loss, individuals increase their network size by strengthening their closest contacts within the family, spending more time with neighbors, and making more use of social media. Although they devote their extra leisure time mostly to private activities, our results do not support the hypothesis of social exclusion following unemployment.
    Keywords: Unemployment, job loss, social exclusion, leisure, social satisfaction, doubly robust difference-in-differences
    JEL: I31 J01 J64
    Date: 2023
  3. By: Carrillo-Tudela, Carlos (University of Essex); Kaas, Leo (Goethe University Frankfurt); Lochner, Benjamin (University of Erlangen-Nuremberg)
    Abstract: Firms and workers predominately match via job postings, networks of personal contacts or the public employment agency, all of which help to ameliorate labor market frictions. In this paper we investigate the extent to which these search channels have differential effects on labor market outcomes. Using novel linked survey-administrative data we document that (i) low-wage firms and low-wage workers are more likely to match via networks or the public agency, while high-wage firms and high-wage workers succeed more often via job postings; (ii) job postings help firms the most in poaching and attracting high-wage workers and help workers the most in climbing the job ladder. To evaluate the implications of these findings for employment, wages and labor market sorting, we structurally estimate an equilibrium job ladder model featuring two-sided heterogeneity, multiple search channels and endogenous recruitment effort. The estimation reveals that networks are the most cost-effective channel, allowing firms to hire quickly, yet attracting workers of lower average ability. Job postings are the most costly channel, facilitate hiring workers of higher ability, and matter most for worker-firm sorting. Although the public employment agency provides the lowest hiring probability, its removal has sizeable consequences, with aggregate employment declining by at least 1.4 percent and rising bottom wage inequality.
    Keywords: search channels, on-the-job search, recruitment effort, sorting, wage dispersion
    JEL: E24 J23 J31 J63 J64
    Date: 2023–11
  4. By: Ufuk Akcigit; Harun Alp; André Diegmann; Nicolas Serrano-Velarde
    Abstract: This paper investigates a unique policy designed to maintain employment during the privatization of East German firms after the fall of the Iron Curtain. The policy required new owners of the firms to commit to employment targets, with penalties for non-compliance. Using a dynamic model, we highlight three channels through which employment targets impact firms: distorted employment decisions, increased productivity, and higher exit rates. Our empirical analysis, using a novel dataset and instrumental variable approach, confirms these findings. We estimate a 22% points higher annual employment growth rate, a 14% points higher annual productivity growth, and a 3.6% points higher probability of exit for firms with binding employment targets. Our calibrated model further demonstrates that without these targets, aggregate employment would have been 15% lower after 10 years. Additionally, an alternative policy of productivity investment subsidies proved costly and less effective in the short term.
    Keywords: Industrial policy, Privatizations; Productivity; Size-dependent regulations
    JEL: D22 D24 J08 L25
    Date: 2023–11–07
  5. By: Hall, Robert E. (Stanford University); Kudlyak, Marianna (Federal Reserve Bank of San Francisco)
    Abstract: We propose that the natural rate of unemployment has an active role in the business cycle, in contrast to the prevailing view that the rate is essentially constant. We demonstrate that this tendency to treat the natural rate as near-constant would explain the surprisingly low slope of the Phillips curve. We show that the natural rate closely tracked the actual rate during the long recovery that began in 2009 and ended in 2020. We explain how the common finding of research in the Phillips-curve framework of low – often extremely low – response of inflation to unemployment could be the result of fairly close tracking of the natural rate and the actual rate in recoveries. Our interpretation of the data contrasts to that of most Phillips-curve studies, that conclude that inflation has little relation to unemployment. We suggest that the flat Phillips curve is an illusion caused by assuming that the natural rate of unemployment has little or no movement during recoveries.
    Keywords: business cycle, recovery, unemployment, recession, monetary policy, natural rate of unemployment, inflation anchor, NAIRU
    JEL: E32 J63 J64
    Date: 2023–11
  6. By: Sandra M. Leitner (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: This paper analyses occupational trajectories of refugees from their last job in the home country to their first and current jobs in Austria and the role of co-ethnic and Austrian social networks in job search, using data from a large-scale survey of recognised refugees from Syria, Afghanistan, Iraq and Iran who have predominantly come to Austria since 2010, thereby covering the strong refugee wave of 2015 2016. The results corroborate a U-shaped pattern, with a sharp initial occupational loss followed by a rather moderate occupational recovery. Although native social networks play no role for occupational changes, co-ethnic social networks – particularly when used as a stand-alone job search strategy – prove detrimental along the entire trajectory. However, co-ethnic social networks are beneficial if used in combination with the Austrian labour market service or NGOs. Some refugees prove particularly vulnerable, such as older refugees or highly educated refugees who undergo more pronounced initial occupational downgrading, with subsequent occupational upgrading either limited or absent.
    Keywords: Refugees, labour market integration, occupational trajectories, social capital
    JEL: J15 J24 J62
    Date: 2023–11
  7. By: Christophe André; Orsetta Causa; Emilia Soldani; Douglas Sutherland; Filiz Unsal
    Abstract: Women’s employment rates and wages are still lagging those of men across OECD countries, with average employment and wage gaps now around 15% and 12% respectively. Gaps narrowed at a relatively modest pace over the past decade, calling for further policy action. A lack of affordable high-quality childcare is often an obstacle to women’s participation in the labour market and notably to working full time. A very unequal sharing of parental leave between parents and challenges upon return to work further hampers women’s careers. Biases in the tax system may discourage women from working in some countries. Women face disadvantage in accessing management positions and entrepreneurship. A range of policies can help reduce gender gaps, including better childcare provision, incentivising parents to better share parental leave, re-skilling and upskilling on return from parental leave, encouraging gender equality within firms, integration programmes for foreign-born women, promoting women entrepreneurship and financial inclusion, and levelling taxation for second earners. Moreover, the multiple dimensions and root causes of gender inequality call for mainstreaming gender across policy domains.
    Keywords: Childcare, Economics of Gender, Education, Entrepreneurship, Financial inclusion, Gender equality, Immigration, Inequality, Labour discrimination, Parental leave, Taxation, Training
    JEL: D63 H24 I24 J13 J15 J16 J71 J78 L26 M53
    Date: 2023–11–20
  8. By: Sofia Dromundo; Marius Lüske; Michele Tuccio
    Abstract: Long-term unemployment remains a structural challenge for most OECD countries. Despite major efforts to address this issue, the efficiency and effectiveness of many existing active labour market policies are limited for jobseekers who face major vulnerabilities and have no ties to the labour market. Therefore, there is a need for innovative approaches that specifically address the barriers faced by long-term unemployed individuals in their labour market (re)integration. This paper discusses examples of promising practices from across Europe, which can serve as a source of inspiration for policymakers seeking new approaches to assist vulnerable jobseekers in overcoming the challenge of long-term unemployment.
    Keywords: active labour market policies, innovative approaches, long-term unemployed, unemployment
    JEL: E24 J24 J64
    Date: 2023–11–21
  9. By: Natalia Bermudez (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES)); Muriel Dejemeppe (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES)); Giulia Tarullo (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))
    Abstract: Following massive take-up rates during the COVID-19 period, short-time work (STW) policies have attracted renewed interest. In this paper, we take stock of this policy instrument and provide a critical review of STW systems in Europe. We focus on the objectives of STW programs and their primary characteristics, as well as the inefficiencies associated with these policies, such as excessive use and slower worker reallocation. Additionally, we take a stroll through the main contributions of STW impact evaluations. Finally, we identify relevant directions for the refinement of the main design features of the scheme, key lessons, and avenues for future research.
    Keywords: Short-time work; labor hoarding; employment; firm survival; unemployment insurance
    JEL: E24 J22 J23 J63 J65
    Date: 2023–10–30
  10. By: Kaiser, Ulrich (University of Zurich); Grimpe, Christoph (Copenhagen Business School); Sofka, Wolfgang (Copenhagen Business School)
    Abstract: Wage discrimination against women remains a major obstacle to fair economic opportunities for women and a grand challenge constraining economic growth in many countries. Existing research is ambivalent about whether foreign MNC subsidiaries as employers of women offer a solution to this grand challenge. On the one hand, foreign MNC subsidiaries can pay higher wages to women because they are outsiders to the host country and can deviate from social norms that disadvantage women. On the other hand, they suffer from the liabilities of foreignness that limit their attractiveness as employers for women relative to domestic firms. We theorize that the latter factor becomes less important as the level of wage discrimination against women by domestic employers increases, so that foreign MNC subsidiaries become more attractive employers when women change jobs. We isolate two boundary conditions for this effect based on (a) whether women can observe wage premiums at foreign MNC subsidiaries in local labor markets and (b) when foreign MNC subsidiaries deviate from social norms in the labor market by relying more on female top managers than domestic employers. We test and support these hypotheses for 123, 343 female professionals/managers who changed jobs in Denmark between 2000 and 2016.
    Keywords: gender pay gap, female employee mobility, MNC wages, employer attractiveness
    JEL: J5 J16
    Date: 2023–11
  11. By: Stefan Jestl (The Vienna Institute for International Economic Studies, wiiw); Maryna Tverdostup (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: This paper analyses the labour market entry of refugees and other (non-humanitarian) migrants originating from middle- and low-income non-European countries that arrived in Austria in 2014-2016. Specifically, we analyse factors that shaped the transition to and out of the first job in the Austrian labour market, document the characteristics of the first job and explore job stability in Austria. Even though refugees took longer to find a job, individual and household characteristics, as well as labour market indicators, are associated with the time between arrival and the first job in Austria, similar to other migrants. Refugees and other migrants also found similar job types as their entry jobs, which tended to be located in low-wage segments. The results, however, suggest that other migrants held their first job, on average, for a longer time than refugees. Although other migrants quit their first job relatively quickly when it was marginal employment, refugees tended to hold marginal jobs as long as full-time and part-time jobs. Finally, our results suggest that entry jobs with a higher quality in terms of working hours and wages (i.e. full-time jobs) tended to be linked with job stability, while entry jobs with a lower quality (i.e. marginal jobs) tended to be associated with job instability for both refugees and other migrants. The results of the paper showcase the importance of immediate access to various training and re-education programs for refugees to improve the quality of their entry jobs and their long-term prospects in the Austrian labour market.
    Keywords: Refugees, labour market integration, labour market entry, labour market transition, job stability
    JEL: C41 J15 J62
    Date: 2023–11
  12. By: Robert E. Hall; Marianna Kudlyak
    Abstract: We propose that the natural rate of unemployment has an active role in the business cycle, in contrast to the prevailing view that the rate is essentially constant. We demonstrate that this tendency to treat the natural rate as near-constant would explain the surprisingly low slope of the Phillips curve. We show that the natural rate closely tracked the actual rate during the long recovery that began in 2009 and ended in 2020. We explain how the common finding of research in the Phillips-curve framework of low-often extremely low-response of inflation to unemployment could be the result of fairly close tracking of the natural rate and the actual rate in recoveries. Our interpretation of the data contrasts to that of most Phillips-curve studies, that conclude that inflation has little relation to unemployment. We suggest that the at Phillips curve is an illusion caused by assuming that the natural rate of unemployment has little or no movement during recoveries.
    Keywords: business cycles; recoveries; unemployment; recessions; monetary policy; natural rate of unemployment; NAIRU; inflation; anchor
    JEL: E32 J63 J64
    Date: 2023–11–03
  13. By: Matija Vodopivec
    Abstract: Two out of five OECD countries contract out some of the job brokerage and counselling functions of publicly financed employment services using outcome-based payment models. This paper examines several important aspects related to the design and implementation of such outsourcing. First, innovative payment models can improve incentives for external providers to offer training and more effective services for hard-to-place clients. Second, providing forward guidance to providers and accounting for contingencies can mitigate their risks, e.g. of being underpaid relative to expenses incurred, thus lowering service costs. Third, letting individuals choose a provider can result in services that are better tailored and foster ongoing competition between providers. Finally, automating data exchange can, somewhat paradoxically, improve data privacy and data protection while enabling new payment models. These and related findings are discussed with country examples based on desk research and interviews with stakeholders in several OECD countries. The paper builds on work conducted in the project “Reforming the Swedish Public Employment Service”, which was carried out with funding from the European Union via the Technical Support Instrument and was implemented by the OECD in cooperation with the European Commission's Directorate-General for Structural Reform Support.
    Keywords: active labour market programmes, contracting out, employment services, outcome-based payments, private providers, public employment service
    JEL: J68 L33
    Date: 2023–11–22
  14. By: Chad P. Bown (Peterson Institute for International Economics); Kathleen Claussen (Georgetown University Law Center)
    Abstract: The US-Mexico-Canada Agreement (USMCA) introduced a new compliance institution for labor rights in trade agreements: the facility-specific Rapid Response Labor Mechanism (RRM). The RRM was developed to tackle one particular thorn in the side of North American integration-labor rights for Mexican workers--which had had detrimental, long-term political-economic consequences for the two countries' trade relationship. This paper reviews the unique political-economic moment in the United States and Mexico that prompted the creation of this tool. It describes how the RRM works and the considerable financial and human resources the two governments have brought to bear to operationalize it. The paper then reports a number of stylized facts on how governments used the RRM during its first three years, largely in the auto sector. It proposes paths of potentially fruitful political-economic research to understand the full implications of the RRM and concludes with preliminary lessons as well as a discussion of the potential for policymakers to transpose facility-specific mechanisms for labor or other issues, such as the environment, into future economic agreements.
    Keywords: USMCA, RRM, labor, auto industry, unions, collective bargaining, dispute resolution
    JEL: F13
    Date: 2023–10
  15. By: Ann-Marie Sommerfeld (Friedrich Schiller University Jena)
    Abstract: Exploiting the age-at-enrollment policies in 16 German states as exogenous source of variation, I examine whether the schooling of the oldest child in a migrant household affects parents' integration. My analysis links administrative records on primary school enrollment cutoff dates with micro data from the German Socioeconomic Panel (GSOEP). Using a regression discontinuity design around the school enrollment cutoff and an instrumental variable approach I show that children's schooling improves the integration of parents along several dimensions, such as labor market outcomes, financial worries, and German language skills. Labor market outcomes are most positively affected for mothers. Additional analysis of underlying mechanisms suggests that results are driven by gains in disposable time and exposure to the German language and culture.
    Keywords: international migration, assimilation, integration, education, schooling, family, regression discontinuity, instrumental variables
    JEL: F22 I24 I26 J16
    Date: 2023–11–14
  16. By: YOSHIDA Yukiko; HONJO Yuji
    Abstract: This paper investigates the actual situation of employee entrepreneurship and mobility in Japan. The Government of Japan positioned 2022 as the first year of startup creation and formulated the “Startup Development Five-year Plan†at the end of 2022. Using a questionnaire survey entitled “Survey on Employee Entrepreneurship and Mobility, †we examine how individuals’ attributes, experiences, abilities, and thinking characteristics affect their intention for entrepreneurship and job switching. The following points became clear from the survey results. (1) Young generations are more likely to have an intention for entrepreneurship and job switching. Males are more likely to start a business than females. (2) Individuals with a large amount of financial assets are more likely to have an intention for entrepreneurship. (3) Individuals with large family sizes are more likely to have an intention for entrepreneurship, while those with small family sizes are more likely to have the intention of job switching. (4) Dissatisfaction with the current job environment increases individuals’ intention for entrepreneurship and job switching. (5) A longer working period reduces individuals’ intention for entrepreneurship and job switching. (6) Experience in working overseas and with foreign-affiliated firms, as well as transactions with and investment in startups, is positively associated with individuals’ intention for entrepreneurship and job switching. (7) Experience in filing patents and utility models is positively associated with individuals’ intention for entrepreneurship and job switching. (8) Experience in receiving commendations or awards based on professional competence is positively associated with individuals’ intention for entrepreneurship and job switching. (9) Parents’ experience in entrepreneurship is positively associated with individuals’ intention for entrepreneurship. (10) Individuals who take concrete steps to start a business tend to have high extraversion and low agreeableness in terms of the Big Five personality traits.
    Date: 2023–11
  17. By: Aristide Houndetoungan (Department of Economics, Thema, Cy Cergy Paris Université); Asad Islam (Centre for Development Economics and Sustainability (CDES) and Department of Economics, Monash University, and J-PAL); Michael Vlassopoulos (Economics Department, Social Sciences, University of Southampton, and IZA.); Yves Zenou (Department of Economics, Monash University, CEPR, and IZA)
    Abstract: Social networks play an important role in various aspects of life. While extensive research has explored factors such as gender, race, and education in network formation, one dimension that has received less attention is the gender of one’s child. Children tend to form friendships with same gender peers, potentially leading their parents to interact based on their child’s gender. Focusing on households with children aged 3-5, we leverage a rich dataset from rural Bangladesh to investigate the role of children’s gender in parental network formation. We estimate an equilibrium model of network formation that considers a child’s gender alongside other socioeconomic factors. Counterfactual analyses reveal that children’s gender significantly shapes parents’ network structure. Specifically, if all children share the same gender, households would have approximately 15% more links, with a stronger effect for families having girls. Importantly, the impact of children’s gender on network structure is on par with or even surpasses that of factors such as income distribution, parental occupation, education, and age. These findings carry implications for debates surrounding coed versus single-sex schools, as well as policies that foster inter-gender social interactions among children.
    Keywords: Social networks, early childhood, network formation, gender
    JEL: C57 D85 J16 O12
    Date: 2023–11
  18. By: Juan Huang; Weerachart Kilenthong
    Abstract: This paper uses the China Household Income Project 2018 dataset to estimate returns to education for various Hukou-migration subgroups. We overcome the endogeneity problem of years of schooling using an instrument based on the Great Expansion of Higher Education policy. Our results indicate that the highest returns are for urban native workers (27.4%), followed by urban Hukou-converted (25.0%) and rural native workers (14.7%). In contrast, the returns to education for rural-urban migrant workers are insignificant. Further analyses suggest that Hukou conversion significantly increased the returns to education for rural-origin people by enabling them access to better job opportunities.
    Keywords: returns to education; Hukou system; migration; China
    JEL: I24 I26 J15 J61
    Date: 2023–11
  19. By: Pyka, Vinzenz; Schnabel, Claus
    Abstract: We shed light on an understudied group: retirees in unions. Using representative individual-level data of 19 European countries, we find that the share of retirees in unions and the union density of retirees increased between 2008 and 2020. Econometric analyses indicate that on average retired workers' probability of union membership is 17 percentage points lower than that of active workers. This finding is consistent with social custom models and cost-benefit considerations. We further find that some determinants of union membership differ between active and retired workers and that standard membership models better explain the unionization of active than retired workers.
    Abstract: Wir untersuchen eine untererforschte Gruppe: Rentner in Gewerkschaften. Basierend auf repräsentativen Individualdaten für 19 europäische Länder finden wir, dass der Rentneranteil in Gewerkschaften und der gewerkschaftliche Organisationsgrad von Rentnern zwischen 2008 und 2020 gestiegen sind. Ökonometrische Analysen zeigen, dass die Wahrscheinlichkeit einer gewerkschaftlichen Mitgliedschaft für Rentner im Durchschnitt 17 Prozentpunkte geringer ausfällt als für Beschäftigte. Diese Erkenntnis ist vereinbar mit "social custom"-Modellen und Kosten-Nutzen-Überlegungen. Wir finden zudem, dass sich einige Determinanten der gewerkschaftlichen Mitgliedschaft zwischen aktiven und verrenteten Arbeitskräften unterscheiden und dass die üblichen Mitgliedschaftsmodelle besser die gewerkschaftliche Organisierung von aktiven als von verrenteten Arbeitskräften erklären können.
    Keywords: trade union, retirement, union membership, Europe
    JEL: J26 J51
    Date: 2023

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