Unemployment vs. mismatch of talents: Reconsidering unemployment benefits

We develop an equilibrium search-matching model with risk-neutral agentsand two-sided ex-ante heterogeneity. Unemployment insurance has thestandard effect of reducing employment, but also helps workers to get a suitable job. The predictions of our simple modelare consistent with the contrasting performance of the labor market in Europeand US in terms of unemployment, productivity growth and wage inequality.To show this, we construct two fictitious economies with calibratedparameters which only differ by the degree of unemployment insurance andassume that they are hit by a common technological shock which enhancesthe importance of mismatch. This shock reduces the proportion of jobs whichworkers regards as acceptable in the economy with unemployment insurance(Europe). As a result, unemployment doubles in this economy.In the laissez-faire economy (US), unemployment remains constant,but wage inequality increases more and productivity grows less due to largermismatch. The model can be used to address a number of normative issues.

Ex post bargaining, labor coordination and wage formation at the firm level

We lay out a model of wage bargaining with two leading features:bargaining is ex post to relevant investments and there isindividual bargaining in firms without a Union. We compareindividual ex post bargaining to coordinated ex post bargainingand we analyze the effects on wage formation. As opposed to exante bargaining models, the costs of destroying the employmentrelationship play a crucial role in determining wages. Highfiring costs in particular yield a rent for employees. Ourtheory points to a employer size-wage effect that is independentof the production function and market power. We derive a simpleleast squares specification from the theoretical model thatallow us to estimate components of the wage premium fromcoordination. We reject the hypothesis that labor coordinationdoes not alter the extensive form of the bargaining game. Laborcoordination substantially increases bargaining power butdecreases labor's ability to pose costly threats to the firm.

Communication, coordination and efficiency in evolutionary one-population models

We analyze the role of commitment in pre-play communication for ensuringefficient evolutionarily stable outcomes in coordination games. All players are a priori identical as they are drawn from the same population. In games where efficient outcomes can be reached by players coordinating on the same action we find commitment to be necessary to enforce efficiency. In games where efficienct outcomes only result from play of different actions, communication without commitment is most effective although efficiency can no longer be guaranteed. Only when there are many messages then inefficient outcomes are negligible as their basins of attraction become very small.

On the efficiency and sensitivity of a pyramidal classification algorithm

In this paper we propose a Pyramidal Classification Algorithm,which together with an appropriate aggregation index producesan indexed pseudo-hierarchy (in the strict sense) withoutinversions nor crossings. The computer implementation of thealgorithm makes it possible to carry out some simulation testsby Monte Carlo methods in order to study the efficiency andsensitivity of the pyramidal methods of the Maximum, Minimumand UPGMA. The results shown in this paper may help to choosebetween the three classification methods proposed, in order toobtain the classification that best fits the original structureof the population, provided we have an a priori informationconcerning this structure.

Immigration, family responsibilities and the labor supply of skilled native women

This paper investigates the effects of Spain s large recent immigration wave on thelabor supply of highly skilled native women. We hypothesize that female immigration led to an increase in the supply of affordable household services, such as housekeeping and child or elderly care. As a result, i) native females with high earnings potential were able to increase their labor supply, and ii) the effects were larger on skilled women whose labor supply was heavily constrained by family responsibilities. Our evidence indicates that over the last decade immigration led to an important expansion in the size of the household services sector and to an increase in the labor supply of women in high-earning occupations (of about 2 hours per week). We also find that immigration allowed skilled native women to return to work sooner after childbirth, to stay in the workforce longer when having elderly dependents in the household, and to postpone retirement. Methodologically, we show that the availability of even limited Registry data makes it feasible to conduct the analysis using quarterly household survey data, as opposed to having to rely on the decennial Census.

Business cycles, unemployment insurance and the calibration of matching models

This paper theoretically and empirically documents a puzzle that arises when an RBC economy with a job matching function is used to model unemployment. The standard model can generate sufficiently large cyclical fluctuations in unemployment, or a sufficiently small response of unemployment to labor market policies, but it cannot do both. Variable search and separation, finite UI benefit duration, efficiency wages, and capital all fail to resolve this puzzle. However, either sticky wages or match-specific productivity shocks can improve the model's performance by making the firm's flow of surplus more procyclical, which makes hiring more procyclical too.

Cost efficiency in primary care contracting: A stochastic frontier cost function approach

The principal aim of this paper is to estimate a stochastic frontier costfunction and an inefficiency effects model in the analysis of the primaryhealth care services purchased by the public authority and supplied by 180providers in 1996 in Catalonia. The evidence from our sample does not supportthe premise that contracting out has helped improve purchasing costefficiency in primary care. Inefficient purchasing cost was observed in thecomponent of this purchasing cost explicitly included in the contract betweenpurchaser and provider. There are no observable incentives for thecontracted-out primary health care teams to minimise prescription costs, whichare not explicitly included in the present contracting system.

Overconfidence and market efficiency with heterogeneous agents

We study financial markets in which both rational and overconfident agents coexist and make endogenous information acquisition decisions. We demonstrate the following irrelevance result: when a positive fraction of rational agents (endogeneously) decides to become informed in equilibrium, prices are set as if all investors were rational, and as a consequence the overconfidence bias does not aect informational efficiency, price volatility, rational traders expected profits or their welfare. Intuitively, as overconfidence goes up, so does price infornativeness, which makes rational agents cut their information acquisition activities, effectively undoing the standard effect of more aggressive trading by the overconfident.

Endogenous labor market participation and the business cycle

Existing models of equilibrium unemployment with endogenous labor market participation are complex, generate procyclical unemployment rates and cannot match unemployment variability relative to GDP. We embed endogenous participation in a simple, tractable job market matching model, show analytically how variations in the participation rate are driven by the cross-sectional density of home productivity near the participation threshold, andhow this density translates into an extensive-margin labor supply elasticity. A calibration of the model to macro data not only matches employment and participation variabilities but also generates strongly countercyclical unemployment rates. With some wage rigidity the model also matches unemployment variations well. Furthermore, the labor supply elasticity implied by our calibration is consistent with microeconometric evidence for the US.

Explaining movements in the labor share

In this paper we study the evolution of the labor share in the OECD since 1970. We show it is essentially related to the capital-output ratio; that this relationship is shifted by factors like the price of imported materials or the skill mix; and that discrepancies between the marginal product of labor and the real wage (due to, e.g., product market power, union bargaining, and labor adjustment costs) cause departures from it. We provide estimates of the model with panel data on 14 industries and 14 countries for 1973-93 and use them to compute the evolution of the wage gap in Germany and the US.

Wage inequality in a frictional labor market

Wage inequality in the United States has grown substantially in thepast two decades. Standard supply-demand analysis in the empiricsof inequality (e.g.Katz and Murphy (1992)) indicates that we mayattribute some of this trend to an outward shift in the demand forhigh skilled labor. In this paper we examine a simple static channelin which the wage premium for skill may grow -increased firm entry.We consider a model of wage dispersion where there are two types ofworkers and homogeneous firms must set wages and preferences forwhat type of worker they would like to hire. We find that both thewage differential and the demand for high skill workers can increasewith the proportion of high skill workers -these high skill workerstherefore 'create' their own demand without exogenous factors. Inaddition, within group wage inequality can increase in step with thebetween group wage inequality. Simulations of the model are providedin order to compare the findings with empirical results.

The labor market effects of payroll taxes in a middle-income country: Evidence from Colombia

We use a panel of manufacturing plants from Colombia to analyze how the risein payroll tax rates over the 1980 s and 1990 s affected the labor market.Our estimates indicate that formal wages fall by between 1.4% and 2.3% as aresult of a 10% rise in payroll taxes. This 'less-than-full-shifting' islikely to be the result of weak linkages between benefits and taxes and thepresence of downward wage rigidities induced by a binding minimum wage inColombia. Because the costs of taxation are only partly shifted fromemployers to employees, employment should also fall. Our results indicatethat a 10% increase in payroll taxes lowered formal employment by between4% and 5%. In addition, we find less shifting and larger disemploymenteffects for production than non-production workers. These results suggestthat policies aimed at boosting the relative demand of low-skill workers byreducing social security taxes on those with low earnings may be effectivein a country like Colombia, especially if tax cuts are targeted to indirectbenefits.

Effects of employment protection and product market regulations on the Italian labor market

Labor market regulations have often being blamed for high and persistentunemployment in Europe, but evidence on their impact remains mixed. Morerecently, attention has turned to the impact of product market regulationson employment growth. This paper analyzes how labor and product marketregulations interact to affect turnover and employment. We present a matchingmodel which illustrates how barriers to entry in the product market mitigatethe impact of labor market deregulation. We, then, use the Italian SocialSecurity employer-employee panel to study the interaction between barriersto entry and dismissal costs. We exploit the fact that costs for unjustdismissals in Italy increased for firms below 15 employees relative to biggerfirms after 1990. We find that the increase in dismissal costs after 1990decreased accessions and separations in small relative to big firms,especially for women. Moreover, consistent with our model, we find evidencethat the increase in dismissal costs had smaller effects on turnover for womenin sectors faced with strict product market regulations.

Growth accounting in items of turbulence and death: efficiency, technology, capital accumulation and human capital 1929-1950

We employ a non-parametrical approach to growth accounting (Data Envelopment Analysis,DEA) to disentangle the proximate sources of labour productivity growth in 41 nationsbetween 1929 and 1950 by decomposing productivity growth into four components:technological change; efficiency catch-up (movements towards the production frontier),capital accumulation and human capital accumulation. We show that efficiency catch-upgenerally explains productivity growth, whereas technological change and factoraccumulation were limited and distorted by the effects of war. War clearly hamperedefficiency. Moreover, an unbalanced ratio of human capital to physical capital (a gap to thetechnological leader) was crucial for efficiency catching-up.

Market structure and hospital efficiency: Evaluating potential effects of deregulation in a national health service

In this article we examine the potential effect of market structureon hospital technical efficiency as a measure of performance controlled byownership and regulation. This study is relevant to provide an evaluationof the potential effects of recommended and initiated deregulation policiesin order to promote market reforms in the context of a European NationalHealth Service. Our goal was reached through three main empirical stages.Firstly, using patient origin data from hospitals in the region of Cataloniain 1990, we estimated geographic hospital markets through the Elzinga--Hogartyapproach, based on patient flows. Then we measured the market level ofconcentration using the Herfindahl--Hirschman index. Secondly, technicaland scale efficiency scores for each hospital was obtained specifying aData Envelopment Analysis. According to the data nearly two--thirds of thehospitals operate under the production frontier with an average efficiencyscore of 0.841. Finally, the determinants of the efficiency scores wereinvestigated using a censored regression model. Special attention waspaid to test the hypothesis that there is an efficiency improvement in morecompetitive markets. The results suggest that the number of competitors inthe market contributes positively to technical efficiency and there is someevidence that the differences in efficiency scores are attributed toseveral environmental factors such as ownership, market structure andregulation effects.