Wage rigidity and job creation

Recent research in macroeconomics emphasizes the role of wage rigidity in accounting for the volatility of unemployment fluctuations. We use worker-level datafrom the CPS to measure the sensitivity of wages of newly hired workers to changesin aggregate labor market conditions. The wage of new hires, unlike the aggregatewage, is volatile and responds almost one-to-one to changes in labor productivity.We conclude that there is little evidence for wage stickiness in the data. We alsoshow, however, that a little wage rigidity goes a long way in amplifying the responseof job creation to productivity shocks.

Structural unemployment

Structural unemployment is due to mismatch between available jobs and workers.We formalize this concept in a simple model of a segmented labor market with searchfrictions within segments. Worker mobility, job mobility and wage bargaining costsacross segments generate structural unemployment. We estimate the contribution ofthese costs to fluctuations in US unemployment, operationalizing segments as statesor industries. Most structural unemployment is due to wage bargaining costs, whichare large but nevertheless contribute little to unemployment fluctuations. Structuralunemployment is as cyclical as overall unemployment and no more persistent, bothin the current and in previous recessions.

Compensating wage differentials and voluntary job changes: Evidence from West Germany

Does the labor market place wage premia on jobs that involve physical strain,job, insecurity or bad regulation of hours? This paper derives bounds on themonetary returns to these job disamenities in the West German labor market.We show that in a market with dispersion in both job characteristics andwages, the average wage change of workers who switch jobs voluntarily and optfor consuming more (less) disamenities,provides an upper (lower) bound on themarket return to the disamenity. Using longitudinal information from workersin the German Socio Economic Panel, we estimate an upper bound of 5% and alower bound of 3.5% for the market return to work strain in a job.

Employee referrals and efficiency wages

Many workers believe that personal contacts are crucial for obtainingjobs in high-wage sectors. On the other hand, firms in high-wage sectorsreport using employee referrals because they help provide screening andmonitoring of new employees. This paper develops a matching model thatcan explain the link between inter-industry wage differentials and useof employee referrals. Referrals lower monitoring costs because high-effortreferees can exert peer pressure on co-workers, allowing firms to pay lowerefficiency wages. On the other hand, informal search provides fewer job andapplicant contacts than formal methods (e.g., newspaper ads). In equilibrium,the matching process generates segmentation in the labor market becauseof heterogeneity in the size of referral networks. Referrals match good high-paying jobs to well-connected workers, while formal methods matchless attractive jobs to less-connected workers. Industry-level data show apositive correlation between industry wage premia and use of employeereferrals. Moreover, evidence using the NLSY shows similar positive andsignificant OLS and fixed-effects estimates of the returns to employeereferrals, but insignificant effects once sector of employment is controlledfor. This evidence suggests referred workers earn higher wages not becauseof higher unobserved ability or better matches but rather because theyare hired in high-wage sectors.

Crises and growth: A re-evaluation

We address the question of whether growth and welfare can be higher in crisis prone economies. First, we show that there is a robust empirical link between per-capita GDP growth and negative skewness of credit growth across countries with active financial markets. That is, countries that have experienced occasional crises have grown on average faster than countries with smooth credit conditions. We then present a two-sector endogenous growth model in which financial crises can occur, and analyze the relationship between financial fragility and growth. The underlying credit market imperfections generateborrowing constraints, bottlenecks and low growth. We show that under certain conditions endogenous real exchange rate risk arises and firms find it optimal to take on credit risk in the form of currency mismatch. Along such a risky path average growth is higher, but self-fulfilling crises occur occasionally. Furthermore, we establish conditions under which the adoption of credit risk is welfare improving and brings the allocation nearer to the Pareto optimal level. The design of the model is motivated by several features of recent crises: credit risk in the form of foreign currency denominated debt; costly crises that generate firesales and widespread bankruptcies; and asymmetric sectorial responses, wherethe nontradables sector falls more than the tradables sector in the wake of crises.

The ins and outs of unemployment: An analysis conditional on technology shocks

We analyze how unemployment, job finding and job separation rates reactto neutral and investment-specific technology shocks. Neutral shocks increaseunemployment and explain a substantial portion of it volatility; investment-specificshocks expand employment and hours worked and contribute to hoursworked volatility. Movements in the job separation rates are responsible for theimpact response of unemployment while job finding rates for movements alongits adjustment path. The evidence warns against using models with exogenousseparation rates and challenges the conventional way of modelling technologyshocks in search and sticky price models.

Award errors and permanent disability benefits in Spain

There is a controversial debate about the effects of permanent disability benefits on labormarket behavior. In this paper we estimate equations for deserving and receiving disabilitybenefits to evaluate the award error as the difference in the probability of receiving anddeserving using survey data from Spain. Our results indicate that individuals aged between55 and 59, self-employers or working in an agricultural sector have a probability of receiving a benefit without deserving it significantly higher than the rest of individuals. We also find evidence of gender discrimination since male have a significantly higher probability of receiving a benefit without deserving it. This seems to confirm that disability benefits are being used as an instrument for exiting the labor market for some individuals approaching the early retirement or those who do not have right to retire early. Taking into account that awarding process depends on Social Security Provincial Department, this means that some departments are applying loosely the disability requirements for granting disability benefits.

Estimating the probability of leaving unemployment using uncompleted spells from repeated cross-section data

We propose a new econometric estimation method for analyzing the probabilityof leaving unemployment using uncompleted spells from repeated cross-sectiondata, which can be especially useful when panel data are not available. Theproposed method-of-moments-based estimator has two important features:(1) it estimates the exit probability at the individual level and(2) it does not rely on the stationarity assumption of the inflowcomposition. We illustrate and gauge the performance of the proposedestimator using the Spanish Labor Force Survey data, and analyze the changesin distribution of unemployment between the 1980s and 1990s during a periodof labor market reform. We find that the relative probability of leavingunemployment of the short-term unemployed versus the long-term unemployedbecomes significantly higher in the 1990s.

Formação profissional e empregabilidade: O caso dos diplomados da escola de formação profissional da Cabnave em São Vicente – Cabo Verde

Se houve um tempo em que eram as empresas as mais preocupadas em dotar os seus empregados com um determinado leque de competências técnicas, pela via da Formação Profissional, para se tornarem cada vez mais competitivas, hoje torna-se crucial para qualquer país poder determinar o grau de empregabilidade dos diversos cursos de formação profissional realizados pela sua população activa, de modo a optimizar a inserção dos seus cidadãos no mercado de trabalho. A presente investigação visa analisar a empregabilidade a partir de um caso nacional, em que uma escola de formação profissional, inserida numa empresa – a Cabnave – vem desenvolvendo um modelo de formação, que para além de estar directamente relacionado com a sua própria actividade, encontra-se ligado a vários sectores da actividade económica de Cabo Verde, particularmente ao da indústria Mecânica e Metalomecânica. O estudo contém dois principais momentos. Um primeiro, no qual se procedeu à contextualização e fundamentação do tema, com base em bibliografia nacional e internacional, e enfoque nos seguintes assuntos: o sistema de ensino em Cabo Verde, mais concretamente a via do ensino secundário técnico; a formação profissional; e o mercado de trabalho em Cabo Verde. Num segundo momento desenvolveu-se um Caso de Estudo, para se determinar o grau de empregabilidade dos diplomados da Escola de Formação Profissional da Cabnave, que seguiram uma carreira em áreas profissionais diferentes do curso realizado, recorrendo-se à aplicação de um questionário a uma amostra final de 80 inquiridos, e à interpretação dos resultados, através dos métodos de análise estatística Descritiva e Correlacional. Das conclusões resultantes da análise das respostas obtidas, chama-se a atenção para o facto de a maioria dos diplomados partilharem de uma opinião positiva relativamente à empregabilidade dos cursos que frequentaram, independentemente de os mesmos terem ou não conduzido a uma profissão directamente ligada ao sector da Mecânica e MetalomecânicaIf at one point companies used to be the ones that were the most concerned with providing specific technical skills to their employees, through professional education, as to become more competitive, it is today highly important for every country to determine the level of employability of the numerous professional education programs pursued by its active population, so as to increase citizens’ chances to enter the labor market. The present research aims to study the concept of employability, with focus on a national case, a school of professional education which integrates the company Cabnave, and has been developing an educational model that, in addition to responding to the company’s own needs, is also connected to Cape Verde’s various economic sectors, notably the Mechanics and Metalworking industry. The study consists of two main parts. A first one where, based on national and international bibliography, the theme is contextualized, with closest attention to the following subjects: the Cape Verdean education system, especially vocational education in secondary schools; professional education; and the labor market in Cape Verde. In the second part, a Case Study is conducted, in order to determine the level of employability of those who were trained by Cabnave’s School of Professional Education, but have pursued a career in a different professional field. Therefore, a questionnaire was submitted to a sample of 80 respondents, and the correspondent data was analyzed and interpreted, with the use of Descriptive Statistics and Correlation Analysis. One of the conclusions deriving from the survey results is that most of the School’s trained graduates have a positive view of the employability of the programs they have pursued, independently of whether they continued to work in the Mechanics and Metalworking industry

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.

Nonparametric bounds on the returns to language skills

This paper applies the theoretical literature on nonparametric bounds ontreatment effects to the estimation of how limited English proficiency (LEP)affects wages and employment opportunities for Hispanic workers in theUnited States. I analyze the identifying power of several weak assumptionson treatment response and selection, and stress the interactions between LEPand education, occupation and immigration status. I show that thecombination of two weak but credible assumptions provides informative upperbounds on the returns to language skills for certain subgroups of thepopulation. Adding age at arrival as a monotone instrumental variable alsoprovides informative lower bounds.

Vários percursos diversas identificações : descendentes de migrantes cabo-verdianos no Bairro do Talude - Unhos

The research presented here aimed to analyze the processes of integration of Cape Verdeans immigrants descendants of living in the neighborhood of Talude, Town of Unhos, Municipality of Loures. To analyze the central object of research - the process of integration of descendants of migrants in the neighborhood of Talude we tried to answer the following questions, which reflect the objectives of the research:  What are the paths of socialization the descendants of immigrants: at the family, at school, in employment, in the neighborhood and in other activities?  What is the influence of gender relations in the processes of integration of descendants?  What are the perception the of immigrants descendants living in the neighborhood of Talude in relation to how they are viewed by residents of the Town residents in the neighborhood? And the people or society in general? And what influence these perceptions have in their process of integration? This study consists in two parts: the design of the survey, which is depicted on the reason for the choice of topic, the definition of the topic, research objectives, the method that was used in the course of investigation and the framing of the issue. In the second part, the analysis of data in different pathways: family, neighborhood, school, labor market, in other activities, the influence of gender and image(s). As a general conclusion we can say that there are several factors that contribute to the identification of immigrant descendants (there are no apparent factors that predominate) and the images they have of themselves and the Portuguese society in general are diverse.

Schumpeterian technology shocks

We analyze the labor market effects of neutral and investment-specific technologyshocks along the intensive margin (hours worked) and the extensive margin(unemployment). We characterize the dynamic response of unemploymentin terms of the job separation and the job finding rate. Labor market adjustmentsoccur along the extensive margin in response to neutral shocks, along theintensive margin in response to investment specific shocks. The job separationrate accounts for a major portion of the impact response of unemployment. Neutralshocks prompt a contemporaneous increase in unemployment because of asharp rise in the separation rate. This is prolonged by a persistent fall in thejob finding rate. Investment specific shocks rise employment and hours worked.Neutral shocks explain a substantial portion of the volatility of unemploymentand output; investment specific shocks mainly explain hours worked volatility.This suggests that neutral progress is consistent with Schumpeterian creative destruction,while investment-specific progress operates as in a neoclassical growthmodel.

Are changes in education important for the wage premium and unemployment?

A generalized rise in unemployment rates for both college and high-schoolgraduates, a widening education wage premium, and a sharp increase incollege education participation are characteristic features of thetransformations of the U.S. labor market between 1970 and 1990. This paperinvestigates the interactions between these changes in the labor marketand in educational attainment. First, it develops an equilibrium searchand matching model of the labor market where education is endogenouslydetermined. Second, calibrated versions of the model are used to studyquantitatively whether either a skill-biased change in technology or amismatch shock can explain the above facts. The skill-biased shock accountsfor a considerable part of the changes but fails to produce the increasein unemployment for the educated labor force. The mismatch shock explainsinstead much of the change in the four variables, including the wage premium.

The impact of tax credits on labour supply

One of the principle aims of the Working Families' Tax Credit in the UK was to increase the participation of single mothers. The literature to date concludes there was approximately a five-percentage-point increase in employment of single mothers. The differences-in-differences methodology that is typically used compares single mother with single women without children. However, the characteristics of these groups are very different, and change over time in relative covariates are likely to violate the identifying assumption. We find that when we control for differential trends between women with and without children, the employment effect of the policy falls significantly. Moreover, the effect is borne solely by those working full-time (30 hours or more), while having no effect on inducing people into the labor market from inactivity. Looking closely at important covariates over time, we can see sizeable changes in the relative returns to employment between the treatment and control groups.