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.

Income taxation in a frictional labor market

A new model of wage dispersion is used to examine welfare aspects of income taxation. The model retains the dynamics of wage posting modelswhile exogenizing search e¤ort, therefore allowing more insight into policy issues. The results highlight effects that standard analyses do not take into account. The optimal income tax should depend on an incidenceeffect between workers and firms. This incidence effect arises from firmstrying to lower wages as much as possible. An employment tax proves, incertain cases, to be the best method to encourage labor force participation.

Labor market heterogeneity and the aggregate matching function

The matching function -a key building block in models of labor market frictions- impliesthat the job finding rate depends only on labor market tightness. We estimate such amatching function and find that the relation, although remarkably stable over 1967-2007,broke down spectacularly after 2007. We argue that labor market heterogeneities are notfully captured by the standard matching function, but that a generalized matching functionthat explicitly takes into account worker heterogeneity and market segmentation is fullyconsistent with the behavior of the job finding rate. The standard matching function canbreak down when, as in the Great Recession, the average characteristics of the unemployedchange too much, or when dispersion in labor market conditions -the extent to which somelabor markets fare worse than others- increases too much.

The Political Economy of Active Labor-Market Policy

Active labor-market policies (ALMPs) have developed significantly over the past two decades across Organization for Economic Cooperation and Development (OECD) countries, with substantial cross-national differences in terms of both extent and overall orientation. The objective of this article is to account for cross-national variation in this policy field. It starts by reviewing existing scholarship concerning political, institutional, and ideational determinants of ALMPs. It then argues that ALMP is too broad a category to be used without further specification, and it develops a typology of four different types of ALMPs: incentive reinforcement, employment assistance, occupation, and human capital investment. These are discussed and examined through ALMP expenditure profiles in selected countries. The article uses this typology to analyze ALMP trajectories in six Western European countries and shows that the role of this instrument changes dramatically over time. It concludes that there is little regularity in the political determinants of ALMPs. In contrast, it finds strong institutional and ideational effects, nested in the interaction between the changing economic context and existing labor-market policies.

Heterogeneity, selection and labor market disparities

We study the incentives to acquire skill in a model where heterogeneous firmsand workers interact in a labor market characterized by matching frictions and costlyscreening. When effort in acquiring skill raises both the mean and the variance of theresulting ability distribution, multiple equilibria may arise. In the high-effort equilibrium, heterogeneity in ability is sufficiently large to induce firms to select the bestworkers, thereby confirming the belief that effort is important for finding good jobs.In the low-effort equilibrium, ability is not sufficiently dispersed to justify screening,thereby confirming the belief that effort is not so important. The model has implications for wage inequality, the distribution of firm characteristics, sorting patternsbetween firms and workers, and unemployment rates that can help explaining observedcross-country variation in socio-economic and labor market outcomes.

A Behavioral Account of the Labor Market: The Role of Fairness Concerns

In this paper, we argue that important labor market phenomena can be better understood if one takes (a) the inherent incompleteness and relational nature of most employment contracts and (b) the existence of reference-dependent fairness concerns among a substantial share of the population into account. Theory shows and experiments confirm that, even if fairness concerns were to exert only weak effects in one-shot interactions, repeated interactions greatly magnify the relevance of such concerns on economic outcomes. We also review evidence from laboratory and field experiments examining the role of wages and fairness on effort, derive predictions from our approach for entry-level wages and incumbent workers' wages, confront these predictions with the evidence, and show that reference-dependent fairness concerns may have important consequences for the effects of economic policies such as minimum wage laws.

Aggregate Costs of Gender Gaps in the Labor Market: A Quantitative Estimate

[eng] This paper examines the quantitative effects of gender gaps in entrepreneurship and labor force participation on aggregate productivity and income per capita. We simulate an occupational choice model with heterogeneous agents in entrepreneurial ability, where agents choose to be workers, self-employed or employers. The model assumes that men and women have the same talent distribution, but we impose several frictions on women's opportunities and pay in the labor market. In particular, we restrict the fraction of women participating in the labor market.

Aggregate Costs of Gender Gaps in the Labor Market: A Quantitative Estimate

This paper examines the quantitative effects of gender gaps in entrepreneurship and labor force participation on aggregate productivity and income per capita. We simulate an occupational choice model with heterogeneous agents in entrepreneurial ability, where agents choose to be workers, self-employed or employers. The model assumes that men and women have the same talent distribution, but we impose several frictions on women's opportunities and pay in the labor market. In particular, we restrict the fraction of women participating in the labor market.

Aggregate Costs of Gender Gaps in the Labor Market: A Quantitative Estimate

This paper examines the quantitative effects of gender gaps in entrepreneurship and labor force participation on aggregate productivity and income per capita. We simulate an occupational choice model with heterogeneous agents in entrepreneurial ability, where agents choose to be workers, self-employed or employers. The model assumes that men and women have the same talent distribution, but we impose several frictions on women's opportunities and pay in the labor market. In particular, we restrict the fraction of women participating in the labor market.

Labor market experience and well-being after firm closure. Survey evidence on displaced manufacturing workers in Switzerland

This study examines how plant closure affected individuals' careers and lives about two years after they lost their job. We analyze the displaced workers' reemployment prospects and study for reemployed workers the characteristics of their new jobs in terms of reemployment sectors, wages, and job quality. Additionally, we inquire how workers' sociability and subjective well-being were affected by job loss. Our analysis is based on our own survey conducted in Switzerland in 2011. The survey included the workforce of five manufacturing companies that had closed down two years earlier. We addressed the risk of biases typically prevailing with observational data by complementing it with register data from the public unemployment insurance. Moreover, we use a control group based on matched data from the Swiss Household Panel. We find that workers experience strongly diverging outcomes after plant closure: on the one hand, high proportions of the workers experience a smooth transition after plant closure. More than two-thirds of the workers returned to employment, more than half of them within less than six months. With respect to their social lives, we find that positive changes in relationships with their spouse, family and friends are more frequent than negative changes. On the other hand, for a small group of workers plant closure had a detrimental effect. Close to twenty percent remained unemployed. About ten percent of the workers were long-term unemployed and subsequently often were reemployed in jobs of lower quality. Unemployed workers and workers who dropped out of the labor force were particularly prone to find their subjective well-being decreasing. The most vulnerable subgroup in our study were workers over 55. This result stands in striking contrast to a large body of literature that considers labor market institutions to be primarily biased against young workers. Our findings show that older workers not only take longer to find a job but are also less likely to return to employment. Moreover, if they manage to find a job, they experience the severest cuts in wages and job quality of all cohorts. From a life-course perspective this result is remarkable since it shows that workers are not protected from hardship in their late careers. In light of the current demographic changes this finding may have important policy implications. -- Cette étude analyse l'impact des fermetures d'entreprises sur les travailleurs licenciés. Plus précisément, nous examinons les chances de réinsertion des travailleurs dans le marché du travail et - pour ceux qui l'ont fait avec succès - dans quels secteurs, pour quels salaires et avec quelle qualité d'emploi ils sont réengagés. Nous nous intéressons également aux répercussions engendrées par la perte de l'emploi sur la sociabilité et le bien-être subjectif des travailleurs concernés. Notre analyse se base sur les données d'une enquête que nous avons menée en 2011. Cette enquête cible le personnel de cinq entreprises industrielles suisses qui avaient fermé leurs portes deux ans auparavant. Pour dépasser les biais typiques liés aux données d'observation, nous utilisons en complément des données administratives issues de l'assurance chômage publique. De plus, nous utilisons un groupe de contrôle basé sur des données appariées provenant du Panel Suisse de Ménage. Nos analyses montrent des résultats fortement contrastés. D'un côté, la majeure partie des travailleurs ont vécu une transition professionnelle plutôt facile : plus des deux tiers des personnes ont retrouvé un travail et parmi elles plus de la moitié en moins de six mois. Par rapport aux relations sociales, tant avec leur partenaire, qu'avec les membres de leur famille et leurs amis, les changements expérimentés étaient plus fréquemment positifs que négatifs. De l'autre côté, cependant, pour une petite partie de travailleurs la fermeture de leur entreprise a eu des conséquences très négatives sur leur carrière et leur bien-être. Au moment de notre enquête, presque vingt pourcents des travailleurs étaient au chômage. Les personnes au chômage et celles qui avaient quitté le marché du travail ont été particulièrement affectées par une diminution de leur bien-être subjectif. Les plus vulnérables parmi les travailleurs licenciés étaient ceux qui étaient âgés de plus de 55 ans. Notre analyse montre que les travailleurs âgés ont beaucoup moins fréquemment retrouvé un travail. Pour les personnes de plus de 55 ans qui ont tout de même retrouvé un emploi, la réinsertion a durée plus longtemps, les pertes de salaire étaient plus conséquentes et la diminution de la qualité de l'emploi plus grande que pour les autres cohortes. Au vu des changements démographiques actuels, ce résultat interpellant peut avoir des implications politiques importantes.

Labor Market Signaling and Self-Confidence: Wage Compression and the Gender Pay Gap

I extend Spence's signaling model by assuming that some workers are overconfident-they underestimate their marginal cost of acquiring education-and some are underconfident. Firms cannot observe workers' productive abilities and beliefs but know the fractions of high-ability, overconfident, and underconfident workers. I find that biased beliefs lower the wage spread and compress the wages of unbiased workers. I show that gender differences in self-confidence can contribute to the gender pay gap. If education raises productivity, men are overconfident, and women underconfident, then women will, on average, earn less than men. Finally, I show that biased beliefs can improve welfare.