Essays on Job Search and Labor Market Dynamics

This dissertation consists of three separate essays on job search and labor market dynamics. In the first essay, “The Impact of Labor Market Conditions on Job Creation: Evidence from Firm Level Data”, I study how much changes in labor market conditions reduce employment fluctuations over the business cycle. Changes in labor market conditions make hiring more expensive during expansions and cheaper during recessions, creating counter-cyclical incentives for job creation. I estimate firm level elasticities of labor demand with respect to changes in labor market conditions, considering two margins: changes in labor market tightness and changes in wages. Using employer-employee matched data from Brazil, I find that all firms are more sensitive to changes in wages rather than labor market tightness, and there is substantial heterogeneity in labor demand elasticity across regions. Based on these results, I demonstrate that changes in labor market conditions reduce the variance of employment growth over the business cycle by 20% in a median region, and this effect is equally driven by changes along each margin. Moreover, I show that the magnitude of the effect of labor market conditions on employment growth can be significantly affected by economic policy. In particular, I document that the rapid growth of the national minimum wages in Brazil in 1997-2010 amplified the impact of the change in labor market conditions during local expansions and diminished this impact during local recessions.

In the second essay, “A Framework for Estimating Persistence of Local Labor

Demand Shocks”, I propose a decomposition which allows me to study the persistence of local labor demand shocks. Persistence of labor demand shocks varies across industries, and the incidence of shocks in a region depends on the regional industrial composition. As a result, less diverse regions are more likely to experience deeper shocks, but not necessarily more long lasting shocks. Building on this idea, I propose a decomposition of local labor demand shocks into idiosyncratic location shocks and nationwide industry shocks and estimate the variance and the persistence of these shocks using the Quarterly Census of Employment and Wages (QCEW) in 1990-2013.

In the third essay, “Conditional Choice Probability Estimation of Continuous- Time Job Search Models”, co-authored with Peter Arcidiacono and Arnaud Maurel, we propose a novel, computationally feasible method of estimating non-stationary job search models. Non-stationary job search models arise in many applications, where policy change can be anticipated by the workers. The most prominent example of such policy is the expiration of unemployment benefits. However, estimating these models still poses a considerable computational challenge, because of the need to solve a differential equation numerically at each step of the optimization routine. We overcome this challenge by adopting conditional choice probability methods, widely used in dynamic discrete choice literature, to job search models and show how the hazard rate out of unemployment and the distribution of the accepted wages, which can be estimated in many datasets, can be used to infer the value of unemployment. We demonstrate how to apply our method by analyzing the effect of the unemployment benefit expiration on duration of unemployment using the data from the Survey of Income and Program Participation (SIPP) in 1996-2007.

Estimated distribution of unemployment compensation contributions and benefits according to industry /

Description based on: 1940-41; title from caption.

The impact of unemployment insurance benefits on local economies : Tucson /

Bibliography: p. 75.

Unemployment compensation contributions, benefits and reserves : papers presented at Round Table Conference, American Statistical Association, December 29, 1939.

At head of title: Federal Security Agency, Social Security Board, Bureau of Employment Security.

A study of the characteristics and labor market experience of unemployment insurance claimants exhausting benefits, July 1956-June 1957, Mississippi and the Jackson area.

Mode of access: Internet.

The effects of aggregate unemployment insurance benefits in the U.S. on the operation of a local economy.

"Prepared by Ronald L. Oaxaca ... and Carol A. Taylor."

The distribution of unemployment insurance benefits and costs /

Bibliography: p. 189-193.

Unemployment compensation : a history of extended benefits for the long-term unemployed /

"September 23, 1992; updated May 18, 1993."

Neoliberal austerity and unemployment

Neoliberal fiscal austerity policies decrease public expenditure through cuts to central and local government budgets, welfare services and benefits and privatisation of public resources resulting in job losses. This article interrogates the empirical, theoretical, methodological and ideological relationships between neoliberalism, unemployment and the discipline of psychology, arguing that neoliberalism constitutes rather than causes unemployment...

Microeconometric Studies on Unemployment and Business Cycles

Väitöskirja koostuu neljästä esseestä, joissa tutkitaan empiirisen työntaloustieteen kysymyksiä. Ensimmäinen essee tarkastelee työttömyysturvan tason vaikutusta työllistymiseen Suomessa. Vuonna 2003 ansiosidonnaista työttömyysturvaa korotettiin työntekijöille, joilla on pitkä työhistoria. Korotus oli keskimäärin 15 % ja se koski ensimmäistä 150 työttömyyspäivää. Tutkimuksessa arvioidaan korotuksen vaikutus vertailemalla työllistymisen todennäköisyyksiä korotuksen saaneen ryhmän ja vertailuryhmän välillä ennen uudistusta ja sen jälkeen. Tuloksien perusteella työttömyysturvan korotus laski työllistymisen todennäköisyyttä merkittävästi, keskimäärin noin 16 %. Korotuksen vaikutus on suurin työttömyyden alussa ja se katoaa kun oikeus korotettuun ansiosidonnaiseen päättyy. Toinen essee tutkii työttömyyden pitkän aikavälin kustannuksia Suomessa keskittyen vuosien 1991 – 1993 syvään lamaan. Laman aikana toimipaikkojen sulkeminen lisääntyi paljon ja työttömyysaste nousi yli 13 prosenttiyksikköä. Tutkimuksessa verrataan laman aikana toimipaikan sulkemisen vuoksi työttömäksi jääneitä parhaassa työiässä olevia miehiä työllisinä pysyneisiin. Työttömyyden vaikutusta tarkastellaan kuuden vuoden seurantajaksolla. Vuonna 1999 työttömyyttä laman aikana kokeneen ryhmän vuosiansiot olivat keskimäärin 25 % alemmat kuin vertailuryhmässä. Tulojen menetys johtui sekä alhaisemmasta työllisyydestä että palkkatasosta. Kolmannessa esseessä tarkastellaan Suomen 1990-luvun alun laman aiheuttamaa työttömyysongelmaa tutkimalla työttömyyden kestoon vaikuttavia tekijöitä yksilötasolla. Kiinnostuksen kohteena on työttömyyden rakenteen ja työn kysynnän muutoksien vaikutus keskimääräiseen kestoon. Usein oletetaan, että laman seurauksena työttömäksi jää keskimääräistä huonommin työllistyviä henkilöitä, jolloin se itsessään pidentäisi keskimääräistä työttömyyden kestoa. Tuloksien perusteella makrotason kysyntävaikutus oli keskeinen työttömyyden keston kannalta ja rakenteen muutoksilla oli vain pieni kestoa lisäävä vaikutus laman aikana. Viimeisessä esseessä tutkitaan suhdannevaihtelun vaikutusta työpaikkaonnettomuuksien esiintymiseen. Tutkimuksessa käytetään ruotsalaista yksilötason sairaalahoitoaineistoa, joka on yhdistetty populaatiotietokantaan. Aineiston avulla voidaan tutkia vaihtoehtoisia selityksiä onnettomuuksien lisääntymiselle noususuhdanteessa, minkä on esitetty johtuvan esim. stressin tai kiireen vaikutuksesta. Tuloksien perusteella työpaikkaonnettomuudet ovat syklisiä, mutta vain tiettyjen ryhmien kohdalla. Työvoiman rakenteen vaihtelu saattaa selittää osan naisten onnettomuuksien syklisyydestä. Miesten kohdalla vain vähemmän vakavat onnettomuudet ovat syklisiä, mikä saattaa johtua strategisesta käyttäytymisestä.

Unemployment and private returns to higher education in Argentina (1974-2002)

Resumen: El trabajo analiza la evolución de los retornos privados a la educación superior en Argentina durante el período 1974–2002 y cómo éstos se vieron afectados por el desempleo. La conclusión es que los retornos a la educación son mayores si se los corrige teniendo en cuenta el desempleo para cada nivel educativo, ya que a mayor nivel, menor tasa de desempleo. Al evaluar invertir en educación no se debería considerar simplemente el diferencial de ingresos sino también la mayor probabilidad de tener un trabajo. Esto es relevante en un país como Argentina que pasó de tener tasas de desempleo cercanas a 5% en la década del ochenta a tener tasas de dos dígitos a fines del siglo XX y comienzos del XXI.

Unemployment insurance in the presence of an informal sector

We study the effect of UI benefits in a typical developing country where the informal sector is sizeable and persistent. In a partial equilibrium environment, ruling out the macroeconomic consequences of UI benefits, we characterize the stationary equilibrium of an economy where policyholders may be employed in the formal sector, short-run unemployed receiving UI benefits or long-run unemployed without UI benefits. We perform comparative static exercises to understand how UI benefits affect unemployed worker´s effort to secure a formal job, their labor supply in the informal sector and leisure time. Our model reveals that an increase in UI benefits generates two opposing effects for the short-run unemployed. First, since search efforts cannot be monitored it generates moral hazard behaviours that lower effort. Second, it generates an income effect as it reduces the marginal cost of searching for a formal job and increases effort.The overall effect is ambiguous and depends on the relative strength of these two effects. Additionally, we show that an increase in UI benefits increases the efforts of long-run unemployed workers. We provide a simple simulation exercise which suggests that the income effect pointed out is not necessarily of second-order importance in comparison with moral hazard strength. This result softens the widespread opinion, usually based on the microeconomic/partial equilibrium argument that the presence of dual labor markets is an obstacle to providing UI in developing countries.

Measuring Unemployment Insurance Generosity

In this paper, we develop a methodology to summarize the various policy parameters of an unemployment insurance scheme into a single generosity parameter. Unemployment insurance policies are multdimensional objects. They are typically defined by waiting periods, eligibility duration, benefit levels and asset tests when eligible, which makes intertemporal or international comparisons difficult. To make things worse, labor market conditions, such as the likelihood and duration of unemployment matter when assessing the generosity of different policies. We build a first model with such complex characteristics. Our model features heterogeneous agents that are liquidity constrained but can self-insure. We then build a second model that is similar, except that the unemployment insurance is simpler: it is deprived of waiting periods and agents are eligible forever with constant benefits. We then determine which level of benefits in this second model makes agents indifferent between both unemployment insurance policies. We apply this strategy to the unemployment insurance program of the United Kingdom and study how its generosity evolved over time.

An Unemployment Insurance Scheme for the Euro Area: A simulation exercise of two options. CEPS Special Report No. 98/December 2014

This study offers an in-depth economic analysis of the two main proposals for the creation of a European unemployment insurance scheme. One proposes the creation of a harmonised European unemployment benefit scheme that would apply automatically to every eligible unemployed person. The alternative, termed ‘reinsurance’ here, would transfer funds to national unemployment insurance schemes to finance benefits from the centre to the periphery when unemployment is measurably higher than normal. The rationale behind these proposals is to set up an EU-level shock absorber to overcome coordination failures and the crisis-budget constraints of individual countries. The authors consider the possible trade-offs and challenges of, for example, the definition of the trigger, the fiscal rule and the harmonisation of national benefits. They conclude that while both options are viable, ‘reinsurance’ offers a stronger stabilisation effect for the same amount of European distribution.

Productivity and job security : attrition--benefits and problems.

Bibliography: p. 111-116.