Report of the Recommendations to the Iowa Department of Workforce Development on a Review of Selected General and Application Controls Over the Unemployment Insurance System, May 1, 2006 to May 24, 2006

State Audit Reports

Business Cycles, Unemployment Insurance, and the Calibration of Matching Models

This paper points out an empirical 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, both sticky wages and match-specific productivity shocks help the model reproduce the stylized facts: both make the firm's flow of surplus more procyclical, thus making hiring more procyclical too.

Wage inequality and unemployment with overeducation

A skill-biased change in technology can account at once for the changes observed in a number of important variables of the US labour market between 1970 and 1990. These include the increasing inequality in wages, both between and within education groups, and the increase in unemployment at all levels of education. In contrast, in previous literature this type of technology shock cannot account for all of these changes. The paper uses a matching model with a segmented labour market, an imperfect correlation between individual ability and education, and a fixed cost of setting up a job. The endogenous increase in overeducation is key to understand the response of unemployment to the technology shock.

Turbulence and unemployment in a job matching model

According to Ljungqvist and Sargent (1998), high European unemployment since the 1980s can be explained by a rise in economic turbulence, leading to greater numbers of unemployed workers with obsolete skills. These workers refuse new jobs due to high unemployment benefits. In this paper we reassess the turbulence-unemployment relationship using a matching model with endogenous job destruction. In our model, higher turbulence reduces the incentives of employed workers to leave their jobs. If turbulence has only a tiny effect on the skills of workers experiencing endogenous separation, then the results of Lungqvist and Sargent (1998, 2004) are reversed, and higher turbulence leads to a reduction in unemployment. Thus, changes in turbulence cannot provide an explanation for European unemployment that reconciles the incentives of both unemployed and employed workers.

Geochemistry and stable isotope composition of fresh alkaline porphyry copper tailings: Implications on sources and mobility of elements during transport and early stages of deposition

Prevention of acid mine drainage (AMD) in sulfide-containing tailings requires the identification of the geochemical processes and element pathways in the early stages of tailing deposition. However, analyses of recently deposited tailings in active tailings impoundments are scarce because mineralogical changes occur near the detection limits of many assays. This study shows that a detailed geochemical study which includes stable isotopes of water (delta H-2, delta O-18), dissolved sulfates (delta S-34, delta O-18) and hydrochernical parameter (pH, Eh, DOC, major and trace elements) from tailings samples taken at different depths in rainy and dry seasons allows the understanding of weathering (oxidation, dissolution, sorption, and desorption), water and element pathways, and mixing processes in active tailings impoundments. Fresh alkaline tailings (pH 9.2-10.2) from the Cu-Mo porphyry deposit in El Teniente, Chile had low carbonate (0.8-1.1 Wt-% CaCO3 equivalent) and sulfide concentrations (0.8-1.3 wt.%, mainly as pyrite). In the alkaline tailings water, Mo and Cu (up to 3.9 mg/L Mo and 0.016 mg/L Cu) were mobile as MoO42- and Cu (OH)(2)(0). During the flotation, tailings water reached equilibrium with gypsum (up to 738 mg/L Ca and 1765 mg/ L SO4). The delta S-34 VS. delta O-18 covariations of dissolved sulfate (2.3 to 4.5% delta S-34 and 4.1 to 6.0 % delta O-18) revealed the sulfate sources: the dissolution of primary sulfates (12.0 to 13.2%. delta S-34, 7.4 to 10.9%.delta O-18) and oxidation of primary sulfides (-6.7 to 1.7%. delta S-34). Sedimented tailings in the tailings impoundment can be divided into three layers with different water sources, element pathways, and geochemical processes. The deeper sediments (> 1 m depth) were infiltrated by catchment water, which partly replaced the original tailings water, especially during the winter season. This may have resulted in the change from alkaline to near-neutral pH and towards lower concentrations of most dissolved elements. The neutral pH and high DOC (up to 99.4 mg/L C) of the catchment water mobilized Cu (up to 0.25 mg/L) due to formation of organic Cu complexes; and Zn (up to 130 mg/L) due to dissolution of Zn oxides and desorption). At I m depth, tailings pore water obtained during the winter season was chemically and isotopically similar to fresh tailings water (pH 9.8-10.6, 26.7-35.5 mg/L Cl, 2.3-6.0 mg/L Mo). During the summer, a vadose zone evolved locally and temporarily up to 1.2 m depth. resulting in a higher concentration of dissolved solids in the pore water due to evaporation. During periodical new deposition of fresh tailings, the geochemistry of the surface layer was geochemically similar to fresh tailings. In periods without deposition, sulfide oxidation was suggested by decreasing pH (7.7-9.5), enrichment of MoO42- and SO42-, and changes in the isotopic composition of dissolved sulfates. Further enrichment for Na, K, Cl, SO4, Mg, Cu, and Mo (up to 23.8 mg/L Mo) resulted from capillary transport towards the surface followed by evaporation and the precipitation of highly soluble efflorescent salts (e.g., mirabilite, syngenite) at the tailing surface during summer. (C) 2008 Elsevier B.V. All rights reserved.

Fixed-term contracts and the duration distribution of unemployment

In the mid-1980s, many European countries introduced fixed-term contracts.Since then their labor markets have become more dynamic. This paper studiesthe implications of such reforms for the duration distribution ofunemployment, with particular emphasis on the changes in the durationdependence. I estimate a parametric duration model using cross-sectionaldata drawn from the Spanish Labor Force Survey from 1980 to 1994 to analyzethe chances of leaving unemployment before and after the introduction offixed-term contracts. I find that duration dependence has increased sincesuch reform. Semi-parametric estimation of the model also shows that forlong spells, the probability of leaving unemployment has decreased sincesuch reform.

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.

Temporary help agencies and workers' occupational mobility

This paper focuses on the occupational mobility of temporary helpagency workers by studying their job-to-job upgrading chances as opposedto those who have not been hired through these intermediaries. A screeningapproach to the role of those labor brokers suggests that agency workersmay expect greater chances of upgrading from one occupation to another.Results obtained with a sample of Spanish workers show that workingthrough those intermediaries comparatively offers stronger prospects ofoccupational upgrading for workers of a medium qualification level. Thisbasic result is reinforced when the existence of self-selection into thistype of intermediated work is appropriately taken into account.

Hiring and firing costs, adverse selection and long-term unemployment

In this paper, we present a matching model with adverse selection that explains why flows into and out of unemployment are much lower in Europe compared to North America, while employment-to-employment flows are similar in the two continents. In the model,firms use discretion in terms of whom to fire and, thus, low quality workers are more likely to be dismissed than high quality workers. Moreover, as hiring and firing costs increase, firms find it more costly to hire a bad worker and, thus, they prefer to hire out of the pool of employed job seekers rather than out of the pool of the unemployed, who are more likely to turn out to be 'lemons'. We use microdata for Spain and the U.S. and find that the ratio of the job finding probability of the unemployed to the job finding probability of employed job seekers was smaller in Spain than in the U.S. Furthermore, using U.S. data, we find that the discrimination of the unemployed increased over the 1980's in those states that raised firing costs by introducing exceptions to the employment-at-will doctrine.

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.

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.

A new way of quantifying dominant upper-limb mobility in healthy and painful shoulders

Introduction: Quantification of daily upper-limb activity is determinant in the evaluation of shoulder surgery. For a number of shoulder diseases, roblems in performing daily activities have been expressed in terms of upper-limb usage. Althought many instruments measure upper-limb movements, there is no accepted standard or widely used objective measure and no device to differenciate left or right shoulder usage. We present an objective method to measure the mobility and quantify the usage of dominant and healthy or painfull shoulder movement during daily life. Methods: 12 patients with unilateral pathological shoulder (rotator cuff disease) are compared to 18 control subjects (10 right and 8 left handed). Both SST and DASH questionnaires were completed by each one. Three inertial miniature modules including triaxial gyroscopes and accelerometers were fixed on the dorsal side of both humerus, and on the thorax. An ambulatory datalogger have recorded the signals during one day. Results: We observed that right handed healthy subjects used 18% and 26% more their dominant shoulder during respectively stand and sit postures while left handed subjects used 8% and 18% more their left side. In walking periods, shoulder mobility was quite alike for both sides. Patients affected on their dominant arm (PD group) mostly used their non-dominant side (respectively 5% and 9% during stand and sit). For the patients affected on their non-dominant shoulder (PND group), this difference is respectively 28% and 26%. Moreover, we can note that, during walking periods, a difference can be observed (on the contrary to controls). Patients used 13% and 15% more their nonpathologic side respectively for PD and PND groups. Conclusion: Inertial sensors, during long-term ambulatory monitoring of upper limbs, can quantify the difference between dominant and nondominant sides. Patients used more their non affected shoulder during daily life. For the PD group, the difference with control can be shown during walking. These results are very encouraging for future evaluation of patients with shoulder injuries since it can provide an objective evaluation of the shoulder mobility and of the treatment outcome during daily life.

The impact of firing costs on turnover and unemployment: Evidence from the Colombian labour market reform

Reductions in firing costs are often advocated as a way of increasingthe dynamism of labour markets in both developed and less developed countries. Evidence from Europe and the U.S. on the impact of firing costs has, however, been mixed. Moreover, legislative changes both in Europe and the U.S. have been limited. This paper, instead, examines the impact of the Colombian Labour Market Reform of 1990, which substantially reduced dismissal costs. I estimate the incidence of a reduction in firing costs on worker turnover by exploiting the temporal change in the Colombian labour legislation as well as the variability in coverage between formal and informal sector workers. Using a grouping estimator to control for common aggregate shocks and selection, I find that the exit hazard rates into and out of unemployment increased after the reform by over 1% for formal workers (covered by the legislation) relative to informal workers (uncovered). The increase of the hazards implies a net decrease in unemployment of a third of a percentage point, which accounts for about one quarter of the fall in unemployment during the period of study.

Intergenerational mobility and the informative content of surnames

We propose an alternative method for measuring intergenerational mobility. Measurements obtained fromtraditional methods (based on panel data) are scarce, difficult to compare across countries and almost impossible to get across time. In particular, this means that we do not know how intergenerational mobility is correlated with growth, income or the degree of inequality.Our proposal is to measure the informative content of surnames in one census. The more information thesurname has on the income of an individual, the more important is her background in determining her outcomes; and thus, the less mobility there is.The reason is that surnames provide information about family relationships because the distribution ofsurnames is necessarily very skewed. A large percentage of the population is bound to have a very unfrequent surname. For them the partition generated by surnames is very informative on family linkages.First, we develop a model whose endogenous variable is the joint distribution of surnames and income.There, we explore the relationship between mobility and the informative content of surnames. We allow for assortative mating to be a determinant of both.Second, we use our methodology to show that in large Spanish region the informative content of surnamesis large and consistent with the model. We also show that it has increased over time, indicating a substantial drop in the degree of mobility. Finally, using the peculiarities of the Spanish surname convention we show that the degree of assortative mating has also increased over time, in such a manner that might explain the decrease in mobility observed.Our method allows us to provide measures of mobility comparable across time. It should also allow us tostudy other issues related to inheritance.