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.

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.

Protective or counter-productive? Labor market institutions and the effect of immigration on EU natives

We estimate the effect of immigrant flows on native employment in WesternEurope, and then ask whether the employment consequences of immigrationvary with institutions that affect labor market flexibility. Reducedflexibility may protect natives from immigrant competition in the nearterm, but our theoretical framework suggests that reduced flexibility islikely to increase the negative impact of immigration on equilibriumemployment. In models without interactions, OLS estimates for a panel ofEuropean countries in the 1980s and 1990s show small, mostly negativeimmigration effects. To reduce bias from the possible endogeneity ofimmigration flows, we use the fact that many immigrants arriving after1991 were refugees from the Balkan wars. An IV strategy based onvariation in the number of immigrants from former Yugoslavia generateslarger though mostly insignificant negative estimates. We then estimatemodels allowing interactions between the employment response toimmigration and institutional characteristics including business entrycosts. These results, limited to the sample of native men, generallysuggest that reduced flexibility increases the negative impact ofimmigration. Many of the estimated interaction terms are significant,and imply a significant negative effect on employment in countrieswith restrictive institutions.

Declining labor force attachment and downward trends in unemployment and participation

The US labor market witnessed two apparently unrelated secular movements in thelast 30 years: a decline in unemployment between the early 1980s and the early 2000s,and a decline in participation since the early 2000s. Using CPS micro data and a stock-flow accounting framework, we show that a substantial, and hitherto unnoticed, factorbehind both trends is a decline in the share of nonparticipants who are at the margin ofparticipation. A lower share of marginal nonparticipants implies a lower unemploymentrate, because marginal nonparticipants enter the labor force mostly through unemployment,while other nonparticipants enter the labor force mostly through employment.

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.

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.

Economics breeds culture

Several recent papers document the influence and long lasting effects of technology on preferences. Simultaneously, cultural factors are often invoked to explain heterogeneity in preferences. These two ideas suggest that culture determines the short run equilibrium values of economic variables, but, in the long run, culture changes in response to the underlying economic fundamentals. We build a model in which preferences are endogenous and the diversity in preferences (the "cultural" diversity) is explained by the variation in the relevant economic fundamentals. This can help explain observed differences in labor market attachment among groups defined e.g., by citizenship, ethnicity or gender.

The Transformation Problem : an Aleternative Solution with an Identical Aggregate Profit Rate in the Labor value and the Monetary Space.

The aim of this paper is to demonstrate that, even if Marx's solution to the transformation problem can be modified, his basic conclusions remain valid. the proposed alternative solution which is presented hare is based on the constraint of a common general profit rate in both spaces and a money wage level which will be determined simultaneously with prices.

Distortionary Taxation and Labor Supply: Evidence from Canada.

This paper examines empirically the effects of distortionary taxation on labor supply using a general equilibrium framework. The long-term relations predicted by the model are derived and tested using Canadian data between 1966 and 1993. While the cointegrating predictions of the model without taxation are rejected, the ones of the model with labor taxation are not. Persistent labor tax rate increases appear to play an important role in the observed downward trend in hours worked.

The Transformation Problem : an Aleternative Solution with an Identical Aggregate Profit Rate in the Labor value and the Monetary Space.

The aim of this paper is to demonstrate that, even if Marx's solution to the transformation problem can be modified, his basic conclusions remain valid. the proposed alternative solution which is presented hare is based on the constraint of a common general profit rate in both spaces and a money wage level which will be determined simultaneously with prices.