Job Destruction Research Articles

The Influence of Market Concentration on the Development of Newly Born Businesses in the Czech Republic

The paper deals with the market concentration as a detractor of life expectancy of new-born economic entities in the Czech economy. Although the start-up firms are small companies, their role in the economy exceeds their size, they are seen as providing the energy for economic growth. The aim of the paper is to evaluate the influence of different levels of market concentration on the business lifespan and consequently the job destruction in the economy. The analysis has shown that the greatest decline of start-up firms comes during the first and second year and that only around 30% of them get to their sixth year. From the viewpoint of the job creation it was found out that almost 30% of all new positions in the Czech economy are established in wholesale and retail trade sector, followed by manufacturing and professional, scientific and technical activities, both with 14% of new jobs. Using the regression analyses and statistical hypotheses testing the relationship between market concentration and firms’ lifespan was investigated with result of semi-strong dependency of the business success on the market structure. The positive correlation between the probability of decline across individual economic sectors and the market concentration in these sectors was confirmed on the level of statistical significance α = 0.01.

Explaining the gender wage gap: Estimates from a dynamic model of job changes and hours changes

I address the causes of the gender wage gap with a new dynamic model of wage, hours, and job changes that permits me to decompose the gap into a portion due to gender differences in preferences for hours of work and in constraints. The dynamic model allows the differences in constraints to reflect possible gender differences in job arrival rates, job destruction rates, the mean and variance of the wage offer distribution, and the wage cost of part-time work. The model is estimated using the 1996 panel of the Survey of Income and Program Participation. I find that the preference for part-time work increases with marriage and number of children among women but not among men. These demographic factors explain a sizable fraction of the gender gap in employment, but they explain no more than 6 percent of the gender wage gap. Differences in constraints, mainly in the form of the mean offered wages and rates of job arrival and destruction, explain most of the gender wage gap. Policy simulation results suggest that, relative to reducing the wage cost of part-time work, providing additional employment protection to part-time jobs is more effective in reducing the gender wage gap.

Did small and medium enterprises maintain better jobs during the early years of the recession? Job quality multidimensional evidence from Spain

While the literature has indeed confirmed a general tendency linking small and medium enterprises (SMEs) to a dynamic of greater job creation, there is little available evidence on what has happened to job quality since the financial crisis. Through a representative sample of 5311 employees in 2008 (first year of job destruction) and 4925 employees in 2010 (last year for which data were available), and using a two-stage structural equation model, this article empirically analyses the multidimensional determinants of job quality, by enterprise-size class, in Spain. The research has revealed three main results. First, job quality in Spain improved in all enterprises, regardless of their size, during the early years of the recession. Second, the greatest improvements were found in SMEs. Although job quality was already better in SMEs than in large enterprises in 2008, the differences between them subsequently widened. Third, this accelerated divergence was explained by the following dimensions: working conditions, work intensity, health and safety at work, and work–life balance. These dimensions were much more positive in SMEs. Employment-related public policy should therefore focus more specifically on SMEs. There are two reasons for this. First, despite the recession, SMEs have shown themselves to be key factors in the explanation of job quality. Second, by making changes to their value generation model, they could continue to drive the creation of better quality jobs.

Worker flows and job flows: A quantitative investigation

This paper studies quantitative properties of a multiple-worker firm search/matching model and investigates how worker transition rates and job flow rates are interrelated. We show that allowing for job-to-job transitions in the model is essential to simultaneously account for the cyclical features of worker transition rates and job flow rates. Important to this result are the distinctions between the job creation rate and the hiring rate and between the job destruction rate and the layoff rate. In the model without job-to-job transitions, these distinctions essentially disappear, thus making it impossible to simultaneously replicate the cyclical features of both labor market flows.

Which firms create fixed-term employment? Evidence from Portugal

We study net job creation in Portugal using matched employer-employee data with information on both contract type and firm age. Young firms, particularly startups, are an important source of job creation and that creation occurs in large part through fixed-term contracts. In contrast, most job destruction is due to small older firms that tend to use open-ended contracts. We also find that the share of fixed-term contracts increased substantially between 2002 and 2007 and that this increase was driven mainly by each successive cohort of startups. The severely deteriorating business climate in Portugal starting in the early 2000s coincides with the increased use of fixed-term contracts by firms. Our findings suggest that job creation in Portugal operates similarly as in the U.S. (Haltiwanger et al., 2013).

Are engineers designing their robotic replacements? [Reflections

ROBOTS ARE COMING FOR YOUR JOBS! THAT WAS THE gist of numerous news reports following the release of the 2016 U.S. Economic Report of the President. My first thought on reading this was that anyone who saw the videos of clumsy robots falling helplessly during the recent DARPA Robotics Challenge must have been incredulous: That's what's coming after my job!? · My second thought was more sobering. Robots are, after all, only a subset of the computerization leading to the automation of traditional jobs. As engineers we can see steady progress in machine learning, artificial intelligence, and big data. Contemplating this, it suddenly occurred to me to worry about engineering jobs. Are they threatened as well? · History has shown that while automation increases productivity and creates new jobs, it also displaces jobs. However, the president's economic report notes that in recent decades the rate of job destruction has outpaced the rate of job creation, resulting in less overall participation in the workforce. Regardless, stopping or slowing the pace of technological development has always been a fruitless exercise. While we engineers may be responsible for implementing tech's advance, we also seem powerless before its inevitable progression. As technology's handmaidens, we will undoubtedly provide at least complicit support, even as our own engineering jobs are displaced. · An earlier report, by Carl B. Frey and Michael A. Osborne, of the University of Oxford, examined the potential for technological disruption in 702 different occupations. Their study concluded that 47 percent of current U.S. jobs are at risk of displacement. In considering the risk for each occupation, they evaluated the technological bottleneck that would be most likely to occur in automation efforts. The bottleneck could arise in any of three different aspects of work–the need for perception and manipulation, the need for creative intelligence, and the need for social intelligence.

Employment growth and inter-industry job reallocation: spatial patterns and relatedness

ABSTRACTEmployment growth and inter-industry job reallocation: spatial patterns and relatedness. Regional Studies. The nature of employment reallocation between industries is assessed using rich register data for the Netherlands. It is found that employment decline in some industries is countered, in a communicating vessels fashion, by employment growth in other industries, which is primarily driven by the availability of released skilled labour. These labour demand interactions are predominantly local and stronger between related industries. In addition, the inter-industry labour reallocation has a distinct geographical character in which the location of employment creation depends primarily on the residential location of the released employees rather than on the location of the job destruction.

Into the Abyss: Occupational Segregation of Immigrant Workers and the Spanish Crisis 2006-2012

<p><em>Spain became one of the world’s top immigration destinations in the 21<sup>st</sup> century, with the share of migrants in employment</em><em> </em><em>climbing to a peak of 17% just as the crisis hit the country. How did</em><em> </em><em>these immigrants fare in a rigid labour market as</em><em> </em><em>the housing bubble burst and recession brought soaring unemployment? Our paper explores the occupational segregation of Spain</em><em>’</em><em>s immigrants and finds that it declined in the wake of the crisis.</em><em> </em><em>The improvement, however, obscures massive job destruction in temporary jobs and in the low-skilled sectors where foreigners were concentrated. The results point to the need for better skills and training and measures to tackle the deep permanent/temporary contract divide in Spain,</em><em> </em><em>to protect migrant workers as well as unskilled Spaniards.</em></p>

Where do jobs go when oil prices drop?

In this paper, we estimate a factor augmented vector autoregressive (FAVAR) model to investigate the effect of oil price shocks on total private job flows as well as on industry-level job creation and destruction. Following an unexpected oil price drop in the first year, we find that in oil and gas extraction and support activities for mining exhibit a reduction in job creation and an increase in job destruction. Instead, industries in construction, manufacturing and services exhibit an increase in the net employment change. An unexpected decline in the real oil price slows down the pace of gross job reallocation. We demonstrate that the increase (decrease) in private job destruction (creation) observed during the first year is primarily driven by the response of closing (expanding) firms in services and manufacturing.

Is the worsening of psychosocial exposures associated with mental health? Comparing two population-based cross-sectional studies in Spain, 2005-2010.

To analyze whether associations between workplace psychosocial exposures and the mental health of the working population in Spain changed between 2005 and 2010. Two representative samples of the Spanish working population have been analyzed, 2005 (n = 5073) and 2010 (n = 3544). In 2010 there was a significant association between poor mental health and exposure to high Demands, low Social Support and high Insecurity over working conditions, and exposure to high Insecurity over losing the job only for men. In 2005 there was a significant association with exposure to high Demands and low Social Support. Changes in the associations between psychosocial risks and mental health may be related to the socioeconomic context marked by the rise in unemployment and the destruction of jobs as a result of the 2008 economic crisis.

Entry and exit in severe recessions: lessons from the 2008–2013 Portuguese economic crisis

Under cleansing, productivity-enhancing reallocation is expected to be accelerated in recessions. In this paper we contribute to the analysis of one component of the national systems of entrepreneurship (namely capital market frictions) by showing that in the extreme scenario of deep recession efficiency in resource reallocation can actually be reduced. Using data from the pronounced Portuguese economic crisis, we do find a spike in firm exit in 2008–2012 vis-a-vis the 2004–2007 pre-crisis period, and a substantial increase in job destruction as well. But we did not find any strong evidence that job reallocation is countercyclical, while a non-negligible fraction of high-productivity firms actually shut down. In turn, our selected proxies for strictness in credit markets reveal that in deep recessions they are seemingly associated with increased firm exit and lower employment creation. Taken in round, our results show that credit market stringency in conjunction with an unfavourable economic cycle is likely to generate a long-lasting destructive process.

The crisis and regional employment in Europe: what role for sheltered economies?

This paper examines how the evolution of employment trends in the regions of Europe since the outbreak of the crisis may have been shaped by the emergence of sheltered economies in certain regions of Europe in the pre-crisis period. The paper uses descriptive and econometric analysis to determine the relationship between the level of protection from the market of regional economies in the years of economic boom between 1995 and 2007 and employment trends in the first four years of the crisis (2008-2012). The analysis covers 272 NUTS2-level regions in 27 EU countries. The results of the analysis show that regions which had developed more sheltered economies during the boom years have not weathered the employment shock associated with the crisis well, while pre-crisis dynamism in employment generation has been connected to lower post-crisis employment destruction. The only exception are the most highly sheltered economies in the pre-crisis period, which have endured a lower level of job destruction than any other type of region. The question is whether this early resistance to job destruction can be maintained once the recovery starts.

Setting the level of a national minimum wage: What can South Africa learn from other countries’ experiences?

In 2015, the South African Government, organised business and organised labour agreed to the introduction of a national minimum wage (NMW) in principle, but without any agreement over the level at which it should be set. One of the key arguments for a high NMW is that the experiences of other countries (including especially Brazil and Germany) supposedly show that a NMW can be increased rapidly to a high level and covering a majority of the workforce without any adverse effects on either economic growth or employment. We show that this is a misinterpretation of comparative experiences because in both advanced capitalist and middle-income economies NMWs are set at modest levels, covering the minority of lowest-paid workers, and taking into account the real risks of job destruction. Most countries have slowly raised minima because low unemployment made them confident that modest increases would lead to little or no job destruction. South Africa’s current sectoral minima are already broadly in line with minima in most other countries. International experience does not support the contention that South Africa, with its exceptionally high unemployment rate, should raise rapidly the NMW to a very high level without regard for job destruction.

Business Dynamics Statistics of High Tech Industries

Modern market economies are characterized by the reallocation of resources from less productive, less valuable activities to more productive, more valuable ones. Businesses in the High Technology sector play a particularly important role in this reallocation by introducing new products and services that impact the entire economy. Tracking the performance of this sector is therefore of primary importance, especially in light of recent evidence that suggests a slowdown in business dynamism in High Tech industries. The Census Bureau produces the Business Dynamics Statistics (BDS), a suite of data products that track job creation, job destruction, startups, and exits by firm and establishment characteristics including sector, firm age, and firm size. In this paper we describe the methodologies used to produce a new extension to the BDS focused on businesses in High Technology industries.

Job Creation Schemes in Turbulent Times

This paper analyzes the impact of job creation schemes (JCSs) on job search outcomes in the context of the turbulent East German labor market in the aftermath of the German reunification. High job destruction characterized the economic environment. JCSs were heavily used in order to cushion this development. Using data from 1990-1999 and building upon the timing-of-events approach, we estimate multivariate discrete time duration models taking selection based on both observed and unobserved heterogeneity into account. Our results indicate that participation in JCSs increases the unemployment duration mainly due to locking-in effects. However, twelve months after the program start the significantly negative impact on the job finding probability vanishes. We find evidence for effect heterogeneity. Our results suggest that female and highly skilled participants leave unemployment quicker than other groups, which results in highly skilled women benefiting from participation. However, we find no significant impact on post-unemployment employment stability. Our results are robust to allowing for random treatment effects. Also taking into account endogenous participation in training programs, endogenous censoring, or multiple treatment effects do not change the results.

Job creation and job types – New evidence from Danish entrepreneurs

We extend earlier analyses of the job creation of start-ups versus established firms by considering the educational content of the jobs created and destroyed. We define education-specific measures of job creation and job destruction at the firm level, and we use these measures to construct a measure of “surplus job creation”, defined as jobs created on top of any simultaneous destruction of similar jobs in incumbent firms in the same region and industry. Using Danish employer-employee data from 2002–2007 that identify the start-ups and that cover almost the entire private sector, these measures allow us to provide a more nuanced assessment of the role of entrepreneurial firms in the job-creation process than in previous studies. Our findings show that although start-ups are responsible for the entire overall net job creation, incumbents account for more than one-third of net job creation within high-skilled jobs. Moreover, start-ups “only” create approximately half of the surplus jobs and even less of the high-skilled surplus jobs. Finally, our approach allows us to characterise and identify differences across industries, educational groups and regions.

Can the stochastic equilibrium job search models fit transition economies?

The aim of this study is to apply the stochastic job search framework to the analysis of three transition economies (Poland, Hungary, and the Czech Republic). Two versions of equilibrium unemployment models have been developed resembling Mortensen and Pissarides’ models, namely the dynamic and stochastic models. The dynamic model’s properties were briefly examined by evaluating the Jacobian matrix and plotting the phase plane of the economy. In the primary analysis of the stochastic model, job destruction decisions are endogenous as a response to random productivity changes. A martingale, i.e. a discrete-space version of the geometric Brownian motion with the drift and volatility parameter, was used to enable fluctuation of endogenous variables and to perform numerical simulations. The results are promising, although ambiguous in some points, e.g. the main model-generated time-series are close to the empirical time-series, including reasonable fluctuations, correlation signs, and autocorrelations. However, the model was unable to capture some subtle differences in productivity and job destruction rate series across the countries, which is its main limitation.

Book Reviews

Joshua D. Gottlieb of University of British Columbia and NBER reviews “Housing Markets and the Economy: Risk, Regulation, and Policy: Essays in Honor of Karl E. Case”, edited by Edward L. Glaeser and John M. Quigley. The Econlit abstract of this book begins: “Ten papers, plus commentary, collected in honor of Karl Case, examine topics in housing markets and the economy. Papers discuss Case, housing, and the economy; derivatives markets for home prices; home equity insurance—a pilot project; spatial variation in the risk of home owning; arbitrage in housing markets; subprime mortgages—what, where, and to whom?; government-sponsored enterprises, the Community Reinvestment Act, and home ownership in targeted undeserved neighborhoods; siting, spillovers, and segregation—a reexamination of the low-income housing tax credit program; measuring land use regulations and their effects in the housing market; whether real estate agents compete on price— evidence from seven metropolitan areas; and the role of job creation and job destruction dynamics. Glaeser is Fred and Eleanor Glimp Professor of Economics at Harvard University. Quigley is I. Donald Terner Distinguished Professor at the University of California at Berkeley.”

Age-Specific Labour Market Effects of Employment Protection: A Numerical Approach

The particular situation of the youngest and oldest individuals on the labour market motivates age-specific labour market analysis. One topical case is employment protection for older workers. The effect of employment protection on the total number of jobs is ambiguous. The positive effect of lower job destruction is counteracted by the negative effect of lower job creation. This ambiguity carries over to the more specific case of age-related employment protection. Numerical analysis can be illuminating when countervailing effects produce an ambiguity. In this paper, I present a numerical model based on the theoretical set-up of Cheron et al. (Econ J 121:1477---1504, 2011). Simulations performed with the model highlight age-specific effects of general employment protection measures and effects of measures targeted at particular age-groups on workers outside the target group. Firing taxes and hiring subsidies have age-specific consequences because employment and unemployment rates vary over the lifecycle. Positive effects of employment protection for the target group can be outweighed by negative effects for other workers.

Job Creation, Job Destruction, and Productivity Growth: The Role of Young Businesses

Recent improvements in the data infrastructure at US statistical agencies have dramatically enhanced the ability to measure and study job creation and job destruction. The longitudinal data now permit the tracking of all firms and establishments in the US private sector in a comprehensive and integrated manner. This allows researchers to distinguish between the contribution of new firms and that of new establishments. In addition, firm entry, growth, and survival dynamics can be tracked in terms of organic changes instead of changes associated with mergers and acquisitions or other forms of business ownership changes. These new developments have led to a burgeoning literature on US firm dynamics. The recent literature has especially focused on the role of young businesses for job and productivity growth. The findings from that literature are the focus of the current article. The recent developments are discussed in light of the large literature on firm dynamics (in terms of both theory and empirics) that has developed over the past few decades.