Effects Of Labor Market Policies Research Articles

Intergenerational transmission or local labour market context? A comparative analysis of the formation of work value patterns in 65 European regions

AbstractThis article analyses the driving factors behind the formation of individual work values in European welfare states. By comparing relative preferences for extrinsic and intrinsic work values, we shed light on the discussion of the effects of intergenerational transmission and the structuring effects of labour market policies and regional opportunity structures on the formation of work values. Therefore, a multilevel analysis is applied using the innovative CUPESSE data set, which provides data on young adults and their parents in 65 NUTS‐1‐regions from 11 European countries. The results show that individual work values of young Europeans are most substantively shaped by the respective values of their parents. Furthermore, we demonstrate that individual characteristics such as sex, education and personal unemployment experiences determine preferences for work values. Finally, the paper shows that the local labour market context and welfare state arrangements also play a decisive role in the formation of individual work values.

Side effects of labor market policies*

AbstractLabor market policies, such as training and sanctions, are commonly used to bring workers back to work. By analogy to medical treatments, exposure to these tools can have side effects. We study the effects on health using individual‐level population registers on labor market outcomes, drug prescriptions, and sickness absence, comparing outcomes before and after exposure to training and sanctions. Training improves cardiovascular and mental health, and lowers sickness absence. This is likely to be the result of the instantaneous features of participation, such as the adoption of a more rigorous daily routine, rather than improved employment prospects. Benefits sanctions cause a short‐run deterioration of mental health.

Labor Market Policies in a Deep Recession: Lessons from Hoover's Policies during the U.S. Great Depression

AbstractWhat are the effects of labor market policies when the economy is sliding into a deep recession? We show that public announcements asking firms not to cut wages under H. Hoover during 1929–33 postponed entering the zero lower bound episode and reduced its duration. We develop and estimate a medium scale New Keynesian model to measure the effect of Hoover policies during the Great Depression and we find evidence that without such polices the U.S. economy would have ended up in a liquidity trap 3 years before it actually did, suffering an even deeper recession with a larger deflation.

Labor Market Policies in a Dual Economy

A structural model of heterogeneous agents is built to account for the labor market dynamics of an economy with a large informal sector and to quantify effects of labor market policies on employment, worker flows, savings and welfare in a dual economy. The introduction of unemployment insurance has only a small impact on unemployment but induces a sectoral reallocation of formal labor into informality. Generous severance payments lower the wage of formal jobs and reduce flows from unemployment to formality. In financing expenditures, shifting a tax burden from labor income to consumption increases the size of a formal sector, enhancing productivity and welfare. Economic and welfare consequences of policy reform can significantly differ from those in a single-sector economy due to workers’ incentives to avoid taxes and maximize transfers by moving across sectors.

Side Effects of Labor Market Policies

Side Effects of Labor Market Policies

Cluster analysis of effectiveness of labour market policy in the European Union

Research background: In the era of demographic changes and the need for rationalization of public expenditure, the European Union social policy promotes the activation approach. In addition, a growing importance of increasing the effectiveness and efficiency of public entities can be noticed. These phenomena are visible in the implementation of the labour market policy. However, the EU countries represent a different approach to spending public funds on issues related to the implementation of labour market policy.
 Purpose of the article: The authors are presenting the main theoretical assumptions concerning effectiveness and efficiency of labour market policy. Moreover, in the paper the EU countries are classified in clusters according to their level of expenditure on different categories of LMP. A comparison of the situation over ten years ? in 2004 and 2014 ? has also been conducted. In 2004, ten new members entered the EU, and the year 2014 presents the most current data in the analyzed area.
 Methods: As a research method cluster analysis was applied. Cross-country labour market situation throughout the EU is presented by the analysis of the Eurostat data. The countries are grouped in clusters following Ward's and k-means methods.
 Findings & Value added: There is a need to work out a complex evaluation of labour market policies in the EU to provide comparative analysis of the EU countries (or groups of countries). It would allow to determine the level of development of the country in terms of the efficiency of labour market policies. The EU countries with the best labour market indicators represent diverse levels of LMP expenditure.

Revisiting unemployment in intermediate macroeconomics: A new approach for teaching Diamond-Mortensen-Pissarides

ABSTRACTThe authors present a version of the Diamond-Mortensen-Pissarides model of unemployment that is accessible to undergraduates and preserve the dynamic structure of the original model. The model is solvable in closed form using basic algebra and admits a graphical representation useful for illustrating a variety of comparative statics. They show how to use the model to teach the effects of labor market policies, advancements in Internet technology, and labor market dynamics. Supplementary materials such as teaching tips, a classroom experiment, and online resources including a JavaScript-based simulation tool, U.S. data used to make figures, and practice problems are provided.

노동시장정책이 청년의 고용성과에 미치는 효과 분석 : 고용보호, 직업교육, 적극적 노동시장정책을 중심으로

노동시장정책이 청년의 고용성과에 미치는 효과 분석 : 고용보호, 직업교육, 적극적 노동시장정책을 중심으로

Effect of labor market policies on unemployment when firms adapt their recruitment strategy

Firms conduct interviews to select who to hire. Their recruitment strategies affect not only the hiring rate but also job destruction rate as more interviews increase the chances of finding the right worker for the job; a link mostly overlooked in the literature. I model this recruitment behavior and investigate the effects of labor market policies on unemployment. These policies change the value of hiring the right worker, altering firms' incentives to conduct interviews. Policies further affect job creation and destruction when firms adapt their recruitment strategies. Net effect of a policy on unemployment depends on the magnitude of change in job creation versus destruction. Qualitative analysis reveals that the effect of a policy on unemployment is mostly weakened with the introduction of firms' recruitment behavior to the model. Firing taxes still increase unemployment, albeit at a lower rate. The effect of hiring subsidies on unemployment is even reversed: Unemployment increases with hiring subsidies if firms adapt. Minimum wage and unemployment insurance policies are also analyzed.

The Impact of Skill Endowments and Collective Bargaining on Knowledge-Intensive Greenfield FDI

This paper assesses the contribution of skilled employment and labour market conditions to the ability of attracting knowledge intensive and manufacturing greenfield FDI. We carry out our analysis by controlling for a wide range of labour market features, such as the collective bar- gaining coverage rate, the non-wage labour costs, and the occupational skills of employment. It departs from the existing literature in two respects. First, it deepens the analysis on the ef- fect of labour market regulations and skills endowments on greenfield FDI inflows. Second, it investigates the extent to which labour market characteristics matter for discriminating among 'resource-seeking' and 'efficiency/strategic asset-seeking' greenfield FDI activities (e.g. manufac- turing versus knowledge-intensive foreign investments, respectively). Our empirical analysis suggests that the quality of employment and the technological knowl- edge base have different impact on the location of knowledge-intensive and on low-cost labour- intensive manufacturing foreign investments. Further, associating the collective bargaining cov- erage of unions with the level of regulation in the labour market, our results can provide insights into the effectiveness of labour market policies that aim at attracting knowledge-intensive invest- ments.

Trade and Unemployment Revisited: Do Institutions Matter?

AbstractThis paper revisits the trade to unemployment nexus for Germany based on the estimation of a model featuring heterogeneous firms and search unemployment. We structurally estimate parameters that match the key moments of the German labour market. Our estimation and calibration are based on a single plant‐level data source, that is, the IAB establishment and worker panel. The calibration shows that trade liberalisation reduces unemployment in the long run. In our counter‐factual policy simulations, we focus on the effect of labour market policies on the trade and unemployment nexus and we explore how the magnitude of the effects differs under different bargaining regimes. Labour market institutions have stronger effects under collective bargaining. Compared with trade or the bargaining power of unions, the effect of unemployment benefits on unemployment turns out to be rather modest.

Unobservable, But Unimportant? The Influence of Personality Traits (and Other Usually Unobserved Variables) for the Evaluation of Labor Market Policies

Many commonly used treatment effects estimators rely on the unconfoundedness assumption (“selection on observables”) which is fundamentally non-testable. When evaluating the effects of labor market policies, researchers need to observe variables that affect both treatment participation and labor market outcomes. Even though in many countries it is possible to access (very) informative administrative data, concerns about the validity of the unconfoundedness assumption remain. The main concern is that the observed characteristics of the individuals may not be enough to properly address potential selection bias. This is especially relevant in light of the research on the influence of personality traits and attitudes on economic outcomes. We exploit a unique dataset that contains a rich set of administrative information on individuals entering unemployment in Germany, as well as several usually unobserved characteristics like personality traits, attitudes, expectations, and job search behavior. This allows us to empirically assess how estimators based on the unconfoundedness assumption perform when alternatively including or not these usually unobserved variables. Our findings indicate that these variables play a significant role for selection into treatment and labor market outcomes, but do not make for the most part a significant difference in the estimation of treatment effects, compared to specifications that include detailed labor market histories. This suggests that rich administrative data may be good enough to draw policy conclusions on the effectiveness of active labor market policies.

How Do Policies Affect the Exit Rate out of Unemployment? Disentangling Job Creation from Labour Market Frictions

AbstractThis paper assesses the effects of labour market policies on the unemployment outflow rate while disentangling two channels, namely labour market tightness and employer–employee matching efficiency. Using a sample of 11 OECD countries over the period 1985–2007, we treat the endogeneity of market tightness with business cycle shocks and the tax wedge as instruments. We find that the replacement rate of unemployment benefits, Active Labour Market Policies as well as the tax wedge in countries with poorly representative unions, have a significant, robust, and large impact on market tightness. Employment protection has a negative but small impact on matching efficiency. Overall, policy effects appear to be mostly channeled through market tightness and job creation.

Unobservable, But Unimportant? The Influence of Personality Traits (and Other Usually Unobserved Variables) for the Evaluation of Labor Market Policies

Many commonly used treatment effects estimators rely on the unconfoundedness assumption (selection on observables) which is fundamentally non-testable. When evaluating the effects of labor market policies, researchers need to observe variables that affect both treatment participation and labor market outcomes. Even though in many countries it is possible to access (very) informative administrative data, concerns about the validity of the unconfoundedness assumption remain. The main concern is that the observed characteristics of the individuals may not be enough to properly address potential selection bias. This is especially relevant in light of the research on the influence of personality traits and attitudes on economic outcomes. We exploit a unique dataset that contains a rich set of administrative information on individuals entering unemployment in Germany, as well as several usually unobserved characteristics like personality traits, attitudes, expectations, and job search behavior. This allows us to empirically assess how estimators based on the unconfoundedness assumption perform when alternatively including or not these usually unobserved variables. Our findings indicate that these variables play a significant role for selection into treatment and labor market outcomes, but do not make for the most part a significant difference in the estimation of treatment effects, compared to specifications that include detailed labor market histories. This suggests that rich administrative data may be good enough to draw policy conclusions on the effectiveness of active labor market policies.

Aggregate Earnings and Macroeconomic Shocks: the Role of Labour Market Policies and Institutions

I examine the effect of labour market policies and institutions on the transmission of macroeconomic shocks to the labour market, using both aggregate and industry-level annual data for 23 OECD countries, 23 business-sector industries and up to 29 years. I find that high and progressive labour taxes and generous unemployment benefits amplify labour income fluctuations. By contrast, statutory minimum wages reduce the difference in the sensitivity of wages to aggregate shocks between low-wage and high-wage industries. Dismissal regulations are found to mitigate the impact of shocks on both earnings and employment. Moreover, this mitigation effect is greater in industries where firms have a greater propensity to make staffing changes through dismissals.

Aggregate Earnings and Macroeconomic Shocks: The Role of Labour Market Policies and Institutions

I examine the effect of labour market policies and institutions on the transmission of macroeconomic shocks to the labour market, using both aggregate and industry-level annual data for 23 OECD countries, 23 business-sector industries and up to 29 years. I find that high and progressive labour taxes and generous unemployment benefits amplify labour income fluctuations. By contrast, statutory minimum wages reduce the difference in the sensitivity of wages to aggregate shocks between low-wage and high-wage industries. Dismissal regulations are found to mitigate the impact of shocks on both earnings and employment. Moreover, this mitigation effect is greater in industries where firms have a greater propensity to make staffing changes through dismissals.

R&D, unemployment, and labor market policies

This paper studies the effects of labor market policies on R&D activities and unemployment. I develop a search and matching model in which firms’ R&D decisions are endogenously determined. The model demonstrates that more intensive labor market policies that protect workers reduce the levels of R&D activities. This study offers a theoretical framework to understand the relationship between R&D activities, labor market policies, and unemployment which is discussed in empirical studies.

The solution space: developing research and policy agendas to eliminate employment-related health inequalities.

As in many other areas of social determinants of health, policy recommendations on employment conditions and health inequalities need to be implemented and evaluated. Case studies at the country level can provide a flavor of "what works," but they remain essentially subjective. Employment conditions research should provide policies that actually reduce health inequalities among workers. Workplace trials showing some desired effect on the intervention group are insufficient for such a broad policy research area. To provide a positive heuristic, the authors propose a set of new policy research priorities, including placing more focus on "solving" and less on"problematizing" the health effects of employment conditions; developing policy-oriented theoretical frameworks to reduce employment-related inequalities in health; developing research on methods to test the effects of labor market policies; generalizing labor market interventions; engaging, reaching out to, and holding onto workers exposed to multiple forms of unhealthy employment conditions; measuring labor market inequalities in health; planning, early on, for sustainability in labor market interventions; studying intersectoral effects across multiple interventions to reduce health inequalities; and looking for evidence in a global context.

The Effects of Labour Market Policies in an Economy with an Informal Sector

In this article, we build an equilibrium search and matching model of an economy with an informal sector. Our model extends Mortensen and Pissarides (1994) by allowing for ex ante worker heterogeneity with respect to formal-sector productivity. We use the model to analyse the effects of labour market policy on informal-sector and formal-sector output, on the division of the workforce into unemployment, informal-sector employment and formal-sector employment, and on wages. Finally, we examine the distributional implications of labour market policy; specifically, we analyse how labour market policy affects the distributions of wages and productivities across formal-sector matches. In this article we construct a search and matching model that we use to analyse the effects of labour market policies in an economy with a significant informal sector. What we mean by an informal sector is a sector that is unregulated and hence not directly affected by labour market policies such as severance or payroll taxes. We find that labour market policies that apply only to the formal sector nonetheless affect the size and the composition of employment in the informal sector. This is important since there is substantial economic activity in the informal sector in many economies, particularly in developing countries. Estimates for some Latin American countries put the informal sector at more than 50% of the urban work force.1 The informal sector is also important in many transition countries as well as in some developed economies.2 Although much of the literature treats the informal sector as a disadvantaged sector in a segmented labour market framework, this interpretation is not consistent with recent empirical evidence from Latin America. Under a segmented or dual labour market interpretation, one would expect jobs to be rationed in the primary sector and workers to be in the secondary or informal sector involuntarily and to be queuing for formal-sector jobs. Maloney (2004) presents evidence for several Latin American countries that challenges this view and instead interprets the informal sector as an unregulated micro-entrepreneurial sector. Similarly, using data from the Argentinian household survey, Pratap and Quintin (2006) reject the notion that labour markets are segmented in the greater Buenos Aires area, concluding that there is no evidence of a formal-sector wage premium after controlling for individual and establishment * We thank Mauricio Santamaria for stimulating conversations that inspired our interest in this topic. We also thank Bob Hussey and Fabien Postel-Vinay as well as our editor, Steve Pischke, and two anonymous

A Model of TFP

This paper proposes an aggregative model of total factor productivity (TFP) in the spirit of Houthakker (1955—1956). It considers a frictional labor market where production units are subject to idiosyncratic shocks and jobs are created and destroyed as in Mortensen and Pissarides (1994). An aggregate production function is derived by aggregating across micro production units in equilibrium. The level of TFP is explicitly shown to depend on the underlying distribution of shocks as well as on all the characteristics of the labor market as summarized by the job-destruction decision. The model is also used to study the effects of labor-market policies on the level of measured TFP.