Employment Shocks Research Articles

Employment shocks and demand for pain medication: Understanding the channels that drive opioid use.

Higher employment ratios can affect opioid use through two main channels: by increasing physical pain from working or by reducing mental distress that may contribute to substance misuse. To separate these channels, I contrast the effect of labor demand shocks on the use of opioids with the effect on the use of over-the-counter painkillers-commonly used to treat pain but not mental distress. I find that during local economic expansions, opioid use declines while the demand for over-the-counter pain relief medication increases. Employment changes in high injury industries accentuate this pattern. One possible explanation is that, during local economic expansions, the use of pain medications to manage work injuries increases while the misuse of opioids decreases.

COVID-19 employment shocks and safety net expansion: Health effects on displaced workers

COVID-19 precipitated sharp job losses, concentrated in the service sector. Prior research suggests that such shocks would negatively affect health and wellbeing. However, the nature of the pandemic crisis was distinct in ways that may have mitigated any such negative effects, and historic expansions in unemployment insurance (UI) may have buffered workers from negative health consequences. We draw on employer-employee linked cross-sectional (N = 15,219) and panel (N = 3307) data from service sector workers to estimate the effects of job loss on health and wellbeing during COVID-19. Using employer fixed-effects, lagged dependent variables, and models that focus on job loss due to establishment closure to minimize confounding, we find negative effects of unemployment on health and wellbeing. However, in periods when UI was most generous or in cases where UI fully replaced pre-job loss wages, unemployed workers who received UI were no worse off than those who remained employed. Although UI protected against worsening health, receiving generous UI benefits did not confer a health advantage relative to working at the height of the pandemic.

The potential synergy between air pollution control and employment growth

Public service sectors play crucial roles in maintaining societal functioning through the provision of essential services. However, amidst the backdrop of air pollution, their developmental trajectories may veer off course from their intended goals. Quantifying the impact of air pollution on public service sectors, particularly from an employment perspective, offers valuable insights for policymakers aiming to foster the sustainable growth of these sectors and expand the analysis framework on air pollution externalities. Drawing on monthly data spanning from January 2015 to December 2019 across 269 prefecture cities, this paper therefore explores the impact of air pollution on public service sector employment using a cross-lagged panel model with fixed effects. I find that air pollution negatively affects the employment scales in public service sectors. This negative employment shock is also unevenly distributed across areas and sub-sectors and intensifies over time. Cities belong to key areas for air pollution prevention and control, small and medium-sized cities, and secondary-industry dominated cities, suffer disproportionately negative employment shocks in their public service sectors. These findings offer actionable insights for policymakers to implement targeted measures supporting the continued growth of public service sectors and deepen understanding of the economic ramifications of air pollution.

Earnings, labor market dynamics, and inequality in Sweden

AbstractIn this paper, we develop a comprehensive model of earnings and labor market dynamics, where employment and job change are endogenous. The model is estimated by applying the method of indirect inference on Swedish register data, and then used to carry out some policy experiments. There are three key conclusions from these experiments. First, employment shocks early in life can, to a larger extent, be mitigated before retirement compared with employment shocks occurring later. Second, we find that idiosyncratic productivity shocks, unobserved heterogeneity, and education contribute substantially to life‐cycle earnings inequality. Finally, we find that transitory shocks to employment risk have negative effects on earnings and employment in the short run but may increase labor market fluidity in the medium run.

Financial stability of Kazakhstan citizens: employment shock and consumption correction

Financial stability of Kazakhstan citizens: employment shock and consumption correction

Local labor market effects of offshoring: Evidence from the US Trade Adjustment Assistance program

AbstractWe explore the wage effects of offshoring‐induced employment shocks in US commuting zones (CZs) and industries. Using data on petitions for the Trade Adjustment Assistance (TAA), we measure such shocks by computing the share of TAA‐certified offshoring‐induced layoffs out of total employment. We further identify material‐offshoring shocks and service‐offshoring shocks and connect the TAA data to individual‐level worker data from the American Community Survey. Empirical results show statistically significant and negative wage effects of the CZ‐level offshoring shocks, especially for service offshoring. On the contrary, we find positive wage effects of industry‐level offshoring shocks in industries exposed to both types of offshoring. Furthermore, we show that offshoring is associated with the widening gender wage gap in local labor markets and that workers in production and highly‐offshorable occupations are more vulnerable to the CZ‐level offshoring shocks.

Fertility in a Pandemic: Evidence from California.

The COVID-19 pandemic was accompanied by social and economic changes previously associated with fertility delay and reduction, sparking widespread discussion of a "baby bust" in the U.S. We examine fertility trends using restricted vital statistics data from California, a diverse population of 40 million contributing 12% of U.S. births. Using time series models that account for longer-run fertility trends, we observe modest, short-term reductions in births from mid 2020 through early 2021. Birth counts in subsequent months matched or even eased the pace of fertility decline since the 2008 recession and are unlikely a function of the pandemic alone. Responses to the pandemic were heterogeneous. Fertility declined markedly among the foreign-born population, largely driven by changes in net migration. Among the U.S.-born population, the short-term pandemic-attributable reductions were largest among older, highly educated people, suggesting mechanisms of fertility reduction disparately accessible to those with the most resources. We find no evidence of a strong population fertility response to the pandemic's accompanying employment shock, providing additional evidence of a growing divide between macroeconomic conditions and fertility patterns in the U.S.

Food security and the COVID-19 employment shock in Nigeria: Any ex-ante mitigating effects of past remittances?

This paper examines the role of past remittances in mitigating the adverse effects of COVID-19 employment shocks on food security in Nigeria. We formally define the mitigating effects parameter as the difference in the shock impact between households that received remittances and those that did not. Leveraging pre- and post-COVID-19 surveys, we employ a triple-difference strategy to estimate the mitigating effects parameter. Our results suggest that past remittances can alleviate the negative consequences of COVID-19 employment shocks, particularly in the short term. Indeed, the mitigation effect is limited to the early stages of the pandemic, as the negative effects of the shock persist over time. Additionally, we find that the impact of remittances on mitigating the shock varies based on the origin of remittances, recipients’ area of residence, and poverty status. Furthermore, our study highlights the importance of the capital channel in explaining the mitigating role of past remittances. Our findings demonstrate that formal financial inclusion, capital ownership such as livestock, and rental earnings amplify the impact of remittances in mitigating the negative consequences of COVID-19 employment shocks on food security.

Research progress on the impact of artificial intelligence on the labor market

The application and development of artificial intelligence has exerted an important influence on the labor market. The existing literature mainly studies the impact of artificial intelligence on the total amount of employment and the employment structure. This paper argues that AI has the potential to reshape the labor market in many ways, with the potential to realize the leisure age of Keynes. AI can increase productivity and efficiency through automation of everyday tasks and may replace work through automation of everyday tasks. Governments need to adopt aggressive policies to address the potential trade-off between automation and unemployment. Investing in education and training programs is critical due to skill changes caused by AI. Therefore, this paper also provides further policy suggestions on how to deal with the possible employment shock caused by AI.

Financial inclusion, financial capability and financial fragility during COVID-19 pandemic

PurposeFinancial inclusion can be proxied by banking status. The purpose of this study is to investigate the potential effects of financial capability on the financial fragility of US adults with various banking statuses during the COVID-19 pandemic.Design/methodology/approachThis study utilized the 2021 National Financial Capability Study (NFCS) dataset to investigate the relationship between financial capability and financial fragility among consumers with different banking statuses. The analysis controlled for employment shocks, health shocks and other consumer characteristics. Banking statuses included fully banked, under-banked (utilizing both banking and alternative financial services) and unbanked individuals. Logistic regression analyses were conducted on both the entire sample and subsamples based on banking statuses.FindingsThe results showed that financial capability was negatively associated with financial fragility. The magnitude of the potential negative effect of financial capability was the greatest among the fully banked group, followed by the underbanked and unbanked groups. Respondents who were underbanked or unbanked were more likely to experience financial fragility than those who were fully banked. Additionally, respondents who were laid off or furloughed during the pandemic were more likely to experience financial fragility than those without employment shocks. The effect size of financial capability factors was greater than that of COVID-19 shock factors. These results suggest that higher levels of both financial capability and financial inclusion may be effective in reducing the risk of financial fragility.Originality/valueThis study represents one of the first attempts to examine the potential effects of financial capability on financial fragility among consumers with various banking statuses during the COVID-19 pandemic. Furthermore, this study offers new evidence to determine whether COVID-19 shocks, as measured by health and employment status, are associated with financial fragility. Additionally, the effect size of financial capability factors is greater than that of COVID-19 shock factors. The results from the 2021 NFCS dataset provide valuable insights for banking professionals and public policymakers on how to enhance consumer financial wellbeing.

Estimation of smoothing of consumer expenditures of Kazakhstan citizens and their chances to increase the demand for credit resources

The decline in the level of well-being of the population has been observed in recent years in some countries of the near and far abroad, as well as the growth of debt obligations of individuals to second-tier banks. Various indicators are taken as the level of well-being of the population in foreign researches in order to verify these statements. The ability of individuals and households to smooth out consumer spending in response to temporary rather than permanent income shocks is one of the key determinants of well-being according to the permanent income hypothesis and life cycle theory. In this regard, the ability of Kazakhstan citizens to smooth out consumer spending in response to shocks in employment, wages, debt burden and changes in temporary income are studied, as well as the chances of an increase in applications of Kazakhstan citizens for credit resources to second-tier banks are assessed in the presented article. Data for 16 regions of Kazakhstan for 2003–2020 are used to calculate coefficient estimates for the variables of interest. The results obtained indicate the ability of Kazakhstan citizens to smooth out approximately 7 % of temporary income. Meanwhile, negative employment shocks contribute to a 0,22 % reduction in consumer spending, ceteris paribus. The level of education and the average age of Kazakhstan citizens have a positive effect on the growth of consumer spending. It should be noted that the average age in Kazakhstan is lower than in European countries. The economically active population of Kazakhstan are not inclined to increase the demand for credit resources in second-tier banks in response to negative wage shocks. The results of the research indicate the financial stability of second-tier banks in Kazakhstan. At the same time, the financial stability of banks are achieved by gradually reducing the volume of loans to individuals.

Does labour protection influence mental-health responses to employment shocks? Evidence on older workers in Europe

This paper investigates if and how Employment Protection Legislation (EPL) influences mental-health responses to older workers’ job disruptions in Europe. It exploits labour market shocks during the first wave of the COVID-19 pandemic, and it is based on European data from the SHARE survey, in which each country is characterised by a different level of EPL. The analysis controls for workers’ individual characteristics and other contextual factors via propensity score matching. Results show that mental-health distress following job disruptions depends on the level of EPL, with significantly higher distress in countries in which EPL is more binding, especially among individuals with a lower education level. These findings suggest to consider the costs and benefits of mitigating measures for European countries with a high EPL, especially for older citizens with disadvantaged backgrounds.

Do inter-firm networks sustain the resilience of regional industrial ecosystems? A network-based analysis of the South Korean automotive industry

ABSTRACT Firms may grow and decline, and their impact on the regional economy can be attributed not only to each firm but also to their inter-firm networks in the region. Therefore, firms and their connectivity should be understood within the context of the regional industrial ecosystem. To empirically show the role of inter-firm networks for the sustainability of the regional industrial ecosystem, this study analyses the automotive industry in South Korea. The Automobile Parts Yearbook, the main data source for the study, provides the addresses of 892 firms and the connectivity between five major automakers and their subcontractors. A network-based approach is chosen to untangle the complex production network and compare the network structure by region. Specifically, the number of nodes, links and connections, as well as density and modularity measures, are analytically compared across six sub-regions in the country. There are more links within the groups than between the groups, which suggests preferential attachment in the network structure. Multiple centralised structures are observed to exist around the five major automakers in sub-regions in South Korea. The empirical results of the paper imply that firms with multiple trading networks in the regional industrial ecosystem tend to recover from an industrial crisis or employment shock crisis more successfully than companies with a single trading network. Overall, these findings highlight the importance of understanding the role of inter-firm networks in regional industrial ecosystems for promoting sustainability and resilience.

Assessing county-level vulnerability to the energy transition in the United States using machine learning

Energy sector decarbonization will play a critical role in society's attempt to minimize climate change. This transition will unavoidably involve economic disruption to communities that rely on fossil fuels for jobs and economic activity. In this work, we assess the economic vulnerability of counties across the contiguous United States to the energy transition using a novel methodological approach that combines exposure through reduction in energy employment and socio-economic sensitivity due to a lack of adaptive capacity during the energy transition. Using machine learning clustering, we first identify county-level exposure to negative employment shocks. We then develop and implement the Resilience during the Energy Transition Index (RETI) to measure county-level sensitivity and adaptive capacity and compared this Index across employment clusters. We find that counties in coal mining clusters are significantly – and uniquely – less able to cope with economic distress. We also apply our framework to a case study focused on three of the states in Marcellus-Utica shale plays: Pennsylvania, Ohio and West Virginia. The results of this case study support the argument that financial and infrastructure boosts from non-renewable energy extraction and utilization build resilience only if they are used to building capital for the post‑carbon economy, providing further evidence of the conditions required for fossil fuels to serve as bridge fuels towards a low-carbon economy.

Investigating the Shocks of Real Sectors of the Economy on the Welfare Index in the Iranian Economy

The vector auto regression model was used to investigate the effect of real sector shocks on the social welfare in Iran during the period of 1980-2019.The results of the impulse response test showed that the Amartya Sen welfare index showed a rapid response to the shocks of total factor productivity growth in the first period, which had a zero effect over time. The utility-oriented welfare index reacts positively to the shocks of total factor productivity growth in the first period, which has decreased from the second period and has become negative even from the fifth period. Amartya Sen Welfare Index and utility-oriented welfare index shows a positive and rapid response to real GDP per capita shocks in the first period, which is adjusted over time, and from the seventh period. The Amartyasen Welfare Index reacts negatively to oil revenue shocks and is very weak. If the utility-oriented welfare index shows a positive response in the first period, but in the following periods, its effect is adjusted and remains partially positive. Amartya Sen welfare index shows a leap and positive response to employment shocks from the first period and its trend continues and from the fifth period it continues in a positive and stable manner and the utility welfare index has a similar trend to Amartya Sen welfare index. Discussion: In the Iranian economy, employment leads to increased social welfare, while in the long run, oil revenues, GDP per capita and growth in total factor productivity have led to a decrease in social welfare. Therefore, in the Iranian economy, creating employment and reducing unemployment is the most appropriate factor to increase welfare.

Experience of a Job Loss and Analysts’ Subsequent Performance

We investigate the forecasting performance of analysts who have been rehired after experiencing a recent job loss as a result of the closure of the brokerage house they worked for. We find that forecasts of the displaced analysts are significantly more pessimistic relative to both their peers and actual earnings after they get rehired. Importantly, we also document a decline in the accuracy of their forecasts at their new job, which indicates that forecast pessimism is no better than forecast optimism for forecasting quality. Overall, our study provides empirical evidence that temporary negative employment shocks affect analysts’ subsequent forecasting performance.

Precautionary Fertility: Conceptions, Births, and Abortions Around Employment Shocks

Precautionary Fertility: Conceptions, Births, and Abortions Around Employment Shocks

A Time-Varying Connectedness Analysis of the Korean Economy

We examine time-varying connectedness among Korea’s macroeconomic variables with a special focus on whether there are structural changes among macro variables between beforeand after-Covid19 periods. From total connectedness analysis, we found that the connectedness among macro variables intensified after Covid-19. From “NET” connectedness analysis, we also found that employment shock affects other variables more than other shocks affect employment and that wage is affected by other shocks more than its shock affect other variables after Covid-19 pandemic. Net pairwise directional connectedness analysis reveals that the sign of net effect reversed between (1) total hours worked and employment, and (2) wage and employment after Covid-19. Finally, network graphs of net pairwise directed connectedness, based on the relative strength of connectedness, show that wage shock strongly affect production. CPI also affects the production while it is also affected by interest rate shock. Employment shock has significant effect on interest rate. We also provide the policy implications based on the connectedness analysis.

Labor market impact of COVID‐19 on migrants in South Korea: Evidence from local outbreaks

AbstractDespite the growing importance of migrants and their role in the South Korean economy, how much and in which ways COVID‐19, as an adverse labor market shock, has affected them has received too little attention, with no single study published to date yet. Motivated by such a paucity, this paper investigates the impact of the COVID‐19 pandemic crisis on employment for migrants in South Korea, with special emphasis on quantifying the magnitude of its causal effect. In doing so, this study exploits the unique fact that only one specific region in South Korea had a substantial number of COVID‐19 infections in the early stage of the pandemic so that estimations can be made using a difference‐in‐differences (DD) model. The DD estimates suggest that COVID‐19 lowered migrants’ overall employment probability by 2.5 to 3.2 percent points. However, strong heterogeneity between the genders is apparent: the pandemic severely hurts female migrants’ employment, with male migrants weathering it relatively unscathed. Furthermore, female migrants seem considerably harder hit than female host populations. Heterogeneity analyses reveal that (i) a duration of stay exceeding 5 years and (ii) fluency in Korean (as a local language) protect migrants from being heavily affected by the COVID‐driven employment shock.

Changes in Smoking Status and Behaviors After the First 10 Months of COVID-19 Pandemic in Indonesia.

There remains inconclusive evidence on potential changes in smoking status and behaviors during the coronavirus disease 2019 (COVID-9) pandemic, especially in developing countries. This study explores the direction of changes in smoking status and behaviors after 10 months of the COVID-19 pandemic in Indonesia as well as examining the association between economic shocks and changes in smoking behaviors. Primary data were gathered through a phone survey targeting productive-age mobile-phone users in Indonesia (n = 1082). Descriptive analysis was employed to determine changes in smoking status and behaviors 10 months into the pandemic, while logistic regression analysis was used to investigate how employment shocks, financial strain, COVID-19-related indicators, and demographic characteristics were associated with smoking behaviors of people who continue smoking. Respondents experiencing changes in smoking status were dominated by people who persistently smoked during the pandemic, while those who quit, relapsed, and started smoking, was extremely small. Nevertheless, a considerable portion of people who continue smoking adjusted their smoking behaviors: 40.3% reduced smoking intensity and 25.3% switched to lower-price cigarettes. Multivariable regression analysis revealed that, among people who continue smoking, those who experienced financial strain during the pandemic had higher odds of reducing smoking intensity, while those who switched to lower job status had higher odds of switching to cheaper cigarettes. The research has shown that smoking status and behaviors of people who continue smoking mostly remained unchanged after 10 months of the COVID-19 pandemic. Changes in employment and financial conditions during the pandemic were associated with modified smoking behaviors. This study is the first to determine the direction and analyze the factors of changes in smoking during the COVID-19 pandemic in Indonesia. This new understanding should help improve predicting the trends in smoking in future crises or pandemics in developing countries, specifically Indonesia. The discovered patterns on smokers' reaction to an exogenous shock may provide evidence to support tobacco control policies in Indonesia.