Labour Market Performance Research Articles

The Distribution of Returns to Education for People with Disabilities

This article takes a first look at the distribution of returns to education for people with disabilities, a particularly disadvantaged group whose labor market performances have not been well studied or documented. Using a nonparametric approach, we uncover significant heterogeneity in the returns to education for these workers, which is drastically masked by conventional parametric methods. Based on these estimates, we construct the Sharpe ratio of human capital investment (taking into account its substantial risk), and our results corroborate the claimed importance of human capital in improving these workers’ wages. Our stochastic dominance tests show that the returns to education for workers with disabilities, as a group, may have been affected more adversely in the most recent recession, relative to their non-disabled counterparts.

An analysis of labor market performance of two-year college graduates’ transfer to four-year college and moderating effects of vocational training, qualifications, and working period

An analysis of labor market performance of two-year college graduates’ transfer to four-year college and moderating effects of vocational training, qualifications, and working period

Unemployment persistence in OECD countries after the Great Recession

The 2008 economic downturn in the United States resulted in a wave of contractionary effects across many OECD countries. This paper investigates the pattern of the unemployment persistence in the United States and other 28 OECD countries before and after the Great Recession. To detect possible changes in the pattern of unemployment persistence, we employ a mean bias-corrected estimation of the persistence parameter with a rolling window of five years. In addition, we estimate the most likely date of change in the trend function of unemployment to test whether there was any significant change in the pattern of unemployment persistence after the Great Recession. We find significant evidence of a structural break and hysteresis in unemployment rates, with a persistence parameter close to unity, across the United States and other 28 OECD countries. Besides, bootstrap permutation tests show that all half-lives and impulse response functions have significantly changed after the Great Recession. Therefore, our findings call for structural reforms aimed at improving labor market performance, to prevent upward shifts in unemployment across OECD countries from becoming permanent.

The Performance of Immigrants in the German Labor Market

This paper uses a large survey (SOEP) to update and deepen our knowledge about the labor market performance of immigrants in Germany. It documents that immigrant workers initially earn on average 20 percent less than native workers with otherwise identical characteristics. The gap is smaller for immigrants from advanced countries, with good German language skills, and with a German degree, and larger for others. The gap declines gradually over time but at a decreasing rate and much stronger for more recent cohorts. Less success in obtaining jobs with higher occupational autonomy explains half of the wage gap. Immigrants are initially less likely to participate in the labor market and more likely to be unemployed. While participation fully converges after 20 years, immigrants always remain more likely to be unemployed than the native labor force.

Horse Race or Heir Apparent: The Role of Internal Competition on New CEOss Compensation

We examine the dynamics of firms’ internal succession methods and find that horse race successions are common among the largest U.S. firms. Although heir and horse race CEO candidates are of similar quality, the consequences of these two succession methods differ significantly. We show that horse race successions induce conflict and are detrimental to the firm but not to the newly appointed CEOs. Our findings suggest firm’s succession methods influence the CEO labor market, CEO compensation, and firm performance. These findings highlight the importance of CEO succession planning in the form of grooming an heir.

The impact of EU Objective 1 funds on regional development: Evidence from the U.K. and the prospect of Brexit

AbstractBrexit means that regions of the United Kingdom will lose access to the EU Cohesion Policy. Have EU funds been effective, and what might be the consequences of an interruption of EU financial support? This paper studies the impact of “Objective 1” funding—the highest form of EU aid—in Cornwall and South Yorkshire, two of the U.K.’s most subsidized regions. Counterfactual methodologies assessing their labor market and economic performance provide evidence of a positive effect of EU Objective 1 funds. When in 2006 South Yorkshire lost Objective 1 eligibility, this massively reduced its share of EU funds and the region was unable to sustain the gains obtained in previous years. This suggests that while Structural Funds may be effectively improving socio‐economic conditions of poorer regions, the performance of subsidized areas could be deeply affected by a reduction (or worse, an interruption) of EU aid.

The fiscal impact of immigration to welfare states of the Scandinavian type

In this paper, we examine the potential of immigration to strengthen fiscal sustainability, which is under pressure by an ageing population in many European countries. We look at a particularly challenging case, namely that of Denmark, which has extensive tax-financed welfare programmes that provide a high social safety net. The analysis is based on a forecast of the entire Danish economy made using a dynamic computable general equilibrium model with overlapping generations. We present life cycle estimates of the potential fiscal impact of immigration considering the cost of immigration on the margin as well as on average. The main conclusion is that immigrants from Western countries have a positive fiscal impact, while immigrants from non-Western countries have a large negative one, which is also the case when considering only non-refugee immigrants. The negative effect is caused by both a weak labour market performance and early retirement in combination with the universal Danish welfare schemes.

Prior host-country work experience and immigrant labor market outcomes: evidence from Canada

Recent changes to immigration selection policies favor skilled workers with prior work experience in the immigrant host country. Using unique administrative tax data for Canada, we estimate earnings equations to quantify the difference in earnings of immigrants with prior Canadian experience (prefilers) and those without prior experience (non-prefilers). We find that, relative to non-prefilers, entry earnings are higher for prefilers and, for male immigrants, this earnings advantage persists for at least 20 years after arrival. We show that the primary source of the higher entry earnings of prefilers is a higher return to foreign experience. In addition, the prefiler earnings advantage is largest for university graduates and the return to foreign experience is higher for prefilers from Western countries than those from the rest of the world. Our findings suggest that a move towards an immigrant selection system which uses previous host-country work experience as a criterion will improve the labor market performance of immigrants.

Early Smoking, Education, and Labor Market Performance

This study investigates the effects of early smoking on educational attainment and labor market performance by using mixed ordered and mixed proportional hazard models. The results show that early smoking adversely affects educational attainment and initial labor market performance, but only for males. The probability to finish a scientific degree is 4%-point lower for an early smoker. The effect of early smoking on initial labor market performance is indirect through educational attainment. Once the indirect effect is controlled for there is no direct effect. Moreover, for males only, early smoking has a negative effect on current labor market performance even after conditioning on educational attainment. The probability to have an academic job is 4%-point lower for an early smoker. For females neither education nor labor market performance is affected by early smoking.

Social Harmonization and Labor Market Performance in Europe

The paper aims to assess the impact of selected elements of social harmonization on labor market performance in the European Union among two groups of workers — the total working population and the elderly. The aim is to examine whether upward changes in labor taxes affect employment, unemployment, and inactivity rates in the European Union. The descriptive empirical evidence shows that the level of labor taxation varies significantly across European countries and the introduced changes might affect national markets differently. The Arellano-Bond dynamic panel data regression shows that an increase in the tax wedge, as an element of a social harmonization process, has a very weak impact on labor market performance in the European Union. The impact is statistically significant and negative only for the elderly (i.e. the population aged 50). Empirical analysis suggests that upward social convergence might negatively affect the employment of the most disfavored groups in the labor market, such as the elderly. It suggests that social harmonization focused on reducing the tax wedge would have favorable effects on labor market performance, especially among the most disadvantaged groups.

The Distribution of Returns to Education for People with Disabilities

This note takes a first look at the distribution of returns to education for people with disabilities, a particularly disadvantaged group whose labor market performances have not been well studied or documented. Using a nonparametric approach, we uncover significant heterogeneity in the returns to education for these workers, which is drastically masked by the conventional parametric methods. Based on these estimates, we construct the Sharpe ratio of human capital investment (taking into account its substantial risk), and our results corroborate on the claimed importance of human capital in improving these workers' wages. Our stochastic dominance tests, however, show that the returns to education for workers with disabilities, as a group, may have been affected more adversely in the most recent recession, relative to their non-disabled counterparts.

Director Networks, Turnover, and Appointments

This paper analyzes the labor market (turnover and appointments) of executive and non-executive directors by means of social network methodology. We find that directors with strong networks are able to obtain labor market information that enables them to leave their firm more easily for better opportunities. Networks also mitigate information asymmetry problems of external director appointments. Furthermore, the strong impact of indirect connections is in line with the ‘strength of the weak ties’ theory. The fact that direct connections are less important signifies that the connections to people that are close and local are likely to convey redundant information, whereas connections to distant individuals are more efficient in terms of information acquisition and labor market performance improvement.

Collective Bargaining Through the Magnifying Glass: A Comparison Between the Netherlands and Portugal

Since the global financial crisis, sector-level bargaining has come under renewed scrutiny. While in Southern Europe, the crisis raised concerns about the role of collective bargaining as an obstacle to labour market adjustment, in Northern Europe it was perceived more favourably and, according to some, may even have helped to weather the fallout of the crisis more easily. This paper seeks to contribute to a deeper understanding of sector-level bargaining systems and their role for labour market performance. We compare two countries with seemingly similar collective bargaining systems, the Netherlands and Portugal, and document a number of features that may affect labour market outcomes, including: i) the scope for flexibility at the firm or worker level within sector-level agreements; ii) the emphasis on representativeness as a criterion for extensions; iii) the effectiveness of coordination across bargaining units; and iv) pro-active government policies to enhance trust and cooperation between the social partners.

The Relative Labour Market Performance of Former International Students: Evidence from the Canadian National Graduates Survey

Canada is increasingly looking to international students as a source of postsecondary tuition revenues and new immigrants. By 2014, international students accounted for 10% of graduates from Canadian postsecondary institutions, up from 3% in 2000, and 11% of new permanent residents, up from 7% in 2010. This article compares the labour market performance of former international students (FISs) entering the Canadian labour market during the first decade of the 2000s to their Canadian-born-and-educated (CBE) and foreign-born-and-educated (FBE) counterparts. We find that FISs outperform FBE immigrants by a substantial margin and underperform CBE individuals graduating from similar academic programs by a relatively modest margin. We also find some limited evidence, particularly among women, of a deterioration in FIS outcomes through the 2000s relative to both comparison groups. We argue that this deterioration is consistent with a quality tradeoff as postsecondary institutions and governments have reached deeper into international student pools to meet their demands for students and new immigrants without a commensurate increase in their supply.

Collective Bargaining Through the Magnifying Glass: A Comparison between the Netherlands and Portugal

Since the global financial crisis, sector-level bargaining has come under renewed scrutiny. While in Southern Europe, the crisis raised concerns about the role of collective bargaining as an obstacle to labour market adjustment, in Northern Europe it was perceived more favourably and, according to some, may even have helped to weather the fallout of the crisis more easily. This paper seeks to contribute to a deeper understanding of sector-level bargaining systems and their role for labour market performance. We compare two countries with seemingly similar collective bargaining systems, the Netherlands and Portugal, and document a number of features that may affect labour market outcomes, including: i) the scope for flexibility at the firm or worker level within sector-level agreements; ii) the emphasis on representativeness as a criterion for extensions; iii) the effectiveness of coordination across bargaining units; and iv) pro-active government policies to enhance trust and cooperation between the social partners.

Labor Market Integration of Refugees in Finland

This paper documents Finland’s policy response to the increase in asylum applications in 2015 and the labor market performance of earlier immigrants living in Finland. Immigrants born in Afghanistan, Iraq and Somalia had substantially lower employment rates, earned less and received more social benefits than other immigrant groups or natives in 1990–2013. The immigrant-native gaps in employment and earnings decreased over time but remained large. Ten years after arriving in Finland, the average earnings of immigrant men from these countries were only 22–38 percent of the average earnings of native men of the same age. The relative earnings of women were even smaller. Furthermore, the difference in equivalence-scaled social benefits persisted over time despite the narrowing of earnings gaps.

Collective Bargaining Through the Magnifying Glass: A Comparison Between the Netherlands and Portugal

Since the global financial crisis, sector-level bargaining has come under renewed scrutiny. While in Southern Europe, the crisis raised concerns about the role of collective bargaining as an obstacle to labor market adjustment, in Northern Europe it was perceived more favourably and, according to some, may even have helped to weather the fallout of the crisis more easily. This paper seeks to contribute to a deeper understanding of sector-level bargaining systems and their role for labor market performance. We compare two countries with seemingly similar collective bargaining systems, the Netherlands and Portugal, and document a number of features that may affect labor market outcomes, including: i) the scope for flexibility at the firm or worker level within sector-level agreements; ii) the emphasis on representativeness as a criterion for extensions; iii) the effectiveness of coordination across bargaining units; and iv) pro-active government policies to enhance trust and cooperation between the social partners.

Generation Internship: The Impact of Internships on Early Labour Market Performance

Many university graduates conduct internships before starting to work in a direct-hire job. I analyse the effects of internships on early labour market performance to evaluate whether they enhance or hinder the university-to-work transition. I use propensity score matching to identify graduates that resemble each other in important characteristics such as cognitive ability, and only differ with respect to the internship experience. This allows comparison between interns and non-interns in key dimensions of job market performance: monthly earnings, employment status, and job satisfaction. The results suggest that internships have detrimental effects across dimensions. Graduates with an internship experience are significantly less likely to be employed one year after graduation, and, if employed, earn significantly less than their non-intern peers. However, the negative effects are short-lived and vanish within five years. Due to this catching up, I can rule out that interns are a negative selection of all graduates. Instead it seems that the internship sends a negative signal to prospective employers and is thus causing the underperformance at job entry. The measured effects are less pronounced for female interns.

Banking Globalization, Local Lending, and Labor Market Effects: Micro-Level Evidence from Brazil

This paper estimates the effect of a foreign funding shock to banks in Brazil after the collapse of Lehman Brothers in September 2008. Our robust results show that bank-specic shocks to Brazilian parent banks negatively affected lending by their individual branches and trigger real economic consequences in Brazilian municipalities: More affected regions face restrictions in aggregated credit and show weaker labor market performance in the aftermath which documents the transmission mechanism of the global financial crisis to local labor markets in emerging countries. The results represent relevant information for regulators concerned with the real effects of cross-border liquidity shocks.

Technological Progress and (Un)Employment Development

One of the key issues in economics is the explanation of unemployment and its variation across different economies. Modern mainstream macroeconomics refers to the effects of financial crises and to institutional structures and their variation across countries. However, unemployment within the European states varies nearly as much as between these countries. In the interior of a country, however, there are only minor differences in institutions. To solve this puzzle, we explain this variation of unemployment building on the regional industry composition and technological progress. It is shown formally that under general and standard preconditions the price elasticity of demand on product markets is decisive: Technological progress leads to an expansion of employment if product demand is elastic. It is accompanied, however, by shrinkage of employment if product demand is inelastic. A transition from the elastic into the inelastic range of the demand function for the most important product(s) can already suffice to plunge a region into crisis. In our empirical analysis we use industry level time series data on output, prices, employment and national income for Germany provided by the Federal Statistical Office. We estimate Marshallian type demand functions using an instrumental variables estimator to derive the price elasticities for different industries and link this information to the regional labour market performance of the respective industries and regions. (Author's abstract, IAB-Doku) ((en))