Labor Market Shocks Research Articles

Male Fertility: Facts, Distribution and Drivers of Inequality

We document new facts on the distribution of male fertility and its relationship with men's labor market outcomes. Using Norwegian registry data on all births since 1967, we show that rates of male childlessness in recent cohorts are 71\% among the lowest five percent of earners but only 11\% among the highest earners, and that this gap widened by almost 20 percentage points over the last thirty cohort years. There has been a compression in the fertility distribution, with a substantial share of men being ``left behind'' and fewer men experiencing a larger share of the population's new births. We use firm bankruptcies as a source of variation in job loss and earnings to provide robust evidence that men experiencing negative labor market shocks are less likely to experience the birth of a child, transition out of childlessness, and be partnered, and that these effects are persistent up to 15 years after the event. We conclude by documenting that men's fertility penalty to job loss has increased markedly over the last three decades.

Identification of Labour Market Shocks

Identification of Labour Market Shocks

The Effect of Labor Market Shocks Across the Life Cycle

The Effect of Labor Market Shocks Across the Life Cycle

Male Fertility: Facts, Distribution and Drivers of Inequality

We document new facts on the distribution of male fertility and its relationship with men's labor market outcomes. Using Norwegian registry data on all births since 1967, we show that rates of male childlessness in recent cohorts are 72% among the lowest five percent of earners but only 11% among the highest earners, and that this gap widened by almost 20 percentage points over the last thirty cohort years. There has been a compression in the fertility distribution, with a substantial share of men being left behind and fewer men experiencing a larger share of the population's new births. We use firm bankruptcies as a source of variation in job loss and earnings to provide robust evidence that men experiencing negative labor market shocks are less likely to experience the birth of a child, transition out of childlessness, and be partnered, and that these effects are persistent up to 15 years after the event. We conclude by documenting that men's fertility penalty to job loss has increased markedly over the last three decades.

Employment Guaranteed? Social Protection During a Pandemic

The Covid-19 pandemic has highlighted the potential of social protection programs in mitigating labor market shocks. We examine the role of one of the world's largest employment guarantee schemes, India's MG-NREGA, in cushioning job losses in one of the worst affected economies due to the pandemic. Our findings indicate that regions with greater historical state capacity to provide public workdays under the scheme generated relatively higher employment during the pandemic. Consequently, an increase in state capacity by one MG-NREGA workday per rural inhabitant in a district reduced job losses in rural areas in April-August 2020 by 7% overall and by 74% for rural women, over baseline employment rate. These cushioning effects strengthened as the mobility restrictions eased and were larger for women who were less mobile and less skilled. Our results suggest that employment guarantee programs can protect livelihoods, but for certain demographic groups relatively more than others depending on the nature and skill level of work offered.

When Opportunity Knocks: Confronting Theory and Empirics About Dynamics of Gender Wage Inequality

We present empirical evidence that large structural shocks are followed by changes in labor market inequality. Specifically, we study short-run fluctuations in adjusted gender wage gaps (unequal pay for equal work) following episodes of structural shocks in the labor markets, using several decades of individual data for a wide selection of transition countries. We find that for cohorts who entered the labor market after the onset of transition. Labor market shocks lead to significant declines in the gender wage gap. This decrease is driven mostly by episodes experienced among cohorts who enter the labor market during the transition. By contrast, we fail to find any significant relation for cohorts already active in the labor market at the time of transition. We provide plausible explanations based on sociological and economic theories of inequality.

The Role of Short-Time Work and Discretionary Policy Measures in Mitigating the Effects of the COVID-19 Crisis in Germany

In this paper, we investigate the impact of the COVID-19 pandemic on German household income using a micro-level approach. We combine a microsimulation model with labour market transition techniques to simulate the COVID-19 shock on the German labour market. We find the consequences of the labour market shock to be highly regressive with a strong impact on the poorest households. However, this effect is nearly entirely offset by automatic stabilisers and discretionary policy measures. We explore the cushioning effect of these policies in detail, showing that short-time working schemes and especially the one-off payments for children are effective in cushioning the income loss of the poor.

Female Employment and Intimate Partner Violence: Evidence from Syrian Refugee Inflows to Turkey

We investigate the impact of female employment on intimate partner violence by exploiting the differential arrivals of Syrian refugees across Turkish provinces as an exogenous labor market shock. By employing a distance-based instrument, we find that refugee inflows caused a decline in female employment with no significant impact on male employment. This decline led to a reduction in intimate partner violence, without changes in partner characteristics, gender attitudes, co-residence patterns, or division of labor. Our results are consistent with instrumental theories of violence: a decline in female earning opportunities reduces the incentives of men to use violence for rent extraction.

The Effect of Labor Market Shocks Across the Life Cycle

The Effect of Labor Market Shocks Across the Life Cycle

Policy biases in a model with labor market frictions

We develop a model with labor-market matching frictions that is subject to a range of shocks, including shocks to matching efficiency and bargaining power, and use the model to examine how monetary policy should respond to such shocks. We show that optimal monetary policy is highly efficient at responding to these labor market shocks, producing outcomes that are close to the flex-price equilibrium. Moreover, this efficiency remains if monetary policy is conducted with discretion, indicating that time-inconsistency and forward-guidance are not central to the policy response. We also show that several popular simple rules are also effective at responding to these labor market shocks.

Impact of Corona Virus pandemic on Different sectors of Nepalese Economy

Novel coronavirus (COVID-19) causing persistent drumbeat of positive tests and reported deaths across the globe, has created widespread crisis in Nepal as well. The crisis has already led into an economic and labour market shock, impacting both on demand and supply chain. Due to the outbreak of this deadly coronavirus, Nepal has started to suffer the most abrupt and widespread cessation of economic activity. The goal of this paper is to study the emerging and rapidly growing literature on the impact of COVID-19 on various economic and social sectors and to synthetize the insights emerging from a very large number of studies. This study summarizes the literature on the socio-economic consequences of corona virus and consequent lockdown imposed by government on Nepal. This study revealed that COVID-19 has negatively impacted macro economy of country lowering national GDP, decreasing revenue collection, slowing economic growth rate, decreasing wage rate, price inflation and causing loss of employment opportunities. The study showed that almost every sector of socio-economics has been slowed down that adversely effect on country’s economy. The effect are identified on Remittance, Labour and Employment, Tourism, Education and Agriculture (Dairy, vegetables and Poultry) .The uncertain impact of the COVID-19 pandemic on Nepal’s social economy will magnify depending on how events unfold on three fronts; i) its dependence on tourism, trade, and foreign employment and the consequences that will propagate through the services and industrial landscape; ii) if or when the spread of the pandemic overwhelms a grossly inadequate health infrastructure and antivirals or vaccine become available and iii) Nepal’s heavy geo-economic reliance on India and China, and the nature of contagion in those countries.

Projecting a Life-cycle Income – a Simulation Model for the Slovak Pension Benefit Statement

The introduction of a regulation requiring pension asset managers to provide savers with an estimation of pension benefits opened a wide range of scientific questions on the projection methods and estimation of input parameters. One of them is the estimation of life-cycle income for calculating expected contributions and the estimation of the benefit ratio at the moment of retirement. We present an estimation of life-cycle income functions for various age and educational cohorts influenced by temporary labor market shocks. By employing the resampling simulation method for incorporating macroeconomic shocks, we have shown that using longitudinal data on the income process from a large closed economy could bring valid results for a country with a small open economy as well where the longitudinal data on income processes of individuals are unavailable. Our findings could serve a practical use when pension or other social benefits tied to individual income should be modelled.

Easy come, easy go? Economic shocks, labor migration and the family left behind

This article investigates the impact of negative income shocks in migrant destination countries around the world on the domestic and international labor migration decisions of their family members left behind at origin. Exploiting differences in labor market shocks across and within destinations during the Great Recession, I find large and heterogeneous effects on both types of migration decisions. Poor migrant households reduced domestic and increased international labor migration in response to the shock. Rich migrant households remained largely unaffected. I provide a theoretical framework, which rationalizes this heterogeneity by the relative magnitudes of income and substitution effects caused by the shock. The results imply a deterioration in the skill selection of aggregate international migrant flows as poor households had below average skill levels. New international migrants targeted the same destinations as established ones from the same household, providing evidence of strong kinship migration networks. Changes in migration also led to an increase in intimate partner cohabitation and fertility among poor families. The results show that domestic and foreign migration decisions are interrelated and jointly determine household outcomes.

Consumption dynamics under time-varying unemployment risk

In response to an adverse labor-market shock, a calibrated heterogeneous-agent model predicts that aggregate spending on durable goods falls mainly due to the ex-ante increase in income uncertainty caused by higher unemployment risk. In contrast, aggregate spending on nondurable goods falls mainly due to the ex-post income losses associated with realized unemployment spells. When households hold little liquid assets, the nondurable spending response is amplified, whereas the durable spending response is dampened. These differences stem from micro-level adjustment frictions involved in purchases of durable goods. The model is corroborated with evidence from micro survey data.

The heterogeneous and regressive consequences of COVID-19: Evidence from high quality panel data

Using new data from the first two waves of the Understanding Society COVID-19 Study collected in April and in May 2020 in the UK, we study the labour market shocks that individuals experienced in the first wave of the pandemic, and the steps they and their households took to cope with those shocks. Understanding Society is based on probability samples and the Covid-19 Study is constructed carefully to support valid population inferences. The Covid-19 Study collected novel data on the mitigation strategies that individuals and households employ. Further, prior observation of respondents in the panel allows us to characterize regressivity with respect to pre-pandemic economic positions. Our key findings are that those with precarious employment, aged under 30 and from minority ethnic groups faced the biggest labour market shocks. Almost 50% of individuals have experienced declines in household earnings of at least 10%, but declines are most severe in the bottom pre-pandemic income quintiles. Methods of mitigation vary substantially across groups: borrowing and transfers from family and friends are most prevalent among those most in need.

Unemployment Insurance Generosity and Crime

Previous studies show that unemployment has a positive effect on crime rates; however, unemployment insurance (UI) benefits could mitigate these effects. Using county-level unemployment and crime data and taking advantage of the UI law changes across states and over time (1990-2016), we provide new evidence that the UI benefits act as a buffer against local labor market shocks. A one-standard-deviation increase in benefits is associated with 2.4% and 1.9% lower property and violent crime rates for a county at average unemployment.

Covid-19 Labour Market Shocks and Their Inequality Implications for Financial Wellbeing

Using an online survey of Australian residents, we elicit the potential impacts of COVID-19 related labour market shocks on a validated measure of financial wellbeing. Experiencing a reduction in hours and earnings, entering into unemployment or having to file for unemployment benefits during the pandemic are strongly and significantly associated with decreases in financial wellbeing of around 29% or 18 points on the financial wellbeing scale of 0-100, despite various government measures to reduce such effects. Unconditional quantile regression analyses indicate that the negative COVID-19 labour market effects are felt the most by people in the lowest percentiles of the financial wellbeing distribution. Counterfactual distributional analyses and distribution regression indicate a shifting of the financial wellbeing distribution leftwards brought on by those suffering any of the above-mentioned labour market shocks, indicating potential dramatic increases in financial wellbeing disadvantage and inequality.

How educational choices respond to large labor market shocks: Evidence from a natural experiment

This paper uses the closure of the Israeli labor market as a large labor market shock and examines its impact on Palestinian youths' educational choices. The sudden closure denied thousands of Palestinian workers, mostly low-skilled males, access to the Israeli labor market. We provide evidence that the conflict-induced labor demand shock reduced the opportunity cost of attending school and consequently, male students' high school dropout rates.

Unemployment insurance generosity and crime

ABSTRACT Previous studies show that unemployment has a positive effect on crime rates; however, unemployment insurance (UI) benefits could mitigate these effects. Using county-level unemployment and crime data and taking advantage of the UI law changes across states and over time (1990–2016), we provide new evidence that the UI benefits act as a buffer against local labour market shocks. A one-standard-deviation increase in benefits is associated with 2.4% and 1.9% lower property and violent crime rates for a county at average unemployment.

The initial impact of COVID-19 and policy responses on household incomes

As soon as the scale of the coronavirus shock to the economy became clear, the UK government introduced three policies to protect directly household incomes: a Job Retention Scheme, to pay the wages of employees who were temporarily furloughed; a Self-Employment Income Support Scheme, to give grants to established self-employed people whose businesses had been affected; and a package of increases to entitlements to social security benefits, with Universal Credit at the core, that bolstered the UK’s means-tested ‘safety net’. This paper analyses the design and beneficiaries of these policies and, given the distributional pattern of the labour market shock, considers the emerging overall impact on living standards, particularly of low-income households.