Job Destruction Rates Research Articles

Labor reallocation and the regional greenhouse gas initiative

ABSTRACT Policies intended to reduce the amount of greenhouse gas emissions are among the most hotly debated policy problems of our time. Among the concerns raised are that costs will be passed on to consumers and jobs will be lost. We use the introduction and eventual tightening of the Regional Greenhouse Gas Initiative (RGGI), a regional carbon permit system in the Northeastern United States, to measure labor market responses and dynamics following the implementation of a carbon pricing system. We find that implementation of the RGGI and the subsequent tightening of the emissions cap has had no effect on employment or earnings in the utilities sector but increased the rate at which workers flow in and out of jobs. In particular, within the utilities sector, we observe some job destruction and worker separation combined with increased labor reallocation across establishments. This is complemented with small spillover effects yielding positive increases in hiring, worker reallocation and job creation in industries outside of utilities. Furthermore, when we account for the endogeneity of electricity prices we find increased hiring, job creation and worker reallocation rates and a decline in job destruction rates across industries.

Homeownership in the equilibrium unemployment theory

Purpose This theoretical study aims to clarify the (a priori) ambiguous effect of homeownership on unemployment. In general, in fact, homeownership discourages job mobility, but homeowners are less likely to be unemployed than tenants, since homeownership would seem to be positively related to human capital.Design/methodology/approach This study develops a modified version of the benchmark theoretic model of the labour market – the well-known “equilibrium unemployment theory” – where homeownership affects both the “Beveridge Curve” (BC, by means of job immobility) and the “Job Creation Condition” (JCC, by means of human capital).Findings The general result is that an increase in homeownership increases unemployment. Therefore, policymakers could encourage job mobility, before facilitating homeownership. This policy implication, however, may not apply in the case of high inflation and/or low nominal interest rate, and when the job destruction rate depends on the homeownership rate.Research limitations/implications The model studies the steady-state equilibrium of the labour market, so the policy implications only relate to the long-run. The model, therefore, does not consider the short-run effects of homeownership on unemployment (which may differ from the long-term results).Practical implications The model suggests a public policy characterised by large investment in rail lines and subsidised commuter fares. By promoting a more efficient allocation of workers across regions (and, thus, job mobility), indeed, this policy can be a good way to increase employment, without harming homeownership.Social implications The practical implication of this model is also a social implication, since it relates to homeownership and housing tenure.Originality/value To the best of author’s knowledge, this is the first model that introduces the key role of homeownership in the so-called “Equilibrium unemployment theory”. Precisely, the model uses a modified version of both the BC (which includes the negative effect of homeownership on the overall job search intensity of unemployed workers) and the JCC (which includes the positive effect of homeownership on both the business start-up and the human capital of workers). By comparing these two opposite effects, this theoretical work makes clearer the net effect of homeownership on unemployment.

Impact of COVID-19 on Jobs in Ohio's Health Care Sector

Background: This study seeks to measure the impact of COVID-19 on health care jobs in Ohio. We examine whether health care sector workers were similarly affected compared to workers in other industries in Ohio and if there were any significant differences in job categories within the health care sector. Methods: Using a rich dataset provided by the Ohio Department of Job and Family Services (ODJFS), we study the employment levels for different health care subsectors in Ohio by calculating job creation, destruction, and reallocation rates and analyze the disruption in labor markets caused by COVID-19. Results: Certain health care subsectors such as ambulatory health care services and hospitals recovered almost immediately after the lockdown but are still below their pre-COVID-19 employment levels. The social assistance subsector eventually recovered but also has not reached its pre-COVID-19 employment level. The nursing and residential care subsector has experienced a continuous decline in jobs. Although both job creation and destruction rates reached their relative peaks for all health care subcategories, the gap between pre-COVID-19 and post-COVID-19 levels was higher for job destruction rate. Conclusion: Ohio’s health care sector has not yet fully recovered from the COVID-19 lockdown imposed in 2020.

Interpersonal, cognitive, and manual skills: How do they shape employment and wages?

We study how interpersonal, cognitive, and manual skills affect employment and wages in a search and matching model through their impact on productivity, complementarity, job destruction, and the cost of unemployment. Combining several data sets on workers who acquired skills in vocational education and training (VET), we quantify each channel, allowing for unobserved heterogeneity in ability. All three skills increase productivity, yet they affect job destruction rates differentially. While manual skills are associated with lower job destruction, interpersonal and cognitive skills have the opposite effect. Focusing on low-ability workers, we then estimate the value of VET. Through VET, wages increase up to 10% and unemployment drops by over 50%. Low-ability workers thus have particularly large benefits from acquiring manual skills because they increase wages and shield from unemployment.

Exchange rate fluctuations, labour laws, and gender differences in job flows: Analysis of manufacturing industries across Indian states

India’s disappointing performance in creating productive employment for women, in spite of its increased integration with the world markets, contrasts with the experience of several countries in Asia. A number of studies have analysed the supply and demand side factors responsible for this situation. However, no study has examined the gender differences in job flows – job creation, destruction and reallocation. Net employment changes may conceal large changes in gross job flows and the associated adjustment costs. Using plant level panel data from India’s formal manufacturing sector for the period 1998–2014, this paper estimates the magnitude of job flows and analyses the impact of industry-level changes in exchange rates on job flow dynamics of men and women across state-industries. Even as net employment grew sluggishly for women, we find that, the labour market was characterised by a simultaneous process of job destruction and creation. Our analysis provides evidence for an asymmetric impact of exchange rates on job flows, with depreciation (appreciation) resulting in higher (lower) gross job creation rates with no effect on job destruction rates. Exchange rate depreciation results in higher gross and net job creation rates for both men and women in states with flexible labour laws. In states with inflexible labour laws, however, depreciation causes an increase in gross job creation for women (but not for men) with no effect on net job creation. Exchange rate depreciation also causes women to face higher job reallocation than men, particularly in states with inflexible labour laws. Participation in global value chains and output tariff reductions are found to exacerbate the effects of exchange rate changes on women’s job flows. Firms operating under rigid labour market conditions tend to employ female workers as a ‘buffer’ to adjust the workforce in response to short term fluctuations in export competitiveness.

Robotics technology and firm-level employment adjustment in Japan

Unlike studies that analyze the impact of robotics technology on overall employment at the industry or firm level, this study investigated cross-division employment adjustment within a firm in an industry with greater diffusion and penetration of robotics technology. By examining changes in the composition of employment, we measured job creation and destruction at the division level and explored whether robotics technology, as a leading example of automation, not only displaces workers but also introduces new jobs in favor of labor. We made use of unique, division-level employment data for Japan’s manufacturing firms, together with industry-level data on the installation of industrial robots. We found that industry-level adoption of robots positively affects the firm-level job creation rate and the job destruction rate. Because the magnitude of the impact is larger for job destruction, robot adoption has an overall negative impact on firms’ net employment growth. Our findings suggest that the labor displacement effect of robotics technology and the emergence of new jobs due to technological change coexist even at the firm level.

Job Destruction, Unemployment, and Unemployment Insurance Benefits: Evidence from the Outbreak of COVID-19 across US Counties

This paper explores the potential externality of welfare payments under the Unemployment Insurance (UI) program during times of high job destruction rates and unemployment rates on the spread and mortality of COVID-19. Using data for all US counties over the year 2020 and applying a difference-in-difference identification strategy, we explore the potential effects of UI benefits on the spread of COVID-19. We find that each additional $1,000 increase in UI maximum benefit is associated with 0.03 fewer deaths and 3.9 fewer confirmed cases per 100,000 population. The results are quite robust across specifications and subsamples with larger effects observed among counties with a higher share of blacks and low educated individuals and among counties below-median of per capita income.

Job Destruction and Job Finding Rates by Age in Danmark

I use register data from Statistics Danmark to compute job destruction and job finding rates by age in Danmark. The data shows that the life cycle has far more variation in finding and destruction rates than the business cycle. In addition, rates that account for job to job transitions are much higher and more stable over the cycle than rates of movement in and out of employment that exclude them. Finally, the destruction and finding rates that should be used in the new MAKRO model of the Danish economy are the ones that include job to job transitions.

L’effet des coûts de licenciement sur la durée des emplois des travailleurs peu qualifiés en France

Jusqu’en septembre 2017, les employeurs devaient verser au moins six mois de salaire aux employés dont l’ancienneté était supérieure à deux ans en cas de licenciement sans cause réelle et sérieuse dans les entreprises de plus de 11 salariés. À partir des données du ministère de la justice, nous observons que cette réglementation entraîne une hausse des indemnités de licenciement à deux ans d’ancienneté, ce qui engendre une augmentation significative du taux de destruction d’emplois avant le seuil des deux ans et une baisse juste après. Les coûts de licenciement et leur composante procédurale sont évalués grâce à l’estimation d’un modèle de recherche et d’appariement reproduisant l’évolution du taux de destruction d’emplois. Nous constatons que le coût total des licenciements augmente avec l’ancienneté et qu’il est environ quatre fois plus élevé que les indemnités légales et conventionnelles à deux ans d’ancienneté. Des exercices contre-factuels montrent que la fragilité des emplois de faible ancienneté implique que les coûts de licenciement réduisent la durée moyenne de l’emploi pour un large éventail de paramètres empiriquement pertinents.

Has the Swedish business sector become more entrepreneurial than the US business sector?

Recent studies document a 30-year decline in various measures of entrepreneurship in the U.S. Using detailed Swedish employer-employee data over the period from 1990 to 2013, we find young firms to be more prominent in the Swedish business sector than in the U.S. business sector. Young Swedish firms, aged five years or less, account for more than half of all firms during this period. We also observe an increase in Swedish entrepreneurial activity for start-ups. However, since the mid-2000s, job destruction rates for young firms have been increasing, which implies a declining employment share for younger firms. Moreover, most of the job creation by young firms occurs in the expanding service sector. We discuss different explanations for why Sweden appears not to have the same strong decline in entrepreneurial activity as the U.S. has had during the last two decades. We argue that one important explanation is the economic reforms that were implemented in Sweden in the 1990s that mitigated several hurdles to entrepreneurship.

Debtor Protection and Business Dynamism

We study the effect of debtor protection on business dynamism. We find that greater debtor protection, in the form of more lenient personal bankruptcy laws, increases firm entry only in sectors requiring low startup capital. We also find that debtor protection increases firm exit and job destruction rates among young small firms. This negative effect takes three years to materialize, and is persistent in time. Finally, we provide evidence consistent with two mechanisms underlying these changes in business dynamism: a reduction in credit supply and entry of lower quality firms following increases in debtor protection.

Enforcement of labor regulations and job flows: evidence from Brazilian cities

The frequency of labor inspections in Brazil increased in the late 1990s. In the years that followed, between 2003 and 2007, formal employment expanded significantly in the country. This paper examines whether these city-level changes in labor inspections could be a significant factor contributing to the increase in the number of formal labor contracts at the city level. We exploit unique administrative data on formal employment on different indicators for job and worker flows—including job creation, destruction, reallocation, accessions, and separations—between 1996 and 2006, and on the intensity of labor inspections, both at the city level. The results show that increases in the enforcement of labor market regulations at the subnational level led to an increase in gross and net formal job creation rates and accession rates in a period when the Brazilian GDP and formal employment were growing and informality rates were declining. In contrast, increases in enforcement of regulations are not significantly correlated with changes in the rate of job destruction. This finding is robust to different specifications and is consistent with a model where formal jobs become more attractive to workers when enforcement of different types of labor regulations increases.JEL ClassificationJ21, J63, E24, H80, C23

The Costs of Firm Exit and Labour Market Policies: New Evidence from Europe

Abstract The churning of firms is an inherent process of industrialized economies, which entails a high rate of job destruction. Thus, a key question is: what are the policies that minimize the costs of worker displacement due to business closure? Accordingly, this paper exploits a retrospective panel of workers in 13 European countries over the period 1985–2008 to explore the factors which shape the reemployment prospects of workers displaced due to business closure. The results suggest that higher spending on active labour market policies increases the reemployment prospects of the unemployed workers displaced by business closure, both in terms of unemployment duration and in terms of stability of reemployment. On the contrary, there is evidence of a negative and sizable impact of passive labour market policies on unemployment duration.

The Heterogeneity of Job Creation and Destruction in Transition and Non-transition Developing Countries: The Effects of Firm Size, Age and Ownership

The Heterogeneity of Job Creation and Destruction in Transition and Non-transition Developing Countries: The Effects of Firm Size, Age and Ownership-Developing Countries, Transition Economies, Non-transition Economies, Entrepreneurship, Firm Age, Firm Size, Ownership, Job Creation, Job Destruction, Gibrat’s Law, Learning Model, Soft Budget Constraint

The Heterogeneity of Job Creation and Destruction in Transition and Non-Transition Developing Countries: The Effects of Firm Size, Age and Ownership

This paper investigates how firm age, size and ownership are related with job creation and destruction, and how these patterns differ across transition and non-transition economies. The analysis finds that age is inversely related with gross job creation and net job creation in the two samples. This finding is consistent with the theory of the learning effect. The relationship between age and job destruction is indifferent in non-transition economies. On the contrary, old firms in transition economies destroy more jobs than young ones. The paper further establishes an inverse relationship between size and gross job creation in the two groups. However, there is divergence between the two samples; small firms in non-transition economies also exhibit a higher gross job destruction rate. Consequently large firms have a higher net job creation rate. In transition economies, small and large firms exhibit similar rates of job destruction. But small firms retain a higher net job creation rate. A more intriguing finding is that state owned firms do not underperform domestic private ones. This means these countries may be using soft budget constraint which allows state owned firms to overstaff. Finally, crowding out of SMEs by foreign owned firms is not evident in transition economies.

Labor market and access to justice

In 2008, the French government enacted a reform that reduced the number of labor courts by one quarter. This led to significant changes in access to labor courts for many workers and employers who had to travel further to proceed with conflict litigation. We use this reform to evaluate how access to labor courts affects the labor market. Our empirical approach mainly relies on regression-adjusted conditional differences-in-differences estimations. We find that cities that experienced an increase in the distance to their associated labor court suffered from a lower growth rate of job creation (−4 percentage points), job destruction (−4.6 pp) and firm creation (−6.3 pp) between 2007 and 2012 compared to unaffected cities. We find opposite but insignificant effects for cities that experienced a fall in the distance to the labor court. These results emphasize the central role of labor courts for the good functioning of the labor market.

Enterprise dynamics and employment growth

This chapter investigates how employment outcomes vary with respect to firm size, age and sector and over time. It provides an in‐depth analysis of formal private sector enterprises in 132 developing, emerging and developed economies by identifying the types of firms (by size and age) that created and destroyed jobs during the pre‐ and post‐crisis periods. The chapter finds that both firm size and age are related to the employment situation. In particular, relative to SMEs, large enterprises are the principal source of employment in the formal private sector. But SMEs and young firms are more dynamic than large firms, both with respect to employment growth and as an important source of employment and firm ownership, particularly women. Since the crisis, for certain types of employment the contribution of young firms and SMEs has declined, owing in part to the faster rate of job destruction seen in SMEs relative to large enterprises. Finally, region‐specific (and by extension country‐specific) characteristics play a stronger role in influencing firm size than the specific sectoral composition.These findings shed light on the importance of an enabling environment for enterprise survival and growth. Indeed, there is a need for policies to better promote SMEs’ and young firms’ access to resources, particularly in the post‐crisis era.

Optimal incentive contracts with job destruction risk

We study the implications of job destruction risk for optimal incentives in a long-term contract with moral hazard. We extend the dynamic principal-agent model of Sannikov (2008) by adding an exogenous Poisson shock that makes the match between the firm and the agent permanently unproductive. In modeling job destruction as an exogenous Poisson shock, we follow the Diamond-Mortensen-Pissarides search-and-matching literature. The optimal contract shows how job destruction risk is shared between the rm and the agent. Arrival of the job-destruction shock is always bad news for the rm but can be good news for the agent. In particular, under weak conditions, the optimal contract has exactly two regions. If the agent's continuation value is below a threshold, the agent's continuation value experiences a negative jump upon arrival of the job-destruction shock. If the agent's value is above this threshold, however, the jump in the agent's continuation value is positive, i.e., the agent gets rewarded when the match becomes unproductive. This pattern of adjustment of the agent's value at job destruction allows the firm to reduce the costs of effort incentives while the match is productive. In particular, it allows the firm to adjust the drift of the agent's continuation value process so as to decrease the risk of reaching either of the two inefficient agent retirement points. Further, we study the sensitivity of the optimal contract to the arrival rate of job destruction.

FINANCIAL SHOCKS, JOB DESTRUCTION SHOCKS, AND LABOR MARKET FLUCTUATIONS

This paper investigates the effect of financial shocks using a general equilibrium model that links the firm's flows of financing with labor market variables. The results show that financial shocks have sizeable effects on debt, dividend payout, and wages. Shocks to the job destruction rate are important in explaining fluctuations in unemployment. The analysis also investigates the underlying driving forces of some key comovements in the data and finds shocks to the job destructions rate important.

Institutions’ and Firms’ Adjustments: Measuring the Impact of Courts’ Delays on Job Flows and Productivity

AbstractNot only is labor-market rigidity the result of legislative provisions, but it is determined by the institutional framework at large. We argue that courts’ delays in settling labor disputes affect the strictness of employment-protection legislation by increasing the expected firing costs. We exploit the variation in the length of labor trials across Italian judicial districts and the fact that the Italian legislation regarding firing prescribes different firing regimes for firms above the 15-employee threshold and provide evidence on the impact of courts’ delays on job reallocation and firms’ productivity. We show that in judicial districts with longer trials, the rate of job turnover is significantly lower. This occurs through lower rates of job destruction and, to a lesser extent, job creation. We also find a detrimental impact of courts’ delays on the labor productivity of firms above the 15-employee threshold. The effect is stronger in sectors with higher flexibility requirements.