EMPLOYMENT ADJUSTMENT AND LABOR UTILIZATION

Standard models of labor adjustment assume that firms can change only the size of their workforce (the extensive margin) and not the number of hours of their existing employees (the intensive margin) in response to shocks. I propose a general equilibrium search model that allows for adjustment on both of these margins. The model includes on‐the‐job search that generates different vacancy filling and attrition rates across firms. I calibrate the model to a unique matched employer–employee panel of Danish firms and simulate two labor market policies aimed at promoting job creation: hiring subsidies and a reduction in the official workweek.     

A THEORY OF THE CROSS‐SECTIONAL FERTILITY DIFFERENTIAL: JOB HETEROGENEITY APPROACH

This article presents a theory of the cross‐sectional fertility differential, which produces the negative wage–fertility relationship based on job heterogeneity. Although evidence suggests the importance of job heterogeneity in the labor market, it has largely been ignored in theories of fertility choice. I show that a theory incorporating job heterogeneity requires only standard conditions on preferences to generate the negative wage–fertility relationship, and the negative relationship derived from the model is robust to changes in economic environments (e.g., public policy and technology). Furthermore, the theory reconciles the negative cross‐sectional wage–fertility relationship with various time‐series variations in aggregate fertility.     

Reducing Start‐up Costs for New Firms: The Double Dividend on the Labor Market*

Starting a firm with expansive potential is an option for educated and high‐skilled workers. If there are labor market frictions, this additional option can be seen as reducing the chances of ending up in a low‐wage job and hence as increasing the incentives for education. In a matching model, we show that reducing the start‐up costs for new firms results in higher take‐up rates of education. It also gives rise—through a thick‐market externality—to higher rates of job creation for high‐skilled labor as well as average match productivity. We provide empirical evidence to support our argument.     

Labor market reforms, job instability, and the flexibility of the employment relationship

We endogenize separation in a search model of the labor market and allow for bargaining over the continuation of employment relationships following productivity shocks to take place under asymmetric information. In such a setting separation may occur even if continuation of the employment relationship is privately efficient for workers and firms. We show that reductions in the cost of separation, owing for example to a reduction in firing taxes, lead to an increase in job instability and, when separation costs are initially high, may be welfare decreasing for workers and firms. We furthermore show that, in response to an exogenous reduction in firing taxes, workers and firms may switch from rigid to flexible employment contracts, which further amplifies the increase in job instability caused by policy reform.     

Sensitivity of Job Destruction to Vintage and Tenure Effects

Matching models with endogenous job destruction typically deliver excessively volatile job destruction and moderate volatility of vacancies. In our model, vintage and tenure effects promote the creation of new matches that are temporarily more productive, while reducing the survival of temporarily less productive matches. This cleansing effect produces a counter‐cyclical inflow into unemployment, removes the strong response of job destruction to productivity shocks, and generates a downward‐sloping Beveridge curve, as in the data. The model also generates more volatility in vacancies, the job‐finding rate, and labor‐market tightness.     

Government Spending Shocks and Rule‐of‐Thumb Consumers with Steady‐State Inequality*

In the body of literature concerning fiscal policy, a central result is that government spending might stimulate private consumption because only some households save, while others spend their entire income each period. Although such heterogeneity naturally causes inequality, this complication is commonly avoided by assuming that transfers redistribute steady‐state wealth. I show that this steady‐state assumption drives short‐run results. Without redistribution, the equilibrium is indeterminate, and the labor‐market structure that is imposed to support the expansive result is theoretically inconsistent. On a more positive note, I propose a labor‐market formulation under which the expansive effects of government spending might arise.     

DYNAMIC CONTRACTS WITH WORKER MOBILITY VIA DIRECTED ON‐THE‐JOB SEARCH

This article proposes a model with dynamic incentive contracts and on‐the‐job search in a frictional labor market. The optimal long‐term contract exhibits an increasing wage–tenure profile. With increasing wages, worker effort also increases with tenure. These two features imply that the probabilities of both voluntary and involuntary job separation decrease with both job tenure and the duration of employment. Given these results, workers experience differing labor market transitions—between employment, unemployment, and across different employers—and the equilibrium generates endogenous heterogeneity among ex ante homogeneous workers.     

LABOR‐MARKET FRICTIONS,HUMAN CAPITAL ACCUMULATION,AND LONG‐RUN GROWTH: POSITIVE ANALYSIS AND POLICY EVALUATION*

We construct a search model with endogenous human capital and labor participation to study the growth effects of short‐run frictions and the effectiveness of human capital policies. Employment, learning effort, and output growth increase with more effective learning, better labor‐market matching, lower job separation, or less costly vacancy creation. Although output growth, employment, vacancy creation, and learning and search effort are most responsive to changes in a human capital policy that directly affects learning effort, such a policy need not be more beneficial for welfare. The effects of human capital policies become larger as the severity of labor‐market frictions rises.     

A welfare economic analysis of labor market policies in the Harris–Todaro model

This paper presents a welfare economic analysis of the benefits of various labor market policies in the Harris–Todaro labor market model. The policies considered are a policy of modern sector job creation, which I call modern sector enlargement (MSENL); a policy of rural development, which I call traditional sector enrichment (TSENR); and a policy of wage limitation in the urban economy, which I call modern sector wage restraint (MSWR). First, I analyze the inequality effects of these policies. I then perform two welfare economic analyses, the first based on summary measures of labor market conditions (total labor earnings, unemployment, inequality of labor incomes, and poverty rates) and the second based on dominance analysis in the labor market, in both cases assuming that the costs are borne elsewhere. The results of the welfare analyses are compared, and it is shown that TSENR unambiguously increases welfare in the labor market using both approaches, the other policies yield ambiguous results, and no policy is unambiguously welfare-decreasing.     

关于劳动力市场歧视的微观分析——基于河南省的数据

笔者通过对河南省劳动力市场调查数据的分析,发现我国劳动力市场歧视呈动态性变化并主要存在于职业搜寻领域,是企业在信息不对称条件下的理性选择,呈现均衡状态。因此偏见不是歧视产生的根源,缺乏科学的人员甄选手段才是造成歧视的根本。降低甄选成本以及增强劳动者的个体差异性和人力资本的专用性是控制歧视的有效方法。     

Sharing Money Creation in a Monetary Union*

How to share money creation among the members of the European Monetary Union? To address this issue, we construct a two‐country New Open‐economy Macroeconomics model of an asymmetric monetary union with an incomplete financial market and home bias in consumption. We consider two sharing rules consistent with the current regulations of the European System of Central Banks. First, each participating National Central Bank supplies half of the European Central Bank determined money creation in the monetary union. Secondly, each National Central Bank adapts the national increase in money demand, under the constraint that the total money creation in the union does not exceed the level determined by the ECB for the whole union. We show that the current sharing rule, which ignores countries’ heterogeneity, is superior in terms of welfare. The key role of the current account is emphasized. It proves an efficient decentralized mechanism for allocation of money.     

Migration,Unemployment, and Skill Downgrading

In this paper, we analyze the labor market impacts of immigration under flexible and rigid labor market regimes. A general equilibrium framework is developed, accounting for skill heterogeneity and labor market frictions, where unemployed medium‐skilled manufacturing workers are downgraded into low‐skilled service jobs, while low‐skilled service workers might end up unemployed. The analytical analysis shows that medium‐skill immigration decreases low‐skilled unemployment under the flexible regime, indicating a complementarity effect, while the rigid regime induces a substitution effect, leading to low‐skilled unemployment. Moreover, it leads to wage polarization. In a numerical analysis, the economic effects of different migration scenarios are quantified.     

New evidence on the effects of job creation schemes in Germany—a matching approach with threefold heterogeneity

This paper evaluates the effects of job creation schemes on the participating individuals in Germany. The very informative dataset at hand justifies the application of a matching estimator and allows to take account of threefold heterogeneity. The recently developed multiple treatment framework is used to evaluate the effects with respect to regional and individual heterogeneity as well as to differences in the programme sectors. The results show considerable differences with respect to these sources of heterogeneity, but the overall finding is very clear. At the end of our observation period, that is 2 years after the start of the programmes, participants in job creation schemes have a significantly lower success probability on the labour market in comparison to matched non-participants.     

EFFICIENCY AND LABOR MARKET DYNAMICS IN A MODEL OF LABOR SELECTION

This article characterizes efficient labor market allocations in a labor selection model. The model's crucial aspect is cross‐sectional heterogeneity for new job contacts, which leads to an endogenous selection threshold for new hires. With cross‐sectional dispersion calibrated to microeconomic data, 40% of empirically relevant fluctuations in the job‐finding rate arise, which contrasts with results in an efficient search and matching economy. The efficient selection model's results hold in partial and general equilibrium, as well as with sequential search.     

Factor Heterogeneity,Factor Market Imperfection and Trade

This paper develops a tractable model of examining how factor heterogeneity and imperfect factor market interact for determining a pattern of trade. Institution plays a crucial role for the interaction. In my work, firm productivity is defined as a composition of factor productivity and technology. Thus, input selection should affect the pattern of Melitz’s intra-industry allocation due to the incurring transaction cost. For a simple model, I assume two factors (labor and capital) and two sectors, which are relatively less institution-dependent and relatively more institution-dependent. When the economy is open, effect of the transaction cost on income distribution is more drastic for an institutionally underdeveloped country. Depending on institutional quality, the economic openness reallocates resource across countries through job creation or job destruction. The job turnovers redistribute income between heterogeneous labors within countries. The income redistribution is catalyzed by international mobility of capital. As a result, income disparity is widened between the institutionally developed country and the institutionally underdeveloped country. This paper can contribute to the literature of institution and international trade.     

Revisions to US labor market data and the public’s perception of the economy

Using the monthly “Employment Situation” reports for 1994–2013, this paper studies the revisions to US employment data. The paper shows that the first press release underestimates net job creation in expansions and overestimates it in downturns. The “errors” in reporting the data on the labor market can distort the public’s perception about the stance of the labor market and have some political consequences. This is well reflected by the finding that the job approval rating of President Obama, the index of consumer confidence, and the economic conditions index of Gallup have all been responding to the initial news on the US labor market as they were published in the Employment Situation reports.     

Intra‐Week Price Patterns in the Housing Market*

In this paper, I demonstrate the existence of city‐specific intra‐week price patterns in the Norwegian housing market. I use a data set with exact sell dates to show that sell prices are higher on certain days. Using ask prices and observations on repeat sales in fixed‐effect models, I seek to control for composition effects and unobserved heterogeneity. The intra‐week price patterns are shown to be associated with patterns in the frequency of public‐showing days. I argue that the findings are consistent with optimizing agents acting on new information.     

Unobserved Heterogeneity,Exit Rates,and Re‐Employment Wages

Exit rates from unemployment and re‐employment wages decline over a period of unemployment, after controlling for worker observable characteristics. We study the role of unobserved heterogeneity in an economy with asymmetric information and directed search. We show that the unique equilibrium is separating and that skilled workers have more job opportunities and higher wages. The composition of the unemployed varies with the duration of unemployment, so average exit rates and wages fall with time. The separating equilibrium relies on performance‐related pay schemes and the ability of firms to commit to renting an input that is complementary to worker skills.     

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.     

Wealth inequality and employment fluctuations

This paper is concerned with the business cycle dynamics in search and matching models of the labor market when agents are ex-post heterogeneous. We focus on heterogeneity caused by different labor market histories and the resulting wealth inequality they generate. We show that this inequality implies wage rigidity relative to a complete insurance economy. The fraction of wealth poor agents prevents real wages from falling too much in recessions, since small decreases in income imply large losses in utility. Analogously, wages rise less during expansions than in models with homogeneous workers as small increases are enough for poor workers to accept job offers. This mechanism reduces the volatility of wages but generates more volatile employment levels.