Unemployment and interindustry labour mobility in Canada in the 1980s

The determinants of interindustry mobility of labour, and its relationship to the unemployment rate is examined, using micro-data on Canadian workers from 1980/81, 1982/83 and 1985/86. It contrasts the implications of the ‘dynamic reallocation’ model (Lilien, 1982) in which rising aggregate unemployment is due to in creased dispersion in the net hiring rates of firms (implying positive covariance of interindustry mobility and unemployment rates) with the older ‘Keynesian’ perspective that high unemployment ‘chills’ labour market mobility, implying a neative relationship. Qualified support is obtained for the ‘chilling’ model, as well as standard results on the role of job tenure, hours worked, etc. The general moral is the cyclical sensitivity of labour market behaviour, i.e. individuals appear to react to the aggregate unemployment rate.     

Has the Affordable Care Act increased part-time employment?

We examine the impact of the Affordable Care Act (ACA) on part-time employment. Because the ACA’s employer health insurance mandate applies to individuals who work 30 or more hours per week, employers may try to avoid the mandate by cutting workers’ hours below the 30-hour threshold in order to avoid having to provide them with health insurance. Although the employer mandate only went into effect in 2015, many observers have argued that forward-looking employers began to shift towards a part-time workforce well in advance of the mandate. To test this hypothesis, we examine relative shifts across two categories of part-time workers (25–29 hours and 31–35 hours). We find some evidence of a shift from the 31–35-hour category into the 25–29-hour category after the passage of ACA in March 2010. However, that shift is not more pronounced among low-wage workers or among workers in industries and occupations most likely to be affected by the mandate. Thus, there is little evidence that the ACA has caused the shift across hours categories, or led to an increase in part-time employment. However, the ACA could cause a shift towards part-time work in the future as the mandate takes effect.     

Democracy,rent seeking,public spending and growth

Does democratization imply faster growth, less corruption and less inefficiency? Past studies yield ambiguous results on the effects of democracy on economic performance and growth. We develop a simple two-sector endogenous growth model that shows both very young and mature democracies grow faster than countries in mid stages of democratization, producing a ‘U’ effect. This effect results from the pattern of rent seeking as it diverts from the provision of public goods. Rent-seekers act as monopolistic competitors. Initially, more democracy increases their number, raising aggregate rents. However, rents per rent-seeker fall with the number of rent seekers. Due to this crowding effect and the increased competition among rent seekers, aggregate rents fall in mature democracies. Thus, rents show an ‘inverted-U’ effect in relation to democracy. We find fairly robust supportive evidence for the latter.     

Do technology shocks lower hours worked? – Evidence from Japanese industry level data

We examine the response of productivity and hours worked to technology and nontechnology shocks using the Japan Industrial Productivity (JIP) Database. We find that, at the aggregate level, positive technology shocks increase hours worked both in the manufacturing and the nonmanufacturing sector, accounting for a large fraction in the variances of hours worked. At the two- and three-digit industry levels, in contrast, we find that the correlation between productivity and hours worked in response to sectoral technology shocks tends to be negative. Further, we find that neither aggregate nor sectoral technology shocks appear to be the dominant factor underlying fluctuations in hours worked at the disaggregate level. The productivity decline in response to nontechnology shocks is not related to a permanent change in the relative size of industries.     

Financial statement comparability and audit efficiency: evidence from South Korea

In this study, we examine the effect of financial statement comparability on audit hours, which we use as a proxy for audit efficiency. We examine the hours worked by auditors in completing 2322 audits in Korea between 2006 and 2010. Audit efficiency can be determined by the total audit effort required to achieve a successful audit. Using a sample consisting of firms maintaining a certain level of audit quality, we investigate whether financial statement comparability reduces audit hours. We find that comparability is negatively associated with audit hours. In addition, we find that the effect of comparability on audit hours is attenuated for firms that are ‘highly followed’ by financial analysts. This study contributes to the literature by proposing a possible way to improve audit efficiency from a unique perspective. While prior studies show that a client’s inherent risk and control risk lower audit efficiency, the results of this study show that comparability between financial statements facilitates audit efficiency. Improvements in audit efficiency reduce the opportunity costs associated with audit effort and thereby enable auditors to spend more time and effort focusing on high-risk engagements. Comparability is one of four qualitative characteristics of accounting information included in accounting conceptual frameworks. Despite the importance of comparability, there is very little research on its benefits. This study makes a unique contribution by measuring audit effort using a large database of audit hours worked by auditors in Korean firms.     

Poverty is a Public Bad: Panel Evidence From Subjective Well‐Being Data

Previous research has found that subjective well‐being (SWB) is lower for individuals classified as being in poverty. We extend the poverty‐SWB literature by focusing on aggregate poverty. Using panel data for 39,239 individuals living in Germany from 2005–2013, we show that people's SWB is negatively correlated with the regional (state‐level) poverty ratio while controlling for individual poverty status and poverty intensity. This suggests that poverty is a public bad. The negative relationship between aggregate poverty and SWB is more salient in the upper segments of the income distribution and is robust to controlling for the rate of unemployment and per capita GDP. The character of poverty as a public bad suggests that poverty alleviation is a matter not only of distributive justice, but of allocative efficiency.     

Total work time in Spain: evidence from time diary data

Using detailed time-use data from 2002–03 and 2009–10 for Spain, we analyse changes in the time-allocation decisions of the Spanish population, with a focus on the time devoted to total work. Consistent with prior literature, we document that the concept of ‘iso-work’ (e.g. the time devoted to total work by gender is equal) does not hold in societies with stringent gender roles, such as Spain. Women devote more time to total work than men, and this difference has increased throughout the period studied by 2 hours per week. The relative increase in total work for women compared to men can be explained by a relative increase in market work of 8 hours per week, coupled with a relative decrease in nonmarket work of 6 hours per week, which have led Spanish women to devote, relatively, 2 fewer hours to leisure per week in 2009–10, compared to 2002–03. We propose social norms as a potential explanation of these empirical findings. By uncovering how individuals allocate their time inside and outside the market over a period of time, our results may improve our understanding of the dynamics of economic change and welfare.     

2018 KLEIN LECTURE: INDIVIDUAL AND AGGREGATE LABOR SUPPLY IN HETEROGENEOUS AGENT ECONOMIES WITH INTENSIVE AND EXTENSIVE MARGINS

We study business cycle fluctuations in heterogeneous agent general equilibrium models featuring intensive and extensive margins of labor supply. A nonlinear mapping from time devoted to work to labor services generates operative extensive and intensive margins. Our model captures the salient features of the empirical distribution of hours worked, including how individuals transit within this distribution. We study how various specifications influence labor supply responses to aggregate technology shocks and find that abstracting from intensive margin adjustment can have large effects on the volatility of aggregate hours even if fluctuations along the intensive margin are small.     

How ‘Little’ Outsourcing Creates A Large Skill Premium: A Model of North‐to‐South Manufacturing Outsourcing

This paper develops a general equilibrium model that shows that a small volume of North–South ¹ trade (i.e. 2% of Northern GDP) could have caused the observed rise in the skill premium, thus resolving the ‘small trade volume paradox’ in the skill premium debate. We apply the concept of ‘trade in tasks’ of Grossman and Rossi‐Hansberg to analyze the nature of North‐to‐South manufacturing outsourcing. As a conceptual innovation, we carefully distinguish two different implicit assumptions of the Heckscher–Ohlin model: ‘factor immobility’ versus ‘task inseparability’. We show that outsourcing, as a form of trade in tasks, essentially attains ‘task separability’ while apparently retaining factor immobility, thus rendering the traditional Heckscher–Ohlin framework obsolete for analyzing current North–South trade. We argue that this change in the nature of trade calls for new thinking in economics and public policy‐making.     

Do pensions foster education? An empirical perspective

The paper examines the effect of population ageing on public education spending. On the one hand, ageing is expected to have a negative effect on education, as an increasing number of retirees results in ‘intergenerational conflict’ and, hence, the condemnation of education expenditure. On the other hand, ageing, in combination with pay-as-you-go pension systems, offers incentives for the working-age generation to invest in the public education of the young in order to ‘reap’ the benefits (that is, higher income tax/contributions) of their greater future productivity. Empirical evidence derived from the application of a fixed effects approach to panel data for OECD countries shows that the increasing share of elderly people has a non-linear effect on education spending. This indicates a certain degree of intergenerational conflict. Nevertheless, we find that future population ageing, which reinforces the mechanism linking public education and pensions, reflects positively on education expenditure. Furthermore, by disaggregating total education expenditure by educational levels, we observe that this effect is led by levels of non-compulsory education, probably as a reflection of the direct connection to labor productivity.     

Revisiting the impact of impure public goods on consumers’ prosocial behavior: A lab experiment in Shanghai

In this study, we implemented a dictator game experiment to examine how the increase of the public characteristic in an impure public good affects individuals’ prosocial behaviour. A within‐subject design was used in the experiment. The dictator game was repeated six times with an impure public good introduced in four of them. We observe that the increase of the public characteristic in an impure public good partly crowds out individuals’ subsequent donations, which could be explained by a seemingly ‘mental accounting’ mental process. In addition, we also find that the selfish behaviour of individuals in dictator games with impure public goods, to some extent, has an inertia influence on their subsequent donations when the impure public good is removed.     

Changing patterns of transfers in Slovenia in the last three decades: transition from a socialist economy to a market economy

Rapid population ageing increases interest in economic flows across ages and intergenerational transfers in general. This article uses the National Transfer Accounts methodology to measure consumption and production at each age, and how the difference between consumption and production is financed through (private and public) transfers and the interaction with assets, i.e. ‘asset-based reallocations’. During working ages, people earn more than they consume and with the surplus they finance the deficit of the young and old generations who consume more than they produce. Such a pattern of economic dependency is universal across countries and across time, but huge differences exist in the ages at which individuals produce more than they consume and vice versa. Moreover, the importance of private and public transfers and asset-based reallocations varies across countries and times. In the last three decades, life expectancy at birth in Slovenia increased by 9.3 years, while the age span in which production exceeds consumption narrowed rather than increased. Child dependents are predominantly financed by private transfers, whereas the elderly mainly rely on public transfers. Young and old individuals increasingly rely on public transfers. Together with rapid population ageing, this is likely to jeopardise the public finance system in the future.     

Employment cycles and minimum wages. A macro view

We start from the hypothesis that Goodwin’s (1967) distributive cycle does not represent a process of social reproduction that can be considered as adequate and sustainable in the long-run, due to the degradation of a part of the workforce it implies during periods of mass unemployment. Against this background, the paper then formulates an unemployment benefit system and a minimum (and maximum) wage rule for the employed where this form of economic reproduction of capitalism is overcome, at least to a certain extent. There is perfect mobility on the labor market (concerning ‘hiring’ and ‘firing’), with fluctuations of the employment rate made socially acceptable by guaranteeing minimum levels of income to all members of the workforce. We can show in this framework that minimum (and maximum) real wages provide increased stability to the economy by reducing the amount of overshooting in income distribution as well as the employment rate.     

The pyramid of Okun’s coefficient for Italy

Our aim is to propose a pyramid of Okun’s coefficient by age and gender in the Italian labour force using a varying-coefficient model. The unemployment rate by age and gender—useful information for estimating Okun’s relationship—is not available for Italy from official statistics. Therefore, we provide an estimation of the indicator using microdata for the 2005–2014 period from ISTAT, the Italian labour force survey. Okun’s law is investigated using two measures of the unemployment rate: a traditional measure based on a labour force with and without work experience, and a new measure restricted to the labour force with experience. When Okun’s relationship is estimated using the unemployment rate restricted to the labour force with experience, the young population is less sensitive to business cycles. As the workforce ages, this gap in sensitivity tends to shrink. We also found that there are no significant differences by gender in the magnitude of Okun’s coefficient among the youngest population when considering the unemployment rate restricted to the labour force with experience.     

Two-sector perspectives on the effects of payroll tax cuts and their financing

This paper analyzes the consequences of lifting from labor some of the burden of taxation in a life-cycle two-sector setup where a consumption good is produced alongside a capital good. The analysis focuses on the implications of alternative ways of financing payroll tax cuts in closed and small-open neoclassical economies. In our models payroll tax cuts do not necessarily stimulate hours worked in the stationary state. We show, for example, that in the closed economy –paradoxically– long-run aggregate labor hours and the capital stock will be reduced if labor tax proceeds are replaced by capital taxation. If instead government purchases of the capital good (or government labor services) are decreased, manhours are left unchanged in the long-run, while capital formation is spurred. In the small-open economy it is only if the offsets are a fall in entitlement spending or a rise in the wealth tax that aggregate manhours are increased —otherwise steady state hours worked are invariant.     

Long term trends in fair and unfair inequality in the United States

This article analyses the microeconomic sources of wage inequality in the United States from 1967–2012. Decomposing inequality into factors categorized by degree of personal responsibility, education explains over twice as much of inequality today as 45 years ago. However, neither hours worked nor education, industry, marital status, or geographical location can explain the rise in income inequality. In fact, ‘unfair’ inequality (income disparity derived from non-responsibility factors) has risen faster than ‘fair’ inequality (income disparity derived from responsibility factors), regardless of the set of variables chosen as fair sources of inequality. We further examine income inequalities within gender and racial groups, finding substantial heterogeneity. Overall, using micro data to understand the sources of inequality and how these changes over time can provide better information for policymakers motivated to combat rising inequality.     

Keeping up by robbing the Joneses

In this article, we find evidence of a ‘keeping up with the Joneses’ effect in the relationship between inequality and crime in Italy. We use data on minor and major crimes in the 20 Italian regions in the years 2004–2015 and show that for higher (lower) income levels, inequality leads individuals to commit major (minor) crimes to try to keep up with richer people.     

Hours Worked in Europe and the United States: New Data,New Answers*

We use national labor force surveys from 1983 to 2015 to construct hours worked per person on the aggregate level and for different demographic groups for 18 European countries and the United States. We apply a harmonization procedure to measure hours worked consistently across countries and over time. In the recent cross‐section, Europeans work 14 percent fewer hours than US Americans. Differences in weeks worked and in the educational composition each account for one quarter to one half of this gap. In addition, lower hours worked per person than in the United States are driven by lower weekly hours worked in Scandinavia and Western Europe, but by lower employment rates in Eastern and Southern Europe.     

Some thought experiments on the changes in labor supply in Turkey

Turkey has the lowest hours worked (the product of total employment and annual hours per worker, divided by the size of the working-age population) among the OECD countries. We study the changes in hours of work following Ohanian, Raffo, and Rogerson (Journal of Monetary Economics, 2008) and find that the intratemporal first-order condition from the neoclassical growth model accounts for the decline in total hours worked during 1998–2009 in Turkey. Hours worked increased in Turkey since 2009 and the model accounts for half of that increase between 2009 and 2011. Our findings suggest that time-varying taxes on consumption and labor play significant roles in explaining the hours worked in Turkey. The model without subsistence consumption provides a better fit with the data after 2003. The presence of government consumption in the utility function does not seem very important.     

Models of Labour Services and Estimates of Australian Productivity

This paper examines the manner in which labour services are modelled in the aggregate production function, concentrating on the specification of the relationship between the number of persons employed and average hours worked. We argue that, given the presence of quasi-fixed costs of employment, hours of work and the number of employees cannot be perfect substitutes. We then show that estimates using total hours worked as the measure of labour input implicitly assumes that they are perfect substitutes and this false assumption results, inter alia, in biased estimates of the rate of labour and multifactor productivity growth in Australia.