THE IMPACT OF INSURANCE SUBSIDIES ON SELF‐EMPLOYMENT: DO STATE NON‐GROUP HEALTH INSURANCE REGULATIONS MATTER?

This paper tests whether the effect of tax‐based subsidies for self‐employed health insurance on the level of self‐employment differs with the type of non‐group insurance regulatory regime at the state level. Using a panel of tax returns from 1999 to 2004, we estimate fixed effects instrumental variable regressions for the probability of being self‐employed, allowing the effect of the after‐tax price of self‐employed health insurance to differ by regulatory regime. Our results suggest that states with community rating and guaranteed issue regulations had significantly smaller increases in the fraction of taxpayers reporting some amount of self‐employment income as a result of a decrease in the after‐tax price of self‐employed health insurance. However, there is suggestive evidence that heavily regulated states experienced a larger increase in exclusive self‐employment, particularly among older taxpayers. (JEL J24, H24, I18)     

Employment adjustment in the global crisis

This paper analyzes the employment adjustment of domestic, foreign and state‐owned companies before and during the global crisis. Using Hungarian firm‐level data for the period between 2006 and 2012 and matching foreign and state‐owned firms to domestic enterprises by industry and employment, it finds that the net job creation rate is similar in domestic and state‐owned firms while it is larger by 3.5 percent in foreign‐owned enterprises before the crisis. Domestic and foreign‐owned firms react to the crisis in very similar fashion by dropping net job creation by about 4 percentage points. Contrary to this behaviour, state‐owned enterprises do not decrease net job creation in some, and increase it by 3.5‐6 percent in other regressions.     

Public firms' merger,employment, and welfare in developing countries: A general equilibrium analysis

This paper examines the effect of a merger of state‐owned firms on wage gap, employment, and social welfare in a general equilibrium setting. For a developing economy with state‐owned firms in the urban sector, a merger via a reduction in the number of the urban state‐owned firms can reduce the cost of capital. It then lowers the skilled wage rate through the factor‐substitution effect, while it raises the unskilled wage by the inflow of capital to the rural sector and hence lowers urban unemployment. In addition, the reduction in the number of the urban state‐owned firms can yield a scale effect to the firms. The beneficial effects on higher urban output and less urban unemployment can improve social welfare of the developing economy.     

Political Connections and Firm Performance in Chinese Companies

This study uses panel data analysis to examine the relationship between political connections and firm performance in Chinese firms from 2004 to 2008. We define firm‐level political connections and demonstrate a robust result for the positive relationship between political connections and firm performance. In addition, we integrate the effects of ownership structure, related‐party transactions and political connections into our analysis and continue to show a positive relationship. We show that political connections dampen the negative effect on firm value of related‐party transactions. Finally, we demonstrate channels through which the benefits of political connections are realized in terms of greater cash holdings, larger long‐term loans, lower financing costs, larger sales and lower sales costs. Our results indicate that state‐owned and non‐state‐owned enterprises use political connections equally effectively to enhance performance.     

ESTIMATED MACROECONOMIC EFFECTS OF THE U.S. STIMULUS BILL

This paper uses a multicountry macroeconometric model to estimate the macroeconomic effects of the U.S. stimulus bill passed in February 2009. The analysis has the advantage of taking into account many endogenous effects. Real U.S. output is estimated to be $554 billion larger when summed over the 12‐year period 2009:1–2020:4 (0.29% of the total sum of output). The average number of jobs is 509 thousand larger (0.37%). There is some redistribution of output and employment away from 2012 to 2015. At the end of 2020, the federal government debt is larger by $637 billion in real terms (the debt/GDP ratio is larger by 3.19 percentage points), which may increase the risk of negative asset‐market reactions. (JEL E17)     

Occupational attainment and stratification in China: The interactive effects of social networks and the hukou system

This paper examines the effects of social networks and hukou status on worker’s occupational attainment in China. To identify the potential ranking of different occupations, we consider the use of the stereotype ordered regression model to estimate individual occupational choice. Our results show that social networks play different roles in shaping occupational outcomes for urban and rural workers. In particular, friendship ties significantly improve urban workers’ opportunities in obtaining higher‐ranked occupations; in contrast, kinship ties appear to be more influential for rural migrants, but the effects are limited to the attainment of lower‐ranked occupations. While social contacts from government organizations or state‐owned sectors facilitate urban workers’ attainment of higher‐ranked occupations, similar patterns are not observed among rural workers. We further find that the beneficial effects of social networks or urban hukou identity are stronger for workers who are from less‐developed regions, who work in state‐owned enterprises, or who have a college degree. Decomposition of the wage gap between urban and rural workers suggests that differences in social networks and occupation types, together with hukou discrimination, account for the majority of the current wage inequality.     

HOW DID EXCHANGE RATES AFFECT EMPLOYMENT IN U.S. CITIES?

We estimate the effects of exchange rate on U.S. employment, exploiting differences in industrial composition across major cities. We find that a 1% depreciation of export‐weighted real exchange rate has a positive 0.98% direct effect on manufacturing employment. Its indirect effect on local nonmanufacturing employment rises with the size of the local manufacturing sector, consistent with the hypothesis that there exists a local spillover from the tradable to the nontradable sector. In cities with heavy concentration of manufacturing employment, the indirect effect is statistically significant and about 60% as large as the direct effect measured by the number of jobs. (JEL F3, F1, J2)     

THE SHORT‐RUN EMPLOYMENT EFFECTS OF RECENT MINIMUM WAGE CHANGES: EVIDENCE FROM THE AMERICAN COMMUNITY SURVEY

This paper presents early evidence on the employment effects of state minimum wage increases enacted between January 2013 and January 2015. As of 2015, we estimate that relatively large minimum wage increases (defined as those exceeding $1) reduced employment among low‐skilled population groups by just over 1 percentage point. Smaller minimum wage increases, as well as increases linked to inflation indexation provisions, appear to have had much smaller (and possibly positive) effects on employment over our sample period. The estimates thus raise the potential importance of nonlinearities in the minimum wage's effects, which are consistent with standard models of the labor market. (JEL H11, J08, J23)     

EXPORTS AND JOBS: THE CASE OF JAPAN, 1975–2006

This paper asks how much employment is created by increasing goods and services exports and how the export dependence of employment has changed over time. Using the newly developed Japanese input‐output table for 1975–2006, this paper estimates the effect of exports on an industry's employment (i.e., direct effect) and the effect on other industries' employment (i.e., indirect effect). One of our major findings is that the magnitude of the indirect effect exceeded that of the direct effect over almost the entire period. This implies that more than half of the effects of exports appeared through intraindustry linkages. We also found the indirect effect of goods exports is not limited to goods industries. As a result, the increases in the export dependence of employment are not limited to major Japanese export‐oriented industries such as electrical machinery, motor vehicles, and general machinery. In identifying the potential risks of negative external shocks, it is important for policy makers to estimate how much employment is indirectly as well as directly dependent on exports. (JEL F16, F14)     

Market Size and the Survival of Foreign‐owned Firms*

We develop a general equilibrium model with heterogeneous firms and foreign direct investment cost uncertainty and investigate the survival of foreign‐owned firms. The survival probabilities of foreign‐owned firms depend on firm‐level characteristics, such as productivity, and host country characteristics, such as market size. We show that a foreign‐owned firm will be less likely to be shut down when its parent firm's productivity is higher and its indigenous competitors are less productive. Although a larger market size will always reduce the survival probability of indigenous firms, it can lead to a higher survival probability for foreign‐owned firms if their parent firms are sufficiently productive.     

LABOR MARKET IMPACTS OF SMOKING REGULATIONS ON THE RESTAURANT INDUSTRY

This paper examines the impact of smoking regulations on restaurant employment in West Virginia, a state with a high rate of smoking prevalence. Using a confidential establishment‐level dataset, our results suggest that smoking bans reduced restaurant employment by between 0.7 and 1.5 workers, depending on model specification. We find that smoking restrictions have heterogeneous impacts across establishments, with the largest impacts on mid‐sized establishments, defined as those with 10–29 employees. Our results also suggest that the impact of smoking restrictions was larger in counties with higher rates of smoking prevalence. (JEL L51, D78, H0)     

Mixed Ownership, Unemployment, and Welfare for a Developing Economy

This paper considers the employment and welfare effects of mixed ownership via partial privatization of state‐owned enterprises for a developing economy. An increase in the private ownership lowers the production and, hence, worsens urban unemployment in the short run. However, in the long run, capital moves to the rural region, alleviating the problem of urban unemployment. The employment effect can have a positive contribution to social welfare in the long run.     

A WARM EMBRACE OR THE COLD SHOULDER? WAGE AND EMPLOYMENT OUTCOMES IN ETHNIC ENCLAVES

This paper examines how immigrant enclaves influence labor market outcomes. We examine the effect of variation in ethnic concentration across counties and county subdivisions on both immigrant earnings and employment using the non‐public use, 1‐in‐6 sample of the 2000 U.S. Census. We find that there is heterogeneity in enclave impacts by ethnic group and skill composition of the enclave. While some groups tend to suffer from lower wages and employment propensities when residing in areas with larger ethnic concentrations, others have higher wages and improved employment opportunities in enclaves. (JEL J61, J15, R23)     

DO STATE EMPLOYMENT ELIGIBILITY VERIFICATION LAWS AFFECT JOB TURNOVER?

State laws requiring employers to verify workers' employment eligibility may reduce employment and earnings among unauthorized workers and make it difficult for them to switch jobs. Using data from the 2005–2014 Quarterly Workforce Indicators, we find evidence of a reduction in employment and job turnover among Hispanics as a whole in states that require all employers to verify employment eligibility. These adverse effects become larger as the share of likely unauthorized Hispanic workers falls. The drop in job turnover may be due to the laws trapping some Hispanic workers in their jobs. There is little effect on employment or job turnover among non‐Hispanic whites or blacks. There is no effect on average pay for all groups of workers. (JEL J15, J61, J68)     

THE EFFECT OF WELFARE ASSET RULES ON AUTO OWNERSHIP,EMPLOYMENT, AND WELFARE PARTICIPATION: A LONGITUDINAL ANALYSIS

This paper investigates how asset tests for welfare eligibility affect auto ownership, employment, and welfare participation for single mothers without a college degree. We combine longitudinal data from the 1996 Survey of Income and Program Participation with data on state‐level welfare program rules from the Urban Institute and data on state‐level controls to test whether these single mothers were more likely to (1) own a car, (2) be employed, and (3) be off of welfare, depending on the welfare asset rules instituted in their state. We find evidence that, taken as a group, the asset rules have a statistically significant effect on the probability of car ownership. Ordinary least squares results and cross‐sectional two‐stage least squares (2SLS) results using the asset rules to instrument for car ownership show a large, positive, statistically significant effect of car ownership on employment. However, in 2SLS models controlling for prior car ownership and prior employment, the asset instruments are weaker and we do not find an effect of car ownership on employment. Of significance for policy makers, we find that the asset rules do not have a statistically significant joint effect on welfare participation, even after addressing possible endogeneity. (JEL I38, J68, J08)     

THE 2005 LAWRENCE R. KLEIN LECTURE: EMERGENT CLASS STRUCTURE*

This article presents a model of the emergent class structure, in which a society inhabited by inherently identical households may be endogenously split into the rich bourgeoisie and the poor proletariat. For some parameter values, the model has no steady state where all households remain equally wealthy. In this case, the model predicts emergent class structure or the rise of class societies. Even if every household starts with the same amount of wealth, the society will experience “symmetry‐breaking” and will be polarized into two classes in steady state, where the rich maintain a high level of wealth partly due to the presence of the poor, who have no choice but to work for the rich at a wage rate strictly lower than the “fair” value of labor. The nonexistence of the equal steady state means that a one‐shot redistribution of wealth would not be effective, as wealth inequality and the class structure would always reemerge. Thus, the class structure is an inevitable feature of capitalism. For other parameter values, on the other hand, the model has the unique steady state, which is characterized by perfect equality. In this case, the model predicts dissipating class structure or the fall of class societies. Even if the society starts with significant wealth inequality, labor demand by the rich employers pushes up the wage rate so much that workers will escape from the poverty and eventually catch up with the rich, eliminating wealth inequality and the class structure in the long run. In an extension, we introduce self‐employment, which not only provides the poor with an alternative to working for the rich, but also provides the rich with an alternative to investment that creates jobs. Due to this dual nature of self‐employment, the effects of self‐employment turn out to be quite subtle. Yet, within the present framework, it is possible to offer a complete characterization of the steady states even in the presence of self‐employment.     

THE ECONOMIC EFFECT OF BANNING SMOKING IN WISCONSIN'S BARS AND RESTAURANTS

There is much debate as to whether or not the passage of no‐smoking laws has adverse consequences for businesses in the hospitality industry. In 2010, the state of Wisconsin implemented a law that banned smoking in all public places. Using a panel of county‐level employment data, I examine the relationship between the implementation of smoking bans in Wisconsin and the subsequent changes in bar and restaurant employment. Using variation in the timing of bans that occurred as a result of four counties that implemented local bans prior to the July 2010 statewide ban, I conduct a difference‐in‐differences analysis to measure the average treatment effect of implementing a smoking ban in Wisconsin. I find that restaurant employment is not affected and that bar employment is significantly reduced as a result of the smoking ban. I also find that counties with higher levels of smoking prevalence see greater reductions in bar employment when a smoking ban is enacted. Back‐of‐the‐envelope estimates suggest that even though there are employment losses, the benefits of the smoking ban outweigh the costs. (JEL L510, D780)     

Labour Tax Reform, the Good Jobs and the Bad Jobs

We analyse recent proposals to shift the tax burden away from low‐paid labour, assuming a dual labour market where the “good” high‐paying jobs are rationed. A shift in the tax burden from low‐paid to high‐paid workers has an ambiguous effect on the level of aggregate employment while the allocation of aggregate employment is further distorted. Even if the tax reform raises total employment, economic efficiency may be reduced because labour is reallocated from high‐productive to low‐productive jobs. We also find that opportunities for on‐the‐job search have important implications for the policy effects.     

The Displacement Effect of Labour‐Market Programs: MONASH Analysis*

A key question concerning labour‐market programs is the extent to which they generate jobs for their target group at the expense of others. This effect is measured by displacement percentages. We describe a version of the MONASH model designed to quantify the effects of labour‐market programs. Our simulation results suggest that: (i) labour‐market programs can generate significant long‐run increases in employment; (ii) displacement percentages depend on how a labour‐market program affects the income trade‐off faced by target and non‐target groups between work and non‐work; and (iii) displacement percentages are larger in the short run than in the long run.     

Firm ownership and internal labour practices in a transition economy

One feature common to many post‐socialist transition economies is a relatively compressed wage structure in the state‐owned sector. We conjecture that this compressed wage structure creates weak incentives for work effort and worker skill acquisition and thus presents adverse consequences for the entire transition economy if a substantial portion of the labour force works in the state sector. We explore firm wage incentives and worker training, as well as other labour practices and outcomes, in a transition setting with matched firm and worker data collected in one of the largest provinces of Vietnam – Ho Chi Minh City. The Vietnamese state sector exhibits a compressed wage distribution in relation to privately owned firms with foreign ownership. State wage practices stress tenure over worker productivity and their wage policies result in flatter wage–experience profiles and lower returns to education. The state work force is in greater need of formal training, a need that is in part met through direct government financing. In spite of the opportunities for government financed training and at least partly due to inefficient worker incentives, state firms, by certain measures, exhibit lower levels of labour productivity. The private sector comparison group to state firms for all of these findings is foreign owned firms. The internal labour practices of foreign firms are more consistent with a view of profit‐maximizing firms operating with no political constraints. This is not the case for Vietnamese de novo private firms that exhibit much more idiosyncratic behaviour and whose labour practices are often indistinguishable from state firms. The exact reasons for this remain a topic of on‐going research yet we conjecture that various private sector constraints, including limited access to formal capital, play an important role.