Cross‐Country Evidence on Labor Market Institutions and Young Adult Employment through the Financial Crisis

I develop and analyze a set of cross‐country facts regarding employment and wage setting institutions over the decade surrounding the 2008 financial crisis. Among long‐industrialized countries, young adult employment declined more than prime age employment over this time period. I show that differences in countries' wage setting institutions strongly predict variations in the magnitude of declines in young adult employment. Both unconditionally and conditional on changes in macroeconomic conditions, young adult employment declined 5 percentage points less in countries where wage setting is driven by collective bargaining arrangements than in countries with statutory wage floors. Evidence on the evolution of legislated minimum wage rates and of an asymmetry in the relationship between growth and young adult employment suggest an important role for a standard “wage rigidity” mechanism.     

Welfare receipt and the intergenerational transmission of work‐welfare norms

This article investigates the role of welfare receipt in shaping norms regarding work and welfare using unique Australian data from the Youth in Focus Project. We begin by incorporating welfare into a theoretical model of the transmission of work‐welfare norms across generations. Consistent with the predictions of this model, we find evidence that youths' attitudes toward work and welfare may be influenced by socialization within their families. Young people are more likely to oppose generous social benefits and to believe that social inequality stems from individual characteristics if (i) their mothers support these views; (ii) their mothers were employed while they were growing up; and (iii) their families never received welfare. Finally, youths' work‐welfare norms appear to be unrelated to their neighbors' welfare receipt suggesting that socialization occurs primarily within families rather than within neighborhoods.     

Eastern European trade and the Austrian labour market

Eastern European Trade and the Austrian Labour Market. — Recent years have seen a major break in trade relations between Western and Eastern European countries. Austria experienced a large bilateral trade creation with these countries. In this paper, the authors take a closer look at the impact this trade growth had on the Austrian labour market. To differentiate as far as possible between different segments of the labour market, they concentrate on unemployment experience and wage growth for a panel of individual workers in Austrian industry. The results show rather small employment effects, the impact on wage growth is more pronounced with interesting modifications for mobile and immobile workers.     

The Effect of the Tipped Minimum Wage on Employees in the U.S. Restaurant Industry

According to federal law in 2013, employers can take a credit of up to $5.12 for tips received by workers in satisfying the minimum‐wage requirement of $7.25. This article uses interstate variation in laws regarding tip credits and minimum wages to identify the effects of reducing or eliminating the tip credit on employment, hours, and earnings in the U.S. restaurant industry. Using data from the Quarterly Census of Employment and Wages and the Current Population Survey, we find that a reduction in the tip credit increases weekly earnings but reduces employment in the full‐service restaurant industry and for tipped workers. The results are robust to controls for spatial heterogeneity in employment trends and are supported by a series of falsification tests.     

The puzzle of migrant labour shortage and rural labour surplus in China

The paper examines the contentious issue of the extent of surplus labour that remains in China. China was an extreme example of a surplus labour economy, but the rapid economic growth during the period of economic reform requires a reassessment of whether the second stage of the Lewis model has been reached or is imminent. The literature is inconclusive. On the one hand, there are reports of migrant labour scarcity and rising migrant wages; on the other hand, estimates suggest that a considerable pool of relatively unskilled labour is still available in the rural sector. Yet the answer has far-reaching developmental and distributional implications. After reviewing the literature, the paper uses the 2002 and 2007 national household surveys of the Chinese Academy of Social Sciences to analyse and explain migrant wage behaviour, to predict the determinants of migration, and to examine the size and nature of the pool of potential rural–urban migrants. An attempt is also made to project the rural and urban labour force and migration forward to 2020, on the basis of the 2005 1% Population Survey. The paper concludes that for institutional reasons both phenomena are likely to coexist at present and for some time in the future.     

Identification of Job Lock and Inefficient Labor Market Mobility

The common practice of linking employment with certain fringe benefits, notably health insurance, has long been thought to impede labor market mobility, thereby producing a phenomenon called job lock. A sizable literature has developed theoretical frameworks for how job lock impacts the labor market and empirically estimated the magnitudes of these effects. However, most empirical studies rely on identification strategies that do not separately identify productivity enhancing from productivity reducing labor market mobility. This article develops a simple theoretical framework showing how prior identification strategies confound both types of mobility and outlines conditions where productivity reducing mobility is of greatest concern.     

Does Increased Funding for Homeless Programs Reduce Chronic Homelessness?

This article tests whether programs that provide housing assistance to homeless people can reduce chronic homelessness. I analyze data from the Department of Housing and Urban Development for 130 communities across the United States over the period 2005 to 2007. Because the amount of federal money allocated to a community to combat homelessness may depend on unobserved characteristics of that community, I estimate a fixed‐effects model that estimates the effect of new federal homeless funding on chronic homelessness. I find that the first‐year cost of moving one chronically homeless person into permanent supportive housing is $55,600. An analysis of new funding to specific types of homeless programs indicates that programs that provide long‐term housing and services to homeless people with disabilities drives this relationship.     

Old‐Age Government Transfers and the Crowding Out of Private Gifts: The 70 and Above Program for the Rural Elderly in Mexico

We estimate the crowding out of private transfers caused by 70 y Más –a public assistance program for the rural elderly in Mexico for whom family support is an important source of income. Using data from the Mexican Income and Expenditure Survey and a triple difference approach, we find that the program crowds out private gifts by 37%, and it does so mostly by reducing the probability of receiving domestic remittances. As a result, the nonlabor income of beneficiaries increases by less than their government transfers. Thus, by reducing their private support to the elderly, domestic donors are dampening the effect of the program, although not completely neutralizing it.     

A cross-country comparison of the demand for labour in Europe

A Cross-Country Comparison of the Demand for Labour in Europe.-This paper investigates structural differences in the demand for labour in France, Germany, and the UK. It finds substantial differences in the sensitivity of the demand for labour to international product demand and factor prices in all three countries. In particular, it reacts to domestic factor prices in Germany but international cost competitiveness in France and the UK; it depends upon European-wide product demand in France and Germany and a wider measure of product demand in the UK. The authors attribute these differences to product market conditions and institutional factors rather than to differences in the production technology.     

Separation of powers and the tax level in the U.S. states

We estimate a nonlinear and discontinuous relationship between the tax level and the degree of alignment between the legislature and the governor, measured as the number of seats in the legislature that belong to the governor's party. In the states with the line‐item veto, the tax level jumps at the point where the government switches from divided to unified. With a regression discontinuity design, we show that this jump can be interpreted as a causal effect. We propose a simple model to account for this nonlinear relationship. The sequential nature of the budget bargaining game, that is, the legislature proposes and the governor cuts with the line‐item veto, implies that the tax level is determined by the overlap between the supporters of the governor and the supporters of the legislative majority. Changes in the size of the overlap determine the tax level.     

Estimating the Short Run Effects of South Africa's Employment Tax Incentive on Youth Employment Probabilities using A Difference‐in‐Differences Approach

South Africa's Employment Tax Incentive (ETI) came into effect on the 1st of January 2014, with the objective of reducing the substantial national youth unemployment rate. Under the ETI, firms are eligible to claim a deduction from their taxes due, for the portion of their wage bill that is paid to certain groups of youth employees. We utilise several waves of nationally representative data and implement a difference‐in‐differences methodology at the individual level, in order to identify the effects of the ETI on youth employment probabilities in the short run. Our primary finding is that the ETI did not have any statistically significant and positive effects on youth employment probabilities. The point estimate from our preferred regression is ?0.005 and the 95% confidence interval is from ?0.017 to 0.006. We also find no evidence that the ETI has resulted in an increase in the level of churning in the labour market for youth. Thus, any decrease in tax revenues that arise from the ETI are effectively accruing to firms which, collectively, would have employed as many youth even in the absence of the ETI.     

Institutions and economic performance: evidence from the labour market

We analyse the institutional determinants of economic performance,taking European labour-market institutions as a case in point.European economic growth after the Second World War was basedon Fordist technologies, a setting to which the continent'sinstitutions of solidaristic wage bargaining were ideally suited.They eased distributive conflicts and delivered wage moderation,which in turn supported high investment. The wage compressionthat was a corollary of their operation was of little consequenceso long as the dominant technologies were such that firms couldrely on a relatively homogeneous labour force. But as Fordismgave way to diversified quality production, which relied moreon highly skilled workers, the centralization of bargainingand the compression of wages became impediments rather thanaids to growth. Assuming that growth will rely even more inthe future on rapidly changing, science-based, skilled-labour-intensivetechnologies, countries with centralized labour-market institutionswill have to move still further in the direction of decentralization.Whether Europe in particular can accommodate these demands willhelp to determine whether it is able to re-establish a fullemployment economy in the twenty-first century.     

The ERM and structural change in European labour markets: A study of 10 countries

The ERM and Structural Change in European Labour Markets: A Study of 10 Countries. — This paper tests for structural changes in European labour markets and attempts to associate them with the evolution of the ERM as well as with political and institutional developments. The results indicate that diverging sacrifice ratios, rather than tax wedge and productivity effects may be the strongest impediment to labour market convergence in the transition from the ERM to full economic and monetary union. The empirical work indicates that the ERM may have provided some pressure towards more symmetric responses to shocks, but the changes have not been great.     

The Effect of Social Security Contributions on Coverage and Wages: A Gender Perspective Using a Natural Experiment from Colombia

This article investigates, from a gender and marital status perspective, the effects of pension and health care contributions on the employment and wages of workers covered by social security regulations. To do this, I use as a natural experiment a reform implemented in Colombia during the mid‐1990. In particular I employ a differences‐in‐differences estimation based on an endogenous switching‐regression model that accounts for self‐selection into coverage. My results indicate that, for females, a 10% increase in contributions reduces the relative wages of covered workers by 7.2%. On the other hand, for males, the reform increases the relative wages of covered workers by 7.1%. Among females, the effect is predominantly present in single women. Among men, divorced and widowed workers are the only group not to experience an effect on earnings. For most family groups, the social security reform has no significant effect on coverage.     

Trade, capital mobility, and the German labour market

Trade, Capital Mobility, and the German Labour Market. — This paper sets up three structural variants of a general equilibrium model of a small open economy with three sectors (exportables, importables, non-tradables) and three factors (internationally mobile capital and immobile skilled and unskilled labour) in order to analyse the employment and wage effects of globalisation shocks. The model is numerically implemented for West Germany in 1980 on the base of input-output tables and employment data from a random sample of social security accounts. Overall this study indicates that the globalisation process does not have strong effects on unemployment and/or the wage differential in West Germany.     

Impact of Allowing Sunday Alcohol Sales in Georgia on Employment and Hours

Differential timing across counties of the removal of restrictions on Sunday alcohol sales in the state of Georgia is used to determine whether the change had an impact on employment and hours in the beer, wine, and liquor retail sales industry. A triple‐difference (DDD) analysis finds significant relative increases in average weekly hours in the treated industry, but no significant impact on employment. We speculate regarding the forces behind the positive DDD result and conclude that the change in regulation likely lowered profits for affected liquor stores. This would explain why store owners were vocal opponents to restriction removal.     

The effect of foreign competition on UK employment and wages: Evidence from firm-level panel data

The Effect of Foreign Competition on UK Employment and Wages: Evidence from Firm-Level Panel Data. —This paper contributes to the sparse empirical literature on the effects of foreign competition on domestic employment and wages. The authors estimate a structural labour demand equation on UK firm-level panel data between 1982 and 1989 and several wage equations. When they restrict the sample to the manufacturing sector only, they find for the unionized firms that foreign competition has a negative effect on both wages and on employment. However, when UK manufacturing firms face only a few rivals, foreign competition has a positive effect on wages, but no effect on employment.     

Contrasting paradigms: segmentation and competitiveness in the formation of the chinese labour market

An urban labour market is in the process of being formed in China. The objective of this paper is to analyse the stage that it has reached. A 1999 household survey is used to investigate whether the labour market has three tiers comprised of recently retrenched and re-employed urban workers, non-retrenched urban workers, and rural–urban migrants. It tests whether wage levels and structures differ across these categories of worker. Panel data are used to model the evolution of the wage structure and, specifically, the impact of retrenchment and re-employment. The results indicate that non-retrenched urban workers enjoy a wage premium, although migrants receive similar returns to education. Re-employed workers receive no return to education and appear to have lost out on the wage rises enjoyed by the non-retrenched. There is evidence to suggest that the urban labour market is segmented into these categories, which differ in their openness to market competition. The urban labour market has a long way to go before it is fully competitive.     

Evaluating the Economic Effects of Flat Tax Reforms Using Synthetic Control Methods

Tax reforms are often motivated by their potential to improve economic performance. However, their actual impacts are difficult to quantify. We analyze the impact of flat tax reform on incomes using “synthetic control” methods. We identify the eight Eastern and Central European countries that adopted flat tax systems between 1994 and 2005, and then compare post‐reform GDP per capita of “treated” countries with a convex combination of similar but “untreated” countries, while accounting for the time‐varying impact of unobservable heterogeneity. We find positive impacts in all eight countries, with seven out of eight cases significant at the conventional level.     

SNAP and Paycheck Cycles

It is well documented that individuals do not spend the Supplemental Nutrition Assistance Program (SNAP) benefits smoothly over the month after receipt. Rather, recipients spend a disproportionate share of benefits at the beginning of the benefit month. This has costs for recipients and stores. There is also evidence that other income streams, such as Social Security and paychecks, are not spent smoothly. The presence of these other income streams may bias estimates of the effects of this SNAP cycle on consumption for working SNAP beneficiaries and those who receive other government benefits. We use data from United States Department of Agriculture's National Household Food Acquisition and Purchase Survey to explore how the SNAP cycle is affected by accounting for these other income streams. We find suggestive evidence that the cycle is more pronounced for workers who are paid on a weekly or monthly basis, but little evidence that cycles in other income streams mitigate or exacerbate the SNAP cycle.