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Means-tested Social Assistance (SA) benefits play an important role as social protection floors supporting households in financial difficulties. This paper presents evidence on the patterns of SA benefit receipt in a selection of OECD and EU countries. It provides an overview of the role of SA benefits in social protection systems and assesses the generosity of benefit payments. It then studies the dynamics of SA benefit receipt based on micro-level data describing trends in aggregate receipt and transition rates and presenting new evidence on spell durations and repeat spells. The final part of the paper summarizes recent empirical evidence on state dependence (or 'scarring effects') in benefit receipt and discusses its possible sources and policy implications.

This paper reconsiders the Brazilian wage curve using individual data from the National Household Survey at 27 Federative Units over the period 2002 - 2009. We find evidence in favor of the Brazilian wage curve with an unemployment elasticity of -0.08 when the lagged unemployment rate is used as an instrument for current unemployment rate. We also find that males in Brazil are significantly more responsive to local unemployment rates (-0.13) than their female counterparts. In fact, we find that the unemployment elasticity for women is statistically insignificant. Applying gender specific unemployment rates, the elasticity for men decreases to -0.09, while the elasticity for women remains statistically insignificant. This paper also finds that the estimates for Brazilian wage curve are completely different for the case of formal and informal workers.

The relationship between happiness and work is subject to an ever growing empirical literature in economics. The analyses are mostly based on large-scale survey data to measure subjective well-being. Whereas one large strand of research investigates the effect of job loss and becoming unemployed, another field of study focuses on the determinants of job satisfaction evolving around employment conditions, self-employment, and potential public sector satisfaction premiums. A smaller part of the literature investigates potential driving effects of happiness on labor market outcomes. This article will give an overview about the most significant subareas of research and the empirical literature in economics to date.

This paper sheds new light on the effects of the minimum wage on employment from a two-sided theoretical perspective, in which firms’ job offer and workers’ job acceptance decisions are disentangled. Minimum wages reduce job offer incentives and increase job acceptance incentives. We show that sufficiently low minimum wages may do no harm to employment, since their job-offer disincentives are countervailed by their job-acceptance incentives.

This paper contributes to the existing literature on public employment showing that the wage setting policy of the public sector is an important determinant of private employment and unemployment. I look at the case of geographically homogeneous wages across regions with different productivity, and show that public employment generates a crowding out effect against private employment. This effect is larger the larger is the public sector share of total employment. However, when the government pays wages according to local productivity the crowing out effect vanishes. I present a two region two sector model based on Pissarides (2000) heterogeneous search and matching model where vacancies are posted by the private and the public sector as in Quadrini and Trigari (2007), Gomes (Forthcoming) and Boeing-Reicher et al. (2016). I calibrate the model to the Italian labor market and show that the uniform wage setting policy adopted by the central government, in the presence of productivity unbalance across regions, is responsible for up to 33% of the unemployment gap between the North and South. Moreover, I show that the geographical homogeneous wage setting is responsible for a stronger and geographically highly asymmetric response of unemployment to aggregate productivity shocks. I also allow for migration from one region to the other and find that it has only a very limited mitigating role in reducing this gap. Policy experiments suggest that reducing the size of public employment reduces unemployment in lower productive regions while allowing for regional wage setting in the public sector almost eliminates the unemployment differential.

This paper provides an empirical analysis of reference-dependent effects of unemployment on mental well-being. We show that the negative effect of unemployment on mental well-being depends on expectations about the future employment status. Several contributions to the literature have shown that the perception of the individual employment status depends on the surrounding unemployment rate. We argue that expectations are a possible link between unemployment rates and the individual employment status regarding changes in mental well-being. Theoretical foundation comes from models for reference-dependent preferences with endogenous reference points. We provide a simple theoretical model to motivate and structure the empirical analysis. Using data from the German Socio-Economic Panel, we estimate a pairwise interacted model for employment status and expectations over two time periods. Life satisfaction is used as a proxy for mental well-being. To identify a causal effect of unemployment, expectations and their interactions on mental wellbeing, the analysis relies on fixed effects and exogenous entries into unemployment due to plant closures. We confirm the standard result that unemployment has a negative effect on mental well-being. Furthermore, the results deliver empirical evidence for reference-dependent effects of unemployment on mental well-being. We find that becoming unemployed unexpectedly is more severe as if the unemployment was expected. Therefore, this paper contributes to the understanding of how mental well-being is affected by unemployment and delivers empirical support for the theoretical models of reference-dependent preference wit endogenous reference points determined by expectations.

© 2018, Springer Science+Business Media, LLC, part of Springer Nature. This study estimates the stigma effect of unemployment and overeducation within one framework. We conduct a randomised field experiment in which we send out trios of fictitious job applications, from male candidates with no relevant work experience, to real vacancies. One candidate graduated just a few months before the application, the two others graduated a year earlier and had been unemployed or underemployed since that time. By monitoring the subsequent callback, we find evidence of a larger stigma effect of unemployment than overeducation. The stigma effect of overeducation is found to occur for permanent contract jobs but not for temporary ones. ispartof: De Economist vol:167 issue:1 pages:1-21 status: published

We construct a novel measure of the duration of joblessness using the labor force status histories in the four-month CPS panels. For those out of the labor force (OLF) and the unemployed, the job finding rate declines with the duration of joblessness. This duration measure dominates other existing measures in the CPS for predicting transitions from non-employment to employment. For those OLF, the variation in job finding rates explained by the duration of joblessness is five times larger than the variation explained by the self-reported desire to work or reasons for not searching. For the unemployed, the job finding rate declines with the self-reported duration of unemployment only to the extent that this variable correlates with the duration of joblessness. The two duration measures are not equivalent, and the discrepancy between them is not a classification error. Instead, the self-reports of unemployment durations refer to how long the respondent looked for work, often disregarding short-term jobs or including periods of employment while searching. Using our novel measure, we provide new estimates of the duration distribution of the unemployed and reexamine current approaches to misclassification error in the CPS.

Self-reported satisfaction measures respond to a great variety of socio-demographic characteristics as well as the job and living environment. In this paper we ask whether the recent financial market crisis has caused a deterioration of satisfaction not only for the unemployed but also for those out of the labour force and especially those in employment. The focus of our analyses is on the pattern of life, job and health satisfaction over time and the influence of unemployment rates, inflation rates and GDP growth. We compare the UK and Germany, two countries with different employment protection regulations and different consequences of the crisis for the labour market. For our analysis we use data from the German Socio-Economic Panel (SOEP) and the British Household Panel Study (BHPS) for the period 1996 to 2010 and supplement this with annual information on macroeconomic indicators. We estimate Ordered Logit and OLS models, both with individual fixed effects.We were somewhat surprised to find significant differences between the formerly separated parts of Germany even twenty years after re-unification – not only in satisfaction but also its determinants. While people living in the western part of Germany report somewhat lower satisfaction in 2009 compared to the previous years, those living in the eastern part report higher levels than in 2006, the year before the financial crisis started. This could be due to the largely different employment structures in both parts of Germany. As exports and not so much services were hit by the crisis, western German federal states were facing stronger negative demand pressures. Our findings for the UK are similar to the East German evidence, as year dummies for the crisis years 2008 to 2010 do not show any sign of a decrease, except for a fall in job satisfaction in 2010. Looking at the impact of macroeconomic indicators such as GDP growth, inflation and unemployment, we find mostly diverse effects between the two German regions but similar between West Germany and the UK. First of all, satisfaction with life is related to the business cycle, we observe positive reactions to an increase in GDP in the whole of Germany and negative reactions to rising inflation in the UK and Germany. However, the strongest and most robust result concerns the relationship between self-reported satisfaction and the regional unemployment rate: The higher regional unemployment the more satisfied people in East Germany seem to be irrespective their current labour market status. Both unemployed and employed seem to be more satisfied with their lives, jobs and health when unemployment is rising around them. At the same time, the overall level of unemployment has a significantly negative effect. In West Germany and the UK, on the contrary, the reverse is true: overall unemployment is positively related to satisfaction and regional unemployment in West Germany is negatively related. Interestingly, we get similar though somewhat weaker results when looking at job and health satisfaction. Hence, though the direct costs of the financial and economic crisis in form of falling GDP seem to have been by far larger than the psychological costs, we find some limited additional costs in the crisis years, and a considerable impact of regional and national unemployment rates.

Subjective well-being is primarily treated as an outcome variable in the economic literature. However, is happiness also a driver of behavior and life's outcomes? Rich survey data of recent entrants into unemployment in Germany show that a significant inverted U-shaped relationship exists between residual happiness and an unemployed individual's future reemployment probability and the reentry wage. Residual life satisfaction displays higher (or lower) satisfaction levels than would be predicted by a number of socioeconomic and demographic characteristics. This paper is the first to show that happiness is mainly a predictor for self-employment and less for standard reemployment. Related findings suggest that happiness matters for male unemployed, and the concept of locus of control is able to explain part of the effect. If reemployment and higher wages are considered desirable outcomes for the unemployed individual and society, the shape of the effect suggests an optimal level of happiness, which is not necessarily the highest.

Usually, when the attention is focused on the different performances of the labour market, the overall rate of unemployment is at the center stage. But this is misleading: while short term unemployment can be seen as physiological for the the working of the labour market, long-term unemployment is certainly pathological. The paper considers how the different varieties of capitalism affect the rate of long-term unemployment, rather than the aggregate rate. The liberal market variety, where employment protection is the lowest, presents lower rates of long-term unemployment than the continental European and the Mediterranean varieties. In the latter both employment protection and long-term unemployment are the highest and labour market participation the lowest. The social-democratic Scandinavian variety gets the best of both worlds: low rates of long-term unemployment, high rates of labour participation, lower degree of inequality, with relatively high levels of employment protection. However the Scandinavian model may be hardly applicable in countries, such as the Mediterranean ones, where a sizable part of public opinion apparently adheres to the various specifications of the “lump of something” economic fallacy. Low rates of long-term unemployment and high levels of labour participation are also produced by the far-Eastern Asian variety, but at the cost of a markedly dualistic labour market structure.

We use the differences between life satisfaction and emotional well-being of employed and unemployed persons to analyze how a person's employment status affects cognitive well-being. Our results show that unemployment has a negative impact on cognitive, but not on affective well-being, which we interpret as a loss in identity utility. Living in a partnership strengthens the loss in identity utility of men, but weakens that of women. Unemployment of a person's partner reduces the identity loss of unemployed men, but raises it for women. These results suggest that the unemployed's feeling of identity is affected by traditional gender roles, while this does not seem to be the case for the affective part of their subjective well-being., Working papers series, ISSN 2628-1724, 2012, Heft 19

This paper studies how family firms reacted to the 2008 economic crisis by adjusting employment. In particular, we look at how the geographical distribution of the workforce may have led to divergencies between family and non-family firms. Using a difference-in-difference approach, we provide empirical evidence that paths of adjustment did diverge, with family firms systematically preferring to safeguard workplaces close to headquarters. We offer a new theoretical framework, the social recognition motive, that is consistent with this finding; it is based on contributions in the literature on corporate governance that stress the importance of the non-pecuniary benefits of the owner's control of the family firm. The social recognition motive originates from the psychological relation linking the family-firm owner with his or her community. The theory also offers a clear set of predictions that are all confirmed by the data. Alternative explanations, although theoretically plausible, seem to be ruled out in our setting.

I examine the effect of labour market policies and institutions on the transmission of macroeconomic shocks to the labour market, using both aggregate and industry-level annual data for 23 OECD countries, 23 business-sector industries and up to 29 years. I find that high and progressive labour taxes and generous unemployment benefits amplify labour income fluctuations. By contrast, statutory minimum wages reduce the difference in the sensitivity of wages to aggregate shocks between low-wage and high-wage industries. Dismissal regulations are found to mitigate the impact of shocks on both earnings and employment. Moreover, this mitigation effect is greater in industries where firms have a greater propensity to make staffing changes through dismissals.

We suggest the use of an index of Internet job-search intensity (the Google Index, GI) as the best leading indicator to predict the US monthly unemployment rate. We perform a deep out-of-sample forecasting comparison analyzing many models that adopt our preferred leading indicator (GI), the more standard initial claims or combinations of both. We find that models augmented with the GI outperform the traditional ones in predicting the unemployment rate for different out-of-sample intervals that start before, during and after the Great Recession. Google-based models also outperform standard ones in most state-level forecasts and in comparison with the Survey of Professional Forecasters. These results survive a falsification test and are also confirmed when employing different keywords. Based on our results for the unemployment rate, we believe that there will be an increasing number of applications using Google query data in other fields of economics.

In central theories of monetary non-neutrality the Ramsey optimal inflation rate varies between the negative of the real interest rate and zero. This paper explores how the interaction of nominal wage and search and matching frictions affect the policy prescription. We show that adding the combination of such frictions to the canonical monetary model can generate an optimal inflation rate that is significantly positive. Specifically, for a standard U.S. calibration, we find a Ramsey optimal inflation rate of 1.11 percent per year.

In this paper we propose an integrated framework for the analysis of earnings inequality and mobility, which enables the analysis of the distributional dimension of inequality reduction from mobility, an assessment of the economic drivers of mobility and a sense of which drivers are equalising and dis-equalising. In particular we are able to capture the extent to which life-cycle characteristics, key life events, job related characteristics, and changes in working time affect overall mobility and inequality. The framework also offers a bounded approach to isolating the underlying inequality reduction resulting from mobility from measurement error which can otherwise lead to a substantial upward bias. Using data from the Australian HILDA survey we find evidence of a sizable degree of earnings mobility in Australia over the years 2001/2 to 2008/9. The raw inequality reduction resulting from economic mobility was 0.148 Gini points from an initial estimate of 0.368, however, the bounded range based on two alternative versions of two stage estimation lies between 0.072 and 0.102 or between 1/4 and 1/3 of original inequality. We show how the inequality reduction from mobility is primarily driven in the bottom part of the initial distribution, with the upper tail being particularly prone to measurement issues. A sizeable part of the identified mobility is simply driven by age-earnings growth that sees more rapid wage increases for younger workers and wage progression among women in notably stronger in reducing inequality because they start lower in distribution. Yet this rather smooth picture of earnings rising with age is shown to be substantially driven by a series of less frequent step changes associated with job-to-job moves, promotions and taking on more responsibility. There are also shocks which run against this equalising process, most notably job loss, which has substantial negative effects on earnings and disproportionately falls on lower waged workers.

We estimate Frisch elasticity in a labor market with high job turnover. In a context where only around 18% of the employed labor force has formal and stable jobs, we perform a fixed effects estimation as proposed by MaCurdy (1981) with a Heckman correction for selection into unemployment . We identify the positive slope of the labor supply using firms' size as an instrumental variables for wages. We use Peruvian data from the Permanent Employment Survey of Lima. We find that neglecting wage endogeneity implies a downward sloping labor supply, while the job turnover bias, not accounting for job turnover, overestimates Frisch elasticity. We estimate Frisch elasticity at around 0.38, which indicates fairly adjustable wages and little reaction of hours of work to wage variations. Moreover, we find that the Frisch elasticity is decreasing in income and tended to increase in the last decade.

This short empirical paper examines the unemployment dynamics in Greece both in the long run and during the current crisis. Using monthly data from 2001 until mid-2012 it finds that unemployment fluctuations were predominantly driven by the job finding rate. Nevertheless, during the current unemployment boom, the contribution of the separation rate has increased, indicating that the recent reforms relaxing Employment Protection Legislation (EPL) have amplified the unemployment response to the recession.

The Longitudinal Employer-Household Dynamics (LEHD) Program at the U.S. Census Bureau, with the support of several national research agencies, has built a set of infrastructure files using administrative data provided by state agencies, enhanced with information from other administrative data sources, demographic and economic (business) surveys and censuses. The LEHD Infrastructure Files provide a detailed and comprehensive picture of workers, employers, and their interaction in the U.S. economy. This document describes the structure and content of the 2004 Snapshot of the LEHD Infrastructure files as they are made available in the Census Bureau’s Research Data Center network.

This paper analysed the OECD data on employment protection for 23 OECD countries over the time span 1990-2008 on the basis of alternative dynamic panel data models and panel causality tests and examines the validity of the neo-liberal argument that strictness of employment protection hurts labour through increased long-term and youth unemployment rates. While it finds no empirical basis for this orthodox standpoint it observes that long-term unemployment dampens aggregate production which in turn aggravates unemployment problem.

We analyse a recently developed leximetric dataset on Indian labour law over the period 1970 to 2006. Indian labour law is seen to be highly protective of workers’ interests by international standards, particularly in the area of dismissal regulation. We undertake a time-series econometric analysis to estimate the impact of the strengthening of labour laws on unemployment and industrial output in the formal economy. We find no evidence that pro-worker labour legislation leads to unemployment or industrial stagnation. Rather, pro-worker labour laws are associated with low unemployment, with the direction of causality running from unemployment and output to labour regulation

Happiness drops when individuals become unemployed. The negative impact of the unemployment shock, however, may differ by cultural background. To test the hypothesis of a 'Teutonic work ethic', this paper takes advantage of Switzerland in its cultural diversity. By comparing different cultural groups in the same institutional setting, I empirically test whether such deep psychological traits have an influence on how unemployment is perceived. It is found that unemployment has a significantly negative effect on life satisfaction in Switzerland. I furthermore present evidence which confirms to some extent the hypothesis that Swiss German individuals suffer more from unemployment, although for the most part, these results are without statistical significance. Swiss Germans are additionally found to be happier than their French-speaking compatriots – independent of whether they are unemployed. This difference between Romanic and Germanic cultural backgrounds is in line with previous findings, but deserves further research attention.

We document results from a survey of wage setting in Hungarian enterprises. The survey was developed and coordinated by the Eurosystem Wage Dynamics Network, and it was administered in 17 European countries; this allows us to put the Hungarian findings in context. The main conclusion from the survey is that while Hungarian firms operate in a quite flexible institutional environment, their wage setting practices are relatively rigid. In its wage setting outcomes, Hungary shares more similarities with Western European countries than with countries in the Central and Eastern European region. The survey provides strong evidence that the observed wage setting behaviour can be explained by internal factors related to employee motivation, perceived fairness, and firms’ desire to maintain a desired wage distribution.

This paper investigates both the added worker effect (the labour supply responses of women to their partners' job losses) and the discouraged worker effect (workers withdrawing from the labour market because of failed searches) for married women in Australia, with the emphasis on the former. We focus on the partners’ involuntary job loss experiences, and analyse women's labour market activities in the periods before and after their partners’ job loss. By estimating fixed effects labour supply equations using the first seven waves of data from the HILDA Survey, we find a significant added worker effect in terms of increased full time employment and working hours. The findings also suggest that it is harder for the female partners of males who have recently lost jobs to enter the labour market than for those already working to increase their working hours to compensate for lost income incurred by their partners’ job loss. We also find the effect to be persistent in that, one year after the partners’ job loss, more of those women would still like to work longer hours than they actually were. By investigating the relationship between self-assessed job-finding probability on job-seekers’ subsequent labour force participation, and by studying the relationship between labour force participation of all married women and the regional unemployment rate, we also find a substantial discouraged worker effect.

In this paper, we generalize the study of the return to education undertaken in e.g. Laing, Palivos and Wang (1995) or Burdett and Smith (2002) to an environment where the link between education and employment stability is taken into account. This enables us to study how an European-like and Employment Protection Legislation (EPL) with heavily regulated long-term contracts and more flexible short-term contracts affects the return to schooling, equilibrium unemployment and welfare. In this context, we show that ¯ring costs and temporary employment have opposite effects on the rate of use of human capital and thus, on educational investments. We furthermore demonstrate that a laissez faire economy with no regulation is inefficient as it is characterized by insufficient educational investments leading to excess job destruction and inadequate job creation. By stabilizing employment relationships, firing costs may spur educational investments and therefore lead to welfare and productivity gains, though a first-best policy would be to subsidize education. However, there is little chance for a dual (European-like) EPL to raise the incentives to schooling and aggregate welfare.

"Using representative linked employer-employee data of the German Federal Employment Agency, this paper shows that just one out of seven full-time employees who earned low wages (i.e., less than two-thirds of the median wage) in 1998/99 was able to earn wages above the low-wage threshold in 2003. Bivariate probit estimations with endogenous selection indicate that upward wage mobility is higher for younger and better qualified low-wage earners, whereas women are substantially less successful. We show that the characteristics of the employing firm also matter for low-wage earners' probability of escaping low-paid work. In particular, small plants and plants with a high share of low-wage earners often seem to be dead ends for low-wage earners. The likelihood of leaving the low-wage sector is also low when staying in unskilled and skilled service occupations and in unskilled commercial and administrative occupations. Consequently, leaving these dead-end plants and occupations appears to be an important instrument for achieving wages above the low-wage threshold." (Author's abstract, IAB-Doku) ((en))

The number of studies investigating neighbourhood effects has increased rapidly over the last two decades. Although many of these studies claim to have found evidence for neighbourhood effects, most 'evidence' is likely the result of reversed causality. The main challenge in modelling neighbourhood effects is the (econometric) identification of causal effects. The most severe problem is selection bias as a result of selective sorting into neighbourhoods. This paper argues that in order to further our understanding of neighbourhood effects we should explicitly incorporate neighbourhood sorting into our models. Neighbourhood effect studies are in the situation where the processes behind one of its key methodological problems (selection bias) are also critical to fully understand the neighbourhood context itself. It is thus remarkable that residential mobility and neighbourhood sorting has been almost completely ignored in the neighbourhood effects literature.

The Mortensen-Pissarides model with unemployment benefits and taxes has been able to account for the variation in unemployment rates across countries but does not explain why geographical mobility is very low in some countries (on average, three times lower in Europe than in the U.S.). We build a model in which both unemployment and mobility rates are endogenous. Our findings indicate that an increase in unemployment benefits and in taxes does not generate a strong decline in mobility and accounts for only half to two-thirds of the difference in unemployment from the U.S. to Europe. We find that with higher commuting costs the effect of housing frictions plays a large role and can generate a substantial decline in mobility. We show that such frictions can account for the differences in unemployment and mobility between the U.S. and Europe.

The OECD’s unemployment problem is largely concentrated among low-skilled workers. In this paper, four explanations of low-skilled workers’ unemployment are examined: wage-setting institutions, employment regulation, globalization, and monetary policy. The analysis is based on pooled regressions for 21 affluent countries over the period 1991-2006. Our findings provide no support for the hypothesis that low-skilled workers’ employment prospects are hindered by legal minimum wages or strict employment protection. Likewise, large wage inequality does not seem to be a necessary condition for countries to achieve low rates of low-skilled unemployment. In contrast, investment in active labour market policies pays off in form of less low-skilled unemployment. Additionally, low real interest rates are associated with significantly less low-skilled unemployment. Hence, low-skilled workers’ job prospects seem enhanced by a combination of active labour market policies with a monetary policy that allows the economy to fully exploit its growth potential.

Wage determination under asymmetric information generates inefficiencies due to excess turnover. Severance pay and layoff taxes can improve efficiency. We show that inefficient separations can even be fully removed with fixed separation taxes in the case where the relevant private information is exponentially distributed.

Do EU citizens have an increased opportunity to improve their position in the distribution of lifetime earnings? To what extent does earnings mobility work to equalize/disequalize longerterm earnings relative to cross-sectional inequality and how does it differ across the EU? Our basic assumption is that mobility measured over a horizon of 8 years is a good proxy for lifetime mobility. We used the Shorrocks (1978) and the Fields (2008) index. Moreover, we explored the impact of differentials attrition on the two indices. The Fields index is affected to a larger extent by differential attrition than the Shorrocks index, but the overall conclusions are not altered. Based on the Shorrocks (1978) index men across EU have an increasing mobility in the distribution of lifetime earnings as they advance in their career. Based on the Fields index (2008) the equalizing impact of mobility increases over the lifetime in all countries, except Portugal, where it turns negative for long horizons. Thus, Portugal is the only country where mobility acts as a disequalizer of lifetime differentials. The highest lifetime mobility is recorded in Denmark, followed by UK, Belgium, Greece, Ireland, Netherlands, Italy, France, Spain, Germany, and the lowest, Portugal. The highest mobility as equalizer of longer term inequality is recorded in Ireland and Denmark, followed by France and Belgium with similar values, then UK, Greece, Netherlands, Germany, Spain and Italy.

Do EU citizens have an increased opportunity to improve their position in the distribution of earnings over time? This question is answered by exploring short and long-term wage mobility for males across 14 EU countries between 1994 and 2001 using ECHP. Mobility is evaluated using rank measures which capture positional movements in the distribution of earnings. All countries recording an increase in cross-sectional inequality recorded also a decrease in short-term mobility. Among countries where inequality decreased, short-term mobility increased in Denmark, Spain, Ireland and UK, and decreased in Belgium, France and Ireland. Long-term mobility is higher than short-term mobility, but long-term persistency is still high in all countries. The lowest long-term mobility is found in Luxembourg followed by four clusters: first, Spain, France and Germany; second, Netherlands, and Portugal; third, UK, Italy and Austria; forth, Greece, Finland, Belgium and Ireland. The highest long-term mobility is recorded in Denmark.

Using firm-level data for Belgium over the period 1997-2005, we evaluate the elasticity of firms' labour and real average labour compensation to microeconomic total factor productivity (TFP). Our results may be summarised as follows. First, we find that the elasticity of average labour compensation to firm-level TFP is very low contrary to that of labour, consistent with real wage rigidity. Second, while the elasticity of average labour compensation to idiosyncratic firm- level TFP is close to zero, the elasticity with respect to aggregate sector-level TFP is high. We argue that average labour compensation adjustment mainly occur at the sector level through sectoral collective bargaining, which leaves little room for firm-level adjustment to firm-specific shocks. Third, we report evidence of a positive relationship between hours and idiosyncratic TFP, as well as aggregate TFP within the year. JEL Classification: J30, J60

This paper contributes to the ongoing debate regarding the appropriate approach to use in identifying the impact of immigration on native workers’ labor market outcomes. The initial regression analysis makes use of German administrative data and is based on the variation of foreign workers’ shares within education-experience cells over time. It confirms previous findings suggesting that immigration in Germany had no adverse impact on native wages. However, the paper highlights that in Germany immigrants and natives with similar education and experience are likely to work in different occupations. The subsequent analysis based on occupational clustering uses the same data and finds significant adverse wage effects for natives, particularly for those in basic service occupations. The paper argues, therefore, that an identification strategy based on formal education characteristics might lead to biased estimates if a country’s labor market is characterized by occupational segmentation of immigrants.

Atypical employment arrangements such as agency temporary work and contracting have long been criticized as offering more precarious and unstable work than regular employment. Using data from two datasets – the CAEAS and the NLSY79 – we determine whether workers who take such jobs rather than regular employment, or the alternative of continued job search, subsequently experience greater or lesser employment continuity. Observed differences between the various working arrangements are starkest when we do not account for unobserved individual heterogeneity. Controlling for the latter, we report that the advantage of regular work over atypical work and atypical work over continued joblessness dissipates.

We propose and estimate a model where unemployment fluctuations result from self-fulfilling changes in expected inflation (sunspot shocks) affecting nominal wage bargaining. Since the estimated parameters fall near the locus of Hopf bifurcations, country-specific expected inflation shocks can replicate the strong persistence and heterogeneity observed in European unemployment rates. They also generate positive comovements in macroeconomic variables and a large relative volatility of consumption. All these features, hardly accounted for by standard sunspot-driven models, are explained here by the fact that liquidity constrained workers, facing earnings uncertainty in the context of imperfect unemployment insurance, choose to consume their current income.

We develop a model where information about jobs is essentially obtained through friends and relatives, i.e. strong and weak ties. Workers commute to a business center to work and to interact with other people. We find that housing prices increase with the level of social interactions in the city because information about jobs is transmitted more rapidly and, as a result, individuals are more likely to be employed and to be able to pay higher land rents. We also show that, under some conditions, workers using more their weak ties than strong ties to find a job receive a higher wage. We finally demonstrate that workers living far away from jobs pay lower housing prices but experience higher unemployment rates than those living close to jobs because they mainly rely on their strong ties to obtain information about jobs.

"Over the last decade, both the availability of quantitative indicators on labor market institutions and of studies trying to explain differences in national labor market performance through institutional variables have burgeoned significantly. It is now time to review these indicators and the empirical findings. Therefore, this paper has a threefold objective: first, we provide an overview of the aggregate indicators of core labor market institutions such as employment protection, the generosity of the benefit system, active labor market policies, taxation and collective bargaining. We assess the reliability of selected indicators. Second, we review the most relevant macro-econometric studies that made use of these indicators in order to explain diverging patterns of national employment performance. Third, and finally, this paper draws some preliminary conclusions regarding the further development of aggregate indicators and possible directions for future empirical research." (Author's abstract, IAB-Doku) ((en))

By applying readability statistics to the Humphrey-Hawkins testimonies given by the Federal Reserve Chairman, I test whether the clarity of central bank communication affects volatility in financial markets. There are three key results. First, when clarity matters, the results are unequivocal: clarity diminishes volatility. Second, clarity of communication matters mostly for volatility of medium-term interest rates. Third, the effects of clarity vary over time. Clarity mattered especially, but not exclusively during Alan Greenspan's term at the Federal Reserve. Overall, the analysis shows the importance of transparent communication on monetary policy.

We reassess the "scarring" hypothesis by Clark et al. (2001), which states that unemployment experienced in the past reduces a person’s current life satisfaction even after the person has become reemployed. Our results suggest that the scar from past unemployment operates via worsened expectations of becoming unemployed in the future, and that it is future insecurity that makes people unhappy. Hence, the terminology should be altered by one letter: past unemployment "scars" because it "scares".

The influence of industrial structure, more specifically of business ownership, is investigated on the level of unemployment in Japan. The question is to what extent business ownership, i.e., entrepreneurship, can reduce the level of unemployment. It will be concluded that Japan is hardly an outlier when using a simple model of the relationship between unemployment and the rate of business ownership. The model is calibrated using recent data of 23 OECD countries. It shows a minor underestimation of the rise in unemployment in Japan in the period 1984-2002. Arguments are brought forward why this might be the case. We argue that small firms in Japan have benefitted in the past from the protective environment of the keiretsu structure. In the current process of industrial restructuring, keiretsu support is dissipating, but has not yet been adequatly replaced with a market environment conducive to the establishment and growth of entrepreneurial firms. The underestimation of the rise in unemployment is a reflection of the limited access of small firms to the market in Japan.

This paper presents an applied general equilibrium model for Germany. The model integrates specific labour market institutions in an otherwise standard general equilibrium framework. There are sectoral wage negotiations for two skill types of workers between firms and trade unions. The bargaining setup is sensitive to the specific conditions of the respective sector (profits, output and labour demand elasticities, bargaining power) and generates wages that reflect empirical wage differentials across sectors. The model is used to simulate the labour market effects of changes in the taxation of labour: marginal and average wage tax, and social security contributions.

To those working on climate change it is obvious that energy policy should be influenced by climate change considerations. The question that this paper seeks to answer is, to what extent do they influence policy and what contribution can a careful analysis of the costs and benefits of climate change options have on the formulation of that policy. We seek to understand this by looking in some detail at energy policy formulation in Russia. To do so it is necessary to look at the whole set of issues that determine energy policy. These include energy security, macroeconomic and uncertainty factors, local environmental issues and social issues. The analysis has been carried out for a specific case – that of the RF, where energy policy is currently under formulation to 2010. Two options have been looked at: a “High Coal” option, where there would be a substantial change in fuel mix away from gas to coal; and a “High Gas” option where the current fuel mix is retained and the increase in demand is met from all sources in proportion to current use. The analysis shows that, at international prices for fuels, the “High Coal” option is attractive. However, when we include the potential decline of price for natural gas in the European market, the relative preference for this option drops dramatically but it still remains the preferred option. When, account is also taken of the carbon benefits of the High Gas option, using plausible values for carbon, the attraction of the High Coal option is further reduced but not altered. When finally account is taken of the health associated with the lower use of coal in the High Gas option, the preference can be reversed but it requires a critical value for the health benefits. This critical value – at around $3,000 for a life year lost -- is plausible for the RF, if anything the actual value is probably higher. What the analysis shows is the need for a careful evaluation of the different factors determining energy policy. Among these is climate change. It is not the critical factor but it can be an important one. Perhaps more important are the environmental benefits that go with the lower carbon High Gas options.

Conventional methods for analysing worker flows often focus on gross flows or transition probabilities. This is not necessarily informative for identifying the scale of labour 'adjustment' in an economy in the sense of the expansion and decline of industries. We develop a method which relates the individual characteristics of workers to net, rather than gross flows. Our method also allows for interactions between the regional and sectoral mobility of labour. We apply this to the UK using data from the Labour Force Survey over a period of significant structural change, and quantify the relative importance of education and housing tenure on regional and sectoral mobility.

By international standards, unemployment in Sweden remained remarkably low throughout the 1970s and the 1980s. In the early 1990s, however, the unemployment rate skyrocketed and hit double-digit levels. Unemployment remained high for several years but exhibited a marked fall from 1997 and onwards. The paper describes this development and discusses the causes of the rise and fall of unemployment. It is argued that the steep rise in unemployment was mainly the result of a series of adverse macroeconomic shocks, partly self-inflicted by bad policies and partly caused by unfavourable international developments. Institutional factors, such as a trend increase in the generosity of unemployment insurance, caused some secular rise in NAIRU but do not appear as promising explanations of the events of the early 1990s. The fall in unemployment in the late 1990s reflects a combination of favorable macroeconomic conditions and structural factors that may have reduced the NAIRU.

This study analyses Dutch employment growth and dynamics during the booming end 1990s. In this period many new jobs were created as employment growth was strongly positive. Next to these net flows of employment the gross flows of employment – i.e. the numbers of jobs created and number of jobs destructed- are calculated per establishment in 1994, 1996 and 1998. From the analyses follows that relatively many jobs were destructed. Further, relatively more job creation and job destruction took place in small than in large establishments. Significant evidence for job creation as a consequence of government subsidized programs was not found. Neither did the development of real wages affect job creation or destruction during the end 1990s.

The Scottish extension-sample of the British Household Panel Study (BHPS) is used to shed light on differences in job mobility patterns in England and Scotland for both men and women. Based on probit estimates of the overall mobility rate, a decomposition is applied to distinguish between explained and unexplained differences. Furthermore, exploiting data on the number of job changes, a zero inflated Poisson model is estimated to provide information on possible differences in the expected number of job changes. Overall, there is evidence that suggests significant differences in mobility patterns south and north of the Borders; however, these are confined to men. Yet, whether this suffices to justify a heterogeneous labour market policy for the two countries remains to be seen.

With reference to the EU enlargement, a framework is derived which allows the study of the effect of unemployment benefits on the migration decision. While benefits simply increase the expected gain for risk neutral individuals, they work as an insurance device for risk averse migrants; the results for the two groups might differ. Thus, the migration decision is reformulated as monetary lottery and a utility function exhibiting constant relative risk aversion is applied. The model suggests increased migration incentives independent of taste and a positive selection of risk neutral individuals. Furthermore, risk averse migrants are likely to be found in countries with more evenly distributed incomes, other things equal. While the calibration of the model shows a significant change in migration incentives, empirical results on aggregate data for South-North migration within the EU are rather ambiguous.

In this paper, we examine the job stability of workers in a wide range of flexible staffing arrangements: agency temporary, direct-hire temporary, on-call, contract company, independent contractor, and regular part-time work. We draw upon two data sources in our analysis. The first is a nationwide survey of employers on their use of flexible staffing arrangements conducted by the Upjohn Institute for Employment Research. This survey provides evidence on why employers use various types of flexible staffing arrangements and the extent to which employers move workers in these positions into regular arrangements within their organization. The second data source is the Supplement to the February 1995 Current Population Survey on Contingent and Alternative Work Arrangements. Exploiting the longitudinal component of the CPS, we compare the subsequent labor market status of individuals in flexible work arrangements and those in regular full-time positions in February 1995. We find that, except for independent contractors, workers in flexible staffing arrangements have less job stability than those in regular full-time arrangements in the sense that they are more likely to switch employers, become unemployed, or involuntarily drop out of the labor force within a year. However, the degree of job stability varies considerably across arrangements. We also show that the recent growth in certain types of flexible staffing arrangements could have translated into small declines in aggregate job stability and can account for a substantial share of the modest increase in job switching observed over the last decade.