A common explanation for the growth in unemployment in southern Europe after the Great Recession is lack of flexibility in over-regulated labour markets. This column examines wage adjustment in regulated and unregulated labour markets in Italy during the recent crisis. Using data on immigrant workers, it shows that before the crisis wages in the formal and informal sectors moved in parallel. During the crisis, however, formal wages did not adjust downwards, while informal labour wages did. Greater flexibility in wages in the formal market could slow the decline in employment.
Sergei Guriev, Biagio Speciale, Michele Tuccio, 13 September 2016
Wolfgang Frimmel, Martin Halla, Rudolf Winter-Ebmer, 18 August 2016
It has been widely demonstrated that parental divorce is associated with negative outcomes for affected children. However, the degree of causality in this relationship is not as clear. This column tackles this problem by using the level of gender integration in fathers’ workplaces as an instrument for divorce. The results suggest a causal link between divorce and worse economic outcomes that persists into early adulthood.
Sari Pekkala Kerr, William Kerr, 10 August 2016
Increased hostility to immigration has been a key driver of the rise of right-wing populist movements across the world. At the same time, local governments – notably in the US – have designed work programmes to attract immigrant entrepreneurs to their areas. This column explores the types of businesses founded by immigrants and their growth patterns, and examines how these outcomes relate to immigrants’ age at arrival to the US. Immigrant entrepreneurs experience greater volatility – they fail more frequently, but those that persist experience greater employment growth than their native counterparts.
Masayuki Morikawa, 10 July 2016
The service sector accounts for much of the output of many advanced economies, and maximising the sector’s output while also minimising regional disparities is an important policy challenge. This column analyses productivity in service sectors in Japan, focusing on economies of urban density. The higher the employment density of the cities in which service firms are located, the higher their productivity, but firms relocating to such cities negatively impacts regional disparity. Further, considerable differences in productivity improvements among sectors indicate there certain industries should be promoted in large cities, and others in smaller cities with lower employment density.
James Harrigan, Ariell Reshef, Farid Toubal, 06 July 2016
Job polarisation has been documented in many large developed economies over the past two decades. This column shows how the growth of ICT has contributed to these trends. Using French firm-level data, it documents the declining share of middle-wage jobs, and identifies an increase in the share of technology-related jobs as an important contributing factor. Firms with more ‘techies’ are also found to grow faster than less techie-intensive firms.
Daron Acemoglu, Pascual Restrepo, 05 July 2016
Many economists throughout history have been proven wrong in predicting that technological progress will cause irreversible damage to the labour market. This column shows that so far, the labour market has always adapted to the replacement of jobs with capital, using evidence of new types of skilled jobs between 1970 and 2007. As long as the rate of automation of jobs by machines and the creation of new complex tasks for workers are balanced, there will be no major labour market decline. The nature of new technology, and its impact on future innovation potential, has important implications for labour stability.
Biagio Bossone, Stefano Labini, 01 July 2016
Despite facing many of the same challenges, Germany’s current macroeconomic policy is substantially different to those of other countries, in part due to the economy legacy of Walter Eucken. This column considers the economic policy of Hjalmar Schacht, whose ‘MEFO-bills’ monetary solution ended the years of economic struggle caused by the Treaty of Versailles’ reparations commitments. By tying the bills to output, Schacht was able to stimulate output, and eliminate unemployment. This historical implication has clear modern-day implications, with parallels to ‘helicopter money’ policy and Italy’s recent ‘fiscal money’ proposal.
Nicola Fuchs-Schündeln, Paolo Masella, 05 June 2016
There are strong links between the nature of education in a country and its political institutions, and an individual’s education can impact their lifetime labour market choices. This column examines how being educated under a socialist regime impacts individuals in a free labour market. Using data on students from East and West Germany in the 1970s, it finds that a socialist regime education led to a larger spread in labour market outcomes – more of these individuals were not employed, but conditional on being employed, had higher wages and a higher probability of achieving a professional status in the East.
Ross Levine, Chen Lin, Wensi Xie, 03 June 2016
There has been much research on the effects of banking crises, but corporate resilience to systemic crises is less well understood. This column uses data from 34 countries from 1990 to 2011 to analyse the role of social trust – societal expectations that people will behave honestly and cooperatively – in building corporate resilience. It finds that social trust facilitates access to trade credit, and dampens the harmful effects of crises on corporate profits and employment.
Elias Einiö, Henry Overman, 07 April 2016
Areas experiencing poor economic performance are often targeted by governments with programmes aimed at improving employment. However, there are concerns that any increases in employment come at the cost of reduced employment elsewhere. This column examines the displacement effects of one such programme in the UK. While employment increased within the targeted areas, there were comparable decreases in employment just outside the areas’ boundaries. These findings suggest place-based policies should focus on traded activities that are less susceptible to local displacement effects.
Andrea Garnero, Alexander Hijzen, Sébastien Martin, 21 March 2016
Some economists argue that income inequality suggests intra-generational mobility in society. This column provides comprehensive evidence across a large number of advanced economies on the importance of intra-generational mobility and its relationship with earnings inequality. The findings do not support the belief that higher earnings inequality necessarily goes hand-in-hand with greater mobility over the working life. Higher inequalities are not systematically compensated by higher mobility opportunities.
Daniel Aaronson, Eric French, Isaac Sorkin, 19 March 2016
Economists these days tend to think that a minimum wage can be a useful policy tool for reducing poverty while leaving employment numbers intact, as long as the policy is well designed. This column looks at recent evidence from a new perspective and claims that much of the recent research suggesting that minimum wage hikes barely reduce the number of jobs in the short run should be taken with caution. The longer-run disemployment effects are potentially large.
Matteo Picchio, Sigrid Suetens, Jan van Ours, 06 December 2015
The impact of wage and income shocks on labour supply is difficult to measure. Some studies therefore use lottery prizes as an exogenous shock on income. This column looks at the effect of the size of the prize won on employment status and salaried earnings, using data from Dutch lotteries. The findings show that lottery prizes lead to a reduction of working hours but not to a decrease in the employment rate.
Simone Moriconi, Giovanni Peri, 19 October 2015
Unemployment rates vary widely across EU countries. While national institutions and policies explain much of the variation, cultural values, attitudes, and beliefs may also play a role. This column uses survey data from 26 EU countries to investigate the existence of culturally transmitted preferences for work. Country-specific preferences for work are found to have a positive effect on emigrants’ labour market outcomes, with those from countries with an above-average preference for work having higher employment rates abroad. Cultural preferences are significant enough that EU countries may never converge to the same employment rate.
CEP invites academics and practitioners to submit an extended abstract until August 15, 2015 to [email protected]. Further information is at the link below.
- Ejaz Ghani, Lead Economist at The World Bank
- Marion Jansen, Chief Economist at International Trade Centre
- Sebastien Miroudot, Trade Policy Analyst at the OECD Trade and Agriculture Directorate
- Sebastian Saez, Senior Trade Economist at The World Bank
- Pierre Sauvé, Director of External Programmes and Academic Partnerships at the WTI
- Johannes Schwarzer, Trade Policy Fellow at CEP
Ross Levine, Chen Lin, 02 July 2015
Labour market regulations have important implications for both the incidence of cross-border acquisitions, and the outcomes for acquiring firms. This column explores how variations in labour regulations between countries affect cross-border acquisitions and subsequent firm performance. For a sample of 50 countries, firms are found to enjoy larger returns when they acquire a target in a country with weaker labour regulations than the acquirer’s home country.
Ejaz Ghani, William Kerr, Alex Segura, 09 June 2015
The vast informal sector in India affects everything from poverty to growth. This column presents new facts on how Indian job growth in manufacturing is concentrated in informal tradable industries, especially one-person establishments. These features are most closely linked to the urbanisation of informal Indian manufacturing, but subcontracting and rising female participation also appear to play noteworthy roles.
Jan van Ours, 27 February 2015
The Great Recession has been characterised by an unprecedented decline in GDP, and unemployment rates remain above pre-Great Recession levels in many countries. This column argues that economic growth is a ‘one size fits all’ solution for the problem of unemployment, because the unemployment rates of different kinds of workers are strongly correlated within countries. That said, economic growth affects above all the position of young workers, and so benefits mostly those who need it the most.
John Mondragon, 11 January 2015
The Great Recession was marked by disruptions to the supply of credit to firms and households. But little is known about how much supply shocks to household credit actually contributed to employment losses. This column uses data on US counties to examine the causal relationship running from the supply of household credit to employment during the recession. The author concludes that contractions in household credit supply caused substantial employment losses.
Theodore Moran, Lindsay Oldenski, 09 August 2014
There is indisputable evidence that manufacturing employment as a share of total employment in the US has been declining. This column argues that focusing on employment masks important signs of growth of the manufacturing sector. Using most up-to-date data, the authors reason that the US manufacturing base is growing larger, more productive and competitive. The expansion of operations abroad by US manufacturing multinationals leads to particularly strong increases in economic activity – including creation of greater numbers of high-paying manufacturing jobs – by those same firms in the US domestic economy.