Finding exogenous variables to establish control mechanisms is difficult outside of randomised control trials. This column shows that under certain circumstances, it is possible to separate out the causal effect of an unknown variable on the observed and unobserved variables. When applied to trade exposure and voter sentiment for populist parties, the model is largely accurate and gives the surprising finding that 170% of the total effect of trade exposure on populist voting is explained by labour markets, meaning that trade exposure’s other effects on voting – those that do not run through labour markets – are politically moderating.
Christian Dippel, Robert Gold, Stephan Heblich, Rodrigo Pinto, 12 April 2017
Marco Di Cataldo, Andrés Rodríguez-Pose, 06 April 2017
EU development strategies are aimed at producing growth with “a strong emphasis on job creation and poverty reduction”. But it is unclear whether the economic conditions in EU regions are ideal for the generation of employment and labour market inclusion. This column argues that the quality of public institutions and the endowment of human capital – two key factors behind EU growth strategies – are essential for the reduction of labour market exclusion and the promotion of inclusive employment across Europe.
Yoshio Higuchi, Kozo Kiyota, Toshiyuki Matsuura, 04 December 2016
There is a belief among the general public that employment volatility tends to be greater for firms with higher foreign exposure, but the relationship between the two is ambiguous in theory. This column uses firm-level data for Japan to compare the impact of foreign exposure on employment volatility for multinational, trading, and non-trading firms; for manufacturing and wholesale and retail trade; and for intra-firm and inter-firm trade. In manufacturing, the effect of exports on the volatility of employment varies, depending on the share of intrafirm exports to total sales. In wholesale retail, the effect of exports is generally insignificant.
Elisa Gamberoni, Katerina Gradeva, Sebastian Weber, 03 December 2016
Employment subsidies have been widely used in OECD countries to counteract the recent job crisis, but their effectiveness is difficult to assess. This column summarises the findings of a recent study analysing a 2012 Spanish employment subsidy given to firms with fewer than 50 employees that make use of a new type of permanent contract. Consistent with other country studies, it fails to find robust evidence for increased employment growth due to the subsidy scheme.
Frank Caliendo, Maria Casanova, Aspen Gorry, Sita Nataraj Slavov, 16 November 2016
Not knowing when you are going to retire can make it hard to plan both savings and consumption in old age. This column examines how much uncertainty people face over their retirement and how costly this is as they attempt to make optimal saving plans. It argues that current structure of the Social Security retirement and disability programmes in the US does not provide much insurance against this uncertainty.
Gilbert Cette, Jimmy Lopez, Jacques Mairesse, 04 November 2016
With structural reforms of labour markets currently being considered in several countries, including in southern Europe, assessing their impact is vital. This column investigates the effects of employment protection legislation on a variety of production factors. Structural reforms that increase labour flexibility – that is, which weaken employment protection legislation – could have a favourable impact on firms’ R&D investment and their hiring of low-skilled workers.
Isamu Yamamoto, 14 October 2016
There is ample empirical evidence showing that poor mental health is increasing, but the impact of this on long-run productivity and its implications for the labour market are not well researched. This column outlines two ways in which labour market research can contribute to the study of the impact on mental health of working conditions. It also identifies several channels related to working conditions that affect mental health, and argues that deteriorating mental health adversely affects corporate performance in the long run.
Enrique Fernández-Macías, Martina Bisello, 25 September 2016
A tasks approach to labour market analysis can contribute to a better understanding of structural change and employment trends. However, its narrow focus on a few specific types of task content and its neglect of the social aspects of production can limit the usefulness of this approach. This column presents a new framework for conceptualising and measuring tasks, and discusses an application to Europe.
Tito Boeri, Pietro Garibaldi, Espen Moen, 08 September 2016
The Eurozone's sustained rise in youth unemployment since 2008 threatens to create a 'lost generation'. This column presents evidence that this is, in part, an unintended consequence of pension reforms in southern Europe that locked in older workers. In future, reforms that create flexible retirement ages alongside variable pension levels could minimise the impact on youth unemployment without increasing the state's long-term pension liabilities.
Suresh Naidu, Noam Yuchtman, 23 August 2016
Today’s labour market in the US has much in common with that of the late 19th and early 20th centuries. Then, as now, there were few government protections for workers, fears over cheap immigrant labour, rapid technological change, and increasing market concentration. This column explores the lessons that can be drawn from the earlier ‘Gilded Age’. The findings suggests that even as markets play a greater role in allocating labour, legal and political institutions will continue to shape bargaining power between firms and workers.
Stefano Scarpetta, Mark Keese, Paul Swaim, 25 July 2016
The labour market recovery in OECD countries has been steady but slow since the Great Recession. More worrying is the fate of wage growth over the same period. This column assesses the implications of stagnation in the labour market for growth, wages, and inequality. It finds that structural weaknesses in labour market performance have become more visible as markets recover from the Great Recession. The policy response must include macroeconomic policies aimed at strengthening investment, and structural policies to support growth while nudging workers towards higher-skilled jobs.
Jeffrey Nugent, 14 July 2016
Labour market regulations make it harder for firms to adjust to shocks, but protect workers. In this video, Jeffrey Nugent presents his research on the quantification of key aspects of labour market regulation. This video was recorded during a UNU-WIDER conference on “Human capital and growth” held in June 2016.
Ghazala Azmat, Rosa Ferrer, 12 July 2016
Gender gaps in earnings exist in high-skill industries despite male and female workers having similar educational backgrounds. This column uses evidence from the legal industry to assess how performance affects career outcomes across genders. Performance gaps, defined by hours billed and new revenue raised, explain a substantial share of the gender gaps in earnings, as women’s working hours are affected by having young children while those of men are not. An important implication is that gender-based inequality in earnings and career outcomes might not decrease in the near future as more high-skilled workers are explicitly compensated based on performance.
Sara Calligaris, Massimo Del Gatto, Fadi Hassan, Gianmarco Ottaviano, Fabiano Schivardi, 28 June 2016
Many advanced economies have experienced a productivity slowdown in recent years. Italy, however, has been experiencing such a slowdown since the mid-1990s. This column provides a detailed analysis of Italy’s patterns of misallocation over this period. Firms in the Northern regions, as well as large firms, have experienced the sharpest increase in resource misallocation. To tackle the resulting productivity slowdown, reforms need to address unemployment benefits and higher education, as well as encouraging investment in intangible assets.
Marianne Bertrand, Patricia Cortes, Claudia Olivetti, Jessica Pan, 21 June 2016
Marriage rates of skilled and unskilled women have evolved quite differently across countries since 1995. The rate is lower overall for skilled women but the gap is narrowing, and even reversing, in some countries. This column uses evidence from 23 countries between 1995 and 2010 to consider how skilled women’s labour market opportunities impact their marriage prospects in different societies. Generally, more conservative societies have lower marriage rates for skilled women relative to unskilled women, with the effects of an increase in skilled women’s wages depending on the degree of conservatism.
Santiago Caicedo, Robert Lucas, Esteban Rossi-Hansberg, 14 May 2016
A large part of people’s wages rewards the knowledge embedded in them that they use in a production endeavour. Knowledgeable individuals specialise in hard, complicated tasks, while less knowledgeable ones specialise in simpler, more common tasks. This column uses a dynamic model of knowledge accumulation over time and career paths to find an underlying cause for wage inequality in the US over the last few decades. A good explanation for the wage inequality is the discrepancy between the rate of technological change and the rate at which the distribution of knowledge catches up.
Robert Dixon, Guay Lim, Jan van Ours, 03 May 2016
Okun’s law describes the positive empirical relationship between unemployment and the output gap. This column explores how this relationship differs depending on age and gender, taking into account different labour market institutions. Using data for 20 OECD countries over three decades, the authors find that the effect of Okun’s relationship decreases with age. Labour market institutions have similar effects on the unemployment rates of all groups, though magnitudes vary by age and gender.
Nobel Prizes in Economics Joseph Stiglitz, Angus Deaton and Michael Spence will lecture at the I.S.E.O International Summer School 2016 focused on "Looking forward: new challenges and opportunities for the World Economy”. The course takes place in a wonderful location in northern Italy and it's promoted by I.S.E.O Institute chaired by Robert Solow. Post graduate students, young economists and researchers are eligible. Partial scholarships available. Info www.istiseo.org or [email protected].
Wolfgang Dauth, Sebastian Findeisen, Jens Südekum, 21 February 2016
A common theme of recent trade theory models is that globalisation-related shocks induce worker sorting across industries, labour markets, and plants. However, there is little empirical evidence of shocks causing such endogenous mobility responses. This column explores how rising international trade exposure affected the job biographies and earnings profiles of German manufacturing workers since the fall of the Berlin Wall. Individuals are found to systematically adjust to globalisation, with a notable asymmetry in the individual labour market responses to positive and negative shocks. Critically, the push effects out of import-competing manufacturing industries are not mirrored by comparable pull effects into export-oriented branches.
Italo Colantone, Rosario Crinò, Laura Ogliari, 04 December 2015
Influential studies have shown that trade liberalisation is associated with substantial adjustment costs for workers in import-competing jobs. This column uses UK data to shed light on one such cost that has not been considered to date – subjective well-being. Import competition is found to substantially raise mental distress, through worsened labour market conditions and increased stress on the job. These findings provide evidence of an important hidden cost of globalisation.