Isabel Z. Martínez, 10 May 2022

It is not only countries but also sub-national jurisdictions such as states that compete for high-income taxpayers. In recent decades, both tax competition as well as attempts to keep aggressive tax practices at bay have intensified. This column uses Swiss data on local tax changes to show that lower income taxes for high-income taxpayers do attract top earners. Nonetheless, the net effect on tax revenue is not necessarily positive. The associated mechanical tax revenue losses that arise from lowering the tax rates may be so large that such tax cuts do not pay for themselves.

Pascal Michaillat, Emmanuel Saez, 19 April 2022

Empirically, the unemployment rate is inversely related to the vacancy rate. Furthermore, servicing a job opening costs about as much as one job in terms of resources. This column shows that the labour market minimises waste when the unemployment rate equals the vacancy rate. It is too slack when the unemployment rate is higher and too tight when it is lower. Consequently, the efficient unemployment rate is simply given by the geometric average of the current unemployment and vacancy rates. At the beginning of 2022, the US labour market is excessively tight, and tighter than at any point since 1951.

Carlos Carrillo-Tudela, Camila Comunello, Alex Clymo, Annette Jäckle, Ludo Visschers, David Zentler-Munro, 07 April 2022

The strength of the labour market recovery from Covid-19, and the extent of the economic scarring, depend on both job creation and whether job seekers look for jobs in the growing sectors of the economy. This column uses a novel dataset to provide direct evidence on the types of jobs sought by workers during the pandemic. It shows that workers increasingly targeted jobs in expanding occupations and industries. Nevertheless, a significant proportion of workers targeted jobs in declining occupations and industries. These workers tend to be the most disadvantaged: the non-employed and those with the lowest education qualifications.

Antoine Bertheau, Edoardo Maria Acabbi, Cristina Barceló, Andreas Gulyas, Stefano Lombardi, Raffaele Saggio, 11 March 2022

Studying the consequences of job loss can help us understand the extent to which labour markets efficiently reallocate unemployed workers to new jobs. Using a dataset that combines administrative records from seven countries with diverse labour market institutions, this column finds that the consequences of losing one’s job vary across countries. Workers in Denmark and Sweden experience the lowest earnings declines following job loss, while workers in Italy, Spain, and Portugal experience losses three times as high. Labour market institutions have the potential to mitigate these differences.

Marianne Bertrand, Chang-Tai Hsieh, Nick Tsivanidis, 20 October 2021

Changes in contract labour regulation were introduced in India in the late 1940s. The hope was that controlling whether firms could downsize would reduce mass job losses as large British companies left the country post-independence. This column explores the effect of the Industrial Disputes Act on firms of different sizes. The authors find that smaller firms did not see much change, but larger firms did employ fewer contract workers as a result. However, this effect was driven by firms exploiting a loophole, rather than the law itself.

Wouter den Haan, Lukas B. Freund, Pontus Rendahl, 11 September 2021

It has been argued that increased uncertainty can worsen unemployment if employers prefer to wait and postpone job creation. However, under the dominant theory of unemployment – the search-and-matching model – the value of waiting plays no role. This column proposes an amended model which relaxes some of the theoretical assumptions, and shows that an increase in perceived uncertainty does indeed increase the value of waiting, thus reducing job creation.

Chuan He, Karsten Mau, Mingzhi (Jimmy) Xu, 15 July 2021

Tariffs are often advertised as an effective tool to protect or even create jobs in specific industries. Empirical evidence suggests differently. Using data from a Chinese online job portal, this column documents how firms facing US tariff increases during the recent trade war posted fewer jobs and offered lower salaries, among other adjustments. Chinese retaliatory tariffs have not induced any systematic adjustments in firms’ vacancy postings. The winners of the trade war remain elusive while losers can be found on both sides.

Nicholas Bloom, Paul Mizen, Shivani Taneja, 15 June 2021

The COVID-19 pandemic prompted a collective shift to working from home. This column argues that though the shift was surprisingly easy, returning to the office will be hard. New evidence from a survey of 2,500 employees in the UK shows a preference in favour of home working 2-3 days a week, with lingering concerns of overcrowded transport and offices. But allowing workers to choose when to work from home will leave empty offices Monday and Friday, and many tasks such as large group meetings are more effective in person than online. Hybrid working will be the solution.

Mette Foged, Linea Hasager, Giovanni Peri, 20 March 2021

The labour market integration of refugees and immigrants is key to their ability to contribute to the economy of the receiving country and to enhancing the fiscal sustainability of more open immigration policies. Using the quasi-random assignment of Danish refugees to language training, this column shows that language acquisition significantly increased the lifetime earnings of refugees. Refugees with language training became more likely to work in communication-intensive jobs and obtained additional education. The positive effects are transmitted to the next generation in terms of improved schooling outcomes for male children of refugees.

Francesca Carta, Francesco D'Amuri, Till von Wachter, 16 March 2021

Population ageing reduces labour supply and burdens pension systems. At the same time, delaying the statutory retirement age may have an impact on firms’ productivity and risks crowding out younger workers. This column exploits an unexpected pension reform in Italy in 2012 which sharply increased the full retirement age for workers aged 55 or above to show that such concerns may not be warranted. A rise in employment of older workers led to an increase in value added while holding labour costs constant. Employment in other age classes also increased. This suggests older workers are valuable to employers and that pension reforms postponing retirement can remove a constraint rather than placing a burden on firms.

Ammar Farooq, Adriana Kugler, Umberto Muratori, 07 February 2021

Economists have long debated whether extensions to unemployment insurance benefit durations help or hinder the labour market. Using US administrative microdata, this column shows that the generosity of unemployment insurance benefits has a positive effect on the labour market by improving job match quality. Importantly, these benefits are greater for women as well as for minority and less educated workers. In light of the current economic crisis, giving ideally suited workers and firms sufficient time to find each other can be part of the healing. 

Andreas I. Mueller, Johannes Spinnewijn, Giorgio Topa, 29 January 2021

Longer spells of unemployment are associated with worse employment prospects, but there has been no consensus in the literature on what drives the decline in employment prospects. This column uses data on elicited beliefs of unemployed job seekers to uncover the forces driving long-term unemployment. It shows that 85% of the decline in job-finding rates is due to intrinsic differences across job-finding ‘types’, rather than a deterioration of skills during unemployment. Improving job seekers’ information about employment prospects may help reduce costly long-term unemployment.

Stephen Machin, Sandra McNally, Camille Terrier, Guglielmo Ventura, 23 December 2020

England introduced University Technical Colleges – hybrid education institutions which combine general and vocational education – in 2010. This column presents the results from the first evaluation of the causal effect of attending such a college on student academic and vocational achievement, and on eventual labour market outcomes. While college enrolment can have positive effects on the probability of studying a STEM subject at university, the age that a student enrolls plays a key part in determining their overall attainment.

Hie Joo Ahn, James Hamilton, 14 August 2020

The COVID-19 crisis in the US sent the unemployment rate soaring just as labour force participation crashed. A closer look at the data reveals several inconsistencies across labour force measures and the resulting unemployment estimates. This column highlights large discrepancies between the number of unemployment insurance claims and the count of unemployed in recent months, as well as in the number of people outside the labour force who wanted a job at the time. It argues that the actual unemployment rate was two percentage points higher prior to the pandemic than reported, and this gap has likely widened since the crisis.

Mai Dao, Mitali Das, Zsoka Koczan, 20 July 2020

The declining labour share of income is a global phenomenon that has affected primarily low-skilled and middle-skilled workers. This column examines the effects of trade and technology on the labour shares of different skill groups using a new dataset covering both advanced and developing economies. Both trade and technology have contributed to the declining labour share of middle-skilled workers but have had little effect on low-skilled and high-skilled labour. Policies should be designed with the goal of spreading the benefits of globalisation to the entire labour force.

Francesco Fasani, Tommaso Frattini, Luigi Minale, 09 June 2020

The COVID-19 pandemic has brought to light how much societies rely on migrants for key labour while highlighting the vulnerabilities of already weaker groups. Easing the socio-economic integration of migrants is beneficial to both migrants and host countries; yet, many European countries ban asylum seekers from legal employment upon arrival. This column examines the effect of such employment bans. The bans have large and lasting negative effects on refugees’ future labour-market integration and constitute an economic loss for the host country. Allowing early labour market access is an easily implementable and financially costless policy that effectively accelerates refugee integration.

Shigeru Fujita, Giuseppe Moscarini, Fabien Postel-Vinay, 15 May 2020

Current government policies addressing the COVID-19 crisis protect the hardest-hit workers and jobs. The world economy, however, is already experiencing needs for employment reallocation towards certain essential activities. This column proposes a policy framework to resolve the trade-off between protecting valuable match-specific capital and restoring the desired pace of healthy reallocation. The scheme leverages the distinct age profile of COVID-19 health risks, matching capital, and worker reallocation, by tailoring furlough subsidies, wage subsidies, and unemployment insurance to worker age.

Ewout Frankema, Marlous van Waijenburg, 02 May 2020

Despite a clear positive relationship between education and income at the micro-level, raising educational attainment rates in the developing world have so far failed to lead to substantial and sustained economic growth. This column collects data on skill premia for 50 African and Asian countries for 1870-2010 and presents evidence of a dramatic fall in skill premia from initially very high levels for both Asia and Africa over the course of the 20th century. This convergence of skill premia to Western levels is shown to be negatively related to the relative supply of educated workers in those economies.

Tilman Tacke, Anu Madgavkar, Hans‐Helmut Kotz, 30 April 2020

The first two decades of the 21st century saw job opportunities expand and prices for discretionary consumer goods drop. But these gains came at the cost of social contracts in many countries, where working arrangements became more fragile, wages stagnated, and the labour share of income fell. This column argues that the severe economic consequences of the COVID-19 pandemic have revealed vulnerabilities in the social contract. When the immediate crisis is over, risk may need rebalancing towards an increasing role for institutions and mutualisation.

Brian Bell, Nicholas Bloom, Jack Blundell, Luigi Pistaferri, 06 April 2020

The COVID-19 pandemic is turning into a global recession – probably the biggest drop in economic activity since the Great Depression of the 1930s. This column uses over 3 million earnings observations drawn from more than 400,000 UK workers between 1975 and 2016 to identify groups of workers who are most exposed to aggregate risk. This findings suggest that young male workers at small firms could see earnings losses of 8% to 9%, with older women at large firms seeing little or no change in their earnings.

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