Download or read book The Aggregate Effects of Labor Market Frictions written by Michael Elsby and published by . This book was released on 2017 with total page 61 pages. Available in PDF, EPUB and Kindle. Book excerpt: Labor market frictions are able to induce sluggish aggregate employment dynamics. However, these frictions have strong implications for the source of this propagation: They distort the path of aggregate employment by impeding the flow of labor across firms. For a canonical class of frictions, we show how observable measures of such flows can be used to assess the effect of frictions on aggregate employment dynamics. Application of this approach to establishment microdata for the United States reveals that the empirical flow of labor across firms deviates markedly from the predictions of canonical labor market frictions. Despite their ability to induce persistence in aggregate employment, firm-size flows in these models are predicted to respond aggressively to aggregate shocks but react sluggishly in the data. This paper therefore concludes that the propagation mechanism embodied in standard models of labor market frictions fails to account for the sources of observed employment dynamics.
Download or read book Sticky Feet written by Claire H. Hollweg and published by World Bank Publications. This book was released on 2014-07-03 with total page 123 pages. Available in PDF, EPUB and Kindle. Book excerpt: This report quantifies labor mobility costs in developing countries and simulates the implied adjustment paths of employment and wages following a change in trade policy. High mobility costs are shown to reduce the potential gains to trade reform.
Download or read book Sticky Feet written by Claire H. Hollweg and published by World Bank Publications. This book was released on 2014-06-26 with total page 123 pages. Available in PDF, EPUB and Kindle. Book excerpt: The analysis in this report confirms the findings of previous studies that trade liberalization improves aggregate welfare and is in the long run associated with higher employment and wages. The analysis addresses a major gap in the literature, which has heretofore provided limited evidence about the trade-related adjustment costs faced by workers in developing countries and how they are affected by mobility costs. Labor market frictions reduce the potential gains from trade reform. For a tariff reduction in a given sector, the resulting change in relative prices raises real wages in some sectors and reduces them in the liberalized sector. The emerging wage gaps lead to labor reallocation. But workers typically incur costs to change jobs; the higher the mobility costs, the slower the transition to the new labor market steady state. Workers’ sticky feet result in foregone welfare gains from trade. This report presents an estimation strategy for capturing mobility costs when only net flows of workers between industries are observed, generating cross-country estimates for 47 developed and developing countries. The basic analytical approach is then refined to take advantage of micro-level data on worker transitions and wages when gross flows can be observed to derive mobility cost estimates that account for sector and formality status. These cost estimates are used to model the dynamic paths of labor reallocation between sectors and in and out of the labor force, the associated wage paths, and the resulting labor adjustment costs. The main findings of the report are that: labor mobility costs in developing countries are high; foregone trade gains due to frictions in labor mobility can also be substantial; workers bear the brunt of adjustment costs; mobility costs and labor market adjustments to trade-related shocks vary by industry, firm type, and worker type; entry costs are significantly higher for formal than for informal employment; trade reforms increase economy-wide wages and employment; and workers displaced by plant closings are likely to face relatively long adjustment periods. The findings provide insights that could be helpful to policymakers hoping to mitigate negative short-term consequences of trade liberalization and facilitate labor adjustment.
Download or read book Aggregate Implications of Indivisible Labor Incomplete Markets and Labor Market Frictions written by Per Krusell and published by . This book was released on 2008 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyzes a model that features frictions, an operative labor supply margin, and incomplete markets. We first provide analytic solutions to a benchmark model that includes indivisible labor and incomplete markets in the absence of trading frictions. We show that the steady state levels of aggregate hours and aggregate capital stock are identical to those obtained in the economy with employment lotteries, while individual employment and asset dynamics can be different. Second, we introduce labor market frictions to the benchmark model. We find that the effect of the frictions on the response of aggregate hours to a permanent tax change is highly non-linear. We also find that there is considerable scope for substitution between "voluntary" and "frictional" nonemployment in some situations.
Download or read book Labor Market Frictions Firm Growth and International Trade written by Pablo D. Fajgelbaum and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper develops a model to study the aggregate effects of labor market frictions in an open economy through their impact on the growth and investment decisions of firms. The model features interactions between firms' dynamic fixed investments in exporting and search frictions with job-to-job mobility. Search frictions induce slow firm growth and are a source of dispersion in firm size and export status. Job-to-job transitions are a crucial ingredient of the analysis, as in their absence search frictions do not affect outcomes per worker. The model is tractable for general-equilibrium analysis and accommodates several extensions which are useful for quantitative work. A calibration to Argentina's economy suggests that frictions in job-to-job mobility may have considerable effects on firm growth and aggregate income, and that barriers to worker mobility across firms may be relevant to measure the gains from international trade.
Download or read book Aggregate Implications of Indivisble Labor Incomplete Markets and Labor Market Frictions written by Per Krusell and published by . This book was released on 2008 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Labor Markets and Business Cycles written by Robert Shimer and published by Princeton University Press. This book was released on 2010-04-12 with total page 189 pages. Available in PDF, EPUB and Kindle. Book excerpt: Labor Markets and Business Cycles integrates search and matching theory with the neoclassical growth model to better understand labor market outcomes. Robert Shimer shows analytically and quantitatively that rigid wages are important for explaining the volatile behavior of the unemployment rate in business cycles. The book focuses on the labor wedge that arises when the marginal rate of substitution between consumption and leisure does not equal the marginal product of labor. According to competitive models of the labor market, the labor wedge should be constant and equal to the labor income tax rate. But in U.S. data, the wedge is strongly countercyclical, making it seem as if recessions are periods when workers are dissuaded from working and firms are dissuaded from hiring because of an increase in the labor income tax rate. When job searches are time consuming and wages are flexible, search frictions--the cost of a job search--act like labor adjustment costs, further exacerbating inconsistencies between the competitive model and data. The book shows that wage rigidities can reconcile the search model with the data, providing a quantitatively more accurate depiction of labor markets, consumption, and investment dynamics. Developing detailed search and matching models, Labor Markets and Business Cycles will be the main reference for those interested in the intersection of labor market dynamics and business cycle research.
Download or read book Labor market Frictions and Employment Fluctuations written by Robert E. Hall and published by . This book was released on 1998 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt: The labor market occupies center stage in modern theories of fluctuations. The most important phenomenon to explain and understand in a recession is the sharp decline in employment and jump in unemployment. This chapter for the Handbook of Macroeconomics considers explanations based on frictions in the labor market. Earlier research within the real business cycle paradigm considered frictionless labor markets where fluctuations in the volume of work effort represented substitution by households between work in the market and activities at home. A preliminary section of the chapter discusses why frictionless models are incomplete they fail to account for either the magnitude or persistence of fluctuations in employment. And the frictionless models fail completely to describe unemployment. The evidence suggests strongly that consideration of unemployment as a third use of time is critical for a realistic model. The two elements of a theory of unemployment are a mechanism for workers to lose or leave their jobs and an explanation for the time required for them to find new jobs. Theories of mechanism design or of continuous re-bargaining of employment terms provide the first. The theory of job search together with efficiency wages and related issues provides the second. Modern macro models incorporating these features come much closer than their predecessors to realistic and rigorous explanations of the magnitude and persistence of fluctuations.
Download or read book Misallocation Effects of Labor Market Frictions written by Stanislav Rabinovich and published by . This book was released on 2020 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Emerging Market Business Cycles written by Ms.Emine Boz and published by International Monetary Fund. This book was released on 2012-10-09 with total page 51 pages. Available in PDF, EPUB and Kindle. Book excerpt: Emerging economies are characterized by higher consumption and real wage variability relative to output and a strongly countercyclical current account. A real business cycle model of a small open economy that embeds a Mortensen-Pissarides type of search-matching frictions and countercyclical interest rate shocks can jointly account for these regularities. In the face of countercyclical interest rate shocks, search-matching frictions increase future employment uncertainty, improving workers’ incentive to save and generating a greater response of consumption and the current account. Higher consumption response in turn feeds into larger fluctuations in the workers’ bargaining power while the interest rates shocks lead to variations in the firms’ willingness to hire; both of which contribute to a highly variable real wage.
Download or read book The Aggregate and Distributional Effects of Spatial Frictions written by Sebastian Heise and published by . This book was released on 2021 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We develop a general equilibrium model of frictional labor reallocation across firms and regions, and use it to quantify the aggregate and distributional effects of spatial frictions that hinder worker mobility across regions in Germany. The model leverages matched employer-employee data to unpack spatial frictions into different types while isolating them from labor market frictions that operate also within region. The estimated model shows sizable spatial frictions between East and West Germany, especially due to the limited ability of workers to obtain job offers from more distant regions. Despite the large real wage gap between East and West of Germany, removing the spatial frictions leads, in equilibrium, to only a small increase in aggregate productivity and it mostly affects the within-region allocation of labor to firms rather than the between-region allocation. However, spatial frictions have large distributional consequences, as their removal drastically reduces the gap in lifetime earnings between East and West Germans.
Download or read book Gross Worker Flows and Fluctuations in the Aggregate Labor Market written by Per Krusell and published by . This book was released on 2020 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We build a three-state general equilibrium model of the aggregate labor market that features both standard labor supply forces and labor market frictions. Our model matches key features of the cyclical properties of employment, unemployment, and nonparticipation as well as those of gross worker flows across these three labor market states. Our key finding is that shocks to labor market frictions play a dominant role in accounting for labor market fluctuations. This is in contrast to the focus of the traditional RBC literature, which emphasized how employment fluctuations arise as a consequence of labor supply responses to price changes induced by TFP shocks.
Download or read book Labor Market Rigidities Trade and Unemployment written by Elhanan Helpman and published by . This book was released on 2007 with total page 64 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study a two-country two-sector model of international trade in which one sector produces homogeneous products while the other produces differentiated products. The differentiated-product industry has firm heterogeneity, monopolistic competition, search and matching in its labor market, and wage bargaining. Some of the workers searching for jobs end up being unemployed. Countries are similar except for frictions in their labor markets. We study the interaction of labor market rigidities and trade impediments in shaping welfare, trade flows, productivity, price levels and unemployment rates. We show that both countries gain from trade but that the flexible country -- which has lower labor market frictions -- gains proportionately more. A flexible labor market confers comparative advantage; the flexible country exports differentiated products on net. A country benefits by lowering frictions in its labor market, but this harms the country's trade partner. And the simultaneous proportional lowering of labor market frictions in both countries benefits both of them. The model generates rich patterns of unemployment. Specifically, trade integration -- which benefits both countries -- may raise their rates of unemployment. Moreover, differences in rates of unemployment do not necessarily reflect differences in labor market rigidities; the rate of unemployment can be higher or lower in the flexible country. Finally, we show that the flexible country has both higher total factor productivity and a lower price level, which operates against the standard Balassa-Samuelson effect.
Download or read book Sticky Feet written by Claire H Hollweg and published by . This book was released on 2014-07-19 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The analysis in this report confirms the findings of previous studies that trade liberalization improves aggregate welfare and is in the long run associated with higher employment and wages. The analysis addresses a major gap in the literature, which has heretofore provided limited evidence about the trade-related adjustment costs faced by workers in developing countries and how they are affected by mobility costs. Labor market frictions reduce the potential gains from trade reform. For a tariff reduction in a given sector, the resulting change in relative prices raises real wages in some sectors and reduces them in the liberalized sector. The emerging wage gaps lead to labor reallocation. But workers typically incur costs to change jobs; the higher the mobility costs, the slower the transition to the new labor market steady state. Workers sticky feet result in foregone welfare gains from trade. This report presents an estimation strategy for capturing mobility costs when only net flows of workers between industries are observed, generating cross-country estimates for 47 developed and developing countries. The basic analytical approach is then refined to take advantage of micro-level data on worker transitions and wages when gross flows can be observed to derive mobility cost estimates that account for sector and formality status. These cost estimates are used to model the dynamic paths of labor reallocation between sectors and in and out of the labor force, the associated wage paths, and the resulting labor adjustment costs. The main findings of the report are that: labor mobility costs in developing countries are high; foregone trade gains due to frictions in labor mobility can also be substantial; workers bear the brunt of adjustment costs; mobility costs and labor market adjustments to trade-related shocks vary by industry, firm type, and worker type; entry costs are significantly higher for formal than for informal employment; trade reforms increase economy-wide wages and employment; and workers displaced by plant closings are likely to face relatively long adjustment periods. The findings provide insights that could be helpful to policymakers hoping to mitigate negative short-term consequences of trade liberalization and facilitate labor adjustment.
Download or read book Labor Market Frictions as a Source of Comparative Advantage with Implications for Unemployment and Inequality written by Elhanan Helpman and published by . This book was released on 2010 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Abstract: Recent research has emphasized firm heterogeneity as a source of comparative advantage. Combining this approach with labor market frictions and worker heterogeneity provides a framework for studying the impact of trade on unemployment and inequality. This paper reviews this approach and reports a number of results from recent studies
Download or read book Misallocation Effects of Labor Market Frictions written by and published by . This book was released on 2020 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We theoretically study misallocation of labor in a heterogeneous-firm model with imperfectly directed search. Some workers can direct their search, while others are uninformed about the location of wage offers ex ante and are assigned to job openings randomly. The main result is that too many workers apply to high-productivity firms, relative to the social optimum. This occurs because too many firms take advantage of their market power, attracting only random searchers. Because it is the low-productivity firms that do so, this induces all the directed searchers to concentrate at the high-productivity firms, a "flight-to-quality" phenomenon. Improvements in information have ambiguous effects on worker allocation, wages, and worker utility. A minimum wage can increase employment and welfare by reallocating workers across firms. With an endogenous entry choice, policy design meets with a tradeoff in balancing the misallocation inefficiency and a standard entry externality.
Download or read book Labor market Matching with Precautionary Savings and Aggregate Fluctuations written by Per Krusell and published by . This book was released on 2009 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: We analyze a Bewley-Huggett-Aiyagari incomplete-markets model with labor-market frictions. Consumers are subject to idiosyncratic employment shocks against which they cannot insure directly. The labor market has a Diamond-Mortensen-Pissarides structure: firms enter by posting vacancies and match with workers bilaterally, with match probabilities given by an aggregate matching function. Wages are determined through Nash bargaining. We also consider aggregate productivity shocks, and a complete set of contingent claims conditional on this risk. We use the model to evaluate a tax-financed unemployment insurance scheme. Higher insurance is beneficial for consumption smoothing, but because it raises workers' outside option value, it discourages firm entry. We find that the latter effect is more potent for welfare outcomes; we tabulate the effects quantitatively for different kinds of consumers. We also demonstrate that productivity changes in the model---in steady state as well as stochastic ones---generate rather limited unemployment effects, unless workers are close to indifferent between working and not working; thus, recent findings are corroborated in our more general setting.
