On the Employment Consequences of Automation and Offshoring: A Labor Market Sorting View
Ester Faia, Sébastien Laffitte, Maximilian Mayer, Gianmarco Ottaviano
Lili Yan Ing, Gene M. Grossman (eds), Robots and AI: A New Economic Era. Routledge: London,
2022
Abstract
We argue that automation may make workers and firms more selective in matching their specialized skills and tasks. We call this phenomenon “core-biased technological change”, and wonder whether something similar could be relevant also for offshoring. Looking for evidence in occupational data for European industries, we find that automation increases workers’ and firms’ selectivity as captured by longer unemployment duration, less skill-task mismatch, and more concentration of specialized knowledge in specific tasks. This does not happen in the case of offshoring, though offshoring reinforces the effects of automation. We show that a labor market model with two-sided heterogeneity and search frictions can rationalize these empirical findings if automation strengthens while offshoring weakens the assortativity between workers’ skills and firms’ tasks in the production process, and automation and offshoring complement each other. Under these conditions, automation decreases employment and increases wage inequality whereas offshoring has opposite effects.
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Capital Requirements, Market Structure, and Heterogeneous Banks
Carola Müller
IWH Discussion Papers,
No. 15,
2022
Abstract
Bank regulators interfere with the efficient allocation of resources for the sake of financial stability. Based on this trade-off, I compare how different capital requirements affect default probabilities and the allocation of market shares across heterogeneous banks. In the model, banks‘ productivity determines their optimal strategy in oligopolistic markets. Higher productivity gives banks higher profit margins that lower their default risk. Hence, capital requirements indirectly aiming at high-productivity banks are less effective. They also bear a distortionary cost: Because incumbents increase interest rates, new entrants with low productivity are attracted and thus average productivity in the banking market decreases.
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Does Working at a Start-up Pay Off?
Daniel Fackler, Lisa Hölscher, Claus Schnabel, Antje Weyh
Small Business Economics,
No. 4,
2022
Abstract
Using representative linked employer-employee data for Germany, this paper analyzes short- and long-run differences in labor market performance of workers joining start-ups instead of incumbent firms. Applying entropy balancing and following individuals over ten years, we find huge and long-lasting drawbacks from entering a start-up in terms of wages, yearly income, and (un)employment. These disadvantages hold for all groups of workers and types of start-ups analyzed. Although our analysis of different subsequent career paths highlights important heterogeneities, it does not reveal any strategy through which workers joining start-ups can catch up with the income of similar workers entering incumbent firms.
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The (Heterogenous) Economic Effects of Private Equity Buyouts
Steven J. Davis, John Haltiwanger, Kyle Handley, Josh Lerner, Ben Lipsius, Javier Miranda
IWH Discussion Papers,
No. 10,
2022
Abstract
The effects of private equity buyouts on employment, productivity, and job reallocation vary tremendously with macroeconomic and credit conditions, across private equity groups, and by type of buyout. We reach this conclusion by examining the most extensive database of U.S. buyouts ever compiled, encompassing thousands of buyout targets from 1980 to 2013 and millions of control firms. Employment shrinks 13% over two years after buyouts of publicly listed firms – on average, and relative to control firms – but expands 13% after buyouts of privately held firms. Post-buyout productivity gains at target firms are large on average and much larger yet for deals executed amidst tight credit conditions. A post-buyout tightening of credit conditions or slowing of GDP growth curtails employment growth and intra-firm job reallocation at target firms. We also show that buyout effects differ across the private equity groups that sponsor buyouts, and these differences persist over time at the group level. Rapid upscaling in deal flow at the group level brings lower employment growth at target firms.
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The Place-based Effects of Police Stations on Crime: Evidence from Station Closures
Sebastian Blesse, André Diegmann
Journal of Public Economics,
March
2022
Abstract
Many countries consolidate their police forces by closing down local police stations. Police stations represent an important and visible aspect of the organization of police forces. We provide novel evidence on the effect of centralizing police offices through the closure of local police stations on crime outcomes. Combining matching with a difference-in-differences specification, we find an increase in reported car theft and burglary in residential properties. Our results are consistent with a negative shift in perceived detection risks and are driven by heterogeneous station characteristics. We can rule out alternative explanations such as incapacitation, crime displacement, and changes in police employment or strategies at the regional level. We argue that criminals are less deterred due to a lower visibility of the local police.
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Inequality in Life and Death
Martin S. Eichenbaum, Sergio Rebelo, Mathias Trabandt
IMF Economic Review,
March
2022
Abstract
We argue that the COVID epidemic disproportionately affected the economic well-being and health of poor people. To disentangle the forces that generated this outcome, we construct a model that is consistent with the heterogeneous impact of the COVID recession on low- and high-income people. According to our model, two-thirds of the inequality in COVID deaths reflect preexisting inequality in comorbidity rates and access to quality health care. The remaining third stems from the fact that low-income people work in occupations where the risk of infection is high. Our model also implies that the rise in income inequality generated by the COVID epidemic reflects the nature of the goods that low-income people produce. Finally, we assess the health-income trade-offs associated with fiscal transfers to the poor and mandatory containment policies.
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Globalization, Productivity Growth, and Labor Compensation
Christian Dreger, Marius Fourné, Oliver Holtemöller
IWH Discussion Papers,
No. 7,
2022
Abstract
We analyze how changes in international trade integration affect productivity and the functional income distribution. To account for endogeneity, we construct a leaveout measure for international trade integration for country-industry pairs using international input-output tables. Our findings corroborate on the country-industry level that international trade integration increases productivity. Moreover, we show that both trade in intermediate inputs and trade in value added is associated with lower labor shares in emerging markets. For advanced countries, we document a positive effect of trade in value added on the labor share of income. Further, we show that the effects on productivity and labor share are heterogeneous across different sectors. Finally, we discuss the implications of our results for a possible throwback in international trade integration due to experiences from recent crises.
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Revealing Corruption: Firm and Worker Level Evidence from Brazil
Emanuele Colonnelli, Spyridon Lagaras, Jacopo Ponticelli, Mounu Prem, Margarita Tsoutsoura
Journal of Financial Economics,
No. 3,
2022
Abstract
We study how the disclosure of corrupt practices affects the growth of firms involved in illegal interactions with the government using randomized audits of public procurement in Brazil. On average, firms exposed by the anti-corruption program grow larger after the audits, despite experiencing a decrease in procurement contracts. We manually collect new data on the details of thousands of corruption cases, through which we uncover a large heterogeneity in our firm-level effects depending on the degree of involvement in corruption. Using investment-, loan-, and worker- level data, we show that the average exposed firms adapt to the loss of government contracts by changing their investment strategy. They increase capital investment and borrow more to finance such investment, while there is no change in their internal organization. We provide qualitative support to our results by conducting new face-to-face surveys with business owners of government-dependent firms.
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Aleksandr Kazakov, Michael Koetter, Mirko Titze, Lena Tonzer
Abstract
We study whether government subsidies can stimulate bank funding of marginal investment projects and the associated effect on financial stability. We do so by exploiting granular project-level information for the largest regional economic development programme in Germany since 1997: the Improvement of Regional Economic Structures programme (GRW). By combining the universe of subsidised firms to virtually all German local banks over the period 1998-2019, we test whether this large-scale transfer programme destabilised regional credit markets. Because GRW subsidies to firms are destabilised at the EU level, we can use it as an exogenous shock to identify bank responses. On average, firm subsidies do not affect bank lending, but reduce banks’ distance to default. Average effects conflate important bank-level heterogeneity though. Conditional on various bank traits, we show that well capitalised banks with more industry experience expand lending when being exposed to subsidised firms without exhibiting more risky financial profiles. Our results thus indicate that stable banks can act as an important facilitator of regional economic development policies. Against the backdrop of pervasive transfer payments to mitigate Covid-19 losses and in light of far-reaching transformation policies required to green the economy, our study bears important implications as to whether and which banks to incorporate into the design of transfer Programmes.
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Gift-Exchange in Society and the Social Integration of Refugees: Evidence from a Field, a Laboratory, and a Survey Experiment
Sabrina Jeworrek, Bernd Josef Leisen, Vanessa Mertins
Journal of Economic Behavior and Organization,
December
2021
Abstract
Refugee integration requires broad support from the host society, but only a minority is actively engaged. Given that most individuals reciprocate kind behavior, we examine the idea that the proportion of supporters will increase as a reciprocal response to refugees’ contributions to society through volunteering. Our nationwide survey experiment shows that citizens’ intentions to contribute time and money rise significantly when they learn about refugees’ pro-social activities. However, we find a substantial heterogeneity in the observed treatment effects. Individuals with a high reciprocal inclination show higher willingness to contribute time, while individuals with a lower reciprocal inclination are ready to contribute money after learning about the refugees' good deeds. Information regarding the possibility to establish a mutual support relationship with the refugees does not generally increase the willingness to contribute time or money beyond the information on refugees’ general contributions to the society. We complement this investigation with experiments in the lab and the field that confirm our findings for actual behavior.
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