Involuntary Unemployment and the Business Cycle
Lawrence J. Christiano, Mathias Trabandt, Karl Walentin
Review of Economic Dynamics,
January
2021
Abstract
Can a model with limited labor market insurance explain standard macro and labor market data jointly? We construct a monetary model in which: i) the unemployed are worse off than the employed, i.e. unemployment is involuntary and ii) the labor force participation rate varies with the business cycle. To illustrate key features of our model, we start with the simplest possible framework. We then integrate the model into a medium-sized DSGE model and show that the resulting model does as well as existing models at accounting for the response of standard macroeconomic variables to monetary policy shocks and two technology shocks. In addition, the model does well at accounting for the response of the labor force and unemployment rate to these three shocks.
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Decentralisation of Collective Bargaining: A Path to Productivity?
Daniele Aglio, Filippo di Mauro
IWH-CompNet Discussion Papers,
Nr. 3,
2020
Abstract
Productivity developments have been rather divergent across EU countries and particularly between Central Eastern Europe (CEE) and elsewhere in the continent (non-CEE). How is such phenomenon related to wage bargaining institutions? Starting from the Great Financial Crisis (GFC) shock, we analyse whether the specific set-up of wage bargaining prevailing in non-CEE may have helped their respective firms to sustain productivity in the aftermath of the crisis. To tackle the issue, we merge the CompNet dataset – of firm-level based productivity indicators – with the Wage Dynamics Network (WDN) survey on wage bargaining institutions. We show that there is a substantial difference in the institutional set-up between the two above groups of countries. First, in CEE countries the bulk of the wage bargaining (some 60%) takes place outside collective bargaining schemes. Second, when a collective bargaining system is adopted in CEE countries, it is prevalently in the form of firm-level bargaining (i. e. the strongest form of decentralisation), while in non-CEE countries is mostly subject to multi-level bargaining (i. e. an intermediate regime, only moderately decentralised). On productivity impacts, we show that firms’ TFP in the non-CEE region appears to have benefitted from the chosen form of decentralisation, while no such effects are detectable in CEE countries. On the channels of transmission, we show that decentralisation in non-CEE countries is also negatively correlated with dismissals and with unit labour costs, suggesting that such collective bargaining structure may have helped to better match workers with firms’ needs.
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Wages and the Value of Nonemployment
Simon Jäger, Benjamin Schoefer, Samuel Young, Josef Zweimüller
Quarterly Journal of Economics,
Nr. 4,
2020
Abstract
Nonemployment is often posited as a worker’s outside option in wage-setting models such as bargaining and wage posting. The value of nonemployment is therefore a key determinant of wages. We measure the wage effect of changes in the value of nonemployment among initially employed workers. Our quasi-experimental variation in the value of nonemployment arises from four large reforms of unemployment insurance (UI) benefit levels in Austria. We document that wages are insensitive to UI benefit changes: point estimates imply a wage response of less than $0.01 per $1.00 UI benefit increase, and we can reject sensitivities larger than $0.03. The insensitivity holds even among workers with low wages and high predicted unemployment duration, and among job switchers hired out of unemployment. The insensitivity of wages to the nonemployment value presents a puzzle to the widely used Nash bargaining model, which predicts a sensitivity of $0.24–$0.48. Our evidence supports wage-setting models that insulate wages from the value of nonemployment.
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Tournament Incentives and Acquisition Performance
Iftekhar Hasan, Marco Navone, Thomas To, Eliza Wu
Review of Corporate Finance Studies,
Nr. 2,
2020
Abstract
This paper examines the impact of promotion-based tournament incentives on corporate acquisition performance. Measuring tournament incentives as the compensation ratio between the CEO and other senior executives, we show that acquirers with greater tournament incentives experience lower announcement returns. Further analysis shows that the negative effect is driven by the risk-seeking behavior of senior executives induced by tournament incentives. Our results are robust to alternative identification strategies. Our evidence highlights that senior executives, in addition to the CEO, play an influential role in acquisition decisions.
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Do Diasporas Affect Regional Knowledge Transfer within Host Countries? A Panel Analysis of German R&D Collaborations
Lutz Schneider, Alexander Kubis, Mirko Titze
Regional Studies,
Nr. 1,
2019
Abstract
Interactive regional learning involving various actors is considered a precondition for successful innovations and, hence, for regional development. Diasporas as non-native ethnic groups are regarded as beneficial since they enrich the creative class by broadening the cultural base and introducing new routines. Using data on research and development (R&D) collaboration projects, the analysis provides tentative evidence that the size of diasporas positively affects the region’s share of outward R&D linkages enabling the exchange of knowledge. The empirical analysis further confirms that these interactions mainly occur between regions hosting the same diasporas, pointing to a positive effect of ethnic proximity rather than ethnic diversity.
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Innovation and Top Income Inequality
Philippe Aghion, Ufuk Akcigit, Antonin Bergeaud, Richard Blundell, David Hemous
Review of Economic Studies,
Nr. 1,
2019
Abstract
In this article, we use cross-state panel and cross-U.S. commuting-zone data to look at the relationship between innovation, top income inequality and social mobility. We find positive correlations between measures of innovation and top income inequality. We also show that the correlations between innovation and broad measures of inequality are not significant. Next, using instrumental variable analysis, we argue that these correlations at least partly reflect a causality from innovation to top income shares. Finally, we show that innovation, particularly by new entrants, is positively associated with social mobility, but less so in local areas with more intense lobbying activities.
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Differences Make a Difference: Diversity in Social Learning and Value Creation
Yiwei Fang, Bill Francis, Iftekhar Hasan
Journal of Corporate Finance,
2018
Abstract
Prior research has demonstrated that CEOs learn privileged information from their social connections. Going beyond the importance of the number of social ties in a CEO's social network, this paper studies the value generated from a diverse social environment. We construct an index of social-network heterogeneity (SNH) that captures the extent to which CEOs are connected to people of different demographic attributes and skill sets. We find that higher CEO SNH leads to greater firm value through the channels of better corporate innovation and diversified M&As. Overall, the evidence suggests that CEOs' exposure to human diversity enhances social learning and creates greater growth opportunities for firms.
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TV and Entrepreneurship
Viktor Slavtchev, Michael Wyrwich
IWH Discussion Papers,
Nr. 17,
2017
Abstract
We empirically analyse whether television (TV) can influence entrepreneurial identity and incidence. To identify causal effects, we utilise a quasi-natural experiment setting. During the division of Germany after WWII into West Germany with a free-market economy and the socialistic East Germany with centrally-planned economy, some East German regions had access to West German public TV that – differently from the East German TV – transmitted images, values, attitudes and view of life compatible with the free-market economy principles and supportive of entrepreneurship. We show that during the 40 years of socialistic regime in East Germany entrepreneurship was highly regulated and virtually impossible and that the prevalent formal and informal institutions broke the traditional ties linking entrepreneurship to the characteristics of individuals so that there were hardly any differences in the levels and development of entrepreneurship between East German regions with and without West German TV signal. Using both, regional and individual level data, we show then that, for the period after the Unification in 1990 which made starting an own business in East Germany, possible again, entrepreneurship incidence is higher among the residents of East German regions that had access to West German public TV, indicating that TV can, while transmitting specific images, values, attitudes and view of life, directly impact on the entrepreneurial mindset of individuals. Moreover, we find that young individuals born after 1980 in East German households that had access to West German TV are also more entrepreneurial. These findings point to second-order effects due to inter-personal and inter-generational transmission, a mechanism that can cause persistent differences in the entrepreneurship incidence across (geographically defined) population groups.
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