Despite the vast evidence on declining labormarket mobility, very few pa- pers have attempted to provide an explanation for the observed low-frequency trend. Two notable exceptions are Davis et al. (2010) and Fujita (2012). Particu- larly, Davis et al. (2010) argue that declines in job destruction intensity can lead to lower unemployment inflows; according to their results, the observed decline in the quarterly job destruction rate in the U.S. private sector can account for 28 percent of the fall in unemployment inflows from 1982 to 2005. One possible interpretation, which they offer, is a secular decline in the intensity of idiosyn- cratic labor demand shocks, but they also do not rule out other interpretations, like greater compensation flexibility over time or increased adjustment costs. Fu- jita (2012) proposes an explanation according to which economic turbulence has increased over time. In particular, if the risk of skill obsolescence during unem- ployment has risen, then workers should be less willing to separate and accept lower wages in exchange for keeping the job. The author shows that this mecha- nism can be behind the decline in the separation rate.
The discussion about the social and economic consequences of immigration occupies the center of the debate in the first world due to impact migratory movements might have on local workers’ and the whole society. The policy significance of these questions is evident. Immigrants who have high levels of humancapitaland, hence, high productivity can make a significant contribution to economic growth. Conversely, if immigrants lack the skills that employers demand immigration may turn into a heavy burden as immigrants do not get jobs and increase the size of public assistance needy population adding a heavy load on public finances. The latter might as well exacerbate ethnic or racial turbulence.
determined not only by individual characteristics but also by the average hu- man capital level of the region. A variable that measures the average humancapital level is included in the traditional Mincerian regression. We call this the Mincerian approach (M). This methodology may have some problems in identifying humancapital externalities because of various problems. First, it implicitly assumes that there is perfect substitutability between the dif- ferent groups of workers defined by different humancapital levels. Imperfect substitutability between workers with different skills, though, would imply a relative labor demand with negative slope, and the M approach implies a positive effect of the aggregate humancapital variable even if the social re- turn is smaller than the private return. The intuition is simple: an increase in the number of skilled workers in a region relative to the rest of regions would imply an increase of the wages of unskilled workers simply because of the substitution effect, even if there are no externalities. The empirical evidence for the United States (Katz and Murphy, 1992; Ciccone and Peri, 2006), as well as for other countries (Angrist 1995) and particularly for Spain, in this thesis, chapter 2 shows that the elasticity of substitution is quite different from one, and therefore the M approach may fail in identifying human cap- ital externalities. It is necessary therefore to complement the M approach with other methodologies that take into account the possibility of imperfect substitutability of skilled and unskilled workers. For instance Ciccone and Peri (2006) propose the Constant Composition approach (CC) which is valid for any value of the elasticity of substitution. According to this approach, and as they show theoretically, the externalities are defined as the marginal effect of the intensity of humancapitalon average aggregate wages, holding constant the composition of the labor force.
intermediate goods enter into the production function and, in particular, their elasticity of substitution. In Table 1 a unitary elasticity of substitution is assumed. In this case, the presence of high xed production costs in Sector 2 make external nancing problems par- ticularly severe in this industry. As a result, goods produced in Sector 2 become relatively more scarce than goods produced in Sector 1 and the ratio of output prices moves accord- ingly. In Table 2, we consider an example in which intermediate goods are better substitutes than in the benchmark economy (we set ½ = :5 instead of ½ = 0): Relative to the results in Table 1, a decrease in enforcement is associated with an increase in the rate of substitu- tion of intermediate good 1 for intermediate good 2. Since the value of output in industry 1 rises relative to industry 2 as enforcement decreases, industry 1 is able to rely more on ex- ternal funding than industry 2 when capital markets are imperfect. Despite the fact that the “technological needs” for external funds is higher in industry 2, industry 1 is able to borrow more because it faces a higher demand for its output. In Table 3, we consider an example where intermediate goods are “poor” substitutes in production (relative to the benchmark case ½ = 0 in Table 1). As a result, a decrease in enforcement leads to large increases in the relative price of the second intermediate good. When enforcement is imperfect, labor productivity is substantially higher in Sector 2 than in the other industries in the economy due to the high relative price of intermediate good 2.
The thesis consists of three chapters. In the first chapter I show empirical ev- idence that wait unemployment is an important driving force of unemployment in the United States. When facing slack demand for his skills, an unemployed worker might rationally prefer to wait through a long spell of unemployment instead of seeking employment at a lower wage in a job he was not trained for. I evaluate this trade-off empirically using micro-data on displaced workers. To achieve identifica- tion, I use a difference-in-difference approach exploiting two sources of variation. Firstly, the more a worker invested in occupation-specific humancapital the more costly it is for him to switch occupations and the higher is therefore his incentive to wait. Secondly, I use geographic variation. In a diverse local labormarket where employment is not concentrated in few industries but spread out over many sectors it is less likely that a worker will have to switch occupations in the first place; the potential cost of changing occupations are less likely to be binding. My estimates suggest that wait unemployment is a major reason behind extended unemployment spells. Under conservative assumptions, about between 5% and 20% of total un- employment in the United States can be attributed to wait unemployment.
The objective of the first chapter is to evaluate the impact of dual labormarket in- stitutions on the investment in firm specific humancapitaland productivity. Empirically this is done by estimating the impact of mass-layoffs on subsequent wages in Spain, differentiating between workers holding permanent and fixed term contracts at the time of displacement. The main empirical finding is that permanent contract (PC) workers suffer larger and more persistent wage losses than their fixed term contract (FTC) coun- terparts. Wage losses for PC workers stem mainly from the loss of pre-displacement firm tenure, while this source is not important for FTC workers. This is taken as evidence of the difference in the accumulation of job specific humancapital between the two type of contracts. The wage loss gap due to the difference of investment in firm specific humancapital is estimated to be 6% after the first quarter of displacement. A search and match- ing model à la Mortensen and Pissarides allowing for endogenous accumulation of firm specific humancapitaland the existence of the two type of contracts is developed. The model shows that firms always offer fixed term contracts if they are allowed to do so. The employee’s decision of investment in humancapital depends on the expected dura- tion of the contracts, and hence on the expiration rate of FTC and firing costs. Calibrated to the Spanish economy the model predicts that only PC workers invest in firm specific humancapital, while FTC workes do not. This implies that PC workers are on average 12% more productive than FTC. The model suggests that aggregate labor productivity would increase due to the investment in firm specific humancapital of FTC workers if the employment protection law for FTC workers was more stringent (i.e. lower maxi- mum duration of this type of contract).
I next turn to explain how firm productivity is measured in the analysis, being pro- ductivity the main theoretical determinant of firm export status. As a first measure of productivity I take the distance between firm and sector average labor productivity (value added per worker) 29 . This productivity measure, even if it is only a proxy for total factor productivity, works quite well throughout the analysis. However, as firm productivity is an important control variable in regression specifications, I also con- sider more sophisticated and reliable measures of Total Factor Productivity (TFP). TFP is usually estimated as a residual of a Cobb-Douglas log-linearized production function. However, as many previous empirical studies argued, this estimation is bi- ased because of simultaneity and selection biases. The first bias arises because firms may adjust one of their production factor (capital) knowing a part of their produc- tivity, which is unknown by the econometrician. Thus the estimated coefficient for capital may be biased since it is correlated with an unknown firm level heterogeneous term which is left in the error term. Selection bias, instead, may arise because in this data set some firms exit and presumably they are the less productive ones. I thus use Olley-Pakes semi-parametric estimation method to measure TFP controlling for both biases 30 . The simultaneity bias is taken into account by using an investment
My paper contributes to this strand of the literature in the following aspects. First, I show that in a market characterized by random search the decentralized allocation is not constrained efficient in the presence of humancapital depreciation during unemployment because the latter gives rise to a composition externality. This composition externality is driven by firms ignoring how their hiring decisions affect job-seekers’ skills and hence the output that can be produced by other firms’ newly formed matches. Moreover, I show that this finding hinges on both work- ers with and without eroded skills searching for jobs in the same market. When workers with and without eroded skills search for jobs in separate markets, with each of those markets characterized by random search, and firms choose in which market to post vacancies, the decentralized alloca- tion is constrained efficient if the standard Hosios condition holds in each market. Finally, and in contrast to previous work, I explore the compo- sition externality in an environment subject to aggregate shocks. Those shocks make the composition of the pool of searchers time-varying. This in turn allows me to analyze whether and how the externality’s magnitude depends on the composition of the pool of searchers.
In developing economies, there is a pattern that seems to dominate the private sector activity: Business Groups. The definition of business group varies between researchers and countries. Leff (1978) refers to them as “a group of companies doing business in different markets under a common administrative or financial control”, and states that its members are "bound by relations of interpersonal trust”. Strachan (1976) defines a business group as a long-term partnership of firms. Encarnation (1989) refers to the Indian business houses, emphasizing the social ties between members of the Group: "In each of these houses, strong social ties of family, caste, religion, language, and ethnicity; strengthen the financial and organizational ties between the member companies”. There is a voluminous literature on Japanese corporate groups, or "Keiretsu", which share some of the characteristics of the business groups in less developed economies. For example, Gerlach (1992) mentions that the Keiretsu is characterized by long term relationships between companies in a broad spectrum of markets. Business groups are characterized by a system of internal networks composed of companies from different areas of economic activity. A characteristic feature is that the ownership and control of the group is concentrated, and in most cases, families have a decisive influence on the board of directors, and therefore in financing and investment decisions of each company of the group. In economies with a poor legal system, such groups can be seen as a form of organization that helps companies cope with market failures and malfunction (or absence) of certain institutions. To Ghemawat and Khanna (1998), the problems of asymmetric information (especially in the laborandcapital markets) and entrepreneurial talent shortages are the cause for different companies join under one organization. To Khanna and Palepu (2000), affiliation of a company to a group allows them to better manage market risks. For this reason, business groups are integrated by firms operating in diverse sectors of economic activity. Khanna and Yafeh (2000) stated that being a member of a business group helps to minimize revenue fluctuations and reallocate money from one subsidiary to another in difficult times.
but lasts over time, which points out the importance of distinguishing between short term and long term effects. Next, the chapter gives a broad overview of the seminal contributions to the topics studied in this thesis. In an attempt to classify such contributions in a clear way, they are related to the dimensions space and time. Although the space dimension has been related to the study of economics for a longer period of time, it was Alfred Marshall at the beginning of the XXth century with the concept of external economies one of the ﬁrst and most crucial contributions, which lay the basis for a wide array of literature streams taking into account the role of space in the economy. In this respect, the contributions of Walter Isard in mid-XXth century are also worth mentioning, since he brought the ﬁrst locational theories into the mainstream economics and gave birth, along with other scholars, to the regional economics discipline. The other dimension, time, was gradually introduced in the industrial organisation ﬁeld during the XXth century. Speciﬁcally, the initially static concept of ﬁrm entry considered by the ﬁrst contributions in the ﬁeld, which rendered ﬁrm entry just as an error correction mechanism, was being gradually rendered obsolete as new evidence revealed the dynamic nature of industry through its evolution over time. Such new evidence was very heterogeneous and covered aspects such as determinants of ﬁrm entry, exit and survival, effect of new ﬁrms on economic performance, equilibrium prices and incumbent’s behaviour over time, to name some of them. Despite such heterogeneity, these contributions are often referred to as belonging to the ﬁeld of industrial dynamics or ﬁrm demography. The rest of the chapter is devoted to a broad, albeit essential, review of the literature. The ﬁrst part of such review covers the main spatial determinants of industrial location both from a theoretical and empirical point of view, which are agglomeration economies, public infrastructures, humancapital, public policies, technological factors and internal factors of the ﬁrm. The second part of this review focuses on the theoretical and empirical contributions dealing with the short term and long term effect of new ﬁrms upon the economy. Since this literature is very broad and heterogeneous, it has been decomposed into the following categories: economic growth, competition, innovation and productivity. A brief summary closes this chapter.
Analyzing French data, she emphasizes learning about match quality, but also finds that learning-by-doing plays an important role during the first six months of an employment relationship, consistent with our story. The interaction between turnover and specificity of skills in a setting with search frictions and firing costs is also explored by Wasmer (2006), who argues that labormarket institutions can affect investment decisions between general and specific humancapital. Finally, Elsby and Shapiro (2012) study the interplay between the return to experience andlabor supply in order to explain long-run trends in nonemployment by skill group. Following this introduction, Section 1.2 provides some empirical evidence by education on unemployment, its inflows and outflows, andon-the-job training. Section 1.3 outlines the model, which is then calibrated in Section 1.4. Section 1.5 contains the main simulation results of the model and a discussion of the mech- anism driving the results, while Section 1.6 explores other possible explanations for differences in unemployment dynamics by education. The main simulation results are presented for the population with 25 years of age and older. Section 1.7 shows that our conclusions remain unaffected when considering the whole working-age population and Section 1.8 conducts a further sensitivity analysis of the main quantitative results. Finally, Section 1.9 concludes with a discussion of possible avenues for further research. We provide data description, some fur- ther empirical checks, analytical proofs and additional robustness checks in the Appendix.
Second, recent literature shows that parental investments into humancapital (edu- cation) is a very important channel for intergenerational correlation of incomes. Becker et al. (2015) in their theory of intergenerational mobility find that even in a world of perfect capital markets with no differences in ability rich parents tend to invest more into their children’s humancapital than poor parents and as a result in the top of distribution earnings persistence is stronger than in the middle. There is a very large literature that shows that early childhood investments are very important in determining humancapital of a child when he becomes adult (Cunha and Heckman, 2007; Cunha, Heckman and Schennach, 2010; Heckman, Yi and Zhang, 2013). Family environment along with family in vestments play a crucial role in this process (Carneiro and Heckman, 2003; Cunha, Heckman, Lochner and Masterov, 2006). Lefgren, Lindquist and Sims (2012) examine two transmission channels for intergenerational persistence of income: causal effect of parental income and causal effect of parental humancapital. They find that both chan- nels are active, around 37% is due to the causal impact of father’s financial resources, the remainder is due to the transmission of father’s humancapital. Restuccia and Urrutia (2004) build an overlapping generations model with early and late investment in humancapital. Their simulations show that around half of intergenerational correlation in earn- ings is attributed to parental investments into education (particularly, early education). Building a similar model, Caucutt and Lochner (2012) suggest that financial constraints might prevent parents from effective investments into their children. And as a result dif- ferences in initial conditions by the age of 20-25 explain up to 60% of variation in lifetime earnings, according to Huggett et al. (2011).
The second approach is that of demographic models. These establish link between the de- mographic characteristics of a child (e.g. number of siblings, birth order) and their educational attainment (as measured by test scores, completed years of schooling or earnings). In these mod- els, two theories are tested. The first is the “resource dilution effect” which predicts that the more children there are in the household, the lower the educational quality, since the resources of the household, in terms of both material resources and parents’ attention, are diluted. The second theory, the “teaching effect”, predicts that the presence of siblings has a positive influence on educational achievement through the benefit of either teaching younger siblings or being taught by older siblings. Empirical studies which include the number of children in the household as an explanatory factor tend to support the resource dilution effect, which is also suggested by the fertility decision model. However, when birth order is included as a variable, the results are mixed for both resource dilution and teaching effects (see Kessler, 1991; Travis and Kohli, 1995). Using data from Peru, Patrinos and Psacharopoulos (1997) find that having a greater number of younger siblings implies less schooling, more age-grade distortion in the classroom and more child labor. Related studies are Knodel et al. (1990) and Knodel and Wongsith (1991). 4
In the second chapter, entitled LaborMarketDynamics of Married Couples and co- authored with Nezih Guner and Yuliya Kulikova, we study joint labormarket transitions of married couples. The existing empirical literature onlabormarketdynamics mainly fo- cuses on movements between employment and unemployment, and has ignored, as far as the cyclical movements in unemployment are concerned, the movements of individuals in and out of the labor force. Another key feature of the existing literature is its focus on individual transitions among labormarket states (employment, unemployment, and out of labor force). We study joint labormarket transitions of husbands and wives among the three labormarket states. We use data from the Current Population Survey (CPS) that has been widely used to study labormarketdynamics. The results show that joint labormarket transitions are important to understand cyclical movements in unemployment as well as the secular rise in aggregate employment. Married men and women diﬀer in their labormarketdynamics. Transitions in and out of labor force play a more important role for unemployment dynamics of females than they do for those of males. Hence modeling out of labor force as a distinct state is critical to understand joint labormarketdynamics of married couples. The results also show that joint labormarket transitions of husbands and wives imply an important degree of coordination between labormarket activities of household members.
common feature of most of these policies, especially those used in general equilibrium models, is that they impose restrictions only on employment decision of the …rm and not explicitly on the outcome of a match for the …rm. I argue that, in general, regulations that restrict free working arrangement of a match may a¤ect the dynamics of unemployment. Restrictive regulations refer to regulations that in one way or another prevent …rms from freely choosing among di¤erent working arrangements. The idea is that restrictions on work arrangements have kind of asymmetric e¤ects on a match during the business cycle. At good times the restrictions could reduce the pro…tability of a match; however the match still could be pro…table enough to survive. At bad times, however, the small pro…ts of less productive matches fade away by imposing restrictions. This triggers more job destruction than otherwise. Those restrictions, in general, include regulations that explicitly prohibit some working arrangements (e.g. explicit restrictions on weekly hours worked, forbidding temporary employment under certain conditions) or restrictions that makes some arrange- ments costlier for the …rm (e.g. setting a premium for extra hours worker, or discriminating at …ring cost among full time and temporary workers).
This dissertation includes three chapters on the macroeconomic effects of the finan- cial system, particularly the credit market. In the first chapter, I show a causal link between household credit supply and economic activity using an exogenous shock to household credit supply by Spanish banks in Mexico resulting from macroprudential regulations in Spain. I use the variation in exposure to this shock across Mexican municipalities as a natural experiment and measure the elasticity of lending to the non-tradable sector to changes in household credit ranging from 1.6-3.5. In the second chapter, I show that the Spanish regulations did not affect lending to Mexican firms by Spanish banks. I use firm-level data to show that firms with multiple bank relation- ships did not experience a change in loan-terms (in levels and interest rates) of marginal credit offered by Spanish banks vis-a-vis the terms offered by non-Spanish banks. I write a theoretical model that accounts for the asymmetric effect of the Spanish reg- ulations on lending to firms and households based on the relationship rents earned by banks depending upon the proprietary information held by them on a given borrower. In the third chapter, I study the effect of asset bubbles in the presence of financial frictions and heterogeneous projects. I consider an economy with two sectors - a pro- ductive, financially constrained sector and an unproductive sector with lower levels of financial constraints. Financial constraints create conditions for the existence of asset bubbles. Asset bubbles, in turn, raise interest rates and lower investment productiv- ity by directing financial resources away from the financially constrained, productive sector to the less constrained, unproductive sector. Such bubbles guide the economy to steady states with low levels of consumption that I call bubbly growth traps.
Controlling for legal origin and religion does not alter the coe¢cients of the natural resource variables and their interaction terms with ethnic fractionalization signi cantly. The coe¢cients on the interaction terms of mineral and fuel exports as a share of exports and GDP remain negative and highly signi cant at the one percent level. Similarly, the corresponding coe¢cient on mineral and fuel exports per capita is signi cant at the ve percent level once legal origin and religious dummies are included in the set of regressors. As discussed above, natural resources provide means and incentives to people who live in resource-rich regions to form an independent state and may contribute signi cantly to triggering, prolonging and nancing civil conicts. The occurrence of a violent sec- cessionist movement is statistically more likely in natural resource abundant countries. In many instances, ethnic cleavages can appear to generate the conict and secessionist movements could seem to be ethnically based. Often the conict seems to appear as an ethnically distinct population enjoys few bene ts from resource extractions, while bear- ing the costs. Examples are Aceh (Indonesia), Biafra (Nigeria) and Katanga (DRC). 69
Wessels, 1988; Frank and Goyal, 2008, 2009). In particular, we use the logic of the pecking order theory to examine whether the banks’ choices of ﬁnancial instruments are related to adverse selection costs. Also, we test whether the choice of ﬁnancial instruments targets an optimal capital structure. To perform such tests, we look at the expected choices of ﬁnancial instruments if banks have liquidity needs or have growth opportunities as predicted by the different theories. Speciﬁcally, we test whether banks have a preference toward debt, as the pecking order predicts, or if banks want to maintain a target capital ratio, as predicted by the trade-off theory. The pecking order theory argues that the issuance of ﬁnancial instruments responds to informational problems and banks should prefer to issue the type of market instrument that minimizes the adverse selection discount. The trade-off theory states that there is an optimal capital structure for each individual bank and banks should issue those ﬁnancial instruments that minimize the overall cost of their capital structure. If the pecking order holds, we expect a higher probability in issuing instruments with more information asymmetries (i.e., capital) for those banks that the markets know, such as listed banks. If the trade-off theory holds, banks prefer to combine issuances of different instruments to reach or maintain an optimal capital structure. We also test how the fulﬁllment of capital regulation affects the choice of ﬁnancial instruments. Under the pecking order, we hypothesize that banks prefer to issue debt-like capital instruments (from now on, hybrid instruments) rather than capital instruments (i.e., common shares) because the former can also be computed as regulatory capital but suffer from lower costs of asymmetric information as compared to capital instruments. Under a trade-off, we could expect a combination of issuances of hybrid andcapital instruments to maintain the relative weight of the different capital instruments.
The results of generalised cost -benefit analyses done showed that, also for the United States, there is a big heterogeneity in the efficiency of the treatment of different health problems. However, the mean positive productivity of healthcare expenditure, and the fact that the social value is bigger than the cost, is not a reason for the indiscriminate increase in healthcare services and medical innovations. Actually, in clinical practice, the extension of any innovation to marginal patients, i.e. those that obtain a small benefit from the treatment, could result in very small additional benefits derived from healthcare expenditure, although the innovation is efficient in mean terms. On the contrary, economic evaluation of health interventions should be encouraged, using proper methods and broad perspectives as discussed in Annex 3, to take into account all effects on society, in terms of extended life and quality of life improvement, and in relation to existing and alternative interventions, including health technologies, public health interventions, and lifestyle behaviours, such as in the example shown in Paper 3. A continuing challenge for health care economic analysis in Spain is to follow methodological guidelines and reporting conventions, to improve the dissemination of research, as well as to use more sophisticated economic analysis techniques, and to publish in international journals.
Abstract: In order to address skill shortages and the demographic challenges facing the EU, member states have to attract (and retain) the more skilled migrants. Nevertheless, foreign residents generally find a significant wage gap with respect to native-born workers when arriving in a host country. Favourable integration policies seem to improve the relative performance of immigrants in the labour market. Indeed, analysis of the role of favourable or unfavourable policies in supporting labour market mobility of recently arrived immigrants shows that wage discrimination between immigrants and natives is lower in those countries with more favourable policies and that this lower gap is associated with higher returns on experience and schooling.